On the surface, the hearing was supposed to determine if a lower court made a mistake last year when it ruled that the case could proceed as a certified class action, meaning that the Authors Guild can seek damages from Google on behalf of every writer whose book was scanned.

The three appeals court judges, however, appeared less interested in the technical aspects of class actions than they were in tackling “fair use” — a four part test that examines whether a given activity (in this case Google’s book scanning) should be exempt from copyright.

“Shouldn’t we address that first?” asked Judge Pierre Leval, a noted fair use scholar, adding that the issues in the case appeared to be “out of sequence.”

Leval and fellow judge Barrington Parker appeared sympathetic at times to Google’s position that the book scanning is transformative and acts as a discovery method, rather than as a replacement for book sales. They suggested that the lower court should address the fair use issue sooner than later.

“If the case is continued, you could face decades of litigation,” said Parker. “This project, with potentially enormous value for our culture, has this great cloud hanging over it.”

Judge Leval also suggested that the book scanning may be analogous to a famous fair use case known as “Perfect 10,” in which a California case held that showing thumbnail images in search results is fair use — even though the entire image is reproduced.

One or many lawsuits?

Google’s lawyer, Seth Waxman, reiterated Google’s position that the scanning is transformative but argued that the court should decertify the class, and require the plaintiffs to proceed individually — rather than as a unified block.

The search giant’s position is that the millions of authors in question have very different perspectives on the scanning — and that many of them support it. The latter, Google said, shouldn’t be forced into a lawsuit they don’t support. In its earlier filings, Google produced a survey that said many authors like the idea of having snippets of their books appear in the company’s search results.

The appeals court, however, appeared reluctant to break the case into multiple baskets of plaintiffs, and questioned if this would lead to separate cases for every type of book.

“You’re going to have to get this resolved. Are you going to have five, 10, 20 different lawsuits? Poetry, science, math table ligation?” Judge Parker wondered

The Authors Guild, meanwhile, wants to go ahead with the fair use ruling, at trial if necessary, without distinguishing the different types of books and authors at issue — a potentially risky proposition for the Guild too.

The court drew a laugh when it asked the Guild’s lawyer, Robert LaRocca, if the group would be comfortable betting the whole fair use ruling on a sample scanned book of Google’s choosing.

The judges also asked LaRocca to explain why some authors were supporting Google’s position; he described them as “a very, very vocal group out at Berkeley.”

What next: some possible end games

It’s risky to read legal tea leaves from the questions judges ask. But, in this case, the appeals court appeared to be strongly considering remanding the case for a ruling on the fair use question — a decision that could then be appealed back to the Second Circuit.

The situation, however, is complicated by internal judicial politics. Specifically, the lower court judge who would have to take up the fair issue is Denny Chin — who now sits on the Second Circuit as a colleague of the three judges who heard today’s hearing. In the past, Chin has shown more sympathy to copyright owners than Leval; the trick for the appeals court, then, is to hand the case back to Chin with obvious guidance, but without upbraiding his handling of it so far.

There is also, of course, the question of money. Google has enough cash to litigate to the Supreme Court and back without breaking a sweat. The Authors Guild, on the other hand, may be feeling stretched as it pays for the appeals in the current case, while also pursuing a parallel case, known as HathiTrust, against a group of university libraries.

At the Tuesday hearing, the Authors Guild’s attorney said paying up would cost Google just 90 days of earnings — or around three billion dollars. It’s an interesting idea, but it’s not going to happen.

First, Google can litigate this thing till the cows come home. Second, the actual amount at issue is much less than the extravagant multibillion dollar figures flashed in numerous headlines. As I’ve explained before, the Authors Guild is seeking $750 per scanned book — but the actual number of books that would qualify is far fewer than the overall number of what Google has scanned.

Another possible outcome is that the appeals court agrees with Google’s request to decertify the class. This would likely force the Authors Guild to pack up and go home, leaving the handful of individual author plaintiffs to take on Google’s mighty lawyer machine out of their own pockets — game over, in other words.

