In the latest challenge to Google’s plan to establish the world’s largest digital library and bookstore, the U.S. Justice Department said late on Friday that a proposed legal settlement between Google and groups representing book authors and publishers should not be approved by the court without modifications.

The Justice Department said the agreement raised significant issues regarding class-action, copyright and antitrust law.

But the Justice Department described recent discussions with the parties as “productive” and asked the court to encourage the parties to continue negotiations, indicating that its objections could be remedied.

“As presently drafted the proposed settlement does not meet the legal standards this court must apply,” the department wrote in a 32-page legal filing. “This court should reject the proposed settlement and encourage the parties to continue negotiations to comply with Rule 23 and the copyright and antitrust laws.” Rule 23 governs procedures for class-action lawsuits.

The Justice Department made its filing after 10 p.m. and representatives of Google and the other parties to the settlement -- the Authors Guild and the Association of American Publishers — could not immediately be reached for comment.

The proposed $125-million settlement, which is subject to court approval, has ignited extensive controversy, and the Justice Department’s filing echoed some of the concerns that have been raised by various groups. Some critics, including academics and Google rivals like Microsoft and Amazon.com, say it will give Google virtually exclusive rights to commercialise millions of so-called orphan works — out-of-print books whose copyright holders are unknown or cannot be found.

Others, including authors and publishers in the United States and overseas, as well as the nation’s top copyright official, have said that by granting Google a blanket license to millions of books unless authors specifically object, the agreement turns copyright law on its head.

Several advocacy groups and librarians have also raised concerns that the agreement does not explicitly protect the privacy of users, whose reading habits would be tracked by Google.

The parties to the settlement have strongly defended the agreement, saying that nothing in it prevents competitors from following in Google’s footsteps and obtaining similar licenses to orphan works. They argue that the agreement would give authors and publishers new ways to earn money from digital copies of their books, and it would benefit the public by making millions of rarely seen out-of-print books widely available online.

Sony, which makes a reader for digital books, and some academics and public interest groups have also expressed support for the agreement.

If approved, the settlement would resolve class actions filed in 2005 by the groups representing authors and publishers against Google in the United States District Court for the Southern District of New York. The suits claimed that the company’s plan to digitise millions of copyrighted books from libraries without prior approval from rights holders was illegal.

The settlement would allow Google to go forward with its scanning project and absolves it of copyright liability. It also greatly expands what Google can do with digital copies of copyrighted books. Under the settlement, which covers all domestic and foreign books that are protected by copyright in the United States, Google would be allowed to show American online readers as much as 20 per cent of most books. Readers would be able to buy from Google access to complete copies of individual books online. Google would also be allowed to sell access to its entire collection to universities and other institutions. And it would also grant free access to the full texts in its digital library at one terminal at every public library in the country.

The revenue generated by the programme will be split, with Google taking 37 per cent and authors and publishers sharing the rest. Google will also help set up a non-profit Book Rights Registry administered by authors and publishers, which will oversee rights and distribute payments.

Individual authors were allowed to opt out of the settlement until September 8. Those who did not can remove individual books from Google’s database at any time. — © 2009 The New York Times News Service

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