A New York court has rejected a class action settlement hammered out between Google Inc and publishers that would allow the Web search leader to scan millions of books and sell them online.

Under terms of the proposed settlement of a 2005 lawsuit brought by the Authors Guild and Association of American Publishers, Google would create a registry of books and pay $125 million to people whose copyrighted books have been scanned and to locate the authors of scanned books who have not come forward.

But Judge Denny Chin said the agreement would simply go too far and would give Google a significant advantage over its competitors.

The Justice Department is also looking into the deal, and has said that it might violate antitrust and copyright law.

A Google spokesman declined to comment.

Google has scanned some 12 million books in what it says is an effort to provide easier access to the world's knowledge.

Critics of the proposed settlement include Amazon.com Inc, which markets a reader that would not be compatible with Google's library, and Microsoft Corp. Sony Corp, which makes an electronic reader, favors the pact.

(Reporting by Grant McCool and Diane Bartz; Editing by Richard Chang)

Down Google