The Google Books settlement, a book collector whose audacious plan to remake copyright law was ultimately for naught, died today. It was caught in the blast from a recent court decision, and received fatal injuries. Ironically, the settlement, which had been seriously injured in the spring, had been rumored to be planning a comeback tour. In the end, however, doctors declared that its internal divisions were incurable. The settlement was a little over two months short of its third birthday, and is survived by millions of orphan works.

Today, the Second Circuit decided In re: Literary Works in Electronic Databases Copyright Litigation, a kind of older sibling to the Google Books case. That suit, by freelance writers against databases (like LEXIS/NEXIS) that they claimed were including their articles without authorization, has been kicking around for a long time in one form or another. It has been to the Supreme Court twice: first in 2001 on an issue of substantive copyright law, and again in 2010 on a jurisdictional point. Most recently, it has had the form of a proposed class-action settlement on behalf of all the freelancers that would have paid them up to $18 million in exchange for letting the databases reproduce the articles in perpetuity. The Second Circuit held that the settlement couldn’t be approved because different parts of the class were so at odds with each other that they each needed their own lawyers in the negotiations. Since the deal was worked out by a single group of lawyers for the whole class, that obviously hadn’t happened, and it’s back to square one for the settlement talks in the freelancer lawsuit, or maybe even square zero if some of the parties give up on settlement entirely.

The parallels between the two lawsuits — the Google Books suit and the freelancers’ suit — are striking. Both were brought as putative class actions on behalf of copyright owners against large commercial entities that have allegedly been making infringing copies. Both were brought by a coalition including the Authors Guild, and indeed, they even used the same lawyers. Both morphed into global settlements that would have provided compensation in exchange for allowing the works to stay in the databases — and possibly be used in new ones. And both settlement classes were riven by the same, fatal fault lines.

In the freelancers’ lawsuit, the Second Circuit explained that there was an inherent conflict within the class based whether the articles had been registered with the Copyright Office. The law of registration is a mess, but here are the two basic rules, as they apply to “United States works”:

• A copyright owner may not file a lawsuit until after registration.
• A copyright owner can receive much larger damage awards for infringements that take place after registration.

This meant that the articles in the freelancers’ suit fell into three distinct groups:

• Articles that were registered early (before the infringement) and so were eligible for big payouts in a lawsuit.
• Articles that were registered later (after the infringement), and so were eligible only for small payouts in a lawsuit.
• Articles that haven’t yet been registered, and so weren’t yet eligible for any payouts in a lawsuit.

(This last part is confusing, and may require a brief digression. The tl;dr version is “skip this paragraph.” You may wonder why unregistered works could be in the settlement at all. This was the point of the Supreme Court’s second ruling: it held that the “register before suing” rule is only a prerequisite to suing, not an absolute bar on the court’s ability to hear the case. You may also wonder why unregistered works could be eligible for any payouts at all. That’s again because registration is only a prerequisite to suing. Infringement of an unregistered work is still an infringement; it’s just not eligible for a lawsuit yet. If the copyright owner ever gets around to registering, she can bring suit then, and collect damages for the past infringement.)

The freelancers’ settlement provided for different payouts for the different categories of works. Articles in the first group — Category A — got the biggest payments (starting at $1,500). Articles in the second group — Category B — got medium-sized payments (starting at $150). Articles in the last group — Category C — were far and away the most numerous but got the smallest payments (starting at $5). Moreover, the total payments (including attorneys’ fees and other costs) were capped at $18 million. If the total claims were larger than that number, the group C works took a haircut first, followed by the group B works and then the group A works.

The Second Circuit held that the members of the different groups had obviously different incentives. Each wanted to maximize its total take. Nonetheless, the members of group C got an obviously smaller payment. Now, this in itself wasn’t fatal to the settlement. Their claims might well have been objectively worth less. They might have been getting an exceptionally good deal for their low-value claims. But the court straight up admitted that it had “no basis for assessing whether the discount applied to Category C’s recovery appropriately reflects” the value of those claims.

The only way to police for appropriate valuation, it held, was each group to be separately represented. With its own attorneys in the negotiating room (and looking to maximize their own fees), each group would get as much, but only as much, as its claims were worth. The actual settlement, however, was negotiated by a single set of attorneys on behalf of the whole class, leading to the temptation to maximize the bottom-line cash value of the settlement by throwing in every possible claim and class member and selling off these ballast claims (the Category C’s) on the cheap. Thus, the court remanded back to the trial court to consider dividing the class of freelancers into subclasses. It hinted, but didn’t definitively say, that dividing it along the A/B/C lines would suffice.

And now back to the Google Books case. The class shares some of the same registration issues. There is no precise equivalent to Category C in the plaintiff class, but there are equivalents to Categories A and B, depending on the timing of registration and where the work was published. If they needed separate representation in the freelancers’ case, they need separate representation here: both are compensation-providing settlements in a copyright class action. But, just as in the freelancers’ case, there have never been subclasses or separate representation, which means it’s back to square one or square zero here, as well.

And really, square one isn’t an option. That’s because there are other divisions within the plaintiff class in the Google Books case, divisions that are arguably just as serious. Objectors, scholars, and even Judge Chin himself have called attention to them. Here are just a few:

• United States copyright owners versus foreign copyright owners
• Owners of full books versus owners of shorter “inserts”
• Commercial authors versus academic authors
• Easily findable owners versus orphan owners

Creating subclasses that track these different groups, then supplying them with their own skilled lawyers, and putting everyone in a room together to knock out a new settlement: it just isn’t going to happen. The Venn diagram will have at least a dozen different boxes in it. The expense would be absurd, it would take months or more likely years to pull off, and I still can’t imagine those negotiations succeeding, especially not after the level of vehement opposition to the original settlement. There is no trust here, and Judge Chin had already been banging heads together to get the case moving. No, the Google Books settlement — any settlement — is now dead. There is no square one: this case is going back to litigation.

