The Entertainment, Arts and Sports Law Blog

Ed McCoyd

E-books

An e-book is a book sold in digital form, for reading on a computerized device such as a desktop or laptop computer, a “personal digital assistant” such as a Palm handheld or Pocket PC, a handheld device dedicated for reading electronic content, a mobile product (such as a cell phone or Blackberry), or other digital platform.

While e-books still only account for a very small portion of total book industry sales, their sales numbers have been increasing steadily for the past several years, from an estimated $20 million in wholesale revenues in 2003, up to $30 million in 2004, $44 million in 2005, $54 million in 2006, $67 million in 2007, and more than $113 million in 2008. The number of e-books that are available has also grown since publishers began offering e-book products. Last month it was reported in Publishers Weekly that ninety percent of the top 50,000 trade (i.e., general interest fiction and nonfiction) book titles were available in both print and electronic editions.

E-books are also becoming increasingly available in the education market. The MBS textbook exchange, for example, offers e-books from many of the largest publishers of postsecondary instructional materials. Higher Ed publishers Pearson, Wiley, Cengage, McGraw-Hill, Houghton Mifflin, and Bedford, Freeman & Worth have created CourseSmart, another e-textbook store, in an effort to spark student adoption of e-books by providing a critical mass of available titles at one site.

The e-book format even empowers educators to mix and match content from a wide variety of books into one electronic package. O'Reilly Media's SafariU lets professors create custom computer science course materials, from a selection of thousands of books and articles from O'Reilly, Pearson, and other publishers. Similar platforms include Primis from McGraw-Hill, and Cengage Learning's iChapters.

E-books are available in a wide range of formats for multiple devices. Adobe PDF-formatted e-books can be rendered on desktop and laptop PCs and a range of handheld devices. The Mobipocket format, which is optimized for handhelds, works on Palm OS, Windows Mobile, and Blackberry handheld devices, as well as on Symbian OS phones. Other popular reading formats include Sony, Kindle, Microsoft Reader, Palm Reader, and others.

There are also hardware devices dedicated for e-book reading. One is called eBookwise, a device from the e-book retailer Fictionwise.com (recently acquired by Barnes & Noble). Another that has captured people's imaginations is the Sony Reader. This device uses an innovative screen technology known as E-Ink electronic paper display, which consists of capsules that turn white or black based on an electric charge to configure the text. What makes E-Ink unique is that it when you read it, it's the light around you that enables you to read the text, rather than light projected from the screen. Consequently, you can read on the device on a beach, and generally it's contended that this technology creates less glare and eye strain. Furthermore, without backlighting, the need for battery power is reduced, enabling a lightweight device that can render up to 7,500 page turns without recharging. There approximately 45,000 titles available in this format on the Sony Connect bookstore. Sony and Borders have also teamed up to sell books in this format, and e-books formatted for the Sony Reader are also available on eBooks.com, a site with over 130,000 e-book titles available in a range of formats including Sony, Adobe, Mobipocket, and Microsoft Reader.

The E-Ink screen is also featured on the iLiad and the iLiad Book Edition available from the Dutch iRex Technologies. These devices display e-books in the popular Mobipocket format.

Amazon has made a huge splash with its Kindle e-book reading device, which also uses an E-Ink screen, and has a built-in wireless connection enabling device owners to access the Amazon bookstore anywhere, anytime. Customers grabbed up Amazon's entire inventory of the device within the first few months after it went on the market in November of 2007. In February of 2009 Amazon released the “Kindle 2,” a new version of the device with improvements including a slimmer and more lightweight design, sharper screen display, and longer battery life, to name a few. The fact that more than 245,000 titles are now available for use on the Kindle is clear evidence that book publishers are also embracing the technology.

In May of 2008, Amazon CEO Jeff Bezos made the interesting announcement that sales of books for use on the Kindle were accounting for 6% of all Amazon sales of books available in both Kindle and print formats (125,000 books at the time). In August of 2008, Amazon executive Ian Freed said that owners of the Kindle more than doubled their overall number of book purchases after getting the device, and that they continued to buy as many printed books as they had prior to owning a Kindle. In February of this year, Bezos announced that e-books were accounting for 10% of all sales on Amazon. Today, the Kindle has the added cache of being known to have been acquired by many celebrities and public figures – as of February, Tiki Barber, Oprah Winfrey, Jennifer Aniston, Warren Buffet, Dick Cheney, Martha Stewart, and Whoopi Goldberg were all reported to own Kindles.

Numerous platforms and applications for reading e-books on cell phones and mobile devices have recently been unveiled. Last month, Amazon began making e-books for the Kindle also available in a format that renders them on the iPhone and the iPod Touch. Stanza, an application from the company Lexcycle, also makes e-books available for these two devices. eReader Pro rendering software from Fictionwise works on Blackberrys and a wide range of other mobile devices, and e-books solutions for mobile are also being provided by Macmillan Publishing Solutions, Expanded Books, Incelligence, and ScrollMotion.

A relatively new format innovation is .EPUB, developed by the International Publishing Forum (IDPF). EPUB is a standard that enables publishers to create one reflowable file of an e-book, which retailers and wholesalers can then easily convert into formats for various consumer devices (Mobipocket, iLiad, etc.). Furthermore, an EPUB file can be rendered directly on many of the devices.

E-books are also available via libraries. The vendor Overdrive's Digital Library Reserve platform offers more than 80,000 e-book and downloadable audiobook titles to libraries. Libraries purchase the books outright, and the encryption attached to the book permits a one-patron-at-a-time lending model. The patron "checks out" the book and reads it on the device of his or her choosing. When the lending period expires, the book automatically "checks back in" and the next patron can access it. Netlibrary offers a comparable model for more than 160,000 e-book titles and a growing collection of audiobooks.

