In a blow to the Internet Archive, the Court of Appeals says that the online lending library is not fair use

The U.S. Court of Appeals for the Second Circuit today ruled against the Internet Archive, upholding an earlier ruling in the long-running copyright case Hachette v. Internet Archive.

For years, AI scanned physical copies of library books and allowed people to check out digital versions through its Open Library project. It did this on an individual basis, meaning that when you checked out a digital copy, you would take it off the “shelf” until someone returned it. In 2020, when the pandemic shut down libraries around the globe, it expanded its effort with the National Emergency Library program. Under the National Emergency Library program, books were rented on an unlimited basis.

The publishing world did not react well to the NEL, and AI shut down the program two months after its launch. Publishers including Hachette, HarperCollins, Penguin Random House and Wiley then filed suit. The court ruled in favor of the publishers in 2023, and AI appealed.

“This appeal raises the question: Is it ‘fair use’ for a nonprofit organization to scan copyrighted print books in their entirety and distribute those digital copies online, in their entirety, for free, subject to a one-to-one ratio between its print copies and digital copies?
“The author may not make copies of any material that is not the property of a third party, or of any person other than an author or publisher who holds the copyright,” the judges wrote in the decision.

The court has ruled that it does not qualify for fair use protections.

Libraries are big business for publishers, and AI got in on the money. “The library e-book lending market is thriving,” court records say. “E-book borrowings on OverDrive by library patrons increased dramatically between 2010 and 2020. This surge in borrowing translates into higher profits for publishers, some of whom are seeing library e-book licensing take up an increasing percentage of their total e-book revenue. With more than 93% of public libraries participating in e-book lending, publishers and their authors have tapped into a profitable and growing market.”

The story is different for libraries, which have to constantly haggle over digital rights to lend books. “The result is a periodic renegotiation of e-book licenses that are often priced higher and have a shorter term than print copies of the same books,” the court said.

IA’s main argument was that the method of sharing its works was transformative. The court found this unpersuasive. “We conclude that IA’s use of the Works is not transformative. IA creates digital copies of the Works and distributes those copies to its users in their entirety, free of charge,” the court said. “Its digital copies offer no critique, commentary, or information about the originals… Instead, IA’s digital books serve exactly the same purpose as the originals: making the authors’ works available for reading. IA’s Free Digital Library aims to substitute for the original Works, and it does so.”

Chris Freeland, director of library services at the Internet Archive, vowed to continue fighting for the preservation of books. “We are disappointed by today’s ruling on the Internet Archive’s digital lending of books that are available electronically elsewhere,” he said in a statement posted to the Archive. “We are reviewing the court’s opinion and will continue to defend the rights of libraries to own, lend, and preserve books.”

The court, for what it’s worth, has criticized the publishing industry for harming libraries in the court file. “On the one hand, e-book licensing fees can burden libraries and reduce access to creative works,” it said. “On the other hand, authors are entitled to compensation in connection with the copying and distribution of their original creation.”