The proposed settlement arose out of a journey that began in 2004 when Google announced a partnership with several large academic libraries to digitize materials from their collections and make them searchable through Google. While the full-text of the books would be scanned, searchers would encounter only “snippets”, or excerpts of the book in response to a search, along with links to the library holding the book, booksellers, and other location where the book might be found.

In response, a coalition of authors and publishers filed a class action lawsuit claiming the proposed digitization and publication of the “snippets” violated their copyrights. Google defended its actions claiming that its plans were permitted by the fair use doctrine, which allows limited and “transformative” uses of copyrighted works.

While the lawsuit was progressing, settlement negotiations were also underway. The proposed settlement (which was modified at least once prior to the court’s decision) provided that Google would develop and market a subscription database containing all of the digitized works in return for payments of royalties to authors. Google would also fund a “Registry” which would maintain a database of copyright owners and administer distribution of royalties. Significantly, the database would include all works digitized by Google, but that copyright owners could opt-out if they did not wish their works to be included.

The settlement was hailed by many as a way of giving “libraries, schools, researchers, and disadvantaged populations” access to a vast array of resources, many of which were out-of-print and only available on “dusty library shelves.” It also would resolve the “orphan works” problem, describing works that were still under copyright, but for which the copyright owner—whether author or publisher—could not be found. Orphan works would be included in the Registry, and their owners paid if they emerged after “reasonable (search) efforts.”

Notwithstanding the benefits, objections quickly arose. Many people objected on the grounds that the settlement gave Google a monopoly over the proposed database. A competitor would need to scan the books themselves and risk their own lawsuit. Objections were also raised that scanning without permission, then requiring authors to opt-out of the database violated fundamental copyright law. Additional objections were raised about whether the settlement fairly represented the interests of all authors, whether it went beyond the scope of the original lawsuit, whether it violated international copyright law, and whether authors’ privacy was violated.

The 47-page decision addressed several of these concerns, but its rejection of the settlement was based primarily on three points. The court indicated that the plan to scan all copyrighted works into the database without permission, and then require the copyright owners to opt-out, violated fundamental principles of copyright law. Copyright law gives owners the right to “exclude others” from using their works, and includes the right not to sell, license, or distribute. The court indicated that the Constitution delegates the role of defining these fundamental copyright principles to Congress and that courts should “encroach only reluctantly” on Congress’s prerogative, which this judge was unwilling to do.

The court next pointed out that the original lawsuit was brought in response to Google’s plan to display snippets of works. The original plan—and consequently the original lawsuit—did not involve making full text of the books available. The court noted that Google would have had “no colorable defense” to selling full-text access. The settlement giving Google—and only Google—the ability to sell full-text access was beyond the scope of the original lawsuit, and consequently could not be covered by the settlement of the suit.

Finally, the court noted that many members of the class had different interests than the named commercial authors and publishers. Academic authors are often interested in “maximizing access to knowledge,” whereas the named plaintiffs (including the Authors Guild and the Association of American Publishers) are usually interested in maximizing profits. The unknown orphan works authors had yet a different interest. The court noted that none of the parties would have a great incentive to locate orphan works authors, as “fewer opt-outs will mean more unclaimed works...to exploit.” The court also expressed concerns about the antitrust, international copyright, and privacy issues raised, but did base its decision on those objections.

Since last week, there has been a great deal of speculation about what will happen next. Google or the plaintiffs could appeal the rejection, although with the rejection being based on several separate reasons, a successful appeal is unlikely. They could also continue with the original lawsuit, e.g., “snippets vs. fair use.” However, it appears clear that both parties are more interested in developing a commercial database product than in “snippets” regardless of whether it’s fair or not.

Further settlement discussions are another possible outcome. The court even invited the parties to consider an “opt-in” regime, where copyright owners would be in the database once they affirmatively agreed to be included. However, the “opt-in” world of content is likely far smaller than the “opt-out” world, and would have neither the value nor revenue generation capacity of the rejected settlement.

It may be up to Congress to act. If copyright law can be changed so that orphan works can be made available for use, such as in the Google book database—and in other databases—the increasing content would also increase the value of the database, so that a settlement on the remaining issues would be worth pursuing. Orphan works legislation stalled in the last Congress and has yet to be introduced in the current Congress, but the rejected settlement may motivate Congress to reconsider orphan works law. Stay tuned.