Digital Marketing
The Internet is accounting for an increasing amount of people’s leisure time. Book publishers need to compete with the Internet by using the Internet. They are now pursuing a variety of online strategies to market and sell their products.

One approach is the distribution of book "widgets," which are copyable and transferable digital "objects" that resemble the books they promote. A widget typically is a replica of the book's cover. If you click on it, you may get access to portions of the work, such as the table of contents and a sample chapter, plus a link to buy the product. Widgets can be posted anywhere on the Internet, including on individuals' pages on community sites like MySpace and Facebook as a form of "viral" marketing, in online book reviews, and elsewhere.

Another form of widget is videos featuring authors discussing their books. While author videos are not new, what is new is the ability to distribute them through social networking and streaming video sites. Online video production companies currently providing services to publishers and authors include TurnHere, Vidlit, and BookShorts, to name a few.

Web sites developed by publishers may be built around a particular author, or even a specific book. Nowadays the sites contain features to make them "sticky," that is, to create a relationship with readers that makes them enthused about the site and causes them to keep returning. These features may include digitized elements of book covers that users can download as screen savers; community chat rooms; chats with the author; community games, such one in which users of the site can contribute sections to a collectively-written story; blogs; newsletters; and RSS feeds.

There are even social networking sites dedicated to users' book interests, including LibraryThing.com and Shelfari.com.

Marketing to customers via their mobile phones is also being employed. The romance novel publisher Harlequin sends out serialized stories in electronic format to readers' mobile phones, for example, to maintain a connection with customers.

It will be fascinating to see what the future holds as publishers, along with their authors and technology partners, continue exploring ways to employ the Internet and digital technologies generally to reach readers and distribute books to them.

Ed McCoyd is an attorney and director of digital policy at the Association of American Publishers, the leading trade organization of book publishers in the U.S. He works on issues including the use of digital technologies to market, sell, and distribute publishers' products; the prevention of electronic piracy of books; the provision of accessible instructional materials to postsecondary students with disabilities under applicable federal and state laws; and environmental issues associated with the procurement of book paper. He can be reached at emccoyd@publishers.org.

Prior to joining AAP's staff, Ed served as director of legal services at the Authors Guild, providing licensing and copyright advice to published writers and advocating for authors' rights. Ed is also the author of the book To Live and Dream: The Incredible Story of George Foreman, as well as the song “Besame,” featured in the major motion pictures “16 Blocks” (starring Bruce Willis) and “Cleaner” (starring Samuel L. Jackson, Eva Mendes, and Ed Harris).

By Bennett Liebman

For large parts of the 20th century, the New York State legislature set the agenda for legislation that would be subsequently passed in other statehouses. It is regrettably no longer the case today, as the New York State legislature is more often noted for its alleged incapacity and dysfunction rather than for its transformative qualities.

Yet, the 2008 legislation that New York State passed on “libel tourism” may end up being a national model. Other states are following the New York example, and the United States Congress may also end up following the New York State model on libel tourism.

More ... (PDF)

It appears that Shepard Fairey lied, deliberately destroyed evidence of the actual image used in the Obama Hope poster, and in a cover-up, created false documents to support his fraud. He has now issed the below press release in apology. Fairey's attorneys have given notice to AP that they intend to withdraw upon his acquiring new counsel.

For Immediate Release
Contact: Jay Strell– Sunshine, Sachs & Associates,
(212) 691-2800/ (917) 362-9248 cell
strell@sunshinesachs.com

STATEMENT BY SHEPARD FAIREY ON ASSOCIATED PRESS FAIR USE CASE
OCTOBER 16, 2009

In an effort to keep everyone up to date on my legal battle to uphold the principle of fair use in
copyright laws, I wanted to notify you of a recent development in my case against The
Associated Press (AP).

On October 9, 2009, my lawyers sent a letter to the AP and to the photographer Mannie Garcia,
through their lawyers, notifying them that I intend to amend my court pleadings. Throughout the
case, there has been a question as to which Mannie Garcia photo I used as a reference to
design the HOPE image. The AP claimed it was one photo, and I claimed it was another.
The new filings state for the record that the AP is correct about which photo I used as a
reference and that I was mistaken. While I initially believed that the photo I referenced was a
different one, I discovered early on in the case that I was wrong.

In an attempt to conceal my mistake I submitted false images and deleted other images. I
sincerely apologize for my lapse in judgment and I take full responsibility for my actions which
were mine alone. I am taking every step to correct the information and I regret I did not come
forward sooner.

I am very sorry to have hurt and disappointed colleagues, friends, and family who have
supported me in this difficult case and trying time in my life.

I am also sorry because my actions may distract from what should be the real focus of my
case – the right to fair use so that all artists can create freely. Regardless of which of the two
images was used, the fair use issue should be the same.

Statement from Srinandan R. Kasi, VP and General Counsel, The Associated Press

Striking at the heart of his fair use case against the AP, Shepard Fairey has now been forced to admit that he sued the AP under false pretenses by lying about which AP photograph he used to make the Hope and Progress posters. Mr. Fairey has also now admitted to the AP that he fabricated and attempted to destroy other evidence in an effort to bolster his fair use case and cover up his previous lies and omissions.

In his Feb. 9, 2009 complaint for a declaratory judgment against the AP, Fairey falsely claimed to have used an AP photograph of George Clooney sitting next to then-Sen. Barack Obama as the source of the artist’s Hope and Progress posters. However, as the AP correctly alleged in its March 11, 2009 response, Fairey had instead used a close-up photograph of Obama from the same press event, which is an exact match for Fairey’s posters. In its response, the AP also correctly surmised that Fairey had attempted to hide the true identity of the source photo in order to help his case by arguing that he had to make more changes to the source photo than he actually did, i.e., that he at least had to crop it.

