Industry & Advocacy News
March 21, 2023
Oral arguments in Hachette Book Group v. Internet Archive, the publishers’ lawsuit against Internet Archive for committing mass copyright infringement through its Open Library, took place yesterday. The proceeding was conducted over the phone with Judge John G. Koeltl of the Southern District of New York presiding, Elizabeth McNamara from Davis Wright Tremaine arguing on behalf of the publishers, and Joseph Gratz from Morrison and Foerster representing the Internet Archive. Others were invited to listen in to the engaging ninety-minute hearing, during which both sides argued their respective motions for summary judgment.
The arguments opened with Ms. McNamara laying out the case for why the Internet Archive’s “controlled digital lending” (CDL) was not fair use under existing law and stating the undisputed facts of the case. She first addressed claims by the Internet Archive that Open Library is non-commercial and that the court should favor a fair use finding under the first fair use factor because it is a not-for-profit. Ms. McNamara pointed out both the Internet Archive’s commercial entwinement with Better World Books and the fact that it has generated $35 million in revenue from providing digitizing services to libraries.
Further, she argued that copying a physical book without authorization from the copyright owner and distributing the digital copy is not the sort of transformative use that courts have upheld as fair use. Ms. McNamara underscored the Second Circuit’s opinion in Authors Guild v. HathiTrust and Authors Guild v. Google, which stated that a transformative use of a copyrighted work must serve a different function from that of the market use. In both HathiTrust and Google, the Second Circuit allowed digitization of print books without authorization because the function of the digitized versions was to improve “searchability” of the books — not, as with the Internet Archive’s digitization, to create a direct substitute for ebooks licensed by the publishers, from which authors derive income.
Ms. McNamara also emphasized that the Second Circuit had rejected the argument the Internet Archive first advanced as an amicus in Capitol Records v. ReDigi, which suggested that thefirst sale doctrine allows purchasers of physical copies to resell digital copies (so-called “digital first sales”), with the court noting that the issue is for Congress to decide.
Judge Koeltl’s line of questioning towards Ms. McNamara and the publishers’ position focused on whether the publishers had suffered actual market harm and whether this was an issue of fact that would compel the case to go to trial instead of being decided on summary judgment. Ms. McNamara responded by reiterating that the Internet Archive not only does not pay for ebook licensing, it also encourages libraries to forego licensing and engage in CDL. She estimated that publishers lose tens to hundreds of millions of dollars in potential licenses as a result. She further stressed that if even a fraction of the eight to nine thousand library systems in the U.S. pivot to CDL, the losses to publishers—and consequently authors—would be insurmountable.
Mr. Gratz, on behalf of the Internet Archive, addressed the non-profit status of the Internet Archive in his opening, noting only that Better World Books and its revenues from the scanning business were separate from the Internet Archive’s lending program.
He then argued that CDL was transformative under the framework laid out by the Supreme Court in Sony Corp. of America v. Universal City Studios, Inc. Specifically, he contended that the Internet Archive “utilizes technology to improve efficiency without unreasonably encroaching on the commercial entitlement of rightsholders.” He also claimed that the Second Circuit’s HathiTrust opinion, which he continually cited as the principal legal authority for the Internet Archive’s position, allowed copying and distribution for “public benefit.” However, as Ms. McNamara was quick to point out in her closing rebuttal, the “public benefit” in Hath Trust was one-time distribution of copies to individuals with print disabilities, under statutory authority in Section 121 of the Copyright Act — in other words, a far cry from the Internet Archive’s wholesale distribution to the public at large.
Judge Koeltl, on several occasions, pressed Mr. Gratz to provide the most closely analogous case to the Internet Archive’s use. When Mr. Gratz offered HathiTrust, the judge expressed incredulity, calling the case “not nearly analogous.” The judge also charged the Internet Archive counsel for “avoiding the question,” “belying” and “ignoring” the central issue in the case — whether a library has the right to reproduce and digitally lend a book that it owns — by conflating it with the incontestable right a library has to lend the copies of books it owns.
The exchange between Judge Koeltl and Mr. Gratz on the issue of “market harm” further revealed the legal vulnerabilities of Internet Archive’s position. Whereas Judge Koeltl had queried Ms. McNamara about evidence of market harm, his line of inquiry towards Mr. Gratz focused on whether a market for digital lending exists and whether the Internet Archive’s unauthorized use violated this market. Mr. Gratz attempted to deflect this inquiry by arguing that the publishers were not worse off due to the scanning. Judge Koeltl responded, “Rather than pay that licensing fee to the publisher, some libraries choose to make their own copy and to lend that copy. Why isn’t it self-evident that that deprives the publisher of the fees that the publisher could otherwise obtain from licensing an ebook to that library?”
Here again, it became clear that the Internet Archive was deviating from established legal standards and suggesting new ones to fit its theory. Yet, under the Supreme Court’s precedent in Campbell v. Acuff-Rose Music, the standard for evaluating market harm isn’t whether a plaintiff is actually worse off due to the use, but the potential harm to the value of the work if the use becomes widespread and unrestricted. In other words, what will happen to the value of the works if the court finds Open Library’s digitizing and lending of books to be fair use and everyone starts doing it?
Yesterday’s oral arguments exposed several legal defects in the CDL theory, many of which we have identified and explained over the years. As we have said before, and became clear yesterday, the Internet Archive’s reliance on CDL to support its Open Library program lacks foundation in existing law, and falls afield even of the controversially expansive fair use framework of HathiTrust and Google.
The publishers asked the court to place an injunction against the Internet Archive’s unauthorized copying and lending of their books and award damages for the violations. They have presented a very strong case, which we hope will convince the court to rule favorably on their summary judgment motion and hold the Internet Archive liable for its infringement. If, however, the court finds that there are genuine issues of fact, then the case will proceed to trial with the potential of the parties settling. The more likely outcome is that the court will decide the summary judgment motion on the merits and address the requested relief separately.
This case has enormous consequence for authors. If the Internet Archive prevails (although unlikely), the market for library ebook licensing could be eviscerated, and commercial markets would also likely be severely hit. Giving CDL the patina of legality would also open the floodgates for anyone — even pirate sites — to claim fair use. Recognizing the stakes, the Authors Guild led more than twenty author organizations in submitting an amicus brief to the court, strongly advising the court of the repercussions authors would face as a result of CDL being labeled fair use of copyrighted works.
We will keep you posted on further developments in the case.
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