The U.S. Second Circuit Court of Appeals today affirmed a district court decision that the Internet Archive’s “Free Digital Library” violates the suing publishers’ copyrights. (A complete copy of the Second Circuit decision in Hachette vs. Internet Archive can be downloaded at the link. A discussion of the 2023 district court decision is here.)

The court summarized its ruling as follows:

Internet Archive creates digital copies of print books and posts those copies on its website where users may access them in full, for free, in a service it calls the “Free Digital Library.” Other than a period in 2020, Internet Archive has maintained a one-to-one owned-to-loaned ratio for its digital books: Initially, it allowed only as many concurrent “checkouts” of a digital book as it has physical copies in its possession. Subsequently, Internet Archive expanded its Free Digital Library to include other libraries, thereby counting the number of physical copies of a book possessed by those libraries toward the total number of digital copies it makes available at any given time.

Plaintiffs-Appellees―four book publishers―sued Internet Archive in 2020, alleging that its Free Digital Library infringes their copyrights in 127 books and seeking damages and declaratory and injunctive relief. Internet Archive asserted a defense of fair use under Section 107 of the Copyright Act. The district court rejected that defense and entered summary judgment for Plaintiffs.

This appeal presents the following question: Is it “fair use” for a nonprofit organization to scan copyright-protected print books in their entirety, and distribute those digital copies online, in full, for free, subject to a one-to-one owned-to-loaned ratio between its print copies and the digital copies it makes available at any given time, all without authorization from the copyright-holding publishers or authors? Applying the relevant provisions of the Copyright Act as well as binding Supreme Court and Second Circuit precedent, we conclude the answer is no. We therefore AFFIRM.

The Court’s analysis revolved around “four non-exclusive factors” for determining whether a particular use is “fair”: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (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; and (4) the effect of the use upon the potential market for or value of the copyrighted work.

In the Court’s analysis of the fourth factor, “The effect of the use on the potential market for or value of the work”, it said:

…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. While IA claims that prohibiting its practices would harm consumers and researchers, allowing its practices would―and does―harm authors. With each digital book IA disseminates, it deprives Publishers and authors of the revenues due to them as compensation for their unique creations…

The Internet Archive posted this response to the decision:

We are disappointed in today’s opinion about the Internet Archive’s digital lending of books that are available electronically elsewhere. We are reviewing the court’s opinion and will continue to defend the rights of libraries to own, lend, and preserve books. 

What statutory damages the Internet Archive should owe is a question the district court is expected to revisit once the plaintiffs reduce their damage claims to judgment. In the district court case, the Internet Archive asked that damages be remitted if the court rejected IA’s fair use defense, citing Section 504 of the Copyright Act which directs courts to remit statutory damages where the infringer is a “nonprofit educational institution, library, or archives,” or one of its agents or employees, and the defendant “infringed by reproducing the work in copies” and “believed and had reasonable grounds for believing” that its use of the work was fair use. At the time of the district court’s decision they said the request was premature and that IA may renew the argument “in connection with the formation of an appropriate judgment” (i.e., when the plaintiffs try to get paid.)