Hachette Book Group, Inc. v. Internet Archive

In Publishers’ view, to hold IA’s use transformative would “destroy

the value of [their] exclusive right to prepare derivative works,” including the

right to publish their authors’ works as eBooks. Id. at 27. Nor does IA’s adherence

to CDL render its use transformative: “[W]ithout a different purpose from the

original,” Publishers argue, “IA’s ebooks are not transformative.” Id.

We conclude that IA’s use of the Works is not transformative. IA creates

digital copies of the Works and distributes those copies to its users in full, for free.

Its digital copies do not provide criticism, commentary, or information about the

originals. Nor do they “add[] something new, with a further purpose or different

character, altering the [originals] with new expression, meaning or message.”

Campbell,

510 U.S. at 579

. Instead, IA’s digital books serve the same exact purpose

as the originals: making authors’ works available to read. IA’s Free Digital Library

is meant to―and does―substitute for the original Works. Warhol II,

598 U.S. at 528

(“The use of an original work to achieve a purpose that is the same as, or highly

similar to, that of the original work is more likely to substitute for, or supplant, the

work.” (cleaned up)). As we have said, “[w]hen all or a substantial portion of text

that contains protectable expression is included in another work, solely to convey

24 the original text to the reader without adding any comment or criticism, the second

work may be said to have supplanted the original because a reader of the second

work has little reason to buy a copy of the original.” Ringgold v. Black Entm’t TV,

Inc.,

126 F.3d 70, 79

(2d Cir. 1997). Though “[n]ot every instance will be clear cut,”

this one is. Warhol II,

598 U.S. at 528

True, there is some “change” involved in the conversion of print books to

digital copies. See Infinity Broadcast Corp. v. Kirkwood,

150 F.3d 104

, 108 n.2 (2d Cir.

1998) (“[A] change in format . . . is not technically a transformation.”). But the

degree of change does not “go beyond that required to qualify as derivative.”

Warhol II,

598 U.S. at 529

. Unlike transformative works, derivative works

“ordinarily are those that re-present the protected aspects of the original work, i.e.,

its expressive content, converted into an altered form.” Google Books,

804 F.3d at 225

. To be transformative, a use must do “something more than repackage or

republish the original copyrighted work.” Authors Guild, Inc. v. HathiTrust,

755 F.3d 87, 96

(2d Cir. 2014); see also TVEyes,

(“[A] use of copyrighted

material that merely repackages or republishes the original is unlikely to be

deemed a fair use.” (internal quotation marks omitted)). Changing the medium of

a work is a derivative use rather than a transformative one. Warhol II,

598 U.S. at 529

. In fact, we have characterized this exact use―“the recasting of a novel as an

25 e-book”―as a “paradigmatic” example of a derivative work. Google Books,

804 F.3d at 215

. Digitizing physical copies of written work is not transformative, because

the act “merely transforms the material object embodying the intangible article that

is the copyrighted original work.” American Geophysical Union v. Texaco Inc.,

60 F.3d 913, 923

(2d Cir. 1994).

To construe IA’s use of the Works as transformative would significantly

narrow―if not entirely eviscerate―copyright owners’ exclusive right to prepare

(or not prepare) derivative works. See Warhol II, 598 U.S. at 528–29;

17 U.S.C. § 106

(2). The Supreme Court has cautioned against such an “overbroad concept of

transformative use.” Warhol II,

598 U.S. at 529

. In Google Books, we identified a fair

use in Google’s “snippet view” search function, which allowed users to search the

text and view snippets of it online, 804 F.3d at 217–218, but we noted that had the

Plaintiffs’ claim been “based on Google’s converting their books into a digitized

form and making that digitized version accessible to the public, their claim would

[have been] strong,” id. at 225. As the district court noted here, that is “precisely

what the Publishers allege in this case.” Hachette, 664 F. Supp. 3d at 381.

IA’s arguments to the contrary are unpersuasive. IA argues that the format

change alone is not what makes its use transformative. Rather, its use of the Works

is transformative because of “the sort of lending the scanning enables,” namely,

26 (1) making lending more efficient, and (2) enabling other uses not possible with

print books and physical borrowing. Appellant’s Br. at 33. Neither of these

justifications render IA’s use of the Works transformative because the underlying

purpose of making the Works available in a derivative format is still the same.

IA argues that its use of the Works is transformative because it “make[s]

lending more convenient and efficient” and “uses technology to deliver the work

only to one already entitled to view it―the one person borrowing the book at a

time.” Id. at 31–32. IA derives this argument from three cases: Sony, TVEyes, and

ReDigi. In Sony, the defendant manufactured and sold home video tape recorders

that allowed users to record TV programs broadcast at set times over the airwaves

so they could watch them later. 464 U.S. at 422–23. The Supreme Court, in a

decision that predated our use of the word “transformative” as a term of art,

concluded that “time-shifting for private home use . . . [is] a noncommercial,

nonprofit activity” that “merely enables a viewer to see such a work which [they]

had [already] been invited to witness in its entirety free of charge.” Id. at 449. For

those reasons, the Court concluded that the first fair use factor favored the

defendant. Id.

We contextualized Sony within the modern fair use framework in TVEyes.

There, the defendant recorded vast quantities of live TV programs, compiled those

27 recordings into a text-searchable database in which they would be held for thirty-

two days before being deleted, and allowed its paying subscribers to search for

and watch up to ten-minute video clips of recordings that featured their terms of

interest. 883 F.3d at 173–74. In assessing whether the use was transformative, we

reframed the Supreme Court’s discussion from Sony:

While Sony was decided before “transformative” became a term of art, the apparent reasoning was that a secondary use may be a fair use if it utilizes technology to achieve the transformative purpose of improving the efficiency of delivering content without unreasonably encroaching on the commercial entitlements of the rights holder.

Id. at 177. Expanding on that reasoning, although we ultimately rejected TVEyes’

fair use claim, we concluded that the use at issue was at least “somewhat

transformative” because it “enhanc[ed] efficiency” by enabling users to view

programming that discussed topics of interest to them “without having to monitor

thirty-two days of programming in order to catch each relevant discussion.” Id. at

177.

