IP Law Daily, COPYRIGHT—2d Cir.: Internet Archive’s e-book library was not a fair use, (Sep 4, 2024)

By Matthew Hersh, J.D.

The court of appeals affirms a lower court holding in favor of book publishers.

A non-profit organization made famous for archiving the entire public internet could not use the fair use defense for running a separate service that lent out digital copies of books, the U.S. Court of Appeals for the Second Circuit has held. The court, in affirming the district court’s grant of summary judgment to book publishers who challenged the e-lending service, found that none of the traditional fair use factors favored the non-profit’s activities (Hachette Book Group, Inc. v. Internet Archive, No. 23-1260 (2d Cir. Sept. 4, 2024)).

The lawsuit involves the Internet Archive, the non-profit organization perhaps known best for archiving every public webpage on the internet through the archive.org website. The organization, founded by Brewster Kahle, also works with libraries, museums, universities, and the public to preserve and offer free online access to texts, audio, moving images, software, and other cultural artifacts. But that is not all the Internet Archive does. The organization also buys up (or collects donations of) print books, scans them, and lends them electronically to users through an “e-library” function.

The Internet Archive’s e-library raised the ire of a number of major book publishers, among them Hachette, HarperCollins, Wiley, and Penguin Random House. Those publishers, noting that many of the books in this e-library were protected by copyright, filed a lawsuit against the Internet Archive in 2020.

In March 2023, the district court granted summary judgment in favor of the book publishers, leading to this appeal on the issue of fair use.

Transformative use. The court, in a scholarly 64-page opinion, found that the e-book library was not protected by the fair use doctrine. The court began by finding that the library did not constitute a transformative use. The Internet Archive argued that library was transformative because its technology made lending more convenient and efficient and “enable[d] uses not possible with print books and physical borrowing,” such as allowing authors to linked directly to digital books in the library. But this was not enough to make the library transformative, the court found. “IA creates digital copies of the Works and distributes those copies to its users in full, for free,” the court noted. “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 with new expression, meaning or message.” Rather, the court found, “IA’s digital books serve the same exact purpose as the originals: making authors’ works available to read.” There was nothing transformative in that.

Nor did the e-book library offer consumers any kind of service that they could not have obtained from licensed offerings. The Internet Archive argued that the case was analogous to the 1984 Sony case in which the Supreme Court held that the use of video recorders to watch shows on a tape-delay (to “time shift,” in other words) constituted fair use because the technology “merely enables a viewer to see such a work which [they] had [already] been invited to witness in its entirety free of charge.” Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 449 (1984). But this was not the same, the court of appeals found here. “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,” the court noted. Here, by contrast, the court observed, the publishers already offered precisely the same service. “Understood this way,” the court noted, “IA’s Free Digital Library does not ‘improv[e] the efficiency of delivering content’ without unreasonably encroaching on the rights of the copyright holder; it offers the same efficiencies as Publishers’ derivative works while greatly impinging on their exclusive right to prepare those works.”

Commercial use. Although the court of appeals agreed with the district court that the use was not transformative, it parted ways on the question of commercial use. The district court found that the Internet Archive made a commercial use of the works because it solicited donations on its website and took a cut of the proceeds when users bought a physical book from an affiliated provider using a link embedded on its website. But that was not enough to make the use commercial, the court of appeals found. It was undisputed that Internet Archive IA was a nonprofit entity and that it distributes its digital books for free, the court noted—and “of course, IA must solicit some funds to keep the lights on.” Moreover, the court noted, the funds received from these activities were “too attenuated for us to characterize the use as commercial on that basis.”

Important, the court noted, the fact that the use was non-commercial did not outweigh the non-transformative nature of the use. The nonprofit character of the library’s use was “not conclusive,” the court noted, and transformativeness remained the “central” focus of the first factor. Thus, on balance, the court found, the first fair use factor favored the publishers.

Nature of the use. The court found that the second factor also favored the publishers. The Internet Archive argued that the factor should be neutral because the universe of books offered by the e-book library included both fiction and non-fictional works. But that general statement was an “oversimplification,” the court found. “While the Works in Suit include both fiction and nonfiction books,” the court noted, “even the nonfiction books contain original expression “close[] to the core of intended copyright protection.” That was enough to tilt this factor against fair use.

Amount and substantiality of the use. The court easily found that the amount and substantiality of the use weighed against fair use. It was undisputed, the court noted, that the Internet Archive copies the books in their entirety and distributes those copies to the public in full. Internet Archive argued that the third factor weighed neutrally because “copying the entire work is necessary” in order to carry out its lending purposes. But “this argument hinges entirely on its assumption that its use of the Works is transformative,” the court explained. Since the use was not transformative, the copying of the entire works would also weigh against fair use.

Effect on the market. The court found that this factor, too, weighed against fair use. This conclusion was easy to reach. “Here, not only is IA’s Free Digital Library likely to serve as a substitute for the originals,” the court noted, “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.” Common sense suggested that there was a market effect, the court found.

Nor did the Internet Archive meet its burden to disprove market effect. The Archive presented expert evidence showing that around the time that it took down its free archive, sales of print and online books decreased rather than increased. “But just because one event follows another doesn’t mean it was caused by the prior event,” the court observed. Indeed, the court noted, there were a broad range of factors at play around the same time, “including the COVID-related surge in ebook sales which slowed down by summer 2020 as public spaces began to reopen.” The analysis did not change the outcome.

The district court’s summary judgment ruling was affirmed.

The Case is No. 23-1260.

Judge: Kahn, M.

Attorneys: John Browning (Davis Wright Tremaine LLP) for Hachette Book Group, Inc. Joseph C. Gratz (Morrison & Foerster LLP) for Internet Archive.

Companies: Hachette Book Group, Inc.; HarperCollins Publishers LLC; John Wiley & Sons, Inc.; Penguin Random House LLC; Internet Archive

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