Controlled Digital Lending Thwarts Democratic Process and Rights of Authors

By Devlin Hartline
August 30, 2021

“There is a weird notion, particularly among copyright skeptics, that anything arguably supporting the public good should be legal. But these arguments downplay the inevitable harms that would result from CDL.”

https://depositphotos.com/403527238/stock-photo-illustration-library-lots-books-laptop.htmlOne of the latest controversies in copyright law concerns the practice of controlled digital lending (CDL) by libraries. The idea is simple: Libraries take the physical books on their shelves, digitize them, and then share the digital copies with members of the public. Under the CDL theory, there is no permission needed to make the digital copies, nor is permission needed to share them publicly. The theory instead posits that all these things are perfectly legal—and presumably they have been legal for decades, though people are just now starting to notice. If this sounds too good to be true, that’s because it is. Ultimately, the CDL theory is really just the CDL fantasy. It’s an example of wishful thinking by supposed do-gooders who have figured out yet another way to give away other people’s copyrighted works for free. Except, this time, it at least comes with the fig leaf of a library.

Some proponents of CDL, such as Internet Archive founder Brewster Kahle, view it as the means of creating “the modern-day Library of Alexandria,” where digital copies of “the published works of humankind” are available online to everyone. In fact, Kahle’s Open Library has been working toward that goal by digitizing works and putting them online without permission for the past decade. However, while a central repository of all the world’s works certainly sounds appealing, it is important to keep focused on the authors who labor to provide us with that original expression in the first place. Copyright law has never been about giving away everything for free without the consent of the author while pretending that alone promotes the public good. On the contrary, copyright promotes the public good by granting and protecting exclusive rights in original works of authorship.

Digital First Sale and Fair Use Do Not Support the CDL Theory

The most vigorous defense of CDL was published in 2018 in the form of a Position Statement and White Paper. Noticeably, the Position Statement never once uses the word “author” in defending the practice, though it does purport to preserve “an appropriate balance between the public benefit of such lending and the protected interests of private rights holders.” That “balance” is nowhere to be found, and the Position Statement instead touts the societal benefits of access while downplaying the “arguable negative impact” from “the loss of sales due to lending as a substitution.” The White Paper, which expands on the legal arguments undergirding the CDL theory, follows suit, likewise claiming that it “maintains the market balance long-recognized by the courts and Congress as between rightsholders and libraries.” That “balance” again comes at the expense of authors, and the White Paper claims that any negative market effects are not cognizable harms.

Echoing the Position Statement, the White Paper primarily argues that CDL is noninfringing under the first sale and fair use doctrines. It’s a bit wishy washy on whether first sale can carry the day by itself, and it instead tries to import exhaustion principles into its fair use analysis. But the amalgamation doesn’t work, and the whole is no greater than the sum of its parts. The key to the CDL theory is that it’s “controlled”: the physical copies that are digitized should be owned and lawfully acquired; the total number of copies in circulation should never exceed the number of physical copies owned; the time period of the loan should be limited; and digital rights management (DRM) should be used to prevent further copying and redistribution. While perhaps admirable at first blush, these controls do not complete the doctrinal work that CDL advocates would like.

The White Paper claims that first sale applies, but only cautiously. The first sale doctrine, codified in Section 109, provides that “the owner of a particular copy” that is “lawfully made” can distribute that copy to others—the initial authorized sale of the copy exhausts the copyright owner’s distribution right as to that particular copy. The problem for CDL supporters is that first sale does not create exceptions for any of the other exclusive rights, most notably the reproduction right, which is certainly implicated when a physical copy is first turned into a digital one and then again as numerous copies are made while it wends its way across the internet. The White Paper suggests that the courts may clarify the law on digital first sale, and the Second Circuit did just that in Capitol Records v. ReDigi a few months later when it rejected the position that first sale applies to unauthorized digital reproductions.

Undeterred by the inapplicability of first sale, the White Paper then turns to fair use. The fair use argument is just a rehash of the same arguments raised to support the defendants in the Authors Guild’s lawsuits against HathiTrust and Google. The Second Circuit in those cases blessed (here and here) the scanning of millions of books in order to create a searchable database that provides information about the books—page numbers and frequency of terms—and even snippets of the text. But both cases were clear that providing the entire work itself would be a very different story. Indeed, it is a simple fact that no court has ever found that giving away entire works for free online, en masse and without additional comment or criticism, constitutes fair use.

What CDL envisions is nothing like a search engine that provides information about books or mere snippets of text—it provides entire copyrighted works to the public. The Second Circuit in the Authors Guild cases found the searchable database transformative because it did more than simply republish the original works, and that transformativeness drove the rest of the fair use analysis. With CDL, however, there is no such transformative use, and the White Paper all but admits as much. It instead argues that it doesn’t matter since CDL “aligns closely with the statutory purpose of the first sale doctrine,” and it claims that this purpose drives the analysis. Of course, the purpose of first sale is to give effect to the common law rule against restraints on the alienation of physical goods—not the creation of unauthorized digital copies. And without the first sale foundation, the entire fair use analysis falls like a house of cards.

CDL Bypasses the Legislative Process to the Detriment of Authors

People who follow these things know that these issues are nothing new. Digital first sale and mass digitization have been discussed and studied for years. For example, after a lengthy review that included the comments and testimony of multiple stakeholders, the Copyright Office concluded in 2001 that first sale does not apply to new digital copies—nor should it. The Office noted that there are fundamental differences between physical copies, which degrade with use and require significant time, space, effort, and cost to lend, and digital ones, which do not, and it recommended against changing the law since these and other differences would upset the balance between authors and users. Mass digitization has likewise been extensively studied by the Copyright Office, with its most recent report recommending that Congress consider a licensing regime since “it is unlikely that fair use will ever yield the kind of broad use of full-text works that some would like to see in the online environment.”

