DOJ Asks Court to Reject Google Book Search, Pending Changes

The Department of Justice said the Google Book Search settlement would violate class action, copyright and antitrust law and said it should not be approved without changes. The DOJ suggested the parties limit the provisions for future licensing; eliminate potential conflicts among class members; provide more protections for unknown rights holders; address the concerns of foreign authors and publishers; remove the joint-pricing mechanisms among publishers and authors; and enable book-scanning rivals, such as Amazon, to access the books for resale.

The Department of Justice Sept. 18 said the Google Book Search settlement would violate class action, copyright and antitrust law and said it should not be approved without changes.

New York District Judge Denny Chin gave the DOJ a Sept. 18 deadline to voice its opinion on Google Book Search, a deal that would let Google scan millions of books online and charge readers to use them, with authors and publishers getting a share of the proceeds. Other parties were required to file their concerns by Sept. 8. Chin is holding a hearing on the proposed settlement Oct. 7.

The DOJ urged the court to order Google and the Author’s Guild and the Association of American Publishers to make changes to the deal: "This court should reject the proposed settlement in its current form and encourage the parties to continue negotiations to modify it so as to comply with Rule 23 and the copyright and antitrust laws."

The DOJ suggested the parties limit the provisions for future licensing; eliminate potential conflicts among class members; provide more protections for unknown rights holders; address the concerns of foreign authors and publishers; remove the joint-pricing mechanisms among publishers and authors; and enable book-scanning rivals, such as Amazon, to access the books for resale.

Echoing concerns voiced by other opponents of the deal, the DOJ said it is concerned the deal will restrict pricing competition among authors and publishers.

Orphaned works are those that are out of print and whose authors cannot be found. The DOJ believes the proposed settlement would grant Google too much power over these works, limiting competition with rival book providers. Amazon, which has its own effort to scan books online and offer them through its Kindle electronic readers, has made similar claims. Google moved to assuage such concerns by offering to let book retailers resell books from its Google Book Search catalog.

Google, which is reportedly modifying the Google Book Search deal for the DOJ, chose to see the silver lining in the DOJ’s filing, noting in a statement: "The Department of Justice’s filing recognizes the value the settlement can provide by unlocking access to millions of books in the U.S.  We are considering the points raised by the Department and look forward to addressing them as the court proceedings continue."

Consumer advocates were joyous about the DOJ’s finding:

"This is a victory for consumers and the broad public interest," said John M. Simpson, consumer advocate with Consumer Watchdog. "Consumer Watchdog supports digitization and digital libraries in a robust competitive market open to all organizations, both for-profit and non-profit, that offer fundamental privacy guarantees to users. But a single entity cannot be allowed to build a digital library based on a monopolistic advantage when its answer to serious questions from responsible critics boils down to: ‘Trust us. Our motto is "Don’t be evil."’"

Proponents of the deal had a different take. Ed Black, president and CEO of the Computer & Communications Industry Association, said the DOJ was overstating the antitrust concerns, in a statement:

"We believe this deal enhances competition among books and paves the way for competition in the online book marketplace, and helps disseminate information and knowledge in the best traditions of our industry. The DOJ makes a variety of arguments about class action procedure and antitrust. Some antitrust conerns outlined by the DOJ are overstated, and in any event can certainly be addressed. These should not be an obstacle to the court approving the legal settlement."

The DOJ, meanwhile, noted that its antitrust division is still investigating the proposed settlement, but acknowledged its filing is a good gauge for how it feels about Google Book Search as it stands.

Read more about this issue on TechMeme here, but Search Engine Land’s Danny Sullivan dissects the filing best here.

DOJ Urges Changes To Google Book Deal

The Justice Department weighed in on Google’s plan
to create the world’s largest digital library and bookstore late
Friday, telling a New York federal court that it should press for
changes to a pending $125 million deal in a class-action lawsuit
involving the Internet giant, authors and publishers. The government
said it has concerns about the arrangement, which stemmed from a 2005
suit, but a properly structured deal could have societal benefits.

DOJ told U.S. Judge Denny Chin who has scheduled a
hearing for Oct. 7, that the parties should consider the following
changes: imposing limitations on open-ended provisions for future
licensing; eliminating potential conflicts among class members;
providing additional protections for unknown rights holders; addressing
concerns of foreign authors and publishers; eliminating joint-pricing
mechanisms among publishers and authors; and providing a way for
Google’s competitors to gain comparable access.

The U.S. government’s top copyright official warned last week that
the settlement would encroach on Congress’ role in setting copyright
policy and would let Google "engage in a number of indisputable acts of
copyright infringement." Register of Copyrights Marybeth Peters testified alongside fans and foes of the proposal during a House Judiciary Committee hearing. Google Chief Legal Officer David Drummond said the deal complies with copyright law and will lower barriers to entry for competitors.

The
Open Book Alliance, a group formed by interests who oppose the current
settlement plan, said it was pleased with DOJ’s action. Making books
searchable, readable and downloadable can unlock huge amounts of
cultural knowledge but the arrangement as drafted is the wrong way to
go about making that promise a reality, the group said. One of Google’s
chief critics, a nonprofit called Consumer Watchdog, said even if DOJ’s
concerns are addressed, the settlement should not be implemented.

Google, the Authors Guild and the Association of American Publishers
issued a joint statement saying DOJ’s filing "recognizes the value the
settlement can provide by unlocking access to millions of books in the
U.S. We are considering the points raised by the department and look
forward to addressing them as the court proceedings continue."

U.S. Urges Court To Reject Google Book Deal

WASHINGTON, D.C. — The U.S. Justice Department urged a New York
court on Friday to reject Google’s controversial deal with authors and
publishers that would allow the search engine giant to create a massive
online digital library.

The Justice Department said in a filing that the court "should
reject the proposed settlement in its current form and encourage the
parties to continue negotiations to modify it so as to comply with…
copyright and antitrust laws."

The filing was to a New York court considering settlement of a 2005
class action lawsuit. In that suit, authors and publishers had accused
Google of copyright infringement for scanning libraries full of books.

The proposed settlement, which was reached last October, would
establish a registry to pay authors for works in Google’s book search.

