By Joshua D. Wolson
Special to the Legal
Copyright owners have the right to exploit, or not exploit, their works largely as they see fit. That right is one of many reasons -- and one of the most interesting -- that Google's proposed settlement with a class of authors and publishers fell through for a second time when Judge Denny Chin rejected a proposed settlement in Authors' Guild v. Google. Chin's decision raises an important question: can a class of copyright holders ever settle a claim under Federal Rule of Civil Procedure 23? Or is Rule 23 fundamentally at odds with a copyright holder's control over its intellectual property?
Under Rule 23, members of a class presumptively participate in the case. In a damages case, they can opt out. In other cases -- typically those involving claims for injunctive relief -- their participation in the class is mandatory. In Google's settlement, mandatory participation, or even mandatory participation after an opt-out period, would have meant that any author or publisher who did not opt out of the case licensed its copyright to Google, at least provisionally. (Under the proposed settlement, class members could exempt their copyrighted works from some types of republication by Google, even after the opt-out period).
Chin, however, held that this arrangement would run afoul of federal copyright law by putting the onus on copyright holders to take some action to prevent their copyrights from being exploited, rather than the normal default under which inaction means that a copyright cannot be exploited.
Chin's decision raises the question of whether any class of copyright holders can ever settle a class action, at least in federal court, where the Federal Rules of Civil Procedure will govern. Certainly, a class could reach a financial settlement for past infringement, because that settlement would not implicate a copyright holder's right to control how its copyright is used. But it seems almost impossible to settle a claim for forward-looking relief.
The problem is that, as with Google's case, a claim that sets ground rules for future use of class members' copyrights necessarily infringes on absent class members' rights to control their intellectual property. In his opinion, Chin suggests that the way around this is an opt-in settlement.
In an opt-in settlement, a copyright holder would decide whether to participate, and if she does not, then her copyright could not be exploited. That is, an opt-in settlement would not alter the baseline rule that a copyright holder's inaction does not permit the exploitation of her rights. Federal law, however, does not contemplate an opt-in settlement. Some state laws, including Pennsylvania law, do permit opt-in settlements. In addition, a few federal laws expressly provide for such a device, such as the Fair Labor Standards Act. The Copyright Act, however, does not.
So, unless Congress amends the Copyright Act, Chin's suggestion of an opt-in settlement might not chart a path to resolving the case.
Joshua D. Wolson is a partner in the litigation department at Dilworth Paxson. He can be reached at 215-575-7295 or [email protected].
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