Legal Tech • February 2025

Second Circuit Rules on Copyright: Libraries and E-Books

The path going forward is clear—publisher licensing terms and restrictions must be followed to avoid liability.

Written by Mandi Phillips

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Second Circuit Makes Clear: Libraries Cannot Create Their Own e-books but Must Adhere to Publisher Licensing Terms
On September 4, the U.S. Court of Appeals for the 2nd Circuit issued an opinion in the highly publicized battle between digital library Internet Archive (IA) and four publishing companies—Hachette, HarperCollins, John Wiley & Sons, and Penguin Random House. In Hachette Book Group, Inc., et al. v. Internet Archive, the publishers brought copyright infringement claims against IA and requested millions in damages, arising from IA’s digital book lending process. In response to these claims, IA has maintained that its digital lending process is fundamentally identical to traditional libraries, only digitized.

Internet Archive’s Digital Lending Process
According to IA, it allows the public to check out digital copies of books for two weeks or less and only permits users to check out as many digital copies of each book as IA and its partner libraries physically own. As part of this process, IA claims to withhold lending a physical copy while the digital copy is on loan. The publishers countered, maintaining that rather than purchasing legitimate “e-books,” IA actually scanned copies of 127 books in print before lending those copies, all without the authorization of the publishers.

District Court’s Initial Ruling
The matter was brought before the 2nd Circuit after a district court in the Southern District of New York ruled that IA’s use of the scanned books in its digital library was not fair use. The district court granted the publishers’ claims against IA while denying those brought by IA, resulting in judgment in favor of the publishers.

The Role of e-books Licensing and Aggregators
On appeal, the 2nd Circuit noted that e-books are not purchased by libraries in the same way as print copies but are licensed through distributors called “aggregators.” Those aggregators are tasked with oversight—essentially ensuring only library members can check out the e-books. Aggregators also use digital rights management (DRM) software and other security measures to prevent the unauthorized copying or distribution of the e-books. The 2nd Circuit also took note of various licensing models used by book publishers to both protect and profit from the distribution of e-books, such as subscriptions for a limited term, pay-per-use, or other models. Still further, the court considered the growth of the e-books industry in recent years, which generated $59 million annually for Penguin and $46.9 million for HarperCollins from 2015 to 2020.

Public Domain Books vs. Copyrighted Works
The IA website includes millions of public domain e-books users can download for free and read without restriction. The IA library also includes 3.6 million copyrighted books (including 33,000 of the plaintiffs’ titles). IA expanded its lending capacity beginning in 2018. During the COVID-19 pandemic, it launched the National Emergency Library (NEL) after the pandemic closed libraries nationwide and took an estimated 650 million books out of circulation. During NEL, IA allowed e-books to be borrowed by up to 10,000 patrons simultaneously.

Fair Use Defense and the 1-to-1 Lending Model
Both before the district court and the 2nd Circuit, IA asserted that it ensured one-to-one lending—meaning one e-book loaned for each print copy—making its use fair use rather than copyright infringement. Both courts disagreed. In particular, the 2nd Circuit noted evidence that in some cases, the print copies were not withheld from circulation while the corresponding e-book was on loan. Regardless, the 2nd Circuit held that one-to-one lending, even if true, would not excuse IA’s scanning of print materials to create its own “e-books” without authorization of the publishers.

The 2nd Circuit’s Final Ruling
On the basis of these facts, the 2nd Circuit upheld the district court’s judgment in favor of the book publishers and against IA. A key linchpin in this final decision appears to have been the library’s unauthorized scanning of print versions of copyrighted materials to create its own digital copies. Thus, the path going forward is clear—the distribution of e-books does not occur in the same manner reserved for print copies, and publisher licensing terms and restrictions must be followed to avoid liability.

This article, which was originally published on the Klemchuk Ideate Blog, has been edited and reprinted with permission.

Headshot of Pierre Grosdidier who is wearing a white shirt, red
tie, and black suit jacket. MANDI PHILLIPS is a senior attorney with Klemchuk, where her practice focuses on commercial and intellectual property litigation and enforcement and trademark prosecution.