Judge Rules Against Google Books Settlement

A federal judge has ruled against Google (NSDQ: GOOG) in its long-standing attempt to expand a plan to scan and then distribute millions of books online. Google was sued by the Authors’ Guild and the Association of American Publishers back in 2004, with the writers’ groups saying that the company’s Google Books site broke copyright laws. The two sides settled their dispute in 2008, but revised that initial settlement in fall 2009 in response to objections from the Justice Department and competitors, who claimed that the initial settlement gave Google too much control over the electronic distribution of in-copyright, out-of-print books.

In an opinion issued today, U.S. Circuit Judge Denny Chin said the new settlement remained too favorable to Google. “The [settlement] 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,” Chin wrote.

Chin suggested that Google and the publishers could solve many of the problems with the settlement by changing from a system where authors must “opt out” to keep their content out of Google Books, to a system where they would “opt in.” Now Google and the publishers will have to decide whether to revise the settlement and re-submit it to Chin, or appeal Chin’s decision to a higher court.

Parts of the opinion suggest that Chin is bothered that Google kicked off Google Books without asking permission from authors first. If it wasn’t for the settlement, Google would have “no colorable defense” in a copyright lawsuit, Chin writes, yet the proposed settlement would have granted Google “control over the digital commercialization of millions of books, including orphan books and other unclaimed works. And it would do so even though Google engaged in wholesale, blatant copying, without first obtaining copyight permissions.”

About 500 comments were submitted to Chin regarding the settlement, with “the vast majority” objecting, Chin noted. Objectors included two major Google competitors, Microsoft (NSDQ: MSFT) and Amazon (NSDQ: AMZN), who complained that the settlement would violate existing copyright law. The class included all U.S. authors with a valid book copyright, but about 6,800 class members opted out, choosing to preserve their rights to negotiate with Google-or sue Google-as individuals.

In the decision, Chin quotes Thomas Rubin, a Microsoft lawyer, who told the court that Google bypassed the “painstaking” and “costly” process of getting permission to scan books. “Google … took a shortcut by copying anything and everything regardless of copyright status,” Rubin stated.

And fundamentally, Chin writes, some of the issues addressed in the settlement-such as creating a marketplace for “orphan works” for situations where copyright owners can’t be found-should be the purview of Congress, not courts.

The settlement would have set up a revenue split between authors and Google in which 70 percent of the revenue from Google Books would have gone to authors and publishers.

In a statement, Google tells us, “This is clearly disappointing, but we’ll review the Court’s decision and consider our options. Like many others, we believe this agreement has the potential to open-up access to millions of books that are currently hard to find in the US today. Regardless of the outcome, we’ll continue to work to make more of the world’s books discoverable online through Google Books and Google eBooks.”

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