Google Class Action Settlement: Are You In or Are You Out?

Article Update! 

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If you are a copyright owner, author or publisher, there’s a very good chance your rights may be affected by the proposed settlement agreement in the class action lawsuit against Google. Members of the class have until May 5, 2009 to opt-out of the settlement. Unless they opt out, members of the settlement class will be bound by all determinations and judgments in the litigation, including the dismissal of the case with prejudice and the release of Google from liability. Those who timely opt out will not be bound by orders or judgment entered in the case, and will not receive benefits provided for in the proposed settlement agreement, if/when it is approved by the court.[1]

If you are a member of the class, the following are the actions you may want to take:

• Do nothing and remain in the settlement. If you do not opt-out, you will be bound by the Court’s rulings, including a release of your claims against Google if the proposed settlement is approved by the Court.
• Object to or comment on the settlement. You must object or comment in writing by May 5, 2009.
• Opt out of the settlement and keep your right to sue Google individually. You must opt out in writing by May 5, 2009.
• File a claim for a cash payment (depending on eligibility). You must file your claim by January 5, 2010.
• File a removal request to request Google exclude your works from the project and from all Google servers by April 5, 2011.

II. Thoughts to Consider

Supporters of the settlement believe the agreement will offer a significant benefit to authors and publishers and provide a means for copyright owners to control online distribution and access to their works. By providing Google the rights to offer online access to their works, copyright owners will receive a portion of revenue. Thus, the agreement may offer significant revenue streams for many copyright owners, particularly the owners of works which are currently out of print and no longer in distribution. In addition, making collections available online will enable many libraries and other institutions to better preserve and maintain collections and provide access to students, researchers, and staff simultaneously, among others.

The agreement can be seen as a positive step toward increased distribution and accessibility, which will help copyright owners maximize revenues. However, copyright owners and publishers must give careful thought to the significant legal implications of the settlement agreement, the plan of allocation for revenues and other business considerations which may impact the decision to opt-in or opt-out of the settlement. This article will help you distill some of the major provisions of the agreement, and may help address some of the issues that influence such a decision.

III. Overview of Google Lawsuit and Status

Over three years ago, on September 20, 2005, The Authors Guild, the Association of American Publishers and several authors brought a class action lawsuit against Google based on its digitization of thousands of books for inclusion in Google’s library project.[2] The Authors Guild, Inc., et al. v. Google Inc., Case No. 05 CV 8136 (S.D.N.Y.). On October 28, 2008, after nearly two years of negotiating, the parties announced they had reached a settlement agreement (134 pages in length) that will result in payments by Google of over $125 million, including payments to resolve claims by the class and funding to create and setup a Book Rights Registry. In exchange, the class will release Google from liability based on its digitization of books and Google will be allowed to proceed with its project to digitize millions more books and make a number of revenue-earning uses by providing public access to the books online. The settlement also resolves a separate lawsuit filed by five large publishers as representatives of the Association of American Publishers (The McGraw-Hill Companies, Inc.; Pearson Education, Inc. and Penguin Group (USA) Inc., Publishers; John Wiley & Sons, Inc.; and Simon & Schuster, Inc.). The McGraw-Hill Companies, Inc., et al. v. Google Inc., No. 05 CV 8881 (S.D.N.Y.).

The U.S. District Court for the Southern District of New York preliminarily approved the settlement agreement on November 14, 2008, and will hold a final settlement/fairness hearing on June 11, 2009 to determine (a) whether the terms and conditions of the settlement are fair, reasonable, and adequate; (b) whether to certify the class and Sub-Classes; and (c) whether the proposed settlement agreement should be approved by the Court and judgment should be entered.

At this stage of the class-action suit, members of the class have until May 5, 2009 to opt-out of the settlement.[3] Persons who do not opt out but wish to object or be heard by the Court on the settlement must file their statements of objections and a Notice of Intent to Appear no later than May 5, 2009.

IV. Overview of Major Settlement Provisions

As the settlement agreement is 134 pages in length, we simply cannot give an overview of the entire document. However, below you will find an overview of the major settlement provisions.[4]

Given the complexity of the agreement, in order to digest the following overview (and the settlement itself) you will need to know some of the key definitions for terms used in the Settlement Agreement. At the end of this article, you will find a glossary of key terms, which appear capitalized in this article.

