 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. 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. 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. 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. 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. 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. 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. 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.”