Finally, the two sides may enter settlement negotiations (if they haven’t already) to permit the Authors Guild to enjoy a symbolic victory and, possibly, recoup some of their legal fees, while letting Google appear as a good guy. But don’t count on this, especially, if Google believes it can win the fair use ruling.

To read more background and insider details on the whole saga, see my e-book: “The Battle for the Books: Inside Google’s Gambit to create the world’s biggest library.”

Turow’s piece, which appeared in this weekend’s New York Times, could have been a rallying cry to support American literature. Instead, it amounts to a hysterical rant full of slipshod reasoning that shows again the Guild’s propensity for tactical errors and alienating potential allies.

The central conceit of the piece is the U.S. Constitution’s intellectual property clause, which permits Congress to grant limited monopolies to “promote the Progress of Science and Useful Arts.” Turow, despite being a lawyer, miscasts the clause to suggest it awards a constitutional right to authors and to say that the current copyright system betrays the Founders. This is misleading twice over.

First, the grant of copyright is discretionary — as with many of the other items listed in Article I, Section 8, copyright is a power (like declaring war or borrowing money) that Congress can choose to exercise when it sees fit. The clause does not, as Turow writes, “instruct” Congress to protect authors’ rights.

The second problem with the constitutional conceit is that Turow and others would likely have been appalled by the Founders’ ideas about copyright protection. This was an age when Alexander Hamilton opted for piracy as an industrial strategy, and authors’ rights were precarious at best. Indeed, foreign writers received none at all (ask Charles Dickens what he thought of the Founders’ copyright law).

In lamenting the attenuated state of U.S. copyright law, Turow also fails to mention that protection for authors has been expanded from its original 28-year term to the life of the author plus 70 years. Congress and the courts, in other words, have signed off on a scheme that locks up titles like Presumed Innocent until the year 2100 or beyond — is this not enough copyright for you, Mr. Turow?

It is these absurd terms — plus harsh penalties of up to $150,000 per infringement — that have helped to make copyright such a mess in the digital age. In an era when the internet grants every writer a printing press and a distribution system, it seems absurd to hand out century-long copyright terms.

Instead of discussing how copyright can work in digital times, Turow instead lashes out at academics and librarians who are trying to find a way to distribute neglected books and locked-up research to broader audiences through efforts like the Hathi Trust. In my experience, these people respect copyright — they just don’t like the way that some abuse it — and their goal is expanding access to knowledge. Librarians at Duke are among those who are most forcefully challenging the current state of copyright; you can decide for yourself here if they are selling out authors.

In addition to a potshot at the Supreme Court, Turow also trots out the usual canard that sites like Google and Yahoo are complicit in book piracy with “paid ads decorating the margins of [their] pages.” While book piracy is indeed a problem, Turow’s suggestion that search engines are engaged in deliberate criminal behavior is far-fetched; these are mature companies with big and legitimate customers that have scant need or interest to pander to pirates. (While Google has landed in very hot water in the past over ads for illegal pharmacies, it now says it vies to curtail the bad advertising actors.)

In short, what Turow has done is to raise an important issue — how to devise an economic means to support modern literary culture — and then alienated nearly every potential ally, not to mention distorting the picture to his own ends. If Turow and the Authors Guild are really on the side of writers, they should toss the specious and acerbic arguments and work instead to build a coalition of advocates for a fair and workable copyright regime.

“Amazon’s acquisition of Goodreads is a textbook example of how modern Internet monopolies can be built,” said Guild president Scott Turow in a statement issued on Friday. Turow claims that Amazon sought to eliminate Goodreads as a future competitor and that it has “squelched” an important source of independent discussion and reviews.

It’s unlikely anything so dramatic will occur in the short term. As executives from Goodreads and Amazon told my colleague Laura Owen, the book network will remain for now a standalone site and the first goal of the merger is to “do no harm.”