Later that same year, we addressed the fair use defense of a defendant-

website that hosted an online platform for reselling digital music files. ReDigi, 910

F.3d at 652–54. We repeated our characterization of Sony from TVEyes, adding:

In Sony, the “apparent reasoning was that a secondary use may be a fair use if it utilizes technology to achieve the transformative purpose of improving the efficiency of delivering content without unreasonably encroaching on the commercial entitlements of the 28 rights holder” because the improved delivery was to one entitled to receive the content.

Id. at 661 (quoting TVEyes,

) (emphasis added). Still, we determined

that the use in ReDigi was not transformative.

The website provided “neither

criticism, commentary, nor information about” the original music files, nor did it

“deliver the content in more convenient and usable form to one who has acquired

an entitlement to receive the content.”

Instead, it effectively “provide[d] a

market for the resale of digital music files, which . . . compete[d] with sales of the

same recorded music by the rights holder.”

For that reason, the first fair use

factor favored the plaintiffs.

The “efficiencies” identified in Sony and TVEyes are distinct from the

purported efficiencies offered by IA’s Free Digital Library. Sony was decided long

before modern technology made it possible for one to view virtually any content

at any time. Put in context, the “time-shifting” permitted by the defendant’s tape

recorders in Sony was a unique efficiency not widely available at the time, and

certainly not offered by the plaintiff-television producer.

464 U.S. at 449

. The

defendant in TVEyes likewise offered a uniquely efficient service: allowing users

to watch short clips of television programs featuring their selected search terms.

883 F.3d at 173–74.

29 Here, by contrast, IA’s Free Digital Library offers few efficiencies beyond

those already offered by Publishers’ own eBooks. IA argues that its use is more

efficient because it “replace[s] the burdens of physical transportation with the

benefits of digital technology,” but this ignores the fact that IA’s digital books

compete directly with Publishers’ eBooks―works derivative of the original print

books. Appellant’s Br. at 32. Understood this way, IA’s Free Digital Library does

not “improv[e] the efficiency of delivering content” without unreasonably

encroaching on the rights of the copyright holder; it offers the same efficiencies as

Publishers’ derivative works while greatly impinging on their exclusive right to

prepare those works. TVEyes,

; ReDigi,

910 F.3d at 661

. In Sony,

“timeshifting merely enable[d] a viewer to see such a work which [the viewer] had

been invited to witness in its entirety free of charge” by the broadcasters, Sony,

464 U.S. at 449

, and therefore did not “unreasonably encroach[] on the commercial

entitlements of the rights holder,” TVEyes,

(characterizing Sony).

The Publishers in this case never “invited” readers to read their books for free from

an unlicensed digital library. Sony,

464 U.S. at 449

Nor does IA’s asserted adherence to CDL render its use transformative. IA

maintains that it delivers each Work “only to one already entitled to view

[it]”―i.e., the one person who would be entitled to check out the physical copy of

30 each Work. Appellant’s Br. at 32. But this characterization confuses IA’s practices

with traditional library lending of print books. IA does not perform the traditional

functions of a library; it prepares derivatives of Publishers’ Works and delivers

those derivatives to its users in full. That Section 108 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.

17 U.S.C. § 108

; see also,

e.g., ReDigi,

910 F.3d at 658

(“We are not free to disregard the terms of the statute

merely because the entity performing an unauthorized reproduction makes efforts

to nullify its consequences by the counterbalancing destruction of the preexisting

phonorecords.”). Whether it delivers the copies on a one-to-one owned-to-loaned

basis or not, IA’s recasting of the Works as digital books is not transformative.

Google Books,

804 F.3d at 215

IA also argues that its use is transformative “because it enables uses not

possible with print books and physical borrowing,” such as allowing “authors

writing online articles [to] link directly to [IA’s digital books].” Appellant’s Br. at

32. We rejected a similar argument in TVEyes. There, the defendant argued that

its provision of reproduced content identified through targeted search tools was

transformative “because it allow[ed] clients to conduct research and analysis of

31 television content by enabling them to view [video] clips responsive to their

research needs[,] [and] [r]esearch . . . [was] a purpose not shared by users of the

original content.” TVEyes,

883 F.3d at 178

n.4. Although we concluded that

TVEyes’ use was at least “somewhat transformative,”

id. at 178

, we rejected the

research-based argument, explaining that simply because “a secondary use can

facilitate research does not itself support a finding that the secondary use is

transformative,”

id.

at 178 n.4. To deem a use transformative on that basis would

extend the concept of transformativeness “beyond recognition.”

So too here.

That authors of online articles may embed links to IA’s Free Digital Library does

not render the Library a significantly transformative secondary use of the Works.

In sum, because IA’s Free Digital Library primarily supplants the original

Works without adding meaningfully new or different features that avoid unduly

impinging on Publishers’ rights to prepare derivative works, its use of the Works

is not transformative. TVEyes,

(“Although transformative use is

not absolutely necessary for a finding of fair use, transformative works lie at the

heart of the fair use doctrine, and a use of copyrighted material that merely

repackages or republishes the original is unlikely to be deemed a fair use.”

(cleaned up)).

32 B. Commerciality

We next consider “whether [the] use is of a commercial nature or is for

nonprofit educational purposes.”

17 U.S.C. § 107

(1). The commercial nature of a

secondary use generally weighs against a finding of fair use, especially where the

secondary use is only “modest[ly] transformative.” TVEyes,

883 F.3d at 178

However, we assess commerciality “with caution” since “nearly all of the

illustrative uses listed in the preamble to Section 107 are generally conducted for

profit in this country.” Warhol I,

11 F.4th at 44

(cleaned up). “The crux of the

profit/nonprofit distinction,” then, “is not whether the sole motive of the use is

monetary gain[,] but whether the user stands to profit from exploitation of the

copyrighted material without paying the customary price.” Harper & Row,

471 U.S. at 562

Importantly, commerciality is only one part of the first factor inquiry and

the broader fair use analysis. See, e.g., Sony, 464 U.S. at 448–49 (noting that the

commercial or nonprofit character of a work is “not conclusive” but rather a factor

to be “weighed [alongside the others] in any fair use decision”). Accordingly, “the

mere fact that a use is educational and not for profit does not insulate it from a

finding of infringement, any more than the commercial character of a use bars a

finding of fairness.” Campbell,

510 U.S. at 584

; see also Google Books,

804 F.3d at 219

33 n.20 (“[T]here is . . . no reason to presume categorically that a nonprofit educational

purpose should qualify as a fair use.”).

