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Google Books: Headed for the Bonfire?

Google's (GOOG) business strategy depends on constant expansion of the content it offers. That's why the company pushed to establish its Google Books service. After all, a typical book has hundreds of times the content of a web page, so think of how many more search ads Google could potentially match against it.

But the strategy took a hard hit yesterday when U.S. judge Denny Chin rejected the $125 million settlement that Google had reached with publishers and authors in 2009 over a class action copyright infringement suit. Suddenly, a valuable and powerful source of immense content, millions of books potentially unavailable to any other company, which Google had grabbed in a negotiation coup, were gone. And the chance of Google getting them back without legal ramifications is slim at best.

Google had used its now classic approach of proceed and then ask forgiveness rather than seeking and possibly not obtaining permission. Working with universities, it scanned millions of books, converting them to searchable text and making the results available on Google search. The Authors Guild, a trade organization for book authors, brought suit together with a number of publishers.

The two sides negotiated a highly controversial settlement that drew extensive criticism from the Department of Justice, including the following:

  • Class action suits generally address past actions. This one allowed Google to display copyrighted works in the future for anyone who did not opt out of the agreement.
  • It seemed questionable that any representative could adequately represent all rights owners, especially those who were unreachable but who owned rights to books that were under copyright protection but out of print.
  • Google needed active permission to use the in-print works but not out-of-print. Rights owners that did not claim money within five years would forfeit their money to those already registered. So the deal was stacked in the favor of those with rights to books currently in print, even though Google wanted to scan and display the out-of-print books.
  • Similarly, foreign rights owner could have significantly different interests than those in the U.S., but they were inadequately represented in negotiations and notification of the suit was inadequate to reach them.
  • The structure of the settlement would have made it difficult for other companies to compete on an even footing with Google, raising antitrust issues.
Implosion of the settlement certainly doesn't put Google Books out of business, but it puts a huge damper on its plans. Even if the two sides could work through the legal restrictions, Google would still no only enjoy a decided advantage over competitors. (And if the company's intent is really to make the world's information available, why would it need exclusive rights to some parts of that data?)

Google might proceed anyway. It had claimed that it was under no obligation to let people or companies opt out of having their books scanned even with the settlement. Perhaps the company will again exercise its expertise in formulating apologies rather than requests.


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