The department said it had not finished its investigation but said
that there was a "significant potential" that the division would
eventually decide the settlement broke antitrust law.

In a statement, Google, the Authors Guild and the Association of
American Publishers said the Department of Justice filing "recognizes
the value the settlement can provide by unlocking access to millions of
books" in the United States."

"We are considering the points raised by the Department and look
forward to addressing them as the court proceedings continue," they
added in the statement.

The Justice Department noted that the "settlement appears to give
book publishers the power to restrict price competition" and would give
Google "de facto exclusivity" in distribution of orphan works, books
which are in copyright but the rights holder cannot be located.

The department noted that the settlement allows the Book Registry to license these works and to then distribute the money.

"The structure of the proposed settlement, therefore, pits the
interests of one part of the class (known rightsholders) against the
interests of another part of the class (orphan works rightsholders,"
the department said in its filing.

The Justice Department indicated that ongoing talks with Google —
which a department official characterized as "very constructive" —
could lead to changes that would make the settlement acceptable.

"We’ll see if they come to fruition," the official said.

John Simpson of Consumer Watchdog said he was pleased with the filing.

"As the Justice brief makes clear, the proposed class-action
settlement is monumentally overbroad and invites the court to overstep
its legal jurisdiction, to the detriment of consumers and the public,"
Simpson said in an email.

Earlier on Friday, European groups opposed to the settlement urged European Union regulators to investigate.

Under the terms of the settlement, Google will pay $125 million to
create a Book Rights Registry, where authors and publishers register
works and are paid for books and other publications that the search
giant would put online.

A fairness hearing on the deal has been set for October 7 in the federal court in Manhattan.

The case is: Authors Guild et al v Google Inc 05-08136 in U.S. District Court for the Southern District of New York (Manhattan).

Consumer Watchdog Praises Department Of Justice Action In Google Books Case, Warns Major Issues Including Lack Of Privacy Guarantees Remain Problematic

SANTA MONICA, CA — Consumer Watchdog praised the U.S. Justice Department for objecting to the proposed Google Books settlement in a brief the department filed in U.S. District Court tonight.

The nonpartisan, nonprofit consumer group had asked the Justice Department to intervene in the case on antitrust grounds last April. Justice announced it was investigating in July. Justice’s objections tonight went beyond antitrust concerns.

Read the Department of Justice brief here.

“This is a victory for consumers and the broad public interest,” said John M. Simpson, consumer advocate with Consumer Watchdog. “Consumer Watchdog supports digitization and digital libraries in a robust competitive market open to all organizations, both for-profit and non-profit, that offer fundamental privacy guarantees to users. But a single entity cannot be allowed to build a digital library based on a monopolistic advantage when its answer to serious questions from responsible critics boils down to: “Trust us. Our motto is ‘Don’t be evil.’”

“As the Justice brief makes clear, the proposed class-action settlement is monumentally overbroad and invites the court to overstep its legal jurisdiction, to the detriment of consumers and the public,”  Simpson said. “The proposed settlement agreement would strip rights from millions of absent class members, worldwide, in violation of national and international copyright law, for the sole benefit of Google.”

Consumer Watchdog stressed that even if Google, The Authors Guild and the Association of American Publishers agree to change their deal to overcome Justice’s antitrust objections, the settlement still should not be implemented.

“Solving the antitrust problem is only piece of the problem,” said Simpson. “Another deal-breaker should be the complete lack of privacy guarantees. Google, under pressure from the Federal Trade Commission, released a so-called ‘privacy policy’, but what’s to stop them from changing it the day after a settlement is approved on a corporate whim?”

Consumer Watchdog asked the Justice Department last April to intervene in the Google Books settlement because of antitrust concerns. Kasowitz, Benson filed an amicus brief in New York’s Southern U.S. District Court opposing the deal on Consumer Watchdog’s behalf. Last week Simpson was one of eight witnesses to testify about the deal to the House Judiciary Committee.

Read the brief here.

Read the testimony and see a video of the hearing here.

The case in U.S. District Court’s Southern District of New York stems from a suit brought by The Authors Guild and the Association of American Publishers.  Judge Denny Chin has said that around 400 briefs have been filed in the case and that he may have to limit the number of speakers at the fairness hearing set for Oct. 7.

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Consumer Watchdog, formerly the Foundation for Taxpayer and Consumer Rights, is a nonprofit, nonpartisan consumer advocacy organization with offices in Washington, DC and Santa Monica, Ca.  Our website is: www.ConsumerWatchdog.org.

Kasowitz, Benson, Torres & Friedman LLP is a national law firm with over 300 lawyers specializing in high stakes, complex litigation.  The firm has offices in New York, Newark, Houston, Atlanta, Miami and San Francisco. For more information, visit www.kasowitz.com.
Contact: Daniel Fetterman, 212-506-1934, dfetterman@kasowitz.com or Peter Toren, 212-506-1986, ptoren@kasowitz.com.

DOJ: Court Should Reject Google Book Search Settlement

The U.S. Department of Justice has come out against the proposed
agreement to settle copyright lawsuits that authors and major
publishers filed against Google over the search company’s book search
program.

"This Court should reject the Proposed Settlement in its current
form and encourage the parties to continue negotiations," reads a
filing the DOJ submitted to the U.S. District Court for the Southern
District of New York late on Friday.

The proposed settlement must be modified by Google and the
plaintiffs so that it complies with U.S. copyright and antitrust laws,
the DOJ said in its filing, a 32-page Statement of Interest.

The DOJ’s opinion is likely to be seen a major blow against Google,
which has been in court over this matter for about four years and is
eager to get the case settled.

The DOJ had until Friday to submit a written report to the court on
the findings of a formal investigation over whether the proposed
agreement violated U.S. laws.

Rumors that the DOJ had started reviewing the proposed agreement
surfaced in April. The DOJ confirmed that it was conducting a formal
investigation in July.

Those following the case have been widely anticipating the result of
the DOJ’s probe of the proposed agreement, which has been loudly
praised and criticized since it was announced in October of last year.

Book authors and the Authors Guild filed a class action lawsuit,
while five large publishers filed a separate lawsuit as representatives
of the Association of American Publishers’ membership.

