Google ’s ambition to create the world’s largest digital library and bookstore has run into the reality of a 300-year-old legal concept: copyright. 
 
 The company’s plan to digitize every book ever published and make them widely available was derailed on Tuesday when a federal judge in New York rejected a sweeping $125 million legal settlement the company had worked out with groups representing authors and publishers. 
 
 The decision throws into legal limbo one of the most ambitious undertakings in Google’s history, and it brings into sharp focus concerns about the company’s growing power over information. While the profit potential of the book project is not clear, the effort is one of the pet projects of Larry Page, the Google co-founder who is set to become its chief executive next month. And the project has wide support inside the company, whose corporate mission is to organize all of the world’s information. 
 
 “It was very much consistent with Larry’s idealism that all of the world’s information should be made available freely,” said Ken Auletta, the author of “Googled: The End of the World as We Know It.” 
 
 But citing copyright, antitrust and other concerns, Judge Denny Chin said that the settlement went too far. He said it would have granted Google a “de facto monopoly” and the right to profit from books without the permission of copyright owners. 
 
 Judge Chin acknowledged that “the creation of a universal digital library would benefit many,” but said that the proposed agreement was “not fair, adequate and reasonable.” He left open the possibility that a substantially revised agreement could pass legal muster. Judge Chin was recently elevated to the United States Court of Appeals for the Second Circuit, but handled the case as a district court judge. 
 
 The decision is also a setback for the Authors Guild and the Association of American Publishers, which sued Google in 2005 over its book-scanning project. After two years of painstaking negotiations, the authors, publishers and Google signed a sweeping settlement that would have brought millions of printed works into the digital age. 
 
 The deal turned Google, the authors and the publishers into allies instead of opponents. Together, they mounted a defense of the agreement against an increasingly vocal chorus of opponents that included Google rivals like Amazon and Microsoft, as well as academics, some authors, copyright experts, the Justice Department and foreign governments. 
 
 Now the author and publisher groups have to decide whether to resume their copyright case against Google, drop it or try to negotiate a new settlement. 
 
 Paul Aiken, executive director of the Authors Guild, said in an interview that it was too early to tell what the next step would be. “The judge did expressly leave the door open for a revised settlement,” he said. 
 
 Hilary Ware, managing counsel at Google, said in a statement that the decision was “clearly disappointing,” adding: “Like many others, we believe this agreement has the potential to open up access to millions of books that are currently hard to find in the U.S. today.” The company would not comment further. 
 
 Google has already scanned some 15 million books. The entire text of books whose copyrights have expired are available through Google’s Book Search service. It shows up to 20 percent of copyrighted titles that it has licensed from publishers, and only snippets of copyrighted titles for which it has no license. 
 
 The settlement would have allowed it to go much further, making millions of out-of-print books broadly available online and selling access to them. It would have given authors and publishers new ways to earn money from digital copies of their works. 
 
 Yet the deal faced strong opposition. Among the most persistent objections, raised by the Justice Department and others, were concerns that it would have given Google exclusive rights to profit from millions of so-called orphan works, books whose rights holders are unknown or cannot be found. They also said no other company would be able to build a comparable library, leaving Google free to charge high prices for its collection. And some critics said the exclusive access to millions of books would help cement Google’s grip on the Internet search market. 
 
 Judge Chin largely agreed with the critics on those points. But he suggested that substantial objections would be eliminated if the settlement applied only to books whose authors or copyright owners would explicitly “opt in” to its terms. 
 
 When the Justice Department suggested as much last year during a court hearing, Google rejected the idea as unworkable. It would leave millions of orphan works out of the agreement and out of Google’s digital library, greatly diminishing its value to Google and to the public. 
 
 “Opt-in doesn’t look all that different from ordinary licensing deals that publishers do all the time,” said James Grimmelmann, a professor at New York Law School who has studied the legal aspects of the agreement. “That’s why this has been such a big deal — the settlement could have meant orphan books being made available again. This is basically going back to status quo, and orphan books won’t be available.” 
 
 Some longtime opponents of the settlement hailed the decision, saying that they hoped it would prompt Congress to tackle legislation that would make orphan works accessible. 
 
 “Even though it is efficient for Google to make all the books available, the orphan works and unclaimed books problem should be addressed by Congress, not by the private settlement of a lawsuit,” said Pamela Samuelson, a copyright expert at the University of California, Berkeley who helped organize efforts to block the agreement. 
 
 Gina Talamona, a Justice Department spokeswoman, said in a statement that the court had reached the “right result.” 
 
 A group of publishers said they were disappointed by the decision, but believed that it provided “clear guidance” on the changes necessary for the settlement to be approved. 
 
 John Sargent, the chief executive of Macmillan, spoke on behalf of the publishers, which included Penguin Group USA, McGraw-Hill, Pearson Education, Simon & Schuster and John Wiley & Sons. 
 
 “The publisher plaintiffs are prepared to enter into a narrower settlement along those lines to take advantage of its groundbreaking opportunities,” Mr. Sargent said in a statement. “We hope the other parties will do so as well.” 
 
