In a swift decision, a three-judge panel of the Second Circuit Court of Appeals has unanimously affirmed a March 2023 lower court decision finding the Internet Archive's program to scan and lend print library books is copyright infringement. In an emphatic 64-page decision, released on September 4, the court rejected the Internet Archive’s fair use defense, as well as the novel protocol known as “controlled digital lending” on which the Archive’s scanning and lending is based.
“This appeal presents the following question: Is it ‘fair use’ for a nonprofit organization to scan copyright-protected print books in their entirety, and distribute those digital copies online, in full, for free, subject to a one-to-one owned-to-loaned ratio between its print copies and the digital copies it makes available at any given time, all without authorization from the copyright-holding publishers or authors? Applying the relevant provisions of the Copyright Act as well as binding Supreme Court and Second Circuit precedent, we conclude the answer is no,” the decision states.
The closely watched copyright infringement lawsuit was first filed on June 1, 2020, in the Southern District of New York by Hachette, HarperCollins, Penguin Random House, and Wiley, organized by the Association of American Publishers.
The appeals court ruling comes just over two months after a lengthy June 28 hearing in New York, at which the panel appeared highly engaged, if deeply skeptical of the Internet Archive’s case—a relatively quick turnaround that suggests that the court did not struggle in deciding the case, much like district court Judge John G. Koeltl, who delivered his March 24, 2023 summary judgment ruling in favor of the plaintiff publishers just days after a March 20 hearing.
In his now affirmed 47-page opinion, Koeltl forcefully rejected the Internet Archive’s fair use defense. “At bottom, IA’s fair use defense rests on the notion that lawfully acquiring a copyrighted print book entitles the recipient to make an unauthorized copy and distribute it in place of the print book, so long as it does not simultaneously lend the print book,” Koeltl wrote in his opinion granting the publisher plaintiffs’ motion for summary judgment and denying the Internet Archive’s cross-motion. “But no case or legal principle supports that notion. Every authority points the other direction.”
Not Fair Use
The Second Circuit agreed, affirming that all four factors of the fair use test favored the publishers, including a straightforward rejection of the Internet Archive’s argument that its scanning and lending was “transformative” under the first factor.
“We conclude that IA’s use of the Works is not transformative,” the decision states. “Instead, IA’s digital books serve the same exact purpose as the originals: making authors’ works available to read. IA’s Free Digital Library is meant to―and does―substitute for the original Works,” the ruling continues, adding that “to construe IA’s use of the Works as transformative would significantly narrow―if not entirely eviscerate―copyright owners’ exclusive right to prepare (or not prepare) derivative works.”
The appeals court also easily dispatched with the idea that the Internet Archive’s scanning and lending is permissible because it is done within the framework of “controlled digital lending,” a set of protocols designed to mimic physical library lending.
“This characterization confuses IA’s practices with traditional library lending of print books. IA does not perform the traditional functions of a library; it prepares derivatives of Publishers’ Works and delivers those derivatives to its users in full,” the court held. “Whether it delivers the copies on a one-to-one owned-to-loaned basis or not, IA’s recasting of the Works as digital books is not transformative.”
The court did reject one part of Koeltl’s decision, however—that the nonprofit Internet Archive was somehow engaged in a commercial activity because the Internet Archive sought donations from the public who visited its Open Library, gained non-monetary reputational value from its program, and because the IA received a small slice of the profits from book sales through its Better World Books subsidiary.
“We conclude, contrary to the district court, that IA’s use of the Works is not commercial in nature,” the court held. “To hold otherwise would greatly restrain the ability of nonprofits to seek donations while making fair use of copyrighted works.”
And in terms of the crucial fourth factor, the impact on the market, the court also had little trouble finding for the publishers.
“Here, not only is IA’s Free Digital Library likely to serve as a substitute for the originals, the undisputed evidence suggests it is intended to achieve that exact result,” the decision states. “IA copies the Works in full and makes those copies available to the public in their entirety. It does not do this to achieve a transformative secondary purpose, but to supplant the originals.”
The court also rejected that Internet Archive’s public benefit argument. “While IA claims that prohibiting its practices would harm consumers and researchers, allowing its practices would―and does―harm authors,” the court concluded. “With each digital book IA disseminates, it deprives Publishers and authors of the revenues due to them as compensation for their unique creations. Though IA and its amici may lament the consolidation of editorial power and criticize Publishers for being motivated by profits, behind Publishers stand authors who are entitled to compensation for the reproduction of their works and whose ‘private motivation’ ultimately serve[s] the cause of promoting broad public availability of literature, music, and the other arts.”
Is The End in Sight?
With the exception of an en banc hearing before the full Second Circuit, the appeals court decision leaves only the Supreme Court left for the Internet Archive, suggesting the case may finally be winding down after years of contentious legal wrangling.
Notably, a consent judgment has already been entered to settle the claims in the case, which includes an undisclosed monetary payment to publishers that is payable once the appeals process has been exhausted. According to the AAP, that payment, should the publishers ultimately prevail, would “substantially” cover the publishers’ “significant attorney’s fees and costs in the action.”
Meanwhile, the Internet Archive is still facing a similar, follow on suit filed by a group of major record labels over its "Great 78" program, which collects vintage, 20th century 78 rpm recordings, digitizes them and makes them freely available to the public.
“Today’s appellate decision upholds the rights of authors and publishers to license and be compensated for their books and other creative works and reminds us in no uncertain terms that infringement is both costly and antithetical to the public interest," said AAP president and CEO Maria Pallante, in a statement. "If there was any doubt, the Court makes clear that under fair use jurisprudence there is nothing transformative about converting entire works into new formats without permission or appropriating the value of derivative works that are a key part of the author’s copyright bundle.”
In a blog post, IA reps said they were disappointed in the decision. "We are reviewing the court’s opinion and will continue to defend the rights of libraries to own, lend, and preserve books," the statement reads.
