The Justice Department has opened an antitrust investigation into Google’s settlement with authors and publishers over its Google Book Search service, according to two people briefed on the matter.

The Justice Department has opened an antitrust investigation into Google’s settlement with authors and publishers over its Google Book Search service, according to two people briefed on the matter.

Lawyers for the Justice Department have been in conversations in recent weeks with various groups opposed to the settlement, including the Internet Archive and Consumer Watchdog. More recently, Justice Department lawyers notified the parties to the settlement, including Google, and representatives for the Association of American Publishers and the Author’s Guild, that they were investigating various antitrust issues related to the far-reaching agreement.

The investigation does not necessarily mean that the department will oppose the settlement, which is subject to a court review. But it suggests that some of the concerns raised by critics, who say the settlement would unfairly give Google an exclusive license to profit from millions of books, have resonated with the Justice Department.

A spokeswoman for the Justice Department was not immediately available to comment. A spokesman for Google declined to comment. Representatives for the Association of American Publishers and the Author’s Guild could not immediately be reached.

The settlement agreement stems from a class action filed in 2005 by the Author’s Guild and the Association of American Publishers against Google. The suit claimed that Google’s practice of scanning copyrighted books from libraries for use in its Book Search service was a violation of copyrights.

The settlement, which was announced in October, gives Google the rights to display the books online and to profit from them by selling access to individual text and selling subscriptions to its entire digital collections to libraries and other institutions. Revenues would be shared between Google, authors and publishers.

But critics say that Google alone will have a license over millions of so-called “orphan books,” whose authors and right holders are unknown or cannot be found. Some experts believe the orphan works account for the bulk of the collections of some of the major university libraries, that have allowed Google to scan books.

Some librarians fear that with no competition, Google will be free to raise prices. Some scholars have also said that the system for pricing books could raise antitrust concerns.

Separately on Tuesday, U.S. District Court Judge Denny Chin, who is overseeing the settlement, postponed by four months the May 5th deadline for authors to opt-out of the settlement and for other parties to oppose the settlement or file briefs. The decision follows requests by groups of authors and their heirs, including representatives of the estate of John Steinbeck, who argued that authors needed more time to understand the far reaching implications of the complex settlement.

Google, as well as the authors and publishers, have defended the settlement saying it will bring benefits to authors, publishers and the public at large. They said it would renew access to millions of rarely seen out-of-print books from major university libraries, which would now be available in digital form at every public library in America.

If the Justice Department decides to take action against Google, it will not be the first time that the company would find itself in the cross-hairs of federal regulators. Last year, Google abandoned a high-profile advertising partnership with Yahoo after the Justice Department threatened to go to court to block the deal.

The Justice Department and the Federal Trade Commission have wrangled over jurisdiction over the book settlement, and the Justice Department won out, according to a person familiar with the probe.


SEC Charges Oklahoma-Based Attorney with Insider Trading

Washington, D.C., April 28, 2009 (LAWFUEL) – The Securities and Exchange Commission today charged Tulsa, Okla.-based attorney Matthew J. Browne with insider trading, alleging that he sold all of the stock he owned in a local energy company on the basis of confidential information that he learned while providing legal services to a client.

The SEC alleges that Browne avoided losses of more than $80,000 by selling all of his shares in SemGroup Energy Partners, LP (SGLP) on the same day he found out that its privately-held parent company and largest customer, SemGroup LP, was experiencing liquidity issues and defaulted on a $50 million margin call. The SGLP stock dropped nearly two-thirds in value by the end of that week after a public announcement was made by the company. Browne has agreed to pay more than twice the amount of his avoided losses to settle the SEC’s charges, without admitting or denying the allegations.

“By secretly trading on confidential information, Browne took advantage of his client, the law firm at which he was then employed, and the public at-large,” said Rose Romero, Director of the SEC’s Fort Worth Regional Office. “Attorneys should know better – the use of client information to profit from securities trading breaches their duties of trust and confidence.”

According to the SEC’s complaint, filed in the U.S. District Court for the Northern District of Oklahoma, Browne learned the non-public information on the morning of July 14, 2008, and immediately sold his entire position in SGLP (5,200 shares) at an average price of $24.06 per share. After the close of trading on July 17, SGLP announced that SemGroup LP was “experiencing liquidity issues” and was considering bankruptcy. On July 18, SGLP’s unit price closed at $8.30 per share, 65.5 percent lower than Browne’s average sale price earlier that week. According to the SEC’s complaint, by liquidating his SGLP holdings on July 14, Browne avoided losses of $81,773.

In settling the SEC’s charges, Browne consented to pay disgorgement equal to the $81,773 loss he avoided by his illegal trading, plus prejudgment interest of $1,505.98 and a penalty of $81,773. Browne also agreed to a permanent injunction against future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Browne consented to a five-year suspension from appearing or practicing before the Commission under Rule 102(e) of the Commission’s Rules of Practice.

The SEC’s investigation is ongoing.

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