Sunday, September 20, 2009

DOJ drops bomb in Google/AAP settlement

On Friday, September 17, 2009 the Department of Justice delivered its long-awaited Statement of Interest in the proposed settlement between Google and the AAP/AG in the class action suit surrounding the Google Book Search product. The DOJ has some very specific requirements for modification of the settlement, some of which could result in significant changes in the nature of the agreement. The headline, however, is:
that "the court should reject the settlement in its current form," and reconsider after changes are made.

Beyond that, my summary is this:

1) the DOJ does not like that the settlement allows uses of orphan works that go beyond those allowed by copyright law, and especially that others will be profiting from those uses

2) the DOJ considers the settlement to be anti-competitive, and

3) between the lines, it appears that the DOJ can't decide between supporting the full access to scanned books for the good of mankind, and wanting the settlement to limit itself to the original scope of Google's project, which was to digitize for indexing only.

And I should add:

4) nothing here has a direct effect on libraries or the Google library partners, except, perhaps, in that it changes the product that Google will provide as its subscription service, and

5) that the DOJ letter clearly states that Google and the AAP/AG are already in the process of making changes to the settlement to respond to the DOJ's concerns.

The Concerns

The Class

The first has to do with the definition of the class of rights holders who are party to the class action suit. DOJ concludes that the settlement does not satisfy the rules for defining a class as set out in Rule 23, the rule that governs class action suits.

In this area, DOJ is mainly concerned with the potential rights holders of orphan works. It isn't easy to understand what solutions DOJ sees for finding the rights holders for these works, but the Department is uneasy that known rights holders will be the ones negotiating with the rights registry, and that they will also benefit from any money made on orphan works. In other words, it will be to the advantage of rights holders that the parents of those orphans NOT be found. DOJ suggests, among other things, that the money made on orphan works not be paid out to others, but be used to try to find rights holders.

It also suggests that not enough work was done to notify all potential members of the class, in particular foreign authors.

The Potential Uses, and Orphan and Out-of-Print Works

DOJ appears to be nervous about the open-endedness of the future uses that Google can make of both orphan and out-of-print works. To remedy this, it is suggested that out-of-print works (including orphans) be treated the same as in-print works, that is, that rights holders must opt-in to any uses that Google intends to make of the works. To me this makes sense from a legal point of view, since copyright does not distinguish between in- and out-of-print status. It makes less sense from a market point of view, because presumably there is less active interest in the out-of-print works on the part of the rights holder. However, we really do not know what in- and out-of-print mean in a predominantly digital environment, and it may be a mistake to be making decisions based on the analog market, as the settlement does.

There are some parts of the DOJ document that suggest what could be radical solutions, yet they appear almost as asides, such as when suggesting that out-of-print works should be subject to opt-in, they say:
"Such a revision would, of course, not give Google immediate authorization to use all out-of-print works beyond the digitization and scanning which is the foundation of the plaintiffs' Complaint in this matter." p. 14
This seems to indicate that DOJ would be more comfortable with a settlement that essentially authorized the current scope of the Google Book Search product, which was the basis for Google's claim of Fair Use: search and snippet display.

In another section, they voice concern over the fact that some rights holders will be earning money on the unclaimed works of others. They say:
"The risk of such improper leveraging might also be reduced by narrowing the scope of the license. A settlement that simply authorized Google to engage in scanning and snippet displays in the future would limit the profits that others could potentially derive from out-of-print works whose owners fail to learn of their right to claim those profits." p. 15
In fact, this would greatly limit the profit that Google could earn (from which those of the rights holders derive), since the main source of expected profit for Google seems to be from the licensing of full views of the books (to libraries and other institutions) and the "sale" of books to individuals. If this is really what the DOJ means, then it is essentially suggesting that Google have no more use of orphaned works than it has today. With that limitation, it seems that Google might as well go forward with its Fair Use defense, if it would want to continue scanning books at all.


DOJ is concerned that the settlement doesn't allow for sufficient competition. It isn't clear to me, however, how that competition might be achieved. First the document states that the Registry does not have the power to give access to works to entities other than Google, since copyright law doesn't allow it. Then it says that the best solution is to make sure that other companies get equal access. To show that I'm not making this up (although I may be mis-interpreting):
"The Proposed Settlement does not forbid the Registry from licensing these works to others. But the Registry can only act "to the extent permitted by law." S.A. 6.2(b). And the parties have represented to the United States that they believe the Registry would lack the power and ability to license copyrighted books without the consent of the copyright owner -- which consent cannot be obtained from the owners of orphan works." p. 23
"This risk of market foreclosure would be substantially ameliorated if the Proposed Settlement could be amended to provide some mechanism by which Google's competitors could gain comparable access to orphan works...." p. 25
As far as antitrust goes, the document states that although there are concerns about antitrust, the full analysis has not been completed. There are suggestions, however, that the main concerns have to do with the Book Rights Registry and the setting of prices for all works (instead of relying on competition to determine prices).


All in all, it seems to me that the DOJ has pointed out some of the same problems indicated by others, but unfortunately hasn't really given a clear direction for the settlement to take. What we do know is that we'll see a new version of the settlement sometime in the future... many more pages of dense text to ponder.


constant gina said...

It could only mean more trouble when the Dept. of Justice gets involved...

Peter Brantley said...

On licensing of orphans, see also the intriguing FN 10:

"Authorizing the Registry to license the orphan works to third parties would appear to expand only the circumstances under which it could exercise the authority to act as continuing agent for the rightsholders with respect to orphan works already granted to it under the Agreement."

This intriguing language suggests some possible room for discussion over re-envisioning the role of the BRR.

Jonathan said...

"In fact, this would greatly limit the profit that Google could earn"

The Google Books guy who presents at conferences (what's his name) has always said that Google didn't go into this wanting to make a profit selling books, they went into it simply wanting to do the snippets and search thing (and continue making a profit from advertising on their pages).

But the only way they could reach a settlement allowing them to provide search and snippets (and make a profit from selling ads) was... with what they ended up with. Which I interpret to mean that the only way they could reach a settlement was to share the profit (from ads) with the class representatives, and as long as they had to do that, and the class representatives would agree to selling books too, might as well increase the size of the pie that had to be sold.

This does make you (or me) think about how weird this whole thing is to begin with. "A settlement that simply authorized Google to engage in scanning and snippet displays in the future" wouldn't be acceptable to the rights-holder class representatives (unless perhaps Google agreed to share any future ad revenue)---Google on the other hand might indeed be happier with just going ahead with the fair use claims (if you believe Google), but didn't want to risk litigating. (Although I wonder if they've spent as much money on the settlement as they would have on litigating -- and it's not like a settlement approval is a sure thing either, that money was still riskily spent!)

Karen Coyle said...

Jonathan, I agree that it is totally weird and I would love to know exactly who wanted what out of the agreement. Your (very interesting) analysis could be interpreted as: the rights holders wanted more $$ than they thought they would get from advertising, and so they insisted on other products run by Google, such as sales and the licensed access that will be offered to institutions. The detailed rules for access strike me as being a real nightmare for Google (not that they aren't capable of following them), and add a lot of cost to the possible products. Plus I have no idea what the market will be for selling online access to the individual books to consumers (which is what the "sale" of the books really amounts to).

This also makes me wonder what role the libraries had. After all, if they couldn't get some access to the full text, what would be their motivation for working with Google to digitize the books? The settlement doesn't allow them to use their own copies for full text access.

Damned NDA!