Judge Postpones Hearing On Google Books Deal

By Jessica Dye

Law360, New York (September 25, 2009) -- A federal judge has agreed to push back the scheduled start for fairness hearings on Google Inc.'s proposed royalty settlement with authors and publishers, citing last-minute work currently under way by the settling parties to address a chorus of competitive concerns raised regarding the $125 million deal.

Judge Denny Chin of the U.S. District Court for the Southern District of New York on Sept. 24 granted settling plaintiffs' unopposed request from earlier this week to adjourn the planned Oct. 7 fairness hearing on the deal and directed the writers groups and Google to appear that day before the court to present their plans for resolving the four-year-long fight over Google Books as quickly as possible.

The proposed $125 million Google Books deal — forged between Google and trade publishers and authors represented by the Authors Guild and the American Association of Publishers in 2008 to settle several copyright infringement class actions — is awaiting approval by the district court.

In the agreement's current form, Google would pay money into a general class fund that would distribute royalties to copyright holders whose works appear in the massive, free Google Books database. The search giant would fund the creation of the nonprofit Book Rights Registry, which would manage rights claims for scanned books, and also create a premium, subscription-paid Google Books service for universities and libraries.

Judge Chin's order indicates that the plaintiffs are engaged in ongoing negotiations with the U.S. Department of Justice to revise the deal, likely to “result in significant changes to the existing settlement agreement.”

As his order noted, the outpouring of criticism from a slew of concerned parties — more than 400 in total, from state and federal regulators in the U.S. and abroad to for-profit competitors, nonprofit interest groups, authors, publishers, professors and more — made it clear that “fair concerns” remained in the proposed deal.

Their worries range from whether the deal would give Google too much power over setting royalty reimbursements for authors appearing in the database to whether it would covertly build a monopoly on so-called orphan works — copyright protected works for which no rights-holder can be located — and even if the deal could potentially siphon away unclaimed royalties, properties and rights from state governments.

The Justice Department has had the settlement under formal scrutiny for several months, after indicating its concern that the deal could raise antitrust issues.

However, Judge Chin conceded that there also were “many benefits to society” in a successful Google Book deal that could permit millions of books to be made digitally available to a vast online audience.

Dozens of groups have lent their support to the deal, and even the Justice Department admitted in its interested-party filing that “the proposed settlement has the potential to breathe life into millions of works that are now effectively off limits to the public.”

“It would appear that if a fair and reasonable settlement can be struck, the public would benefit,” Judge Chin wrote. However, he added, “Under all the circumstances, it makes no sense to conduct a hearing on the fairness and reasonableness of the current settlement agreement, as it does not appear that the current settlement will be the operative one.”

The Authors Guild said in a statement that it would continue its work with the Justice Department to amend the settlement.

Google repeatedly has defended the settlement as both pro-competitive and pro-consumer, although it did not oppose the plaintiffs' motion to push back the deadline.

Judge Chin indicated that, while the parties filing briefs over the deal would not be allowed to speak at the status conference hearing Oct. 7, they were welcome to attend.

Google is represented by Kilpatrick Stockton LLP.

The cases are The Authors Guild et al. v. Google Inc., case number 05-08136, and The McGraw-Hill Cos. Inc. et al. v. Google Inc., case number 05-08881, in the U.S. District Court for the Southern District of New York.

--Additional reporting by Jocelyn Allison.