Second Circuit Says Libraries Disincentivize Authors To Write Books By Lending Them For Free

What would you think if an author told you they would have written a book, but they wouldn’t bother because it would be available to be borrowed for free from a library? You’d probably think they were delusional. Yet that argument has now carried the day in putting a knife into the back of the extremely useful Open Library from the Internet Archive.

The Second Circuit has upheld the lower court ruling and found that the Internet Archive’s Open Library is not fair use and therefore infringes on the copyright of publishers (we had filed an amicus brief in support of the Archive asking them to remember the fundamental purpose of copyright law and the First Amendment, which the Court ignored).

Even though this outcome was always a strong possibility, the final ruling is just incredibly damaging, especially in that it suggests that all libraries are bad for authors and cause them to no longer want to write. I only wish I were joking. Towards the end of the ruling (as we’ll get to below) it says that while having freely lent out books may help the public in the “short-term” the “long-term” consequences would be that “there would be little motivation to produce new works.”

Which is just all kinds of disconnected from reality. There is not a single person in the world who thinks “well, I would have written this book, except that it would be available for people to borrow for free from a library, so I guess I won’t.” Yet a three-judge panel on the Second Circuit concludes exactly that.

As you’ll recall, the Open Library is no different than a regular library. It obtains books legally (either through purchase or donation) and then lends out one-to-one copies of those books. It’s just that it lends out digital copies of them. To keep it identical to a regular library, it makes sure that only one digital copy can be lent out for every physical copy it holds. Courts have already determined that digitizing physical books is fair use, and the Open Library has been tremendously helpful to all sorts of people.

The only ones truly annoyed by this are the publishers, who have always hated libraries and have long seen the shift to digital as an open excuse to effectively harm libraries. With licensed ebooks, the publishers have jacked up the prices so that (unlike with regular books), the library can’t just buy a single copy from any supplier and lend it out. Rather, publishers have made it prohibitively expensive to get ebook licenses, which come with ridiculous restrictions on how frequently books can be lent and more.

It was clear that the only reason all the big publishers sued the Internet Archive was to put another nail in the coffin of libraries and push to keep this ebook licensing scheme grift going. Now the courts have helped.

This ruling from the Second Circuit pushed back a little bit on one of the most overbroad parts of the district court’s ruling. The judge there seemed to have decided how he was going to rule long before oral arguments even happened, as he published his ruling the very same week as the arguments, and he twisted things to favor the publishers on every single issue, even arguing that because the Internet Archive — a non-profit — asks for donations, that makes everything it does a “commercial activity.” However, this ruling is still really problematic, and arguably in significant conflict with other circuits.

The key part of the case is whether or not the Internet Archive’s scanning and lending of books is fair use. The Second Circuit says that it fails the fair use four factors test. On the question of transformative use, the Internet Archive argued that because it was using technology to make lending of books more convenient and efficient, it was clearly transformative. Unfortunately, the court disagrees:

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 full, for free. Its digital copies do not provide criticism, commentary, or information about the originals. Nor do they “add[] something new, with a further purpose or different character, altering the [originals] with new expression, meaning or message.” Campbell, 510 U.S. at 579. Instead, IA’s digital books serve the same exact purpose as the originals: making authors’ works available to read. IA’s Free Digital Library is meant to―and does―substitute for the original Works

The panel is not convinced by the massive change in making physical books digitally lendable:

True, there is some “change” involved in the conversion of print books to digital copies. See Infinity Broadcast Corp. v. Kirkwood, 150 F.3d 104, 108 n.2 (2d Cir. 1998) (“[A] change in format . . . is not technically a transformation.”). But the degree of change does not “go beyond that required to qualify as derivative.” Warhol II, 598 U.S. at 529. Unlike transformative works, derivative works “ordinarily are those that re-present the protected aspects of the original work, i.e., its expressive content, converted into an altered form.” Google Books, 804 F.3d at 225. To be transformative, a use must do “something more than repackage or republish the original copyrighted work.” Authors Guild, Inc. v. HathiTrust, 755 F.3d 87, 96 (2d Cir. 2014); see also TVEyes, 883 F.3d at 177 (“[A] use of copyrighted material that merely repackages or republishes the original is unlikely to be deemed a fair use.” (internal quotation marks omitted)). Changing the medium of a work is a derivative use rather than a transformative one.

But, that’s not what a derivative work is? A derivative work is not scanning a book. Scanning a book is making a copy. A derivative work is something like making a movie out of a book. So, this analysis is just fundamentally wrong in saying that this is a derivative work, and thus the rest of the analysis is kinda wonky based on that error.

