On 22 March 2011, the U.S. District Court for the Southern District of New York denied its approval of a proposed settlement in the class action proceedings regarding Google’s digital library project.
It was already the second time the parties could not prevail with a settlement proposal. The first Settlement Agreement (SA) was proposed already back in October 2008. It was meant to settle a dispute between Google on the one side and The Authors Guild as well as the Association of American Publishers on the other side. In 2004, Google started scanning books at large scale. The project was launched on the basis of contractual arrangements with various university libraries in the United States and later on also abroad. However, Google did not obtain authors’ or publishers’ consent for digitising their copyrighted works. Therefore, the aforementioned associations took Google to court.
The SA triggered respectable resentment but also support, both in the United States and around the world. In particular, the U.S. Department of Justice raised concerns in various ways. Moreover, numerous foreign right holders and their representatives filed amicus curiae. In February 2010, a fairness hearing took place, where inter alia VG WORT, a German collecting society, was represented by Lovells counsel. After the hearing, the parties decided to modify their initial proposal in order to meet at least some of the concerns presented to the court. Thus, on 13 November 2009, the parties issued the Amended Settlement Agreement (ASA). Nonetheless, also the ASA once again received heavy criticism.
In denying its approval of the ASA, the court found that even in the amended form it was not fair, adequate and reasonable. While several aspects of the ASA were acceptable, the court expressed great concern about the implications of the ASA as affecting not merely past claims of copyright infringement, but how Google would be able to use copyrighted works in the future. According to the court, the proposal to allow Google to continue with its book project particularly implicated copyright and antitrust issues under U.S. law.
From a copyright perspective, the court expressed concern with the fact that the ASA would allow Google to display outof- print and "orphan" books without the express authorization of the owners of the copyrights in those books, even though the ASA would allow the owners to object. The court found it "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." The court opined, moreover, that given all the myriad issues surrounding the use of millions of copyrights in a new and wide-reaching technological service, the establishment of a mechanism for exploiting copyrights in this way was a matter more suited for the U.S. legislature rather than the courts.
Due to the potential competitive benefits to Google if the ASA were approved, antitrust issues also loomed large. The court noted that the ASA, which purported to settle the complaint in the action, would go beyond the past and give Google the right to sell full access to copyrighted works that it otherwise would have no right to exploit, giving it control over the digital commercialization of not just books where the copyright owners gave consent and received payment, but over orphan books and other unclaimed works. Describing it as a "de facto monopoly", the court explained that the ASA would essentially give one party free reign to exploit copyrights where competitors would face exposure to statutory damages for infringement.
From international perspective, Judge Chin picked up on the concerns that were raised with regard to the Berne Convention which grants foreign authors the same rights and privileges for their works as domestic authors enjoy. Therefore, even though the case at issue is about U.S. copyright interests, an uncounted number of foreign right holders is still affected. Even worse, many of the authors have no adequate means to determine whether or not their works actually fall within the scope of the ASA. While making no determinations of foreign law, the court took these international concerns expressly into account when reaching the overall conclusion that the ASA did "simply go to far."
Judge Chin’s denial of the ASA was without prejudice to a new turn in the event the parties negotiate a once again revised settlement agreement. In this course, he furnished the parties with the annotation that many of the concerns raised in the objections would be ameliorated if the ASA were converted from an "opt-out" settlement to an "opt-in" settlement. Yet the question remains whether Google’s business model would work on an opt-in basis.