The Copyright Office recognizes that legislative changes are needed to implement the very things that CDL advocates say are already legal. Indeed, it seems that the purpose of CDL is to gain in the courts what they have been unwilling or unable to achieve in Congress. This is seen too with the significant exceptions that are not being claimed by CDL proponents. Section 108 provides statutory exceptions for libraries to make and distribute copies, even digital ones, though it does not allow digital copies to be shared beyond the physical premises of the library. And Section 110, the TEACH Act, creates exceptions for the use of digital copies in distance learning—one of the purported goals of CDL. These exceptions were hammered out after years of studies, debates, hearings, and drafts—the way laws are usually developed through the compromises of the democratic process. But rather than work to amend the law, CDL advocates pretend that it already favors their extreme position.

There is a reason why the Authors Guild, the National Writers Union, the Association of American Publishers, the Register of Copyrights, Senator Thom Tillis, Senator Tom Udall, and many others are skeptical of the CDL theory: It would jettison the hard-fought balance between authors and users we have now as reflected in the text of the Copyright Act. Real change is hard, but it’s a battle worth having if we are to consider and address the divergent views of the various stakeholders. The rights of authors are not some minor inconvenience to be routed around. They are the lifeblood without which our shared culture would shrivel up and die on the vine. We should not be figuring out new ways to rob authors of a living. We should be doing everything we can to make sure that they thrive in the digital age where infringement requires nothing more than the click of a mouse.

Perhaps the least plausible defense of CDL is the notion that it causes no cognizable market harm to authors. The White Paper claims that “CDL does not negatively affect the market any differently than the uses already permitted by libraries when lending books physically,” but this is simply not true. Physical copies are demonstrably different than digital ones, and the licensing markets for each are distinct. Libraries buy books and license ebooks, and authors get royalties with both. CDL, by contrast, cuts off the ebook licensing royalties that authors would otherwise collect because it is a direct market substitute that competes with the original. Rather than fulfilling the policy objectives of the first sale and fair use doctrines, CDL usurps the rights of authors and devalues the market for their copyrighted works.

CDL Goals Misunderstand the Copyright Bargain

The goals of CDL are admirable: Who doesn’t want to “promote the progress of science,” as the Constitution puts it? But CDL thwarts the very “engine of free expression,” as Justice O’Connor so eloquently described copyright protection in Harper & Row, by favoring free access over author remuneration. That’s not the copyright bargain, and that’s not the law. By design, with limited exceptions, the copyright system is premised on permission. That permission-based system supports the creative ecosystem that brings us the wonderful works that we all enjoy today, both in the physical world and online. It empowers authors who want to charge for access to their works in order to put food on their tables and those who are happy giving away their works for free. Copyright law recognizes that progress is best achieved by fostering an environment that encourages the creation and dissemination of new works, not freeloading that undermines the entire system.

There is a weird notion, particularly among copyright skeptics, that anything arguably supporting the public good should be legal. But these arguments downplay the inevitable harms that would result from CDL, and, more fundamentally, they misunderstand the ways in which copyright law promotes the public good. Thankfully, it appears that soon we will have a judicial resolution of these issues, as a group of publishers has sued Brewster Kahle’s Internet Archive for its Open Library as well as its pandemic-born National Emergency Library that throws out the “controlled” part of CDL. If anything, the Internet Archive’s actions show us that authors are right to be worried about what CDL is really about—giving away copyrighted works for free on a scale that we’ve never seen before. And make no mistake, it will not end with just the reproduction and distribution of books. The CDL theory will be applied to all kinds of works—movies, sound recordings, video games—with the goal of rendering copyright a nullity. Of course, the problem with giving everything away for free is that eventually there will be little worth giving away.

Image Source: Deposit Photos
Image ID:403527238
Copyright:massimo1g 

The Author

Devlin Hartline

Devlin Hartline is Legal Fellow at the Hudson Institute’s Forum for Intellectual Property in Washington, D.C. His research agenda spans a broad spectrum of doctrinal and political issues in intellectual property law, with particular focus on advancing and protecting the rights of creators and innovators.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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There are currently 1 Comment comments. Join the discussion.

  1. Anon August 30, 2021 9:17 am

    I am left rather unconvinced by the author’s attempt to control the narrative on this topic.

    Quit in fact, the assertion of “ Ultimately, the CDL theory is really just the CDL fantasy. It’s an example of wishful thinking by supposed do-gooders who have figured out yet another way to give away other people’s copyrighted works for free. Except, this time, it at least comes with the fig leaf of a library.” is itself a fantasy, with the author wishing to stake out his side’s ‘morally superior’ position — it’s own supposed do-gooding — and lacks a substantive grasp on just why those who recognize the power of libraries — especially after the recent Sovereign Immunity case of Allen v. Cooper (see https://www.supremecourt.gov/opinions/19pdf/18-877_dc8f.pdf ).

    First, “while pretending that alone promotes the public good.” is an obvious strawman.

    Second, Fair Use does NOT rise and fall with exhaustion and a first sale.

    Third, there is a world of difference between a private organization’s activities and a Sovereigns (and the author seems intent on obscuring this point).

    In its attempt to grab the moral high ground, this piece loses its most important aspect: a rational point of view.

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