The settlement, which has been reached after three years of legal wrangling, will allow Google to go ahead with its project of digitising millions of books.
"Obviously we think the settlement is great and will provide a really exciting new platform for making content available to users," said Daralyn Durie, a partner with San Francisco's Keker & Van Nest, who represented Google in the settlement talks.
Authors and publishers will receive 63% of revenue generated by Google's electronic book database from the sale of online books and advertising. As part of the $125m, Google will pay $34.5m (£21.5m) to set up the Book Rights Registry, which will collect the money and give it to the copyright owners. Another $45m (£28m) will go to authors and publishers that had their books uploaded without permission. Plaintiffs lawyers will take home $30m (£18.7m).
Settlement talks began two years ago after Google was sued by the Authors Guild and a group of publishers for copyright infringement when it began scanning books for its database. Lawyers involved in the case say the reason for the protracted talks was that Google, the authors, the publishers and libraries had to come to an agreement.
"There were four disparate groups with four disparate interests that had to come together," said Michael Boni, of Pennsylvania-based Boni & Zack, which represented the authors in the lawsuit.
The publishers were represented by Debevoise & Plimpton's Jeffrey Cunard, managing partner of the firm's Washington DC office.
Google switched its lawyers once it became clear that the case was headed for settlement and not for trial. When it was in litigation, the search engine had turned to Joseph Beck of Kilpatrick Stockton in Atlanta. When it came time to settle, Google relied on its in-house lawyers, licensing partner Suzanne Bell from Wilson Sonsini Goodrich & Rosati, and the Keker lawyers.
Howard Rice Nemerovski Canady Falk & Rabkin partner Ronald Star represented the libraries, which are involved in a number of ways, including providing the books to be scanned by Google.
Observers differed on who got the best deal: Google or the copyright holders.
Electronic Frontier Foundation lawyer Corynne McSherry said that the settlement, if it works out well, could provide some guidance in the other big copyright disputes, like the one between Viacom and YouTube, another Google property.
"One thing it might suggest to them is that maybe it's better to see how you can make some money from this crazy Internet thing than just fighting it," she said.
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