The New York District Court has rejected the (amended) Google Books Settlement Agreement (the ASA) concluding that the ASA did not pass the relevant test of being "fair, adequate and reasonable".

Judge Chin found that the ASA simply went "too far", not least because it would grant Google rights to exploit books without the permission of the copyright owners and also give Google a significant advantage over competitors rewarding it for its wholesale copying without permission. Judge Chin observed that the Courts "should encroach reluctantly on Congress's legislative prerogative to address copyright issues presented by technological developments" and stated that the idea that a court-approved settlement could release the copyright interests of rights-holders who have not voluntarily consented to such transfer was "troubling". The general impression is that the opinion is pro-copyright and that the Judge is sympathetic with the copyright objections to the ASA. However, it is interesting that at no point in the opinion did the Judge expressly state that the ASA was being rejected on copyright grounds.

Another interesting feature of the opinion is Judge Chin's conclusion which "urges" the parties to consider revising the ASA from an "opt-out" settlement to an "opt-in" settlement. A statement issued by John Sargent of Macmillan on behalf of the involved publishers reports that the opinion "provides clear guidance to all parties as to what modifications are necessary for its approval" and he also confirmed that the publishers are willing to amend the ASA to become narrower in order to achieve such approval.

Presumably this means that, amongst other changes, the publishers would be willing to convert and resurrect the ASA as an opt-in arrangement. This would certainly address many of the objections raised to the ASA including most notably the thorny copyright and competition issues raised by orphan works.

However, whilst the opinion states that "many" of the objections would be ameliorated if the ASA were converted to an "opt-in" agreement it is not clear whether an opt-in settlement would address all of the obstacles to the court approving the settlement. The opinion discusses seven key objections to the ASA, namely adequacy of notice, adequacy of class representation, scope of the ASA regarding future acts, copyright, competition, privacy and international law concerns. On my reading of the opinion, there is only one ground upon which the judge expressly rejects the settlement – namely the scope of the ASA regarding future acts.

As we all know, the ASA deals with two issues. The first is the settlement of Google's past conduct and copyright infringement. The second is an arrangement to permit Google's proposed much broader future sale and exploitation of the works. The judge concluded that "this second part of the ASA contemplates an arrangement that exceeds what the court may permit". The issue here is that the ASA would release claims beyond those raised in the pleadings and the court's powers are limited to approving a settlement on points raised in the pleadings. Naturally, the pleadings related to Google's past scanning and distribution of "snippets" rather than the potential future sale and exploitation of entire copyrighted works -consequently the second limb of the ASA goes beyond the scope of what the court is permitted to approve. 

If it is beyond the court's remit to approve a settlement which deals with the future-looking aspects of the ASA (as opposed to merely the past conduct elements of the ASA) then it begs the question how the court could approve the ASA even if it is further amended to adopt an "opt-in" approach. One possibility is that a revised ASA would need to be confined to settling Google's past conduct and solely those non-display uses contemplated by the pleadings. Clearly that would be a major step back from what the ASA currently strives to achieve. However, a revised ASA providing for opt-in for display uses would similarly be a major step back for Google too especially given that Google already operates a consensual partner programme in any event.

Caroline Turner is a partner in the media and entertainment law firm Harbottle & Lewis