Freelancers’ Settlement All But Dead – Now What?

by Irvin Muchnick on January 7, 2008

Writers, publishers, information consumers – all of us – have a fine mess on our hands these days over at the Second Circuit Court of Appeals, and it has nothing to do with Google. Yet even many of the most seasoned students of copyright, class action and complex legal procedure can follow the goings-on only by rumor and a single cryptic report in The Newspaper Of Record. I suggest this has something to do with the fact that the case involves the economic interests of every newspaper and magazine in the land, and propose to help out.

Nearly three years ago three authors’ organizations announced a global settlement with periodical publishers and their electronic database licensees and partners (LexisNexis and the like) in a consolidation of copyright class-action cases inspired by the 2001 Supreme Court decision Tasini v. New York Times. The Court had ruled that freelance contributors, as opposed to staff writers, retain control of the secondary rights to works originally published in newspapers and magazines unless there is explicit agreement to the contrary. In a nutshell, individual downloadable articles from products such as databases and website archives aren’t the same as new editions of entire collective works, such as library microfilm, which publishers are free to license and profit from without the consent of the copyright holders.

The Second Circuit case, which I’ll get to shortly, is an appeal by ten objectors to the district court’s approval of the settlement. I am one of the objectors.

By the time Tasini, originally filed in 1993, finished wending its way through the courts, periodical publishers had been off and running for a decade or more with the marketing of individual articles via digital technology. In the publishers’ narrative, the ensuing hassle illustrates only the irrationality of the law.

I have a different perspective. Even before Jonathan Tasini, then president of the National Writers Union (NWU), launched the litigation to clarify Section 201(c) of the Copyright Act of 1976, individual writers, groups of writers and authors’ organizations were confronting publishers and database operators about their dubious practices. Almost invariably, the infringers responded with some combination of blowing off complaints, playing dumb, passing the buck, and quietly deleting the material of the squeakiest wheels.

Not nearly as much energy was put into parallel announcements to institutional customers and individual users that these databases, some with hefty time or retrieval fees, were no longer as comprehensive as advertised. After the Tasini decision, however, publishers were quick to make sure the world knew that databases were being turned into “Swiss cheese,” a consequence successfully spun as the dirty deed of freelance authors, those notorious enemies of access.

From 1994 to 1997, I was assistant director of the NWU and founding administrator of its Publication Rights Clearinghouse. PRC was one of several initiatives by creators to set up a default royalty system loosely modeled after the music industry’s ASCAP, whose roots were in the advent of recording equipment. This approach was suggested by the Supreme Court in Tasini but consistently rejected by the publishing community, which preferred to shove all-rights contracts down the throats of freelancers. Screenwriters have learned how to exercise collective muscle (as we see in the current Writers Guild West strike), but their poorly organized journalistic brethren mostly stand around watching management use marketplace power to nullify their court victories.

Even so, there is the not-insubstantial matter of damages for the publishers’ past, systematic and – in my opinion – willful ongoing infringements. What is their value? And how much leverage can they give writers in devising a fairer future regime not only for them but for the concept of a diverse and vital culture in new communications media?

My own answer to those questions was to quit NWU and package the first class-action copyright cases on behalf of authors in the history of American jurisprudence. My initial case as a consultant, Ryan v. CARL Corporation, recovered $7.25 million (including $2.9 million in attorneys’ fees) for freelancers who were knocked off by a small and now-defunct service called UnCover. When word of our success got around, naturally, the sharks circled. Within days of the filing of “my” second class action, in August 2000, two copycat cases were in the books, one of them courtesy of the Authors Guild. The law firm with which I was working responded by bringing in its own writers’ organization, NWU, as a plaintiff, and I was soon out of the picture. The three cases got consolidated in U.S. District Court for the Southern District of New York.

The lawyers and their “associational plaintiffs” – Authors Guild, NWU and the American Society of Journalists and Authors – proceeded to turn freelance writers’ leverage to dust. Tasini, a loud-walking, small-stick sort who had crowed that the case was worth billions, soon was saying he didn’t want to “destabilize” the industry. The litigation had none of the elements one normally associates with the term; the plaintiffs never sought an injunction, never engaged in adversarial discovery and, indeed, never got the defendants to so much as formally answer the complaint. Instead, the parties jawboned for half-a-decade before almost getting away with a 2005 settlement that will go down in the annals of all-time sellouts. The objectors hired attorney Charles Chalmers to oppose the settlement in district court and appeal to the Second Circuit.

(For further background, see my blog Freelance Rights, or my piece last year for Beyond Chron, “Freelance Writers’ Class Action Settlement: A Tree Falls in the Media Forest.”)

In Austin Powers, Dr. Evil emerges from a time capsule with a nuclear device with which he blackmails the United Nations for “one million dollars.” Something similar happened with this settlement. It called for the princely sum of $18 million, $11.8 million of which would go to writers after deduction of attorneys’ fees and administration costs – this for a generation of infringements, by hundreds of publishers and their database licensees and partners, of somewhere between many tens of thousands and some millions of articles, in scores of new for-profit products.

In November 2007, the New York Times and others reported in mysterious tones that the settlement was struck down by the Second Circuit. (Only the Wall Street Journal bothered to point out that the three-judge appellate panel hadn’t parachuted in out of nowhere after two years but was actually deciding an appeal by objectors.)

Ironically, the judges haven’t even addressed the objectors’ merit arguments. We maintain that the settlement is fatally flawed on many grounds, but let’s focus on three. One is inadequate representation of the class, which is evident in several ways – by the generally passive conduct of the lawsuit, and specifically by how the named plaintiffs and a circle of insiders gamed undisclosed registration deadlines and the settlement fund’s structure.

A second fatal flaw is that settlement fund structure. Of the $11.8 million, nothing will go to holders of unregistered copyrights, which constitute 99 percent of the universe of infringements, if enough of the higher-paying registered claims were filed. The objectors believe the “C Reduction” has happened; claims closed in 2005 and the data are in, but the settlement parties refuse to publish them.

Finally, there is the outrageous provision that we call the “license by default.” The class representatives took it upon themselves to grant a release in perpetuity for the defense group to exploit all works for which rights holders did not opt out or file claims. That means everyone the world over, English-speaking or not, alive or not, even if they never got wind of the settlement or didn’t drill into the fine print after discovering that the onerous claims paperwork stood to secure for them a whopping $5.

The reason the appellate judges didn’t get to our issues was that they raised one of their own: jurisdiction. Copyright holders do not have standing to sue until they register their works with the Copyright Office, but the settlement proposes to settle claims for both registered and unregistered works. Two judges of the three-judge panel held that unregistereds not only can’t sue but can’t even be included in a settlement. Here the objectors agree with the defendants and the plaintiffs that unregistereds should be able to participate in a settlement (though I should add that the “complete peace” that publishers seek from the settlement is not really our problem).

If the ruling stands after requests for rehearings and appeals are exhausted, then thousands of unregistered copyright holders, having been belatedly alerted to what a pig in a poke this settlement was, will be free to register their works and file a never-ending wave of new actions.

If the ruling is overturned, then the objectors will be front-and-center again with their substantive, non-procedural criticisms.

A better way: the three authors’ organizations acknowledge here and now that the settlement is dead for all practical purposes, and get out of the way. And the publishers finally sit down with writers, photographers, graphic artists, librarians and other interested parties for good-faith negotiations on a royalty system that would share new-tech revenue fairly while fulfilling the promise of the information superhighway.

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