Here, the district court concluded that IA’s use of the Works is commercial

for two principal reasons. Hachette, 664 F. Supp. 3d at 383–84. Though it

acknowledged IA’s nonprofit status, it determined that IA still “exploits the Works

in Suit without paying the customary price” by (1) soliciting donations on its

website and (2) taking a cut of the proceeds when users buy a physical book from

BWB using a link embedded on IA’s website.

at 383–84. The district court

found “largely irrelevant” the fact that IA distributes its digital books for free,

instead emphasizing that “[w]hat matters is whether IA profited from copying the

Works.” Id. at 384.

IA objects to the district court’s “expansive” understanding of

commerciality, asserting that it “receives no profit or other private benefit” from

its use of the Works. Appellant’s Br. at 21, 23. Publishers argue that IA’s use is

commercial in nature because IA reaps some economic advantages from its

partnership with BWB and obtains “other non-monetary calculable benefits” from

its use of the Works, including advancing its mission of ensuring universal access

to all knowledge. Appellees’ Br. at 39. However, Publishers “do not contend that

a non-profit . . . is commercial merely because it solicits donations.” Id. at 38 n.12.

34 We conclude, contrary to the district court, that IA’s use of the Works is not

commercial in nature. It is undisputed that IA is a nonprofit entity and that it

distributes its digital books for free. Of course, IA must solicit some funds to keep

the lights on: its website includes a link to “Donate” to IA, and it has previously

received grant funding to support its various activities. App’x 6091. But unlike

the defendant in TVEyes, who charged users a fee to use its text-searchable

database, IA does not profit directly from its Free Digital Library.

883 F.3d at 175

It offers this service free of charge. See American Society for Testing and Materials v.

Public.Resource.Org, Inc.,

896 F.3d 437, 449

(D.C. Cir. 2018) (“ASTM I”) (concluding

that use was not commercial where there was no evidence that nonprofit

organization profited from its dissemination of reproduced industry standards

that had been incorporated into law).

We therefore disagree with the district court that IA’s partnership with BWB

renders its use commercial. When users read a digital book on IA’s web browser

platform, a “Purchase at Better World Books” button appears at the top of their

screens. This button links to BWB’s website, where users may buy a used print

copy of the book they were just reading, or any other book in BWB’s library. BWB

compensates IA whenever someone buys a book via the “Purchase at Better World

Books” link; although the exact profits IA earns from this arrangement is disputed.

35 Any link between the funds IA receives from its partnership with BWB and

its use of the Works is too attenuated for us to characterize the use as commercial

on that basis. See Swatch Group Management Services Ltd. v. Bloomberg L.P.,

756 F.3d 73, 83

(2d Cir. 2014). In Swatch, Bloomberg posted a recording of a Swatch

conference call on its website for access by its paying subscribers.

at 78–79.

Although the recording―like other Bloomberg content―could be accessed only

by paying subscribers, we concluded that “the link between the defendant’s

commercial gain and its copying [was] attenuated such that it would be

misleading to characterize the use as commercial exploitation.”

Id. at 83

(cleaned

up). Unlike in TVEyes, where the defendant charged a fee in direct connection

with its use of the works, Bloomberg’s subscription fee covered a broad range of

services, including access to the recording. Compare

id.,

with TVEyes,

883 F.3d at 175

. Because “it would strain credulity to suggest that providing access to [the

recording] more than trivially affected the [overall] value of [Bloomberg’s]

service[s],” we assigned the commercial nature of Bloomberg’s use “little weight.”

Swatch,

756 F.3d at 83

IA does not charge a fee for any of its services, let alone the Free Digital

Library. While IA may incidentally profit from its use of the Works when account

holders check out a digital book via the BookReader platform, click on the

36 “Purchase at Better World Books” link, and purchase a book from BWB, the link

between this commercial gain and IA’s use of the Works to create the Free Digital

Library is “attenuated[,] such that it would be misleading to characterize the use

as commercial exploitation.”

(internal quotation marks omitted). Although IA

exploits the Works in Suit without paying the customary price, it does not profit

directly from that exploitation. See Harper & Row,

471 U.S. at 562

We likewise reject the proposition that IA’s solicitation of donations renders

its use of the Works commercial. IA does not solicit donations specifically in

connection with its digital book lending services―nearly every page on IA’s

website contains a link to “Donate” to IA. App’x 6091. Thus, as with its

partnership with BWB, any link between the funds IA receives from donations and

its use of the Works is too attenuated to render the use commercial. Swatch,

756 F.3d at 83

. To hold otherwise would greatly restrain the ability of nonprofits to

seek donations while making fair use of copyrighted works. See ASTM I,

896 F.3d at 449

(rejecting the argument that because free distribution of copyrighted

industry standards enhanced a nonprofit organization’s fundraising appeal, the

use was commercial).

Finally, to the extent Publishers argue that IA’s use is commercial because it

derives “other non-monetary calculable benefits” from the Free Digital Library,

37 we disagree. Appellees’ Br. at 39. It is true that the “profit/non-profit distinction

is context specific, not dollar dominated,” such that the “absence of a dollars and

cents profit” will not necessarily exclude a finding of commerciality. Weissmann

v. Freeman,

868 F.2d 1313, 1324

(2d Cir. 1989). Indeed, in Weissmann we refused to

weigh the first fair use factor against the plaintiff where the defendant

appropriated her unpublished research article and presented it as his own.

Id. at 1316

. Despite the apparent lack of economic profit, the defendant “stood to gain

recognition among his peers in the profession . . . without paying the usual price

that accompanies scientific research and writing, that is to say, by the sweat of his

brow.”

