Hachette Book Group, Inc. v. Internet Archive

In case alleging copyright infringement stemming from online database’s reproduction and distribution of plaintiffs’ published books, appellate court affirmed district court’s finding that defendant’s conduct did not constitute fair use.

Defendant Internet Archive (IA) is a nonprofit organization dedicated to providing “universal access to all knowledge.” IA had established a practice of acquiring print books, digitally scanning the contents of said books and then distributing those digital copies via IA’s website while retaining the print books in storage and out of circulation. IA’s practice did not involve allowing unlimited downloads of the works it acquired—instead, IA maintained a practice of lending out only as many copies of a work as it owned in print. That means that if IA owned three copies of Book A, it would loan out—in digital or print format—no more than three copies of Book A at any one time. IA further boosted its lending capacity by partnering with libraries and allowing an additional digital copy to be loaned out if a partner library owned a physical copy of a book in question.

Plaintiffs are four leading book publishers, all of which held exclusive rights to publish various books and exploited those rights to distribute electronic copies of those books. Plaintiffs had an established business of licensing e-books to libraries. Plaintiffs sued IA, alleging that its reproduction and distribution of 127 different books—titles including Lord of the Flies, The Bluest Eye and Their Eyes Were Watching God—constituted copyright infringement. IA, in turn, pled a defense of fair use in regard to its lending of plaintiffs’ books through its online library. Following discovery, the parties cross-moved for summary judgment, with the central issue being whether IA’s practice constituted fair use. The district court denied IA’s motion for summary judgment and granted plaintiffs’ cross-motion for summary judgment, holding that all four factors of the fair use test favored plaintiffs. (Read our summary for the district court’s decision here.)

IA appealed the district court’s denial of its motion for summary judgment and the grant of plaintiffs’ cross-motion to the Second Circuit. Appearing before the Second Circuit, IA presented 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?” The panel unanimously answered that question in the negative.

Focusing initially on the first component of the first fair use factor—the degree to which a defendant’s use of the copyrighted work was “transformative”—the panel held, in accordance with the district court’s findings, that there was nothing transformative about IA’s use of the copyrighted works. In the panel’s view, IA’s copying of plaintiffs’ print books merely changed the medium of the books from print to digital, and a change of medium is a derivative use, not a transformative one. Moreover, the panel disagreed with IA’s assertion that its digitization of plaintiffs’ works offered more convenience or efficiency and therefore was transformative, because plaintiffs’ works were also sold by plaintiffs as e-books (and IA’s copies directly competed with those e-books). 

The panel also disregarded IA’s attempt to highlight its lending system as a way in which its use of the works added something new. As the panel noted, “[t]hat Section 108 [of the Copyright Act] allows libraries to make a small number of copies for preservation and replacement purposes does not mean that IA can prepare and distribute derivative works en masse and assert that it is simply performing the traditional functions of a library.” Likewise, the panel did not view as particularly transformative the fact that online authors could directly link to digital copies of books in IA’s digital library. In short, the panel held that “because IA’s Free Digital Library primarily supplants the original Works without adding meaningfully new or different features that avoid impinging on Publishers’ rights to prepare derivative works, its use of the Works is not transformative.”

As for the second component of the first fair use factor—commerciality—the panel disagreed with the district court’s finding that IA’s use of the copyrighted works was commercial in nature. The panel found that while IA may incidentally receive revenue from its digitization of plaintiffs’ works, it was clearly a nonprofit organization that distributed the digitized works for free, and it did not profit directly from its Free Digital Library. The panel likewise disagreed with the district court’s assessment that IA derived reputational benefits from its exploitation of plaintiffs’ books. However, the panel nevertheless held that “because IA’s use of the Works [was] not transformative,” the first fair use factor favored plaintiffs.

The Second Circuit then disposed of the second and third factors—“the nature of the copyrighted works” and the “amount and substantiality of the use,” respectively—in short order. As to the former, the panel held that all of plaintiffs’ works—even the books that were nonfiction—represented the sort of original expression that the Copyright Act seeks to protect. And as to the latter, the panel noted that IA copied and distributed to the public the entirety of the copyrighted works. Accordingly, both factors favored plaintiffs.

Finally, the panel addressed the fourth factor—“the effect of the use on the potential market for or value of the works.” As an initial matter, the panel found that “not only is IA’s Free Digital Library likely to serve as a substitute for the originals, the undisputed evidence suggests that it is intended to achieve that exact result.” Thus, there was little question that IA’s use of the copyrighted books threatened to usurp the market for plaintiffs’ works. However, the panel noted that “even where a secondary use serves the same purpose as the originals”—as was plainly the case with IA’s use of the copyrighted books—a “defendant may present evidence of a lack of market harm to support their defense of fair use.” But here, IA’s evidence of lack of market harm was unpersuasive due to serious methodological issues in the reports presented by IA’s witnesses. 

Meanwhile, the panel readily agreed that plaintiffs could show market harm—even in the absence of presenting empirical evidence—because of the common sense inference that IA’s free digital copies would usurp the market for plaintiffs’ e-books. Thus, IA failed to show that there was a lack of market harm from its use of the copyrighted books. The panel also noted that while it needed to consider the potential benefit to the public of IA’s free digital copies, IA’s practices would actually be overall harmful to the public because they would disincentivize authors to create new works. Accordingly, the panel held that the fourth factor also favored plaintiffs.

Weighing the four factors all together, the panel wrote: “Even if certain tools associated with IA’s reproductions offer some minor functional benefits not associated with the original works (such as linkability), because IA offers these functionalities by reproducing and making publicly available the copyrighted works in their entirety, those benefits are overwhelmingly outweighed by the other fair use considerations.” The panel held that IA’s fair use defense failed as a matter of law, and it affirmed the district court’s grant of plaintiffs’ cross-motion for summary judgment.

Summary prepared by David Grossman and Edward Delman