Google Books: DOJ Likes Concept, Not Terms

The US Department of Justice filed its statement and reaction to the Google Books Search Settlement and came down somewhere in the middle. The US supports the concepts behind the settlement but raises a bunch of concerns and issues surrounding the specifics (emphasis added):

The United States strongly supports a vibrant marketplace for the electronic distribution of copyrighted works, including in-print, out-of-print, and so-called “orphan” works. The Proposed Settlement has the potential to breathe life into millions of works that are now effectively off limits to the public. By allowing users to search the text of millions of books at no cost, the Proposed Settlement would open the door to new research opportunities. Users with print disabilities would also benefit from the accessibility elements of the Proposed Settlement, and, if the Proposed Settlement were approved, full text access to tens of millions of books would be provided through institutional subscriptions. Finally, the creation of an independent, transparently-operated Book Rights Registry (the “Registry”) that would serve to clarify the copyright status and copyright ownership of out-of-print works would be a welcome development.

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.

The papers spend a bunch of time discussing how the proposed settlement fails to comply with Federal Rule of Civil Procedure 23, a set of procedural guidelines that govern class actions. In terms of the anti-trust question and whether the settlement potentially violates the law (as some of the opponents allege), the DOJ says this (emphasis added):

The Department of Justice has opened an investigation into the competitive impact of the Proposed Settlement.  That investigation is not yet complete, and future modifications of the Proposed Settlement in response to comments filed in the instant proceeding may bear on the conclusions of that investigation.  For these reasons, the United States cannot now state with certainty whether the Proposed Settlement violates the antitrust laws in any respect.  Nevertheless, the Department’s views on certain core issues are sufficiently well developed that articulating them now may be beneficial to the Court in its consideration of the Proposed Settlement and to the parties in their continuing negotiations regarding possible modifications. 

In the view of the Department, the Proposed Settlement raises two serious issues.  First, through collective action, the Proposed Settlement appears to give book publishers the power to restrict price competition.  Second, as a result of the Proposed Settlement, other digital distributors may be effectively precluded from competing with Google in the sale of digital library products and other derivative products to come. These problems are evident on the face of the Proposed Settlement and the concerns they raise have not to this point been convincingly addressed by the parties.  The parties have indicated, however, a willingness to consider modifications that would address at least some of the concerns set forth below.

In conclusion the DOJ says:

This Court should reject the Proposed Settlement in its current form and encourage the parties to continue negotiations to modify it so as to comply with Rule 23 and the copyright and antitrust laws.

Bottom line: The DOJ is probably doing the right thing here, supporting the concept of what Google is doing (as inevitable) but identifying the terms that require modification, along the lines of the paragraph immediately above. There may be some additional class notice requirements to comply with FRCP Rule 23.

Gary Price has rounded up the coverage here. The NY Times is here. Danny Sullivan also pours through the filing and has some thoughtful comments. More at Techmeme.

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Related: NY Times discusses the parties’ ongoing negotiations to address all the concerns raised in the filings. October 7 is the hearing date for approval of the settlement. But as the article points out, the deadline is likely to be extended.

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