A. The Class – Are You a Member?

The sheer scope of the class means that the settlement could potentially affect hundreds of thousands of individuals and companies, if not more.

Settlement class members include all persons that, as of January 5, 2009, have a Copyright Interest (own a U.S. copyright or an exclusive license of a U.S. copyright) in one or more Books or Inserts. The class is further divided into two sub-classes, authors (the Author Sub-Class) and publishers (the Publisher Sub-Class). The Author Sub-Class includes authors, their heirs, successors and assigns, and any other members of the Settlement Class who are not members of the Publisher Sub-Class. The Publisher Sub-Class includes (a) companies that publish books, and their exclusive licensees, successors and assigns, and (b) companies that publish Periodicals and have a Copyright Interest in one or more Inserts, and their exclusive licensees, successors, and assigns.

Although a searchable database of books included in the settlement has been compiled, the database does not include all books covered by the settlement.[5] Thus, even though your book may not appear on the list, if you own a U.S. copyright interest in a book published on or before January 5, 2009, you should consider yourself a Class member.

B. Show Me The Money - Payments by Google Under the Settlement Agreement

The settlement agreement requires Google to pay at least $45 million to authors and publishers in the class who’s works were digitized by Google without their permission. Google will also pay $34.5 million to establish a Book Rights Registry (“Registry”), which will locate settlement class members, maintain their contact information and collect and pay revenues on behalf of the settlement class for use of copyrighted works under the settlement. Prospectively, Google will pay 63% of the revenues earned from its commercial uses of the settlement class members’ works (paid to the Book Rights Registry which then allocates funds).

1. Damages to the Class - Cash Payments for Already Digitized Books

As part of the settlement, Google will pay members of the class who do not opt-out (“Rightholders”) for books already digitized a minimum of $45 million as settlement of their claims. In order to receive the payment, the book must have been digitized by Google without authorization from the Rightsholder as of May 5, 2009. To be eligible for a cash payment for Books and Inserts already digitized by Google, at least one Rightsholder must complete a claim form on or before January 5, 2010.[6]

If more than $45 million is required to pay all of the eligible claims, Google will pay the additional funds necessary to make all eligible claims. If the total amount distributed in payment of eligible claims is less than $45 million, the balance will be distributed to Rightsholders by the Registry. Funds will be distributed as follows:

• At least $60 per Principal Work (each book contains only a single principal work)
• At least $25 per Entire Insert
• At least $5 per Partial Insert

Note, only one cash payment will be made for any content digitized by Google, regardless of how may works digitized that contain the same content (e.g. only one payment for the hard cover and soft cover editions of a book, regardless of whether Google digitized both separately; only one cash payment for content contained, as Inserts, in multiple books).

Where a publisher and author own copyright interests in the same book, cash payments for already digitized in-print books will be paid by Google to the publisher of the book, who will then pay any amounts due to authors in accordance with the terms of the contract covering such book. Cash payments for already digitized Out-of-Print books owned by both an author and a publisher (i.e., where the rights have not reverted to the author or the work was not a work-for-hire) the payment will be split as follows: (a) for books first published prior to 1987, 65/35 in favor of the author; and (b) for books first published on or after 1987, 50/50.

2. Prospective Royalties Payments for Authorized Display Uses of Books

Under the settlement, Google will continue to digitize books in order to make them accessible via its website. The agreement authorizes Google to make commercial uses of Books and Inserts that are digitized, including selling subscriptions to its database to institutions (e.g. universities, corporations, government offices), selling online access to books to consumers, displaying previews and snippets in order to increase interest in sales and earn advertising revenues, and placing advertisements on web pages devoted to a single book. Revenues earned from these sources will be split between Rightsholders and Google at 63%, 37%, respectively.

The settlement provides different treatment for in-print and out of print books. For in-print books, Google will not make any display uses of the book unless the Rightsholder affirmatively includes their book in the Google project. Out-of-print books will be automatically included in the Google project and Google may make display uses of out-of-print books unless the Rightsholder expressly instructs Google not to include the book. Notably, the settlement permits Google to make non-display uses of in-print books without the express permission of the Rightsholder.

