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Google, publishers defend book settlement; Amazon.com objects

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Google Inc. (Nasdaq: GOOG) and a group of publishers and authors urged a federal judge today to accept a $125 million settlement that would create the world’s biggest digital book library.

Amazon.com Inc. (Nasdaq: AMZN), Microsoft Corp. (Nasdaq: MSFT), AT&T Inc. (NYSE: T) and the nations of Germany and France are among objectors who say the agreement would give Google unfair control over digitized works, while some author groups say they would lose control of their copyrights. U.S. District Judge Denny Chin in New York is holding a hearing today to determine whether the settlement is fair.

“I am not going to rule today,” Chin told the courtroom. He will instead write an opinion. He said he is still reading and considering the court papers submitted to him. “Voluminous materials have been submitted,” Chin said as he took the bench. “There are recurring themes.”

Google was sued in 2005 by authors and publishers who said the company was infringing their copyrights on a massive scale by digitizing books and allowing “snippets” of them to be seen online. The agreement went beyond that, with a Book Rights Registry to compensate copyright holders and public access to certain books through Google.

The expansive nature of the class-action settlement, which would require copyright owners to opt out or be automatically included, prompted objections from the Justice Department, which said the agreement gives Mountain View, Calif.-based Google rights that “confer significant and possibly anticompetitive advantages on a single entity.”

Amended settlement

Google and the publishers had amended the settlement to address earlier complaints, altering how it handles so-called orphan works whose owners aren’t immediately known. They also scaled back the international reach of the agreement to the U.S., U.K., Australia and Canada.

The settlement dispute touches on the question of who controls digital rights, and has become swept into a battle between large companies over the market for both search-engine advertising and electronic books.

Google, owner of the world’s biggest search engine, would benefit most by its ability to run ads next to search results and provide more comprehensive results than that of Yahoo! Inc. and Microsoft.

Those two companies, both members of the Open Book Alliance that’s leading the challenge to the settlement, are joining forces to form a bigger search competitor by putting Microsoft’s Bing on Yahoo’s Web sites. Google reported $4.95 billion in fourth-quarter sales.

Book-scanning service

Amazon.com, the world’s biggest online retailer, said it plans to build a book-scanning service to rival Google Book Search and contends the agreement would supplant existing copyright law, something that’s the sole purview of Congress.

Seattle-based Amazon.com could see its market share of the e-book sales slip to 72 percent this year from 90 percent last year because of competition from Apple Inc.’s (Nasdaq: AAPL) iPad and Google, Credit Suisse Group AG analysts said this week.

Sony Corp. (NYSE: SNE), maker of an e-book reader that competes with Amazon.com’s Kindle and a partner of Google, contends the agreement “has the potential to impact profoundly and positively the markets for both e-books and e-book readers” by making available books that currently are unseen by most consumers.

The settlement was reached with the Author’s Guild, Pearson Plc’s Penguin and Education units, McGraw-Hill Cos., John Wiley & Sons Inc. and CBS Corp.’s Simon & Schuster subsidiary.

The settlement would give Google immunity from copyright laws to distribute millions of books on the Internet in exchange for sharing revenue it generates from the project. The company said the agreement “will open the virtual doors to the greatest library in history without costing authors a dime they now receive or are likely to receive if the settlement is not approved.”

The case is Authors Guild v. Google Inc., 05cv8136, U.S. District Court, Southern District of New York (Manhattan).

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