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 although in copyright law, "[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.
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's 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," Robinson wrote.