Justice Department Opposes New Google Book Settlement

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Despite the substantial progress reflected in the proposed amended settlement agreement in The Authors Guild Inc. et al. v. Google Inc., the U.S. Department of Justice has advised the federal district court in New York City that class certification, copyright, and antitrust issues remain.

The settlement agreement between Google and the authors and publishers aims to resolve copyright infringement claims brought against Google by The Authors Guild and five major publishers in 2005, arising from Google's efforts to digitally scan books contained in several libraries and to make them searchable on the Internet.

In a Statement of Interest filed with the court on February 4, the Justice Department said:

“Although the United States believes the parties have approached this effort in good faith and the amended settlement agreement is more circumscribed in its sweep than the original proposed settlement, the amended settlement agreement 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.”

On September 18, 2009, the Justice Department submitted views to the court on the original proposed settlement agreement.

At that time, it proposed that the parties consider changes to the agreement, such as imposing limitations on the most open-ended provisions for future licensing, eliminating potential conflicts among class members, providing additional protections for unknown rights holders, addressing the concerns of foreign publishers and authors, and providing a mechanism by which Google’s competitors can gain comparable access. (For further inforamtion on the Justice Department's objections, see September 21, 2009 posting on Trade Regulation Talk.)

In last week’s filing, the Justice Department recognized that the parties made substantial progress on a number of these issues.For example, the proposed amended settlement agreement:

 Eliminates certain open-ended provisions that would have allowed Google to engage in certain unspecified future uses,

 Appoints a fiduciary to protect rights holders of unclaimed works,

 Reduces the number of foreign works in the settlement class, and

 Removes a “most-favored nation” provision that would have guaranteed Google optimal license terms into the future.

The changes, however, do not fully resolve the government's concerns. The agency commented that the revised amended settlement agreement still confers significant and possibly anticompetitive advantages on Google as a single entity, thereby enabling the company to be the only competitor in the digital marketplace with the rights to distribute and otherwise exploit a vast array of works in multiple formats.

The Justice Department’s filing with court regarding the amended settlement is available here on the Department of Justice Antitrust Division’s web site.

Revised Google Book Settlement Attempts to Address U.S. Competition Concerns

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

After consulting with the U.S. Department of Justice, lawyers representing the parties in a copyright dispute brought by authors and publishers against online search engine Google have filed a revised settlement agreement with the federal district court in New York City.

The settlement would resolve claims that Google violated copyright laws by scanning books, creating an electronic database, and displaying excerpts without the permission of copyright holders. Google has denied the claims.

On November 13, 2009, the revised settlement proposal was filed with the court for preliminary approval. The revised proposal comes after the Justice Department expressed concerns that an earlier settlement agreement could harm competition. Specifically, the Justice Department questioned the proposed settlement’s pricing terms and its creation of "de facto exclusive rights for the digital distribution of orphan works."

The latest settlement proposal, which narrows the scope of the books involved, "clarifies how Google's algorithm will work to price books competitively," according to the parties. It will simulate the prices in a competitive market. Moreover, the new proposal removes the so-called "most-favored nation" clause, which pertains to licensing of unclaimed works.

The Justice Department had contended that the most-favored nation clause in the earlier settlement could discourage potential competitors from attempting to compete with Google in digital-book distribution.

Whether these concessions will satisfy the Justice Department's competition concerns is unclear. It has been reported that the Justice Department will provide its views on the revised settlement early next year.

Another change to the proposed settlement limited its scope to books published in the U.S., Great Britain, Canada, and Australia. This change was prompted by objections by foreign governments, rather than the Department of Justice.

Text of the revised settlement agreement in The Authors Guild, Inc. v. Google, Inc., appears here. In the next week, the federal district court is expected to set a date for a “fairness hearing.”