Classification of Books as in-print or out-of-print depends on whether the Book is commercially available. Google will make an initial determination of whether a Book is “commercially available.” This determination is based on whether the book is being offered for sale new through one or more customary channels of trade in the U.S. as of January 5, 2009. Rightsholders and the Registry have the ability to challenge Google’s determination.

To receive compensation for Google’s commercial uses of Books and inserts, Rightsholders must register with the Book Rights Registry. The Registry then determines compensation for uses and allocates and distributes such compensation.

Future revenue-earning uses may also be available by agreement of Google and the Books Rights Registry. If a new commercial use is authorized, Rightsholders will be notified and given an opportunity at any time to exclude their Books and Inserts from such uses.

Google is also permitted to make non-display uses of Books and Inserts. These are uses that do not involve displaying content from the Books or Inserts to the public. By way of example, display of bibliographic information, full-text indexing without display of content (such as listing the number of location of search matches), geographic indexing of Books, algorithmic listings of key terms for chapters of Books, and internal research and development using digital copies are all non-display uses.

C. Establishment of Book Rights Registry

The agreement will create an independent, not-for-profit Book Rights Registry to represent authors, publishers and other Rightsholders. The Registry will be responsible for maintaining a database of Rightsholders and collecting, allocating and paying money to Rightsholders earned under the agreement.

Under the settlement, Google will pay $34.5 million to establishment and initially fund a Books Rights Registry. After Google’s payment is depleted, the Books Rights Registry will be funded by an administrative fee to be taken out of Rightsholders revenues.

Rightsholders who register their Books and Inserts with the Registry will be compensated for the use of such Books and Inserts and on inclusion of their Books and Inserts in any subscription database. To receive fees for use of Books and Inserts, Rightsholders must register their Books and Inserts with the Registry within five years of the Effective Date.

The Registry will be responsible for developing a formula for calculating the “usage” of a book, based on a number of factors, including the number of times users view the book and how much of the book is viewed.

D. Right to Remove and Exclude Books from Google Project

The settlement creates a mechanism that enables Rightsholders to determine whether and to what extent they wish to have their works included in Google’s library project. Under this mechanism, Rightsholders can request Google exclude their works from the project and from all Google servers. Google will honor all such removal requests made within twenty-seven months of January 5, 2009 or April 5, 2011. Thereafter, requests to remove a book are only honored if the book has not yet been digitized by Google at the time the request is received.

Even if Rightsholders miss this deadline, they can still exercise exclusion rights and manage which display uses they wish Google to make of their Books and change elections over time. Exclusion means the Books will not be displayed in one or more display uses by Google. However, the Book will not be deleted from Google or participating library servers.

Notably, all authorizations granted to Google under the settlement agreement are non-exclusive. This means Rightsholders are entitled to authorize any other individual or entities to use their books in any manner. The settlement agreement and authorizations to Google do not transfer any copyright ownership in the Inserts or Books to Google.

E. Other Important Provisions

1. Security Provisions: Google and the plaintiffs of the lawsuits have developed security standards to prevent security breaches and unauthorized uses of the Google database.
2. Dispute Resolution Related to the Settlement Agreement: The settlement provides that Google, the Registry, members of the author and publisher sub-classes and participating libraries must attempt to informally resolve their disputes concerning matters pertaining to the Settlement. If unsuccessful, then the dispute must be arbitrated. The arbitrator’s decision is final and binding on the parties to the dispute.
3. Release: In exchange for benefits conferred by Google, all members of the Settlement Class who do not opt out will be deemed to have released all claims against Google and each Participating library that arise out of certain conduct occurring prior to the Effective Date, including Google’s digitization of books and inserts.

V. Conclusion

Whether to opt-in or opt-out of the settlement will depend on the many factors which are specific to each personal and business situation. Doing nothing will mean that if the settlement agreement is approved, you will be bound by its terms. In order to ensure protection of your rights, we suggest you read the notices and settlement agreement to determine the best course of action as it relates to your rights. If you have questions regarding the settlement and your rights, you should speak to a professional with expertise in copyright law.

Glossary

A "Book" is a written or printed work that meets the following three conditions on or before January 5, 2009:

1. It was published or distributed to the public or made available on sheets of paper bound together in hard copy form for public access under the authorization of the work's U.S. copyright owner; and
2. It was registered with the U.S. Copyright Office, UNLESS the work is not a "United States work" under the U.S. Copyright Act, in which case such registration is not required; and
3. It is subject to a U.S. copyright interest (either through ownership, joint ownership, or an exclusive license) implicated by a use authorized, or for which compensation could be payable, by the Settlement.

