In case you need a recap of what this is all about, the Google Books Amended Settlement Agreement (ASA) was a proposed agreement arranged by some publishers, authors, and author groups as a way to create a compensation and licensing system for Google Book Search, which uses the full text of copyrighted books to provide snippets in search results. Some authors and publishers claim that what Google is doing with Book Search amounts to widespread copyright infringement instead of fair use. For those authors and publishers who had sued Google, the proposed settlement would have protected them from the risk of losing on fair use grounds if the suit proceeded. More controversially, it would have also implemented an opt-out system (instead of opt-in) for authors, and an arbitration system that favored Google and publishers at the expense of authors’ rights. From a competition perspective, it would have also shielded Google from more lawsuits, while leaving competitors unprotected.

U.S. District Court Judge Denny Chin rejected the ASA this past March, noting among other things that it went too far in giving Google special privileges (especially regarding orphaned works), and that the opt-out system was unfair to authors. While that pretty much left it dead in its current state, it also left the door open for Google and the plaintiffs to amend the agreement and try again.

But with yesterday’s rejection of a settlement in Freelance, it looks like there’s no possible way for the ASA to proceed.

Freelance is a class action case from the 90s (actually Tasini v. New York Times), and it involves freelance writers who claimed newspapers didn’t have permission to post their work online without compensation. Its relevance to the ASA is that in both lawsuits, the plaintiffs tried to create a single class out of all authors who might be affected by the issue, and yesterday’s Second Circuit Court of Appeals said that was more or less impossible:

In a 2-1 ruling, the second circuit yesterday held that the district court which approved a settlement between freelance writers and publishers in the class action case known shorthand as Freelance “abused its discretion in certifying the class and approving the Settlement, because the named plaintiffs failed to adequately represent the interests of all class members.”

In really plain language, essentially the judges who rejected Freelance‘s settlement yesterday acknowledged that getting all authors to agree to the same thing is like herding cats, and therefore you can’t put all authors in a single class and claim to represent their collective best interests. There may indeed be no such thing as “collective best interests” when it comes to authors.

So what happens next for Google Book Search? The plaintiffs could move forward with the suit, but it’s a considerable gamble because if they lose, then they’ll have inadvertently expanded the definition of fair use. Personally I think that’s great for society, but it’s not necessarily so great for publishers’ business models, hence their outrage at Google.

Another possible byproduct of the death of the ASA is that Google’s competitors can move forward with their own digitization projects. They’ll be assuming the same risk of lawsuits over copyright that Google is now facing, but at least they now know that Google isn’t about to carve out a special protected arrangement that will give it an unbeatable competitive edge.

(Photo: Aviruthia)

“A settlement isn’t the right way to settle this.”

New York Law School Associate Professor James Grimmelmann, who remained a largely non-partisan outside observer (although he has stated he thinks the settlement should be approved, with modifications), pointed out that a class-action lawsuit isn’t the right way to determine an issue like fair use under copyright law. It needs to be addressed by the government and not through private negotiations, he said, because it has huge societal implications.

Grimmelmann also pointed out that if the settlement goes through, it’s likely Google will emerge with a huge market advantage over any potential competitors, which may negatively impact any healthy competition in the marketplace.

Paul Aiken, executive director of the Authors Guild and a lawyer, argued that the risk of losing the lawsuit was too great: if the courts found Google’s scanning to fall under fair use–as Grimmelman and at least one other legal expert think it could–then others would copy Google’s scanning project. “In our view,” he told the hostile crowd, “It would be catastropic.”

Grimmelman responded that the proposed settlement wasn’t the only valid solution, and that there could have been other paths to a compromise.

“The settlement is overreaching, and probably untenable.”

Lynn Chu, an attorney, author, and book agent, was the most vocal opponent of the settlement, calling it an “outrageously bad deal as a financial matter” for writers and a “typical entertainment industry scam.” At one point she implied that the Authors Guild had been misled by incompetent legal counsel, which not surprisingly seemed to anger Aiken.

Chu pointed out that the business model proposed by the settlement has nothing to do with the original lawsuit, which was solely about fair use. “You glued a business contract to a waiver,” she told Aiken, and accused the Authors Guild of appointing itself as an agent to the world’s authors.

She also criticized the proposed Book Rights Registry, which is sort of an ASCAP for authors appearing in Google Book Search, noting that it would help Google shift costs over to authors by forcing authors to take care of administrative and publishing tasks on their own dime.

“[The settlement] probably won’t survive an appeal,” she told the crowd, a sentiment that Grimmelmann seemed to agree with. Still, she cautioned, “There’s no reason to be apathetic.”

“The settlement isn’t really author-friendly at its core.”

Edward Hasbrouck of the NWU pointed out a worst-case scenario that could happen to an author under the terms of the settlement: You have a book included in the database, but your ex-publisher claims that because it has authorized a print-on-demand version of the book it still owns the rights, so you and the publisher agree to binding arbitration and you lose. Since the arbitration is legally enforceable, you will have permanently lost your claim of ownership over the digital copy in Google’s database.

Chu noted that Google reserves the right to audit the Book Rights Registry, but that the favor isn’t returned because Google claims trade secrets will be compromised. She also noted that authors can make their own deals with Google and don’t need to rely on the settlement.

Note: the Science Fiction & Fantasy Writers of America hosted an online panel discussion this morning. You can read through it at http://sfwa.org/online-google-settlement-panel/.