Essentially yes. Claim awards will not be disbursed during the pendency of the appeal by attorney Charles Chalmers on behalf of ten objectors, including myself. The timetable for what happens next is up to the Second Circuit, and it’s reasonable to expect this to take a year or more to get unraveled.
Are the settlement parties’ communications omitting anything important?
Yes, of course! What more -- or less -- could we have expected from the folks who brought us the License by Default; whose damages analysis stopped in 2001 and didn’ t even calculate interest; and who inserted an 11th hour amendment to the settlement agreement to include, among others, Amazon.com and its new search-inside-the- book feature?
What they’ve left out is that the systematic, blatant, years-long (and in some cases decades-long) infringement by the defendants also continues unabated during the appeal. That means that even the things on which everyone agreed in this settlement agreement won’t get executed for now. Class members like myself, who submitted paperwork notifying the settlement team that they were denying future use of their works in return for reduced claims awards, find their articles are still getting knocked off. So do those who had opted out of the settlement.
Why did you object and why are you appealing?
Fundamentally because the settlement is a disgraceful sellout of freelance writers’ rights and interests and also makes bad public policy for the flow of information in the Internet age.
The architects of this sellout are the so- called “associational plaintiffs”: the Authors Guild, the American Society of Journalists and Authors, and the National Writers Union. In the six weeks since the judge lowered his rubber stamp, none of these organizations has even bothered to update its website with news of the approval of a settlement they’d hyped to the skies six months earlier. The Guild has moved on to suing Google -- right after caving in to Amazon and a cast of thousands in this case. ASJA appears to have published not one, but two, subsequent editions of its house magazine without a word about the resolution it had promoted for In re Literary Works. And the NWU is in deep, deep REM sleep.
What are some of the specifics of this sellout settlement that give you confidence the appeal will succeed?
There was only one way to get a settlement in this case. That was by including all the unregistered works -- what are called Category C’s.
The fact pattern of years of blatant, willful infringement, along with the sheer volume of C infringements, made the C’s the key. The plaintiff organizations and the individual named plaintiffs (all with A’s and B’s) weren’t doing the C’s a favor by including them; they were following the sole road map to resolution of this dispute. (A’s held copyrights registered within 90 days of first publication; B’s held copyrights registered by certain complicated and utterly arbitrary deadlines established by the settlement.)
I’m not speculating when I say this. Check out the following statement by the defendants’ lead attorney, Charles S. Sims:
“From the outset of the litigation, the Database Defendants advised the plaintiffs … that any settlement must … guarantee ‘complete peace’ with respect to the Subject Works.” (Sims Declaration, 6.)
Now, let’s break down the huge differences in the recoveries to B’s and C’s.
C’s get no less than $5, and up to $24 for works sold for under $250. B’s get the greater of $150 or 12.5% of the original price. For an article whose first publication rights were sold for $250, a C gets $25 while a B gets $150. For a $2,000 piece, a C gets $50, a B gets $250. For a $5,000 story, a C gets $60, a B gets $625.
The settlement consolidated four complaints filed originally by different plaintiffs against different defendants -- three in 2000, the fourth in early 2001. Three of these alleged to represent only freelancers who held registered copyrights. The fourth (Laney v. Dow Jones) alleged that it represented all copyright owners, without reference to registration status.
According to plaintiffs’ counsel, settlement discussions with the defendants commenced in September 2001, shortly after the Supreme Court affirmed the Tasini ruling in favor of freelancers. In late September the plaintiffs in three of those cases filed a new, consolidated complaint, which adopted the Laney approach, alleging a class of all copyright owners. This suggests that the plaintiffs’ lawyers understood that the unregistered copyright owners had to be part of the deal.
They were right. An author “owns” a copyright, whether it is registered or not. Registration is a precondition to filing an action. However, once you file your registration you can file an action to recover damages for infringement in the prior three years. Here, since unregistered owners were alleged to part of the class as of September 26, 2001 (and against Dow Jones going back to 2000), the argument can be made that an unregistered who registers is entitled to damages reaching back to three years before those complaints.
