Google relents with revised digital books settlement

By Cecilia Kang
Washington Post Staff Writer
Sunday, November 15, 2009

In a move to allay its critics and the Justice Department, Google filed in federal court a revised legal settlement that would allow it to distribute millions of digital books online.

Addressing charges that its initial settlement in a 2005 lawsuit was overly broad and anticompetitive, Google scaled back its ambitious plan to digitize books from U.S. libraries and created an opening for other companies to license its catalogue of copyrighted, out-of-print books.

The filing on Friday was a clear concession to authors and represents a new level of engagement between the high-tech industry and Washington, which has been slow to regulate the burgeoning online economy.

Regulators say they are grappling with vexing questions over how to encourage competition but not stifle innovation and the benefit of new Web tools for consumers. And with a major merger between Comcast and NBC on the horizon, they will have to address the Web's blurring of traditional industry lines.

"It's a fine line," said Mark Cooper of the Consumer Federation of America. "The book settlement is a perfect example of where there is clearly potential good for the public in this but there is also potential for them to have market power to dominate a particular activity on the Web."

Late Friday, Google and two author and publisher groups revised their settlement over the rights to access and distribute millions of out-of-print titles, narrowing the scope of books involved and how much control Google would have to titles whose authors are unknown. This follows a decision in August by Google chief executive Eric Schmidt to give up his seat on Apple's board, a response to an investigation by the Federal Trade Commission into the board ties between Google and Apple. The two companies, each with their own wireless phone software, browsers and search engines, are becoming greater competitors in the mobile phone industry.

Other Silicon Valley and communications giants also have responded in recent months to a more assertive role by regulators.

Sources said the FTC's investigation of chip giant Intel's business practices was among pressures that pushed the world's largest computer chipmaker to pay $1.25 billion to much smaller competitor, Advanced Micro Devices, in a settlement over allegations that Intel bribed and bullied computer makers to use its chips over AMD's.

The Federal Communications Commission's push for new Internet access rules prompted AT&T in September to allow competing Internet voice applications companies such as Skype to run on its network for the iPhone.

"I think it's pretty clear that across the board, the administration is taking a more pro-competitive enforcement position," said Edward Black, an antitrust lawyer. "But they are not being radical or outrageous, they are signaling they will be steady and serious. And that is making companies act on their own."

But there are mixed signals. Justice approved a merger of Sun and Oracle, saying there were no anticompetitive concerns with the union. The European Union, however, objected to the merger, saying it was concerned about Oracle's control over the competing database software business MySQL, run by Sun.

Some in the industry caution against a strong-handed approach. Because gadgets, television, phones and the Internet are converging, it is not always clear where business practices of the Web economy fit in Washington's regulatory prisms. Some critics of Google have proposed that the company and other Web content producers be included in the FCC's net-neutrality proposal, which would prohibit Internet service providers from blocking or prioritizing Internet content. They say that Google's search engine has become a powerful platform and that it should be punished for favoring its applications over those of competitors.

"The big challenge for policymakers is to not do anything that would screw up the awesomeness of the Internet for consumers. You need rules of the road, but technology moves quickly, and those rules shouldn't make it harder for users to get great new services online," Google spokesman Adam Kovacevich said.

Google's revised book settlement would narrow the international scope of its control over those books and appoint an independent party to oversee the license fees collected for orphan works, or books whose authors are unknown or unable to be found.

The rewritten settlement was submitted to a federal judge. The public will be able to weigh in. It is drawing criticism from competitors and library groups such as the Open Book Alliance, which says it does not address the exclusive-access rights Google would have over orphan works.

The Justice Department will take into consideration that the scope of the settlement has been pared but will probably scrutinize questions over exclusive rights.

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