Google's plan to put millions of books online has been praised for expanding access to books but has also been vociferously criticized on antitrust and copyright grounds.
The deal was amended last year after the Justice Department recommended that the original settlement be rejected but more changes were needed, a Justice Department official said on Thursday, on background.
They made substantial progress but in our view they haven't gone far enough, the official told Reuters.
In its court filing on Thursday, the Justice Department said the proposed settlement posed potential copyright and antitrust issues, and also used a class action mechanism to implement forward-looking business arrangements rather than simply resolving an existing dispute.
The department criticized the agreement for requiring authors to opt out of having their books digitized, when copyright law usually requires that authors approve having their works used.
It also noted that class representatives inappropriately spoke for foreign authors with books published in the United States as well as for authors of orphan works, essentially copyright holders who cannot be identified or located.
Google's exclusive access to these orphan works remains unaddressed, producing a less than optimal result from a competition standpoint, the department said. The pricing mechanisms also came under criticism from the department on antitrust grounds.
U.S. District Judge Denny Chin has scheduled a hearing on the settlement for February 18.
Google noted the praise from the department, and added:
We look forward to Judge Chin's review of the statement of interest from the department and the comments from the many supporters who have filed submissions, Google said in an email statement.
The agreement is designed to settle a 2005 class action lawsuit filed against Google by authors and publishers who had accused the search engine giant of copyright infringement for scanning collections of books from four universities and the New York Public Library.
The Justice Department recommended in September that the agreement be rejected.
Faced with this and other opposition, Google and a group of authors and publishers made a series of changes to the deal in November. For example, they eliminated books published in most of the non-English speaking world and gave funds earned from unclaimed or orphan works to an independent fiduciary rather than the registry.
With the elimination of non-English language books, foreign opposition to the deal has been blunted but plenty of critics remain.
These critics of the deal have been a varied group that includes Yahoo Inc, Amazon Inc, Microsoft Inc, the National Writers Union and Consumer Watchdog.
In mid-December, three library associations stopped short of seeking to halt to Google's digital books plan, but asked for Justice Department oversight to prevent an excessively high price for institutional subscriptions.
The case is The Authors Guild et al v. Google, Inc, U.S. District Court, Southern District of New York, No. 05-08136.
(Reporting by Diane Bartz; Editing by Richard Chang)