In a decision that could have wide reverberations on the internet, the U.S. District Court for the Southern District Court of New York granted summary judgment in favor of book publishers and against Internet Archive (“IA”) in a copyright infringement action involving ebooks brought by the four leading book publishers in the United States, Hachette Book Group, Inc., HarperCollins Publishers LLC, John Wiley & Sons., Inc., and Penguin Random House LLC (together, the “Publishers”). As explained by the Court, copies of ebooks are typically licensed to libraries from the Publishers for the Publishers’ profit. Here, however, IA scanned print copies of the Publishers’ copyrighted works without authorization and loaned those scanned digital copies to IA users for free without the Publisher’s consent. In response, the Publishers sued IA for copyright infringement.

Under IA’s system, as further detailed by the Court, IA made the homemade ebooks available through “Controlled Digital Lending” (“CDL”), instituting a one-to-one owned-to-loaned ratio. In other words, IA loaned books simultaneously only in the number of copies it legitimately acquired. For example, if IA “owns three copies of a title and digitizes one copy, it may use CDL to circulate one digital copy and two print, or three digital copies, or two digital copies and one print.”

In response to the Publishers’ lawsuit, IA raised the fair use defense. The parties filed cross-motions for summary judgment. In its decision, the Court rejected IA’s fair use defense and granted summary judgment in favor of the Publishers.

The Court began its opinion by detailing the four statutory factors of fair use: (1) “the purpose and character of the use”; (2) “the nature of the copyrighted work”; (3) “the amount and substantiality of the portion used in relation to the copyrighted work as a whole”; (4) “the effect of the use upon the potential market for or value of the copyrighted work.” It explained that each factor is not exclusive but must be considered on a case-by-case basis, with the results “weighed together[] in light of the purposes of copyright.”

Purpose and Character of Use

Regarding the first factor, purpose and character of use, the opinion stated that courts consider the extent to which the secondary work is (1) transformative or (2) of commercial or non-profit use. As to transformative use, the Court explained that a transformative use “adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message, rather than merely superseding the original work,” including if the use “expands [the] utility” of the work.”

Applying this standard, the Court held that there was nothing transformative about IA’s “copying and unauthorized lending of the [w]orks.” It noted that IA did not reproduce the works to provide criticism, commentary, or information about them or add something new. Rather, it simply scanned paper books to create ebooks. The Court then concluded that an “ebook recast from a print book is a paradigmatic example of a derivative work.”

The Court also rejected IA’s principal argument that IA expanded the utility of the works by making the delivery of library books more efficient. The Court emphasized that “use does not become transformative by making an invaluable contribution to the progress of science and cultivation of the arts.” Rather, “a transformative work is one that serves a new and different function from the original work and is not a substitute for it,” and IA’s copying did not serve any new or different function. In addition, the Court found that IA’s promise to enforce a one-to-one owned-to-loaned ratio did not excuse its unauthorized reproduction under Second Circuit precedent, Capitol Recs., LLC v. ReDigi Inc., 910 F.3d 649 (2d Cir. 2018), which held (in the music download context) that taking measures to avoid increasing the total number of copies in existence cannot rebut or nullify the fact that a program “unquestionably created new copies of each work and involved unauthorized reproduction.”

Furthermore, as to commercial or non-profit purposes, the Court rejected IA’s argument that its library was wholly noncommercial because IA is a non-profit and did not charge fees to ebook borrowers. It emphasized that the “crux of the profit/nonprofit distinction is not whether the sole motive of the use is monetary gain but whether the user stands to profit from exploitation of the copyrighted material without paying the customary price.” In this instance, the Court determined that although IA did not make a monetary profit it nonetheless gained “an advantage or benefit from distributing the works because it uses it website to attract new members, solicit donations, and bolster its standing in the library community.”

Nature of the Work

Regarding the second factor, the nature of the copyrighted work, the Court detailed two relevant distinctions for the analysis: whether the work is (1) expressive/creative or factual/informational, “with a greater leeway being allowed to a claim of fair use where the work is factual or informational,” and (2) published or unpublished, “with the scope of fair use involving unpublished works being considerably narrower.”

Here, the Court noted that the works included works of fiction, which are creative and thus favored the Publishers. As for the non-fiction works, it explained that the Copyright Act protected them, too, because they contained “subjective descriptions and portraits” that are “far removed” from factual or informational works.

Additionally, the Court rejected IA’s argument that because most of the works were published more than five years before IA copied them, IA did not interfere with the rights of any authors to control the first public appearance of their expression. The Court clarified that published works do not lose copyright protection after five years and no principle of fair use supported that publication of the copyrighted works here weighed in favor of fair use.

Amount and Substantiality of Copied Portion

For the third factor, the amount and substantiality of the portion used in relation to the copyrighted work as a whole, the Court found that this factor disfavored fair use because IA copied the entirety of each book and made the complete copies available for lending. Although the Court noted that copying an entire work is sometimes necessary to make a fair use of the work, in this case the Court found that IA’s wholesale copying the works served no transformative purpose.

Effect of Use on Market for or Value of Work

Regarding the fourth factor, the effect of the challenged use upon the potential market for or value of the copyrighted work, the Court explained this factor focuses on whether a secondary use “usurps the market for the [original] by offering a competing substitute.” The opinion further explained that use usurps the market for the original where an accused infringer’s “target audience and the nature of the infringing content is the same as the original.” The Court found that IA’s partner libraries own print copies of books in IA’s collection and it is “patently more desirable to offer IA’s bootleg ebooks than to pay for authorized ebook licenses.” Thus, the Court determined that IA supplanted the Publishers’ place in the ebook licensing market for libraries. Further, the Court found that IA’s conduct could become more widespread, displacing the Publishers’ potential revenues in the future.

Finally, the Court considered the public benefits resulting from IA’s copying, if any. Although the Court acknowledged IA’s argument that its “digital lending makes it easier for patrons who live far from physical libraries to access books and that it supports research, scholarship, and cultural participation by making books widely accessible on the Internet,” it determined that these alleged benefits could not outweigh the market harm to the Publishers.

Concluding that all four fair use factors favored the Publishers, and IA identified no additional relevant considerations, the Court found that as a matter of law IA’s acts were not excused by the fair use defense. However, as of this writing, the final judgment has not been entered, so an appeal is still possible.

The case is Hachette Book Group, Inc. v. Internet Archive, No. 20-cv-4160 (JGK), _ F. Supp. 3d _ (S.D.N.Y. Mar. 24, 2023).