The data and marketing insight Amazon receives from Goodreads is likely to strengthen the retailer’s already powerful position in book selling. The question of whether this will lead to an Amazon “monopoly” is another matter altogether. Under American rules on vertical integration, a company breaks antitrust laws only it obtains a dominant positions and abuses that position to harm consumers.

Turow and the Authors Guild have already been vociferous critics of Amazon. Last year, Turow accused the company of using discounting to “destroy bookselling.” More recently, the Guild joined with the Association of American Publishers to demand that Amazon be denied control over new internet suffixes “.book” and “.author.”

In a letter addressed to ICANN and posted on the Guild’s website, President Scott Turow stated the group “strongly object to ICANN’s plans to sell the exclusive top-level domain rights for generic book-industry terms.” The Wall Street Journal reports the publishing group has similar objections. (Update: the AAP sets out the reasons for its objections in a letter here.)

The issue, which remains arcane for many outside of the domain name industry, arose as part of ICANN’s decision to open up the list of top-level domains to all comers. In practice, this means hundreds of new suffixes will join familiar ones like “.com” and “.org” as part of the internet. It also means companies that win the right to control names can choose between keeping the names for their own use or earning money when the names are bought and sold in the open market.

Both Amazon and Google have paid to obtain the right to run hundreds of new names though it’s still unclear what the companies intend to do with them. Google has indicated it will keep suffixes related to its core business, such as “.goog” or “.search,” for its private use while making others like “.store” and “.dog” open to anyone. Amazon, which also wants to run names like “.kindle” and “.movie” declined to respond to the Wall Street Journal’s request for comment.

Barnes & Noble has also objected that Amazon could abuse its control over the names to the detriment of the publishing industry. In theory, this could occur if Amazon agreed to to grant a “.book” or “.author” website to favored writers or publishers but not to rivals.

Google and Amazon are just two of hundreds of companies applying to run the new domain names. In some cases, there is only one applicant for the name while in other cases multiple firms have asked ICANN to run names like “.movie.” In the latter situation, ICANN will choose between the competing applicants. (You can see the full list of proposed names and applicants here).

The timing and the process for the arrival of the new names is unclear. In no small part, this is due to the murky operations of ICANN. The LA-based organization is nominally a nonprofit with a mission to run the internet’s naming system, but it has attracted controversy for failing to protect trademark owners who accuse it of facilitating “shakedowns,”  and for self-dealing among its members.

Last week, the CEO of GoDaddy, which is the world’s biggest registrar of domain names, predicted the first series of new names will arrive in June and that others will be rolled out in batches of 20 in the weeks that follow.

There are elements of the Hathi Trust decision that make it different from the issues raised by the Google case, since it involves universities rather than a corporate entity, but the bottom line is that a federal court has decided scanning of books for search purposes is not an infringement of copyright — or rather that this activity is covered under the principle of “fair use,” and therefore should be allowed to continue. And in my opinion (and that of many others) the court was right to do so.

Some authors and publishers clearly don’t like the concept of fair use as it applies to books, because they believe it infringes on their rights as creators and owners of intellectual property — that is, the right to control whatever happens to their work, in any context. But the court reiterated that fair use exists for a crucial reason: namely, to allow others to transform and re-use parts of copyrighted works for artistic or other socially-beneficial purposes. And whether the Guild likes it or not, scanning books so that they can be indexed and searched clearly falls within that description.

The court accepted the fair-use case without a trial

One sign of how clearly the court believes this is that Judge Harold Baer’s decision was a summary judgement, meaning he didn’t think there was any point in even going to trial to argue the details of the case. As a post at the Copyright Librarian points out, “winning on summary judgment means the court agrees your arguments are a slam-dunk.” In his decision (which is embedded in full below), the judge says:

“Although I recognize that the facts here may on some levels be without precedent, I am convinced that they fall safely within the protection of fair use… I cannot imagine a definition of fair use that would not encompass the transformative uses made by Defendants’ MDP and would require that I terminate this invaluable contribution to the progress of science and cultivation of the arts.”

