Objecting and Opting Out

A mini-correction to our report on Thursday’s hearing in New York. The independent objector who spoke was not an objector but someone who chose to opt out of the settlement. His name, I believe, is Francis Hammett. (That may not be the right spelling.)

This gives me an opportunity to explain the difference between objecting and opting out. Our general advice to writers is to object, because the settlement is such an awful sellout, because the paperwork isn’t worth the trouble for the tiny $5-to-$60 claim awards for the vast, vast majority of the infringements, and because the “future license by default” provision will bury the possibility of freelance writers’ being able to leverage new technologies in their own interests for at least a generation.

But if you have a number of “Category A” claims (infringements of works whose copyrights were registered before the infringements), then opting out could be your best move. The claim awards for A’s, topping out at $1,500, are also insultingly lousy. (In the UnCover class action, the equivalent of A’s got $30,000 each.) Opting out preserves your right to sue the class action defendants on your own.

In addition, there’s a provision that says the defendants can blow up the settlement if opt-outs reach a certain threshold. And what is that threshold? Why, it’s secret ... of course!

Don't Worry Your Pretty Little Heads, Version 2.0

So what’s this “supplemental notice” all about?

“Shortly after the Court granted preliminary approval,” the plaintiff associations’ lawyers told Judge Daniels, “Plaintiffs learned for the first time that while the parties were still engaged in mediated settlement negotiations, one or more of the Database Defendants sublicensed to two new databases, Amazon.com and Highbeam Research.”

Mediator Kenneth Feinberg was summoned. The defendants “flatly refused” to improve the settlement fund. But they did agree to move from Category B to Category A all Subject Works whose copyrights were registered before the infringements by Amazon and HighBeam began, regardless of whether they were registered by the previous, and equally incoherent, settlement deadline of December 31, 2002.

This tweak is, in the first place, disingenuous. It is, in the second place, unclear. Who holds the information on whether particular infringements are C’s or B’s or new-and-improved A’s? Why, of course, the all-seeing, all-knowing claims administrator, reputed to be a distant cousin of Carnac the Magnificent.

And what about the possibility that authors of the junior Category C articles -- comprising over 90 percent, almost certainly well over 90 percent, of all the Subject Works -- will find that their claims have been reduced, perhaps even to zero, because the senior Category A and Category B already wiped out this puny $10-to-$18-million settlement fund? That possibility, which the settlement lawyers insist is remote (though without any independent supporting documentation), just got less remote.

Here’s part of what objectors’ attorney Chalmers argued to the court:

This amendment is largely a stratagem to correct or address objections made by these objectors. It is based on an almost farcical foundation. Plaintiffs discovered that some database defendants were still infringing, in particular by licensing their databases which are full of infringed, freelancer, works. This is hardly news. Class member Muchnick informed this Court about the Highbeam infringement, as well as others which are not addressed in this amendment. The database defendants have been systematically continuing with infringement throughout the pendency of this case. The proposed settlement certainly gave them the right to continue such infringement, including sub-licensing. There is absolutely no reason why they would not have continued with business as usual, which is to make money by the use of
their databases, including the infringed works.

Plaintiffs report they sought additional compensation from these, unnamed, database defendants and were rebuffed. Small wonder! They have no leverage. They have presented no threat of litigation to the defendants. Over four years they have done nothing but negotiate. What could plaintiffs. counsel threaten: We.’ll finally start litigating this case and continue with it for the two or more years it will take to get it ready for trial. Defendants, knowing that plaintiffs have let them continue infringing throughout this action, would be well-prepared to call that bluff.

Chalmers said the amendment is a ruse to delay final approval of the settlement, preposterously, until after the claim deadline of September 30. This might allow the plaintiffs to assert that Category C claims were not prejudiced. But that’s circular nonsense. The C’s were never properly represented in the first place, and their $5-to-$60 claim awards give them little incentive to register claims.

Woody Allen used to have a joke about the meals at the old Catskills resorts where he did stand-up: “The food was terrible. And the portions, so small!”

