In 2005, the Authors’ Guild, the Association of American Publishers and others filed a class action in the US against Google. They argued that Google’s project to scan millions of library books amounted to copyright infringement. Google argued that it was “fair use” under US copyright law.

Google and the Claimants agreed a settlement in October 2008 and a settlement agreement was prepared for Court approval. There was considerable opposition to it – including from the US Department of Justice and the French and German governments. The principal objections were that the settlement was anti-competitive and fell foul of US rules relating to class actions. As a result, Google and the Claimants went back to the negotiating table and produced an amended settlement agreement, which was given preliminary Court approval on 19 November 2009.

The amended settlement agreement (“ASA”) still has to get the final seal of approval from the US Court. A hearing date of 18 February 2010 has been set for approval, or not.

The reaction to the ASA has been mixed. The Publishers’ Association have come out in favour of it, seemingly because rights holders potentially have much more control over their participation in the Google digitisation project and the pricing for their works than they had under the original agreement. Others have also come out in favour on the basis that the project will potentially make available many “lost” works and can thus only enhance learning. Those against argue that the ASA takes Google, a commercial enterprise, one step further towards a monopoly over digital content and is an abuse of the class action process.

Even if the ASA is approved by the US Court, an appeal is thought likely. Thus, there is unlikely to be complete certainty over Google’s position for some time to come.

Meanwhile, Google’s digitisation project continues apace, with the latest estimate being that 10m works have now been scanned, the majority of which are out of print or orphan works.

What material does the settlement cover?

The ASA will allow Google to make specified uses of certain copyright material without the need to clear copyrights in the traditional manner, in return for payments to authors and publishers.

Google will have no right to use the material outside the US and is to impose technical measures to stop material being accessed outside the US.

The ASA covers books and inserts in books (like illustrations) which by 5 January 2009 had been registered with the US Copyright Office or published in the UK, Canada or Australia. Comic books, magazines, journals and compilations of journals are not covered. Nor are music notations and children’s book illustrations.

Are all rightsholders bound?

Rights holders of books and inserts can opt out of the ASA, but must do so before 28 January 2010. If they do opt out, the ASA will not apply to any of their works. If they want to object to Google scanning and using their works, they will have to bring a separate claim against Google in the US for copyright infringement.

A rights holder who opts out must provide Google with details of all its works.

It is not clear what use Google will make of works after a rights holder has opted out: there has been some suggestion that Google will continue to scan them but only display bibliographic information about them.

Rights holders who do not opt out, but still want to object to the terms of the settlement, must also do that by 28 January 2010.

Commercially available works – what are these and why are they important?

If the ASA is approved in its current form, how Google may use a work will depend on whether a work is determined by Google to be “commercially available” or not.

A work is “commercially available” if, at the time in question, new copies are available for purchase in the US, UK, Canada or Australia, from anywhere in the world.

In order to make its determination as to whether a work is commercially available, Google will use traditional searches and metadata.

Google must give 60 days’ notice of its categorisation of each work, thereby enabling rights holders to challenge the categorisation before Google uses a work. In order to challenge, it will be sufficient for a rights holder just to assert that a work is or is not commercially available, not necessarily to prove it.

Google can change the categorisation at will, again giving 60 days’ notice.

What can Google do with works that are commercially available?

If rights holders of commercially available works do not opt out of the ASA, Google will be allowed to make “non-display uses” of their works. This means that Google will be allowed to display bibliographic information about the works and listings of key terms from them.

Rights holders of commercially available works must specifically authorise Google to make other pre-determined uses of their works. These uses – called “display uses” – are consumer purchase (which will enable viewing, copying and pasting of portions and printing of not more than 20 pages at any one time), preview uses (to enable potential purchasers to sample works before buying), selling subscriptions to libraries (institutional subscriptions), a public access service (to enable library and higher educational establishment users to search and view the institutional subscription database) and advertising supported previews.

Rights holders can switch authorization for display uses on and off at any time.

Rights holders will be able to choose which display uses they wish to participate in, what level of preview usage they wish to allow, and, where consumer purchase is being authorised, what price to charge for their works.

Rights holders may specify any price, including zero. There is a pricing algorithm that sets default prices for consumer purchase of works where a rights holder does not specify a price. The algorithm is apparently being designed to simulate how a rights holder would price its work in a competitive market, but is being developed by Google without input from rights holders, or indeed any third party.

Rights holders have no control over the advertising which Google may display alongside their content, unless they do not authorise advertising uses. However, Google is not allowed to put advertisements on, behind or over the content of a work. There has already been controversy over advertising uses since Google has displayed anti-gay marriage and pro abortion adverts next to some works.

It is also open to rights holders of commercially available works to request that their works are removed from the digitisation project. The deadline for removal requests is 5 April 2011. By removing a work, rights holders will have no ability to participate in revenue models under the ASA at a later date.

What can Google do with works that are not commercially available?

If rights holders of works which are not commercially available do not opt out of the ASA, Google may make both display uses and non display uses of such works.

