NEW YORK — A judge on Tuesday rejected a deal between Internet search leader Google (Nasdaq: GOOG) and the book industry that would have put millions of volumes online, citing anti-trust concerns and the need for involvement from Congress while acknowledging the potential benefit of putting literature in front of the masses.
U.S. Circuit Judge Denny Chin in Manhattan said the creation of a universal library would “simply go too far,” and he was troubled by the differences between Google’s views and those of everyone affected by the settlement. Still, he left the door open for an eventual deal, noting that many objectors would drop their complaints if Mountain View, California-based Google Inc. set it up so book owners would choose to join the library rather than being required to quit it.
The $125 million settlement had drawn hundreds of objections from Google rivals, consumer watchdogs, academic experts, literary agents and even foreign governments. Google already has scanned more than 15 million books for the project.
Google’s managing counsel, Hilary Ware, called the decision disappointing and said the company was considering its options.
“Like many others, we believe this agreement has the potential to open up access to millions of books that are currently hard to find in the U.S. today,” Ware said in a statement.
She said that, regardless of the outcome, Google would “continue to work to make more of the world’s books discoverable online” through Google Books, a searchable index of literary works, and Google eBooks, which allows readers to access books wirelessly on digital devices.
The judge said the settlement that the company reached with U.S. authors and publishers would “grant Google significant rights to exploit entire books, without permission of the copyright owners.” He was particularly critical of the access Google would have to so-called orphan works — out-of-print books whose writers could not be located — saying the deal gave the company “a de facto monopoly over unclaimed works.”
That was one of the fears raised in 2009 by the Department of Justice when it concluded that the agreement probably violated antitrust law and could decrease competition among U.S. publishers and drive up prices for consumers.
The deal, the judge said, gives Google “a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission.”
He noted that the case was not about full access to copyrighted works or the sale of them because Google did not scan the books to make them available for purchase, but he said the deal still would let Google sell full access to copyrighted works that it otherwise would have no right to exploit. The litigation focused on the use of an indexing and search tool.
The judge said Congress should ultimately decide who should be entrusted with guardianship over orphan books and under what terms, rather than the issue being resolved by private, self-interested parties.
He said Congress also could address the concerns of the international community of authors and publishers. He called it significant that foreign authors, publishers and even nations were saying the agreement violates international law. France and Germany had objected to the deal, along with authors and publishers in Austria, Belgium, India, Israel, Italy, Japan, New Zealand, Spain, Sweden, Switzerland and Britain.
Department of Justice spokeswoman Gina Talamona said in a statement that the government was pleased with the ruling. The settlement, she said, “exceeded the scope of the underlying lawsuit on which it was based and created concerns regarding antitrust, class certification and copyright issues.”
The president of the Authors Guild, an advocate for writers’ interests in copyright protection and other issues, said the organization planned to talk with publishers and Google “with the hope that we can arrive at a settlement within the court’s parameters that makes sense for all parties.”
Guild President Scott Turow said the online library was “an idea whose time has come.”
“Readers want access to these unavailable works, and authors need every market they can get,” he said. “There has to be a way to make this happen. It’s a top priority for the Authors Guild.”
John Sargent, chief executive officer at Macmillan Publishers Limited, noted in a statement on behalf of publisher plaintiffs that the judge had invited the parties to request approval of a revised deal if they can reach one. He said the publishers were prepared to modify the deal and work to overcome the judge’s objections.
He said the publishers wanted to “promote the fundamental principle behind our lawsuit, that copyrighted content cannot be used without the permission of the owner or outside the law.”
The Open Book Alliance, a group that includes Google rivals Microsoft Corp., Yahoo Inc. and Amazon.com Inc., called the ruling “a victory for the public interest and for competition in the literary and Internet ecosystems.”
Attorney Cynthia Arato, representing a number of leading foreign publishing societies and foreign book publishers that objected to the settlement, said it vindicates the important concerns of foreign rights holders.
“Their interests weren’t adequately protected,” she said. “It would be wrong for a U.S. court to allow one company to usurp their fundamental right to control their copyrighted works.”
The judge acknowledged in his decision that there are many benefits to Google’s project, including that libraries, schools, researchers and disadvantaged populations would gain access to far more books; that authors and publishers would find new audiences and new sources of income; and that older books — particularly those out of print — would be preserved and given new life.
The case developed after Google in 2004 announced it had agreed with several major research libraries to digitally copy books and other writings in their collections. The authors and publishers sought financial damages and a court order to block the copying when they sued Google in 2005 after Google failed to obtain copyright permission to scan the books.
A deal was first reached to settle the claims in 2008 and was tentatively approved by the judge in November 2009.
Since presiding over a hearing on the case in February 2010, the judge has been elevated to the 2nd U.S. Circuit Court of Appeals. He acted in the role of a district judge to rule on the case.
At the hearing last year, the judge heard a lawyer for folk singer Arlo Guthrie and “Pay it Forward” writer Catherine Ryan Hyde say the library would exploit his clients with “woefully inadequate compensation” for “unknown and undisclosed uses.”
Microsoft lawyer Tom Rubin said the deal “was structured to solidify Google’s dominance.”
Neither lawyer immediately returned requests seeking comment Tuesday.
Google lawyer Daralyn Durie testified at the hearing that fewer than 10 million of 174 million books in the world would be affected by the settlement and that 5 million of those affected were out of print. Google has estimated that about 130 million titles likely would get into its digital library.
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