The Internet has been buzzing with news regarding U.S. Circuit Judge Denny Chin’s rejection of a settlement agreement reached in the “Google Books” case, The Authors Guild, et al. v. Google, Inc., No 05 Civ 8136. Although it remains to be seen how the parties will negotiate an acceptable settlement agreement going forward, Judge Chin’s well-reasoned opinion gives guidance regarding copyright protection and claim releases in the not-too-distant future of global digitization.
Google had engaged in an ambitious project to organize the world’s information by digitizing every book ever published. This seemed innocent enough and in keeping with Google’s infamous “don’t be evil” mantra. Authors and publishers, however, disagreed. In 2005, they filed a class action suit, alleging that Google was engaged in “massive copyright infringement” by reproducing printed works (such as archives scanned from the University of Michigan) on its servers “in order to attract visitors to its web site and generate advertising revenue.”
Perhaps learning from the foibles of the music industry’s arduous crusade against on-line music sharing, the plaintiffs sought to settle the suit outside of court. The parties reached a settlement in October 2008 that provided (1) at least $45 million to compensate settlement class members whose works were already scanned without permission; (2) $34.5 million to establish a “Book Rights Registry;” and (3) a settlement fund that would give the settlement class 63% of the future revenues earned from Google’s on-line book archive.
Notice of the proposed settlement triggered hundreds of objections from authors and publishers. Companies such as Amazon.com and Microsoft opposed the deal, and argued, among other things, that it would give Google far too much control over “orphan works” (copyrighted works whose owner cannot be located).
In response to the barrage of protests, the parties submitted a revised settlement agreement in November 2009, seeking to address some of the concerns that had been expressed by absent class members, including changes regarding the determination of whether a work is “commercially available,” pricing valuation, the right to negotiate revenue splits, provisions regarding unclaimed funds, an overhaul of the leadership structure, eliminating the right to terminate the agreement, and including supplemental notice to the class. After preliminary approval on November 19, 2009, the Amended Settlement Agreement (“ASA”) was disseminated to the settlement class, which was defined as all persons (and their heirs, successors, and assigns) who, as of January 5, 2009, own a U.S. copyright interest in one or more books or inserts implicated by a use authorized by the ASA.
This prompted another round of massive objections. Another 6,800 class members opted out of the settlement. The Justice Department also weighed in, challenging the ASA as over-reaching and potentially in violation of antitrust and copyright law. The DOJ stated:
Nonetheless, the breadth of the Proposed Settlement—especially the forward-looking business arrangements it seeks to create—raises significant legal concerns. As a threshold matter, the central difficulty that the Proposed Settlement seeks to overcome—the inaccessibility of many works due to the lack of clarity about copyright ownership and copyright status—is a matter of public, not merely private, concern. A global disposition of the rights to millions of copyrighted works is typically the kind of policy change implemented through legislation, not through a private judicial settlement. If such a significant (and potentially beneficial) policy change is to be made through the mechanism of a class action settlement (as opposed to legislation), the United States respectfully submits that this Court should undertake a particularly searching analysis to ensure that the requirements of Federal Rule of Civil Procedure 23 (“Rule 23”) are met and that the settlement is consistent with copyright law and antitrust law. As presently drafted, the Proposed Settlement does not meet the legal standards this Court must apply.
Considering all of the submissions, Judge Chin refused to give final approval of the settlement. In his 48-page opinion, Judge Chin stated that, despite its improvements from the initial settlement, the ASA still went “too far.” In particular, Judge Chin noted that the ASA allowed Google “to implement a forward-looking business arrangement that would grant Google significant rights to exploit entire books, without permission of the copyright owners.”
In fact, the ASA essentially went far beyond what the original Rule 23 class action alleged. In the original complaint, the plaintiffs alleged that Google had made portions (or “snippets”) of their work searchable on-line. In contrast the ASA would have allowed Google to put entire works on-line unless an author chose to opt-out of the settlement agreement. Judge Chin recognized that while “broad class action settlements are common and that consequently plaintiffs in a class action may release claims that were or could have been pled in exchange for settlement relief,” there are limits. “[C]lass action releases may include claims not presented and even those which could not have been presented as long as the released conduct arises out of the identical factual predicate as the settled conduct” and those released claims “must be adequately represented prior to settlement.”
Judge Chin’s analysis was entirely sensible. No matter how allegedly pure the motive, Google’s efforts to digitize the world’s information should not be permitted through the needless release of legitimate claims by authors and publishers . By requiring these releases, the settlement seeking to sanction efforts to digitize entire works simply goes too far. Moreover, it is unnecessary. The parties could devise a settlement authorizing Google’s current efforts to search “snippets” of books for content (much like previewing music before the consumer purchases a song). Such a settlement would achieve Google’s short-term goals, while protecting the interests of authors and publishers in their work. The parties need to go back to the drawing board on this one; Judge Chin is obviously paying attention.
Photo credit: Robert Scoble
 While Judge Chin’s opinion also explores potential violations of copyright and antitrust law, the focus of this blog post is on the fairness of the settlement terms to class members.
 Google Investor Relations, Code of Conduct, http://investor.google.com/corporate/code-of-conduct.html
 Authors Guild v. Google, Inc., No. 05-cv-08136, 2005 U.S. Dist. Ct. Pleadings 8136 (S.D.N.Y. Sept. 20, 2005).
 Amar Toor, N.Y. Court Rejects Settlement in Lawsuit Against Google Books, Switched (Mar. 22, 2001) http://www.switched.com/2011/03/22/n-y-court-rejects-settlement-in-lawsuit-against-google-books/
 Authors Guild v. Google, No. 05-cv-08136, 2005 U.S. Dist. Ct. Motions 710536 (S.D.N.Y. Oct. 28, 2008).
 Clint Boulton, Google Books Settlement Struck Down for Enabling Monopoly, eWeek.com (March 23, 2011) http://www.eweek.com/c/a/Search-Engines/Google-Books-Settlement-Struck-Down-for-Enabling-Monopoly-402620/
 November 9, 2009 Amended Settlement Agreement available at http://www.googlebooksettlement.com/r/view_settlement_agreement.
 “An insert includes, for example, a foreword, prologue, or essay that is independently copyrighted, if other requirements are met. (ASA § 1.75).” Authors Guild v. Google, No. 05-cv-08136 (2d Cir. Mar. 22, 2011) (“Slip op.”), available at http://www.scribd.com/doc/51327711/google-books-settlement.
 Slip op. at 5.
 Slip op. at 10.
 Authors Guild v. Google, No. 05-cv-08136, 2005 U.S. Dist. Ct. Motions 807126, at *3 (S.D.N.Y. Sept. 18, 2009).
 Slip op. at 1.
 Slip op. at 12.
 Slip op. at 16 (internal quotations omitted).
 Slip op. at 16-17 (internal quotations omitted).