Legal Update: Where the Lawsuits Are
by George H. Pike
It isn’t often that the legal challenges of the information industry dominate the mainstream media. But take a look at two such headline stories: The Recording Industry Association of America (RIAA)’s series of copyright infringement lawsuits against peer-to-peer file sharers is one, and the Google Book Settlement (as it has come to be known) is certainly another.
Yet, these are only two of several ongoing lawsuits and legal challenges with the potential for having a significant impact on the information industry. Many of these lawsuits were filed years ago, and they continue to meander their way through the courts. Others were resolved in 2009, while new lawsuits have begun with their resolutions far in the future. As 2010 begins, this is a good time to review these cases, their current status, and their potential for impact.
The 800-Pound Gorilla
Of course, the Google Book Settlement is the 800-pound gorilla of current lawsuits within the information industry. The lawsuit dates from September 2005, when The Authors Guild, the Association of American Publishers, and others sued Google claiming that its Google Books Partner Program violated copyrights in works owned or controlled by authors and publishers. Google defended its program, which involves scanning works owned by libraries and posting excerpts of those works when they match user searches, as a fair use of the copyrighted works.
After 3-plus years of legal skirmishing and fact-finding, a tentative settlement was announced in October 2008. The settlement would allow Google to continue to scan copyrighted works under license to be obtained from the copyright holders, to provide for a royalty payment to authors, to establish a registry to manage past and future royalty payments to authors, and to establish new revenue options for use of the scanned Google Books materials.
Access to Dusty Old Books
The settlement received widespread praise for expanding access to out-of-print and otherwise elusive books held on the “dusty old shelves” of a few libraries. However, opposition arose over the provisions that were seen as giving Google too much power over the digital books database, digitizing foreign books, and the use of “orphan” books. Among the objectors were library and author groups, as well as Google’s corporate rivals Amazon, Microsoft, and Yahoo!. In addition, the U.S. Department of Justice raised concerns about possible antitrust violations, and some foreign governments objected to Google’s violations of their copyright laws.
Due to these concerns, the original settlement was amended in November 2009. The amendments removed foreign-published books from the settlement, changed the distribution of unclaimed funds from the use of orphan works, provided more flexibility in providing for pricing discounts, and limited the uses of commercially available works.
Too Much Power?
However, critics continue to argue that the settlement gives Google too much power over digital works. They point out that the settlement gives Google broad rights to digitize work without previously obtaining permission (rightsholders would have the power to “opt-out” and have their books excluded after the digitizing was done). Any other entity trying to do the same would face the same legal objections that gave rise to the original suit.
While the court has tentatively approved the settlement, it has set a hearing in February 2010 for any further objections to be raised. Of particular interest will be whether the justice department continues to raise concerns about antitrust violations. Most commentators and bloggers suggest that if the justice department signs off on the settlement, it will go through, and I agree. However, if the justice department does not sign off, settlement negotiations are likely to continue rather than send the case to trial. At this point, this seems to be more a business negotiation than a lawsuit.
Fair use is undergoing similar scrutiny in a lawsuit over Georgia State University’s (GSU) digitizing and distribution of materials for teaching purposes. The lawsuit, filed in April 2008, alleges that GSU facilitated copying “through a variety of online systems and outlets,” including the GSU Library’s e-reserves, Blackboard course management, and individual/departmental webpages. GSU is defending itself on the grounds that the intended uses are for the purpose of teaching, scholarship, or research as allowed by the Fair Use Doctrine.
The lawsuit does not ask for money damages, but instead it asks for a declaration that GSU’s actions are infringing (and not fair use) and asks GSU to stop its actions. Two major skirmishes marked the case in recent months.
Recapping the Skirmishes
In the first skirmish in February 2009, GSU indicated that it had implemented a new copyright policy applying to the kinds of digital distribution that are at the center of the lawsuit. Because of the new policy, GSU claimed that to the extent that the lawsuit was based on GSU’s past actions, those claims were no longer valid and that its revised practice complied with copyright law. The publishers who sued GSU responded that the change in policy was not enough. A court partially agreed with GSU that the new policy limited how much of the past practices the publishers could investigate, but it kept the case moving forward on the issue of whether the current policy complies with the law.
The second skirmish amounted to a “battle of the experts”: a law professor retained by GSU as its expert witness and the experts retained by the publishers. Central to this “battle” is the role of the Copyright Clearance Center (CCC) in facilitating copyright permissions, contrasted with fair use. Are the CCC’s fees modest and reasonable? Does the CCC’s permissions structure make it “easy” to obtain permissions and pay royalties? Or by contrast, do the CCC blanket licenses require academic users to pay for materials that are unequivocally covered by fair use? Do the fees remain “modest and reasonable” when cumulatively applied to several works on an e-reserve system and potentially dozens or hundreds of students?
The second skirmish continued until late 2009 and will easily push the lawsuit into 2010. Because no money damages are at risk and the February copyright policy change has been rejected as a solution, a trial in 2010 is likely. For those of us who are not at GSU, a trial and a decision may be a good thing to give some clarity to an unsettled area of fair use law. One way or another, academic institutions may learn what they can and cannot do.
$20 Million Settlement
One lawsuit that was settled in 2009 was the class-action lawsuit against the Veterans Administration (VA) over a 2006 data breach. The data breach occurred when a laptop computer containing information about 26 million veterans was stolen. While the laptop was later recovered and there appeared to be no evidence that the data was misused, a class-action lawsuit was filed for privacy violations. The case was settled for $20 million, which was to be paid to any veterans who can show harm such as those who need credit monitoring or are suffering emotional distress.
While this particular case is now resolved, the trend of class-action lawsuits in data breach cases is continuing. One challenge with data breach lawsuits is that while personal information for thousands or even millions may be at risk, the loss for each individual is usually quite small. Unless their information has actually been misused (which had not been shown in the VA case), the harm usually boils down to some credit monitoring and worry. However, while each individual loss may be small, a class-action lawsuit accumulates those individual losses into a large pot, one that is worth suing over.
Business Method Patents to the Supreme Court
Another long-running case will come to a conclusion this year. In 1997, Bernard Bilski filed a patent application for a business method of hedging risk for utility companies and their customers. Business method patents have been increasingly used in the technology and biotechnology areas to gain patent protection for specific, although abstract, means of doing business. However, the patent office rejected Bilski’s patent, and in 2008, a federal appellate court upheld that decision, asserting that a business method could only be patented if it was tied to a particular machine or transformed a physical thing. Many commentators saw this decision as severely restricting business method patents.
In November 2009, the U.S. Supreme Court took up the Bilski case. Court-watchers noted the nature of the questions very carefully and have been speculating on the future of the 2008 appeals decision. A decision in favor of Bilski would support business method patents. A decision against Bilski may be a bit trickier, and it may or may not restrict business method patents, depending on how the court interprets the Patent Act. A written decision is expected in 2010.
Lawsuits Come and Go
Lawsuits, even potential landmark cases, come and go. A case involving RealDVD, a DVD copying application, is on its way to a federal appeals court in a test of the interaction between fair use and the Digital Millennium Copyright Act (DMCA). So far, the DMCA is trumping fair use in its defense. A case limiting government searching of computer data (arising out of the baseball steroids scandal) is also on its way to a federal appeals court for further review. So it looks likely that 2010 will bring the end to some of these lawsuits, the continuation of others, and, inevitably, a whole new batch for us to watch in the coming months.