In 2020, at the peak of the Covid-19 pandemic and lockdowns, the Internet Archive (IA), a digital non-profit library, temporarily lifted its borrowing restrictions and was promptly slapped with a lawsuit by four out of five of the “Big Five” publishers. Prior to lockdowns, IA followed standard lending library practice and made digital loans on the following conditions: 1) one loan per copy of item; 2) only one user could borrow an item at a time; 3) the loans were restricted to standard library times, i.e. fourteen days with a significant number of items being available for borrowing by the hour. Anecdotally, the latter situation originates in American academia where university libraries frequently hold two copies of an item, one for take-away borrowing and the other for in-house consultation. The change IA made to its lending practices during the pandemic was that they ended waitlisting for items — all items became available for immediate loan — and they ended restricting lending of items to one account at a time. Around mid-2021, the library returned to standard library lending practice.
The lawsuit by the publishers alleges that they suffered financial harm from IA’s change in lending practice and that therefore IA is committing mass copyright infringement. IA’s defense is that as a library, they are operating legally under a principle of controlled digital lending (CDL) and the so-called "First sale doctrine.” Essentially, what the First sale doctrine (and Common Law Exhaustion Principle) state is that authors and publishers are only guaranteed to receive royalties on the first sale (First sale doctrine), and that all subsequent loans or transactions, e.g. gifting a book or purchase via second-hand bookstores, are exempt from payment of residuals (Common Law Exhaustion Principle). So the First sale doctrine allows municipal libraries, i.e. brick-and-mortar, taxpayer-funded institutions, to loan out physical materials they have purchased at retail without being considered intellectual property pirates. For libraries attached to academic institutions, the rules are even looser since their loans fall under the purview of educational purpose.
Much of the case revolves around the legality of CDL, which is legal provided that its use falls under "fair use" copyright exemptions, i.e. used in a non-profit context. This leads to a dual-pronged opposition argument. For the first prong, IA is a non-profit with an educational charter, but it has an affiliate company which owns the online bookdealer Better World Books. For this reason, the plaintiffs’ lawyers indicated that IA should not be treated as a non-profit as they "own,” or at least are partnered with, a for-profit entity. The second prong concerns the difference between CDL and ebook licensing fees, with the publishers’ attorney claiming in their oral arguments that CDL, specifically that of IA, has cost the publishers "millions of dollars in licensing revenues." The licensing revenues mentioned are for ebooks and function in a similar way to software licensing.
Unlike individual users, e.g. owners of e-readers, libraries are no longer able to purchase a license for a one-time fee; instead there are three options: 1) metered use, in which the license expires and must be renewed; 2) cost-per-circulation, in which each loan incurrs a fee to be paid by the library to the publisher; and 3) simultaneous use, in which libraries pay an annual fee to publishers for unlimited access to an ebook. Licensing varies publisher to publisher, and sometimes the configuration is extremely limiting, such as one of the big houses which causes licenses to expire after twenty-six loans, forcing institutions to repurchase titles. It is no suprise that libraries, which is to say the taxpayer, find ebook licensing fees to be crippling. To quote an ebook publishing guide, what libraries and readers face is a “shift from a property purchase model to a licensing model.”
In a way, CDL represents an effort to maintain property rights in a digital era. Libraries are allowed to digitize physical books in their collections and then to lend those copies out, provided that they maintain the “owned to loaned ratio,” i.e. only loan out as many digital copies as physical books owned. This precedent applies to brick-and-mortar libraries and the current issue is whether or not IA may claim the same standing, a debate which has been longstanding, since IA’s founding in 2006, but which became more contentious when publishing houses began switching their digital products to licenses or altered the terms of their licenses around 2018.
Authors themselves are divided on CDL, and by extension digital libraries such as IA. While the US Authors Guild supports the publishers, the Authors Alliance favors IA. Authors Guild maintains that CDL is a form of theft. Authors Alliance cites that there are no conclusive, formal studies proving that the use of CDL harms publishing houses' bottom lines and that the majority of authors prefer to have their books circulating in order to maximize their profiles, especially since they are only paid for the first purchase. Indeed, Authors Alliance argued, based on a 2020 consumer survey, that there were tremendous market benefits to open libraries, which are the ones that tend to use CDL, as the majority of readers buy their own copies of books after borrowing them from a library. This in turn means that publishers and authors stand to benefit materially from entities such as IA, rather than lose.
After oral arguments, on 20 March, 2023, the presiding judge ordered the publishers to provide concrete evidence of “actual market harm.” On 24 March, the judge ruled in favour of the publishers. IA intends to appeal. This case is a precedent shaping one which will have rammifications for libraries, digital and physical, and regular reading consumers. Aside from intellectual property rights, the judgement will affect definitions of property and ownership in a material sense as well.
Comment
|
April 12th, 2023
Controlled Digital Lending is on trial
Mary Lucia Darst about the legal battle between the Internet Archive and "Big Five" publishers over controlled digital lending and the First sale doctrine.
