The judge said Congress should ultimately decide who should be entrusted with guardianship over orphan books and under what terms, rather than the issue being resolved by private, self-interested parties.
He said Congress could address concerns of the international community of authors and publishers. He called it significant that foreign authors, publishers and even nations were saying the agreement violates international law. France and Germany had objected to the deal, along with authors and publishers in Austria, Belgium, India, Israel, Italy, Japan, New Zealand, Spain, Sweden, Switzerland and the United Kingdom.
Department of Justice spokeswoman Gina Talamona said in a statement that the government was pleased with the ruling.
The settlement, she said, "exceeded the scope of the underlying lawsuit on which it was based and created concerns regarding antitrust, class certification and copyright issues."
The president of the Authors Guild, an advocate for writers' interests in copyright protection and other issues, said the organization planned to talk with publishers and Google "with the hope that we can arrive at a settlement within the court's parameters that makes sense for all parties."
Guild President Scott Turow said the online library was "an idea whose time has come."
"Readers want access to these unavailable works, and authors need every market they can get," he said. "There has to be a way to make this happen. It's a top priority for the Authors Guild."
John Sargent, chief executive officer at Macmillan Publishers Limited, noted in a statement on behalf of publisher plaintiffs that the judge had invited the parties to request approval of a revised deal if they can reach one. He said the publishers were prepared to modify the deal and work to overcome the judge's objections.
He said the publishers wanted to "promote the fundamental principle behind our lawsuit, that copyrighted content cannot be used without the permission of the owner or outside the law."
The Open Book Alliance, a group that includes Google rivals Microsoft Corp., Yahoo Inc. and ., called the ruling "a victory for the public interest and for competition in the literary and Internet ecosystems."
Attorney Cynthia Arato, representing a number of leading foreign publishing societies and foreign book publishers that objected to the settlement, said it vindicates the important concerns of foreign rights holders.
"Their interests weren't adequately protected," she said. "It would be wrong for a U.S. court to allow one company to usurp their fundamental right to control their copyrighted works."
The judge acknowledged in his decision that there are many benefits to Google's project, including that libraries, schools, researchers and disadvantaged populations would gain access to far more books; that authors and publishers would find new audiences and new sources of income; and that older books — particularly those out of print — would be preserved and given new life.
The case developed after Google in 2004 announced it had agreed with several major research libraries to digitally copy books and other writings in their collections. The authors and publishers sought financial damages and a court order to block the copying when they sued Google in 2005 after Google failed to obtain copyright permission to scan the books.
A deal was first reached to settle the claims in 2008 and was tentatively approved by the judge in November 2009.
Since presiding over a hearing on the case in February 2010, the judge has been elevated to the 2nd U.S. Circuit Court of Appeals. He acted in the role of a district judge to rule on the case.
At the hearing last year, the judge heard a lawyer for folk singer Arlo Guthrie and "Pay it Forward" writer Catherine Ryan Hyde say the library would exploit his clients with "woefully inadequate compensation" for "unknown and undisclosed uses."
Microsoft lawyer Tom Rubin said the deal "was structured to solidify Google's dominance."
Neither lawyer immediately returned requests seeking comment Tuesday.
Google lawyer Daralyn Durie testified at the hearing that fewer than 10 million of 174 million books in the world would be affected by the settlement and that 5 million of those affected were out of print. Google has estimated that about 130 million titles likely would get into its digital library.