Id. at 1324

. In this context, however, IA does not stand to gain the direct

reputational benefits that accompany presenting another’s work as one’s own.

Rather, it obtains only those nonmonetary benefits that attend most other

legitimate, secondary uses, including advancing its mission and bolstering its

reputation. Characterizing these general benefits as commercial profits would

render commercial the activities of virtually any nonprofit organization that

bolsters its reputation through its own nonprofit activities.

IA does not profit directly from its exploitation of the Works in Suit. For

that reason, its use of the Works is non-commercial in nature. But the nonprofit

character of IA’s use is not conclusive, Sony,

464 U.S. at 448

, and

38 transformativeness remains the “central” focus of the first factor, Warhol II,

598 U.S. at 542

. Thus, because IA’s use of the Works is not transformative, the first fair

use factor favors Publishers. See TVEyes, 883 F.3d at 177–78.

II. The nature of the copyrighted works

The second fair use factor is “the nature of the copyrighted work.”

17 U.S.C. § 107

(2). In assessing the second factor, courts consider (i) whether the work is

expressive or creative, with “greater leeway being allowed to a claim of fair use

where the work is factual or informational”; and (ii) “whether the work is

published or unpublished, with the scope of fair use involving unpublished works

being considerably narrower.” Blanch v. Koons,

467 F.3d 244, 256

(2d Cir. 2006).

This factor recognizes that “some works are closer to the core of intended

510 U.S. at 586

. However, it “rarely

play[s] a significant role in the determination of a fair use dispute.” Google Books,

804 F.3d at 220

; see also HathiTrust,

755 F.3d at 98

(“The second fair-use factor . . . is

not dispositive.”).

IA argues that this factor weighs neutrally because the Works, though

published, include both fiction and nonfiction books. Although we have

previously stated that the second factor tends to favor fair use when the copied

works are factual, rather than fictional, that general statement is an

39 oversimplification of the Works in this case. While the Works in Suit include both

fiction and nonfiction books, even the nonfiction books contain original expression

“close[] to the core of intended copyright protection.” Campbell,

510 U.S. at 586

The Copyright Act “does not protect facts or ideas set forth in a work, [but] it does

protect that author’s manner of expressing those facts and ideas.” Google Books,

804 F.3d at 220

(emphasis added). Wind Power for Dummies may contain factual

information regarding the mechanics of wind power, but the author’s compilation

of those facts into a book suitable for the average “dummy” is an original

expression that the Copyright Act protects.

The nonfiction Works here are therefore unlike the copyrighted materials in

Swatch, one of the few cases in which the second fair use factor bore some

significance. There, as noted above, Bloomberg obtained a sound recording and

transcript of a private conference call between Swatch executives and a group of

securities analysts and posted both online for access by its paying subscribers.

Swatch, 756 F.3d at 78–79. Swatch sued Bloomberg, obtaining a copyright to cover

the statements made by Swatch executives during the meeting. Id. at 79. In

concluding that the second factor favored fair use, we remarked on the “thinness”

of Swatch’s copyright: the copyrighted statements were of a “manifestly factual

40 character,” intended to “convey financial information about the company,” not to

showcase any original expression. Id. at 89.

Here, while the nonfiction Works undoubtedly convey factual information

and ideas, they also represent the authors’ original expressions of those facts and

ideas—and those “subjective descriptions and portraits” reflect “the author’s

individualized expression.” Harper & Rowe,

471 U.S. at 563

. Thus, because the

Works in Suit are “of the type that the copyright laws value and seek to protect,”

the second fair use factor favors Publishers. HathiTrust,

755 F.3d at 98

III. The amount and substantiality of the use

The third fair use factor is “the amount and substantiality of the portion

used in relation to the copyrighted work as a whole.”

17 U.S.C. § 107

(3).

Generally, a finding of fair use is more likely when “small amounts, or less

important passages [of the work] are copied than when the copying is extensive,

or encompasses the most important parts of the original.” Google Books,

804 F.3d at 221

. The third and fourth factors are interrelated, as the greater the amount and

substantiality of the use, “the greater the likelihood that the secondary work might

serve as an effectively competing substitute for the original.”

Still, there is no bright line rule separating permissible from impermissible

copying. Warhol I,

11 F.4th at 46

. Sometimes it is necessary to copy the entirety of

41 a work in order to achieve a legitimate, transformative secondary purpose. See,

e.g., Google Books, 804 F.3d at 221–22 (copying entirety of books necessary to create

transformative search function and snippet view); HathiTrust, 755 F.3d at 98–99

(copying entirety of books necessary to create transformative search function).

Other times, “taking even a small percentage of the original work [is] unfair use.”

Rogers v. Koons,

960 F.2d 301, 311

(2d Cir. 1992). The relevant consideration, then,

is not the amount of copyrighted material used by the copier, but “the amount of

copyrighted material made available to the public.” TVEyes,

Here, it is undisputed that IA copies the Works in their entirety and

distributes those copies to the public in full. Still, IA argues that the third factor

weighs neutrally because “copying the entire work is necessary for Controlled

Digital Lending.” Appellant’s Br. at 43 (cleaned up). As IA itself recognizes, this

argument hinges entirely on its assumption that its use of the Works is

transformative. 7 But IA does not scan the Works in their entirety to achieve a

7 IA faults the district court for improperly “collaps[ing] the first and third factors.” Appellant’s Br. at 44. But IA itself acknowledges―on the same page of its brief―the interrelatedness of the first and third factors in this case. See

id.

(“[T]he district court’s transformativeness analysis was wrong (and failed to consider other justifications for copying). Its third-factor analysis thus is wrong for the same reasons.”). The Supreme Court has explained that the “enquiry” with respect

42 transformative secondary purpose; it scans the Works in their entirety to substitute

IA’s digital books for Publishers’ print books and eBooks.

