DOJ Filing in Google Book Search

Let me start by saying thanks to Mike for the invitation to blog here. I will probably cross-post some posts here and at the Chicago Faculty blog.

This is a longish post and runs the risk of violating some filter Mike has undoubtedly set about the number of self-cites permitted in a post.

Randy

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Late last night, the Antitrust Division filed its statement in the pending Google Book Search case. Once it became clear that DOJ would participate in the case, everyone understood that the filing would receive a great deal of attention. Filing at 10pm on a Friday — and a Jewish holiday to boot — sounds like DOJ was trying to hide the filing, but I suspect the timing reflects the reality of the real complexities of the case. DOJ’s bottom line is that the proposed settlement agreement should be rejected “in its current form” with the parties encouraged to modify it to comply with “Rule 23 and the copyright an antitrust laws.” (Early commentary on the DOJ filing is available by Danny Sullivan (here) and James Grimmelmann (here).)

The statement of interest is divided into three sections and leads with an analysis of whether the proposed settlement complies with Federal Rule of Civil Procedure 23 on class actions. In one way, that isn’t surprising at all. Take a quick scan at some of the filings –nicely available at the Public Index –and you will see much discussion of both deep conceptual issues and ordinary day-to-day class action mechanics. The Antitrust Division filing does both, but do remember what business they are in: antitrust. The Antitrust Division doesn’t have a general portfolio dealing with class actions, so the extent of the class-action discussion is surprising.

My guess is that it reflects real questions about whether a class action is an appropriate vehicle for the scope of changes proposed through the settlement agreement. DOJ characterizes these as “a matter of public, not merely private, concern” and “typically the kind of policy change implemented through legislation, and not through a private judicial settlement.” That said, DOJ still favors moving forward to improve the settlement: “Because a properly structured settlement agreement in this case offers the potential for important societal benefits, the United States does not want the opportunity or momentum to be lost.” I agree with that. Indeed, that was the starting point for my recent testimony on Google Book Search before the House Judiciary Committee (written here and video here (my direct starts around the 45^th minute)).

The DOJ filing focuses on conflicts between active rights holders and inactive ones, especially orphan holders. Two conflicts jump out. First, orphan holders are locked into the settlement agreement. Active holders can opt out and indeed some publishers have and will negotiate separate deals with Google. The extreme version of this would be a settlement agreement that turns out to be binding only on orphan holders because the active holders opt out and do separate deals. It is hard to know what representativeness means in those circumstances. Second, active rights holders benefit from revenues that orphan works generate if those orphan holders never appear.

DOJ suggests a number of potential modifications, though on this core question of representation DOJ states “that it is difficult to see how any class representative could adequately represent the interests of all owners of out-of-print works (including orphan works).” At the House hearing, in questions, I noted that in other contexts — bankruptcy mass tort cases, for example — it was standard to appoint a separate representative for uncontactable — is that a word? — groups of interested parties.

The statement of interest then turns to antitrust law. For me, at least, this was like getting a test back, since my original paper focused on antitrust issues. My incoming Fall antitrust students will be comforted to know that I think that I passed. I focused on three issues in that paper (and for the quick version, read the four-page intro that I used for my House testimony). One was a technical but important issue involving Noerr-Pennington immunity. There is a risk that judicial approval of the settlement agreement will block a subsequent challenge by DOJ. That would be wrong but the caselaw doesn’t resolve this cleanly. The good news on that shows up in footnote 6, p. 16 of the statement of interest: “The parties have represented to the United States that, with regard to any potential challenge to the legality of the settlement, they will not raise a defense based on the Noerr-Pennington doctrine.”

My second issue was the collective pricing mechanism for consumer purchases. That is tricky — see my paper — but DOJ, while not concluding anything yet — they are very clear on that — suggests that “absent modification of these terms, there is a significant possibility that the Department will conclude that they violate the Sherman Act.”

That leaves us with my third issue, the licensing of the orphan works. The genius and curse of the settlement agreement is that it makes possible the use of the orphan works by Google, but, unfortunately, only by Google. In my paper and my testimony, I suggested a number of ways that that license might be expanded. The DOJ statement of interest frames that as a question of market foreclosure and concludes that their concerns could be minimized if “Google’s competitors could gain comparable access to orphan works.”

The third section is brief — less than a full page. DOJ favors what Google has promised to do for users with print disabilities. That is clear enough. Less clear to me is the second point: “data provided should be available in multiple, standard, open formats supported by a wide variety of different applications, devices, and screens. Once these books are digitized, the format in which they are made available should not be a bottleneck for innovation.” I am not sure what that means exactly. The settlement agreement will generate a great deal of data. Indeed, privacy advocates are very much concerned about what Google will be able to learn about users as they read books online. Other data will be data about rights ownership. For example, some post-1923 books may have entered the public domain because of formalities problems and the process for sorting through rights will generate tons of data on that and on which books aren’t actually orphaned. Finally, the digitized scans themselves are a kind of data as well. My guess is that DOJ is referring to rights-ownership data, but they will have to clarify that at some point.

To conclude, at the House hearing, I called the settlement agreement a beta and said that it would be “ungooglish” to not try to improve it. I understand DOJ to call for exactly those sort of improvements going forward. I hope this interesting process that we are running — hearings in the EU and Congress, a filing by DOJ — will result in an improved version of the settlement and one that will provide a framework for meaningful competition in online libraries.