David R. Hansen and Kyle K. Courtney

“ But the 20th century book market suffers from market failure even when owners are known. Failure of rightsholders to exploit the e-book market likely has many causes. Some of those are production-related transaction costs, some are due to the complex thickets of rights associated with each work, [127] and some are likely due just to competing priorities. In all such cases, books are not commercially available in digital form. High transaction costs make it economically unviable for a willing rightsholder and a willing user to negotiate for a sale. ”

“ While many libraries make their collections available broadly to many users, user-group considerations may mean that libraries will want to think carefully about issues such as who their core users are and, for example, how lending to partner libraries in local or regional consortia with deeply integrated print collections may work, as opposed to users at libraries with more distant interlibrary loan arrangements. In any case, the aim would be to make collections more accessible for those who would ordinarily, already be entitled to access. ”

“ For example, a library might introduce lending limits based on library experience with physical lending. If a physical book could be expected to circulate 2,000 times before it degrades, the library could place the same limit on circulation of the digital copy. For many books, this could pose little practical challenge. Large research libraries hold many books that have circulated very seldom in print, [151] and so for many obscure materials ever hitting a maximum loan threshold may be unlikely (though we recognize, digital availability may itself drive lending) . ”

“ Amazon (or libraries) using drones to deliver physical books to one’s doorstep yet faster is no less an impingement on a rightsholder’s market than a digital transaction that moves a copy yet more quickly. Such advancements have already occurred; advances in interlibrary loan services such as RapidILL and BorrowDirect mean books now move quickly and seamlessly between libraries in dramatically less time than in the 1970s when the Copyright Act was enacted. [115] Certainly other actors—FedEx, the fuel suppliers, physical book inventory system manufacturers—may suffer with digital lending. ”

“ Others may have identifiable owners, but are in practice neglected, unavailable in the digital marketplace and with no plan for revitalization in modern formats. For all, it means that they are not fully meeting the basic goals of copyright to promote “the Progress of Science and the useful Arts.” [21] Their unavailability online benefits neither creators nor the reading public.
So, how can libraries provide access? First, we start with a detailed look at the two fundamental copyright law doctrines that already empower libraries to fulfill their missions: first sale and fair use. ”

“ For others, physical access is a matter of great inefficiency in their research and learning. For users with print disabilities—those who currently have some digital access to print collections due to the fair use holding in the HathiTrust case which addressed copying and access of books for print-disabled users [18] —access is currently hampered by hurdles that require users to self-identify disabilities and request special access to digital copies. ”

“ The third and fourth CDL controls are that libraries should (3) “limit the total number of copies in any format in circulation at any time to the number of physical copies the library lawfully owns (maintain an “owned to loaned” ratio) ,” and (4) “lend each digital version only to a single user at a time just as a physical copy would be loaned.” These controls ensure that libraries lending digital copies don’t get more than what they bargained for. A library that owns a single copy of a book could only lend a single copy out at a time. ”

“ Finally, the third market-harm concern is that digital distribution raises greatly increased risks of piracy. In its 2001 report addressing digital first sale, the U.S. Copyright Office concluded that “the concerns about expanding first sale to limit the reproduction right, harm to the market as a result of the ease of distribution, and the lessened deterrent effect of the law that could promote piracy, outweigh the pro-competitive gains that might be realized from the creation of a digital first sale doctrine.” ”

“ A library might lower risk by selecting works for CDL implementation that are clearly not available in the marketplace, either “in print” from the publisher or electronically as a licensed e-book. Selecting these works has the practical risk mitigation strategy of also reducing the risk that anyone will bring suit in the first place—if the work is not currently exploited by its owner, chances stand to be higher that whoever that owner is isn’t particularly concerned with use of it by libraries. ”

“ Market Effect The “market harm” analysis is tied closely together with assessment of the purpose of the use under the first factor, informing how courts should view the market purportedly being harmed in connection with the one (s) a copyright owner intends to enter and has a right to control. For example, the Copyright Act does not grant a copyright owner the right to control negative commentary or criticism of its work, [110] uses favored under the first factor. If criticism results in lost sales, is not the type of harm recognized under the fourth fair use factor. ”

“ Movement of a copy from one location to another takes time; vehicles must drive and deliver copies, acting as a “natural brake on the effect of resales on the copyright owner’s market.” [114] For libraries, it takes time for returned books to make their way back on to shelves, and to check them out again to the next patron. For loans out to patrons in other locations, interlibrary loan adds an additional layer of delay. For digital transactions factors such as time and space no longer act as major impediments to transfer. ”

“ As a way to enhance the fair use position, the “nature of the work” factor tends to weigh more in favor of uses of works that are further from the core of what copyright was designed to protect. While courts have not placed significant weight on this factor, it still stands as a potential area for collection selection to enhance the fair use argument and lower risk.
Libraries have many choices. They may choose heavily factual or scientific books, or merely books that are categorized as non-fiction. ”

“ For each aspect of risk, libraries should make an honest assessment of their risk tolerance, accompanied by advice from legal counsel about how to match some of the ideas presented above and below with that risk profile.
For risk of being sued, it’s not necessarily about the law itself. The issues are actually about time, resources, and reputational harm in defending a lawsuit. A lawsuit can take a tremendous amount of time. For example, the Georgia State e-reserves case (Cambridge University Press v. Patton) has now entered its 10th year of litigation. ”

