The Authors Guild v. Google Inc.

• Decision Date: 22 March 2011
• Docket Number: No. 05 Civ. 8136(DC).,05 Civ. 8136(DC).
• Citation: 98 U.S.P.Q.2d 1229,79 Fed.R.Serv.3d 114,770 F.Supp.2d 666
• Parties: THE AUTHORS GUILD et al., Plaintiffs,v.GOOGLE INC., Defendant.
• Court: U.S. District Court — Southern District of New York

770 F.Supp.2d 666

2011-1 Trade Cases P 77,387

2011 Copr.L.Dec. P 30,057

79 Fed.R.Serv.3d 114

98 U.S.P.Q.2d 1229

THE AUTHORS GUILD et al., Plaintiffs,

v.GOOGLE INC., Defendant.

No. 05 Civ. 8136(DC).

United States District Court, S.D. New York.

March 22, 2011.

Boni & Zack LLC, by Michael J. Boni, Esq, Joanne Zack, Esq., Bala Cynwyd, PA, for Author Plaintiffs.Debevoise & Plimpton LLP, by Bruce P. Keller, Esq., Jeffrey P. Cunard, Richard S. Lee, Esq., New York, NY, for Publisher Plaintiffs.Durie Tangri LLP, by Daralyn J. Durie, Esq., Joseph C. Gratz, Esq., San Francisco, CA, for Defendant Google Inc.A. Marisa Chun, Deputy Associate Attorney General, William F. Cavanaugh, Deputy Assistant Attorney General, Antitrust Division, Owen Kendler, Attorney, U.S. Department of Justice, Washington, D.C., Preet Bharara, United States Attorney for the Southern District of New York, by John D. Clopper, Assistant United States Attorney, New York, NY, for United States of America.

OPINION

CHIN, Circuit Judge.

Before the Court is plaintiffs' motion pursuant to Rule 23 of the Federal Rules of Civil Procedure for final approval of the proposed settlement of this class action on the terms set forth in the Amended Settlement Agreement (the “ASA”). The question presented is whether the ASA is fair, adequate, and reasonable. I conclude that it is not.

While the digitization of books and the creation of a universal digital library would benefit many, the ASA would simply go too far. It would permit this class action—which was brought against defendant Google Inc. (“Google”) to challenge its scanning of books and display of “snippets” for on-line searching—to implement a forward-looking business arrangement that would grant Google significant rights to exploit entire books, without permission of the copyright owners. Indeed, the ASA would give Google a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission, while releasing claims well beyond those presented in the case.

Accordingly, and for the reasons more fully discussed below, the motion for final approval of the ASA is denied. The accompanying motion for attorneys' fees and costs is denied, without prejudice.

BACKGROUND

A. The Facts and Prior Proceedings

In 2004, Google announced that it had entered into agreements with several major research libraries to digitally copy books and other writings in their collections. Since then, Google has scanned more than 12 million books. It has delivered digital copies to the participating libraries, created an electronic database of books, and made text available for online searching. See generally Emily Anne Proskine, Google's Technicolor Dreamcoat: A Copyright Analysis of the Google Book Search Library Project, 21 Berkeley Tech. L.J. 213, 220–21 (2006) (describing project). Google users can search its “digital library” and view excerpts—“snippets”—from books in its digital collection.¹

The benefits of Google's book project are many. Books will become more accessible. Libraries, schools, researchers, and disadvantaged populations will gain access to far more books. Digitization will facilitate the conversion of books to Braille and audio formats, increasing access for individuals with disabilities. Authors and publishers will benefit as well, as new audiences will be generated and new sources of income created. Older books—particularly out-of-print books, many of which are falling apart buried in library stacks-will be preserved and given new life.²

Millions of the books scanned by Google, however, were still under copyright, and Google did not obtain copyright permission to scan the books.³ As a consequence, in 2005, certain authors and publishers brought this class action and the related case, respectively, charging Google with copyright infringement. The authors seek both damages and injunctive relief, and the publishers seek injunctive relief. Google's principal defense is fair use under § 107 of the Copyright Act, 17 U.S.C. § 107.

The parties engaged in document discovery and, in the fall of 2006, began settlement negotiations. On October 28, 2008, after extended discussions, the parties filed a proposed settlement agreement. The proposed settlement was preliminarily approved by Judge John E. Sprizzo by order entered November 17, 2008 (ECF No. 64). Notice of the proposed settlement triggered hundreds of objections. As a consequence, the parties began discussing possible modifications to the proposed settlement to address at least some of the concerns raised by objectors and others. On November 13, 2009, the parties executed the ASA and filed a motion for final approval of the ASA pursuant to Federal Rule of Civil Procedure 23(e) (ECF No. 768). I entered an order preliminarily approving the ASA on November 19, 2009 (ECF No. 772).