After filing the complaint, Fairey went on to make several public statements in which he insisted that the photo with George Clooney was the source image and that “The AP is showing the wrong photo.” It appears that these statements were also false, as were statements that Fairey made describing how he cropped Clooney out of the photo and made other changes to create the posters.

Fairey’s lies about which photo was the source image were discovered after the AP had spent months asking Fairey’s counsel for documents regarding the creation of the posters, including copies of any source images that Fairey used. Fairey’s counsel has now admitted that Fairey tried to destroy documents that would have revealed which image he actually used. Fairey’s counsel has also admitted that he created fake documents as part of his effort to conceal which photo was the source image, including hard copy printouts of an altered version of the Clooney Photo and fake stencil patterns of the Hope and Progress posters. Most recently, on Oct. 15, Fairey’s counsel informed the AP that they intended to seek the Court’s permission to withdraw as counsel for Fairey and his related entities.

The AP intends to vigorously pursue its countersuit alleging that Fairey willfully infringed the AP’s copyright in the close-up photo of then-Sen. Obama by using it without permission to create the Hope and Progress posters and related products, including T-shirts and sweatshirts that have led to substantial revenue. According to the AP’s in-house counsel, Laura Malone, “Fairey has licensed AP photos in the past for similar uses and should have done so in this case. As a not-for-profit news organization, the AP depends on licensing revenue to stay in business.” Proceeds received for past use of the photo will be contributed by the AP to The AP Emergency Relief Fund, which assists staffers and their families around the world who are victims of natural disasters and conflicts.

Anthony T. Falzone (admitted pro hac vice)
Julie A. Ahrens (JA0372)
Stanford Law School
Center for Internet and Society
559 Nathan Abbott Way
Stanford, CA 94305
Telephone: (650) 736-9050
Facsimile: (650) 723-4426
Email: falzone@stanford.edu

Mark Lemley (admitted pro hac vice)
Joseph C. Gratz (admitted pro hac vice)
Durie Tangri LLP
332 Pine Street, Suite 200
San Francisco, CA 94104
Telephone: (415) 362-6666
Email: mlemley@durietangri.com
Attorneys for Plaintiffs and Counterclaim Defendants
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
SHEPARD FAIREY and OBEY GIANT ART, INC., Plaintiffs,
-against-
THE ASSOCIATED PRESS, Defendant and Counterclaim Plaintiff,
-against-
SHEPARD FAIREY, OBEY GIANT ART, INC., OBEY GIANT LLC and STUDIO NUMBER ONE,
INC. Counterclaim Defendants,
And
Case No.: 09-01123 (AKH)
ECF Case
MOTION TO AMEND PLEADINGS

MANNIE GARCIA, Defendant, Counterclaim Plaintiff and Cross-claim Plaintiff/Defendant,
v.
SHEPARD FAIREY AND OBEY GIANT ART, INC., Counterclaim Defendants,
And
THE ASSOCIATED PRESS, Cross-claim Plaintiff/Defendant.

Plaintiffs-Counterclaim Defendants Shepard Fairey (“Fairey”) and Obey Giant Art, Inc. and Counterclaim Defendants Obey Giant LLC and Studio Number One, Inc. by and through their attorneys, respectfully request leave to amend the following pleadings: (A) Plaintiffs Fairey and Obey Giant Art, Inc.’s Complaint; (B) Plaintiffs-Counterclaim Defendants Fairey and Obey Giant Art, Inc. and Counterclaim Defendants Obey Giant LLC and Studio Number One Inc.’s Answer and Affirmative Defenses to the Counterclaims of Defendant The Associated Press (“The AP”); and (C) Plaintiffs-Counterclaim Defendants Fairey and Obey Giant Art, Inc. and Counterclaim Defendants Obey Giant LLC and Studio Number One Inc.’s Answer, Affirmative Defenses, and Counterclaims to the Counterclaims of Defendant Mannie Garcia (“Garcia”). Plaintiffs and Counterclaim Defendants (“Plaintiffs”) move to amend these pleadings to reflect new information Plaintiffs’ counsel first learned on October 2, 2009 relating to the identity of the photograph Mr. Fairey used as a reference to create the Obama Works at issue in this case. The pleadings, with redlining indicating the proposed amendments, are attached to this motion as Exhibits A through C, respectively. The AP stated that it would not oppose this motion as long as Plaintiffs provide the Court with a full explanation as to why the amendment is necessary. Mr. Garcia’s counsel informed Plaintiffs’ counsel that Mr. Garcia does not oppose the motion so long as he is granted an additional 60 days for discovery. In Plaintiffs’ original complaint for declaratory judgment and in their answers to claims alleged against them by The AP and Mannie Garcia, Plaintiffs alleged that Mr. Fairey used a photograph of George Clooney and Barack Obama (identified in the original Complaint as the “Garcia Photograph” and identified by The AP in its Counterclaims as the “Clooney Photograph”) as a photographic reference to create the illustration of Barack Obama that appears in the Obama Works at issue in this case. In addition, Plaintiffs denied that Mr. Fairey used a photograph of Barack Obama alone (identified by The AP in its counterclaims as the “Obama Photograph”) as the photographic reference he used.

