U.S. Circuit Court Judge Denny Chin's rejection of Google's legal settlement with authors and publishers was not only a setback for the search giant's plans to digitize and make available 10 million books, but also for the dream of a universal online library.

So where do we go from here? Is this deal dead?

"There's nothing dead about the case or the settlement," Michael J. Boni, lead attorney for the Authors Guild, told Wired.com in an interview. "We're just considering what our next steps are. It's gratifying that the publishers have said they're still interested in working something out. That's encouraging."

In denying the motion to approve the Amended Settlement Agreement, or ASA, Judge Chin seemed sympathetic to a number of objections raised by critics of the class action settlement. And his wide-ranging opinion (.pdf) raised a number of key issues, including the big one: whether the settlement should be "opt-out" or "opt-in."

Here's the problem: Almost by definition, a class action lawsuit is opt-out. For example, let's say some company negligently pollutes your river, or manufactures faulty brakes on your car. Notice is given to potential class members in the form of a newspaper posting or mailed notification, or even a website. Upon notification, the burden is on the presumed class member to notify counsel that they would not like to participate – i.e., opt out of the class.

About 6,800 authors have already opted out of the ASA, and Judge Chin explicitly wrote in his opinion that he was satisfied that "the class received adequate notice.”

'You'll probably see Elizabeth Taylor remembrance day before you see meaningful reform on orphan works in Congress.'In this case, the class consists of all authors of copyright works, including an untold number of unknown authors responsible for so-called "orphan works," which are works in copyright for which no author can be found, either because they have died or are otherwise unavailable. The corpus of works produced by these unknown authors is in the millions, and represents a vast body of knowledge currently sitting in limbo.

The classic example used to illustrate the "orphan works" problem is the documentary filmmaker who finds a piece of footage but can't find the author. If she uses the footage, under current copyright law, she could be liable for onerous financial penalties if the author emerges after the fact.

In Google's case, the company says it's "fair use" to scan orphan books and use snippets of them in search results. But the settlement went further than that, making it possible for the company to show full pages online and sell digital copies of orphan works, holding the proceeds in escrow for a few years in case an author does show up.

But the court said that went too far, because the settlement was giving away the "property rights" of people without their consent, and the problem of orphan works was better left to legislators.

Judge Chin's view isn't novel: There's a fairly broad consensus that the problem of orphan works needs to be addressed by Congress.

"The questions of who should be entrusted with guardianship over orphan books, under what terms, and with what safeguards are matters more appropriately decided by Congress than through an agreement among private, self-interested parties," Judge Chin wrote.

What are the prospects of Congress taking up orphan works?

Don't hold your breath.

"You'll probably see an Elizabeth Taylor remembrance day before you see meaningful reform on orphan works in Congress," one industry insider quipped.

In lieu of congressional action, what Google and the authors and publishers are trying to do with the settlement is achieve a solution unlocking "orphan works" for the public, essentially through a forward-looking contract between Google and all authors.

Not everyone thinks that's a good idea.

"Our position is that we don't want to grant monopoly control of orphan works to just one entity, Google," Public Knowledge staff attorney John Bergmeyer told Wired.com. "At the same time, we recognize that some access to orphan works would be a good thing."

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The current settlement is too broad, and over-reaches, according to Judge Chin, because it draws all authors, including unknown authors, into a class action settlement that exceeds the scope of the original 2004 lawsuit. That was a fairly straightforward copyright-infringement lawsuit by the authors and publishers against Google for scanning millions of books without permission, and then making snippets available online.

In response to the original lawsuit, Google made a fair-use argument, roughly analogous to the one by which it has the discretion to index the entire web and sell ads against search results. It's important to remember that although Google has scanned millions of books into its database, it only displays a snippet of each copyright book for which it has no license. The purpose of the settlement was to allow Google to open up its database, creating a massive online library of 10 million books, accessible to all.

The problem is that the settlement reads like a forward-looking business contract between Google and all authors.

As New York Law School professor James Grimmelmann observed, “This move is what sinks the settlement.”

“Chin has set up a dichotomy,” Grimmelmann wrote in a legal analysis of the opinion. “Google’s past conduct in scanning and searching was the subject of the lawsuit, but it is Google’s future conduct in selling whole books that would [be] authorized by the settlement.”

Naturally, Google's competitors, like Amazon and Microsoft, were not happy with the prospect of Google effectively becoming the sole publisher of orphan works, and both filed briefs to that effect. Judge Chin appeared to be swayed, at least in part, by their arguments. He wrote:

While the digitization of books and the creation of a universal digital library would benefit many, the ASA would simply go too far. It would permit this class action – which was brought against defendant Google Inc. to challenge its scanning of books and display of "snippets" for on-line searching – to implement a forward-looking business arrangement that would grant Google significant rights to exploit entire books, without permission of the copyright owners [emphasis added]. Indeed, the ASA would give Google a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission, while releasing claims well beyond those presented in the case.

For his part, Boni, the Authors Guild lead counsel, says the ASA – and the "class" it represents – has been "misportrayed."

"There were far fewer objectors than people believed and the press believed," Boni told Wired.com. "It's just that they were extremely vocal, in large part out of self-interest. If you look at the roster of objectors, they're competitors of Google, or they're societies that have their own agendas that don't align with Google's."

'There were far fewer objectors than people believed and the press believed.'

–Authors Guild lawyerOne reason the authors and publishers are so keen on the settlement is that, if they revive the original copyright claim against Google, they could be setting themselves up for a serious defeat that could establish a legal precedent about book-scanning and online use with far-reaching implications. (Google declined to comment beyond its original statement, and counsel for the Association for American Publishers did not return a call for comment.)

By saying that an opt-in settlement would ameliorate many of the objectors' concerns, Judge Chin appears to be telegraphing that the mechanism of a class action may not be appropriate in this case. The reason is that if the settlement were opt-in, it would obviate the need for a settlement at all, because today, any author can forge an individual opt-in agreement with Google, just as thousands have with Amazon.

For now, in the wake of Judge Chin's decision, the status quo prevails. Google continues to scan books – books that it can't share with – or sell to – the public, except for snippets.

"There are many, many people, class members in the thousands, for whom this is a very sad day," Boni said. "This settlement has a tremendous benefit for society and for authors, and we're cautiously optimistic that we will be able to achieve – if not this settlement – than our goals, down the road."

Judge Chin has scheduled a status conference for April 25.

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