A federal judge has rejected a deal that would allow Google to cash in on its massive library of digital books. The search giant had reached a settlement with the Authors' Guild over its indexing of books in 2008 but U.S. circuit judge Denny Chin said the deal unfairly gives Google "a significant advantage over competitors."

"While the digitization of books and the creation of a universal digital library would benefit many, the ASA would simply go too far," reads a court document. "It would permit this class action--which was brought against defendant Google Inc. to challenge its scanning of books and display of 'snippets' for on-line searching - - to implement a forward-looking business arrangement that would grant Google significant rights to exploit entire books, without permission of the copyright owners. Indeed, the ASA would give Google a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission, while releasing claims well beyond those presented in the case."

That last remark is in reference to Google's partnership with a number of universities including Harvard and the University of Michigan in 2004 that began the search giant's indexing of books. Though many of the books were in the public domain, a large portion were out of print books still under copyright. That sparked a series of lawsuits from authors and publishers beginning in 2005. In 2009, a settlement between Google and the Authors' Guild was announced that allowed Google to excerpt portions of out-of-print books even if they were under copyright. That triggered protests from groups such as the Electronic Frontier Foundation and Microsoft which labeled it anti-competitive. Responding to those complains, the guild said it didn't want to fight the same losing battle the RIAA fought with Napster.
 
"Copyright victories tend to be Pyrrhic in the digital age," wrote the Guild. "Protecting authors' interests has always been our top priority: in this case a timely harnessing of Google was the best way to do it."
 
Update: Scott Turow of the Authors' Guild has just issued a statement on ruling.
 
“Opening up far greater access to out-of-print books through new technologies that create new markets is an idea whose time has come,” he said. “Readers want access to these unavailable works, and authors need every market they can get. There has to be a way to make this happen. It’s a top priority for the Authors Guild.”