As if by astonishing coincidence, today also brought news of a third copyright class-action settlement, one also involving Google. During the “let’s all sue YouTube” fad of 2007, the National Music Publishers Association joined the pile-on with a class action on behalf of music copyright owners. The cases were consolidated as Viacom v. YouTube, and all went down to defeat together when the trial judge ruled that YouTube was protected by Section 512 of the DMCA. That ruling is up on appeal, as first-named plaintiff Viacom continues to slug it out, but today the music publishers announced that they’re giving up. They’re dropping their appeal, and in exchange, “[M]usic publishers will have the opportunity to enter into a License Agreement with YouTube and receive royalties from YouTube for musical works in videos posted on the site.” This sounds sufficiently similar to the content monetization opportunities Google already offers through YouTube’s ContentID program that it really appears that Google gave up nothing as part of the “settlement.”

One naturally wonders whether something similar is about to happen in the Google Books case — call it square minus one. The road to class-wide settlement — even to a much more modest settlement that covers only scanning and searching — now appears to be barred. What is more, in light of the freelancers’ case and the Supreme Court’s recent Wal-Mart case, the road to class-wide litigation also looks to be extraordinarily difficult. Google will raise many of the same adequacy of representation arguments in its opposition to class certification. It might still be more feasible for a few copyright owners holding large number of copyrights to litigate on an individual basis — but the major publishers, who best fit that bill, have all more or less made their peace with Google through its Partner Program. The odds of the authors being able to see this one through to the end have just dropped precipitously. Google is holding all the cards now, and they’re all full houses.

(Hat tip to C.E. Petit.)

UPDATE August 19: The class action that the music publishers were part of was never formally consolidated with the Viacom lawsuit. Instead, the two were merely coordinated; they went down to defeat on the same summary judgment motion, but remain separate cases. Also, the music publishers claim that the offer “has never been available before now.” Given, however, that the agreement itself is confidential, this statement has all the credibility of a mattress store’s promise of an “exclusive” model: technically true, but you can still find a suspiciously similar deal down the street. If I am wrong about this, the publishers can easily prove me wrong by releasing the details of the terms that have never been before been available. (Hat tip to Timothy Lee’s Ars Technica article for these two pickups.)

That’s the heart of it. Tomorrow, I hope to pick up on a different thread in the freelancers’ opinion: a passage about how far a class-action settlement can go in releasing claims based on future infringement. By another remarkable coincidence, I gave a presentation on this very topic less than a week ago, so the issue is fresh in my mind. Coming up next: why the Second Circuit was right, and why Judge Chin was right, too.

James, I would expect that this will have big implications for the similar sort of extended collective licencing that the Hargreaves Report in UK recommends for. Clearly, collective representation of complete strangers in the USA is unlikely, therefore there could be harmonisation issues across the Atlantic.I imagine there may be a few regretting the loss of a potentially generous sugar-daddy. Maybe Gillian Spraggs might comment on the likely impacts in the UK.

ECLs, when not compulsory, are voluntary collaborations between a group of rightsholders represented by a named organization, and authorized to license certain, specified types of rights. It has been argued that the GBS settlement was an ECL by another name, but the issues are more complex than such a simple statement would suggest.

In an ECL, “non-mandated” rightsholders (ie, those who have not explicitly opted-in) are by default represented, but any potentially represented rightsholder can explicitly opt-out of the terms.

Given these rulings, you are right to observe that an ECL, should one be proposed, would probably have to address classes of books, e.g. “trade” or “academic”, possibly in concert with conditions such as “published before 1964”, in addition to the status of books, e.g., “not in distribution” or “non-commercially available”. This is complicating.

Perhaps at least as interesting is the possibility that a growing number of authors might seek to retain or pursue alternative exploitation strategies for digital rights - an attractive option at a time when the publishing industry is struggling to establish new contractual norms. Many authors might well want to opt out of ECLs that cover rights they consider to be fundamental to their financial interests.

Since ECLs are structured to include the majority of a represented group of rightsholders, it will be interesting to see whether there is growing convergence or divergence in the generation of author approaches to rights exploitation.

There’s one other issue that I wanted to try to “suss out.”

One area of speculation over the possible contours of a new settlement involved the possibility of a continuation of a more traditional class action for handling the claims of past infringement associated with Google’s digitization (and embodiment in a commercial product), while optionally delineating the conditions for opt-in elections for future business propositions. I have previously criticized the notion that an opt-in for future commercialization could succeed giving the existence of successful contracts in the Google Publishers program, and the recent ratification of a contractual agreement between Google and France’s Hachette Livre for opt-in scanning of older (out of print) works.

Although most cultural sector organizations would have been loathe to see a class action proposal resolving what they would argue is a justifiable Fair Use assertion - i.e., digitization to support discovery - it would have been a respectable strategy for Google, obtaining a marked reduction in exposure to potential liability.

The Muchnick ruling, because it strikes at the heart of the representation issue, suggests that any involvement of the existing proposed class structure would be fatal, including the possibility of a limited settlement that would consider only past acts.

Personally speaking, the terms of trade of the , you can choose ‘which’ collective, but you must be in collective management, system that appears to be envisioned in the EU are uncompetitive. Many authors might well opt out of the EU system.

If the Google players are truly seeking a truly “opt in” settlement, would the Second Circuit decision still be binding on them? I wonder if September 15th will be a wake or a christening?