We’ll provide a rundown review of all the basic problems with UnSettlement 2.0 in future posts. Class members who would like to join our objections can contact me at info@muchnick.net.

OBJECTION DEADLINE EXTENDED

As expected, Judge George B. Daniels yesterday gave preliminary approval to the new-and-improved UnSettlement 2.0. As a result, there’s a new final approval schedule along with an extension for class members to object or opt out.

The events leading up to and during the hearing once again dramatize why freelance writers should, indeed, use this opportunity to object. For UnSettlement 2.0 is just as arrogant and full of baloney as UnSettlement 1.0. More about this in the next post.

In addition to Charles Chalmers, the attorney for us objectors, another objecting writer appeared on his own behalf. I’m relying on second-hand reports and fear that I’ll misspell his name, so I’ll supply that later. I know that he writes for trade magazines and says he has been victimized by dozens of infringements by the defendants.

This independent objector also said in court that he’s one of the tens of thousands of writers who belong to none of the associational plaintiffs, which of course had no business negotiating damages on behalf of their own members or anyone else. In addition, he offered research suggesting that the article database businesses of just one defendant, Thomson Gale, for just its 60,000 public library clients in 60 countries, gross an annual $1.2 billion. This writer called the proposed settlement “an end-run around the Tasini decision” and tantamount to the abolition of freelancers’ copyrights.

But Judge Daniels said no -- or, rather, another preliminary “yes.” Here we go again. The UnSettlement is like a bad Broadway play that got panned in previews. The producers are determined to juggle the cast, doctor the script, and hope they make it past opening night.

In legal terms, this means that a “supplemental notice” has been prepared. It will be posted on the ever-trusty http://www.copyrightclassaction.com website -- which parcels out information to its presumed clients in its own sweet time and for the convenience of the lawyers eager to wrap this up and pocket their $4 million in fees -- and it will be stuffed into a new postal mailing. Once that’s done, all of us will have an additional 30 days in which to object or opt out. (The current note on the website that the objection deadline has passed is characteristically misleading. As is the failure to post publicly, prior to yesterday’s hearing, the text of the new-and-improved UnSettlement 2.0.)

If you didn’t get it together to object by the original July 15 deadline but remain interested -- or if this latest set of outrages sends you over the edge -- you should contact me at info@muchnick.net.

Weekly Standard Article About the Settlement

On the eve of tomorrow’s hearing in New York for new-and-improved preliminary approval of the hastily rejiggered UnSettlement 2.0, the conservative opinion magazine The Industry Standard has an essay in its current issue by writer Charlotte Allen entitled “Freelance Writers of the World, Unite! You have nothing to lose but your copyright fees.” The link to the teaser for the article is http://www.weeklystandard.com/Check.asp?idArticle=5872&r=jqxrs. The full text currently is available online only to subscribers or via your friendly neighborhood electronic database.

Charlotte’s piece gave rise to an email exchange. I thank her for permission to share her end of it.

+++++

Date: Tue, 26 Jul 2005 14:36:32 -0700 (PDT)
From: Irvin Muchnick
Subject: Copyright class action
To: Charlotte Allen

Ms. Allen:

Your Weekly Standard piece is an amusing ideological tirade and exercise in general cynicism. It's not very well informed about the copyright class action case, however.

A lot of people agree with you that the class action system too often doesn't serve anyone's interests except the plaintiffs' lawyers'. Some of us think this particular case is an egregious example, in part because the electronic database industry -- which has expanded well beyond the public library market -- is huge and growing. In April I filed a motion to vacate the preliminary settlement. Earlier this month six co-objectors and I filed objections to the settlement. The settlement parties have asked the court to postpone the scheduled final fairness hearing originally set for this Thursday, July 28. For more information, see my website, http://freelancerights.muchnick.net/, and my blog, http://freelancerights.blogspot.com/.

