Google Books Settlement rejected: is this the final chapter?

Google’s plans for commercialising the world’s largest digital library were stalled this week as US Judge Denny Chin rejected the Google Books Settlement, determining that it was not “fair, adequate or reasonable”.  His Honour found that:

“while the digitization of books and the creation of a universal digital library would benefit many, the Amended Settlement Agreement would simply go too far.  It would permit this class action… to implement a forward-looking business arrangement that would grant Google significant rights to exploit entire books, without permission of the copyright owners.”

Background

In 2004, Google created the Google Book Search Project, forming partnerships with major US university libraries to scan some 12 million titles to date.  Each digitised copy is indexed, creating a searchable index of books, by the title, author, keywords and phrases.

In 2005, the non-profit Authors Guild of America, representing 8000 members, and five publishers sued Google in a class action for copyright infringement.  The plaintiffs argued that Google Books Project’s scanning, indexing and providing snippets of copyright works (3 to 4 lines of text), infringed their reproduction, distribution and display rights.

Defence of Fair Use?

Google argued the defence of Fair Use, under section 107 of the US Copyright Act, 17 U.S.C. § 107, on the basis of promotion of wide public access to books.  Under the US “Fair Use” defence, a reproduction for purposes such as criticism, comment, news reporting, teaching, scholarship, or research, is not an infringement of copyright.  The defence is assessed on a case-by-case basis, in accordance with the purpose of use, nature, amount of work reproduced, impact on market value of the work. 

In contrast, if the scanning and indexing of the works had occurred down under, Google would not be protected by the narrow Australian defences of “fair dealing” under Sections 40-42 of the Copyright Act 1968 (Cth).  The sections provides defences for the specific purposes of research or study, criticism or review, parody or satire and news reporting.  Owing to the scanning of the whole works and Google’s overriding commercial purpose, a defence of fair dealing under Australian law would not be made out.

As the US Fair Use defence was close to call, the parties began negotiations to develop a commercial settlement in 2006.  

Amended Settlement Agreement (“ASA”)

Under US Law, a settlement of a class action requires approval of the court.  The court may approve a settlement that is binding on the class only if it determines that the settlement is “fair, adequate, and reasonable, and not a product of collusion.”

The ASA, which proposed to release Google from liability for past copyright infringement, also transferred Google certain rights and releases in respect of future conduct.  In this respect, Judge Chin criticised the settlement as a “forward looking business arrangement”, which proposed to authorise Google to continue to digitize books and inserts, as well as generate revenue from institutional licensing, the purchase of individual online editions, and advertising appearing next to displays of in-copyright books and make certain other prescribed uses.

The Settlement sum was pitched at $125 million: $34.5 to establish an administrative body, the Books Rights Registry, $45 million to compensate copyright holders and the remainder to cover legal fees.  Google would pay rightsholders 63% of all revenues from above uses.

Orphan Works

In effect, the ASA would therefore license Google to reproduce many copyright works without consent of the rightsholders, including “orphan works”.  Significantly, the ASA made a distinction between in-print and out-of-print works for the purposes of determining the default display uses of a work.  For in-print works, a rightsholder must opt-in to the increased display uses, including full access uses, preview uses, snippet displays and display of bibliographic pages.  For out-of-print works, the rightsholder must opt-out of the display uses. 

This meant that “orphan works” (a work that is protected by copyright, but whose owner cannot be identified or located) that are not commercially available, were automatically caught by the ASA.  As such, anti-trust concerns and Google’s potential monopoly over “orphan works” were a key concern of objectors to the ASA, including the US Department of Justice and Google’s competitors, Amazon and Microsoft.

Judge Chin agreed, stating “it is incongruous with the purpose of the copyright laws to place the onus on copyright owners to come forward to protect their rights when Google copied their works without first seeking their permission”.  His Honour agreed that the licensing of orphan works was a matter for Congress, not parties to a class action settlement agreement.

So, where does this leave orphan works? Currently under US and Australian law, Orphan works are protected in the same way as any other work to which copyright applies during the life of the work.  As a work in which copyright subsists, it is ordinarily an infringement of copyright to do any act comprised in the copyright of the work, without the license of the copyright owner.

Where to next?

Judge Chin noted that many of the concerns raised in the objections would be removed if the ASA were converted from an “opt-out” settlement to an “opt-in” settlement.  In press releases, Google has indicated that it was considering its options. 

In the meantime, Google continues to operate its Google Books Partner Program where Google scans, indexes and makes available certain portions of in copyright works, with consent of rightsholders.

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