Google Inc and a group of authors and publishers are in talks with the U.S. Justice Department about possibly modifying an agreement struck last October to publish millions of books online, Bloomberg reported on Wednesday.

The settlement involved Google paying $125 million to create a Book Rights Registry, where authors and publishers could register works and receive compensation for books and other publications that the search giant would put online.

But Bloomberg cited two unnamed sources as saying that parties to the deal were now talking to the Justice Department about possible changes to the agreement, ahead of a Friday deadline for the department's antitrust division to file its brief to the court.

A fairness hearing on the settlement has been set for October 7 in Manhattan federal court.

The settlement sufficiently protects competition, said former Federal Trade Commission policy director David Balto.

You can readily understand how the Justice Department might think that some additional safeguards might be appropriate, but I don't think that's going to result in a significant change to the structure of the settlement.

Google spokesman Gabriel Stricker declined to comment on the matters with the Justice Department.

If approved by the court, this settlement stands to unlock access to millions of books in the U.S. while giving authors and publishers new ways to distribute their work, he said.

Google is now seeking to assuage regulatory fears the settlement will discourage competitors, according to Bloomberg.

The attorneys general of Connecticut, Texas and Missouri have filed briefs opposing the settlement, largely on the grounds that money Google earns distributing orphan works -- books whose author cannot be found -- should go to state unclaimed property offices.

Google's settlement would call for the money to go to the Book Rights Registry, created to distribute revenue from Google Books. Or that money would go to other copyright holders or to charity.

State unclaimed property laws require that many of these distributions be to unclaimed property funds in the various states. Missouri law requires that abandoned property be deposited with the state treasurer, Missouri said in its brief.

Connecticut's Attorney General, Richard Blumenthal, also called for any money made off of orphan works to be treated as unclaimed property by the state.

He also noted that the proposed deal could violate federal antitrust or copyright laws.

The settlement agreement appears to raise objectionable issues under these headings, the Connecticut brief said.

Google's plan to scan entire libraries has drawn fire from rival companies, privacy advocates and some libraries and small publishers for copyright infringement, and has been stalled by a 2005 copyright lawsuit by the Authors Guild and publishers.

A New York District court has received approximately 400 objections and briefs related to the proposed settlement, according to a separate court document filed on Wednesday.

Opponents argue that it will allow Google to dominate the digital book market in its infancy.

The case is Authors Guild et al v Google Inc 05-08136 in U.S. District Court for the Southern District of New York (Manhattan)

(Reporting by Clare Baldwin and Diane Bartz; Editing by Anshuman Daga)

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