The Second Circuit Court of Appeals delivered a resounding victory to the publishing industry on Wednesday, September 4, 2024, in Hachette Books v. Internet Archive, holding that the Internet Archive's "controlled digital lending" program violated copyright law. The Second Circuit's decision affirmed the lower court's 2023 ruling, finding that the nonprofit's practice of creating and lending full digitized copies of books, even on a one-to-one owned-to-loaned basis, was not shielded by the fair use doctrine.
The Internet Archive scanned physical copies of books to create full digital versions of the physical books for consumers to check out. These digital copies were made available for checkout on a one-to-one basis—that is, the Internet Archive allowed customers to check out only one digital copy for each physical book held by one of its partner libraries. The Internet Archive markets its lending services to libraries as a free alternative to publishers' print books and eBook licenses. For a three-month period at the beginning of the COVID pandemic, the Internet Archive lifted its one-to-one owned-to-loaned model, but implemented this again in June 2020 when publishers Hachette, HarperCollins, Penguin Random House, and Wiley filed suit against the Internet Archive for violating the copyrights of 127 separate works with its controversial lending practice.
On March 24, 2023, the District Court for the Southern District of New York found in favor of the plaintiff publishers on summary judgment.
The Internet Archive appealed, and on September 4, 2024, the Court of Appeals for the Second Circuit upheld the lower court's ruling. The Second Circuit agreed with the Southern District of New York, swiftly disposing of the Internet Archive's fair use argument. The court held that the Internet Archive's actions are not permitted under copyright and that the organization has no valid fair use defense. Books, of course, are generally highly creative and merit great protection, and the Internet Archive was digitizing entire copies of full books. So the key analyses by the Second Circuit were of two of the four fair use factors: the "purpose and character of the use" and "effect on the potential market." Here, the court reasoned that the Internet Archive's digital copying and lending program was not sufficiently transformative. "Changing the medium of a work," the court stated, "is a derivative use rather than a transformative one" (emphasis added). The Internet Archive's digital books served the "same exact purpose as the originals: making authors' works available to read"—they were meant to, and in fact they did, serve as a substitute for the original works. The Second Circuit held that the Internet Archive offers the same efficiencies as the derivative works produced by the publishers while greatly impinging on their exclusive right to prepare those works. Notably, the Second Circuit did not agree with the Internet Archive's argument that their model was in the "public interest," noting that perhaps it might provide some short-term benefits to consumers and libraries but pointing out that there are long-term consequences, and calling it "self-evident" that such practices would harm the publishers' market and will, and has, harmed authors of the books. Accordingly, the Second Circuit held that fair use could not shield the Internet Archive from liability.
The Second Circuit's decision is of course a major win for the publishing industry. But more than that, it is a strong reminder that, as we have frequently written, relying on a successful fair use defense is very risky, even as new technologies continue to emerge. The Second Circuit stated that it determined it was bound by both Supreme Court and Second Circuit precedent in its finding that the Internet Archive's actions were not a fair use under the copyright law.