IA’s use is therefore unlike the copying that took place in HathiTrust and

Google Books. In those cases, the defendants scanned copyrighted books to create,

among other things, searchable databases that allowed users to view snippets of

text pertaining to their search terms, or to learn on which pages and with what

frequency their search terms appeared in any given book. HathiTrust,

755 F.3d at 91

; Google Books, 804 F.3d at 208–10. Though the defendants copied the books in

their entirety, doing so was necessary to achieve a transformative, secondary

purpose―the searchable databases. HathiTrust, 755 F.3d at 98–99; Google Books,

804 F.3d at 221–23. And critically, while the defendants “ma[de] an unauthorized

digital copy of the entire book, [they did] not reveal that digital copy to the public.”

Google Books,

804 F.3d at 221

(second emphasis added).

to the third factor “will harken back to the first of the statutory factors, for . . . the extent of the copying varies with the purpose and character of the use.” Campbell,

510 U.S. at 586-87

; see also A.V. ex rel. Vanderhye v. iParadigms, LLC,

562 F.3d 630, 642

(2d Cir. 2009) (faulting the plaintiffs for “fail[ing] to recognize the overlap that exists between the [first and third] fair use factors”). Thus here, even if features of IA’s offerings were transformative insofar as they facilitate research by allowing the insertion of links, IA’s use would not be “tailored to further its transformative purpose.” Bill Graham Archives v. Dorling Kindersley Ltd.,

448 F.3d 605, 613

(2d Cir. 2006). IA allows the entirety of the Works to be available to millions of users, the vast majority of whom are not using the digital copies to insert links into articles.

43 Here, IA makes unauthorized digital copies of the Works and reveals those

copies to the public in their entirety. The “amount and substantiality” of the

copying is not necessary to achieve a transformative secondary purpose, but

serves to substitute Publishers’ books.

17 U.S.C. § 107

(3). For that reason, the third

fair use factor favors Publishers. See ReDigi,

910 F.3d at 662

(third factor favored

plaintiffs where the defendant made available “identical copies of the whole of

Plaintiffs’ copyrighted sound recordings.”); TVEyes,

(third factor

favored plaintiff where the defendant made available “virtually the entirety of the

[plaintiff’s] programming that TVEyes users want[ed] to see and hear.”).

IV. The effect of the use on the potential market for or value of the works

The fourth and final fair use factor is “the effect of the use upon the potential

market for or value of the copyrighted work.”

17 U.S.C. § 107

(4). This factor

“focuses on whether the copy brings to the marketplace a competing substitute for

the original, or its derivative, so as to deprive the rights holder of significant

revenues because of the likelihood that potential purchasers may opt to acquire

the copy [rather than] the original.” Google Books,

804 F.3d at 223

. Analysis of this

factor “requires us to balance the benefit the public will derive if the use is

permitted” against “the personal gain the copyright owner will receive if the use

44 is denied.” Warhol I,

. The fourth factor is “undoubtedly the single

most important element of fair use.” Harper & Row,

471 U.S. at 566

In assessing the fourth factor, we consider “not only the market harm caused

by the particular actions of the alleged infringer, but also the market harm that

would result from unrestricted and widespread conduct of the same sort.”

TVEyes,

(cleaned up); Campbell,

510 U.S. at 590

. We ask not

“whether the second work would damage the market for the first (by, for example,

devaluing it through parody or criticism), but whether it usurps the market for the

first by offering a competing substitute.” Warhol I,

. This inquiry

encompasses both the market for the original work and the market for any

derivative works the rightsholder might develop. Campbell,

510 U.S. at 590

. The

first and fourth factors are closely related, as the more copying is done to achieve

a purpose that is the same as or substantially similar to the original, the more likely

it is that the copy will serve as a “satisfactory substitute for the original.” Google

Books,

804 F.3d at 223

. Ultimately, the “burden of proving that the secondary use

does not compete in the relevant market is . . . borne by the party asserting the

defense.” Warhol I,

Before discussing the parties’ arguments, we must identify the relevant

market in which IA’s Free Digital Library allegedly competes. Publishers focus on

45 harm to their markets for eBooks, including consumer eBooks and licensed

eBooks. IA, meanwhile, argues that we should consider harm (or lack of harm) to

Publishers’ eBook and print book markets.

In this case, the relevant market for purposes of analyzing the fourth fair use

factor is the market for the Works in general, without regard to format. The

generally

17 U.S.C. § 106

(granting copyright owners the exclusive right to

reproduce their works in numerous formats). Even if we consider the print

editions to be the “original” forms of the Works in this case―and we recognize

that the concept of a singular “original” form may be difficult to grasp in the digital

age―the Act recognizes that presentation of the same content in a different

medium is a derivative work subject to the same legal protections as the purported

original.

17 U.S.C. § 106

(2). Here, Publishers obtained from authors the exclusive

right to publish their Works in numerous formats, including print and eBooks, and

it is this exclusive right that IA is alleged to have violated via its Free Digital

Library. For that reason, the relevant harm―or lack thereof―is to Publishers’

markets for the Works in any format.

46 A. IA does not disprove market harm

IA argues that its Free Digital Library causes no harm to Publishers’ markets

for the Works because IA’s lending “offers a distinct service” from Publishers’

eBooks, not a substitute; and “all available evidence shows that IA’s lending

caused no harm at all” to Publishers’ markets for the Works. Appellant’s Br. at 45.

We address each point in turn.

IA’s first argument is a simple one: because its Free Digital Library is a

transformative use of the Works, it cannot serve as a substitute for the originals.

This argument, like numerous other arguments raised by IA in this appeal, is

premised on its assumption that its use of the Works is transformative. But there

is nothing transformative about IA’s use of the Works or its adherence to CDL―its

digital copies serve the same purpose as the originals. And the more copying is

done to achieve a purpose that is the same as the original, the more likely it is that

the copy will compete in the market as a “satisfactory substitute for the original.”

Google Books,

804 F.3d at 223

Google Books and HathiTrust underscore this point. In HathiTrust, the fourth

factor supported a finding of fair use because the ability to search the text of a book

to determine whether it includes select words did not “serve as a substitute for the

books [themselves].”

755 F.3d at 100

. Likewise, in Google Books, the ability to view

47 small fragments of books pertaining to particular search terms did not “provide a

significant substitute for the purchase of the [actual] book[s].” 804 F.3d at 224–25.