On October 2, 2009, counsel for Plaintiffs learned new information revealing that Plaintiffs’ assertions were incorrect. Mr. Fairey was apparently mistaken about the photograph he used when his original complaint for declaratory relief was filed on February 9, 2009. After the original complaint was filed, Mr. Fairey realized his mistake. Instead of acknowledging that mistake, Mr. Fairey attempted to delete the electronic files he had used in creating the illustration at issue. He also created, and delivered to his counsel for production, new documents to make it appear as though he had used the Clooney photograph as his reference.

On October 9, 2009, Plaintiffs’ counsel sent a letter to counsel for The AP and counsel for Mannie Garcia notifying them of the situation and of the need to amend Plaintiffs’ pleadings accordingly. Plaintiffs’ counsel enclosed proposed amendments with that letter, and specifically advised counsel for The AP and Mr. Garcia that Plaintiffs no longer contend Mr. Fairey used the Clooney Photograph in creating the Obama Works at issue in this case and that Plaintiffs do not deny he used the Obama Photograph. In this letter, Plaintiffs’ counsel also informed opposing counsel that Plaintiffs no longer contend that certain documents Plaintiffs produced in discovery (bearing Bates numbers FAIREY00669 through FAIREY00672) were used in the creation of the Obama Works, and that Mr. Fairey had created these documents in 2009, after the original complaint was filed in this matter. Plaintiffs’ counsel also produced additional documents (bearing Bates numbers FAIREY104735 through FAIREY104766) and explained that Mr. Fairey had attempted to delete some or all of these documents at or around the same time he created the documents bearing Bates numbers FAIREY00669 through FAIREY00672, but that he had been unsuccessful in deleting all copies of them. Finally, the letter corrected certain misstatements Plaintiffs’ counsel had previously made (understanding them to have been true at the time) while meeting and conferring on discovery.

Plaintiffs therefore respectfully request that the Court grant their motion to amend their pleadings in light of the information above.

DATED: October 16, 2009 Respectfully Submitted,
/s/
Anthony T. Falzone (admitted pro hac vice)
Julie A. Ahrens (JA0372)
Stanford Law School
Center for Internet and Society
559 Nathan Abbott Way
Stanford, CA 94305
Telephone: (650) 736-9050
Facsimile: (650) 723-4426
Email: falzone@stanford.edu

Mark Lemley (admitted pro hac vice)
Joseph C. Gratz (admitted pro hac vice)
Durie Tangri LLP
332 Pine Street, Suite 200
San Francisco, CA 94104
Telephone: (415) 362-6666
Email: mlemley@durietangri.com
Attorneys for Plaintiffs and Counterclaim
Defendants

The Exhibits to the Motion to Amend may be found at: http://www.ap.org/iprights/fairey.html.

AP's Motion to Amend the Pleadings and exhibits thereto are available at: http://www.ap.org/iprights/fairey.html.

By Mary Rasenberger

Today is the deadline for filing objections to the amended settlement agreement in the Google Books case. It is also the deadline for opting back in to the settlement (for those who opted out of the original settlement) and for opting out (for those who did not opt out of the original settlement and wish to do so now). There are clear directions on the Google Books Settlement site http://www.googlebooksettlement.com for opting out or opting back in.

The original settlement agreement, filed in October 2008, was the result of two years of negotiations among the named parties in the class action lawsuit brought by U.S. authors and publishers claiming that Google infringed their copyrights by scanning their books and displaying excerpts without authorization. The amended settlement agreement was filed this past November in response to objections submitted by the U.S. Department of Justice and numerous class members.

We'll see what today brings, but so far it's been relatively quiet compared to the storm of filings that preceded the original September 4th deadline for objections to the original settlement agreement. Hundreds of objections had been filed well in advance of that deadline.

The first objections to the amended settlement agreement were filed Tuesday; and less then a dozen appear on the court's docket as of this writing. A couple dozen opt-outs have been filed with the court, some expressing their objections – although anyone who opts out technically does not have standing to file objections. Ursula LeGuin's petition requesting that the United States be exempt from the settlement and signed by over 350 authors does not appear on the docket yet – but she states on her website that the petition has been filed. In addition, a couple of letters in support of the amended settlement have been filed.

One explanation for the apparent relative apathy is that objectors and supporters feel they have already said their piece in objections filed to the original settlement and don’t have much to say about the amendments. Indeed, the amendments do not address most of the objections to the original settlement raised by class members, but are mainly directed to the anti-trust and class action concerns that the Department of Justice raised in its brief. Judge Chin clearly instructed in his November 19, 2009 order that objections be limited to the amendments, which thus far most objectors seem to be heeding to.

Most of the actual objections filed thus far (i.e., not amicus or opt-outs) focus on the amended definition of the settlement class. Class members are now limited to authors or publishers of a book published and registered in the U.S., or published in, the U.K., Australia or Canada prior to January 5, 2009. This amendment was clearly intended to remove many foreign rights holders and their objections from the settlement, including the Germans and French, whose governments had filed objections. Over three-quarters of the more than 400 objections to the original settlement were filed by foreign rights holders. The new definition does not actually remove many foreign right holders, however. It encompasses right holders of any book published at any time prior to January 5, 2009 in any of the named countries; and this includes numerous books by authors and publishers of excluded countries. Go to any foreign language or university book store in Canada, the U.K. or Australia, and you will find many foreign language books. Thus, many of the objectors this time around have complained that the new definition is murky and does not resolve their concerns.

Another explanation for the relative quiet around this deadline might be mere ennui – is this becoming like the health bill – how much longer can we talk about it? Also, there appears to be a coming to terms with the settlement, or perhaps its inevitability, at least among some of the former opponents. Gail Steinbeck, an early and vocal opponent of the settlement, has recently come out in support of it.

