In the case, HarperCollins says that its 1971 contract with George gives it the right to publish Julie of the Wolves in any format, including as an ebook. Open Road argues that HarperCollins never had ebook rights. George, who was 92 when HarperCollins first filed its lawsuit, said that she was “with Open Road all the way,” but she died in May 2012 and never gave a deposition.

HarperCollins argues that its contract included future types of works, and  that print books and ebooks are the same. Open Road contends that it did have the right to publish Julie of the Wolves because ebooks didn’t exist in the 1970s, and because HarperCollins’ 1971 contract with George didn’t specify a royalty rate on electronic works.

Both of the motions filed last week refer to a 2001 case in which Random House sued Rosetta for publishing ebook editions of Random House works. A federal judge ruled that ebooks and books weren’t the same thing and that Random House couldn’t block RosettaBooks from selling the titles. Random House appealed, but the decision was upheld, and Random House and RosettaBooks ultimately settled. Because of the outcome of that case, HarperCollins specifies in its motion how different the Julie of the Wolves case is from Random House v. Rosetta, and Open Road stresses the cases’ similarities.

HarperCollins: Ebooks weren’t around in 1971, but we knew they were coming

HarperCollins notes (here’s the PDF of the motion) that its 1971 contract grants it the right to publish Julie ”in book form,” and says that the grant “encompasses ebook publishing rights of the type Open Road has unlawfully appropriated, particularly given the virtually identical reading experience afforded by its offering to the hardcover and paperback offerings of HarperCollins, with which it directly competes.”

HarperCollins and Open Road both focus closely on the “storage and retrieval and information systems” clause in the original contract. The contract had stated:

“the publisher shall grant no license without the prior written constant of the Author with respect to the following rights in the work: use thereof in storage and retrieval and information systems, and/or whether through computer, computer-stored, mechanical or other electronic means now known or hereafter invented…”

HarperCollins argues that it’s “no stretch to recognize that ‘storage and retrieval information systems’ fully encompass the display of an ebook via an ebook reading device.” In a section of its motion on “the antecedents to ebooks,” it mentions, for instance, a 1968 article “envisioning the Dynabook, a new storage and retrieval device the size of a three-ring binder that would have a multipurpose screen that could be used for both reading and writing.” HarperCollins concludes that “without doubt, as of 1971, when the Agreement was executed, ebooks of the type offered by entities such as Open Road were foreseeable…Electronic delivery of books and other textual works was further anticipated as early as the 1950s and 1960s, when computer scientists envisioned and experimented with devices that could store books, documents and even entire libraries electronically.”

Open Road: “Information, storage and retrieval systems” don’t mean “ebooks”

In its motion (PDF), Open Road says that while HarperCollins takes the phrase “in book form” to include the right to publish an ebook as well, the judge in Random House  vs. Rosetta “found that this term excluded ebooks…It has been for decades the standard grant language that trade usage in the publishing industry has been understood to mean paper forms of the work.” Open Road cites HarperCollins’ own online dictionary, for instance, which defines “book” as “a number of sheets of paper, parchment, etc. with writing or printing on them” and has a separate entry for ebooks: “Hence, ‘book form’ and ‘digital form’ are clearly distinguished as separate forms of publication.”

Open Road also looks at HarperCollins’ later contracts and finds that, unlike the 1971 contract with George, they referred more explicitly to ebooks and didn’t use ”information, storage and retrieval systems” to mean ebook rights. Open Road adds, “ebooks and information storage and retrieval systems are apples and oranges…Harper cannot reasonably argue it now believes there is no difference between ebooks and information storage and retrieval systems, in light of its own differentiation of the two technologies in its earlier contracts.”

