Federal Judge Rejects Amended Google Books Settlement

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Judge finds that settlement would unduly increase Google’s market power.

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Judge Denny Chin, then on the District Court for the Southern District of New York, recently rejected a proposed settlement agreement between Google and a class representing book authors and publishers. The rejection followed objections from the Antitrust Division of the Department of Justice (DOJ) and may presage other antitrust scrutiny of Google.

Through its Google Books project, started in 2002, Google set out to digitize all of the world’s books, millions of which are out of print. Scanning books raises copyright concerns, and in 2005 five book publishers and the Authors Guild sued Google in the Southern District of New York for breach of copyright.

After an initial proposed settlement agreement generated immense public opposition, including from the DOJ and groups representing authors and publishers in Europe and Australia, the parties amended their settlement terms. The amended agreement would have allowed Google to continue scanning books, sell access to its database of books, and profit from advertising on webpages with book-related content. In return, the plaintiffs would have been compensated for books that Google had scanned already and a share of Google’s future book-related profits.

In his recent ruling, Judge Chin found that the amended settlement agreement was not “fair, adequate, and reasonable” under Federal Rule of Civil Procedure 23. He stated that the agreement “would give Google a de facto monopoly over unclaimed [or “orphan”] works” as well as “a significant advantage over competitors [in the search market], rewarding it for engaging in wholesale copying of copyrighted works without permission.”

Judge Chin relied on the collusion and monopolization concerns expressed by the DOJ and others in rejecting the proposed settlement agreement.

The DOJ had written to the court that although the amended settlement agreement addressed some of its concerns, the agreement still apparently violated the antitrust laws by allowing book publishers to “delegate to a common agent pricing authority for all of their wares.” Also, the settlement appeared to extend Google’s already-dominant search market position by granting it “de facto exclusive access to orphan and rights-uncertain works.”

The court will hold a status conference on the settlement on June 1.

Abigail Slater

Abigail Slater is a member of the New York Bar and a former antitrust attorney at the Federal Trade Commission (FTC) in Washington D.C.  All views expressed are the author’s own and do not represent the views of the FTC or any individual Commissioner.