Google today found itself accused of damaging the fundraising efforts of a London children's hospital which has relied for more than 75 years on royalities from J M Barrie's Peter Pan.

The Great Ormond Street Hospital Children’s Charity is angry that Google's policy of making literature freely available online will hit the hospital's finances hard, potentially costing it millions of pounds.

Barrie donated all British royalties and performing rights from the work, including popular stage version widely performed at Christmas time, to the hospital in 1929. Barrie claimed that Peter Pan had been a patient at the hospital as a baby.

In 1988, before copyright in the book, Peter Pan, expired, Parliament passed an amendment to the Copyright Act that extended Great Ormond Street's rights to Peter Pan earnings in the UK in perpetuity

The charity says that royalties earned from Peter Pan stand at the "very core" of its fundraising efforts. Google has angered the charity by making a text of the children’s classic available online as part of the Google Print Library Project, a scheme to make thousands of books available on the net, but which has already attracted controversy from publishers and authors' organisations in Britain and the United States.

Stephen Cox, of Great Ormond Street Hospital Children’s Charity, told Times Online: "Obviously, we are disappointed that Google has done this. It could deprive the charity of potential income."

The charity, which raised around £25 million last year, says that it has a "moral obligation" to gain the fullest benefit possible from the Barrie bequest, but that the internet is practically impossible to police.

Under the conditions of JM Barrie’s will, the sums earned by royalties from Peter Pan remain secret. However, the charity has said that Peter Pan continues to raise a "useful income" and that since 1929, it has been instrumental in raising a "handy sum" for the hospital through stage and film rights and book sales.

Google resumed scanning in books to its online library this week. It had suspended the scheme after a legal row with publishers in the United States who accused Google of "wilful [copyright] infringement to further its own commercial purposes".

Google then said the project was an "historic effort to make millions of books easier for people to find and buy".

Great Ormond Street, which treats more than 90,000 children a year, says it relies on donations to its charity to top up its funding from the NHS. The organisation says these contributions "have a profound effect on the care and treatment we can provide to seriously ill children".

A Google spokesperson today told Times Online that the online copy "looks like it has been provided ...via the Google Print Publishing Programme which means the book has been submitted by the publisher". This was emphatically denied by the spokesman for the charity, who pointed out that the book is under copyright in the US until 2023, although it is out of copyright in other territories, including Canada and Japan.

"We are not going to put Peter Pan on the internet because we wish it to be used for the benefit of children in the hospital," Mr Cox said.

Google’s ambitious library project has already been criticised by publishers who say it will damage their industry.

Last month the Association of American Publishers moved to seek an injunction to stop work on the Google Print Library Project. The scheme involves indexing millions of copyrighted books from three major American university libraries and making them available on the internet.

The legal case, which seeks recovery of costs but no additional damages, cites the "continuing, irreparable and imminent harm publishers are suffering ... due to Google’s wilful [copyright] infringement to further its own commercial purposes."

David Drummond, Google’s general counsel and vice-president of corporate development, denied that the company is infringing copyright. "Creating an easy-to-use index of books is fair use under copyright law and supports the purpose of copyright: to increase the awareness and sales of books directly benefiting copyright holders," he said.

"This is not a matter of copying material and putting it online," Mr Drummond said. "It’s the equivalent of an electronic card catalogue. Our objective is to help publishers and authors."

Under a deal negotiated by Google and the publishing industry, copyright holders had until November 1 to notify the search engine if they do not want works to appear on the internet in full. In these cases, the site will display a short sample of the work and a link to the online bookshop Amazon.com, where users will be able to buy a hard copy.

Publishers and authors have said it should not be the responsibility of copyright holders to let Google know that they wish their rights to be respected. They would prefer a system in which publishers told Google which books they would allow to appear online and such that all others would be out of bounds by default.

The legal action followed a similar move last month by the Authors Guild, an American group representing writers including Michael Crichton and Barbara Taylor Bradford, which sued the internet company in an attempt to halt the project and recover damages.

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