On Monday, a federal court in Manhattan granted yet another extension to Google and a group of authors and publishers as they try to reach a settlement in the landmark digital books case. They are expected to submit a revised proposal today. But whatever the ultimate agreement, this case is a giant missed opportunity.

The class action suit, brought in 2005, challenged Google's unauthorized scanning of copyrighted works to create a vast searchable database of books. It raised a critical question: Are...