The lawsuits were brought after Google launched a program to scan
and index sometimes entire collections from the libraries of major
universities without always getting permission from the copyright
owners of the books.

Google made the text of the books searchable on its book search
engine, claiming it’s protected by the fair use principle because it
only showed snippets of text for in-copyright books it had scanned
without permission.

However, after two years of negotiations, Google and the plaintiffs reached middle ground, hammering out a wide-ranging settlement agreement
that calls for Google to pay US$125 million and in exchange gives the
search company rights to display meatier chunks of these in-copyright
books, not just snippets.

In addition, Google would make it possible for people to buy online
access to these books. The agreement would also allow institutions to
buy subscriptions to books and make them available to their
constituents.

A royalty system would also be set up to compensate authors and
publishers for access to their works via the creation of the Book
Rights Registry. This would be an independent, nonprofit entity
entrusted with distributing payments to copyright holders earned
through online access to their works. Revenue will come from
institutional subscriptions, book sales and ad-revenue sharing.

The Registry, whose board of directors would be made up of an equal
number of author and publisher representatives, would also locate and
register copyright owners, who in turn have the option to request to be
included in or excluded from the project.

A big portion of Google’s $125 million payment would go towards
funding the Registry, while the rest would be used to settle existing
claims by authors and publishers and to cover legal fees.

Google, the Authors Guild and the AAP maintain that the proposed
settlement will be beneficial to authors, publishers and readers by
making it easier to find, distribute and purchase books, especially
those that are out of print.

However, critics have raised several objections, including what they
perceive as excessive control by Google over prices and over so-called
"orphan works." The latter are books that are under copyright but whose
owners can’t be found because the author has died or the publishing
house disappeared.

The court where the case is being heard allowed hundreds of backers
and critics of the proposed agreement to submit opinions for several
months. That comment period closed earlier this month.

Consumer Watchdog, a
consumer protection organization that earlier this year urged the DOJ
to get involved, filed a 30-page document opposing the agreement,
saying it will "strip rights from millions of absent class members,
worldwide, in violation of national and international copyright law,
for the sole benefit of Google."

There should be a competitive book-search market, while the U.S.
Congress must solve the orphan works problem, according to the group.
"The parties simply cannot justify this ‘solution’ which does not
adequately protect the Rightsholders and unfairly benefits a single
party," reads the Consumer Watchdog statement.

Meanwhile, the Center for Democracy and Technology (CDT) came out in
favor of the deal, saying the new book search services will be
"extraordinarily valuable, and will make available to the public a vast
amount of knowledge and information that is largely inaccessible
today." The CDT tempered its endorsement by stating that the new
services create "serious privacy concerns" and that the court should
take "affirmative action" during the settlement process to make sure
reader privacy is protected.

On Oct. 7, Judge Denny Chin will preside over a hearing where Google
and the plaintiffs will have a chance to offer oral arguments in favor
of approving the agreement. Those opposed will also have a chance to
voice their opinions.

DOJ: Google’s Book Settlement Needs Rewrite

The U.S. Department of Justice late Friday urged the court
overseeing Google’s book search settlement with authors and publishers
to reject the settlement in its current form, although it strongly
hinted that the parties are flexible on certain provisions.

"As presently drafted, the Proposed Settlement does not meet the legal
standards this Court must apply," the DOJ said in a 32-page filing (click for PDF)
with the U.S. District Court for the Southern District of New York.
"This Court should reject the Proposed Settlement in its current form
and encourage the parties to continue negotiations to modify it so as
to comply with Rule 23 (a federal law governing class-action
settlements) and the copyright and antitrust laws."

After Google was sued in 2005 for digitizing out-of-print yet copyright protected books by several groups representing authors and publishers, the parties settled out of court in October 2008. That deal granted Google sweeping rights
to scan and display out-of-print books. Ever since the settlement was
announced, opposition has mounted to what one University of California
at Berkeley professor recently called "the largest copyright licensing deal in U.S. history." Opponents claim that Google and the plaintiffs overstepped their bounds in assigning the company the sole right to make digital copies of out-of-print books that are still protected by copyright law.

"The Proposed Settlement is one of the most far-reaching class action
settlements of which the United States is aware; it should not be a
surprise that the parties did not anticipate all of the difficult legal
issues such an ambitious undertaking might raise," the DOJ wrote in its
filing.

The DOJ has been looking into antitrust concerns
stemming from the fact that Google and the nonprofit Books Rights
Registry set up to handle payments to authors would have sole control
over the pricing of institutional subscriptions to the digital library.
But in its filing, it also raised questions about whether the
settlement complies with Rule 23 of the Federal Rule of Civil Procedure
as well as copyright law in general. "In the view of the United States,
each category of objection is serious in isolation, and, taken
together, raise cause for concern."

Still, the DOJ noted that a digital library of books holds important benefits for society, a point that has been repeatedly raised by Google’s supporters,
who argue that it would improve access to knowledge. It would appear
that the DOJ, however, would prefer Congress settle the thorny issues
of copyright laws that apply to orphan works–books whose rightholders
cannot be located but which can be scanned by Google under the
agreement–rather than making policy through legal settlements.

"As a threshold matter, the central difficulty that the Proposed
Settlement seeks to overcome – the inaccessibility of many works due to
the lack of clarity about copyright ownership and copyright status – is
a matter of public, not merely private, concern. A global disposition
of the rights to millions of copyrighted works is typically the kind of
policy change implemented through legislation, not through a private
judicial settlement," the DOJ wrote.

Reaction to the DOJ’s filing allowed parties from all sides of this issue to claim victory.

"The Department of Justice’s filing recognizes the value the settlement
can provide by unlocking access to millions of books in the U.S. We are
considering the points raised by the Department and look forward to
addressing them as the court proceedings continue," Google said Friday
in a statement.

The Internet Archive, perhaps Google’s most vocal opponent in this
matter, was likewise pleased. "Despite Google’s vigorous efforts to
convince them otherwise, the Department of Justice recognizes that
there are significant problems with terms of the proposed settlement,
which is consistent with the concerns voiced with the Court by hundreds
and hundreds of other parties," the Open Book Alliance said in a
statement.