Irv Muchnick

*****

From: Charlotte Allen
Date: Wed, 27 Jul 2005 11:26:26 EDT
Subject: Re: Copyright class action
To: Irvin Muchnick

Mr. Muchnick:

I'm delighted that there are other writers out there who think the settlement in the database suit is an outrage, even if our reasons for thinking so may not completely overlap. In my opinion, the class-action itself was an abuse of the litigation process, filed with no intention of ever going to trial, where even the issue of whether there is a genuine class would be problematic to prove.

And kudos to you and the other six writers for filing a formal objection to the settlement. I couldn't afford to do so, so I filed an informal objection: I faxed a copy of my article to Judge Daniels.

The real problem for free-lance writers, in my opinion, is the abysmally low pay we all must live with unless we write for the New Yorker. It strikes me as an insoluble problem, however, for we writers live for the glory of seeing our names in print as well as the money.

Charlotte Allen

*****

Date: Wed, 27 Jul 2005 08:59:46 -0700 (PDT)
From: Irvin Muchnick
Subject: Re: Copyright class action
To: Charlotte Allen

Ms. Allen:

Thank you for your measured response. We do disagree about whether the class action itself was an abuse of the litigation process. If you’ll review my entire website, and especially the long history at http://crassaction.muchnick.net/, you’ll see that I was an architect of copyright class actions on behalf of freelancers. “My” first case, against the now-defunct UnCover fax service, settled five years ago for $7.25 million and got dozens of writers more than $30,000 each. That case, along with the Tasini case, laid the foundation for the current consolidated class actions (the first of which also was originally “my” project).

We agree on the problem of abysmally low pay for writers. But I think you’re entirely too dismissive of the potential of the secondary-rights issue to improve our lot. The problem is that the plaintiff associations and attorneys didn’t know how to use the leverage they had. In the case of the associations, they had no business representing the class for damages, because their main interest is in looking tough while staying in the good graces of the industry. The long-term solution is, in my view, a “kinder and gentler ASCAP.” No one is saying that I’m Victor Herbert and you’re Irving Berlin. But article database text is now a big, big business, and our indispensable piece of it needs to be acknowledged with a dignified royalty system, not a regime of all-rights contracts. And incidentally, this is better for the public as well as for writers, for reasons which I won’t belabor here but which are fully developed in various trade press articles of mine republished at my website.

Best regards,
Irv

*****

From: Charlotte Allen
Date: Wed, 27 Jul 2005 12:28:59 EDT
Subject: Re: Copyright class action
To: Irvin Muchnick

Irv:

I completely agree with you that the main goal of the writers' unions associated with the suit was to make themselves look good to their members and thus justify their existence.

Charlotte

Welcome to UnSettlement 2.0

The settlement parties’ “minor” change was filed yesterday:

Shortly after the Court granted preliminary settlement approval, Plaintiffs learned for the first time that while the parties were still engaged in mediated settlement negotiations, one or more of the Settlement Databases sublicensed Subject Works to two new databases, Amazon.com and Highbeam Research. Plaintiffs sent those two entities cease-and-desist letters, and informed defendants that plaintiffs considered the licensing of the works to Amazon.com and Highbeam a violation of the Settlement Agreement. With the mediators’ assistance, the parties reached agreement on a resolution of the matter….

More on the specific provisions later, along with comment by your humble blogger. For now, simply note the following:

· The defendants “flatly refused” to improve the $10-to-$18-million settlement fund and the plaintiffs’ attorneys decided to take the amended settlement, with certain technical tweaks, rather than leave it.

· There are no details on the nature of the infringements by Amazon and HighBeam, or on their business and revenue models. And there’s total silence on another infringer, FindArticles -- target of a National Writers Union campaign -- which works with HighBeam and has content licensed by Thomson Corporation and other defendants.

· Judge Daniels will consider the amended settlement at the hearing this Thursday, the 28th (originally the date for the final fairness hearing). If he approves, there will be some additional notice to the class and an extension of the deadline for objecting or opting out (or opting back in).

'Sorry, Judge, We'll Have It For You Next Tuesday. Promise.'