The filing that will undoubtedly have the most influence is the U.S. Department of Justice Statement of Interest on the amended settlement agreement, due next Thursday, February 4th. It will be interesting to see what positions Justice takes to the amendments, since so many of them are intended to directly address its objections -- mainly the more easily remedied specific anti-trust concerns. The amended settlement agreement does not fully address all of Justice's concerns, however, most notably the issues Justice raised about the opt-out provisions for out-of-print works, especially as applied to unclaimed works. Justice indicated that converting the opt-out to an opt-in would resolve many of the problems with the settlement, but never stated that it was necessary to eliminate the opt-out provisions. The opt-out is likely an area of some contention within the government, given Google's heavy lobbying and public insistence that eliminating the opt-out would kill the deal, side by side with a recognition that opt-outs in copyright law are better suited to legislation. As such, I would expect to see continued ambiguity in the government's brief.

The Fairness Hearing scheduled for February 18, 2010. Objectors and supporters may discuss issues related to the original settlement and the amendments. If you wish to appear, you must file your notice of intent to participate by next Thursday, February 4th.

Mary Rasenberger is an attorney with Skadden, Arps, Slate, Meagher & Flom. This blog entry represents her personal views in her individual capacity and not those of Skadden, any other law firm or any client. This blog is not sponsored by Skadden or any other law firm, or any client.

By Barry Skidelsky, Esq. (co-chair NYSBA/EASL/TV-Radio Committee; contact: bskidelsky@mindspring.com or 212-832-4800).

On January 22, 2010, 17 television networks and production studios and 7 talent agencies settled 19 of 23 separate class actions filed in Los Angeles Superior Court, based on alleged intentional and unintentional age discrimination in the selection, employment and representation of television writers. As three companion cases had previously settled, Creative Artists Agency (CAA) is left as the lone holdout.

The procedural history of the TV writers’ cases (which is set forth in Alch et al v. Time Warner Entertainment et al, 122 Cal. App. 4th 339 (2004), subsequent history omitted), began in 2000 as a federal court action under applicable federal law, including the Age Discrimination in Employment Act (which generally protects workers aged 40 or more). That action was dismissed with leave to amend in 2002. Rather than pursue their federal case, Plaintiffs then instead filed 23 separate complaints in California state court, based on state law statutes involving fair employment, civil rights and unfair competition. The parties litigated aggressively over 10 years in the trial courts before five different judges, during which period 20 of the named plaintiffs died and five different appeals ensued, two of which reached the California Supreme Court (primarily involving class certification and discovery matters). Although the past decade saw thousands of pages of documents produced and thousands of interrogatories answered, discovery was still at an incipient stage and the class not yet certified. Thus, with final resolution still years away, the parties agreed (without any admission of liability by defendants) that it made sense to now bring these protracted cases to a close and obtain preliminary approval of the settlement.

The amount of the settlement is $70 million, the largest-ever settlement in the history of age discrimination litigation. Of that sum (two-thirds of which is to be funded by insurance carriers), about $25 million is expected to be paid to plaintiffs’ counsel; and, about $2.5 million is to be set aside into a so-called Fund for the Future to be created (which intends, inter alia, to make loans and grants to TV writers). The remainder of the record-breaking settlement sum is to be paid pursuant to a single formula to class members, which includes both professional and aspiring writers, subject to withholding taxes and union pension or health and welfare deductions as may be appropriate (interestingly, the Writers Guild was not a party to this litigation).

Writers who believe they were unlawfully denied a TV writing opportunity during the class period (from October 22, 1996 to January 22, 2010) and want a piece of this pie must file a claim form (available at www.tvwriterssettlementadmin.com) no later than April 13, 2010. A final approval hearing of the TV writers’ settlement is scheduled for May 5, 2010, in L.A. Superior Court.

It should also be noted that the United States Equal Employment Opportunity Commission (EEOC) has reported a significant uptick in age discrimination complaints. The latest figures show that for the 2008 fiscal year, 24,582 charges of age discrimination were filed with the agency, almost a 29% increase over the prior year, and by far the largest number of such charges filed in the past 10 years. No employer, not even a law firm, is immune. In fact, on January 28, 2010, the EEOC filed an age discrimination complaint in federal court in Manhattan (SDNY) against the nationally known law firm of Kelly Drye and Warren, the details of this action being beyond the scope of this article. Suffice it to say that, without doubt, the difficult economic circumstances we all face today is having a disparate impact (no pun intended) on baby boomers and other older workers; and, all employers (including law firms) would be well advised to review and improve their hiring and other employment practices.

By Mary Rasenberger

A careful reading of the Statement of Interest filed in the Google Books case by the Justice Department last week shows a harsher assessment than was evident in its earlier filing. The government’s brief rejects the amended settlement agreement (“ASA”), finding that the parties’ attempts to cure the issues the government identified in its earlier brief do not go nearly far enough: “Despite this worthy goal [trying to create a mechanism to allow for lawful large-scale book digitization], the United States has reluctantly concluded that the use of the class action mechanism in the manner proposed by the ASA is a bridge too far.”

Given the stakes and pressures that were likely put to bear on the government, it is an incredibly strong document. It will be remarkable if Judge Chin (or his successor in the case, if he is moved up to the Second Circuit soon) approves the ASA as-is, even after the substantial responses filed by the parties.

The government’s main issue with the ASA is that it uses the class action suit to create a far-reaching commercial arrangement that looks far into the future (indeed in perpetuity) and far beyond the claims off the suit. It does this by granting Google legal rights that it never could have obtained through a private arrangement or through a judicial resolution of the suit – and these legal rights fly in the face of “the core principle of the Copyright Act that copyright owners generally control whether and how to exploit their works during the term of copyright.” Secondarily, providing these rights, the government argues, confers significant, possibly anti-competitive advantages to Google.