Registering isn’t that hard: a little paperwork and a $30 fee. You can register a group of works published in the same year under a single omnibus registration.
In the only other similar class action settlement, Ryan v. CARL, the complaint was only for registered copyrights, but the settlement also included unregistereds -- who proceeded to receive the same compensation as the B’s.
What you’re saying is that the tail wagged the dog. How did that happen?
The plaintiffs told the court they had a study showing that only 1 in 1,000 freelancers registered their copyrights. That means that two groups were motivated to keep C compensation low.
One was, obviously, the defendants. Since C’ s represented 99.9% of the freelancers with claims, a higher individual compensation formula would have meant a much higher total settlement number. Besides, the lower a class member’s compensation, the less likely it would be that he or she would undergo the paperwork hassle of filing a claim.
The settlement also has a “reversion” feature. If the filed claims, together with the attorneys’ fees ($4.1 million) and the costs ($1 million) don’t exceed $10 million, then the additional $8 million of the $18 million settlement fund never has to be paid to anyone. If they exceed the $10 million threshold but don’t reach $18 million, then the unused portion of the $8 million goes back to the defendants.
As of September 12, 2005, the claims period had been open for 102 days, and had 18 days to go. At that point, according to the plaintiffs’ attorneys, the filed claims totaled $3.2 million. So I’d say the defendants stand a very good chance of getting to keep that $8 million or a large part of it.
Does anyone else have an incentive to screw the C’s?
Surprise, surprise -- the plaintiffs with A and B claims also were motivated to kept the Category C compensation low. For a couple of reasons.
If you’re arguing about a lump sum of money, these plaintiffs have the problem that the C’s vastly outnumber them by a 1,000-to- 1 ratio. And if the claims, together with fees and costs, don’t exhaust the basic $10 million, then the claimants get to share the remainder pro rata. A’s and B’s would get the lion’s share of any such remainder.
Is there other evidence that the named plaintiffs were serving their own interests and not that of the C’s?
Yes -- plenty.
If you’re an A or a B, and you know that for every one of you there are 1,000 C’s, and your lawyers have reached a tentative settlement for a fixed number ($18 million minus fees and costs), you’re going to be concerned that C claims, even at their low compensation numbers, together with A and B claims, could eat up the settlement and thus reduce everyone’s recovery. So you’d like a provision that if total claims exceed the eighteen mil, then the C claim awards are reduced until the total is under $18 million -- even if the C claim awards must be reduced all the way down to zero -- before A or B claim awards are reduced a penny.
The settlement parties now say there was never any chance of that happening, and they point to the $3.2 million of claims through September 12 to prove it. But if there was very little chance, and they really believed that, why did they put all the risk on the C’s? They were already getting very low compensation. Why not structure the settlement so that everyone shared this putatively tiny risk?
An independent objector, Anita Bartholomew, did a very telling piece of research. Using published numbers for freelance articles covered by the lawsuit for just The Philadelphia Inquirer and The New York Times, and employing ASJA’s anecdotal data on what writers had been paid there, Anita found that claims for those alone could equal $12 million using the C rate of compensation. Twelve million from two publishers -- right there roughly the amount left over from $18 million after you deduct fees and costs.
Anita submitted this information to the court. Neither the plaintiffs nor the defendants responded.
There's a term of art for this kind of thing: collusion on its face.
What do you advise while we’re all waiting?
The objectors-appellants are urging a big campaign to get C’s to register their works with the Copyright Office. If we succeed in killing this settlement, there’s a chance the defendants will say, “OK, sue us.” They might want to fight class action certification on various technical grounds. But what they can’t fight is 50, 100, 250, 500, 1,000, 10,000 individual plaintiffs, all armed and registered, suing them in different cases (or in one case -- they eventually would be consolidated with or without class certification). At 1,000 and growing the defendants will begin to get an icy feeling. At 5,000 they will be begging for negotiations.