Internet Archive Loses Landmark E-Book Lending Copyright Appeal Against Publishers

The Second Circuit Court of Appeals has dealt a blow to the Internet Archive's digital book lending program. The court upheld a lower court's decision, stating that IA's practice of scanning and lending copyrighted books without permission is not fair use. IA's lending program directly threatens the revenues of publishers and violates copyright law, the judges ruled.

In 2020, publishers Hachette, HarperCollins, John Wiley and Penguin Random House sued the Internet Archive (IA) for copyright infringement, equating its ‘Open Library’ to a pirate site.

IA’s library is a non-profit organization that, among other things, scans physical books in-house so these can be lent out to patrons as e-books.

This “Controlled Digital Lending” (CDL) practice allows for only one copy of a book to be lent at a time, mirroring the traditional library lending model. At the same time, however, CDL bypasses the publishers’ e-book licensing model.
Publishers vs. Internet Archive

The in-house scanning service at the Internet Archive (IA) differs from the licensing agreements entered into by other libraries. These agreements see libraries license ‘official’ e-book versions from publishers, who charge for every book that’s lent out to patrons.

The major book publishers eventually ran out of patience with IA’s DIY approach, filing a lawsuit that kicked off a major legal battle four years ago. The publishers equated IA’s lending operation to piracy and, last year, a New York federal court concluded that the library is indeed in the wrong.

The court’s decision effectively put an end to IA’s self-scanning library, at least for books from the publishers in suit. However, IA was not giving up that easily; in December the non-profit filed its opening brief at the Second Circuit Court of Appeals, hoping to reverse the judgment.
Publishers Win at Court of Appeal

During a hearing in June, both sides defended their positions. At the time, the court didn’t appear to be entirely convinced by IA’s arguments. This was confirmed by an opinion and judgment from the three judge panel published a few hours ago.

After reviewing the evidence, circuit judges Steven Menashi, Beth Robinson, and Maria Kahn, affirmed the lower court’s order. They conclude that IA’s self-scanning approach can’t be classified as fair use under U.S. copyright law.

The court understands that libraries are burdened by e-book licensing fees, which can make book lending relatively expensive. However, that doesn’t give IA the right to create its own e-books and lend those out instead.

“IA asks this Court to bless the large scale copying and distribution of copyrighted books without permission from or payment to the Publishers or authors,” the appeal court’s opinion reads.

“Such a holding would allow for widescale copying that deprives creators of compensation and diminishes the incentive to produce new works. This may be what IA and its amici prefer, but it is not an approach that the Copyright Act permits.”
Fair Use?

The Internet Archive hoped to rely on a fair use determination. It stressed that the in-house e-book scanning approach is transformative, because it enhances access to books, especially for those who cannot easily visit physical libraries.

The fact that the organization has no profit motive and only lends out as many digital copies as they have physical copies, should also favor fair use, they argued.

The Second Circuit Court of Appeals ultimately disagrees. For one, the court emphasized that simply digitizing a book is not transformative, as it does not create a new purpose or character. The digital copies served the same function as the original books – reading.

The court reasons that IA’s free digital lending could serve as a substitute for purchasing or licensing e-books, potentially harming the publishers’ revenue. That also goes against a fair use determination.

The court further stresses that while IA is a non-profit, its activities to have a commercial aspect, as it indirectly benefits from its partnerships and donations. That, again, weighs against fair use.
Harmful

The court of appeal had to find a balance between the interests of rightsholders and IA. In this case, it concludes that the scale tilts in favor of the book publishers.

In essence, the court prioritized the publishers’ right to control the reproduction and distribution of their works over IA’s goal of expanding access to knowledge. While IA’s actions are potentially beneficial in some ways, they ultimately harm the market for the publishers’ books, the court concludes.

“While IA claims that prohibiting its practices would harm consumers and researchers, allowing its practices would―and does―harm authors. With each digital book IA disseminates, it deprives Publishers and authors of the revenues due to them as compensation for their unique creations,” the opinion reads.

The decision means that IA’s e-book lending approach remains off-limits, as it applies to these copyrighted works. This may not signal the end of the legal battle, however.

IA is clearly disappointed by the outcome, but it hasn’t thrown in the towel yet.

“We are disappointed in today’s opinion about the Internet Archive’s digital lending of books that are available electronically elsewhere. We are reviewing the court’s opinion and will continue to defend the rights of libraries to own, lend, and preserve books,” IA writes.