A federal judge in New York has rejected Google’s attempt to settle a long-standing lawsuit over its plans to digitize and make available thousands of so-called orphaned works – books that are still under copyright, but which are out of print, and whose authors are unknown or cannot be found.

Google began a massive search and digitization effort years ago, searching out orphaned works in university libraries and scanning them into databases. The company was sued in 2005 by the Authors Guild and the Association of American Publishers, which objected to Google’s ability to profit from the works, without any permission from – or remuneration to – the copyright owners. Google negotiated a $125 million class-action settlement, effectively providing the authors and publishers not only a new distribution channel, but a way to earn money from works that otherwise were not likely ever to see another publication run. However, the settlement was objected to by Google rivals, such as Microsoft and Amazon, and many authors and scholars. The Justice Department also opposed the settlement, on fears that it would grant Google an effective monopoly over millions of works.

The project fits Google’s mission – “to organize the world‘s information and make it universally accessible and useful.” Many orphaned works exist only in libraries and used book stores, or lost in attics or other storage facilities. Google’s desire is to make the works universally accessible, preventing a repeat of the tragedy of the burning of the Royal Library of Alexandria, Egypt, in which the largest store of knowledge in the ancient world was irrevocably lost. The settlement, after intense negotiations, would also provide perhaps the only means of generating revenue for authors and publishers from the vast majority of orphaned works.

On the other hand, the project would be a hugely profitable venture for Google, which would earn revenue not only from the sale of access to the works, but from a monopoly on advertising in accessing the works that were made freely available. Google would also have a de-facto monopoly lock on the content; to compete, other service providers such as Microsoft would have to not only launch their own efforts to find and scan such works, but would have to start from scratch and negotiate a license from the copyright owners. As 2nd Circuit Court of Appeals judge Denny Chin put it, the settlement would “give Google a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission.”

Judge Chin dismissed the proposed settlement “without prejudice,” meaning the parties can try again. In fact, he provided significant guidance along those lines, suggesting that structuring the deal to require copyright owners to “opt in,” rather than allowing those who object to “opt out,” would go a long way towards alleviating the policy concerns voiced by the Justice Department and others.