Google's plans to scan millions of books and sell them online have been put on hold after a judge rejected the terms of a proposed settlement with authors and publishers.
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The proposal was a revised version of a settlement reached after the Authors Guild and the Association of American publishers initially sued Google to stop the project.
Google agreed to pay $125m upfront to scan any published work and allow authors and publishers to collect money whenever their books were viewed online.
But New York circuit court judge Denny Chin said even the revised settlement would give Google greater control over the search and publishing markets.
The settlement would grant Google significant rights to exploit entire books, without permission of the copyright owners, he said.
The plan also raised privacy concerns, said Chin, because Google would be able to collect information about the kind of books people were reading.
Opponents to the plan, led by Microsoft and Yahoo, claim that the digitisation of millions of out of print books would give Google an unfair advantage.
In a statement, Google said the decision was disappointing, but the firm would review the ruling and consider its options.
"Like many others, we believe this agreement has the potential to open up access to millions of books that are currently hard to find in the US today," the statement said.
Google has the option of either appealing against the judge's decision or proposing new settlement terms.