The parts of the Hathi Trust case that make it distinct from Google’s battle with the Authors Guild have to do with the purposes for which the books were being scanned. For example, Judge Baer found that protecting old works from physical deterioration by scanning them was a “transformative use” (one of the four factors the courts take into account when deciding whether something should qualify as fair use), and that making digital books available for the use of visually impaired and other handicapped users was also an important element of the program.

Those kinds of arguments likely wouldn’t hold as much weight for Google itself, except as they apply to scholarly works that are provided to universities and projects like the Hathi Trust. A big part of the Authors Guild case rests on the fact that Google is a corporation with a profit motive, and therefore shouldn’t be allowed to scan copyrighted books without permission, even if its index makes them easier for buyers to find and purchase (Google also shows excerpts or “snippets” for all of the books that it scans, while the Hathi library only shows excerpts for public-domain books).

Indexing books for search is clearly fair use

But even here, the Hathi Trust case provides a substantial amount of ammunition for Google’s defence, because Judge Baer ruled that scanning books for the purpose of indexing them and making them searchable was an important transformative use — something that has also been found in other similar copyright-infringement cases against Google (such as the Perfect 10 lawsuit involving the use of thumbnail images). And that transformative use, he suggested, outweighs other factors such as the potential impact on the commercial market for the works in question.

Quoting from a previous court decision, Judge Baer said: “A copyright holder cannot pre-empt a transformative market.” And he dismissed the Authors Guild argument that scanning and indexing a book doesn’t qualify as a transformative use because it copies the entire book exactly, rather than making use of a part or adding something to the original work:

“The use to which the works in the HDL are put is transformative because the copies serve an entirely different purpose than the original works: the purpose is superior search capabilities rather than actual access to copyrighted material… Plaintiffs’ argument that the use is not transformative merely because defendants have not added anything ‘new’ misses the point.”

In the end, Judge Baer said that his decision was determined by the original goal of copyright law, which is to promote research and knowledge. As he put it: “The ultimate focus is the goal of copyright itself [and] whether ‘promoting the Progress of Science and useful Arts would be better served by allowing the use than by preventing it.’” His ruling makes it clear that the Hathi Trust project met that test, and based on his arguments there is every reason to believe that Google could win its case on similar grounds — and that would be in everyone’s best interests, as much as the Authors Guild would like to believe otherwise.

Post and thumbnail images courtesy of Flickr users Marcus Hansson and Marya

In its order, the New York court agreed to stay proceedings in a lower court while it reviews Judge Denny Chin’s decision last May to certify the class action — a move that allowed authors and illustrators to go forward with claims that Google scanned their works without permission.

The proceedings began in 2005 when the Authors Guild filed a copyright suit over Google’s decision to scan the world’s books. The lawsuit was on hold for several years as the parties tried to get court approval for a settlement that would have created a market for the books. The settlement failed, however, and the Authors Guild resumed legal action last December. The Guild is seeking $750 per book, but only a relatively small number of authors would qualify.

Today’s decision means that the overall case will be on hold for several months. If the appeals court upholds the certification order, it will likely return the case to Judge Chin (who is now on the Second Circuit too) with detailed instructions about how to proceed.

The big issue in the case now is whether or not Google’s scanning constituted “fair use,” which is a defense against copyright infringement. Several scholarly and librarian groups have intervened in Google’s favor in the hopes that the massive digital collection can be used for research purposes.

Meanwhile, a parallel case is playing out between the Authors Guild and the Hathi Trust, a coalition of universities that has collected copies of Google’s book scans. If that case is resolved first, it is likely to determine the fate of the Google Books class action.

Here is a copy of today’s order:

CA2 Order Granting AG Stay

In a short order, Judge Denny Chin rejected Google’s request to suspend the case while it goes before the US Court of Appeals for the Second Circuit. Chin noted that a stay would delay the case “by a year or more” and told Google and the Authors Guild, which is representing writers in a class action, to stick to the current schedule. That schedule calls for them to file arguments ahead of a December court hearing.