Open Road focuses on the fact that digital royalties were absent from the 1971 contract. It says it

“offered to pay Ms. George a 50% royalty to publish her work as an ebook. Ms. George was intrigued by Open Road’s offer and the prospect of bringing her work to a new medium. Still, she wanted to keep her works ‘in-house’ with her print publisher. So she asked Harper to publish Julie of the Wolves as an ebook for the same royalty. Harper flatly refused. It told her it would publish the ebook, but only for a 25% royalty … even though … (1) the contract is silent as to ebook publishing rights and lacks a royalty provision in exchange for those rights, (2) Ms. George expressly reserved all rights not specifically granted, and (3) the technology for such a product did not exist until many years later and a commercially viable ebook publishing market did not take hold until just a few years ago.”

The publisher argues that there was no nascent ebook market in 1971 “or 1981 or 1991,” saying, “the issue is not whether a few isolated academic visionaries could dream of a day when the words of an author’s work could be digitally transmitted through space.”

HarperCollins and Open Road both declined to comment, and a court date has not yet been set.

HarperCollins motion

Open Road motion

This week Tamiz made wave with an appeal against Google, which he was trying to sue over defamatory comments about him made on Blogger posting. In a case that goes back to 2011, Tamiz had argued that Google was effectively the publisher of a series of comments calling him, falsely, a thief and a drug dealer, and should have deleted them as soon as they were made aware of them. Google did delete the comments, but only after a five week gap.

Tamiz is familiar with online controversy: one reason he was a lightning rod for angry comments in the first place was because, he stepped down as a local election candidate in 2011 after calling Margate’s women “sluts” on Facebook. And so, when he did not originally win his case — the first judge ruling that Google was not the publisher of the comments — he appealed to a higher court. There Google’s inaction was found to be troubling, though it did not actually overturn the libel ruling itself.

As the Financial Times reported:

Although Lord Justice Richards and Lord Justice Sullivan agreed with the original ruling that Google was not the primary or secondary publisher of the content it hosted, they said it was “at least arguable that some point after notification Google became liable for continued publication of the material”.

The Lords Justice likened the situation to a 1930s court case in which a golf club was held responsible for defamatory material left on its noticeboard because it failed to remove it after it was notified.

Cue the shrill sound of the press screeching into action. “Blogger.com libel case opens door for internet giant being required to monitor users’ posts”, squealed the Daily Mail with barely contained delight. Except, as it outlines in the story, the headline is essentially trolling — Tamiz was denied his libel claim and asked to pay 50 percent of Google’s legal costs: likely to be a tidy sum. And it’s a stretch to suggest, as much commentary does, that this is another step towards internet regulation — asking a company to respond to notices of illegal content may not be popular (just see the DMCA) but it is reasonable to expect them to comply with local jurisdiction.

Still, Tamiz — and the kerfuffle around his case — does show the amount of energy being expended around online libel in Britain right now.

Defamation laws in the U.K. are notoriously harsh, in large part because they lean in favor of the plaintiff and put the burden of proof on the defendant: it’s a case of “prove your comments were true” rather than “prove their comments were false”.

And the precedent for defamation in online publishing stretches back 15 years, to the case of Godfrey v Demon Internet Service, in which a physics lecturer sued an ISP over comments made in a Usenet group it hosted: the ISP settled the case, because a pre-trial ruling intimated that it was potentially culpable since, despite knowledge of the situation, refused to act for 10 days. Although the award was small — just £15,000 in 1997, the equivalent of around $33,000 today — it has laid the groundwork in Britain.

It’s one major reason many media companies employ battalions of comment moderators, and carefully police the comment threads on their own stories.

But remember, we are all media companies now. And that means that we are all open to the same set of rules. There have also been plenty of high-profile cases on Twitter and Facebook against individual users, but so far there has not been much success in taking on platform providers themselves. Just last week a judge in Northern Ireland ruled that while anonymous comments made on Facebook were defamatory, Facebook itself was not liable.

Still, with Godfrey in the background and more and more cases coming along, you can understand why people see Tamiz’s case as another push at a brick in the wall between platforms and publishing.

Yes, everyone’s a media company now: and eventually that will go for Google, Facebook, Twitter and the rest as much as it does you and me.

“We have closed our investigation and took no action,” a DOJ spokeswoman confirmed.