"This is a major agreement, and it is entirely appropriate for DOJ to
look at a deal of this magnitude," said Ed Black, president and CEO of
the Computer & Communications Industry Association, which has
supported the settlement. "They are doing their job scrutinizing the
competition aspects of this settlement."

And Consumer Watchdog, a strident opponent of the settlement, also found something to like in the DOJ’s filing:

Consumer Watchdog supports digitization and digital
libraries in a robust competitive market open to all organizations,
both for-profit and non-profit, that offer fundamental privacy
guarantees to users. But a single entity cannot be allowed to build a
digital library based on a monopolistic advantage when its answer to
serious questions from responsible critics boils down to: "Trust us.
Our motto is ‘Don’t be evil.’"

Google will learn whether it has earned that trust from Judge Denny Chin on October 7 in New York. That is, unless the settlement is modified in the coming weeks, in which case we could be looking at several more weeks of debate.

Google Said To Be Modifying Google Book Search For DOJ

Google and authors and publishers are talking to the Department of Justice about modifying the Google Book Search agreement. Bloomberg cited anonymous sources who said the parties were discussing ways to make the DOJ feel more comfortable with the competitive implications of the deal. Amazon, which is operating its own book-scanning initiative and offers customers books via its Kindle electronic reader device, has argued that the deal would give Google too much control over online books. The DOJ must submit its view of the deal by Sept. 18.

Google and authors and publishers are talking to the U.S. Department of Justice about modifying the Google Book Search agreement, Bloomberg reported Sept. 16

Inked in October 2008, the controversial deal calls for Google to scan millions of books online and charge users to read them, sharing the proceeds with authors and publishers.

Details are scant, but Bloomberg cited anonymous sources who said the parties were discussing ways to make the DOJ feel more comfortable with the competitive implications of the deal. Spokespersons for the Justice Department and Google declined to comment to eWEEK when asked.  
   
Amazon, which is operating its own book-scanning initiative and offers customers books via its Kindle electronic reader device, has argued that the deal would give Google too much control over online books.

Amazon is particularly concerned about orphan works, or those books that are out of print and for which a copyright holder cannot be found. Amazon, which does not offer its Kindle readers out-of-print books, also said Google, authors and publishers would have the power to fix prices at will.

Google moved to assuage those concerns Sept. 10 by offering to let any book retailer, from Amazon to Barnes & Noble and local bookstores, resell Google Book Search titles to consumers on any Internet-connected device they choose.

Consumer advocate group Consumer Watchdog asked the DOJ to enforce this offer. Privacy advocates oppose the deal because they believe Google will collect too much info on users without proper precautions to protect readers’ privacy.

Sept. 8 was the deadline for parties to voice support or concerns about the deal to New York District Judge Denny Chin, who is holding a hearing on the agreement Oct. 7 to decide whether to approve or deny the deal.

However, Chin asked the Justice Department, which has been scrutinizing the deal for months, to submit its view on the deal by Sept. 18. The DOJ spokesperson declined to say what the agency will announce then.

Bloomberg said Chin has received some 400 filings by individuals and groups who object to the deal, support it or want some legal points to be considered. He ordered Google and the other parties to the settlement to respond to the comments by Oct. 2, or five days before the hearing.

Reuters reported that the attorneys general of Connecticut, Texas and Missouri oppose the deal. They argue that money Google earns distributing orphan works should go to state unclaimed property offices instead of the Book Rights Registry, which will be created to distribute revenue from Google Books to authors and publishers.

Consumer Watchdog Tells Justice Any Google Deal Must Include Means Of Enforcement

WASHINGTON, DC —  Any plan offered by Google meant to overcome objections to the proposed Google Books settlement must include a “binding agreement with the full force of law,” Consumer Watchdog told the U.S. Justice Department today. Justice has until Friday to file its position on the books settlement with the court.

In a letter to Attorney General Eric Holder and Assistant Attorney General For Antitrust Christine Varney, the nonprofit, nonpartisan consumer group wrote that an offer such as that made last week by Google General Counsel David Drummond was “little more than a public relations ploy” unless there was a formal means of enforcement such as a consent decree.

Testifying before the House Judiciary Committee, Drummond said the Internet giant would allow others to sell the out-of-print books that Google has digitized. John M. Simpson, consumer advocate for Consumer Watchdog also testified to the Judiciary Committee opposing the settlement.

The letter to Justice, signed by Simpson,  noted that Google has demonstrated excellent access at the highest levels of government and easy access to policymakers, but expressed confidence the Department would judge the settlement on its legal merits.

“Several former executives have taken important roles in the Obama Administration. Google has built support in academia and the nonprofit world with generous contributions to projects that support its corporate ends,” the letter said.

“Substantial funding at institutions like Harvard’s Berkman Center and Stanford’s Center for the Internet and Society can mean that their programs become merely an extension campus of Google U, and serve as an echo chamber for the company’s policies, rather than centers for unfettered academic exploration of issues vital to the public interest.   Coupled with its recent charm offensive, such connections and efforts by Google to burnish its image may make it difficult for some to objectively evaluate Google’s behavior.”

“Nonetheless Consumer Watchdog is confident that the Justice Department is assessing the Google Books Settlement based on the legal merits and will conclude that it has anticompetitive aspects that must be thwarted,” the letter concluded. “If Google proposes ways to meet those objections, they must be incorporated into a binding agreement with the full force of law.”

Click here to read Consumer Watchdog’s letter.

The case in U.S. District Court’s Southern District of New York stems from a suit brought by The Authors Guild and the Association of American Publishers. Briefs in the case were due on Sept. 8, but Judge Denny Chin gave the Justice Department until Friday, Sept. 18, to file its view of the class action settlement.

The settlement provides a mechanism for Google to deal with “orphan works.”  Orphan works are works under copyright, but with the rights holders unknown or not found.  The danger of using such works is that a rights holder will emerge after the book has been exploited and demand substantial infringement penalties. The proposed settlement protects Google from such potentially damaging exposure, but provides no protection for others.  This effectively is a barrier for competitors to enter the digital book business.

