DoJ Re-Nixes Google's Settlement With Authors

The Department of Justice has advised the U.S. District Court for the Southern District of New York that "significant" copyright and antitrust issues remain in the proposed amended settlement agreement between Google (Nasdaq: GOOG) and the Authors Guild.

"The amended settlement agreement suffers from the same core problem as the original agreement," the agency explains in its filing. "It is an attempt to use the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute before the court in this litigation."

The department also acknowledged the progress made on a number of issues and said it "remains committed to working with the parties on issues concerning the scope and content of the settlement."

Long and Winding Road

The DoJ's objections are yet another pothole in what has become a long and winding road for the Guild and Google.

The saga began three years ago when the Association of American Publishers (AAP) and the Authors Guild filed a class action lawsuit to stop Google's book-scanning project and get compensation for copyright holders.

The goal of Google Books is to digitize millions of books, including works that are still under copyright as well as many that are out of copyright or out of print.

In the first agreement negotiated between the two groups, a year after the suit was filed, Google promised to establish a database that would let authors register their works, approve their licensing through Google, and collect royalties.

However, objections to the agreement quickly surfaced -- not only from writers who said the Authors Guild did not represent their rights, but also competing commercial interests such as Microsoft (Nasdaq: MSFT), Yahoo (Nasdaq: YHOO) and Amazon (Nasdaq: AMZN). Their interests are represented by the Open Book Alliance.

Perhaps more important to Google and the Authors Guild, the Justice Department also voiced concerns over that first proposed settlement.

It suggested, for example, that limitations be imposed on "open-ended" provisions for future licensing, which would eliminate potential conflicts among class members. It also said additional protections for unknown rights holders should be provided in a nod to the concerns of foreign authors and publishers.

In addition, the joint-pricing mechanisms among publishers and authors should be eliminated, Justice said, and a mechanism that would allow Google's competitors to have comparable access to the project should be provided.

Second Round

Google and the Authors Guild decided to tweak the agreement in response. Their latest attempt, though, has not passed muster with the DoJ -- or with the Open Book Alliance, which came out in support of the agency's position.

Progress has been made, the DoJ acknowledges in its filing. "The proposed amended settlement agreement eliminates certain open-ended provisions that would have allowed Google to engage in certain unspecified future uses, appoints a fiduciary to protect rightsholders of unclaimed works, reduces the number of foreign works in the settlement class, and eliminates the most-favored nation provision that would have guaranteed Google optimal license terms into the future."

However, it continues, the amended settlement agreement still confers "significant and possibly anticompetitive advantages on Google as a single entity, thereby enabling the company to be the only competitor in the digital marketplace with the rights to distribute and otherwise exploit a vast array of works in multiple formats."

Essentially, the Department of Justice is still concerned about the property rights of so-called orphan works -- books whose ownership or status is still in question, Raymond Van Dyke, a partner with Merchant & Gould, told the E-Commerce Times.

It also doesn't like the opt-out requirement for authors in the proposed settlement, which the DoJ called "unfair," Van Dyke said. Instead it would like to see "owners of all works under Google's aegis opt-in instead."

Next Stop, Court?

"The fact that the Justice Department is still raising concerns does not bode well for Google," Ryan Radia, an analyst with the Competitive Enterprise Institute, told the E-Commerce Times.

It may be that Google and the Authors Guild will decide to make their case before the judge, who ultimately will decide whether to approve the settlement, he suggested.

"I don't think the Department has fully appreciated that this project could benefit consumers," Radia remarked.

The negotiations are ongoing, and New York district court Judge Chin has set another hearing for Feb. 18 in an effort to settle the case, Van Dyke pointed out.