Anyone questioning that this settlement is in deep, deep trouble need look no further than today's fax to Judge Daniels from class counsel A.J. De Bartolomeo. The full text:

"I write on behalf of Plaintiffs' Co-Lead Counsel regarding the filing of the papers in support of preliminary settlement approval of the Settlement as amended. At the July 19, 2005 status hearing, Plaintiffs' Co-Lead Counsel advised the Court that we expected to file the motion by the end of the week. While we are mindful of the date Co-Lead Counsel told the Court, despite our best efforts to do so, we will not be able to file the papers with the Court until Tuesday, July 26, 2005."

Meanwhile, if you go to the "official" settlement website (http://www.copyrightclassaction.com) and click on the link "Request Exclusion" (opt out of the settlement), you get this note: "The exclusion filing deadline for the In Re Literary Works in Electronic Databases Copyright Litigation was July 15, 2005. Pursuant to court order, exclusions are no longer being accepted."

Good grief.

Waiting With Bated Breath

Today from the "official" settlement website, http://www.copyrightclassaction.com, comes the news that we broke on Tuesday:

THE FINAL FAIRNESS HEARING SCHEDULED FOR JULY 28, 2005 HAS BEEN POSTPONED. FURTHER DETAILS WILL BE PROVIDED SHORTLY.

Under IMPORTANT DATES the site now says:

July 28, 2005 - Hearing for Preliminary Approval for Settlement As Amended

Can't wait to read all about it.

Co-Objectors' Declarations Posted

Three of our six co-objectors have given us permission to publish their declarations in support of last week's objection filing. Two of the three are up on the left-hand side of the page at http://freelancerights.muchnick.net; the third will be added shortly.

After we see the settlement parties' new pleadings, which will include a motion for preliminary approval of the settlement agreement with a "minor" change, we'll have a better idea of whether the deadline for objections has been rolled back and whether new objectors will have an opportunity to join the seven of us.

BULLETIN: FINAL ‘FAIRNESS HEARING’ POSTPONED

Plaintiffs’ co-lead counsel Michael Boni today informed the objectors’ attorney, Charles Chalmers, that Judge Daniels “has adjourned the final fairness hearing and has not rescheduled it.”

This followed a conference among the settlement parties this morning in the judge’s chambers. Last Friday, subsequent to the filing of our objection papers, we were told that the parties were seeking an audience with Judge Daniels to introduce a “minor change” in the settlement agreement.

Chalmers, naturally, objected to the procedural irregularity of this proposed “ex parte” meeting and requested that any discussions between the settlement parties and the judge be put on the record. That was Sunday night. There was silence all day yesterday, followed by Boni’s email today to Chalmers.

Boni told Chalmers that on July 28, at the time originally scheduled for the fairness hearing, “the Court will hear a motion by plaintiffs for preliminary approval of the settlement as amended. Plaintiffs expect to file that motion and supporting papers by the end of the week. The Court requested that objectors be notified that they do not have to appear at this hearing on the 28th of July, but may do so if they wish.”

So … Is this a “minor” tweak of the settlement agreement -- or a substantial revision? Will all of us learn the details and the substance this time around, or are we in for another round of “hide the ball” and guessing games?

And might this double-clutch be a response to our objections? Just perhaps?

Objections Filed: 'SETTLEMENT PRESENTS COLLUSION ON ITS FACE'

JULY 15, 2005 -- Six co-objectors and I have formally filed our objection papers. The package of legal briefs, declarations, and exhibits totals nearly 1,000 pages.The 15-page list of objections can be viewed at http://muchnick.net/Objections.pdf. The 31-page supporting memorandum is at http://muchnick.net/Memo.pdf. My 19-page supporting declaration is at http://muchnick.net/Muchnick.pdf.

Attorney Charles Chalmers has produced a brilliant and devastating portrait of a fatally flawed settlement. The title of Section II says it all: "THE SETTLEMENT PRESENTS COLLUSION ON ITS FACE."

Our blog will proceed to reproduce excerpts of the briefs with comments by myself and others. We also will post selections of the voluminous exhibits, both at this website and at the blog, as efficiently as possible.

