[A2k] Wall Street Journal: New Google Book Pact Unlikely to End Flap

[Thiru Balasubramaniam]

     * TECHNOLOGY
     * NOVEMBER 16, 2009

New Google Book Pact Unlikely to End Flap


By JESSICA E. VASCELLARO And JEFFREY A. TRACHTENBERG

Google Inc. and two author and publisher groups submitted a modified
version of a controversial settlement over digital books, but it
appears likely the fight over the agreement will continue.

The revised pact submitted late Friday would allow Google to
distribute millions of digital books online, but would cut the number
of works covered by the settlement by at least half by removing
millions of foreign works.

Yet the issue of whether it is fair for the settlement to let Google
distribute books whose legal rights owners haven't been identified=97
known as orphan works=97is still drawing criticism.

People familiar with the matter say the Justice Department remains
concerned that the fact the settlement gives Google immunity from
lawsuits related to orphan works may be anticompetitive. The
department is expected to file its reaction to the modified agreement
by early next year.

A spokeswoman for the Justice Department said the department is
reviewing the revised agreement and its investigation into the
settlement is "ongoing."

Google, the Authors Guild and the Association of American Publishers
designed the revised settlement to mollify the Justice Department and
other critics who blasted the original settlement as overly broad and
anticompetitive. Under that settlement, announced in Oct. 2008, Google
would gain permission to distribute and sell millions of digital books
online in exchange for sharing revenue with rights holders.

The new settlement keeps the same structure, but makes a number of
changes, including adding more pricing options to address concerns
about potential price-fixing and clarifying what sort of services
Google can offer related to digital books.

It also aims to address some of the concerns about orphan works by
establishing an independent fiduciary to look out for the interests of
those rights holders and specifying that revenue collected from those
works won't flow back to other rights holders=97a move aimed at
addressing criticism from the Justice Department.

The modifications were defended by Richard Sarnoff, co-chairman of
Bertelsmann Inc., a holding company of publisher Bertelsmann AG, who
negotiated the settlement. He said the parties addressed the
competitive concerns around orphans by writing into the settlement
that Google must act as a reseller of those works to any third party.
Google had previously announced its intention to do so.

"This settlement won't determine the digital future of publishing,"
Mr. Sarnoff said. "It's about reclaiming publishing's past in a way
that would be impossible to do in the U.S. in any other manner. And it
will benefit scholars, readers, and the rights holders of these books."

But critics say the move doesn't resolve one of their main concerns:
that the agreement gives Google exclusive immunity from lawsuits from
unknown rights holders.

The notion that the company could distribute those works without the
threat of getting sued by rights holders has drawn heat from a broad
group of critics, including Google competitors such as Amazon.com
Inc., which argue it would be risky to invest in scanning books
without a promise of similar immunity.

"I don't see how this fixes anything about orphans," said Gary Reback,
an antitrust lawyer who co-founded a group of companies and
organizations including Amazon and Microsoft Corp. that is fighting
the settlement, in an interview Sunday.

Google Books Engineering Director Dan Clancy said Sunday the parties
felt it was beyond the scope of their class-action suit to devise a
solution for licensing all orphan works, and they continue to believe
Congress should resolve the issue.

"We are not asserting that because we created the fiduciary we solved
that problem," he said. U.S. District Judge Denny Chin in New York is
expected this week to set a timetable for objections to the pact's
revisions. Judge Chin is expected to this week lay out a timetable for
parties to object to the changes and set a hearing date, which has
been pending for years.

As part of the revised settlement, the parties proposed setting a
hearing around mid-February

Write to Jessica E. Vascellaro at jessica.vascellaro@wsj.com and
Jeffrey A. Trachtenberg at jeffrey.trachtenberg@wsj.com

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru@keionline.org


Tel: +41 22 791 6727
Mobile: +41 76 508 0997