In an amicus brief, filed by Kasowitz, Benson, Consumer Watchdog argued against the settlement, citing the anticompetitive monopoly it would create.  In addition, Consumer Watchdog’s brief said that the settlement should be rejected because it exceeds the controversy before the court; is an unauthorized attempt to revise the rights of copyright law, which is a Congressional prerogative; and conflicts with International Law.

Click here to read the brief.

Consumer Watchdog is also troubled that the settlement has no binding guarantees to ensure users’ privacy.  Readers in the United States expect that their reading habits will remain private.  Google will gather an unprecedented amount of data on users of Google Books. So far there is no adequate guarantee that whatever “privacy policy” Google adopts will not be changed on a mere corporate whim whenever it suits Google’s narrow agenda.

In April Consumer Watchdog asked the U.S. Justice Department to intervene in the Google Books settlement and Justice subsequently announced it was investigating the deal.  Simpson was one of eight witnesses who testified in opposition to the settlement at the Judiciary Committee Hearing last week.

Click here to read the testimony and see a video of the hearing.

Judge Chin has scheduled a hearing on the Google Books settlement for Oct. 7.

– 30 –

Consumer Watchdog, formerly the Foundation for Taxpayer and Consumer Rights, is a nonprofit, nonpartisan consumer advocacy organization with offices in Washington, DC and Santa Monica, CA.  Our website is: www.ConsumerWatchdog.org.

Google Strives To Build Biggest Online Library

Internet-search giant Google is making conciliatory gestures in an effort to blunt mounting opposition to a copyright deal that is the foundation of its plan to build the biggest online library, Google Books.

In its latest move, Google chief legal officer David Drummond said Thursday during a hearing before the House Judiciary Committee that Google would "let other Internet companies sell its digital copies of its out-of-print books" if the settlement wins court approval.

At issue is the right to scan and make available online millions of books, including out-of-print and in-the-public-domain works. Most importantly, Google could digitize the so-called "orphan works" – books that are still copyrighted although the author is dead, the heirs are untraceable, or the publisher no longer exists and no one can find the clear holder of rights to the work.

Companies such as Microsoft, Yahoo and Amazon, but also consumer groups and professional associations, have filed several complaints with the U.S. District Court opposing the settlement reached by Google with the Authors’ Guild and the Association of American Publishers to create the Google Books Registry.

Next month, Judge Denny Chin of the U.S. District Court for the Southern District of New York is set to review the settlement and hear both sides.

The Open Book Alliance, a group created to counter the settlement, released a statement shortly after Google’s concession, describing it as "much ado about nothing."

"It doesn’t address the fundamental problems with the settlement, including the fact that Google would still have sole control over access to the books," it said.

The agreement was the result of a lawsuit brought by authors and publishers in 2005 on Google’s effort to scan millions of library books. Last October, Google proposed paying $125 million for copyright infringements, and its former foes turned into new friends.

Google began digitizing books in 2004. Google has now already digitized more than 10 million books, and the Google Books Search service boasts partnerships with some of the world’s most renowned libraries, such as Harvard, Oxford, the New York Public Library and the Bavarian State Library in Germany.

As part of the $125 million agreement under review, Google would have the right to scan out-of-copyright and out-of-print books, or copyrighted works from cooperating authors and publishers within the United States.

An Open Book Alliance co-founder, Peter Brantley, said that "with Google granted a monopoly to unclaimed works, it would exercise a monopoly over subscriptions for the most comprehensive collection of books available."

The project has generated strong opposition in Europe. Last week, the German Justice Ministry sent its own filing to the U.S. court, stating that the settlement would violate the German copyright law and privacy protections. And there were complaints from the Union of Publishers in Italy and France, which claimed that "150,000 French books that were in American libraries have been digitized without our consent."

In an attempt to thwart the rise of a potential competitor on the online book-selling market, Amazon filed its own brief with the U.S. District Court. A 50-page document was sent, stating that "the proposed settlement should be disapproved because it would restrain competition by creating a cartel of rights-holders and establishing Google as the exclusive distributor of electronic copies of millions of ‘orphan’ books and other works."

Urging the court to reject the Google Books deal, Consumer Watchdog, a consumer group, said last week the proposed settlement conflicts with international copyright treaties such as the Berne Convention for the Protection of Literary and Artistic Works. It "would strip rights from millions of absent-class members worldwide, for the sole benefit of Google," referring to authors and publishers who did not or could not opt out of the deal between Google and the Guild for the Google Book Search.

Google also said last week that it won’t scan books that are still commercially available in Europe. The Justice Department was expected to file its own brief in the case by Thursday.

Google Books Settlement Facing Scrutiny

Concerns center on possible monopoly, invasion of privacy
 

The proposed Google Books settlement, once hailed by Google cofounder Sergey Brin as giving consumers unprecedented access to “the tremendous wealth of knowledge that lies within the books of the world,” is getting decidedly negative reviews from a number of industry players and government agencies, with concerns about monopolies and consumer privacy at the top of the list.

Google was hit with a lawsuit in 2006, accused of copyright infringement for offering over 10 million protected works to the public free of charge. The search behemoth settled the lawsuit in October of last year, agreeing to pay $125 million in what it called an “historic” deal that would benefit consumers. Under the agreement, Google would give publishers about two-third of revenues made from selling access to out-of-print works, keeping 37% for itself.

The settlement was hailed as the first step toward allowing consumers to search for and buy out-of-print books, and provided that U.S. libraries would have free access to Google’s master database. In testimony before Congress, Google’s chief legal officer David Drummond added that bookstores and online booksellers like Amazon.com would be able to sell access to Google’s database “on any Internet-connected device they choose.”

The settlement is now facing increasing scrutiny as it awaits final court approval. A key point of contention is a section permitting Google to scan and store “orphan books” — those that are no longer in print but still protected by a valid copyright — without first securing permission from the works’ copyright holders.

Marybeth Peters, head of the U.S. Copyright Office, told Congress that the “settlement would give Google a license to infringe first and ask questions later,” and added that the agreement makes “a mockery of Article One of the Constitution, that anticipates that authors shall be granted exclusive rights.”