Notice of the ASA was disseminated. As was the case with the original proposed settlement, hundreds of class members objected to the ASA. A few wrote in its favor. The Department of Justice (“DOJ”) filed a statement of interest raising certain concerns (ECF No. 922). Amici curiae weighed in, both for and against the proposed settlement. The Court conducted a fairness hearing on February 18, 2010.

B. The ASA

The ASA is a complex document. It is 166 pages long, not including attachments. Article I sets forth 162 definitions, including the capitalized terms discussed below. I will not describe the ASA in detail, but will summarize its principal provisions.

The Class consists of all persons (and their heirs, successors, and assigns) who, as of January 5, 2009, own a U.S. copyright interest in one or more Books or Inserts ⁴ implicated by a use authorized by the ASA. Certain individuals and entities are excluded. (ASA § 1.13). The Author Sub–Class consists principally of members of the Class who are authors and their heirs, successors, and assigns. (ASA § 1.17). The Publisher Sub–Class consists of all members of the Class that are publishing companies that own a U.S. copyright interest in an Insert or have published a Book. (ASA § 1.122).

Under the ASA, Google is authorized to (1) continue to digitize Books and Inserts, (2) sell subscriptions to an electronic Books database, (3) sell online access to individual Books, (4) sell advertising on pages from Books, and (5) make certain other prescribed uses. (ASA §§ 3.1, 4.1–4.8; see also ASA § 1.149). The rights granted to Google are non-exclusive; Rightsholders retain the right to authorize others, including competitors of Google, to use their Books in any way. (ASA §§ 2.4, 3.1(a)). Google will pay to Rightsholders 63% of all revenues received from these uses, and revenues will be distributed in accordance with a Plan of Allocation and Author–Publisher Procedures. (ASA §§ 2.1–2.4, 4.5, 5.4 & Attachs. A, C).

The ASA will establish a Book Rights Registry (the “Registry”) that will maintain a database of Rightsholders, and the Registry will administer distributions of revenues. (ASA § 6.1(b)). Google will fund the establishment and initial operations of the Registry with a payment of $34.5 million (which will also cover the costs of notice to the Class). (ASA § 2.1(c)). The Registry will be managed by a Board consisting of an equal number of Author Sub–Class and Publisher Sub–Class representatives (at least four each). (ASA § 6.2(b)). The ASA will also create an “independent” Unclaimed Works Fiduciary to represent interests with respect to, and assume responsibility for certain decisions pertaining to, unclaimed works, including pricing and book classification. (ASA §§ 3.2(e)(i), 3.3, 3.10, 4.2(c)(i), 4.3, 4.5(b)(ii), 4.7, 6.2(b)(ii)).

Rightsholders can exclude their Books from some or all of the uses listed above, and they can remove their Books altogether from the database. At any time Rightsholders can ask Google not to digitize any Books not yet digitized, and Google will use “reasonable efforts” not to digitize any such Books. (ASA §§ 1.124, 3.5(a)(i)). A Rightsholder may also request removal from the Registry of a Book already digitized, and Google is obligated to remove the Book “as soon as reasonably practicable, but it any event no later than thirty (30) days.” (ASA § 3.5(a)(i)).

As for Books and Inserts digitized before May 5, 2009, Google will pay $45 million into a Settlement Fund to make Cash Payments to Rightsholders—at least $60 per Principal Work, $15 per Entire Insert, and $5 per Partial Insert, for which at least one Rightsholder has registered a valid claim on or before the agreed-upon deadline. (ASA §§ 2.1(b), 13.4; see also Stip. & Order to Extend Cash Payment Deadline 1–2, Feb. 18, 2011, ECF No. 970). These are minimum amounts, and if more than $45 million becomes necessary to pay all eligible claims, Google will provide additional funds. If payment of all eligible claims requires less than $45 million, the Registry will distribute greater amounts up to a maximum of $300 per Principal Work, $75 per Entire Insert, and $25 per Partial Insert. (ASA § 5.1).

Going forward, the ASA provides for Google to split revenues with Rightsholders. For works covered by the ASA, Google will pay to the Registry, on behalf of Rightsholders, 70% of net revenues from sales and advertising; net revenues reflect a 10% deduction for Google's operating costs. (ASA §§ 1.89, 1.90, 4.5(a)(i)-(ii)). Revenue splits can be renegotiated by individual Rightsholders. (ASA § 4.5(a)(iii)).

The ASA obligates the Registry to use “commercially reasonable efforts” to locate Rightsholders. (ASA § 6.1(c)). The Registry will receive payments from Google on behalf of Rightsholders and will in turn distribute them to registered Rightsholders. (ASA § 6.1(d)). Funds unclaimed after five years may be used, in part, to cover the expense of locating owners of unclaimed works. (ASA § 6.3(a)(i)(2)). After ten years, unclaimed funds may be distributed to literary-based charities. (ASA § 6.3(a)(i)(3)).⁵

The ASA...