Authors Guild v. Google Inc.
770 F. Supp. 2d 666 (2011)
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Rule of Law:
A class action settlement agreement under Federal Rule of Civil Procedure 23 is not fair, adequate, or reasonable if it attempts to implement a forward-looking business arrangement that grants rights far beyond the scope of the original legal dispute. Such an agreement cannot release claims that do not arise from the 'identical factual predicate' of the lawsuit, especially when it affects the substantive rights of absent class members without their affirmative consent and usurps a legislative function.
Facts:
- In 2004, Google Inc. entered into agreements with several major research libraries to digitally copy books in their collections.
- Google proceeded to scan more than 12 million books, many of which were still under copyright, without obtaining permission from the copyright owners.
- Google created a digital library from these scans and made the text of the books available for online searching.
- Users of Google's service could search the digital library and view short excerpts, or 'snippets,' of the copyrighted books.
- Google's project included numerous 'orphan works,' which are copyrighted books whose owners are difficult or impossible to locate.
- While Google engaged in mass scanning without permission, its competitors typically underwent the costlier process of obtaining permissions from copyright holders before digitizing works.
Procedural Posture:
- In 2005, The Authors Guild and a group of publishers filed separate class action lawsuits against Google Inc. in the U.S. District Court for the Southern District of New York, alleging copyright infringement.
- The authors sought damages and injunctive relief, while the publishers sought only injunctive relief.
- Following discovery, the parties engaged in settlement negotiations and, in October 2008, filed a proposed settlement agreement.
- The court granted preliminary approval, but the agreement drew hundreds of objections from class members and other interested parties, including the Department of Justice.
- In response to the objections, the parties negotiated and filed an Amended Settlement Agreement (ASA) on November 13, 2009.
- The court again granted preliminary approval and, after a notice period, the parties moved for final approval of the ASA.
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Issue:
Under Federal Rule of Civil Procedure 23, is a class action settlement agreement that grants a defendant the right to digitize, display, and sell entire copyrighted books, including those of absent class members who do not opt out, fair, adequate, and reasonable when the underlying lawsuit was limited to claims of copyright infringement for scanning books and displaying short snippets?
Opinions:
Majority - Chin, Circuit Judge
No. The proposed Amended Settlement Agreement (ASA) is not fair, adequate, or reasonable because it attempts to use a class action settlement to implement a forward-looking business arrangement that goes far beyond the dispute before the court. The original lawsuit concerned Google's scanning of books and display of snippets, for which Google had a colorable fair use defense. The ASA, however, would grant Google the right to exploit entire books, a right it would otherwise not have, and release claims that do not arise from the 'identical factual predicate' as the settled conduct. The court reasoned that the ASA improperly uses the class action mechanism to address the complex issue of 'orphan works,' a matter better suited for Congress. Furthermore, the settlement raises significant copyright concerns by converting the rights of absent class members from an 'opt-in' to an 'opt-out' system, effectively transferring property rights without affirmative consent. The court also found that the named plaintiffs did not adequately represent the diverse and conflicting interests within the class, and that the agreement raised substantial antitrust concerns by granting Google a de facto monopoly over orphan works.
Analysis:
This decision significantly limits the use of class action settlements as vehicles for creating broad, forward-looking business arrangements or rewriting public policy. The court reinforced the principle that Rule 23 cannot be used to resolve issues, like the orphan works problem, that are legislative in nature, thereby upholding the separation of powers. By rejecting the 'opt-out' framework for transferring future digital rights, the ruling strongly affirmed the affirmative rights of copyright holders. This case had a profound impact on mass digitization projects, signaling that such endeavors require either legislative solutions or direct, 'opt-in' permissions from rights holders, rather than court-approved settlements that bind non-consenting parties.
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