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Reports: DOJ turns up the heat on Google's book deal

It looks likely that the DOJ will challenge the proposed settlement between Google and the book industry

The U.S. Department of Justice has stepped up its review of a deal that would settle a lawsuit publishers and authors filed against Google over the latter's book search engine, according to published reports.

The DOJ started looking into the proposed deal in April via preliminary and informal inquiries, but has now turned it up a notch by sending civil investigative demands (CIDs) to parties involved.

Critics have objected to the proposed deal, announced in October, citing antitrust concerns. Google and the plaintiffs -- the Authors Guild and the Association of American Publishers (AAP) -- say those concerns are unwarranted.

However, it appears that after its initial review of the deal, the DOJ is leaning toward challenging the proposed settlement.

The Wall Street Journal and The New York Times reported late Tuesday that the DOJ is now sending CIDs to organizations involved in the deals, a more formal approach than its initial information-gathering efforts.

"The Justice Department is clearly focused on Google. It's a wide-ranging request for documentation," a New York publishing executive told the Journal.

A DOJ spokeswoman declined to comment.

"The Department of Justice and several state attorneys general have contacted us to learn more about the impact of the settlement, and we are happy to answer their questions. It's important to note that this agreement is non-exclusive and if approved by the court, stands to expand access to millions of books in the U.S.," Google spokesman Gabriel Stricker said via e-mail.

Authors Guild Executive Director Paul Aiken told IDG News Service that the organization recently received CIDs from the DOJ but said this doesn't mean the probe has escalated.

"We have no indication they're stepping up anything. This is how the DOJ investigates things," Aiken said.

The Authors Guild has been expecting the CIDs since the DOJ first approached it with questions about the proposed settlement in April, Aiken said.

"We've known this was coming since they announced the investigation. This is what they do," he said.

The Authors Guild received the CIDs last week for documents pertaining to the proposed settlement, he said.

"We'll certainly comply with the CIDs and cooperate with the investigation," Aiken said.

That the DOJ is reviewing the proposed settlement isn't surprising, considering Google is involved, Aiken said. "Any big deal that involves Google is going to get a look from the Justice Department."

Asked whether the Authors Guild would be open to revising the proposed settlement, Aiken said he wouldn't speculate on that possibility, saying: "I don't think it'll come to that."

Google has maintained that the proposed settlement, which has to be approved by the court, will be beneficial to authors, publishers and readers by making it easier to find, distribute and purchase books, especially those that are out of print.

Critics have raised several objections, including what they perceive as excessive control by Google over prices and over so-called "orphan works," books that are under copyright but whose owners can't be found, such as when the author has died or the publishing house disappeared.

For example, Consumer Watchdog has charged that the proposed settlement gives Google special protections against lawsuits over orphan works.

"The danger of using such works is that a rights holder will emerge after the book has been exploited and demand substantial infringement penalties. The proposed settlement protects Google from such potentially damaging exposure, but provides no protection for others. This effectively is a barrier for competitors to enter the digital book business," Consumer Watchdog said in a statement.

Aiken doesn't think the antitrust objections are justified.

"We think the settlement will past muster for antitrust concerns. It's a non-exclusive deal and it is making books available to the public that otherwise wouldn't be available," he said. "The people who win here are readers who suddenly have millions of books available to them that they wouldn't otherwise have."

Concerns over orphan works are exaggerated, he said. "We think we'll be able to find the vast majority of the rights holders who would be owed money under the settlement," he said.

In the fall of 2005, the Authors Guild and the AAP separately sued Google alleging that Google's wholesale scanning and indexing of in-copyright books without permission amounted to massive copyright violations. Book authors and the Authors Guild filed a class-action lawsuit, while five large publishers filed a separate lawsuit as representatives of the AAP's membership.

The lawsuits were brought after Google launched a program to scan and index books from the libraries of major universities without always getting permission from the copyright owners of the books.

Google then made the text of the books searchable on its book search engine, although it argued it was protected by the fair use principle because it only showed snippets of text for in-copyright books it had scanned without permission.

Last October, the Authors Guild and the AAP hammered out a wide-ranging settlement agreement that calls for Google to pay US$125 million and in exchange gives the search giant rights to display chunks of these in-copyright books, not just snippets.

In addition, Google will make it possible for people to buy online access to these books. The agreement will also allow institutions to buy subscriptions to books and make them available to their constituents.

A royalty system will also be set up to compensate authors and publishers for access to their works via the creation of the Registry. Revenue will come from institutional subscriptions, book sales and ad-revenue sharing.

This Registry, whose board of directors will be made up of an equal number of author and publisher representatives, will also locate and register copyright owners, who in turn have the option to request to be included in or excluded from the project.

A big portion of Google's $125 million payment will go towards funding the Registry, while the rest will be used to settle existing claims by authors and publishers and to cover legal fees.

Consumer Watchdog also slammed what it calls a "most favored nation" provision in the settlement towards Google, by preventing the Registry from offering better deals to Google competitors interested in offering access to books online.

Meanwhile, University of California at Berkeley law professor Pamela Samuelson has argued against the settlement, saying it will endanger competition because of its orphan work provisions.

"The Book Search agreement is not really a settlement of a dispute over whether scanning books to index them is fair use. It is a major restructuring of the book industry's future without meaningful government oversight. The market for digitized orphan books could be competitive, but will not be if this settlement is approved as is," Samuelson wrote.

The U.S. District Court for the Southern District of New York, which will decide whether to approve the settlement, has extended from June to September the period for members of the plaintiff class -- authors, publishers and rights holders in general -- to be notified of the agreement and mull whether to opt out of it.

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