Why the Internet Archive Lost

Last week, the Internet Archive suffered what can only be described as a significant legal loss. The Second Circuit Court of Appeals ruled in favor of book publishers, upholding a lower court decision that their system of controlled digital lending is copyright infringement.

Though the Internet Archive is likely to appeal the case to the Supreme Court, most believe it’s unlikely that the Court will grant cert. While it’s possible this isn’t the final word in this case, it likely is.

As we discussed last week, this is likely the end of controlled digital lending (CDL) as a practice. This will likely impact the Internet Archive in a variety of ways. However, the most immediate will likely be that it only distributes books that are either in the public domain or that it has authorization to distribute.

So why did it come to this? The answer is that it was the Internet Archive’s own doing.

A Brief History of Controlled Digital Lending

Controlled digital lending started in 2011 with the opening of the Internet Archive’s Open Library program. The idea was straightforward: Libraries would use copyright control tools to “lend” scanned copies of physical books to digital users. They would maintain a strict “loaned-to-owned” ratio, ensuring that a legally owned physical copy backed each loaned copy.

Library Futures, a project of NYU Law’s Engelberg Center on Innovation Law & Policy, first used the term “controlled digital lending” in 2018. In their statement, they said that the practice “may be permissible under existing copyright law.”

However, no one tested that. For nearly a decade, Open Library operated without attracting much legal attention. During that time, it grew rapidly and currently holds nearly 5 million books.

The reason was simple: No one on either side was entirely sure about the legality. For publishers, a loss would have opened the floodgates of similar practices at other libraries and damaged a very lucrative market. CDL was not a big enough problem for them to pursue, especially when there were so many pirate sites.

Then came 2020. With the start of the pandemic, the Internet Archive launched its “National Emergency Library” initiative. It removed the “loaned-to-owned” restrictions, making every book in its library free to read regardless of how many copies they had.

That was a bridge too far. As I reported when it was announced, the Open Library was now indistinguishable from a regular piracy website. CDL might have been a fig leaf, but now even the fig leaf was removed.

Predictably, publishers seized the initiative and filed a lawsuit against the Internet Archive just a few months later. Two court decisions favoring publishers later, we are caught up to today.

Why Controlled Digital Lending Lost

When defending CDL, the Internet Archive focused much of its arguments on fair use. The reason is simple: Even though they owned a physical copy of each book, they still made and distributed an unauthorized digital copy.

As such, they couldn’t argue that this was covered under the right of first sale. The ruling stated, “Section 109 codifies the first sale doctrine, which allows the owner of a physical copy of a work to ‘sell or otherwise dispose of’ it without the copyright owner’s permission.” It doesn’t grant libraries the right to make a new digital copy and distribute that.

The Internet Archive argued that while this was a violation of the owner’s exclusive rights, it was covered under fair use. That was always going to be a difficult argument to make, but it got significantly worse after the recent Warhol ruling.

Before the Warhol ruling, nearly all fair use discussions centered around “transformativeness,” and there was a broad definition of what was considered transformative. After Warhol, more focus was placed on the harm to the potential market and whether the new work was meant to be a substitute for the original.

In the Warhol Case, the Supreme Court found that a photograph of Prince and a painting based on that photo had the same purpose. Namely, to represent Prince.

That’s pretty damning in this case. The Internet Archive couldn’t make a compelling argument that its copies fulfilled a different purpose or wouldn’t harm the market. After all, both copies are meant to be ways to read the book.

As such, the Second Circuit sided with the publishers. Barring the Supreme Court taking up the case, this is likely the end for CDL as a practice.

What’s Next?

As I said in my original article about the decision, this case isn’t likely to kill the Internet Archive. However, record labels have a much larger lawsuit that has similar facts.

Publishers were more interested in stopping CDL than punishing the Internet Archive. After the lower court’s decision, they reached a settlement with the organization. That settlement granted the Internet Archive the right to appeal and focused on an injunction rather than damages.

On the other hand, the record labels are much more aggressive and aren’t likely to settle without a significant damages award. The Internet Archive’s one advantage is that the case was moved to California, meaning that different circuit will get to look at it.

However, the overwhelming publisher victory before the Second Circuit does not bode well for the Internet Archive. Likewise, neither does a judge roundly denying an attempt by the Internet Archive to dismiss the record label case.

While anything can happen, all indications look bad for the Internet Archive.

Bottom Line

The Internet Archive opted to test the boundaries of copyright law. It’s an expensive proposition, even if you win, and even more costly if you lose, but it’s a gamble they chose to take.

The problem is that when the Internet Archive gambles like this, it jeopardizes its less divisive projects. These include The Wayback Machine, the hosting of public domain and openly licensed content, as well as its preservation efforts.

If those things die because of this or the record labels’ lawsuit, it’s not the publishers’ or the record labels’ fault. The Internet Archive chose to enter those dark gray waters. They ultimately bear the blame if they lose.

The Internet Archive took a huge gamble. Unfortunately, it could be the entire internet that ultimately loses.