 He added: “The publisher plaintiffs are prepared to modify the settlement agreement to gain approval. We plan to work together with Google, the Authors Guild and others to overcome the objections raised by the court and promote the fundamental principle behind our lawsuit, that copyrighted content cannot be used without the permission of the owner, or outside the law.” ||||| SAN FRANCISCO (MarketWatch) — A federal judge on Tuesday rejected a proposed settlement between Google Inc. and book authors and publishers as unfair and inadequate, dealing a new setback to the Internet giant’s ongoing effort to push its digital-books business forward on a more solid legal footing. 
 
 Judge Denny Chin wrote in an opinion filed in U.S. District Court for the Southern District of New York that the agreement “would simply go too far” in terms of allowing Google GOOG, +0.73% to establish a business arrangement that grants it the right to “exploit entire books, without permission of the copyright owners.” 
 
 Google began a controversial effort to scan vast quantities of books in 2004, the year that the company went public. Google has argued that its efforts can expand access to otherwise difficult-to-access volumes. 
 
 Plaintiffs including the Authors Guild and the Association of American Publishers sued Google in 2005, complaining that the company’s digital scanning violated copyright protections. 
 
 According to its proposed settlement agreement, Google would gain the right to provide copyrighted works on its books service, apart from those actively withheld by copyright owners. 
 
 In his ruling on Tuesday, Chin wrote that his concerns about the agreement could be eased by converting it to an “opt-in” arrangement for copyright owners, rather than “opt-out.” He urged the parties to consider revising the agreement. 
 
 Hilary Ware, Google’s managing counsel, said in a written statement, “This is clearly disappointing, but we’ll review the court’s decision and consider our options.” 
 
 “Like many others, we believe this agreement has the potential to open up access to millions of books that are currently hard to find in the U.S. today,” Ware said. “Regardless of the outcome, we’ll continue to work to make more of the world’s books discoverable online through Google Books and Google eBooks.” 
 
 Google’s eBooks service is designed to enable users to shop for and buy digital books from Google and other retailers, and to get access to them on multiple devices. 
 
 ‘Everything we were asking for’ 
 
 The Open Book Alliance, which includes Google rivals Microsoft Corp. MSFT, +0.03% and Amazon.com Inc. AMZN, -0.40% has argued that the proposed settlement raises too many concerns, and had urged Chin to reject it. 
 
 Gary Reback, who is counsel to the Open Book Alliance, said Tuesday that Chin’s opinion includes “everything we were asking for.” 
 
 In particular, Reback praised Chin’s tying of Google’s books services to its market-dominating search engine. The proposed settlement agreement “would arguably give Google control over the search market,” Chin wrote, due to provisions such as the inability of search rivals to provide for the online perusal of many of the scanned books. 
 
 Reback said that the issues involving antitrust, privacy and approach to copyright ownership cited by Chin in his opinion are the “three big issues Google is facing everywhere now.” 
 
 “This mirrors the bigger Google question,” he added. 
 
 As Google has grown in size and financial might, it has faced increasing scrutiny from regulators and rivals related to its acquisitions, collection of private data and use of copyrighted material. 
 
 Google had revised its settlement agreement with authors and publishers, reached in 2008, the following year. However, the Justice Department criticized the planned arrangement, saying in a filing that it could lend Google “significant and possibly anticompetitive advantages.” 
 
 DOJ spokeswoman Gina Talamona said in a statement issued Tuesday that, “We believe the Court reached the right result on this complex, proposed settlement. The department expressed to the court that, as structured, the settlement proposed by Google and the authors and publishers exceeded the scope of the underlying lawsuit on which it was based and created concerns regarding antitrust, class certification and copyright issues. We are pleased that the court supported our position. “ 
 
 A conference between Google and authors and publishers has been scheduled for next month. 
 
 In a statement issued Tuesday, publishers involved in the litigation, including McGraw-Hill Companies Inc. MHP, +0.00% and the Association of American Publishers, said they are “prepared to modify the settlement agreement to gain approval.” 
 
 “We plan to work together with Google, the Authors Guild and others to overcome the objections raised by the and promote the fundamental principle behind our lawsuit, that copyrighted content cannot be used without the permission of the owner, or outside the law,” the publishers said.
– Google's plan to build a giant digital bookstore is in limbo after a federal judge rejected a proposed settlement between the search giant and an alliance of book publishers and authors, MarketWatch reports. Judge Denny Chin said the $125 million settlement, which gave Google approval to digitize all books except those actively withdrawn by copyright holders, "would simply go too far." Chin said he would be satisfied if Google switched from an "opt-out" to an "opt-in" model. That would keep so-called "orphan books," or those whose copyright holders can't be found, out of Google's library, notes the New York Times. A company spokesperson called the ruling "disappointing" and said Google was considering its next move. A lawyer for the Open Book Alliance, which includes Microsoft and Amazon.com, said the settlement was "everything we were asking for.”