John M. Simpson of Consumer Watchdog, a California-based non-profit, said a key problem is the unfair competitive advantage Google receives under the settlement that comes from its attempt to pull an end-run around the appropriate legislative solution to the orphan books problem. “This is not an issue for a court and certainly one that cannot be settled by solving the problem for one large corporation and no one else,” he said in testimony before the House Judiciary Committee last week.

He said the problem is Google’s monopolistic digital library and how it would be implemented. “The proposed class-action settlement is monumentally overbroad and invites the court to overstep its legal jurisdiction, to the detriment of consumers and the public,” he said. “The proposed settlement agreement would strip rights from millions of absent class members, worldwide, in violation of national and international copyright law, for the sole benefit of Google.”

Google’s competitors — Microsoft, for example — are also crying foul, claiming that the provision allowing Google to store orphan books would amount to a veritable monopoly on that market. Amazon executive Paul Misener told SF Gate that, while his company also scans and stores orphan books, it first secured permission from copyright holders. “We went to the rights holders, and one by one, negotiated deals,” Misener said.

Misener likened Amazon’s interest in blocking the settlement with its interest in network neutrality. He said the settlement would give Google an advantage rather than provide a level playing field. "Under the proposed settlement, Google would become a consumer’s nightmare: the only store in town," he said.

In a move aimed at quelling such criticism, the settlement agreement provides that funds for orphan books would be held in escrow for five years, or until the copyright owner claims the book. Additionally, Google has agreed to spend $34.5 million to create a registry in an effort to locate those owners.

Privacy Concerns

Google is also under fire from privacy advocates, who insist that the agreement will do nothing to protect consumers. The Electronic Privacy Information Center (EPIC) sought to intervene on behalf of consumers’ privacy rights, apparently unswayed by Google’s newly released privacy proposal.

That proposal, pitched to the Director of the Bureau of Consumer Protection, stresses that Google would not share users’ information with third parties “except under very limited and narrow circumstances,” which would be explicitly set forth in the final privacy proposal. According to Google, those “narrow circumstances” are limited to situations where Google shares information “with trusted entities that process information on our behalf” or to prevent physical or financial harm. Google also promised to enact “protections to limit the information … available to credit card companies about book purchases. Privacy advocates point out that these measures are informal and not legally binding, and thus afford consumers little real protection.

The amount of data that Google could amass about a reader’s behavior is unprecedented, Consumer Watchdog’s Simpson said. It could be commingled with data from other Google services posing a new threat to user privacy and flies in the face of the U.S. tradition of privacy regarding reading habits, he argued.

"Consumer Watchdog supports digitization and digital libraries in a robust competitive market open to all organizations, both for-profit and non-profit, that offer fundamental privacy guarantees to users,” Simpson concluded. “But a single entity cannot be allowed to build a digital library based on a monopolistic advantage when its answer to serious questions from responsible critics boils down to: “Trust us. Our motto is ‘Don’t be evil.’”

Its its defense, Google notes that it has taken measures to protect privacy in the past. The company blurs certain locations on Google Maps – including, until January, the Vice President’s residence in Washington — and its privacy policy says that personal information required for customers to log in is not shared with third parties, although it makes an exception for “trusted” parties.

DC Dispatch: The week in review

Things got busy fast this week in DC as Congress returned from the month-long summer break.

Finance committee chair Sen. Max Baucus released his long-awaited health reform proposal on Tuesday after months of closed-door meetings with the so-called “Gang of Six,” and President Obama stood up the next day for a speech in the House where he tried to re-frame the health care debate.

The President couldn’t have asked for better luck in the House, where GOP Rep. Joe Wilson shouted out “You lie” in the middle of the speech. The break in House decorum shocked all comers, where it’s considered talk-to-the-hand rude when people just refuse to clap for the President, and in my view sucked up most of the media coverage of health reform opponents. Obama couldn’t have positioned the nay-sayers better with a month of campaigning to do it. We know from experience — he didn’t manage all August.

But Baucus’ proposal did just what we here at CW were afraid it would: gave the insurance industry the ability to get out of state consumer protections (like a guaranteed second opinion and bans on drive-thru deliveries), and eliminated provisions to help make that insurance affordable for consumers (like a public plan alternative for people required to obtain health insurance, and subsidies for many low-income consumers).

The question in the end is how much the Prez and Dems are willing to give up real reform of the health industry to get a few Republican votes.
 
Consumer Watchdog’s John M. Simpson was in the Capitol Hill office with me this week, intending to make his rounds on the Hill on internet privacy issues. He ended up being a surprise witness before the House Judiciary committee about a Google court settlement that’s both anticompetitive and threatens reader privacy. John stopped by to talk to committee staff on Tuesday and gave them our take on the books deal (definitely evil) and they asked him to submit some testimony for the record. After reading it Wednesday morning they were on the phone by noon to let John know they could squeeze him into the panel after all.

Judiciary Chairman John Conyers let our John know his testimony “did not disappoint.”

And finally, with all that business going on there had to be lots of parties too. The Sunlight Foundation’s PoliticalPartyTime.org reported 44 fundraisers this week through Sunday. My favorite? The dove hunt. Who doesn’t love shooting peace-loving birds? But don’t worry, if you missed these parties there’s more than twice as many set for next week.

The week to come will see financial regulatory reform heat up. The House markup for a key piece of financial reform – creating a Consumer Financial Protection Agency to create and enforce consumer protections for all financial products – was scheduled for Sept. 23rd, a signal by House Financial Services Chairman Barney Frank that Congress isn’t going to let financial regulatory reform fall by the wayside just because they’re doing health care too. President Obama addresses the nation on the same front Monday.

Lawmakers Created Google Settlement Mess, But Some Urge Staying Out Of It

By failing to pass orphan works legislation in previous sessions, Congress practically guaranteed a messy settlement would result from Google’s scanning and display of millions of out-of-print works found only in libraries, several lawmakers said at a House Judiciary Committee hearing Thursday. But some, including Democratic Silicon Valley Rep. Zoe Lofgren, argued against injecting themselves into the ongoing court review of the Google Book Search settlement, for which the Justice Department will file its analysis with U.S. District Judge Denny Chin by Friday of next week.

