Internet Archive’s e-book lending is not fair use, appeals court rules

The Internet Archive has lost its appeal after book publishers successfully sued to block the Open Libraries Project from lending digital scans of books for free online.

Judges for the Second Circuit Court of Appeals on Wednesday rejected the Internet Archive (IA) argument that its controlled digital lending—which allows only one person to borrow each scanned e-book at a time—was a transformative fair use that worked like a traditional library and did not violate copyright law.

As Judge Beth Robinson wrote in the decision, because the IA's digital copies of books did not "provide criticism, commentary, or information about the originals" or alter the original books to add "something new," the court concluded that the IA's use of publishers' books was not transformative, hobbling the organization's fair use defense.

"IA’s digital books serve the same exact purpose as the originals: making authors’ works available to read," Robinson said, emphasizing that in copyright law, however, "[n]ot every instance will be clear cut... this one is."

The appeals court ruling affirmed the lower court's ruling, which permanently barred the IA from distributing not just the works in the suit, but all books “available for electronic licensing,” Robinson said.

"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," Robinson wrote.

Maria Pallante, president and CEO of the Association of American Publishers, the trade organization behind the lawsuit, celebrated the ruling. She said the court upheld "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."

"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,” Pallante said.

Lead attorneys representing publishers, Elizabeth A. McNamara and Linda Steinman, provided statements to Ars.

"The Second Circuit’s decision is animated by common sense and the desire to foster creativity," McNamara said. "The Court correctly rejected Internet Archive’s arguments that mass copyright infringement can be justified by invoking convoluted theories like the ‘one-to-one-owned to loaned-ratio.’"

"As the Court’s clear-eyed opinion demonstrates, there was nothing transformative about Internet Archive’s distribution of millions of unlicensed ebooks," Steinman said. "This unequivocal decision will serve as a clear warning to future infringers.”

The Internet Archive's director of library services, Chris Freeland, issued a statement on the loss, which comes after four years of fighting to maintain its Open Libraries Project.

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

IA’s lending harmed publishers, judge says

The court's fair use analysis didn't solely hinge on whether IA's digital lending of e-books was "transformative." Judges also had to consider book publishers' claims that IA was profiting off e-book lending, in addition to factoring in whether each work was original, what amount of each work was being copied, and whether the IA's e-books substituted original works, depriving authors of revenue in relevant markets.

Ultimately, for each factor, judges ruled in favor of publishers, which argued that granting IA was threatening to "'destroy the value of [their] exclusive right to prepare derivative works,' including the right to publish their authors’ works as e-books."

While the IA tried to argue that book publishers' surging profits suggested that its digital lending caused no market harms, Robinson disagreed with the IA experts' "ill-supported" market analysis and took issue with IA advertising "its digital books as a free alternative to Publishers’ print and e-books."

"IA offers effectively the same product as Publishers―full copies of the Works―but at no cost to consumers or libraries," Robinson wrote. "At least in this context, it is difficult to compete with free."

Robinson wrote that despite book publishers showing no proof of market harms, that lack of evidence did not support IA's case, ruling that IA did not satisfy its burden to prove it had not harmed publishers. She further wrote that it's common sense to agree with publishers' characterization of harms because "IA’s digital books compete directly with Publishers’ e-books" and would deprive authors of revenue if left unchecked.

"We agree with Publishers’ assessment of market harm" and "are likewise convinced" that “unrestricted and widespread conduct of the sort engaged in by [IA] would result in a substantially adverse impact on the potential market" for publishers' e-books, Robinson wrote. "Though Publishers have not provided empirical data to support this observation, we routinely rely on such logical inferences where appropriate" when determining fair use.

Judges did, however, side with IA on the matter of whether the nonprofit was profiting off loaning e-books for free, contradicting the lower court. The appeals court disagreed with book publishers' claims that IA profited off e-books by soliciting donations or earning a small percentage from used books sold through referral links on its site.

"Of course, IA must solicit some funds to keep the lights on," Robinson wrote. But "IA does not profit directly from its Free Digital Library," and it would be "misleading" to characterize it that way. "To hold otherwise would greatly restrain the ability of nonprofits to seek donations while making fair use of copyrighted works."

Benefits to the public hotly disputed

In her opinion, Robinson noted that both book publishers and the Internet Archive "represent potentially serious interests."