Critical to our conclusions in those cases was the interrelatedness of the first and

fourth factors: because the copying was “done to achieve a purpose that differ[ed]

from the purpose of the original[s],” it was unlikely that the secondary uses would

“serve as a satisfactory substitute for the original[s].”

Id. at 223

Here, not only is IA’s Free Digital Library likely to serve as a substitute for

the originals, the undisputed evidence suggests it is intended to achieve that exact

result. IA copies the Works in full and makes those copies available to the public

in their entirety. It does not do this to achieve a transformative secondary purpose,

but to supplant the originals. IA itself advertises its digital books as a free

alternative to Publishers’ print and eBooks. See, e.g., App’x 6099 (“[T]he Open

Libraries Project ensures [libraries] will not have to buy the same content over and

over, simply because of a change in format.” (internal quotation marks omitted));

id. at 6100 (marketing the Free Digital Library as a way for libraries to “get free

ebooks”); id. at 6099 (“You Don’t Have to Buy it Again!”). IA offers effectively the

same product as Publishers―full copies of the Works―but at no cost to consumers

or libraries. At least in this context, it is difficult to compete with free. IA’s non-

transformative use of the Works is a strong indicator that its digital books “usurp[]

48 the market for the [originals] by offering a competing substitute.” Warhol I,

(emphasis omitted).

Still, even where a secondary use serves the same purpose as the originals,

the defendant may present evidence of a lack of market harm to support their

defense of fair use. IA presents data that purportedly show a lack of harm to

Publishers’ print and eBook markets, and faults Publishers for failing to provide

empirical data of their own.

IA’s expert, Dr. Rasmus Jørgensen, examined OverDrive checkouts of the

Works before, during, and after the National Emergency Library (IA’s COVID-era

program pursuant to which it lifted its one-to-one owned-to-loaned ratio, allowing

each digital book to be checked out by up to 10,000 users at a time without regard

to the corresponding number of physical books in storage or in partner libraries’

possession) to assess potential harm to Publishers’ eBook licensing market. If IA’s

lending were indeed a substitute for Publishers’ library eBook licenses, he

theorized, then the shutdown of the NEL and reinstitution of IA’s lending controls

should correspond to an increase in demand for the Works on OverDrive (the

commercial service used by many libraries who license eBooks). But Dr. Jørgensen

found the opposite: OverDrive checkouts of the Works decreased following the

shutdown of the NEL in June 2020. From this, IA concludes that its lending “has

49 no effect on demand for borrowing on OverDrive” and, therefore, there is “no

reason to imagine, much less assume, that digital lending affects Publishers’ ebook

license revenue at all.” Appellant’s Br. at 51.

Dr. Jørgensen used the same methodology to analyze the effect of IA’s

lending on Hachette’s 8 monthly print and eBook sales of the Works. Once again,

he theorized that if IA’s lending were a substitute for Hachette’s consumer print

and eBooks, then the closure of the NEL should correspond to an increase in

Hachette’s sales of the Works in those mediums. But it did not: at the same time

IA reinstituted its lending controls in June 2020, Hachette’s print and eBook sales

decreased by 21% and 29%, respectively.

IA also submits the expert report of Dr. Imke Reimers, who examined the

effect of IA’s lending on Amazon sales rankings for print copies of the Works. Dr.

Reimers analyzed whether Amazon sales rankings changed when IA (1) first

added the Work to its Free Digital Library, (2) launched the NEL, or (3) removed

the Work from its Free Digital Library in response to this lawsuit. She found “no

statistically significant evidence” that either inclusion in IA’s library or increased

8 In discovery, while Hachette produced monthly sales data for 2020, the remaining Publishers provided only annual sales data. As the NEL ran for a matter of months in 2020, Dr. Jørgensen concluded it was impossible to assess the effect of the NEL on HarperCollins, Penguin, and Wiley’s print and eBook sales.

50 lending through the NEL harmed print sales rankings on Amazon, and that

removal of the Works from IA’s Free Digital Library actually correlated with a

decrease in sales rankings of the Works on Amazon. App’x 4934. From this and

Dr. Jørgensen’s report, IA concludes that its Free Digital Library has no effect on

Publishers’ markets for print and eBooks.

This evidence does not satisfy IA’s “burden of proving that the secondary

use does not compete in the relevant market[s].” Warhol I,

. Dr.

Jørgensen’s report shows, at best, a weak correlation between the closure of the

NEL and a decline in Publishers’ checkouts and sales. As Publishers’ expert Dr.

Jeffrey Prince points out, Dr. Jørgensen “does not even have a[n] [empirical]

model,” let alone a model that accounts for the effect of various other causal factors

on Publishers’ sales. App’x 5476. Instead, Dr. Jørgensen simply analyzes “two

points in time during a period where major macroeconomic events were

occurring,” id. at 5382, and “say[s] any difference that you see is because of the

takedown of the NEL,” id. at 5530.

But “[j]ust because one event follows another doesn’t mean it was caused

by the prior event.” Id. at 5383. There were a broad range of factors at play in June

2020 for which Dr. Jørgensen’s report fails to account, including the “COVID-

related surge in ebook sales” which “slowed down by summer 2020” as public

51 spaces began to reopen. Id. at 5469. Dr. Jørgensen’s own graph reveals that

checkouts spiked for OverDrive and IA between March 2020 and June 2020,

followed by a steady decline for both as checkouts reverted to pre-pandemic

levels. Id. at 4850. In short, Dr. Jørgensen’s report does not indicate, let alone

prove, the effect of IA’s Free Digital Library on Publishers’ markets for the Works.

Dr. Reimers’ report suffers from deeper infirmities. First, her report is of

limited relevance as it analyzes Amazon sales rankings for print editions of the

Works in Suit, not print revenues, eBook Amazon sales rankings, or eBook

revenues. As Dr. Prince explains, Amazon sales rankings are not necessarily a

proxy for revenues, and the sales rankings of print books tell us nothing about the

impact of IA’s lending practices on sales and checkouts of eBooks. Id. at 5397–98.