In 2020, at the peak of the Covid-19 pandemic and lockdowns, the Internet Archive (IA), a digital non-profit library, temporarily lifted its borrowing restrictions and was promptly slapped with a lawsuit by four out of five of the “Big Five” publishers. Prior to lockdowns, IA followed standard lending library practice and made digital loans on the following conditions: 1) one loan per copy of item; 2) only one user could borrow an item at a time; 3) the loans were restricted to standard library times, i.e. fourteen days with a significant number of items being available for borrowing by the hour. Anecdotally, the latter situation originates in American academia where university libraries frequently hold two copies of an item, one for take-away borrowing and the other for in-house consultation. The change IA made to its lending practices during the pandemic was that they ended waitlisting for items — all items became available for immediate loan — and they ended restricting lending of items to one account at a time. Around mid-2021, the library returned to standard library lending practice.
The lawsuit by the publishers alleges that they suffered financial harm from IA’s change in lending practice and that therefore IA is committing mass copyright infringement. IA’s defense is that as a library, they are operating legally under a principle of controlled digital lending (CDL) and the so-called "First sale doctrine.” Essentially, what the First sale doctrine (and Common Law Exhaustion Principle) state is that authors and publishers are only guaranteed to receive royalties on the first sale (First sale doctrine), and that all subsequent loans or transactions, e.g. gifting a book or purchase via second-hand bookstores, are exempt from payment of residuals (Common Law Exhaustion Principle). So the First sale doctrine allows municipal libraries, i.e. brick-and-mortar, taxpayer-funded institutions, to loan out physical materials they have purchased at retail without being considered intellectual property pirates. For libraries attached to academic institutions, the rules are even looser since their loans fall under the purview of educational purpose.
Much of the case revolves around the legality of CDL, which is legal provided that its use falls under "fair use" copyright exemptions, i.e. used in a non-profit context. This leads to a dual-pronged opposition argument. For the first prong, IA is a non-profit with an educational charter, but it has an affiliate company which owns the online bookdealer Better World Books. For this reason, the plaintiffs’ lawyers indicated that IA should not be treated as a non-profit as they "own,” or at least are partnered with, a for-profit entity. The second prong concerns the difference between CDL and ebook licensing fees, with the publishers’ attorney claiming in their oral arguments that CDL, specifically that of IA, has cost the publishers "millions of dollars in licensing revenues." The licensing revenues mentioned are for ebooks and function in a similar way to software licensing.
Unlike individual users, e.g. owners of e-readers, libraries are no longer able to purchase a license for a one-time fee; instead there are three options: 1) metered use, in which the license expires and must be renewed; 2) cost-per-circulation, in which each loan incurrs a fee to be paid by the library to the publisher; and 3) simultaneous use, in which libraries pay an annual fee to publishers for unlimited access to an ebook. Licensing varies publisher to publisher, and sometimes the configuration is extremely limiting, such as one of the big houses which causes licenses to expire after twenty-six loans, forcing institutions to repurchase titles. It is no suprise that libraries, which is to say the taxpayer, find ebook licensing fees to be crippling. To quote an ebook publishing guide, what libraries and readers face is a “shift from a property purchase model to a licensing model.”
In a way, CDL represents an effort to maintain property rights in a digital era. Libraries are allowed to digitize physical books in their collections and then to lend those copies out, provided that they maintain the “owned to loaned ratio,” i.e. only loan out as many digital copies as physical books owned. This precedent applies to brick-and-mortar libraries and the current issue is whether or not IA may claim the same standing, a debate which has been longstanding, since IA’s founding in 2006, but which became more contentious when publishing houses began switching their digital products to licenses or altered the terms of their licenses around 2018.
Authors themselves are divided on CDL, and by extension digital libraries such as IA. While the US Authors Guild supports the publishers, the Authors Alliance favors IA. Authors Guild maintains that CDL is a form of theft. Authors Alliance cites that there are no conclusive, formal studies proving that the use of CDL harms publishing houses' bottom lines and that the majority of authors prefer to have their books circulating in order to maximize their profiles, especially since they are only paid for the first purchase. Indeed, Authors Alliance argued, based on a 2020 consumer survey, that there were tremendous market benefits to open libraries, which are the ones that tend to use CDL, as the majority of readers buy their own copies of books after borrowing them from a library. This in turn means that publishers and authors stand to benefit materially from entities such as IA, rather than lose.
After oral arguments, on 20 March, 2023, the presiding judge ordered the publishers to provide concrete evidence of “actual market harm.” On 24 March, the judge ruled in favour of the publishers. IA intends to appeal. This case is a precedent shaping one which will have rammifications for libraries, digital and physical, and regular reading consumers. Aside from intellectual property rights, the judgement will affect definitions of property and ownership in a material sense as well.
Author
Mary Lucia Darst is a DPhil in Music candidate at the University of Oxford. She holds an MA in History and Literature from Columbia University. In addition to working as a writer and researcher, she is a filmmaker and active classical musician.
View all posts
The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.
Do you like the article?
We are glad you do! Please consider donating if you want to read more articles like this one.
Related
Comment
“The Man Without a Country”
June 24th, 2013
Comment
The Month That Was November, 2013
December 2nd, 2013
Comment
The EU Should Learn from Britain’s Business Ambitions
July 15th, 2020
Comment
Sneak Peek at the Free Market Road Show
February 17th, 2016
Comment
The Global Public Debt Crisis is Keynesian!
August 8th, 2011