In its order, the New York court agreed to stay proceedings in a lower court while it reviews Judge Denny Chin’s decision last May to certify the class action — a move that allowed authors and illustrators to go forward with claims that Google scanned their works without permission.

The proceedings began in 2005 when the Authors Guild filed a copyright suit over Google’s decision to scan the world’s books. The lawsuit was on hold for several years as the parties tried to get court approval for a settlement that would have created a market for the books. The settlement failed, however, and the Authors Guild resumed legal action last December. The Guild is seeking $750 per book, but only a relatively small number of authors would qualify.

Today’s decision means that the overall case will be on hold for several months. If the appeals court upholds the certification order, it will likely return the case to Judge Chin (who is now on the Second Circuit too) with detailed instructions about how to proceed.

The big issue in the case now is whether or not Google’s scanning constituted “fair use,” which is a defense against copyright infringement. Several scholarly and librarian groups have intervened in Google’s favor in the hopes that the massive digital collection can be used for research purposes.

Meanwhile, a parallel case is playing out between the Authors Guild and the Hathi Trust, a coalition of universities that has collected copies of Google’s book scans. If that case is resolved first, it is likely to determine the fate of the Google Books class action.

Here is a copy of today’s order:

CA2 Order Granting AG Stay

In a short order, Judge Denny Chin rejected Google’s request to suspend the case while it goes before the US Court of Appeals for the Second Circuit. Chin noted that a stay would delay the case “by a year or more” and told Google and the Authors Guild, which is representing writers in a class action, to stick to the current schedule. That schedule calls for them to file arguments ahead of a December court hearing.

The case has taken on new life after Judge Chin’s decision in 2011 to reject an elaborate three-way settlement between Google, publishers and the Guild. The settlement would have resolved the Authors Guild’s original 2005 copyright lawsuit. The Guild is now asking Google to pay $750 for every registered work it scanned without permission.

Recently, the lawsuit has turned into a procedural thicket after the Second Circuit agreed to let Google appeal Chin’s decision earlier this year to certify the class (an important procedural hurdle that lets the Guild sue on behalf of all writers).

Chin’s latest ruling creates an unusual situation in which the books case is now before him and the appeals court at the same time. The situation is even more unusual because Chin himself now sits on the appeals court (although he has of course recused himself from hearing the Google appeal).

As it stands, the appeals court will hold a phone hearing for Google and the parties in October while the parties are slated to appear before Chin in December. Chin also recently granted permission for scholars and librarians to file “friends of the court” briefs in support of Google; many in the academic community believe the scanning will help in research.

The significance of the 2nd Circuit’s order is that the current proceedings, which have been heating up, will likely be suspended while the appeals court decides whether the class action should have been allowed to go ahead in the first place. The appeal will go before a panel of two judges after Judge Denny Chin recused himself on the grounds that he is still involved in the original case.

The decision to let Google appeal the certification order effectively takes the case out of the hands of Chin until the appeals court rules. Chin has been skeptical of many of Google’s positions so far.

The appeal will result in one of two outcomes. In one scenario, the Second Circuit could agree with Google that the class of authors shouldn’t have been certified in the first place. This would effectively put an end to the long-running case. In the alternative, the appeals court could uphold Chin’s decision to certify the class and return the case to him with additional guidance about what he should do next.

The appeals court and Chin are in a bit of an awkward spot because Chin is now also a member of the Second Circuit — the same court that is assigned to review Chin’s original decisions. (The situation came about because Chin maintained control of the original Google case after he was promoted in 2010).

Since the long-running Google Books case was destined to end up before it eventually, the Second Circuit likely decided to hear the class certification appeal in order to telegraph its ultimate intentions. Its ruling will thus either end the case or provide Chin with a possible playbook about how to handle it going forward.

Until today, Google and the Authors Guild have been sparring over cross motions for summary judgment — arguments that the case can be decided without a trial. Google says its scanning activities, which saw it create digital copies of more than 20 million books, amount to a fair use that didn’t result in any economic harm to authors. The Authors Guild, which first sued Google in 2005, claims that the company violated copyright and should pay $750 for every qualifying book.

As we wrote last week, recent reports that Google could be liable for billions of dollars are almost certainly overstated. The class of writers covered by the Authors Guild lawsuit is relatively small in relation to the number of books scanned, consisting of only those authors who registered their work with the copyright office and who are not involved in Google’s Partner Program.

The current court proceedings came after the Authors Guild last December fired up its original lawsuit from 2005. The lawsuit was on hold for years after Google, publishers and the Authors Guild hashed out a three-way settlement that would have created a market for many of the out-of-print books that Google scanned. After Judge Chin blew up the proposed settlement in March of 2011, Google and the publishers have been crafting a series of bilateral deals while the Authors Guild decided to press its original claims of copyright infringement.