The case has taken on new life after Judge Chin’s decision in 2011 to reject an elaborate three-way settlement between Google, publishers and the Guild. The settlement would have resolved the Authors Guild’s original 2005 copyright lawsuit. The Guild is now asking Google to pay $750 for every registered work it scanned without permission.

Recently, the lawsuit has turned into a procedural thicket after the Second Circuit agreed to let Google appeal Chin’s decision earlier this year to certify the class (an important procedural hurdle that lets the Guild sue on behalf of all writers).

Chin’s latest ruling creates an unusual situation in which the books case is now before him and the appeals court at the same time. The situation is even more unusual because Chin himself now sits on the appeals court (although he has of course recused himself from hearing the Google appeal).

As it stands, the appeals court will hold a phone hearing for Google and the parties in October while the parties are slated to appear before Chin in December. Chin also recently granted permission for scholars and librarians to file “friends of the court” briefs in support of Google; many in the academic community believe the scanning will help in research.

A bit of background first: The Department of Justice’s proposed final settlement with HarperCollins, Hachette and Simon & Schuster would require the settling publishers to terminate existing agreements with Apple and would end agency pricing for those publishers for two years. Apple, Macmillan and Penguin are fighting the case in court, but the trial will not begin until June 2013. Apple has argued that it is unfair for the settlement to go through before the trial.The DOJ received 868 public comments on the settlement, nearly all of which opposed it. For more, see our guides “What does the DOJ ebook pricing lawsuit mean for readers now?” and “Everything you need to know about the ebook lawsuit in one post.“

Judge Cote has now decided to accept the entirety of a brief that the Authors Guild proposed on August 15. However, she is limiting Kohn’s submission to five pages. He had submitted a 55-page brief and will have to file a new, five-page one by September 4 in order for it to be accepted by the Court.

The Authors Guild and Kohn both argue that the DOJ defines the ebook market too narrowly, disregarding interrelated devices like e-readers. The Authors Guild also says the proposed settlement would harm traditional bookstores and destroy competition. Kohn additionally argues that the DOJ’s own investigation into Amazon’s ebook pricing reveals that the company engaged in predatory pricing, and had demanded that the DOJ turn over all documents relating to its investigation of Amazon.

Kohn will now have to choose which of his arguments are most important and can fit into five pages. Both the Authors Guild and Kohn have called for a hearing, which the DOJ opposes.

Kohn is an attorney and the CEO of RoyaltyShare, a company that handles royalties for digital music, ebooks and other products. He founded MP3 download service eMusic in 1998 and reports on entertainment law.

Kohn’s original proposed brief is here; the Authors Guild’s brief is here; Judge Cote’s motion is embedded below and also here as a PDF.

Last week, attorney Bob Kohn and the Authors Guild sought permission to act as “friends of the court” in the proposed settlement and filed amicus briefs. We have not yet seen a filing from Judge Cote granting their requests, but both parties are listed as “amicus” on the docket report, along with Barnes & Noble and the American Booksellers Association. However, the DOJ does not respond to Kohn or the Authors Guild in its response.

The DOJ shoots down the argument that ebooks are different from print books but doesn’t elaborate on why they are the same (and doesn’t respond to the criticism that it has failed to take interrelated markets, like those for e-readers, into account). Rather, it says, “Railroads, publishers, lawyers, construction engineers, health care providers, and oil companies are just some of the voices that have raised cries against ‘ruinous competition’ over the decades,” and publishers should not be granted special treatment.

Response to Apple

Last week, Apple argued that the DOJ’s proposed settlement, which it has not joined, affects its interests by forcing it to tear up existing contracts. As such, Apple says it’s entitled to a trial before the settlement is approved. The DOJ says Apple “is not entitled to preclude the United States and Apple’s co-defendants from obtaining the immediate benefits of their settlements, as it is well established that the United States ‘need not prove its underlying allegations in a Tunney Act proceeding.’” (The Tunney Act relates to anti-trust proceedings).

