The German Patent and Trade Mark Office (DPMA) said on Tuesday arbitration proceedings between the publishers and Google had failed as they both objected to a settlement proposal put forward by the body's arbitration board.
At issue is the demand of publishers including Axel Springer, Germany's biggest newspaper publisher, that Google and other search engines pay to display their content. The publishers' case centres on an ancillary copyright law, or "Leistungsschutzrecht", in force since August 2013.
"We will definitely go to court," said a manager at one publisher.
Over the past decade, the media industry has often accused Google of making money at its expense by making its content freely available via Google News, YouTube and other services to drive audiences to view ads on Google sites instead.
Google counters that the publishers already profit from advertising revenue generated through its sites.
"Altogether, we pass on 500 million clicks a month to German publishers' pages alone," Google's central Europe chief, Philipp Justus, said on Monday in Berlin.
The failure of the arbitration process comes despite a six-month charm offensive by Google to win over newspaper publishers with collaboration on technology, digital newsroom training and funding for small-scale media innovation projects.
Last November, Axel Springer scrapped a move to block Google from running snippets of articles from its newspapers, saying the experiment had caused traffic to its sites to plunge.Springer said then a two-week-old experiment to restrict access by Google to some of its publications had caused web traffic to plunge for these sites, leading it to row back and let Google once again showcase Springer news stories in its search results.