A unanimous panel of the Second Circuit Court of Appeals has ruled that Google's book-scanning project constitutes fair use, affirming a district court decision that digitizing books and then displaying short passages in search results did not violate copyright law.

"The purpose of the copying is highly transformative, the public display of text is limited, and the revelations do not provide a significant market substitute for the protected aspect of the originals," the court wrote. "Google's commercial nature and profit motivation do not justify denial of fair use."

The Authors Guild (with individual authors later substituted as plaintiffs) initiated the long-running legal battle in 2005, alleging that Google violated their copyrights by contracting with several major libraries to scan all of their books and create a searchable database of tens of millions of tomes.

Google countered that the project constituted fair use, but before a court could rule, the parties reached a $125 million settlement. A federal court judge refused to approve the deal and granted summary judgment in Google's favor in 2013.

The plaintiffs appealed, arguing that the digital scanning was not a "transformative use," and that Google was motivated by profit and dominance of the Internet search market. They also argued that Google violated their derivative rights in search functions, that the storage of the digital copies exposed them to the risk that hackers could steal their books and make them available on the Internet, and that the distribution to participating libraries of the digital copies was not a fair use.

Applying the four factors of fair use—the purpose and character of use, the nature of the copyrighted work, the amount and substantiality of the portion taken, and the effect of the use on the potential market—the federal appellate panel rejected each of the plaintiffs' contentions and affirmed summary judgment in Google's favor.

"Google's making of a digital copy to provide a search function is a transformative use, which augments public knowledge by making available information about Plaintiffs' books without providing the public with a substantial substitute for matter protected by the Plaintiffs' copyright interests in the original works or derivatives of them," the Second Circuit said.

In addition, the database allowed readers "to learn the frequency of usage of selected words in the aggregate corpus of published books in different historical periods," the court noted.

The same held true for the "snippet function" where Google displayed a horizontal segment comprising an eighth of a page of text in response to a search term. A process called "blacklisting" makes one snipped portion on each page and one complete page out of every ten permanently unavailable. The company will exclude any book from snippet view at the request of the rights holder and Google does not provide snippet view for certain books—such as cookbooks and dictionaries—where viewing a small segment was likely to satisfy the searcher's need.

"Google's division of the page into tiny snippets is designed to show the searcher just enough context surrounding the searched term to help her evaluate whether the book falls within the scope of her interest (without revealing so much as to threaten the author's copyright interests)," the panel wrote.

The court also dismissed the plaintiffs' concerns about having their derivative rights in search functions usurped, "in part because the licensing markets in fact involve very different functions than those that Google provides, and in part because an author's derivative rights do not include an exclusive right to supply information (of the sort provided by Google) about her works."

If Google converted books into a digitized form and made it accessible to the public, the plaintiffs' claim would be strong, the court said. But "Google safeguards from public view the digitized copies it makes and allows access only to the extent of permitting the public to search for the very limited information accessible through the search function and snippet view. The program does not allow access in any substantial way to a book's expressive content."

Under these circumstances, profit motivation did not justify denial of fair use, the panel said, and the record before the court did not demonstrate that the plaintiffs were exposed to an unreasonable risk that hackers would cause a loss of copyright value. As for the claim that distribution to the libraries violated the plaintiffs' rights, the court pointed out that the libraries already owned the books and making fair use through provision of digital searches was not an infringement.

To read the opinion in The Authors Guild v. Google, Inc., click here.

Why it matters: Could the overwhelming victory for Google survive a review by the U.S. Supreme Court? The plaintiffs said they will appeal the decision to the justices, asserting that the Second Circuit gave too much weight to the "transformative" issue and not enough consideration to other factors, such as how much of the original work was copied and the potential market effect on the plaintiffs' works.