The government’s September 18th brief focused on the anti-competitive concerns and more technical class action issues, and did so in an equivocal enough way that it left room for the parties to make the minor changes they did in the ASA and be able to wipe their hands with a straight face. The recent brief, in contrast, does not mince words and hits hard on the underlying problem many objectors have with the ASA - it attempts to use the class action process to get around the existing legal system rather than to support it. As Marybeth Peters, the Register of Copyright, has said, and many have repeated: the settlement turns copyright on its head. It creates a whole new legal system of opt-out regime for the benefit of a single entity, which is totally at odds with copyright’s grant of exclusive rights to authors.

To summarize the government’s brief at a very high level, there are three key objections to the ASA:

1. Class action law does not permit settlements to replace commercial transactions that go far beyond the claims at issue in the case or restructure the law;

2. The settlement turns copyright on its head by creating an opt-out regime for the vast majority of works at issue; and

3. Granting an across-the-board license to Google for non-commercial works on an opt-out basis creates potential anti-competitive advantages, as no competitor will be able to obtain those rights, especially in the case of unclaimed works.

At the same time, the government is rightly sympathetic with the parties’ attempt to use the class action process in this way. The current law and practice is arguably defective, and makes mass-digitization, even when it serves a good public purpose, impossible to do legally. Orphan works legislation might help some, as would collective licensing arrangements or perhaps a statutory license for libraries. But you don’t have to be a class action lawyer to know that Rule 23 (the civil procedure rule allowing for class action lawsuits) is not intended to be used to create new law. We have one mechanism for fixing the law in this country – legislation. As judges in countless cases have said: you have a problem with the law, take it to Congress.

Sure, it’s been impossible in recent years to pass copyright legislation, but that doesn’t mean we get to amend the law ourselves in class action lawsuits.

For those interested in more detail, I’ve summarized some of the specific arguments in the government’s February 4th Statement of Interest below. The arguments are made in the context of two separate sets of laws: class action law and antitrust law.

Class Action Law Related Issues

The Government’s brief states: “The Supreme Court has cautioned that 'Rule 23… applied with the interests of absent class members in close view, cannot carry the large load of restructuring legal regimes in the absence of congressional action – however sensible that restructuring might be.'”

The arguments regarding non-compliance with the Rule 23 class action rules are some of the more interesting and compelling ones raised in the case. The Rule 23 law gets at some of the smell test issues in this case, described above – i.e., even though it sounds good, it looks good, it doesn’t smell quite right. It seems at odds with some of our underlying basic legal principles to allow a class action law suit filed by a small group of associations and individuals, who admittedly do not represent all author and publisher class members throughout the world or even the U.S., to take away hundreds of thousands (if not millions) of individuals’ rights without their consent. It’s even odder when you consider that the law suit was brought to enforce those very rights.

It turns out, according to one Justice (and certain other objectors, e.g., Microsoft, Amazon, Scott Gant) that the class action law does have standards, if not crystal clear ones, that don’t necessarily promote this kind of sweeping conversion of rights.

Both the parties’ and the government’s briefs discuss the standards set forth in the Supreme Court’s Firefighters case (Local Number 93, Int’l Assoc. of Firefighters v. City of Cleveland, 478 U.S. 501 (1986)). Under Firefighters and its progeny, the Court may approve a settlement that meets the following three-prong test: (1) the settlement springs from and serves to resolve a dispute with the Court’s subject matter jurisdiction, (2) the settlement comes within the general scope of the case made in the pleadings, and (3) it furthers the objectives of the law on which the complaint was based. The government concludes that:

1. It’s difficult to see how this settlement meets the first prong in that it resolves future claims by absent class members for activities well beyond the facts underlying the complaint;

2. The ASA does not meet the second prong because it creates a business relationship that covers future conduct that goes way beyond the claims in the complaint and provides Google with benefits that it never could have obtained through the litigation itself or even through a privately negotiated deal (i.e., the opt-out for non-commercial works); and

3. The ASA does not further the objectives of copyright law, but is inconsistent with the policy of Copyright Act, which provides for exclusive rights and not opt-outs.

The government concedes that a settlement of a class action may go “somewhat” beyond the conduct complained of in the complaint, but can’t go so far as “to abridge or enlarge substantive rights” and “usurp the legislative function.”

The government further states that the ASA does not remedy the lack of adequate representation of the interests of a large number of members (namely, unclaimed work owners, foreign rightsholders) in the settlement negotiations, and that appointing a fiduciary with limited powers for unclaimed works at the Registry does not solve the problem. It also exhorts the Court to look more closely at the notice provided to potential class members to determine if it was adequate, specifically requesting that the Court “undertake a searching inquiry to ensure both that a sufficient number of class members have been or will be reached and that the notice provided fives a complete picture of the broad scope of the ASA…”

Last, the government raises concerns about Attachment A of the ASA. Attachment A is a sub-agreement that controls potential disputes between authors and publishers, mainly regarding possession of rights and splits, and supersedes all agreements between publishers and authors, even foreign ones. The government notes that there may be a conflict of interest between subclasses of authors and publishers, which raises “serious questions” regarding adequacy of representation under Rule 23.

Antitrust Issues

The antitrust issues discussed in the brief are essentially the same ones addressed in the government’s September 18th brief; and they are the primary issues that the parties attempted to address in the ASA’s amendments. The government states that the parties made “constructive revisions” to address these potential anti-competitive problems, but that the amendments do not go far enough to remedy:

1. The creation of an industry-wide revenue-sharing formula at the wholesale level applicable to all works;

2. The setting of default prices and the effective prohibition on discounting by Google at the retail level; and

3. The control of prices for orphan books by the known publishers and authors with whose books the orphan books likely will compete.

