Google Books Still In Trouble, DOJ Is Unsatisfied with Amended Book Scanning Settlement

(MoneyWatch)  The class action suit that publishers and the Authors Guild, a professional group for book writers, brought against Google (GOOG) over its book scanning and display has been going on for a long time. A proposed settlement, critical to the company's success in its online books and e-books plans, has been controversial since at least the fall of 2008. Last September, the Department of Justice filed a highly critical brief in the case. Now it's submitted its view of the amended proposal, and the news isn't good for the search engine giant.

In its statement of interest filed with the court today, the department stated, "Although the United States believes the parties have approached this effort in good faith and the amended settlement agreement is more circumscribed in its sweep than the original proposed settlement, the amended settlement agreement suffers from the same core problem as the original agreement: it is an attempt to use the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute before the court in this litigation."

The problem for Google is that the "core problems" go to the heart of the business advantage that the company wants. Here are some of the issues that the DOJ originally raised:

• The settlement allows Google "open-ended exploitation" of copyrighted works for "unspecified future uses."
• Out-of-print works don't get the same level of protection as do in-print works, and the rights owners of the former were not represented during the negotiations. Publishers can also negotiate separate agreements with Google while benefiting from the out-of-print works. In other words, some parties get far more protection and benefit than others.
• The antitrust issues are still huge, and the agreement effectively keeps other companies, such as Amazon (AMZN) and Apple (AAPL) from competing with Google.
• There would be considerable implications to copyright law and the principle that right holders control what happens to their works.

The DOJ says that the parties to the settlement have made "substantial progress" in a number of areas, including unspecified future uses, rights of those who were not represented in the negotiations, and a most-favored-nation clause that would have given Google "optimal licensing terms into the future." But then there's the flip side:

However, the changes do not fully resolve the United States' concerns. The department also said that the amended settlement agreement still confers significant and possibly anticompetitive advantages on Google as a single entity, thereby enabling the company to be the only competitor in the digital marketplace with the rights to distribute and otherwise exploit a vast array of works in multiple formats.

The DOJ's view will be critical in the case, as the judge is likely to treat the department as the government's expert view, particularly on issues of antitrust, and that could be enough to scuttle the works. Given that both Apple and Amazon will be anxious to nail down their own agreements, Google will likely have to significantly compromise, and what seemed to be a sweetheart deal is likely to be bittersweet at best, and sour at worst.