Tragically, the Court then undermines the important ruling in the Betamax/VCR case that found “time shifting” (recording stuff off your TV) to be fair use, even as it absolutely was repackaging the same content for the same purpose. The Court says that doesn’t matter because it “predated our use of the word ‘transformative’ as a term of art.” But that doesn’t wipe out the case as a binding precedent, even though the Court here acts as though it does.

Sony was decided long before modern technology made it possible for one to view virtually any content at any time. Put in context, the “time-shifting” permitted by the defendant’s tape recorders in Sony was a unique efficiency not widely available at the time, and certainly not offered by the plaintiff-television producer.

So because content is more widely available, this kind of shifting is no longer fair use? How does that make any sense at all?

Then the Court says (incorrectly — as we’ll explain shortly) that there’s really nothing new or different about what the Open Library does:

Here, by contrast, IA’s Free Digital Library offers few efficiencies beyond those already offered by Publishers’ own eBooks.

The problem, though, is that this isn’t quite true. Getting licensed ebooks out from libraries is a difficult and cumbersome practice and requires each library to have a vast ebook collection that none can possibly afford. As this lawsuit went down, more and more authors came out of the woodwork, explaining how research they had done for their books was only possible because of the Open Library and would have been impossible via a traditional library given the lending restrictions and availability restrictions.

The amazing writer Annalee Newitz just posted about how their recent (amazing) book on psyops was only possible by using the Open Library. Researcher/writer Molly White talks about how useful the Open Library has been to researchers and Wikipedia editors, enabling them to access content that simply isn’t readily available via regular libraries. As Jennie Rose Halperin wrote for us last year, people use the Open Library differently than regular libraries. The average user checks out a book for just 30 minutes, suggesting that it’s not actually a replacement for traditional libraries, but a useful tool for people who are doing research, as Annalee and Molly suggested with their examples.

It’s just wrong for the panel of judges to insist it’s a one-to-one replacement for libraries in terms of how it’s used by borrowers. And it’s not like libraries were complaining about this either. Libraries have been generally supportive of the Open Library (my local library has their own online catalog linked to the Open Library).

A separate way in which the Open Library is unique is that it allows writers and researchers and, well, anyone, to link directly to books, which is incredibly valuable. But the Court is not impressed, even though it barely goes into any details. It just says: “That authors of online articles may embed links to IA’s Free Digital Library does not render the Library a significantly transformative secondary use of the Works.”

From there, the Court explores whether or not the Internet Archive’s use here was commercial. The lower court said it was because, ridiculously, the Internet Archive had donation links on library pages. Thankfully, the panel here sees how problematic that would be for every non-profit:

We likewise reject the proposition that IA’s solicitation of donations renders its use of the Works commercial. IA does not solicit donations specifically in connection with its digital book lending services―nearly every page on IA’s website contains a link to “Donate” to IA. App’x 6091. Thus, as with its partnership with BWB, any link between the funds IA receives from donations and its use of the Works is too attenuated to render the use commercial. Swatch, 756 F.3d at 83. To hold otherwise would greatly restrain the ability of nonprofits to seek donations while making fair use of copyrighted works. See ASTM I, 896 F.3d at 449 (rejecting the argument that because free distribution of copyrighted industry standards enhanced a nonprofit organization’s fundraising appeal, the use was commercial).

It also disagrees that this use is commercial because there’s a referral link for people to go and buy a copy of the book, saying that’s “too attenuated”:

Any link between the funds IA receives from its partnership with BWB and its use of the Works is too attenuated for us to characterize the use as commercial on that basis

Even so, the lack of commerciality isn’t enough to protect the project on the first factor analysis, and it goes to the publishers.

On the second factor, the nature of the works, the Internet Archive tried to argue that because it was sharing knowledge from non-fiction books, this one should be neutral, favoring neither party. However, the Court says it doesn’t matter. Books are books, and so this also favors the publishers.

On the third factor, the amount shared, many people think this should obviously go to the publishers, given that it’s the entire books that are lent. But in the Google Books and HathiTrust cases, the court had said that this factor just means if the use is copying more than is necessary. Thus it’s okay to copy an entire work, if that’s what is necessary for the fair use in question. As such, it seems like this should go to the Open Library. But the Court sees it differently:

IA’s use is therefore unlike the copying that took place in HathiTrust and Google Books. In those cases, the defendants scanned copyrighted books to create, among other things, searchable databases that allowed users to view snippets of text pertaining to their search terms, or to learn on which pages and with what frequency their search terms appeared in any given book. HathiTrust, 755 F.3d at 91; Google Books, 804 F.3d at 208–10. Though the defendants copied the books in their entirety, doing so was necessary to achieve a transformative, secondary purpose―the searchable databases

This seems fundamentally incorrect. The panel is really incorporating its analysis on the first factor and substituting it for any real analysis on the third. Does the third factor regarding the amount copied differ if it is or is not transformative? Then if a court gets the first factor wrong, then by definition they will also get the third factor wrong, shifting at least half of the factors on that one point. That can’t be how the test is supposed to work.

