The Author's Guild has suffered another major setback in its fight to stop Google's ambitious book-scanning project. The Guild lost a key ally when Google settled with a coalition of major publishers last week. Now a judge has ruled that the libraries who have provided Google with their books to scan are protected by copyright's fair use doctrine. While the decision doesn't guarantee that Google will win—that's still to be decided in a separate lawsuit—the reasoning of this week's decision bodes well for Google's case.

Most of the books Google scans for its book program come from libraries. After Google scans each book, it provides a digital image and a text version of the book to the library that owns the original. The libraries then contribute the digital files to a repository called the Hathitrust Digital Library, which uses them for three purposes: preservation, a full-text search engine, and electronic access for disabled patrons who cannot read the print copies of the books.

There are four factors the courts consider in fair use cases. Judge Harold Baer sided squarely with the libraries on all four factors.

Probably the most important factor is the first factor: the "purpose and character" of the use. The courts have held that "transformative" uses are generally fair. For example, it's fair use for a search engine to display thumbnails of copyrighted images in search results. Judge Baer ruled that the libraries' intended uses for its digital copies are similarly transformative.

"The use to which the works in the HDL are put is transformative because the copies serve an entirely different purpose than the original works: the purpose is superior search capabilities rather than actual access to copyrighted material," wrote Judge Baer. "The search capabilities of the HDL have already given rise to new methods of academic inquiry such as text mining." Similarly, Judge Baer noted, the scanning program allows blind readers to read the books, something they can't do with the original.

Also key is the fourth factor: the impact on the market for the works. While a book search engine obviously doesn't undermine the market for paper books, the authors had argued that a finding of fair use would hamper their ability to earn revenue by selling the right to scan their books. But Judge Baer rejected this argument as fundamentally circular. He quoted a previous court decision that made the point: "Were a court automatically to conclude in every case that potential licensing revenues were impermissibly impaired simply because the secondary user did not pay a fee for the right to engage in the use, the fourth factor would always favor the copyright owner."

The libraries' fair use argument is somewhat stronger than Google's because they are non-profit organizations with fundamentally educational missions. But significantly, Judge Baer did not rely heavily on this fact in siding with the libraries. Instead, he focused on the transformative nature of the libraries' use. And since Google is making virtually the same use of its own scanned copies of the books, it's a safe bet that there are some happy lawyers in Mountain View this evening.

The copyright scholar (and sometime Ars contributor) James Grimmelmann called the ruling a "near-complete victory" for the libraries. Indeed, he said, the decision "makes the case seem so lopsided that it makes the appeal into an uphill battle. Perhaps together with the AAP [American Association of Publishers] settlement, this is a moment for a reevaluation of the Authors Guild’s suit against Google. My estimate of the likelihood of settlement just went up substantially."