Rights holders of books that are not commercially available may request removal of their work from the digitisation project. The deadline for removal requests is 5 April 2011. By removing a work, rights holders will have no ability to participate in revenue models under the ASA at a later date.

Claiming works

Rights holders (ie. publishers and authors) may “claim” works covered by the Google project as theirs. Works can be claimed at any time, including now (a claiming site operated by a settlement administrator having been set up at googlebooksettlement.com).

The benefit of claiming a particular work is that it enables rights holders to manage their works for the purposes of the settlement (for example, to exclude certain works from certain uses) and to challenge Google’s categorisation of works.

Rights holders are already claiming their works. Feedback from publishers suggests that the process is labour intensive and quite cumbersome, involving searching for works online and then claiming them online. Although bulk searching and claiming is possible, publishers say that it is necessary to search against many criteria (such as title, author, ISBN) to ensure that all their digitised works are claimed.

In order to claim a work, a publisher has to be “confident or highly confident” that the rights have not reverted to the author.

Revenues and payments

A slice of the money generated by uses authorised by rights holders under the ASA will go to fund the administration costs of distributing payments – and some commentators have estimated that as much as 10% of revenues could be swallowed up in this way.

63% of the remainder will go to rights holders and Google will retain 37%. However, either Google or rights holders can request renegotiation of the 63:37 split in respect of commercially available works. If they cannot agree a new split works can be excluded from the various revenue models.

Google will be required to permit third parties to resell consumer access to works made available for consumer purchase, with the reseller retaining most of Google’s 37% share of the revenues.

Google has considerable flexibility under the ASA to offer discounts on the prices for works for consumer purchase, but must still pay rights holders as if the works had been sold at full price.

The BRR may also authorise Google to make special offer price reductions on works for consumer purchase, paying only 63% of the discounted price to rights holders. However, rights holders will be able to oppose such discounts.

The ASA provides for future revenue models, subject to BRR approval. These are print on demand (for the sale of print copies of books that are not commercially available), digital download (for electronic copies to be downloaded for example for use on e-book readers) and consumer subscription (to allow individual consumers to access the subscription database set up for institutions). All future revenue models require BRR approval and 60 days’ notice to rights holders, who may choose not to participate. The revenue split between rights holders and Google for these additional revenue models will also be 63:37.

In all cases, rights holders may be able to claim a one off cash compensation of at least $60 for each entire work which has been digitised by 5 May 2009. Claims for cash compensation must be made by 31 March 2011.

The Book Rights Registry

An independent not for profit organisation called The Book Rights Registry (“BRR”) has been set up to distribute payments to rights holders from Google, to assist in resolving disputes and to monitor Google’s display and pricing of books to ensure it accords with rights holders’ authorisations. Michael Healy, formerly Executive Director of the Book Industry Study Group, will be the first Executive Director of the BRR.

Google are to contribute US $34.5m to the set up and administration of costs of the BRR.

The BRR will maintain a rights information database, containing information on all works digitised by Google and their status for the purposes of the settlement (for example, authorised for consumer purchase / removal requested).

The BRR will have Board representatives from authors and publishers in each of the US, UK, Canada and Australia.

The consensus amongst publishers in the UK seems to be that the BRR will be more representative and fairer to non US rights holders, particularly as there will now be a mechanism by which the BRR will check that Google’s use of works complies with the settlement and rights holders’ instructions.

Orphan works and the Unclaimed Works Fiduciary

If rights holders do not claim works listed by Google as part of the project, they will be deemed to be orphan works.

An Unclaimed Works Fiduciary (“UWF”) will be appointed by the majority of the Board of the BRR and approved by the US Court. The UWF’s role will be to represent and look after the interests of rights holders of orphan works.

The BRR will also have a role in relation to orphan works. In consultation with the UWF, the BRR will try to locate rights holders of orphan works. The BRR will hold revenues due to them for 10 years, but will be able to use up to 25% of those revenues to find rights holders. If they cannot be located after 10 years the BRR may be able to distribute revenues due in respect of orphan works to literacy based charities in the US, UK, Canada and Australia, so long as the Court has approved such distribution.

Disputes

Under the ASA, the BRR has a role in resolving disputes. Ultimately, though, disputes (between rights holders and Google or BRR, or between author and publisher) will be submitted to binding arbitration. The arbitrators are to be drawn from a pool chosen by Google and the BRR.

In a move designed to appeal to foreign rights holders, the ASA provides that rights holders who do have a dispute which is arbitrated need not travel to the hearing but may participate by phone or videoconference.

What about the Google Partner Programme?

The Google Partner Programme is a programme that enables publishers and authors to allow Google to display their works online, on terms agreed directly with Google. It will continue.

Google has indicated that it may accept works that have been opted out of the settlement or removed from the project into the Google Partner Programme.

It may thus be open to rights holders to opt out of the ASA or remove all or certain works from the digitisation project and do a separate deal with Google, potentially on better terms than under the ASA.

For further information please contact Shireen Peermohamed on +44 (0)20 7667 5000.

If you would like to attend a seminar to learn more about the settlement, please let Julia Weiss know.