Bottom line? Lawers, unclench: this should be considered fair use.
Google will make its money by selling ads next to book search result pages, just as it does when you search for images or Web pages – but the company says it won't show ads on pages that display books from libraries.Link
(...)[T]his isn't the same as the recording industry's war on file-sharing or the Motion Picture Assn. of America's battles against DVD bootleggers. Google isn't pirating books. They're giving away previews. And in order to provide those keyword-searchable peeks, Google may have to scan entire books. For example, let's say you're a pug aficionado. A search on print.google.com for "tiara" + "pug" can't point you to the instructive masterpiece "Putting Party Hats on Dogs" unless the scan process got all the way to page 237, where the chapter "Princess Tea Parties for Toy Breeds" begins. OK, there is no such book, but work with me here.
Perhaps the Authors Guild members would prefer that search companies pay them for the right to build book search services. If Google has its way, their logic goes, we'll lose control over who can copy our work, and we'll lose sales. But Internet history proves the opposite is true. Any product that is more easily found online can be more easily sold. Amazon.com's "look inside" feature works similarly. And, surprise, the Authors Guild has squabbled with it too.
If the paranoid myopia that drives such thinking penetrates too deeply into the law, search engines will eventually shut down. What's the difference, after all, between a copyrighted Web page and a copyrighted book? What if Internet entrepreneurs could sue Google for indexing their websites? What if the law required search engines to get clearance for every Web page? Even a company as large and well-funded as Google couldn't pull that off because what's on the Internet, and who owns that content, changes constantly.