Category Archives: Controlled Digital Lending

Controlled Digital Lending, Round 2

On June 28th, the Second Circuit Court of Appeals in New York heard oral arguments in the Controlled Digital Lending case Hachette v. Internet Archive. The judges probed both sides to find weaknesses in their arguments, positing a number of hypotheticals to push how far each side’s theory of the case went. The hearing lasted almost ninety minutes, well more than the scheduled time.

Listening to the hearing, I came away feeling that the Internet Archive’s attorney was pushed a little harder than the Publishers’. Given that the Internet Archive was appealing a negative ruling where they lost on both the nature of the use and the effect on the market fair use factors, I am not surprised.

A few takeaways from the hearing:

We did not get much argument on the issue of “Was the Internet Archive’s use a commercial use or not?” Even if this does not turn out to be determinative in this case, the issue could be very consequential for other non-profit organizations like the Wikimedia Foundation, which hosts Wikipedia.

I could not tell if judges were being intentionally vague in making comparisons of CDL to making copies for interlibrary loan, or if they did not fully understand the difference in making copies for interlibrary loan via 17 U.S.C. 108 and lending books, including by interlibrary loan, under 17 U.S.C. 109. I am sure the judge’s law clerks will get very acquainted with those sections while the case is being decided.

ASTM v. PRO, a case from the DC circuit about putting things like building codes that have been incorporated into law by reference, was mentioned as a possible analogy to show the lack of effect on a market for copyrighted material. This case in general is one of the best for Internet Archive, both in looking at lack of market harm, and at how copies can be transformative without adding to a work. The downside is that it is not binding precedent in the Second Circuit.

Keep in mind that oral argument is only part of the case. The judges will also consider briefs filed by both parties, as well as a number of amicus briefs filed by outside groups and scholars. Given the amount of briefing and argument in the case, I would not expect a ruling until fall at the earliest, and possibly not until the first half of next year.

Internet Archive v. Hachette: CDL case update

There has finally been some movement in the Internet Archive’s appeal of the Southern District of New York District Court summary judgment decision that it lost back in March.

If you do not recall, the case turned on the question of whether or not controlled digital lending, or at least the Internet Archive’s implementation of it, was fair use. Of the four fair use factors, the court determined that none favored the use as fair. One of the key points of appeal is the District Court’s finding that the Internet Archive’s CDL program was a commercial use. Another important issue was if the use was transformative. The final major point the Internet Archive lost was on economic harm to the publishers. On December 15, the Internet Archive filed its brief addressing these issues.

On the one hand, many of the arguments IA makes are not new; it is just asserting the trial court got them wrong. It claims that the trial court judge “failed to grasp the key feature of controlled digital lending: the digital copy is available only to the one person entitled to borrow it at a time.” (Brief, p. 16). Overall, the Internet Archive sticks to its argument that CDL is non-commercial, transformative, and has no effect on the potential market.

The District Court’s finding that the Internet Archive’s CDL program was commercial could have the most important ramifications going forward. The Wikimedia Foundation and others filed an amicus brief focusing on that issue. Part of that finding was that IA had a “Donate” button on the pages of the digital books it lent. However, it had buttons to donate on every page of the site, much like one sees on Wikipedia. If donation buttons render a page commercial, then non-profit organizations will never be able to have a non-commercial page on the internet.

One other new, or at least more focused argument, is that the market that the District Court identified, the market for ebook licenses for libraries, is the wrong market to consider, but no matter the market, there is no harm. No matter which way this point goes, it would be good to get some more guidance from the court as to who has the burden of proof on this point, and how it should be proven.

Internet Archive does also ask that the court analyze the National Emergency Library, where it lent digital books regardless of the number of print copies it had, and the Open Libraries project, where it digitized and lent books of other libraries, separately. Presumably, this only really matters if regular controlled digital lending is found to be a fair use, but one cannot be sure without seeing the nature of the damages agreed to by the parties, which is confidential.

One thing I noted was that the Internet Archive does not address the recent Supreme Court opinion in Andy Warhol Foundation for Visual Arts, Inc. v. Goldsmith in terms of evaluating transformative use. I had thought that the District Court would wait on this opinion. Given what the opinion said about transformative use, I expect to see it more heavily relied on in the Publishers’ brief, due March 15.

The Boston Library Consortium, of which Boston College is a member, joined an amicus brief in support of the Internet Archive.

Internet Archive case moves forward

The case in the Southern District of New York between the Internet Archive and a group of major publishers has finally wrapped up.

Last March, the Internet Archive’s Controlled Digital Lending (CDL) program was held to be a violation of copyright, and not an allowable fair use. The Court requested that the parties work together to figure out a procedure for determining a final judgment in the case. This could have included more hearings to determine several questions relating to damages in the case under 17 U.S.C. 504(c)(2), including issues such as the Internet Archive counting as a library, and if it had reasonable grounds to assume the activity was fair use.

After some delay, the parties came to an agreement that did not involve more hearings. They agreed on monetary damages (the amount and how it was determined remains confidential) and on an injunction prohibiting the Internet Archive from distributing any digitized books that any of the plaintiffs sell commercially as an ebook, or scanning books for that purpose. The publishers had wanted the injunction to cover all books, regardless of availability in an electronic format, but as the trial only included works sold as ebooks, the court concluded that its opinion did not address the issue of books not available as ebooks. The court does not say that is fair use, but it has not said it isn’t fair use either. This leaves the door open for Controlled Digital Lending of books that are not available as ebooks, which could be particularly helpful in the case of CDL of orphan works. The Internet Archive is also still allowed to use the books for accessibility purposes, and for services that have already been determined to be fair use, like Google Books use of digitized books to return snippets of text based on searches.

The case in the District Court may be over, but the Internet Archive has announced its intent to appeal the decision to the Second Circuit Court of Appeals. In the meantime, they have a new case with record labels about the Great 78 project to worry about.