The merger, which remains under review by other antitrust authorities including the European Commission and the Canadian Competition Bureau, would create the world’s largest publisher. According to the announcement sent by Pearson, “Pearson and Bertelsmann continue to expect the transaction to close in the second half of 2013, after all necessary approvals have been received.”

Pearson’s full announcement:

Pearson and Bertelsmann today announce that they have been notified by the U.S. Department of Justice that it has closed its investigation into the proposed merger of Penguin and Random House, without conditions.

The two companies announced their agreement to combine Penguin and Random House in October 2012. The proposed merger is currently under review by the European Commission, the Canadian Competition Bureau and various other antitrust authorities around the world. Pearson and Bertelsmann continue to expect the transaction to close in the second half of 2013, after all necessary approvals have been received.

Following completion, Bertelsmann will own 53% and Pearson 47% of Penguin Random House. It will encompass all of Random House and Penguin Group’s publishing units in the U.S., Canada, the U.K., Australia, New Zealand, India and South Africa, as well as Penguin’s operations in China and Random House’s publishers in Spain and Latin America. Pearson and Bertelsmann believe that the combined organisation, the world’s leading consumer publishing company, will have a stronger platform and greater resources to invest in rich content, new digital publishing models and high-growth emerging markets.

Macmillan’s $20 million payout is added to the $69 million that Hachette, HarperCollins and Simon & Schuster agreed to pay consumers. The money will be doled out in the form of small credits at ebook retailers.

The fifth publisher involved in the ebook pricing lawsuits, Penguin, settled with the Department of Justice in December but hasn’t reached settlements in the class action suit or with the states. Apple continues to fight all three lawsuits, in a trial set to begin in June.

As my colleague Jeff Roberts wrote last August, the class-action lawyers don’t reap much from the deal: “The settlement lets publishers short-circuit the class action lawyers who are coming at them with a separate lawsuit. Those lawyers, who say they would get more money if they were in charge, are now frozen out because there is no money left to collect on behalf of consumers.” Publishers Lunch speculates that “the class action lawyers may be expecting to reap their bounty from any settlement with or judgment against Apple.”

How this settlement is different

According to documents filed with the court Friday (PDF, and see links below), Macmillan agreed to many of the same settlement terms that HarperCollins, Simon & Schuster, Hachette and Penguin already agreed to — but there are also significant differences. Retailers will immediately be allowed to discount Macmillan’s ebooks, in order to “provide for more prompt relief to consumers.” In the cases of the three original settling publishers (HarperCollins, Simon & Schuster and Hachette) and Penguin (which settled in December), “several months passed before consumers saw the benefits of the settlements through lower retail prices on many of the settling publishers’ ebooks.” In Macmillan’s case, however, according to the competitive impact statement:

That “two-year cooling-off period” means that, for two years, settling publishers can’t restrict retailers like Amazon from setting, changing, or lowering ebook prices. The settlement means Macmillan gets a back-dated head start on this period, so it will again be able to restrict discounting in December 2014. Most-favored nations clauses are prohibited for five years, but Macmillan had already removed those from its contracts.

Unlike the other big-six publishers, Macmillan also publishes digital textbooks. Those are exempt from the settlement because the DOJ antitrust case focused only on trade books.

Finally, there are provisions to make it clear that Macmillan’s parent company, Holtzbrinck, would be in trouble if it “worked in concert with Macmillan to evade Macmillan’s obligations under the settlement.”

“Our company is not large enough to risk a worst case judgment”

In his letter, Sargent describes massive legal bills that Macmillan — the smallest of the big-six publishers, and the only one that is entirely privately owned — would have had to pay in “a worst case judgment”:

As each publisher settled, the remaining defendants became responsible not only for their own treble damages, but also possibly for the treble damages of the settling publishers (minus what they settled for).  A few weeks ago I got an estimate of the maximum possible damage figure. I cannot share the breathtaking amount with you, but it was much more than the entire equity of our company.