After hearing more claims from critics that Google will have a legal monopoly over out-of-print works, Google’s top lawyer pledged the company would license such works to competitors and split the proceeds. That wasn’t good enough for Amazon.com, whose executive repeatedly contrasted his company’s permission-based approach to scanning books with Google’s approach. The chief of the Copyright Office, weighing in for the first time on the settlement, warned that it would
usurp congressional authority over copyright law.

The expanded Google Book Search "could be the greatest innovation in book publishing since the Gutenberg press," said committee Chairman John Conyers, D-Mich. Google’s exclusive right to orphan works under the settlement is troubling, but could be resolved through legislation, "and I have indications from [Google] that they would support such a remedy," he said. Google didn’t attain its dominance through anticompetitive behavior, Conyers said: "To date, they have built a better mousetrap in the eyes of mousetrap purchasers."

Lofgren warned that the "future of literacy" was imperiled if Congress set poor conditions for the digital book market. "We made a very grand effort" to pass orphan works legislation, and lawmakers are considering the issue again because "someone decided to seek forgiveness rather than permission," she said, alluding to Google. But Lofgren defended the "utility" of broad settlements from class-action lawsuits, and said she was "disturbed" that some critics were challenging it as an abuse of the class-action process, as did a prominent Washington antitrust lawyer and author (WID Aug 24 p2). Lofgren also said she was "ashamed" the Copyright Office waited until Thursday morning to hand in its testimony, violating the committee’s 24-hour rule for advance receipt of testimony texts.

It took "three years of painstaking negotiation" to reach agreement with authors and publishers, Google Chief Legal Officer David Drummond said. Though "we strongly believe we would have won the case" by claiming fair use to scan and show snippets of book text, the settlement achieves a better result than even a Google win, he said. Smaller colleges want to "level the playing field" with bigger schools through institutional subscriptions, and by clearing up ownership rights to millions of books, other providers can scan them with no legal fears, Drummond said. He called the settlement "complementary" to a future orphan-works bill.

Amazon started scanning books before Google, with three million now digitized, said Paul Misener, vice president of public policy. The difference is that, "one by one," Amazon got permission from rightsholders first. The settlement would give Google "exclusive, liability-free monopoly rights over millions of works," he said. "What does a competitor get? Nothing," because rightsholders would have to opt in to competitors’ book projects and opt out of Google’s. Contrary to previous legislation, Google also won’t have to perform a "diligent search" to locate owners of orphan works, he said. Consumer Watchdog’s John M. Simpson, perhaps Google’s most vocal nonprofit critic in Washington, said the settlement "simply furthers the relatively narrow agenda" of Google, the Authors Guild and Association of American Publishers. Congress should pass orphan-works or fair-use legislation, so Google won’t get an "unprecedented monopolistic advantage" over some books.

Blind people "want the right to buy books," but some of Google’s competitors "have stiff-armed us" on requests to make books available in blind-friendly formats, said National Federation of the Blind President Marc Maurer. "Only a minimum of difficulty" is required to translate books to accessible formats, yet Google alone has come through, he said. "We spend our lives trying to get at information that others take for granted," and a failed settlement will shut an emerging market to the blind, Maurer said. Authors Guild Executive Director Paul Aiken said the settlement caps a 25- year effort to make out-of-print works available again, noting the guild’s BackInPrint.com service for ordering new bindings of such books. A similar British book registry has a 90 percent success rate in locating authors, he said. As revealed by recent hearings in Brussels, some Europeans don’t like the settlement because they think "we’re getting a significant advantage" over European digital-library efforts, Aiken said.

The judiciary would exceed its constitutional role if Chin approved the settlement, which "makes a mockery" of Article One of the Constitution and its provision of copyright authority to Congress alone, Register of Copyrights Marybeth Peters said. The settlement creates "in effect" a compulsory license for some works and exceeds the scope of the litigation, giving Google a new right to sell books, she said, calling for a "full public debate" led by Congress. The presence of foreign books in the libraries from which Google scanned could also threaten U.S. international commitments on intellectual property rights, Peters said.

University of Chicago law Prof. Randal Picker said the settlement was a "beta," and it would be "un-Googlish" to scrap the whole thing over some troubling provisions. Chin can task DOJ with continuing oversight over the settlement, and DOJ may have problems with Google’s proposed pricing algorithm for books whose owners don’t set prices themselves, he said. Congress and Judge Chin can work in tandem to expand the orphan-works license to all companies, not just Google, Picker said — but Congress should also scrap the "reasonable search" prerequisite for using an orphan work, a hurdle to their use. "Google is no monopolist," said David Balto of the Center for American Progress and former FTC antitrust regulator. The pricing algorithm "is not all that unusual" in the context of prior antitrust settlements, and orphan works are too small a problem to warrant much concern. The controversial most-favored nations clause in the settlement is crucial so "people can’t free ride" on Google’s effort and incurred risk in scanning books, he said: "They deserve the credit for trying to clarify these areas."

‘We Don’t Have a Role to Play’

Google’s Drummond debuted a new offer to potential competitors at the hearing: The company will expand its Google Editions platform for selling in-print works, launched this summer, to out-of-print works as well. It makes accessible from any Internet-connected device book purchases from participating retailers, hosted by Google and made available through APIs. Amazon, Barnes & Noble, and Microsoft — if it enters the market — would be able to sell out-of-print works already scanned by Google through their own platforms, and split the 37 percent of revenue Google keeps from sales, Drummond said. It would essentially be a reseller program, with "most" of the revenue share going to resellers.

Amazon’s Misener wasn’t satisfied by Drummond’s "thrilling new piece of information," as Conyers called the offer. "The Internet has never been about intermediation," Misener said. Holding up a thick binder containing the full settlement, he said Google competitors would still need "express approval" to use orphan works. Pressed by Ranking Member Lamar Smith, R-Texas, Misener said Google was the "only entity in the world that could treat copyright on an opt-out basis. … This is completely turning copyright law on its head." The Open Book Alliance, to which Amazon belongs, said later that Drummond’s promise was "pure vaporware" and something he’s previously said Google planned to do. Google would still have control over the books, to be governed by "questionable and undefined privacy policies," it said.

