On September 18, 2009, the U.S. Department of Justice (DOJ), Antitrust Division, submitted to the court its brief addressing principally the antitrust implications of the proposed settlement of the Google Books copyright case. In summary, the settlement agreement, if approved by the court, would allow Google to become the key player in a massive business enterprise involving the scanning and selling of access to millions of books. The proposal has many potential benefits, but the detailed contractual terms stir many questions and much opposition. The DOJ now joins the roster of interested parties expressing serious concerns.
The filing is remarkable for its lucid dissection of select issues. It is diplomatic, and it holds out repeated hope for the continued talks among the parties to the case. But clearly the DOJ does not like what it sees. In my reading of the filing, I found my attention drawn to several excerpts that I find especially compelling. Here are a few clips from the document, with my accompanying reflections.
“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.”
This statement is powerful and diplomatically loaded. It states directly that the proposed settlement has not passed the “searching analysis” that ought to be applied. (“Rule 23” is from the Code of Civil Procedure, and it imposes the requirement of fairness in a settlement of a class action lawsuit.) The statement is also a strong hint to the court that it could reject the settlement outright on the policy grounds that Congress should have the lead. In turn, the statement is a signal to Congress that it should not retreat from its role in addressing some of the issues involved in this case.
“Moreover, the most sweeping forward-looking licensing provisions of the current Proposed Settlement (which give open-ended control to the Registry and Google for the exploitation of the rights of absent class members unless those class members opt out of those provisions) both exacerbate potential conflicts between the interests of the class representatives and those of absent class members – especially rightsholders of out-of-print works and foreign rightsholders – and are difficult to square with the requirements of Rule 23.”
Translation: The proposed settlement is more than a resolution of legal claims; it is the creation of business plan that authorizes the parties to move forward with rights cleared by the court. Because of the relatively sweeping nature of rights that Google and the Registry would have, the gulf between the interests of Google and the absent rightsholders is too wide to deem “fair” and thus is inappropriate for the court to approve.
“And, because the owners of orphan works are an incredibly diverse group that includes not only living authors or active publishers, but heirs, assignees, creditors, and others who acquire the property interest by contract or operation of law, these rightsholders are difficult or impossible to locate, and thus difficult to notify. Moreover, no amount of notice is likely to protect those orphan rightsholders who are unaware of their rights or unclear how or whether they want to exploit them. Yet, if an out-of-print copyright owner does not come forward within five years, profits from the commercial use of the out-of-print work are distributed to pay the expenses of the Registry and then to the Registry’s registered rightsholders. . . . Thus, the Registry and its registered rightsholders will benefit at the expense of every rightsholder who fails to come forward to claim profits from Google’s commercial use of his or her work.”
This is, to me, one of the most troublesome details in the agreement. The claimants who show up to claim anything actually share in the unclaimed proceeds. I am a claimant. I stand to make money from other people’s copyrights. It is grotesque, not to mention unfair. Later in the statement, the government turns to the issue of pricing of orphan works, noting that the Registry will have much to say about the prices, and the Registry will be dominated by the large publishers. As a result, the Registry would be setting prices for its own competition. I would add that the Registry would also be setting a price to maximize revenues that will flow principally to those larger publishers. In an uncomfortable twist, that problematic distribution of funds was the final clincher, nudging me ultimately to make my claims and not opt out. I felt a duty to show up and absorb some of the money that would otherwise go to the larger players. If this provision is dropped from a renegotiated settlement, I wonder if I will regret my decision. I have to wait and see the details. Later in the document, the DOJ offers an alternative for distribution of the funds:
“Instead, unclaimed profits could be devoted entirely to the search for rightsholders of orphan works, and the Registry could be authorized to petition the court for an alternative distribution based on a showing that search efforts had been fully exhausted. Another possibility would be to appoint persons to the Registry to serve as guardian representatives of orphan works owners.”
Amen! Another proposal I have heard: Dedicate all of the unclaimed funds to research and projects undertaken by nonprofit groups. A portion of the money is already so earmarked in the agreement. Just put all of it there. However, these monies are distributed only after they are used for the expenses and functions of the Registry. Does anyone else have concerns that the Registry will grow just enough to absorb that money? Another proposal is simply to “free the orphans” and to make them equally available to everyone. After all, why should anyone be collecting money in the first place from works they do not own?
