The parties to the Authors’ Guild et al. v. Google et al. Settlement Agreement currently pending before Judge Chin in the Southern District of New York asked the Court on September 22, 2009 to postpone the scheduled October 7th Final Fairness Hearing in order to permit further negotiations to reach a revised settlement agreement. Plaintiffs’ Memorandum In Support of Unopposed Motion to Adjourn October 7, 2009 Final Fairness Hearing And Schedule Status Conference, Civ. A. No. 1:05-cv-08136-DC, filed Sept. 22, 2009 (Docket Entry 729). Plaintiffs’ brief in support of their motion described the objections received to date as “hundreds of objections from individuals and corporate entities within and from outside of the United States, from the Federal Republic of Germany and the Republic of France, and from the Attorneys General of six states (Connecticut, Kansas, Missouri, Pennsylvania, Texas, and Washington).” Id. at 1. The new date requested was November 6.

In prior posts, I have discussed the implications of the settlement and objections and requests for approval that have been received by the Court. But, since my last posting, numerous additional objections had been filed – Judge Chin noted that over 400 filings have been made, including both objections and statements of support. Order, September 16, 2009 (Docket Entry 716).

Copyright Office’s Objection to Settlement Agreement

On September 10, Marybeth Peters, Register of Copyrights (at the U.S. Copyright Office) testified before the House of Representatives, Committee on the Judiciary raising the Office’s concerns the terms of the settlement, and the possibility that it creates a compulsory license to permit Google to digitize and distribute every work published in the U.S. through January 5, 2009. See Statement of Marybeth Peters, The Register of Copyrights Before the Committee on the Judiciary, September 10, 2009.

In particular, Ms. Peters summarized the Copyright Office’s concerns about the settlement agreement:

* Imposing a (Judicial) Compulsory License: Ms. Peters testified that the Settlement Agreement extended more broadly than merely forgiving Google for its past infringement and providing a remedy to those whom it harmed. Instead, the Agreement provided a mechanism to engage in further infringement without risk of liability, and affects a much broader base of copyright owners who were not represented during the original litigation. Id. ¶¶ 7, 12-18. Ms. Peters noted that compulsory licenses are typically “the domain of Congress” and argued that the Court should not be permitted to grant such a license in Google’s favor without giving Congress the opportunity to weigh in. Id. ¶ 15. Further, she testified that compulsory licenses “are generally adopted by Congress only reluctantly, in the face of a marketplace failure.” Id. Such marketplace failure is absent here.

* Treatment of Out-of-Print Works is Flawed: Under Copyright Law, the initial question of whether infringement has occurred focuses on whether the work in question is protected by copyright law. Whether the work continues to be available in the marketplace for purchase by interested buyers or whether it is no longer in-print is irrelevant to the analysis of copyrightability. Id. ¶ 19. Ms. Peters testified that the Settlement Agreement provided Google with certain default rules for dealing with out-of-print works, essentially allowing Google to copy, distribute and otherwise capitalize on them without liability until the rights holders ask Google to stop. Id. ¶ 20.

Ms. Peters also identified concerns over the treatment of orphan works, an issue that was the subject of draft legislation. She explained:

“Orphan works are works that are protected by copyright but for which a potential user cannot identify or locate the copyright owner for the purpose of securing permission. They do not include works that are in the public domain; works for which a copyright owner is findable but refuses permission; or works for which no permission is necessary, i.e. the use is within the parameters of an exception or limitation such as fair use. Many out-of-print works have rights holders who are both identifiable and locatable through a search.”

Id. ¶ 24. She further testified that approving the settlement as drafted would “make it exceedingly difficult for Congress to move forward” in finding a solution for orphan works, and would instead provide Google with an exemption from liability without finding a permanent solution for the problem of locating rights holders in order to obtain permission to use a work and make appropriate royalty payments for such use. Id. ¶ 23.

* Settlement Agreement Inappropriately Includes International Works that were Not Included in the Litigation: Ms. Peters outlined problems that foreign rights holders have, in that their works may be contained in a research library that has decided to partner with Google in this digitization project. Id. ¶ 27. “As a matter of policy, foreign rights holders should not be swept into a class action settlement unknowingly, and they should retain exclusive control of their U.S. markets.” Id. Ms. Peters noted that several foreign governments (particularly France and Germany) and foreign rights holders have alleged that the U.S.’s treaty obligations will be implicated by this Settlement Agreement, and perhaps even abrogated. Id. ¶¶ 29-31. While she did not concede that these obligations have been compromised in actuality, she testified that “it is a cause for concern when foreign governments and other foreign stakeholders make these types of assertions.” Id. ¶ 31.