Court docs

Macmillan’s proposed final judgment (PDF)

Competitive impact statement (PDF)

GeekWire first reported the news. Here’s the description of the patent:

Digital objects including e-books, audio, video, computer applications, etc., purchased from an original vendor by a user are stored in a user’s personalized data store. Content in a personalized data store may be accessible to the user via transfer such as moving, streaming, or download. When the user no longer desires to retain the right to access the now-used digital content, the user may move the used digital content to another user’s personalized data store when permissible and the used digital content is deleted from the originating user’s personalized data store. When a digital object exceeds a threshold number of moves or downloads, the ability to move may be deemed impermissible and suspended or terminated. Additionally or alternatively, a collection of objects may be assembled from individual digital objects stored in the personalized data stores of different users, and moved to a user’s personalized data store.

Users’ rights to resell digital content is already a contentious issue under copyright law. Startup ReDigi, which allows users to resell digital music, says its model is legal according to U.S. copyright law’s “first sale” doctrine, which lets people resell physical content. But the record label EMI is suing ReDigi, claiming that digital files can’t be resold like physical objects because there is no way to ensure that the “original” digital file was deleted. A court will rule on the case this year, and the outcome could have implications for Amazon’s marketplace.

Amazon’s patent for this marketplace is likely to muddy the legal waters even further. If the patent is as broad as it seems, Amazon could theoretically bar ReDigi and everyone else from offering a resale market in the first place. The company, after all, has spent years in court fighting to own the right to “one-click shopping” based on a 1999 patent.

As for the “electronic marketplace” patent itself, Amazon appears to take account of copyright owners’ concerns. The patent outlines a system to “maintain scarcity” of content: “a threshold may limit how many times a used digital object may be permissibly moved to another personalized data store, how many downloads (if any) may occur before transfer is restricted, etc….These limits may be set for a specific digital object, a digital object type (such as a particular title of book), a digital object category (such as all movies), etc….Alternatively, a user’s ability to access the used digital object by streaming may also be limited upon the occurrence of certain events.” It’s not clear, though, how the system would ensure that a user hadn’t stored a copy of the file somewhere other than his or her “personalized data store.”

In a blog post Friday, Google CEO Eric Schmidt announced two new initiatives to appease France: “First, Google has agreed to create a €60 million [USD $82 million] Digital Publishing Innovation Fund to help support transformative digital publishing initiatives for French readers. Second, Google will deepen our partnership with French publishers to help increase their online revenues using our advertising technology.” Google won’t pay for links, however.

As paidContent’s Jeff John Roberts reported recently, French publishers had wanted more money, between €70 and €100 million euros. And a tweet from Frédéric Filloux suggests that more details still have to be worked out. The agreement is similar to one that Google reached with Belgian publishers in December; in that deal, Google agreed to buy around $6 million worth of advertising.

Thumbnail image courtesy of Shutterstock user alp33.

The DOJ alleges that publishers, fearing Amazon’s practice of selling ebooks at $9.99, conspired with Apple at the launch of the iPad and iBookstore to adopt agency pricing, in which the publisher sets an ebook’s price and pays the retailer a commission. Previously, publishers had used wholesale pricing for ebooks, where the publisher sets a suggested list price and the retailer buys the ebook at a discount (usually 50 percent) and can then sell it at whatever price it wants. The DOJ says that that the alleged collusion led to higher ebook prices for consumers and harmed competition in the ebook marketplace. Publishers maintain that agency pricing created a more diverse marketplace by leveling the playing field and reducing Amazon’s power. (Here’s some background on the case.)

Penguin said in a statement:

Penguin has always maintained, and continues to maintain, that it has done nothing wrong and has no case to answer. Penguin continues to believe that the agency pricing model has encouraged competition among distributors of both ebooks and ebook readers and, in the company’s view, continues to operate in the interest of consumers and authors. But it is also in everyone’s interests that the proposed Penguin Random House company should begin life with a clean sheet of paper.

