Internet Archive, a nonprofit organization, operates a 'Free Digital Library' where it scans print books and makes digital copies available to users for free. The organization maintained a 'one-to-one' ratio, meaning it would only lend a digital copy if it owned a physical copy of that book, a practice it called Controlled Digital Lending. In 2020, four major publishers—Hachette, HarperCollins, John Wiley & Sons, and Penguin Random House—sued Internet Archive, alleging that this practice infringed their copyrights in 127 books. The publishers argued that Internet Archive was creating unauthorized derivative works and competing with their own licensed eBook markets. The district court granted summary judgment for the publishers, rejecting Internet Archive's fair use defense. Internet Archive appealed, arguing that its nonprofit status and the efficiency of its lending model constituted fair use.
The Second Circuit applied the four statutory factors of fair use to determine whether Internet Archive's scanning and lending of entire books was permissible. First, regarding the purpose and character of the use, the court focused on whether the use was transformative. The court concluded that Internet Archive's use was not transformative because it did not add new expression, meaning, or message; it merely converted print books into digital copies to serve the same purpose as the originals: reading the full text. The court rejected the argument that the efficiency of digital lending or the one-to-one ratio made the use transformative, noting that changing the medium from print to digital is a derivative use, not a transformative one. Second, the court found the nature of the copyrighted works favored the publishers because the works were creative fiction and nonfiction, which lie at the core of copyright protection. Third, the court held that the amount and substantiality of the use weighed against fair use because Internet Archive copied the works in their entirety. The court distinguished this from cases like Google Books, where copying the whole was necessary for a transformative search function, whereas here, the entire work was made available to the public for reading. Finally, the court found that the effect on the potential market favored the publishers. Internet Archive's free digital copies served as a direct substitute for the publishers' licensed eBooks, usurping a market that properly belongs to the copyright holder. The court rejected Internet Archive's expert data on market harm as insufficient to meet its burden of proof, emphasizing that the burden lies with the party asserting the fair use defense.
The decision affirms the district court's permanent injunction, requiring Internet Archive to cease its unauthorized lending of the 127 disputed titles and likely all titles under its Controlled Digital Lending program. Publishers are entitled to damages and injunctive relief. The ruling clarifies that nonprofit status and the one-to-one ratio do not shield digital lending from copyright infringement when the entire work is copied and distributed as a substitute for the original. The case is remanded for the entry of judgment consistent with the Second Circuit's opinion, solidifying the legal boundary between library preservation and unauthorized digital reproduction.
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