My special thanks to our six co-objectors for doing the right thing. They are being given the choice of whether to post their declarations, and we'll do so in the order in which they might say "yes."

The "fairness hearing" before Federal Judge George B. Daniels will be in New York on Thursday, July 28.

We welcome comments to this blog or to me at info@muchnick.net.

Irv Muchnick

Not Just a Sellout -- A Giveaway

The $10-to-$18-million copyright class action settlement is really a $6.5-million-to-$11.7-million settlement. That's because only 65% of the claims awards is dedicated to compensating authors for past infringements. The other 35% is discretionary, meaning that a claimant will receive it only if he/she also grants a license to the defendants and participating publishers for continued future reuse of the infringed work.

Right now National Writers Union grievance and contract officers are flailing about as they try to design advice to members on how to handle this provision. Giving away future rights -- which the "acquiescent license" essentially does -- goes against every position paper and negotiating principle promulgated by the NWU and the other two "associational plaintiffs," the Authors Guild and the American Society of Journalists and Authors.

But they can't help it. The settlement agreement ties their hands:

Neither [the Associational Plaintiffs] nor the Representative Plaintiffs will undertake actions intended to encourage class members to opt out of the Class, exercise the removal right provided in paragraph 5(a) above, or otherwise undermine the Settlement Agreement. [emphasis added]

As long as they were going to sign off on this ridiculous settlement, it makes sense that the associations would agree not to undermine it. But why are they restricted from giving writers advice on exercising their right to withhold future rights in return for reduced claim awards? This takes an open-ended provision of the settlement and makes the associations the coercive agents of the defendants in procuring content.

It's just one more example of why the NWU, the AG, and ASJA should be ashamed of themselves for first cutting this deal and then attempting to sell it as some kind of authors' rights triumph.

Fighting the 'I Guess That's What You Get' Syndrome

Of the dozens of emails, both signed and anonymous, that this blog has received, none better captured the dynamic at work in this awful, miserable, pathetic copyright class action settlement than one I got the other day from an active member of one of the “associational plaintiffs.”

In case you’ve forgotten, the associational plaintiffs are the National Writers Union, the Authors Guild, and the American Society of Journalists and Authors. They’ve been negotiating with the publishing industry for years, in secret, on resolving the “complicated” issue of piracy of freelance writers’ secondary rights. The issue was so complicated that when it got to the Supreme Court, Antonin Scalia and Ruth Bader Ginsburg were on the same side of a 7-2 majority favoring the authors. It was so complicated that the associational plaintiffs, purporting to represent all writers instead of the only things they were qualified to represent -- their own institutional and bureaucratic and vain interests -- never got around to pressing a real lawsuit as the term is conventionally understood. It was so complicated that the defendants, having been caught dead-to-rights, went merrily along infringing, shuffled the licensee deck, and ramrodded through a settlement that would pay off past infringements for pennies on the dollar, as well as, in an especially perverse twist, grab rights in perpetuity in return for 35% of this princely sum.

But back to the insightful email.

“I guess this is what happens,” my correspondent wrote, “when you get writers negotiating with the hand that feeds them.”

Any sentient observer who has been following our settlement objections knows that this bad deal sticks in the craw of the NWU in particular. The former NWU president, Jonathan Tasini, pressed the Supreme Court case, crowed publicly that industry damages were as high as $600 billion -- or $600 million, depending on how full of himself he felt that day -- then sat down with a mediation team that settled on a cap of $18 million, which he proclaimed “found money.”

Activists know this. NWU officers know this. The current NWU president Gerard Colby (who has been quoted as saying that he would have handled things “very differently”) even knows this. But they can’t, or won’t, say as much out loud. The reason is that this gem of a settlement agreement includes the following passage:

The Associational Plaintiffs and their present officers and immediate past presidents will support, and publicly express their support for this settlement. Neither they nor the Representative Plaintiffs will undertake actions intended to encourage class members to opt out of the Class, exercise the removal right provided in paragraph 5(a) above, or otherwise undermine the Settlement Agreement.