Neither Google nor Authors Guild lawyer Michael Boni immediately responded to email requests for comment.

Here is today’s order:

Google Books Class Cert Appeal Granted

The outcome of the appeal is likely to determine the fate of the more than 20 million books that Google has scanned but that now sit effectively locked up on the company’s servers. The fate of the books has been in limbo since Judge Denny Chin last year blew up a proposed settlement between Google, publishers and the Authors Guild that would have made the books available for sale.

After the settlement collapsed, Google and the publishers have been hashing out bilateral deals while the Authors Guild revived the initial class action lawsuit it filed in 2005. A separate group representing illustrators and publishers joined the case in 2010.

In its appeal, Google is trying the same double-barreled strategy it attempted before Judge Chin. First, it is arguing that the plaintiffs, including the Authors Guild, are not fit to represent an entire class of writers whose works were scanned. Google points to a study to say that many authors are actually pleased with the scanning endeavor and that they should not be pressed into the same lawsuit as those who are unhappy.

Google’s second argument raises a more profound question about copyright law in the digital age. The search giant is arguing that its actions represented fair use — a legal rule that provides immunity for copyright infringement on the grounds that (loosely stated) the benefit of the use outweighs the harm of the  infringement. Google has made this argument all along and many librarians, academics and publishers are eager for a court to address it directly.

The case will now go to the US Second Circuit of Appeals in New York City where Judge Chin now sits after he was promoted during the course of the initial lawsuit. Since Chin is still sitting by designation on the underlying case, he will not be one of the three or more judges to hear the appeal. This might prove favorable to Google as Chin so far has evinced considerable skepticism about Google’s positions.

Google’s appeal filing also coincides with a shift in the company’s rhetorical strategy. In the past, the company has typically issued only terse legal statements but today, in an email statement, a spokesman said:

“Much of the world’s information appears on the printed page, but almost three quarters of the world’s books are out of print and unavailable except to the lucky few who can find old copies in libraries. With Google Books, our goal is make the knowledge contained in books easy to discover and more useful for people.”

This appeal to fairness and spreading knowledge might gain more traction than it did two years ago when Google’s agenda came under fire by dozens of groups led by Microsoft and Amazon who accused the company of aspiring to a monopoly on books.

The story was first reported at PublishersWeekly. A copy of the order can be found here courtesy of James Grimmelmann.

The Guild is suing its former partner for scanning books without permission while a group representing photographers is also appearing before Chin to press copyright claims of its own.

At today’s hearing the Authors Guild is set to ask Chin to confirm that the country’s writers can sue together. Google is opposing the request while also seeking to throw out the Authors Guild and photographers’ complaints altogether.

According to Google, the Authors Guild doesn’t have standing to sue because it’s an association — the search giant says individual writers who own copyrights should bring the case instead. The Guild says it’s the logical group to represent authors who need its institutional muscle.

Google also says there should be no class action to begin with because of the divergent interests among the writer whose books were scanned. It argues, for instance, that many writers like the scanning program and that they shouldn’t be included in the collective lawsuit.

“The ultimate question is who owns the rights to display a small excerpt of the work,” Daralyn Durie, a lawyer for Google, told the judge today. “Many authors contracted that right away to publishers.”

In the bigger picture, the case is unlikely to go anywhere fast. Google and its ace lawyer Durie have the resources to keep it bottled up in preliminary issues for the foreseeable future. Meanwhile, Judge Chin is now overseeing the case as a special matter in addition to his duties on the Second Circuit Court of Appeals where he now sits. At earlier hearings, Chin has indicated that he would like the parties to settle.

At the same time, the larger world of online books has changed dramatically in the last two years. In early 2010, when the parties gathered before Chin in a ballyhooed hearing, critics claimed Google would dominate the online book market. Today, all eyes are instead on dominant Amazon and Apple. The latter indicated it wants to remake the textbook market and is also tangling with the Justice Department over price-fixing allegations.

The Google Books Settlement was originally a three part deal between Google, the Authors Guild and publishers that would have paid writers a flat fee and also given them advertising and royalty revenues.

After Chin rejected the settlement, the Guild and the publishers revived their original lawsuits from 2005. The publishers, however, have quietly been dropping out of the proceedings to obtain bilateral deals with Google.

Google has by now reportedly scanned 20 million books, most of which remain largely locked up.

While the Google case plods along, scholars like Berkeley’s Pamela Samuelson are calling for Congress to fix copyright law in order to create a Digital Public Library of America.

Judge Chin said he will rule later on today’s motions. He also said Google and the Author’s Guild could move for judgment without a trial and he would hear oral motions in September.