Moreover, the Amazon algorithm that determines the rankings is “vague” and

reportedly “susceptible to manipulation.” Id. at 5474. This makes it difficult to

discern whether and to what extent those rankings correspond to sales revenues.

For that reason, the conclusions drawn by IA from Dr. Reimers’ report regarding

the impact of their lending services on Publishers’ sales are ill supported.

Although they do not provide empirical data of their own, Publishers assert

that they (1) have suffered market harm due to lost eBook licensing fees and (2)

will suffer market harm in the future if IA’s practices were to become widespread.

52 IA argues that Publishers cannot rely on the “common-sense inference” of market

harm without data to back that up, citing American Society for Testing & Materials

v. Public.Resource.Org, Inc.,

82 F.4th 1262

(D.C. Cir. 2023) (“ASTM II”). Appellant’s

Br. at 55–56.

We agree with Publishers’ assessment of market harm. “It is indisputable

that, as a general matter, a copyright holder is entitled to demand a royalty for

licensing others to use its copyrighted work, and that the impact on potential

licensing revenues is a proper subject for consideration in assessing the fourth

factor.” Bill Graham Archives v. Dorling Kindersley Ltd.,

448 F.3d 605, 614

(2d Cir.

2006). While “only an impact on potential licensing revenues for traditional,

reasonable, or likely to be developed markets should be legally cognizable” when

evaluating market harm, here, Publishers’ library eBook licensing market is both

reasonable and developed. TVEyes,

883 F.3d at 180

(cleaned up). And it is

undisputed that IA appropriated the Works “without payment of [the] customary

53 licensing fee.” 9 Ringgold,

126 F.3d at 81

. IA has thus “usurped a market that

properly belongs to the copyright holder.” 10 TVEyes,

883 F.3d at 180

(cleaned up).

We are likewise convinced that “unrestricted and widespread conduct of

the sort engaged in by [IA] would result in a substantially adverse impact on the

potential market for [the Works in Suit].” Campbell,

510 U.S. at 590

(cleaned up).

IA’s Free Digital Library serves as a satisfactory substitute for the original Works.

Were we to approve IA’s use of the Works, there would be little reason for

consumers or libraries to pay Publishers for content they could access for free on

IA’s website. See Warhol I,

11 F.4th at 50

. Though Publishers have not provided

empirical data to support this observation, we routinely rely on such logical

inferences where appropriate in assessing the fourth fair use factor. See, e.g., Google

Books, 804 F.3d at 223–25 (relying on logical inferences rather than empirical data

to conclude that the secondary use did not serve as a competing substitute for the

originals); ReDigi, 910 F.3d at 662–63 (relying on logical inferences rather than

empirical data to conclude that the secondary use served as a competing substitute

9 It is “of no moment” that IA approached Publishers to purchase their eBooks on a perpetual basis and was rebuffed; “the failure to strike a deal satisfactory to both parties does not give [IA] the right to copy [Publishers’] copyrighted material without payment.” TVEyes,

883 F.3d at 180

10This is true even though Publishers’ revenues have increased in recent years. That Publishers are both profitable and have lost potential licensing fees as a result of IA’s infringement are not mutually exclusive; both can be, and here are, true at the same time.

54 for the originals); Warhol I,

11 F.4th at 50

(relying on “self-evident” harm that

would result if the defendant’s use were to become widespread). Thus, we

conclude it is “self-evident” that if IA’s use were to become widespread, it would

adversely affect Publishers’ markets for the Works in Suit. Warhol I,

11 F.4th at 50

ASTM II does not convince us otherwise. That D.C. Circuit case involved

various private organizations that promulgate, copyright, and sell copies of

standards establishing best practices for their respective industries, which are

often incorporated by reference into federal agency rules and state and local

regulations. ASTM II,

82 F.4th at 1265

. Three of those standard-setting

organizations sued nonprofit Public.Resource.Org (“PR”), alleging that it

infringed their copyrights in numerous standards that had been incorporated into

government regulations by posting those standards on its website for users to

access for free.

Id. at 1266

. The district court determined that PR’s use of the

standards was a fair use, and the organizations appealed.

Id. at 1265

The D.C. Circuit affirmed, concluding that the first three fair use factors

strongly favored PR.

Id. at 1267

. With regard to market harm, the organizations

pressed the “common-sense” argument that, if users can download an identical

copy of a standard for free, few will pay to buy the standard.

Id. at 1271

. The court

rejected this argument for two reasons. First, PR published only versions of the

55 regulations that had been incorporated into government regulations.

Because

the organizations regularly update their standards, and government agencies are

slow to incorporate those new standards, if builders, engineers, or other

consumers wanted the most up-to-date version of a regulation, they would have

to purchase the organization’s copy.

Thus, there was reason to doubt the

“common-sense inference” that PR’s activities would usurp the market for the

organizations’ standards.

Second, the organizations did not provide any empirical evidence of market

harm, while PR introduced data indicating a lack of such harm.

The Court

explained:

Public Resource has been posting incorporated standards for fifteen years. Yet the plaintiffs have been unable to produce any economic analysis showing that Public Resource's activity has harmed any relevant market for their standards. To the contrary, ASTM’s sales have increased over that time; NFPA’s sales have decreased in recent years but are cyclical with publications; and ASHRAE has not pointed to any evidence of its harm.

The plaintiffs’ primary evidence of harm is an expert report opining that Public Resource’s activities could put the plaintiffs’ revenues at risk. Yet although the report qualitatively describes harms the plaintiffs could suffer, it makes no serious attempt to quantify past or future harms. Like the district court, we find it telling that the plaintiffs do not provide any quantifiable evidence, and instead rely on conclusory assertions and speculation long after Public Resource first began posting the standards.

(cleaned up). The Court thereafter concluded that the “fourth fair-use factor

does not significantly tip the balance one way or the other.”

Id. at 1272

IA urges us to adopt the same analysis of market harm. It argues that

Publishers’ lack of data is similarly “telling,” and that we, like the D.C. Circuit,

should reject their common-sense claim that if users can download an identical

copy of a Work for free, few will pay to buy or lease Publishers’ editions.