The DOJ claims that “in reality, what troubles Apple is that the decree returns pricing discretion not just to Apple, but also to its retail competitors.”

Response to Penguin

Last week, Penguin argued that the DOJ has not proven that ebook prices across the board rose under agency pricing. Penguin, which along with Macmillan is holding out against the settlement, also provided evidence showing that even prior to agency, Amazon priced many of its new titles above $9.99.

The DOJ does not respond to this specific point, but rather presents charts (chart 1-PDF, chart 2-PDF) showing that “Penguin did indeed raise its prices as soon as it gained power to do so. “In four weeks spanning the time when Penguin took retail pricing power from Amazon, the average price for a Penguin e-book sold through Amazon increased 17 percent, and the average price for a Penguin ‘new release’ e-book sold through Amazon increased 21 percent.” Here are the DOJ’s charts (1, 2) and accompanying methodology.

Penguin had argued that the DOJ should turn over all of its research on ebook pricing, since that research is apparently the basis for its conclusion that ebook prices rose across the board under agency pricing. The DOJ refuses, citing case law: “There is simply no basis for Penguin’s assertion that the United States must produce internal economic analyses to support its settlement.”

Response to Macmillan

Macmillan echoed Penguin’s demand for the DOJ’s research on ebook pricing and also asked the DOJ to show, as required by antitrust law, that the settlement would not result in Amazon gaining a monopoly. The DOJ responds by saying that there is no evidence that the settlement would result in Amazon gaining a monopoly because of “competition from established companies such as B&N, Google, Apple, and Sony.”

The DOJ says “the recently announced investment by Microsoft in B&N’s e-book business, and Sony’s release of a new e-reader, do not reflect any reluctance on the part of sophisticated companies to expand their sales of e-books.”

Response to the ABA and Barnes & Noble

In their amicus brief, the booksellers argued that the number of public comments against the proposed settlement vastly outweighed the number of comments in favor of the settlement. The DOJ responds that “it is not unprecedented for parties to oppose a settlement because they have a stake in an anticompetitive status quo,” and claims “the majority of the comments received opposing the decree did not come from those seeking to represent the public interest, but rather from those that benefited from the conspiracy and that have a vested interest in maintaining the status quo.”

In an order this week, Judge Denny Chin granted permission for two groups to intervene in the case: one is the Digital Humanities Scholars and Law Professors; the other is a group representing the Electronic Frontier Foundation, the American Library Association, the Association of College and Research Libraries and the Association of Research Libraries.

The Authors Guild had opposed giving the groups permission to file amicus curiae (“friend of the court”) briefs. Such documents typically provide extra legal ammunition to one side or the other.

The academic community and the EFF are weighing in because they want to use the Google case as a means of expanding “fair use,” a legal doctrine that provides an exception to copyright in the case of research, reporting and certain other activities.

Chin’s order (below) also set out a timetable that allows the Authors Guild to reply to the new filings by September 17. It also instructs Google and the Authors Guild by the same date to file final papers in support of summary judgment — a procedure that could let Chin decide the case without a trial. The judge said the parties are to make their arguments in court on October 9.

Chin’s schedule is something of a surprise given that the US 2nd Circuit announced this week that it would hear an appeal of the same case. I had written earlier that Chin was unlikely to move the case forward given that whatever decision the appeals court makes must inform his own rulings.

UPDATE: James Grimmelmann has just reported that filings and oral arguments have been moved to December.

The Authors Guild is asking Google to pay $750 for book with a registered copyright that it scanned without permission. Google has scanned more than 20 million worldwide but the amount covered by the Authors Guild suit are only a fraction of that.

The new order was first reported by Publishers Weekly. The document is below:

Google Books Amici Grant