But I was right on the mark with my fifth prediction regarding to the US Class action against Google and the so-called Google Book Settlement (“GBS”):
5. Judge Chin will deliver his judgment on the Google Book Settlement approval case in the early part of the year. It will be dramatic. Google will not be happy.
What comparisons can be drawn between the GBS situation in the USA and the Chet Baker Class Action settlement in Canada that is due to be heard for approval by the Supreme Court of Ontario on Monday, March 28, 2011, having already been once adjourned under unusual circumstances? I have blogged before about this case here and here and here.
The US Google litigation is about Google’s business plan that might be called “scan now - pay later” - or, as Judge Chin quoted an objector’s characterization, 'So, sue me.'” The settlement agreement called for a US $45 million payment to authors and publishers.
The Chet Baker proposed settlement also involves a proposed CDN $45 million payment to composers and publishers for unpaid amounts arising from the multinational record industries' practice of making and selling sound recordings, often compilation CDs, without obtaining necessary permissions and making required payments. The industry apparently kept “pending lists” of payments that should have been made - eventually. The practice has been called "exploit now, pay later if at all." Not unlike the “So, sue me” description of Google’s business plan. At least Google could claim to have the loftier motive of trying to create a digital "great library of Alexandria". The record companies had no such excuse.
From this $45 million, at least 10% and doubtless a lot more after legal and other fees are approved, will be deducted. We don’t know what the total deductions will be because the amount of legal fees and disbursements has not yet been disclosed. The 10% we know about would be deducted to pay CSI (CMRRA + SODRAC, namely the publisher’s collectives, in which the record companies have considerable interest) for their ”commissions” for their troubles in distributing the proceeds.
The GBS coincidentally involves about the same amount of proposed payment to authors, although there would be no deductions from the proposed $45 million amount. Instead, Google would have paid about $15 million for the legal costs of publishers, about $30 million for legal costs of authors, and about $34.5 million for the establishment of registry to implement the complex settlement.
The fact that $45 million is involved in both cases is interesting, because CDN $45 million translates to approximately half a billion in US dollars in terms of comparative economic significance, given the usual 10:1 comparison and the current virtual parity in currency.
Moreover, speaking of comparisons:
• The GBS settlement approval process has been going on for several years. After many early objections, an amended settlement agreement was developed and Judge Denny Chin of the Southern District of New York (“SDNY”) held a fairness hearing just over a year ago on February 18, 2010. More than 500 briefs were filed, almost all of them opposing the GBS.
• There has been enormous notice and publicity given to the GBS proceedings. All credit to Google, all one had to do was to “google” the Google Book Settlement to receive an avalanche of information in exquisite - perhaps too much - detail. Very important information was readily available and well organized on Google’s website - such as the amount of compensation sought by the class action lawyers and details about opting in, opting out and future administration. Morever, to credit Access Copyright - which is something I don’t often do - it conducted very informative webinars for Canadians on the implications for Canadians. No doubt AC had its reasons for doing so that were far from altruistic, but the result was still useful.
• In contrast, the Chet Baker litigation has been conducted in virtual secrecy. It was announced with much fanfare by Michael Geist, the father of CIPPIC. CIPPIC is the subsidized legal clinic at the University of Ottawa that Michael founded. CIPPIC has had some considerable but undisclosed involvement in this Chet Baker case. CIPPIC has been listed as counsel on the Amended Statement of Claim, but not as lead counsel. Two class action firms have also been involved.
• In comparison the GBS situation, there has been virtually no notice of the settlement approval hearing in the Chet Baker matter. The sum total of readily available information is available at the lead counsel’s website, namely here. The site is apparently not up to date with respect to the Court’s latest adjournment order.
• There has been minor press coverage in Canada, and limited blog coverage, mostly initially by Michael Geist and lately by myself.
• On January 10, 2011 Harrison Pensa - the lead class action counsel - issued a press release announcing the approval hearing on February 15, 2011. There was very little press coverage and incomplete information on the Harrison, Pensa website.