The DOJ said it is “currently reviewing the proposed joint venture announced by Penguin and Random House Inc., the largest U.S. book publisher. Should the proposed joint venture proceed to consummation, the terms of Penguin’s settlement will apply to it.” Random House was not included in the DOJ’s original lawsuit, because it adopted agency pricing over a year after after the other big-six publishers did.

According to the DOJ’s competitive impact statement (PDF), Penguin has agreed to “substantially the same terms” that the three other settling publishers — HarperCollins, Simon & Schuster and Hachette — agreed to in April: The publisher will terminate its existing agreements with ebook retailers and enter into new ones that, for two years, allow retailers to freely discount its ebooks (with a few limitations). Most-favored nation clauses (which state that no other retailer can charge a lower price) are prohibited for five years. If and when the settlement is approved by Judge Denise Cote of the New York federal court, Random House will be subject to the same terms and will also have to negotiate new retailer contracts.

Like the original settlement, the DOJ’s proposed settlement with Penguin (PDF) is subject to a 60-day public comment period. The DOJ received over 800 public comments on the original settlement, the vast majority of them opposing it. Judge Cote approved it anyway.

Since the original settlement went through, HarperCollins, Simon & Schuster and Hachette have entered new ebook contracts with Amazon and other ebook retailers. They are still setting the prices for their ebooks and paying retailers a commission, but retailers can discount the books as they wish and can sell them at a loss. The DOJ claims that “[the] settlement likely will lead to lower e-book prices for many Penguin titles; prices for titles offered by HarperCollins, Hachette, and Simon & Schuster fell soon after those publishers entered into new contracts as a result of the Original Judgment.” (Many of the settling publishers’ ebooks have only dropped in price slightly.)

Penguin is discussing a similar settlement with the European Commission.

The DOJ notes that “of course, the case against the remaining Defendants” — Apple and Macmillan’s parent company Holtzbrinck — will continue.

But, despite some recent examples, search engines are not supposed to be amongst the list.

Russia’s Federal Service for Supervision of Communications, Information Technology and Mass Communications (Roskomnadzor) has issued a “clarification” to say Web search, image search, news search, video search and other content cached by search engines like Google, Yandex and Bing should not be included in the recently-launched Zapret web blacklist.

This is despite recent inclusion of Google image search and YouTube, which is put down to a “mistake” (via Roem.ru).

Such a distinction by the Russian government is an important one at a time when Google is facing growing international challenges to its long-held operating model. An Australian court ruled that Google search had been a publisher of material deemed defamatory, while a proposed German law would require Google pay a license to publish excerpts of third-parties’ news articles.

Some campaigners out there, like former Formula One boss Max Mosley, want Google to pro-actively strip out excerpts from “illegal” websites, alleviating complainants’ need to go to dozens of individual end sites to which Google points. But the Russian government’s position seems sensible since it blocks access to illegal material at source, not at the signpost.

As previously reported, the impending EU settlement includes Apple, Simon & Schuster, HarperCollins, Hachette and Macmillan’s parent company, Holtzbrinck. Apple and Holtzbrinck are settling in Europe, but not in the United States. The U.S. Department of Justice reached a settlement with HarperCollins, Hachette and Simon & Schuster and it was approved in September. Penguin is not settling in Europe or in the U.S.

The European Commission began its formal antitrust investigation last December and, like the U.S. Department of Justice, accused Apple and publishers of colluding to fix ebook prices. Like the U.S. settlement, the proposed EU settlement requires Apple and settling publishers to terminate their agency agreements and, for two years, prevents publishers from “restrict[ing], limit[ing] or imped[ing] ebook retailers’ ability to set, alter or reduce retail prices for ebooks and/or to offer discounts or promotions.”

As Publishers Lunch notes, “any EC settlement would have real impact in just one territory: the UK. The next two largest book markets (and the only two ebook markets of any scale right now) — Germany and France — have strict laws on book pricing that prevent discounting, and the EC has made clear the settlement has no effect on those laws”

In September, the EC gave consumers a month to comment on the proposed settlement. I’m not sure if those comments were made available to the public, but haven’t yet been able to find them online.