With respect to the first issue, the government notes that the ASA gives Google the right to renegotiate the wholesale revenue split with rights holders, but only for commercially available works. The government believes that the carve-out for non-commercial works may render the amendment somewhat meaningless, given the fact that the vast majority of works at issue are not commercially available under the ASA’s definition and that this will be especially true if the publishers take commercially available books out of the settlement, as many have suggested they will do.

The government also does not believe that the “fixes” regarding the use of pricing algorithms go far enough to prevent a de facto horizontal agreement. It analogizes the publishers’ and authors’ agreement to allow Google to price the works (using its algorithms) to the delegation of pricing to a common agent - a practice found to be unlawful. Far preferable would be actual bilateral negations than the ability to opt-out of the default use of algorithms.

The government’s biggest concern, however, relates to the pricing of orphan works, since the Registry’s board, consisting primarily of commercial publishers and authors, would have the ability and incentive to limit competition from unclaimed works. The parties have responded to this criticism (also in the government’s September brief) by providing in the ASA for an “Unclaimed Works Fiduciary,” but this fiduciary’s powers are limited – for instance, he or she will not have the ability to set prices for works, or renegotiate splits. As such, the government does not believe the appointment of fiduciary cures the underlying problem.
Last and most importantly perhaps, the government finds that the amendments do not address Google’s de facto exclusive rights to use orphan and rights-uncertain works. The government states that no other entity will have the ability to offer these works legally. Although the ASA attempted to address this concern by expressly allowing resellers to provide access to these works, the government does not equate these reseller rights with the right Google has to freely exploit orphan and other unclaimed works. It concludes: “the reseller clause cannot create new competitors to Google.”

So now what?

The government’s brief advises the Court that the public interest would best be served by direction from the Court encouraging the continuation of settlement discussions between the parties. But if we can be realistic for a moment – what are the chances of Google agreeing to all of the concessions that Justice’s analysis would require to make the settlement copasetic? Google has made it clear that, from its perspective, the opt-out for out-of-print works, and especially the orphans, is essential to the deal. If you read the government’s brief carefully, it does not appear that its cumulative objections all could be adequately addressed without getting rid of the opt-out for non-commercial works. The government does state, however, that if the opt-out is retained, Google should be required, among other things, to conduct a search for unclaimed work prior to their use, similar to the reasonable search requirement in the last iterations of the orphan works bill. Google has publicly stated that, although it supports orphan works legislation, that legislation would not provide it with the flexibility it would need to create the inclusive database envisioned.

By Mary Rasenberger

An impressive number of pages were filed this past Thursday (February 11, 2010) by the parties in the Google Books Search case in support of the amended settlement agreement (“ASA”). Only a week after the Justice Department filed its brief, both Google and the named Plaintiffs (publishers and authors collectively) filed briefs worthy of fat binder clips. The Plaintiffs' briefs alone comprise nearly 250 pages, including a 170 page Supplemental Memorandum Objecting to Specific Objections (and with the numerous declarations and exhibits the parties' papers amount to over 2,500 pages altogether).

The briefs remind the Court of the benefits of and support for the settlement, and as would be expected, address the government’s concerns set out in its February 4th Statement of Interest. Google’s brief addresses the government’s objections in great detail supported by substantial case law; the brief also discusses a somewhat random, handful of objections filed by others (fairness to third parties, burden of determining whether a book was registered, inaccuracies in the database, security, and time limit on removal).

The Plaintiffs’ principal brief makes some compelling arguments as to why the ASA is preferable to the alternative outcomes in this case (e.g., protracted litigation, the risk of an on/off decision) and why the settlement is reasonable in light of the case. It summarizes the ASA and its benefits and takes on some of the Rule 23 and other concerns raised by the government. The Plaintiffs’ supplemental brief appears to take on the entire catalog of objections filed by all objectors with standing. Impressive as it is, the supplemental brief may have bit off more than it could chew. Some of the responses, some even to significant objections, come off as non-responsive or conclusory. Moreover, the same objections in some cases are addressed separately in the two briefs, not always completely consistently. They don’t always cross-reference arguments made in the other brief (e.g., the discussion of adequacy of notice in the supplemental brief seems very conclusory if not read alongside the discussion in the principal brief, which is not referenced).

For instance, in response to arguments that the ASA cannot bind foreign members of the class because (1) the law is at odds with that of other countries and (2) the Court lacks personal jurisdiction, the Plaintiffs state in the supplemental brief (pp. 61-63) that members of the class can be bound so long as notice meets the Rule 23 requirements, and that notice was compliant (here referencing their arguments as to why it was compliant). Admittedly, I have not read the cases they cite, but maybe they could explain why compliant notice would address these concerns.

In response to Justice’s and others’ concerns about the fact that Google alone will have the right to offer orphan works (i.e., books for which a copyright owner cannot be located) and the impossibility for others to obtain the rights to the orphans and enter that market, in the Supplemental Motion (pp 149-150), the Plaintiffs summarily respond: "This argument relies on unsupported and illogical speculation that the subset of out of print [orphan] books is so uniquely valuable and desired that other subscription products will be unable to compete with the Institutional Subscription."