Then, finally, we have the “impact on the market” question. This and the first factor tend to be the only ones that really matter in these analyses. The Archive insisted that there was no evidence of any actual harm to publishers from the Open Library. But, the panel here says “eh, we’re pretty sure it must harm publishers.”

Here, not only is IA’s Free Digital Library likely to serve as a substitute for the originals, the undisputed evidence suggests it is intended to achieve that exact result. IA copies the Works in full and makes those copies available to the public in their entirety. It does not do this to achieve a transformative secondary purpose, but to supplant the originals. IA itself advertises its digital books as a free alternative to Publishers’ print and eBooks. See, e.g., App’x 6099 (“[T]he Open Libraries Project ensures [libraries] will not have to buy the same content over and over, simply because of a change in format.” (internal quotation marks omitted)); id. at 6100 (marketing the Free Digital Library as a way for libraries to “get free ebooks”); id. at 6099 (“You Don’t Have to Buy it Again!”). IA offers effectively the same product as Publishers―full copies of the Works―but at no cost to consumers or libraries. At least in this context, it is difficult to compete with free.

But again, this analysis totally misses the underlying difference in scanned books vs. actual ebooks. If there’s a licensed ebook available, the experience for reading is way, way better than just dealing with a scan. Publishers absolutely can compete with free in this example.

I believe that the Court here is taking the Archive’s comment about “will not have to buy” completely out of context. Their argument is that when publishers change formats this offers a way to continue lending without having to repurchase content that they’ve already got. It’s the equivalent of the “time shifting” argument that was fair use in Sony, where all they’re doing is effectively shifting formats of content they already have legal access to, which should be fair use.

Furthermore, the Internet Archive presented even stronger evidence of the lack of harm:

IA’s expert, Dr. Rasmus Jørgensen, examined OverDrive checkouts of the Works before, during, and after the National Emergency Library (IA’s COVID-era program pursuant to which it lifted its one-to-one owned-to-loaned ratio, allowing each digital book to be checked out by up to 10,000 users at a time without regard to the corresponding number of physical books in storage or in partner libraries’ possession) to assess potential harm to Publishers’ eBook licensing market. If IA’s lending were indeed a substitute for Publishers’ library eBook licenses, he theorized, then the shutdown of the NEL and reinstitution of IA’s lending controls should correspond to an increase in demand for the Works on OverDrive (the commercial service used by many libraries who license eBooks). But Dr. Jørgensen found the opposite: OverDrive checkouts of the Works decreased following the shutdown of the NEL in June 2020. From this, IA concludes that its lending “has no effect on demand for borrowing on OverDrive” and, therefore, there is “no reason to imagine, much less assume, that digital lending affects Publishers’ ebook license revenue at all.”

[….]

IA also submits the expert report of Dr. Imke Reimers, who examined the effect of IA’s lending on Amazon sales rankings for print copies of the Works. Dr. Reimers analyzed whether Amazon sales rankings changed when IA (1) first added the Work to its Free Digital Library, (2) launched the NEL, or (3) removed the Work from its Free Digital Library in response to this lawsuit. She found “no statistically significant evidence” that either inclusion in IA’s library or increased lending through the NEL harmed print sales rankings on Amazon, and that removal of the Works from IA’s Free Digital Library actually correlated with a decrease in sales rankings of the Works on Amazon. App’x 4934. From this and Dr. Jørgensen’s report, IA concludes that its Free Digital Library has no effect on Publishers’ markets for print and eBooks.

But the Court dismisses both of these, saying that there could be many reasons for the results that have nothing to do with the changes to the Archive’s lending practices. And it says that the Amazon comparison is meaningless because it was about physical books, not ebooks.

So after complaining that this evidence is weak, it accepts the publishers’ argument that they were harmed even though they presented no actual evidence to support that claim. So, weak evidence is no good for the Internet Archive and the publishers get away with presenting no evidence at all.

Although they do not provide empirical data of their own, Publishers assert that they (1) have suffered market harm due to lost eBook licensing fees and (2) will suffer market harm in the future if IA’s practices were to become widespread.

[…..]

We are likewise convinced that “unrestricted and widespread conduct of the sort engaged in by [IA] would result in a substantially adverse impact on the potential market for [the Works in Suit].” Campbell, 510 U.S. at 590 (cleaned up). IA’s Free Digital Library serves as a satisfactory substitute for the original Works. Were we to approve IA’s use of the Works, there would be little reason for consumers or libraries to pay Publishers for content they could access for free on IA’s website. See Warhol I, 11 F.4th at 50. Though Publishers have not provided empirical data to support this observation, we routinely rely on such logical inferences where appropriate in assessing the fourth fair use factor.

