A Paris court has found U.S. Internet giant Google guilty of violating copyright by digitising books and putting extracts online, following a legal challenge by major French publishers.

The court ruled against Google's French unit after the La Martiniere group, which controls the highbrow Editions du Seuil publishing house, argued that publishers and authors were losing out in the latest stage of the digital revolution.

Google was ordered to pay 300,000 euros ($431,700) in damages and interest, far less than the 15 million euro fine sought by plaintiffs. It must stop reproducing any copyrighted material by French publishers it has not struck deals with.

The popular search engine announced it would appeal, but Friday's ruling will be enforced immediately pending any further court action.

“We believe giving online users access to very short extracts from works is in line with copyright,” Google lawyer Benjamin du Chauffaut said. “French online users will be the only ones deprived of a great part of their literary heritage.”

Shares in Google were up 2.24 percent at $596.19 by 1615 GMT. An executive said they would need to study the ruling before being able to comment on the business impact.

La Martiniere, the French Publishers' Association and authors' groups SGDL had argued that Google was exploiting that heritage, and called scanning an act of reproduction.

“Even if we can't undo the process of digitalisation, this means they cannot use any of the digitised material any more,” Yann Colin, lawyer for La Martiniere told Reuters.

The publishing houses accused Google of scanning the books free of charge, letting users browse the content for free, reaping revenues from advertisers but not adequately compensating the creators and original publishers of the works.

Philippe Colombet, head of partnerships for Google Books in France, could not give details on how many books might be affected, though he pointed out in a conference call that French was one of the most widely used languages on the Internet.

“More than ever, we're determined to collaborate with editors in all commercial areas,” he said.

As electronic readers gain popularity and online libraries expand, companies and governments are keen to learn from the mistakes that the film and music businesses made when their content moved online.

French politicians including President Nicolas Sarkozy have been particularly vocal, pushing for a broader public digitisation programme that would be partly funded through a big national loan.

Google has so far scanned 10 million books through partnerships with libraries. It displays searchable snippets of books in copyright and whole texts of out-of-copyright works.

“Google Books gives access to a greater number of works and therefore contributes to marketing,” lawyer du Chauffaut said.

The project has been praised for breathing new life into out-of-print works but has attracted more than one lawsuit for scanning books without permission from rights holders.

Google recently reached a settlement in the United States after lengthy negotiations with authors and publishers led by the U.S. Authors Guild who had sued it.

The settlement, which includes measures to track down and compensate authors, covers books published in North America, Britain and Australia, and any books registered with the U.S. Copyright Office. It has yet to be approved by a U.S. court.