April 23 – April 30, 2009 Edition

Agency Lawyer Warns Google
Case Violates Author Rights

NEW YORK , NY (Authorlink News, April 23, 2009)—The controversial Google settlement with the Association of American Publishers and the Authors Guild, which purports to help writers get back money for Google’s illegal scanning of their books, is now drawing fire from legal sources around the country and abroad. Lynn Chu, a lawyer and literary agent with Writers Representatives, LLC in New York, has written widely on the case, which in her opinion, will adversely affect authors and threaten the system of U.S. Copyright law.

First, some background on the subject: A so-called nonprofit Book Rights Registry, initially paid for by Google, has been set up as a self-appointed rights clearing house for authors and publishers, and says it will have the authority to determine whether a book is in or out of print, with respect to Google’s use of the material. It also reportedly has the authority to settle any disputes. The 323-page class action legal case is due for a court hearing in June, 2009. The case calls for authors and/or their publishers and agents to opt them “in” or “out” of the settlement no later than May 5, 2009. Basically, opting in will mean the author waives all rights to sue Google for future wrongdoing, in exchange for an approximately $60 payment, which might take up to five years for the author to receive. Opting out, means the author will retain rights to sue. If the author does nothing, he/she will be automatically opted into the settlement, according to settlement lawyers. However, other legal counselors say the settlement has no legal authority to automatically opt people into the case.

Ms. Chu, along with a growing number of other publishing professionals, strongly opposes the settlement and advises authors to refrain from participating. In both an e-mail and audio interview, we asked her to elaborate on her objections.

AUTHORLINK: May 5 is the deadline for opting in or out of the settlement. What are the dangers of simply ignoring the “opt in” “opt out” choices of the settlement. As we understand it, if you do nothing you are automatically opted into the settlement. So if you simply ignore it, and later decide to sue you will not be able to do so. True?

LYNN CHU: Let me preface by saying that all these issues are extremely complex and I am not rendering legal advice. I am giving my honest opinion. I am a lawyer, but I am not a practicing litigator or expert in every aspect of this matter. Law is always complex and this is beyond just about any single person.

My view is that the plaintiffs, the AAP and the Author’s Guild, have no legal authority to represent any one of, much less the whole, owner class. They are “class representatives” solely for purposes of this single litigation which they and only they chose to bring. They have no power to bind any author or publisher to any particular terms of agreement, unless those individuals sign on and “opt in” to what is, in essence, their preferred contract. They are no-one’s agent. This is simple agent-principal law.

I believe that there will be no effect after May 5 on any owner’s copyright or on their right to sue Google or its Registry for infringement of their copyrights by unauthorized online displays if one fails to opt out. These parties have no authority to convey or dispose of anyone’s copyrights for them, nor to grant or authorize any publications. I consider the use of the class action here to be a bit of a PR trick

To do this they would have to convince Congress to change the law of copyright.

Nor may the Registry choose to favor anyone who signs up and claims, perhaps falsely, to own or exclusively control a copyright or discriminate against anyone who fails to do so.

By the way, if you have approval rights in your contract, you may be able to claim that your publisher does not have the right to sign on to the Registry at all, much less claim your revenues, without getting your prior written approval. Arguably, only you have the right to authorize this type of publication. The fact that this sort of publication was entirely unforeseen when you signed your book contract may also mean that these particular rights —which are very different from ebook rights– were not granted to your publisher at all. Your publisher, however, may disagree. They have probably planted vague terminology in your contract granting themselves exclusive discretion over these rights. But courts tend not to look favorably on vague language of that kind. Authors have always historically been at a great disadvantage with publishers in contract negotiations. Courts and the law in this area is well cognizant of the fact that authors, by and large, are a bit of an oppressed class when it comes to publishers and what is in publishing contracts.

AUTHORLINK: You have said that under the settlement every rights owner in America must hand over their contract data on every edition of every work they ever wrote, unless of course they opt out. Hand their contracts over to whom, The Book Rights Registry?

LYNN CHU: Yes, the process they envision is that everyone must log on and sign up with the Registry, naming all their books, the nature of your control over those titles, and all portions of your works that ever appeared in other books, ie, anthologies, under any license you, your publisher, or one of their licensees ever executed. They call these “Inserts.”

AUTHORLINK: In what ways will Google compete with the U.S. copyright Office and the federal courts?

LYNN CHU: Google is requiring everyone in America to register with their Registry, their process, and play by their rules, sidestepping the U.S. Copyright Office and reversing all the rules of the law of copyright. Under which it is Google’s burden, not yours, to ask permission of you, and to negotiate terms of contract for this type of publication that are acceptable to you personally. The settlement agreement is a vast contract, which, if you agree to it, will bar you from the federal courts forever when it comes to Google. The Registry permits itself under this contract to reinterpret and in effect rewrite your contracts, as they prefer to see them, and not as a federal court might.

AUTHORLINK: Doesn’t the Book Rights Registry have the final say over determining whether a book is out of print or not? Doesn’t that hand the BRR a lot of power?

LYNN CHU: Yes. And yes.

AUTHORLINK: You have made the point that as publishers’ costs go down, authors earn more. But not in the case of Google. Elaborate a bit.

LYNN CHU: Not exactly. This structure says that Google takes 37% off the top. Then comes the Registry. We know nothing about what the Registry will take off the top in its costs. That share is thus potentially unlimited, reducing you to a sliver. The author comes last after everyone else has taken their cuts. This reverses the economic structure of books.