“ A library can lend a physical book to a patron through standard circulation or to another library through interlibrary loan. What CDL does do is shift that lending to a new format that opens up access possibilities for readers with disabilities, physical access limitations, research efficiency needs, or other needs for digitally-accessible content.
A CDL system is not a brand-new concept. There are multiple versions of CDL-like systems currently being used in libraries. ”

“ The system we propose maintains the market balance long-recognized by the courts and Congress as between rightsholders and libraries, [10] and makes it possible for libraries to fulfill their “vital function in society” [11] by enabling the lending of books to benefit the general learning, research, and intellectual enrichment of readers by allowing them limited and controlled digital access to materials online. ”

“ Libraries thinking about CDL will encounter risk, both positive and negative. On the positive side, we believe there is a significant upside: CDL helps libraries fulfill their missions in the broadest sense, using technology to increase effective, non-discriminatory access to collections for our users, and the world. Libraries have faced existential challenges for decades—“Is the library dead?”—but have survived in part because of their responsiveness to new technology. ”

“ So, for books published in this time period as a whole, there is a strong argument that they collectively represent a market failure. Part of that failure is due to high costs of determining commercial availability for any given work. The costs of searching and identifying which works are out of print, orphaned, or not available in e-book format is costly itself. ”

“ Given the costs of digitizing, building and maintaining the technical infrastructure necessary to lending digitally and controlling physical copies, and personnel time used to restrict print copies when its digital equivalent is circulating, libraries may spend considerable sums with no compensation. To be sure, libraries and their users would stand to benefit from CDL. We would not propose it if they did not. But under the CDL model we envision, libraries have already paid the customary price, and CDL limits access to a work to one person at a time. ”

“ The Copyright Act does not require rights holders to sell their works in the marketplace; they do not face a “use it or lose it” regime of protection. [128] Beyond the threshold question of protection, even within the fair use analysis, courts have found valid reasons why market harm analysis should weigh against the use when the copyright owner may have had creative or economic reasons for holding back the work. ”

“ Publishers regularly license electronic books for digital distribution without any discernable market premium added to account for the additional risk of impermissible downstream copying. For libraries, security issues should be taken seriously, which they are by design through the six CDL controls described above. Like the approach taken by HathiTrust, the repository of digital copies must be secured from unintended access. Going even beyond the HathiTrust case, CDL would require physical access to works be restricted as well, while digital copies are lent. ”

“ In addition, the files lent must be controlled in some significant way (e.g., using DRM) that will prevent the patron from retaining perpetual or unrestricted access to the file. Other digital first sale scenarios that involve permanent transfer of files from one party to another, such as sale of mp3s, have struggled with how to effectively implement “forward-and-delete” technology. [124] For libraries lending works, the solution is potentially much easier; lending technology for distribution of licensed e-books is well established. ”

“ Traditionally, however, courts have used the second factor to examine whether the work used falls at the “core of intended copyright protection” [95] or closer to its fringes. Use of works of a more scientific or scholarly nature have weighed in favor of fair use; [96] “the law generally recognizes a greater need to disseminate factual works than works of fiction or fantasy.” [97] Use of works that incorporate significant unprotectable elements is also favored. ”

“ The court shall remit statutory damages in any case where an infringer believed and had reasonable grounds for believing that his or her use of the copyrighted work was a fair use under section 107, if the infringer was: (i) an employee or agent of a nonprofit educational institution, library, or archives acting within the scope of his or her employment who, or such institution, library, or archives itself, which infringed by reproducing the work in copies or phonorecords ”

“ In addition to aiding in the likelihood that the market is significantly diminished, many older works may in fact be in the public domain, subject to no copyright restrictions on use at all. Because the public domain analysis can be time consuming and costly, [154] for libraries that are unable to undertake a full public domain analysis to each work, using older works as a proxy in combination with a CDL strategy may be an effective way to minimize copyright-related risks. ”

“ However, even if CDL is not transformative, [87] we believe the purpose and character still strongly weighs in favor of a fair use finding. The courts have been clear that “ [w] hile a transformative use is generally more likely to qualify as fair use, ‘transformative use’ is not absolutely necessary for a finding of fair use.’” [88] In HathiTrust, for example, the Second Circuit found that libraries providing full-text access to print-disabled users was not transformative. ”

“ There are no cases directly on point, and some contrary authority in the context of commercial activities. Yet, there are strong arguments supported by caselaw for why CDL, appropriately tailored to reflect physical market conditions, should be permissible under existing law under the doctrine of fair use. ”

“ The USPTO in its recent white paper declining to recommend development of a broad conception of “digital first sale” stated that that “ [t] o the extent that library lending involves library patrons ‘willing and able to wait their turn for the limited loans and use of library materials,’ [ ] the inefficiencies built into lending processes may avoid crossing the line of competing with the commercial market.” [116] So, while transactional friction may not be necessary for CDL, an implementation that added it could reduce risk for libraries. ”