Aiken told Smith that authors don’t expect to be controversial provisions for in-print books, the vast majority of works at issue. The guild spent 30 months negotiating not only with Google but also the Association of American Publishers, with whom it has a historically antagonistic relationship, and secured several protections for authors not ordinarily available, Aiken said.  Authors expect that publishers actually will try to avoid triggering some settlement provisions for that reason, he said.

Since Congress hasn’t "aggressively and effectively" addressed the orphan-works problem, it shouldn’t interfere in ongoing court review, said Rep. Mel Watt, D-N.C. "I’m a great respecter of this division of powers we have here, and I feel a little awkward" talking about a legislative fix for an issue that’s still under both court and DOJ review. "We’re definitely dabbling in all three branches of government today. Am I missing something here?" he said to audience laughter. Picker said Congress can’t avoid being involved, since only that body can create a licensing regime for orphan works. Asked by Watt about the legality of Google’s scanning, Misener contrasted Amazon’s seeking permission to Google’s "extremely risky and irresponsible" scanning without asking. Pressed by Watt about whether Google acted illegally, Misener said: "That was the consensus" of the plaintiffs.

The allowances given to the proposed Book Rights Registry concerned Rep. Howard Coble, R-N.C. Aiken assured Coble that copyright owners can opt out of the settlement, and that the registry has an economic incentive to license their works to as many digital providers as possible, not just Google. Peters confirmed that her office wouldn’t have any oversight role over the "compulsory license-like" system. It’s not clear from the settlement what rights the registry would have to license works elsewhere, Picker said. But Aiken pointed to collecting societies such as ASCAP and BMI as guides for how the registry would work, asking copyright owners for "blanket approval to cut new deals."

Lofgren agreed with Watt that "we don’t have a role to play" in the settlement, which constitutes "the private sector achieving what we failed to achieve." Google, authors and publishers have solved the problem identified in a Copyright Office report years ago on orphan works, she said – – lack of a technology platform for setting up an orphan-work registry. An Amazon Kindle owner, Lofgren said the digital book industry "for the first time [has] some real heavy-duty competition." Since it’s unlikely Congress will reverse the copyright-term extensions approved in 1998, Congress should step back, she said. "This is a major step forward for literacy and the culture.

Consumer Watchdog Backs Digital Libraries, Opposes Google Books Settlement Deal


Testimony Says Deal Violates Law, Is Anti-Competitive And Raises Privacy Concerns

WASHINGTON, DC — The proposed Google Books settlement should be rejected because it is anticompetitive, violates both U.S. and international law and raises substantial threats to privacy, Consumer Watchdog’s John M. Simpson told the House Judiciary Committee today.

The Committee hearing focused on “Competition and Commerce in Digital Books.”

“Let me be absolutely clear. We do not oppose the concept of digital libraries,” said Simpson. “Done correctly, they would greatly enhance public access to books. Everyone should be in favor of that.”

Simpson said a key problem is the unfair competitive advantage Google receives under the settlement that comes from its attempt to pull an end-run around the appropriate legislative solution to the orphan books problem.  “This is not an issue for a court and certainly one that cannot be settled by solving the problem for one large corporation and no one else,” he said.

“Congress must resolve the ‘orphan rights’ issue,” Simpson said. “It could also step in with legislation about what exactly constitutes fair use in the digital age, though that matter could be fairly adjudicated by the courts.  Privacy guarantees are another area appropriate for legislative action.”

He said the problem is Google’s monopolistic digital library and how it would be implemented. “The proposed class-action settlement is monumentally overbroad and invites the court to overstep its legal jurisdiction, to the detriment of consumers and the public,” he said. “The proposed settlement agreement would strip rights from millions of absent class members, worldwide, in violation of national and international copyright law, for the sole benefit of Google.”

“The parties in the suit negotiated the Google Books settlement in secret and there was no opportunity to represent and protect the broad interests of all consumers,” Simpson told the Committee.  “This deal simply furthers the relatively narrow agenda of Google, The Authors Guild and the Association of American Publishers.”

Read the text of Simpson’s written testimony here: http://www.consumerwatchdog.org/resources/Judiciarytestimony091009.pdf

He told the Judiciary Committee the settlement should be rejected because:

— It is not fair, adequate or reasonable because it far exceeds the actual controversy before the court and abuses the class action process.

— It is an unauthorized attempt to revise the rights and remedies of U.S. Copyright law.

— It conflicts with international law, specifically The Berne Convention for the Protection of Literary and Artistic Works, an international copyright treaty.

–It gives Google an unlawful and anti-competitive monopoly.

— It fails to provide adequate privacy guarantees for users of the service.

The amount of data that Google could amass about a reader’s behavior is unprecedented.  It could be commingled with data from other Google services posing a new threat to user privacy and flies in the face of the U.S. tradition of privacy regarding reading habits, Simpson said.

“Consumer Watchdog supports digitization and digital libraries in a robust competitive market open to all organizations, both for-profit and non-profit, that offer fundamental privacy guarantees to users,” Simpson concluded. “But a single entity cannot be allowed to build a digital library based on a monopolistic advantage when its answer to serious questions from responsible critics boils down to: “Trust us. Our motto is ‘Don’t be evil.’”

In April Consumer Watchdog asked the U.S. Justice Department to intervene in the Google Books settlement and Justice subsequently announced it was investigating the deal. Tuesday the firm of Kasowitz, Benson filed an amicus brief on Consumer Watchdog’s behalf in U.S. District Court opposing the settlement.  The Justice Department has until Sept. 18 to offer its view and Judge Denny Chin has scheduled a hearing on the settlement for Oct. 7.

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Consumer Watchdog, formerly the Foundation for Taxpayer and Consumer Rights, is a nonprofit, nonpartisan consumer advocacy organization with offices in Washington, DC and Santa Monica, Ca.  Our website is www.consumerwatchdog.org.

Kasowitz, Benson, Torres & Friedman LLP is a national law firm with over 300 lawyers specializing in high stakes, complex litigation.  The firm has offices in New York, Newark, Houston, Atlanta, Miami and San Francisco. For more information, visit www.kasowitz.com.
Contact: Daniel Fetterman, 212-506-1934, dfetterman@kasowitz.com or Peter Toren, 212-506-1986, ptoren@kasowitz.com.