In a standard well negotiated book agreement the Author has a royalty based on retail list price. That means that the Author’s share is paid to him first in line and the Publisher must pay all its costs of publication out of whatever is left over to it. So, the Publisher, not the Author, bears all the risk of publication. The Publisher pays its own costs. This aligns economic incentives correctly. This prioritization of the Author is an important component of the classic book contract. It is justified because the Author is the creator of the work. He is due his fairly negotiated, constant, per copy sum, per copy sold, as his guaranteed payback for his creation, and first before everyone else. For the Publisher to bear all publishing costs means they have the motivation to save on those costs. The Registry has no incentive to save on such costs because it all comes out of your money. It is like a sleepy government agency, but worse, because even a government agency only gets a limited budget from Congress. This is a private company and nonprofit doesn’t mean they aren’t going to incur costs nor is it any guarantee of fealty to you, or competence on their part. Here, it just means they have no revenue stream to defray costs other than your money, and their total dependence on their pal Google. In this way, Google cleverly pushes the greatest risks of its whole publishing enterprise off on the Author. Google takes its big, fixed, guaranteed profit and overhead share off the top first. The Author then is forced to bear the very considerable risks of this type of publication and all the squabbling and fighting this structure will unnecessarily create. I believe it will be a terrific cauldron of disputes over who is due what money. Publishers will also all start gaming all their new book contracts to position themselves first at this particular spout forever, and authors will lose every advantage they might have had by reference to past industry tradition in their future contracts.

The author will then be forced into a determination that the Registry will make about whether and how much to split between any particular claimant publisher (and there may be several if your book was licensed in multiple editions) and themselves. This will not be a determination under U.S. law, but under new rules the Registry promises to make up out of whole cloth, like their rule that, for a pre-1987 book, unless the author has have a full written reversion of rights in hand from the original publisher, the author will have to share its Google distribution with that publisher to receive 35% forever.

AUTHORLINK: Who owns the digital rights that flow from the author and/or publisher through the BRR to Google? We have heard it said the BRR does.

LYNN CHU: The author-publisher contract determines who owns online display rights in works. The Registry would like to be the central authority to receive all Google money and decide whom to give it to, rewriting those contracts if it so desires on any rules it would like to create.

AUTHORLINK: Are you aware that out of the 63% in royalties the author is supposed to earn from Google, up to another 20% in fees can be collected from the BRR, not to mention possible arbitration fees for disputes. Does this motivate the BRR to encourage disputes in order to earn more money?

LYNN CHU: Yes. As I read the agreement, the amount off the top by the Registry is in fact unlimited and there is no cap, if its expenses are high. In any event, they get to give it all to the charity of their choice in 5 years, if you don’t present yourself to them. I regard the Registry as one of Google’s costs of publication. It is Google’s liability. Not authors’.

AUTHORLINK: The BRR is “temporarily” funded by Google (the very entity the AAR and Guild were supposed to be opposing). When the $34 million in the Google’s startup funding runs out the BRR’s fees of up to 20% of the author’s royalties kick in. The BRR says it will take up to five years for the authors to get paid from the settlement. That would indicate that the BRR fees will begin to be charged long before the first payment ever goes out to the authors. Thus every author on the planet will be soaked for as much as 20% of their royalties before they even see their $60 check from the settlement. Can you imagine how much money this will amount to across thousands and thousands of authors?

LYNN CHU: Authors are a fully subordinated net residuary here. That is a bad economic position to be in, period. The simple and fair thing would be to ignore the AAP and the Author’s Guild, who are doing nothing but empire building for themselves. If Google had any sense of fair dealing, it would have digitized and indexed the entire library catalog. Then, it would have devised a simple agreement listing several types of publication that authors might authorize, from mere listing, to snippets, to x%, to full display. It would have set its database to be in the “Off” position for everything. Then it would have publicized the ability to display works to all authors so long as the work was listed their U Michigan files. People would check then log on and decide for themselves. Like every other publisher in the world, Google’s agreement would contain a warranty of ownership, and indemnity for breach of that warranty. If you log on to turn “On” one or another publication feature, you would sign that agreement. Easy, fair, simple. It would have to be fair to the author, otherwise people contemplating it would not sign on.

But, in this, they are trying to use the court system in a tricky way to set up a separate entity, so as to get total separation from all hassle of contracting or claims. They pawn off all costs of that publisher liability on the Registry–and you the author to pay for it all.

Furthermore, you the author, as usual, will be politically weak against publishers in this Registry entity. In the end, publishers will wind up owning your rights forever and taking a piece or 100% of these revenues forever. In any head-to-head with publishers, authors will lose, especially if they waive all their rights to access to federal court.

AUTHORLINK: Who needs to worry about this case? All authors?

LYNN CHU: Authors need very much to worry about this. If publishers are allowed to control this process, as they inevitably will, authors are going to lose. The current system has a great deal of flexibility and allows anyone to whom their rights are worth it, the powerful right to sue at common law, and under the copyright statute, to assert their rights. This system extinguishes that in a stroke. It is very dangerous to authors with rights of significant long term value, and a very bad deal because it cuts off the organic power of individual choice and contract negotiation.

For more on the topic, click the links below and Search Authorlink for Google Settlement.

1. Wall Street Journal Op Ed by Lynn Chu:

2. Authors Guild response to Ms. Chu’s Journal piece:

3. Ms. Chu’s reply to the Authors Guild:

4. Comments on the popular law blog,

Lynn Chu is an agent with Writers' Representatives LLC