Earlier today, Judge John Koeltl of the Southern District of New York heard oral arguments in Hachette Book Group v. Internet Archive—a case Authors Alliance has been following since the lawsuit was first filed back in 2020. The case is about—among other things—whether Internet Archive’s controlled digital lending program qualifies as a fair use. Authors Alliance submitted an amicus brief in support of the Internet Archive back in July, arguing that CDL serves the interests of authors who write to be read. IA’s attorney cited to our brief during oral argument, and we are pleased that we were able to magnify the voices of authors who write to be read through its submission. You can learn more about the case and read our brief here.
In the hearing, the judge considered each party’s motion for summary judgment. The parties hotly contested a number of key issues in the case, including whether each side’s experts had properly demonstrated market harm (or lackthereof), what the appropriate market to consider was for purposes of fair use analysis, the commerciality of IA’s use, and what legal cases supported both arguments in favor of and against fair use. Judge Koeltl asked the Internet Archive’s attorney a number of probing questions on these points, grappling with the difficult questions in this case. The judge further implied that there may be open issues of fact in this case, which could indicate the need for additional briefings or hearings.
CDL and Commerciality
The parties disagreed on the commerciality of IA’s use when it produces and makes CDL scans available. The publishers attorney argued that IA’s CDL operations are “intertwined” with its other functions, such as its ownership of the book vendor Better World Books, and further emphasizing its argument that CDL loans result in lost revenue for the publisher—in other words, that the supposed commercial harm to the publishers that results from CDL lending makes the CDL lending itself commercial. The Internet Archive’s attorney answered that IA is a nonprofit organization that does not profit at all from its CDL program. He pointed to the fact that traditional library lending is not commercial in nature and does not provide libraries like IA with commercial benefits.
CDL and Market Effects
The plaintiffs’ attorney began by setting forth plaintiffs’ views on the issue of market harm—the fourth factor in fair use analysis, often cited as one of the most important factors in the inquiry. Plaintiffs discussed what they see as massive financial harm stemming from IA’s CDL program, which they estimated to amount to “millions of dollars in licensing revenues.” Plaintiffs also emphasized that, were CDL “given the green light,” or upheld as a fair use, the plaintiffs would suffer even greater losses. Throughout her argument, plaintiffs’ attorney emphasized the “basic economic principle and common sense is that you cannot compete with free.” In other words, the publishers argue that the ebook library licensing market could collapse altogether if CDL were allowed to continue. Yet this misses the point that CDL is a longstanding and established practice, which has seen adoption and growth in libraries across the country while the ebook licensing market has continued to thrive.
Judge Koeltl, however, pressed the publishers on whether they had shown evidence of actual market harm, i.e. proof that IA’s CDL program had directly harmed their bottom line. In response, plaintiffs criticized the expert evidence offered by IA’s experts to show that no such harm had occurred. This is a difficult question because the party asserting a fair use defense typically has the burden of showing that the use has not harmed the market, but it exceedingly difficult to prove a negative.
The judge also questioned whether CDL actually could represent such a loss: the publishers’ argument rests on the premise that libraries loan out CDL scans in lieu of paying to license ebooks, and were CDL not permitted under the law, IA and other libraries would instead choose to pay licensing fees to lend out ebooks. The judge pointed out that the result might in fact be that libraries would choose not to lend digital copies of works out at all, or would instead lend out physical books, undercutting the lost licensing revenue argument.
IA’s attorney argued that the publishers had not offered empirical evidence of market harm in this case, focusing on the fact that when a library lends out a CDL scan, it does so in lieu of a physical book, “simulating the limitations of physical books.” This is due to CDL’s “owned to loaned” ratio requirement: a library can only loan out the number of CDL scans as it has physical books in its collection, and can only loan these scans out to one patron at a time. When a library lends out a CDL scan, it does so in lieu of loaning the physical book, for which it has already paid. And while the plaintiffs mentioned harm to authors (who are, after all, the people that copyright law is intended to protect) several times during their argument, they did this in a way that linked authors with publishers as parties that are financially invested in a works’ sale—author interests and the finer details of the economics of author income and library lending were absent from the discussion.
The parties also disagreed about which market was the appropriate one to look to when discussing market harm in the context of fair use analysis. The publishers argued, and the judge seemed to assume, that the proper market is the library ebook licensing market. The judge opined that libraries could, instead of using CDL to lend out their books, simply purchase an ebook license. He seemed to view CDL scans and licensed ebooks as one and the same, despite the fact that there are several key differences between these types of loans, both in form and function, as explained in other amicus briefs in the case. Moreover, missing from the argument was the fact that, in many cases, libraries loan out CDL scans because no ebook is available to them: particularly for older books in a publisher’s backlist, or for books that are no longer available commercially, there is in many cases no ebook available, or no ebook available to libraries. Library patrons with print or mobility disabilities in need of digital copies of these kinds of works in order to read them would be greatly harmed if CDL were no longer permitted.
CDL and Transformativeness
The publishers’ attorney started from the premise that CDL as a use was not transformative, explaining that a licensed ebook and a CDL scan served precisely the same function. In response, IA’s attorney in response argued that CDL is a transformative use because it “utilizes technology to achieve the transformative purpose of improving efficiency of delivering content without unreasonably encroaching on the rights of the rightsholder.” He further explained that fair uses are favored when they serve the key purpose of copyright: incentivizing new creation for the public benefit without harming the interests of rightsholders. To illustrate these benefits, he cited to Authors Alliance’s amicus brief, in which we explained the myriad ways that CDL benefits authors and can even incentivize the creation of new works.
Adding to its transformativeness argument, IA explained that, when it comes to speculative or actual market harm, such an effect must be balanced against the public benefit that results from the use. And when it comes to CDL, this public benefit is tremendous: numerous amici, as well as Authors Alliance, explained that CDL serves the interests of library patrons, authors, and the public writ large.
Now that the judge has heard both sides’ arguments, he will issue a decision in the case. While there is no way of knowing exactly when this will happen, Judge Koeltl is known for issuing decisions fairly quickly, so we may have a decision as soon as later this week. As always, we will keep our members and readers apprised of any developments in this pivotal case as it moves forward.