The Court of Appeals for the Second Circuit found that Internet Archive's ("IA") free digital book lending program is not fair use under the Copyright Act. The Court's three-judge panel unanimously affirmed last year's district court ruling (discussed in our previous blog post here) finding that the non-profit's controlled digital lending practice infringed four book publishers' copyrights.
Hachette Book Group Inc., HarperCollins Publishers LLC, John Wiley & Sons Inc., and Penguin Random House LLC (the "Publishers") collectively sued IA in 2020 over the latter's practice of scanning print books in their entirety and distributing full digital copies for free subject to a one-to-one owned-to-loaned ratio. IA calls this system "Controlled Digital Lending," or "CDL," and likens it to traditional library lending of print books because it allows only as many concurrent "checkouts" of a digital book as it has physical copies in storage.
The Publishers alleged that IA impermissibly copied 127 books (the "Works") that were the subject of this suit (including Sandra Cisneros's The House on Mango Street, Sylvia Plath's The Bell Jar, and J.D. Salinger's The Catcher in the Rye) and that such copying harmed their market—in particular, the market for eBooks.
IA countered by stating that digitizing the books and making them available on its Free Digital Library amounted to transformative (and thus fair) use because it used technology "to make lending more convenient and efficient" and "deliver[ed] the work only to one already entitled to view it―the one person borrowing the book at a time."
IA's argument was rejected by district court Judge John G. Koeltl in March of 2023: "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. But no case or legal principle supports that notion. Every authority points the other direction."
On appeal, the Second Circuit affirmed the district court's reasoning and conclusion.
Since it was undisputed that IA had copied the Works without permission, the Court was tasked with determining whether a fair use defense applied. The Copyright Act, 17 U.S.C. § 107, sets out four factors for courts to consider in determining whether an accused use is fair:
- The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
- The nature of the copyrighted work;
- The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
- The effect of the use upon the potential market for or value of the copyrighted work.
As is customary in consideration of the first factor (the purpose and character of the use), the Court assessed whether IA's scanning and lending practices were "transformative." The Court found that they were not.
In particular, the Court noted that the digital copies did not add anything "new, with a further purpose or different character, altering the [originals] with new expression, meaning or message." In the Court's view, a mere change in format is not a transformation. With respect to IA's argument that its digital lending library is more "efficient" than the hard copy books from which it was created, in that it "replaces the burdens of physical transportation with the benefits of digital technology," the Court commented that IA "ignores the fact that [its] digital books compete directly with Publishers' eBooks—works derivative of the original print books." This fact distinguished IA's offering from the "time shifting" enabled by VCRs in the Supreme Court's seminal 1984 Sony v. Universal decision, because that functionality was "not widely available at the time, and certainly not offered by the plaintiff-television producer."
The Court also distinguished the facts before it from its 2015 fair use finding in Authors Guild v. Google, Inc., the "Google Books" case. In Google Books, the defendant scanned books to create searchable databases that allowed users to view "snippets" of books but did not reveal the entire copies to the public. The Court explained that, in Google Books, enabling users to "view small fragments" did not "'provide a significant substitute for the purchase of the [actual] book[s].'" IA, on the other hand, copied Publishers' books and made them public in their entireties.
In a slight departure from the district court's ruling, IA was able to persuade the Second Circuit that its digitization of the books was not commercial in nature. The mere fact that IA, a non-profit organization, receives donations to keep its lights on, or other non-monetary calculable benefits, does not mean that IA profits directly from its digital library, the Court found. It is a free digital library, after all.
This finding did not, however, impact the overall analysis in any significant way because the Court ultimately found that all four fair use factors weighed in the Publishers' favor.
Most notably, in applying the fourth (and arguably most crucial) factor—the effect of the use on the potential market for the copyrighted work—the Court found that not only is the Free Digital Library likely to serve as a substitute for the originals, but the undisputed evidence of record also suggested that it is intended to achieve that exact result.
The opinion went on to say that "IA [is asking] this court to bless the large scale copying and distribution of copyrighted books without permission from or payment to the publishers or authors. Such a holding would allow for wide scale copying that deprives creators of compensation and diminishes the incentive to produce new works."
The Court seemed persuaded by a declaration from author Sandra Cisneros, submitted in support of the Publishers' summary judgment motion, which described the effect of IA's activities on her ability to count on income from her creative efforts:
"I worked hard to earn the financial security that I now have and which enables me to earn a living from my pen without fear of poverty. And, as my agent reminds me, the royalty revenues I receive from the sales of books I have written are precious and must be closely guarded because this is ultimately going to generate the money that supports me in old age...
When I went on the Internet Archive's website and saw that scans of my books were being distributed to anybody who wanted them for free—without my permission or any payment—I was appalled. I found the experience so viscerally upsetting that I could not stay on the website for long. It was like I had gone to a pawn shop and seen my stolen possessions on sale."
Having found that all four factors of the fair use test supported the Publishers, the Second Circuit affirmed the district court's grant of summary judgment holding IA liable for infringement.
The case is Hachette Book Group, Inc. v. Internet Archive, No. 23-1260 (2nd Cir. Sept. 4, 2024).
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