Potential Benefits from a Digitization Project

Ms. Peters also lauded some of the more positive aspects to the Settlement Agreement that “should be encouraged under separate circumstances.” Id. ¶ 6. Specifically: 1) the creation of a book rights registry could improve the licensing structure and the ability to collect small royalty payments related to using works in digital form; 2) providing access to millions of titles to blind and print-disabled library patrons is “not only responsible and laudable, but should be the baseline practice for those who venture into digital publishing;” 3) enabling copyright owners and technology companies to share advertising revenues is a worthwhile business goal; and 4) increasing libraries’ abilities to offer digital access to works in their collection (and elsewhere) should be encouraged. Id. Despite these benefits, however, “none of these possibilities should require Google to have immediate, unfettered and risk-free access to the copyrighted works of other people.” Id.

U.S. Department of Justice’s Antitrust Concerns

In addition, on September 18, 2009, as scheduled, the US Department of Justice filed its brief outlining its concerns (including both antitrust and copyright concerns) with the terms of the settlement as currently drafted. Statement of Interest of the USA Regarding Proposed Class Settlement, Civ. A. No. 1:05-cv-08136-DC, filed September 18, 2009 (Docket Entry 720). The DOJ’s brief invited certain modifications and noted that the parties to the suit had already suggested that such a modified settlement agreement could be presented to the Court for approval. (Indeed, as noted above, the parties have now requested an extension of the Final Fairness Hearing in order to negotiate such a modified agreement.) Specifically, the DOJ’s brief made the following observations:

* A “global disposition of rights to millions of copyrighted works is typically the kind of policy change implemented through legislation, not through a private judicial settlement.” Id. at 2.

* The Settlement Agreement seeks to implement a “forward-looking business arrangement”, not merely a “settlement of past conduct.” Id. at 2-3 (note that this is the same concern raised by Ms. Peters, Register of Copyrights, as summarized
above).

* The Agreement would create a marketplace in which only one competitor (Google) would have rights in a “vast array of works” (especially orphan works). Id. at 3.

* The Agreement authorizes Google to obtain a license to “exploit copyrighted works of absent class members for unspecified future uses” – thus “essentially authorizing [with the agreement of the Book Rights Registry] the open-ended exploitation of the works of all those who do not opt out from such exploitation.” Id. at 7.

* The Agreement and the process of this case to date has provided inadequate notice to absent copyright holders that they must opt out of this Agreement or the terms will operate once approved to limit their exclusive rights in the future. See id. at 7-10.

Despite these concerns, the DOJ identified some benefits that could come out of this settlement negotiation, if the Agreement were to be modified in certain ways:

* The potential to create a “vibrant marketplace for the electronic distribution of copyrighted works, including in-print, out-of-print and so-called ‘orphan’ works.” Id. at 1.

* The potential to “breathe life into millions of works that are now effectively off limits to the public.” Id.

* The potential to “open the door to new research opportunities.” Id. And,

* The potential to increase accessibility to certain works by “users with print disabilities.” Id.

The DOJ’s brief also acknowledged that it provides only a preliminary analysis of its antitrust concerns, since the investigation continues. Id. at 3.

Current Status

On September 24, 2009, the Court accepted Plaintiffs’ unopposed motion for an adjournment (or continuance) of the October 7 hearing date, but did not set a new date for the Final Fairness Hearing. Order, September 24, 2009 (Docket Entry 735). The Court instead re-characterized the October 7 hearing date as a status conference, which the parties are required to attend, but at which the Court “will not hear argument from any objectors, supporters, or amici – including those who emailed requests to be heard – at this conference, though they are free to attend.” Id. at 2.

If you are interested in more information, you can review other items on the docket through Justia. (I haven’t compared this copy of the docket in depth against the official docket provided by Pacer (at a cost), but it appears to provide copies to most of the key docket entries I’ve reviewed over the last few weeks.)