Justice tells court to reject Google’s $125 million digital book settlement

The Justice Department said the settlement reached between Google and publishers regarding its digital library “raises significant legal concerns” and should be revised to comply with antitrust and copyright laws before getting approval.

The department released its opinion late Friday night to the U.S. District Court for the Southern District of New York, which is reviewing the $125 million agreement Google reached after publishers and authors sued the company for breaking copyright laws while scanning more than 10 million books to create an online library.

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Citing the exclusive nature of the agreement and the power it would give Google to set prices and control access to literary works, the department said the settlement, as presently drafted, “does not meet the legal standards this Court must apply.”

Google says its Google Book Search project will make out-of-print and hard-to-find books more accessible to consumers and does not block competitors from striking similar agreements with publishers. Google said it will license works to competitors through a Registry created by the settlement.

Many groups support the settlement, including the National Federation of the Blind, because they say it makes millions of works available to libraries, universities and people with disabilities.

But opponents, including Amazon and Microsoft, say it is anti-competitive because it gives Google a blanket license to use literary works as it sees fit.

The House Judiciary Committee held a hearing on the issue last week. The New York federal court will hold a hearing Oct. 7. The Justice Department’s decision will likely hold weight as the court evaluates the settlement.

William F. Cavanaugh, deputy assistant attorney general in the Antitrust Division, said the agreement is in some respects too broad and forward-looking, granting Google an exclusive right to the “open-ended exploitation of the works of all those who do not opt out from such exploitations.” In other words, if authors or publishers not part of the settlement do not know to opt out of the agreement, Google may continue to scan and use those works for unspecified future business models.

This is especially troublesome for “orphan works,” which are works whose authors cannot be located. Under the current settlement, Google would gain rights to use those works in its project and bring in revenues based on that use, the filing said.

“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,” Cavanaugh said.

He said the parties in the agreement need to make more efforts to ensure the settlement adequately represents all rights holders that would be affected. It also suggested authors and other rights-holders be given more time to respond to the settlement.

Google and the settling authors and publishers argue that the project will create new value for out-of-print and unclaimed works, prompting owners to step forward to claim the copyrights.

In a statement, Google, the Authors Guild and the Association of American Publishers said the filing “recognizes the value the settlement can provide by unlocking access to millions of books in the U.S.”

They added: “We are considering the points raised by the Department and look forward to addressing them as the court proceedings continue.”

The department said it is unclear if the settlement violates antitrust law, but it has two primary concerns.

First, it appears that the settlement gives book publishers, through collective action, the power to restrict price competition. Second, the settlement could preclude other digital distributors from competing with Google in the sale of online books and related products.

To help resolve antitrust violations, Google should come up with a way to allow competitors to have comparable access to orphan works, Cavanaugh said.

Debbie Rose, intellectual property fellow for the Association for Competitive Technology, said the federal court is “going to be hard-pressed not to ignore all this and put an approval stamp on the agreement.”
 
Congress can overturn any court decision. At the hearing on the issue last week, Rep. John Conyers (D-Mich.), chairman of the Judiciary Committee, did not express much concern over the settlement. Many other members deferred to the DoJ but acknowledged legislation is needed to deal with the orphan works problem.