The term ‘book’ does not include: (i) Periodicals, (ii) personal papers (e.g. unpublished diaries or bundles of notes or letters), (iii) written or printed works in which more than thirty-five percent (35%) of the pages contain more than fifty percent (50%) music notation and lyrics interspersed, if any (for purpose of this calculation, ‘music notation’ means notes on a staff or tablature), (iv) written or printed works in, or as they become in, the public domain under the Copyright Act in the United States, or (v) Government Works.”

“Continuous Preview” means that Google may display up to 10% of the pages of a book without being subject to the adjacent page limitation (no more than 5 adjacent pages) of Standard Preview.

“Copyright Interest” means (a) ownership (including joint ownership) of a United States copyright interest or (b) an exclusive license of a United States copyright interest, in each case only if and to the extent the interest is implicated by a use that is authorized or for which compensation could be payable under this Settlement Agreement.

“Effective Date” means the first date upon which each and all of the following events shall have occurred: (a) the Final Approval Date has occurred; (b) the Court has entered the Final Judgment and Order of Dismissal with prejudice as to Google against Plaintiffs and all Rightsholders; and (c) the time for any appeal from the Final Judgment and Order of Dismissal in the Action and the Court’s approval of this Settlement Agreement has expired, or, if appealed, the Final Judgment and Order of Dismissal has been affirmed in its entirety by the court of last resort to which any such appeal has been taken and such affirmance has become no longer subject to further appeal or review. Neither Rule 60 of the Federal Rules of Civil Procedure nor the All Writs Act, 28 U.S.C. § 1651, shall be taken into consideration in calculating the above stated time periods.

“Fixed Preview” means that Google may display up to 10% of the pages of a book. The pages displayed to all users are the same, and do not vary by user or depend on a user's search. Google will choose the pages to be displayed in Fixed Preview unless the Registry developed a mechanism to allow Rightsholders of books to select the pages. Where Preview Use is authorized, Fixed Preview is the default setting for the following types of books: dictionaries, drug reference guides; encyclopedias; price/buyer guides; quotation books; test preparation/certification guides; and thesauri.

Content from one source is an "Insert" if it meets all of the following conditions:

1. It must be text; or an illustration in a children's Book; or tables, charts, graphs that are not pictorial works; or musical notation (i.e., notes on a staff or tablature); and
2. It must be contained in a Book, government work or public domain book that was published on or before January 5, 2009; and
3. It must be protected by a U.S. copyright where the U.S. copyright interest in the Insert is held by someone other than a Rightsholder of the Book's "Principal Work." (For example, if you own rights in a poem that is contained in a Book for which you also hold a U.S. copyright interest, then your poem, as it appears in your Book, is not an Insert; however, it would be an Insert if the poem is contained in a Book for which someone else holds the U.S. copyright interest); and
4. It must have been registered – either alone or as part of another work – with the U.S. Copyright Office on or before January 5, 2009, UNLESS the Insert or that other work is not a "United States work," in which case such registration is not required.

Partial Insert means an Insert other than an Entire Insert but is independently protected expression under the Copyright Act (e.g. excerpts form a book or magazine article, quotations, stanzas from poems or portions of song’s lyrics).

“Revenue Models” means Institutional Subscriptions, Consumer Purchases, Advertising Uses, Public Access Service and any other revenue models agreed between the Registry and Google pursuant to Section 4.7 of the settlement agreement.

“Rightsholders” means a member of the settlement class who does not opt out of the Settlement by the opt-out deadline.

“Standard Preview” means that when a user searches for a term within a book, Google may display up to 20% of the pages of the book, but no more than 5 adjacent pages at a time. For fiction books, Google will block the final 5% of the book, or a minimum of the final 15 pages. For fiction books, Google may also display up to 5% of the pages of the book, or up to 15 pages, whichever is less, adjacent to the user's search term. Standard Preview is the default Preview Use setting and, where Preview Use is authorized, will be offered for most books unless the Rightsholder of the book chooses Fixed Preview or Continuous Preview.