"On the one hand, e-book licensing fees may impose a burden on libraries and reduce access to creative work," Robinson said. "On the other hand, authors have a right to be compensated in connection with the copying and distribution of their original creations."

Robinson considered the fact that more than 93 percent of libraries participate in digital lending, which book publishers view as "a profitable, growing market." Instead of charging libraries for individual books, the publishers offer licenses that must be renewed at increasing expense.

"For libraries, the result is regular renegotiation of e-book licenses that often come at a steeper price and for a shorter term than print copies of the same books," Robinson noted.

The IA strove to give libraries an alternative model by digitally scanning books that can be loaned online for free, and IA supporters have rallied behind this model, with 62 libraries partnering with the project. Among IA supporters is Meredith Rose, senior policy counsel for Public Knowledge, who filed a brief on behalf of the IA and posted a statement criticizing the appeals court's ruling.

"Controlled digital lending is a critical toolkit for libraries to reach their patrons in the digital age," Rose said. "With today’s decision, the Second Circuit undermines those policy goals," including by asserting, "bafflingly, that the Internet Archive is not entitled to statutory protections because it doesn’t perform ‘traditional functions of a library.’ It is unclear what the Second Circuit believes these ‘traditional functions’ to be, if not ‘lending books to the public.’"

Rose argued that IA had no access to "market data necessary to prove that their use has not created a market harm."

"Let us be perfectly clear: The court here is asking defendants to prove a negative, while allowing plaintiffs to actively withhold the only information that the court will accept as dispositive," Rose said. "The Second Circuit has replaced the fourth factor analysis with ‘vibes.’ Franz Kafka would be proud."

Lia Holland, a campaigns and communication director for Fight for the Future—a digital rights group that also supported the IA in court—said the appeals court ruling dealt "a myopic and dangerous blow" to "libraries, diverse authors, and the readers who love them." Unlike traditional libraries, the IA's digital library offered a more privacy-focused way of lending that let readers opt out of systems surveilling their reading habits, Holland suggested.

"Big Tech’s greed has infected Big Publishing, causing them to abandon the concept of ownership for digital books, and to force all libraries and readers to buy licenses that lock them into spyware-ridden apps that turn data on readers into a new product for publishing," Holland alleged.

When the lower court's injunction forced IA to remove 500,000 books from its library, IA fans begged book publishers to restore access. Readers asked publishers to consider the negative educational impact of academics, students, and educators—"particularly in underserved communities where access is limited—who were suddenly cut off from "research materials and literature that support their learning and academic growth."

Holland addressed this impact, insisting that "no one wants a world where libraries are just some Netflix spewing out whatever content Big Publishing and Big Tech allow them to temporarily license."

"It’s a sad day for book people, particularly for disabled, rural, and low-income readers who rely on libraries, and all those who want to write without the threat of erasure or read without the fear of surveillance and punishment, including 25+ civil and human rights organizations like GLAAD, Color of Change, and Presente.org," Holland said.

But Robinson wrote that the court concluded "that both Publishers and the public will benefit if IA’s use is denied."

According to the court, "Any copyright infringer may claim to benefit the public by increasing public access to the copyrighted work," but it cannot come at the cost of negating "rewards for authorship."

"This monopolistic power is a feature, not a bug, of the Copyright Act," Robinson wrote. "If authors and creators knew that their original works could be copied and disseminated for free, there would be little motivation to produce new works. And a dearth of creative activity would undoubtedly negatively impact the public. It is this reality that the Copyright Act seeks to avoid."

If the court had decided to "bless" IA's "large scale copying and distribution of copyrighted books without permission from or payment to the Publishers or authors," Robinson wrote, that "would allow for widescale copying that deprives creators of compensation and diminishes the incentive to produce new works."

So "while IA claims that prohibiting its practices would harm consumers and researchers," the court sided with publishers because "allowing its practices would―and does―harm authors," Robinson wrote.

Rose suggested that the last hope for IA fans may be to appeal to Congress to update laws to protect the future of libraries increasingly strapped to pay publishers' e-book licensing fees.

"We call on Congress to clarify the law surrounding Controlled Digital Lending and reaffirm that libraries can, in fact, lend the books that they own—regardless of format," Rose said.

This story was updated on September 4 to add comments from publishers' attorneys.