Again, this is wrong. I always borrow official ebooks from my library when possible, rather than the Open Library, just because the quality is so much better. I only switch over to the Open Library when such ebooks are not available via my library. But the false assumption, which the Second Circuit buys into, is that there zero difference between the files.

And that’s just fundamentally wrong.

It also seems in pretty direct conflict with what the DC Circuit said last year in the case about whether or not Public Resource could publish standards that have been incorporated into law. In that case, on this fourth factor, they found that just because identical digital copies could be downloaded, it did not mean that the market was negatively impacted. That court noted that the publishers in that case could not show any evidence of harm (indeed, in some cases, their sales had increased).

But this panel brushes that off, saying the burden of proof was on the Archive and it failed, so it doesn’t matter that the publishers offered nothing:

To the extent IA faults Publishers’ lack of empirical data, it forgets the burden of proof. Recall the broader context: Publishers have already established a prima facie case of copyright infringement. The only issue in this appeal is whether IA’s Free Digital Library constitutes a fair use of the Works. “Fair use is an affirmative defense; as such, the ultimate burden of proving that the secondary use does not compete in the relevant market is appropriately borne by the party asserting the defense: the secondary user.” Warhol I, 11 F.4th at 49. While the rightsholder may bear some initial burden of identifying relevant markets, “we have never held that the rightsholder bears the burden of showing actual market harm.” Id. Publishers need not present empirical data of their own in connection with IA’s asserted affirmative defense

Then it goes on to say that the nature of the works is different in that case, but the “nature of the works” is a different factor. So, again, this panel seems to want to keep mixing up the factors.

The final part of the ruling really is a tragic insult to the public. The Internet Archive made a final argument that the library should be allowed to continue given its substantial public benefit. But the Court, ridiculously, claims that the public gets a greater benefit from the library being shut down, and mocks the idea that expanding access to the public is all that important.

Indeed, this next section is going to do tremendous damage to fights for an open internet and against copyright maximalism and how it locks up knowledge. This whole section is basically writing the public benefit out of copyright law, even though benefiting the public is the entire purpose of copyright law. And, on top of it, it argues that libraries disincentivize authors by offering books for free. Which is crazy.

We conclude that both Publishers and the public will benefit if IA’s use is denied.

To be sure, expanding access to knowledge would, in a general sense, benefit the public. But “[a]ny copyright infringer may claim to benefit the public by increasing public access to the copyrighted work.” Harper & Row, 471 U.S. at 569. That does not alone render the infringement lawful. Indeed, the Copyright Act and its empowering constitutional authority reflect a considered judgment that “the Progress of Science and useful Arts” is best promoted by laws that protect authors’ original works and permit authors to set the terms of engagement, at least for a limited time. See Sony, 464 U.S. at 429. Doing so benefits the public “by providing rewards for authorship.” Google Books, 804 F.3d at 212. This monopolistic power is a feature, not a bug, of the Copyright Act.

Within the framework of the Copyright Act, IA’s argument regarding the public interest is shortsighted. True, libraries and consumers may reap some short-term benefits from access to free digital books, but what are the long-term consequences? If authors and creators knew that their original works could be copied and disseminated for free, there would be little motivation to produce new works. And a dearth of creative activity would undoubtedly negatively impact the public. It is this reality that the Copyright Act seeks to avoid.

That bolded line in that paragraph there is exactly what the publishers wanted: a knife in the back of libraries. It’s literally saying “sure, libraries may benefit the public, but if they continue who will continue to write?”

This is completely disconnected from reality. What authors choose not to write because their book is available to be freely borrowed from a library? None. And yet, this is now precedent in the Second Circuit.

It’s a fantasyland claim.

Again, the Open Library works in a manner no different from any regular library from the point of view of a publisher or author. A book is purchased or donated (the publisher and the author therefore get their money) and then it can be lent out. This is literally no different than how an author is compensated from a regular library.

If the bolded comments above are true for the Open Library, they must also be true for a regular library. Yet, I guarantee that not a single author chooses not to write because their books are available in a library to be lent out for free.

This is the part that really destroys me in this ruling. It takes a completely nonsensical claim and insists that it’s true. It’s fantasyland thinking and it effectively puts the knife in the back of libraries.

I imagine the Archive will seek cert at the Supreme Court, but who knows what will happen there. The Supreme Court hasn’t been great on fair use lately. The better answer is that Congress should fix this and make it clear that copyright law blesses this kind of open digital lending, though the copyright industries would throw a shitfit if anyone even dared propose such a bill.

This ruling is a huge loss for public access to knowledge and for libraries.