• Apparently, the only objection filed to the Chet Baker settlement was from Chet Baker’s son, Paul Baker who sent a letter to the Court reportedly questioning his mother’s authority to bind the Estate and himself. This, of course, if a potentially very serious and clearly unusual allegation that could go to the basis of the settlement. Indeed, it is rather odd that this Canadian litigation would be led by a party with an apparently tenuous connection to Canada. The Judge has adjourned the hearing until March 28, 2011 and suggested that Mr. Baker either appear himself or through counsel.
• Many of the issues addressed by the 500 or so parties who wrote to Judge Chin’s court and which were considered in some detail by Judge Chin could well be relevant to the Chet Baker litigation, i.e.:
1. Adequacy of Class Notice
2. Adequacy of Class Representation
3. Scope of Relief Under US Rule 23. As Judge Chin puts it, certain parties were concerned that the settlement would be used “to shape a "forward looking" business arrangement that would release claims not before the Court. They contend that the case is about the scanning of books and the display of "snippets," while the ASA will release claims regarding the display and sale of entire books.”
4. Copyright Concerns
5. Antitrust Concerns
6. Privacy Concerns
7. International Law Concerns
The only one of these concerns that would seem fairly obviously inapplicable in the Canadian context is that of “privacy”. Civil liberties groups in the USA were concerned that “the digitization of books would enable Google to amass a huge collection of information, including private information about identifiable users, without providing adequate protections regarding the use of such information.”
Whatever the big four record companies have done or will do in Canada, the “pending lists” proposed settlement would appear to have obvious privacy implications - other perhaps than efforts to seek out deserving payees. Presumably, such efforts would not be unwelcome and are probably long overdue.
A brief glance at the amended Chet Baker Estate statement of claim (there is apparently no statement of defence) suggests the possibility of the following potential issues of interest to the various potential class members and, indeed, the general public in terms of overall copyright law and policy (assuming that the allegations are well founded, which has not been admitted or proven):
• The parties are arguably asking the Court to, in effect, bless a massive retroactive compulsory license at what appears on its face to be a highly discounted rate. This is nothing if not ironic, considering the CMRRA, whose role is clearly central to this litigation and will benefit greatly if the settlement is improved, lobbied very hard and successfully to eliminate the compulsory mechanical license in Canada.
• The proposed settlement will affect tens of thousands of foreign rights owners, many if not most of which will not even be aware of the litigation.
• The level of disclosure compared to the GBS documentation is minimal. Even the detailed CSI “term sheet”, the absence of which I noted on my blog of February 9, 2011, is minimal compared to the GBS documentation. It was only added recently to the settlement website, and it is not known if and when it was put before the Court.
• The “opt out” provisions of the Chet Baker settlement are to be submitted to the court on a confidential basis.
• The lawyers’ fees and disbursements sought to be recovered and to be paid by the class members out of the settlement trust have not been disclosed. This is in complete contrast to the US situation, where the fees were disclosed and were to be paid directly by Google. Depending on what the Canadian class action counsel and, presumably, CIPPIC will receive after approval, this amount could run into millions. The record companies have already agreed to pay $750,000 between them towards plaintiffs’ costs. The statement of claim was filed just over two years ago and there has apparently been no statements of defence or discovery.
• As I mentioned in my recent blog, there are interesting and substantial questions arising on the face of this matter as to whether there has been a substantial discount over the face value of a $500 minimum statutory damages award per infringed work. While it is theoretically possible that various very limited circumstances would warrant such a reduction, there is nothing on the public website record to hint at what such factors may be. It can often be a dilemma for class counsel as to whether to recommend a quick and discounted settlement or to hold out for more and press forward and potentially go trial. The Canadian Robertson case was clearly an example of the latter - it took more than a dozen years to get a judgement worth only about a third of that which is sought to be approved in this instance.
• There may be other issues that we will not learn about if the matter does not go to trial. For example, if these claims potentially go back more than 20 years, as has been suggested, why hasn’t action been taken earlier and what about limitation provisions? Should CMMRA and SODRAC have done something a long time ago, and, if so, why are they being let off the hook now?
We may never get answers to these questions. But that is how class actions sometimes work.
However, Judge Chin, for one, is not prepared to bless any settlement put before him.