“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.”
Yes! The DOJ document repeatedly mentions that the parties are already negotiating revisions, and the DOJ is encouraging the additional work. The DOJ is also dropping hints about possible solutions. That is great news. First, it might actually be successful. We could get a better agreement and the valuable services of the Google Books database. Second, a simpler settlement along the lines of the above-quoted statement may be the best alternative for the future of the deal. I will gather my thoughts in another posting.
“For these reasons, the United States cannot now state with certainty whether the Proposed Settlement violates the antitrust laws in any respect. . . . As will be shown, absent modification by the parties, there is a significant possibility that the Department will conclude that those terms violate the federal antitrust laws.
The DOJ is not finished with its analysis. The DOJ had deadline of September 18, imposed by the judge, so it needed to speak that day. But the DOJ is also not finished because the issues are tremendously complicated, and the parties to the settlement are still negotiating further changes. Nevertheless, I doubt that the DOJ would make a tentative conclusion with such a firm voice if it did not believe that additional analysis would lead to the same conclusion. To make such a statement is to drive dozens or hundreds of talented and expensive professionals back to work. To make such a statement is, in the extreme, a warning that the parties may be about to break the law—a law that has criminal possibilities. This stuff is not to be taken lightly.
“This de facto exclusivity (at least as to orphan works) appears to create a dangerous probability that only Google would have the ability to market to libraries and other institutions a comprehensive digital-book subscription. The seller of an incomplete database – i.e., one that does not include the millions of orphan works – cannot compete effectively with the seller of a comprehensive product. Foreclosure of newcomers is precisely the kind of competitive effect the Sherman Act is designed to address.”
This is a tacit warning to libraries and educational institutions to beware of the arrangements in this settlement. We are likely to see various proposals to continue some aspects of the settlement, including the institutional subscription database. But on these terms? The DOJ is offering institutions a clue that the terms of the settlement as currently proposed are not likely to be fair. I am a library and university official. I am excited about the possibility of the subscription database, but we have to press for first principles first.
My two last comments. I hardly dare outsmart the DOJ on these issues, and I have not adequately extended my compliments to the government for such as smart and clear brief. But I would urge discussion of two additional general issues that could have fit the flow of this brief:
1. The Indefinite Duration of the Settlement. Although the class of books subject to the proposal is large, it is also circumscribed. Only books with a copyright interest as of January 5, 2009 are subject to the settlement. But once they are in, they remain in the corpus and subject to the terms of the agreement until the last copyright in the pool expires. How long is that? Until the death of the last copyright owner, plus 70 more years. This is an agreement for the ages. It needs safety valves. Rightsholders and readers alike need to know that they are protected if Google fails, or if copyright law changes fundamentally, or if new technologies render the arcana of the settlement effectively obsolete. Where does the vast corpus of millions of books reside? Who gets to rewrite the rules in the future? Protecting the corpus is an important means for establishing the nonexclusivity that is critical to the antitrust concerns.
2. The Rights of Future Owners. Even if the agreement is deemed fair to current rightsholders, copyright ownership is a fluid and dynamic concept. Is a decision today fair to the inevitable changing interests of new copyright owners? A simple sale or transfer of a copyright may not raise serious problems, because the transferee is voluntarily taking the copyright subject to outstanding obligations. However, many people become copyright owners through inheritance or through “termination of transfers” that were made decades before. These legal processes are often intended to protect copyright owners and their families. The settlement apparently undercuts these provisions. The copyrights may indeed change hands in accord with the law, but the owners apparently would take them subject to the court-sanctioned obligations of the settlement. Like the first of my two items, this issue is raising a need to protect copyright owners from in advertently becoming subject to an agreement that unwaveringly commits them for life, plus an extra seven decades. An opportunity for such later owners to affirm or alter their participation in the settlement should be part of the agreement.
These are my initial thoughts. They are mine only, and not my employer’s. I reserve the right to change my mind. We are all still learning.
Kenneth Crews
September 21, 2009