Second Circuit Makes Clear: Libraries Cannot Create Their Own Ebooks but Must Adhere to Publisher Licensing Terms

On September 4, the Second Circuit Court of Appeals issued an opinion in the highly publicized battle between digital library Internet Archive and four publishing companies – Hachette, HarperCollins, Wiley, and Penguin Random House. In Hachette Book Group, Inc., et al. v. Internet Archive, the publishers brought copyright infringement claims against IA and requested millions in damages, arising from IA’s digital book lending process. In response to these claims, IA has maintained that its digital lending process is fundamentally identical to traditional libraries, only digitized.

Internet Archive’s Digital Lending Process

According to IA, it allows the public to check out digital copies of books for two weeks or less and only permits users to check out as many digital copies of each book as IA and its partner libraries physically own. As part of this process, IA claims to withhold lending a physical copy while the digital copy is on loan.  The publishers countered, maintaining that rather than purchasing legitimate “ebooks,” IA actually scanned copies of 127 books in print before lending those copies, all without the authorization of the publishers. 

District Court’s Initial Ruling

The matter was brought before the Second Circuit after a district court in the Southern District of New York ruled that IA’s use of the scanned books in its digital library was not fair use and granted the publishers’ claims against IA, while denying those brought by IA, resulting in judgment in favor of the publishers. 

The Role of Ebooks Licensing and Aggregators

On appeal, the Second Circuit noted that ebooks are not purchased by libraries in the same way as print copies but are licensed through distributors called “aggregators.” Those aggregators are tasked with oversight – essentially ensuring only library members can check out the ebooks. Aggregators also use digital rights management (“DRM”) software and other security measures to prevent the unauthorized copying or distribution of the ebooks. The Second Circuit also took note of various licensing models utilized by book publishers to both protect and profit from the distribution of ebooks such as subscriptions for a limited term, pay-per-use, or other models. Still further, the Court considered the growth of the ebooks industry in recent years, which generated $59 million annually for Penguin and $46.9 Million for HarperCollins from 2015 to 2020.

Public Domain Books vs. Copyrighted Works

The IA website includes millions of public domain ebooks users can download for free and read without restriction. The IA library also includes 3.6 Million copyrighted books (including 33,000 of the plaintiffs’ titles). IA expanded its lending capacity beginning in 2018. During Covid, it launched the National Emergency Library (“NEL”) after the pandemic closed libraries nationwide and took 650 Million books out of circulation. During NEL, IA allowed ebooks to be borrowed by up to 10,000 patrons simultaneously.

Fair Use Defense and the 1-to-1 Lending Model

Both before the district court and the Second Circuit, IA asserted that it ensured 1-1 lending –meaning one ebook loaned for each print copy—making its use fair use rather than copyright infringement. Both courts disagreed. In particular, the Second Circuit noted evidence that in some cases, the print copies were not withheld from circulation while the correspondence ebook was on loan. Regardless, the Second Circuit held that 1-1 lending, even if true, would not excuse IA’s scanning of print materials to create its own “ebooks” without authorization of the publishers.

The Second Circuit’s Final Ruling

On the basis of these facts, the Second Circuit upheld the district court’s judgment in favor of the book publishers and against IA. A key lynchpin in this final decision appears to have been the library’s unauthorized scanning of print versions of copyrighted materials to create its own digital copies. Thus, the path going forward is clear—the distribution of ebooks does not occur in the same manner reserved for print copies, and publisher licensing terms and restrictions must be followed to avoid liability.

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