Considering that the government and many others viewed this as a significant issue, the response seems flippant. Of course, a subscription database that includes all books, including out-of-print books for which no owner has come forward, is much more valuable than one that is created on an opt-in basis and so would not include orphans. As a library, which one would you chose? And if these works don’t increase the value of the database, then why is the opt-out so crucial to the settlement? Why does Google insist it needs these out-of-print works (a huge portion of the books at issue in the settlement)? If the out-of-print, unclaimed works really are so valueless, then make them available to Google on an opt-in basis and 95% of the objections go away.

Some odd responses aside, the parties’ recent briefs keep the ball in play. Perhaps most interestingly, filing these briefs indicates that the parties do not intend to go back to the negotiating table again as the government recommended. Moreover, the briefs contain some solid, convincing arguments. They are worth a thorough read for the interested – who have a lot of free time. (It does feel like reading the original settlement agreement all over again.) Most importantly, one hopes that Judge Chin will have the time to read it all. He may just want to run for the hills when he sees all that paper. I mean the Second Circuit.

The briefs have good table of contents, as you’d expect. One approach to reading the briefs is to do so on a topic by topic using the table of contents, rather than try to read them in linear fashion. And for those of us who’d love to see a list of all objections filed in the case, the supplemental brief serves as a pretty good proxy.

By Cliff Sloan, Judith Kaye, Mary E. Rasenberger & David W. Foster

On March 2, 2010, in Reed Elsevier, Inc. v. Muchnick, the Supreme Court reinstated a class action settlement, approved by the district court, of copyright claims entered into by freelance authors, publishers and electronic database companies. In doing so, the Supreme Court provided important guidance on whether mandatory pre-conditions for suit, such as the requirement for copyright registration in the copyright statute, are jurisdictional.

The Reed Elsevier case involves a longstanding dispute between freelancers and publishers and databases. Nearly a decade ago, in New York Times Co. v. Tasini, 533 U.S. 482 (2001), the Supreme Court held that “owners of online databases and print publishers had infringed the copyrights of six freelance authors by reproducing those authors’ works” in electronic databases “without first securing their permission.”

After Tasini, attention turned to a class action lawsuit by freelance authors against publishers and databases in the Southern District of New York. After years of negotiation and mediation, the freelancers, publishers and electronic database companies agreed on a global settlement. Although the copyright statute requires registration of a creative work before a copyright infringement suit can be brought, the class action settlement resolved potential claims regarding both registered and unregistered works. The district court certified the class and approved the $18 million settlement.

Ten freelancers objected to certain provisions of the settlement on procedural and substantive grounds, and they appealed. The Second Circuit sua sponte asked the parties to address whether the district court lacked jurisdiction to approve the settlement because it included unregistered works. All parties maintained that there was no jurisdictional problem with the settlement, but the Second Circuit disagreed. Ruling that the district court lacked jurisdiction, it threw out the settlement.

The publishers and databases then sought certiorari from the Supreme Court, which was granted. Because none of the parties agreed with the Second Circuit’s holding on jurisdiction, the Supreme Court appointed a law professor as amicus to defend the Second Circuit’s opinion. Skadden filed an amicus brief in the Supreme Court supporting reversal on behalf of ten leading media and publishing companies and organizations.

In an 8-0 ruling (with Justice Sotomayor recused), the Supreme Court reversed. It held that the copyright registration requirement — Section 411(a) of the copyright statute — is mandatory, but not jurisdictional and thus the Second Circuit should not have thrown out the settlement on jurisdictional grounds. Writing for the court, Justice Thomas applied the rule from Arbaugh v. Y & H Corp., 546 U.S. 500 (2006), for distinguishing between jurisdictional statutes, which govern a court’s power to hear a case, and mandatory claim processing rules. The court held that Congress had not clearly stated that the limitations in Section 411(a) are jurisdictional. As a result, the court would not conclude that the mandatory registration requirement is jurisdictional.

Justice Ginsburg, joined by Justices Stevens and Breyer, concurred in part and concurred in the judgment. They stated that there appears to be some tension between the rule announced in Arbaugh and the result in Bowles v. Russell, 551 U.S. 205 (2007), which found that a time limit for an appeal was jurisdictional. The concurring justices resolved that tension by reading Bowles to apply only when a long line of Supreme Court cases has held a statute to be jurisdictional, and that interpretation has been left unchallenged by Congress.

The Supreme Court emphasized the limits of its Reed Elsevier decision. In sending the case back to the Second Circuit, the court expressed no opinion on the merits of the settlement. It also observed that the registration requirement remains a “precondition to suit,” and left open the possibility that “district courts may or should enforce sua sponte” the registration requirement by “dismissing copyright claims involving unregistered works.” The court also noted that it did not reach the question whether, even if the registration requirement were jurisdictional, the court would have authority to approve the settlement.

Beyond the impact in the Reed Elsevier case itself, the most important effect of the decision is the court’s emphasis that it will not lightly presume that statutory requirements are jurisdictional. A conclusion that a requirement is jurisdictional is warranted only if it is clearly stated or mandated by Congress. The court stressed, as it has in other recent opinions, that it will look skeptically at “drive-by jurisdictional rulings” ­— casual statements about “jurisdiction” in past opinions that are unsupported by clear authority in statutory language or intent.

The decision leaves open the question of whether and how compliance with section 411(a) may be waived by a defendant, whether expressly or by default. Until there is a fully developed body of law on the issue, copyright litigators would be wise to raise failure to comply with section 411(a) at the earliest practical moment in the litigation.

Cliff Sloan, Judith Kaye, Mary E. Rasenberger, David W. Foster are attorneys with Skadden, Arps, Slate, Meagher & Flom. This blog entry does not represent the views of Skadden, any other law firm or any client. This blog is not sponsored by Skadden or any other law firm, or any client. The blog is provided for educational and informational purposes only and is not intended and should not be construed as legal advice.