Department of Justice Criticizes Amended Google Settlement Over Copyright, Antitrust Issues

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Delay (at minimum) likely if parties and other stakeholders make major revisions; sunset clause for book database suggested

Norman Oder -- Library Journal, 02/05/2010

• Fairness hearing February 18
• DOJ says compromise possible with major changes
• Opt-in for rightsholders?
• Institutional subscriptions subject to oversight after five or ten years

In a serious blow likely to delay, if not kill, the Google Book Search Settlement, the U.S. Department of Justice (DOJ), in a long-awaited Statement of Interest, yesterday warned that the amended settlement still goes too far in giving Google advantages in distributing scanned books, as well as raising concerns about pricing (which has been one of the key issues raised by the library community).

The DOJ believes that the federal court considering the settlement lacks the authority to approve it.  Thus the settlement, which faces a fairness hearing February 18 in federal court, requires major changes to go forward. The statement came on the heels of rising doubts about the far-reaching nature of the settlement. (Publishers Weekly called the DOJ filing "a serious blow" to the chances of court approval this month.)

While the DOJ filing does not explicitly address concerns raised by the library community, one proposal responds to concerns that Google's monopoly over institutional subscriptions would enable it to exploit its position: the DOJ suggested that such sales sunset after five or ten years, then face reapproval and/or monitoring by the court.

DOJ comments
The DOJ last September raised major concerns about the original settlement, so its court filing responds to the ASA, or amended settlement agreement, which, among other things, removed most foreign works:

Although the United States believes the parties have approached this effort in good faith and the ASA is more circumscribed in its sweep than the original Proposed Settlement, the ASA suffers from the same core problem as the original agreement: it is an attempt to use the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute before the Court in this litigation. As a consequence, the ASA purports to grant legal rights that are difficult to square with the core principle of the Copyright Act that copyright owners generally control whether and how to exploit their works during the term of copyright. Those rights, in turn, confer significant and possibly anticompetitive advantages on a single entity – Google. Under the ASA as proposed, Google would remain the only competitor in the digital marketplace with the rights to distribute and otherwise exploit a vast array of works in multiple formats. Google also would have the exclusive ability to exploit unclaimed works (including so-called “orphan works”) without risk of liability. The ASA’s pricing mechanisms, though in some respects much improved, also continue to raise antitrust concerns.

Grimmelmann's assessment
Commented New York Law School Professor James Grimmelmann, whose position in recent months has moved from concern to opposition:

The United States has filed a new Statement of Interest. The tone is balanced, but the conclusion is clear: the Department of Justice thinks the settlement is beyond the court’s authority and still problematic on antitrust grounds. It’s a careful, detailed brief, that raises fundamental objections to the settlement. These issues will not be resolved with quick patches, even if the parties were in the mood to revise and resubmit a second time.

Google response
The New York Times reported that Google and the other parties seemed to be taking it in stride, quoting a Google spokesman as saying the DOG “recognizes the progress made with the revised settlement, and it once again reinforces the value the agreement can provide in unlocking access to millions of books in the U.S” and that Google looked forward to the court’s review.

What next?
The DOJ said in a statement that it believes compromise is possible, assuming work with the parties and other stakeholders, presumably also Congress:

The department continues to believe that a properly structured settlement agreement in this case offers the potential for important societal benefits. The department stated that it is committed to continuing to work with the parties and other stakeholders to help develop solutions through which copyright holders could allow for digital use of their works by Google and others, whether through legislative or market-based activities.

Some progress
The DOJ allowed that there had been progress:

For example, the ASA: eliminates the open-ended provisions that would have conveyed to Google the rights to engage in unspecified future uses of the works covered by the ASA ; calls for an Unclaimed Works Fiduciary subject to court approval to protect owners of unclaimed works; provides that, after five years, 25 percent of unclaimed funds from unclaimed works may be used to locate the respective rightsholders (rather than be redistributed to other members of the Book Rights Registry); reduces the number of foreign works in the settlement class; and eliminates the most-favored-nation provision that would have guaranteed Google optimal license terms into the future.

Concerns remain
The DOJ expressed several concerns:

• the class representatives (the Authors Guild and Association of American Publishers) lack the authority to grant Google the broad rights that the ASA contemplates
• it's not clear whether the class representatives can adequately represent absent class members
• it's not clear whether the "robust notice" required of class members has been provided
• Google’s de facto exclusive access to orphan and rights-uncertain works remains unaddressed
• Google’s exclusive access to millions and millions of books may well benefit Google’s existing online search business.

Additional safeguards
The DOJ said that, assuming resolution of antitrust issues, an approvable settlement "may be achievable here, for example, by requiring rightsholders to “opt- in” to the settlement, among other things.

Also, the DOJ suggested "a meaningful waiting period before Google may commercially exploit out-of-print works without the permission of the rightsholder," giving the example of two years from the time the title is publicly listed in the Book Rights Registry.

Also, the DOJ suggested a sunset clause regarding Google's book database, an issue surely of interest to potential library subscribers:

[A]ssuming the Court is inclined to permit Google to commercially exploit the unclaimed works of rightsholders who have not opted in to the settlement, the Court should consider limiting that exploitation to a defined term, such as five or ten years, after which period the marketplace could be reassessed. At the end of this limited license term, renewal of the license could be negotiated by the Registry.

Alternatively, the Court could retain jurisdiction over the case for the sole purpose of reviewing whether the term should be extended or revised upon its expiration.

Room for rivals?
The DOJ contends that the class representatives should not be allowed to grant Google the power to sell such a massive database. But if the court disagrees, the DOJ said, "then the Court should carefully examine whether there exists a means for rival distributors to access orphan and rights- uncertain works consistent with Rule 23."