Appellant’s Br. at 56.

To the extent IA faults Publishers’ lack of empirical data, it forgets the

burden of proof. Recall the broader context: Publishers have already established

a prima facie case of copyright infringement. The only issue in this appeal is

whether IA’s Free Digital Library constitutes a fair use of the Works. “Fair use is

an affirmative defense; as such, the ultimate burden of proving that the secondary

use does not compete in the relevant market is appropriately borne by the party

asserting the defense: the secondary user.” Warhol I,

. While the

rightsholder may bear some initial burden of identifying relevant markets, “we

have never held that the rightsholder bears the burden of showing actual market

harm.”

Publishers need not present empirical data of their own in connection

with IA’s asserted affirmative defense.

57 Additionally, the nature of the works at issue in ASTM II was of a manifestly

different character than the Works at issue here. The organizations in ASTM II

updated their standards frequently, such that their production of new copyrighted

standards typically outpaced governments’ incorporation of those standards into

law. ASTM II,

82 F.4th at 1271

. Given that PR posted only standards that had been

incorporated into law, its use did not usurp the organizations’ market for the most

up-to-date version of the standards.

The interrelatedness of the first and fourth

factors was apparently critical to the D.C. Circuit’s conclusion: because PR’s copies

did not replace the originals―i.e., the most up-to-date versions of the

standards―it was unlikely that those copies would bring to the marketplace a

competing substitute for the originals.

Id. at 1271, 1268

(“[PR] publishes only what

the law is, not what industry groups may regard as current best practices.”). This

lack of usurpation made the organizations’ failure to quantify past or future harms

“telling.” 11

11To the extent the D.C. Circuit faulted the plaintiff-organizations for failing to produce empirical evidence of market harm, we don’t understand that court to have shifted the burden of persuasion on the fair use defense. In any event, the law is clear in this Circuit that the burden of producing persuasive evidence of the absence of market harms falls to the infringer that invokes a fair use defense. Andy Warhol Foundation for Visual Arts, Inc. v. Goldsmith,

11 F.4th 26, 49

(2d Cir. 2021) (“[W]e have never held that the rightsholder bears the burden of showing actual market harm. Nor would we so hold. Fair use is an affirmative defense; as such, the ultimate burden of proving that the secondary use does not compete in the relevant market is appropriately borne by the party asserting the defense: the secondary user.”), aff’d,

598 U.S. 508

(2023).

58 Here, by contrast, IA’s use of the Works, which remain unchanged through

time, is not transformative. Because IA’s Free Digital Library functions as a

replacement for the originals, it is reasonable and logical to conclude not only that

IA’s digital books currently function as a competing substitute for Publishers’

licensed editions of the Works, but also that, if IA’s practices were to become

“unrestricted and widespread,” TVEyes,

, it would decimate

Publishers’ markets for the Works in Suit across formats.

B. Any public benefits of IA’s Free Digital Library do not outweigh the harm to Publishers’ markets

Although IA cannot disprove market harm, we still “balance the benefit the

public will derive if the use is permitted [against] the personal gain the copyright

owner will receive if the use is denied.” Warhol I,

. IA argues that its

Free Digital Library provides “significant public benefits,” including expanding

access to free literary materials. Appellant’s Br. at 59. It asserts that prohibiting

its CDL practices would cause harm “to those who have difficulty accessing

physical libraries and to researchers and authors who use controlled digital

lending in creating new works.”

We conclude that both Publishers and the public will benefit if IA’s use is

denied.

59 To be sure, expanding access to knowledge would, in a general sense,

benefit the public. But “[a]ny copyright infringer may claim to benefit the public

by increasing public access to the copyrighted work.” Harper & Row,

471 U.S. at 569

. That does not alone render the infringement lawful. Indeed, the Copyright

Act and its empowering constitutional authority reflect a considered judgment

that “the Progress of Science and useful Arts” is best promoted by laws that protect

authors’ original works and permit authors to set the terms of engagement, at least

for a limited time. See Sony,

464 U.S. at 429

. Doing so benefits the public “by

providing rewards for authorship.” Google Books,

804 F.3d at 212

. This

monopolistic power is a feature, not a bug, of the Copyright Act.

Within the framework of the Copyright Act, IA’s argument regarding the

public interest is shortsighted. True, libraries and consumers may reap some

short-term benefits from access to free digital books, but what are the long-term

consequences? If authors and creators knew that their original works could be

copied and disseminated for free, there would be little motivation to produce new

works. And a dearth of creative activity would undoubtedly negatively impact

the public. It is this reality that the Copyright Act seeks to avoid.

While IA claims that prohibiting its practices would harm consumers and

researchers, allowing its practices would―and does―harm authors. With each

60 digital book IA disseminates, it deprives Publishers and authors of the revenues

due to them as compensation for their unique creations. Sandra Cisneros, an

author who submitted a declaration in support of Publishers’ summary judgment

motion, captured the effect of IA’s infringement:

I worked hard to earn the financial security that I now have and which enables me to earn a living from my pen without fear of poverty. And, as my agent reminds me, the royalty revenues I receive from the sales of books I have written are precious and must be closely guarded because this is ultimately going to generate the money that supports me in old age. . . .

When I went on the Internet Archive’s website and saw that scans of my books were being distributed to anybody who wanted them for free―without my permission or any payment―I was appalled. I found the experience so viscerally upsetting that I could not stay on the website for long. It was like I had gone to a pawn shop and seen my stolen possessions on sale.

App’x 249–50. Though IA and its amici may lament the consolidation of editorial

power and criticize Publishers for being motivated by profits, behind Publishers

stand authors who are entitled to compensation for the reproduction of their

works and whose “private motivation . . . ultimately serve[s] the cause of

promoting broad public availability of literature, music, and the other arts.”

Warhol II,

598 U.S. at 526

(quoting Twentieth Century Music Corp.,

422 U.S. at 156

IA’s Free Digital Library undermines that motivation.

61 In sum, IA has not met its “burden of proving that the secondary use does

not compete in the relevant market[s].” Warhol I,