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HathiTrust Racks Up Fair Use Victory But Heads Back to the Stacks on Preservation Copies

By Barry Werbin and Bryan Meltzer, Herrick, Feinstein LLP

In a much-awaited decision, the Second Circuit held on June 10, 2014, that university libraries are permitted to electronically scan their copyrighted books to (i) create a full-text searchable database, and (ii) provide print-disabled people with access to the copyrighted works. In Authors Guild, Inc. v. HathiTrust, the Court found such uses by the HathiTrust Digital Library (HDL), set up by the HathiTrust -- an organization comprised of colleges, universities and other nonprofit organizations that contributed their book collections to create a massive digital database of over 10 million works -- were protected by the copyright fair use doctrine. The Court remanded on the issue of whether HathiTrust's "preservation" copies were protected as fair use.

As a threshold matter, the Court found that the U.S. association and union plaintiffs lacked standing under §501 of the Copyright Act to bring copyright claims on behalf of their member authors. That section prohibits a copyright holder from choosing a third party to bring suit on his or her behalf. On the other hand, the Court found that the foreign association and union plaintiffs had standing to bring suit on behalf of their members because foreign laws provided them with exclusive rights to enforce the copyrights of their foreign members.

The Court then proceeded to apply the fair use doctrine to the plaintiffs' claims. The Court noted that the Copyright Act "'is designed [] to stimulate activity and progress in the arts for the intellectual enrichment of the public.'" Based on this intention, the fair use doctrine "allows the public to draw upon copyrighted materials without the permission of the copyright holder in certain circumstances."

In assessing a fair use defense under §107 of the Copyright Act, courts are required to consider the following four nonexclusive factors: (1) the purpose and character of the use (e.g., for a commercial or educational purpose); (2) the nature of the copyrighted work; (3) the amount of the copyrighted portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. With respect to the first factor, it has become de rigueur for courts to assess whether the purpose of an allegedly infringing use is "transformative" or not, that is, "whether the work 'adds something new, with a further purpose or different character, altering the first with new expression, meaning or message...'" (Quoting Campbell v. Acuff‐Rose Music, Inc., 510 U.S. 569, 579 (1994).)

As for the HDL's full-text searchable database, the Court found that such use is protected by the fair use doctrine because (i) it constitutes a "transformative" use that adds something new "with a different purpose and a different character" from the copyrighted material (emphasizing, however, that contrary to the District Court's opinion, "a use does not become transformative by making an 'invaluable contribution to the progress of science and cultivation of the arts...." but by serving "a new and different function from the original work"); (ii) while there is no dispute the plaintiffs' works are protected by copyright, the second factor is of "'limited usefulness where,' as here, 'the creative work . . . is being used for a transformative purpose,'" (citing to the Court's own opinions in Cariou v. Prince and Bill Graham Archives v. Dorling Kindersley Ltd.); (iii) the extent of the libraries' copying of the copyrighted material is not excessive and is reasonably necessary to enable the full-text search function (which by its nature required copying of the entire texts of the books); and (iv) because the full-text search does not serve as a "substitute" for the books being searched, the plaintiffs will not suffer any non-speculative harm (the Court emphasizing that the only type of economic injury to be considered under the fourth fair use factor is that which results from the secondary use serving "as a substitute for the original work"). Based on these findings, the Court held that while the works were the type that would otherwise be protected by the Copyright Act, the full-text searchable database constituted a fair use of the works.

Of particular interest is the Court's observation that its finding of a transformative use here was even more compelling than the transformative uses the Court had approved in Cariou and Bill Graham Archives because "full‐text search adds a great deal more to the copyrighted works" (a likely portent of how the Court will soon rule in the pending Google Books appeal).

Of great concern to the plaintiff author groups under the fourth factor was an alleged security risk posed by the existence of the HDL that "might impose irreparable damage on the Authors and their works" if, hypothetically, "hackers were able to obtain unauthorized access to the books stored at the HDL" and then freely disseminate globally those digital copies, thereby decimating the traditional market for those works. However the Court rejected this theory, finding that the record on appeal documented "the extensive security measures the Libraries have undertaken to safeguard against the risk of a data breach."

Similarly, the Court also found that providing access to the blind and print-disabled is a fair use of the copyrighted material. While the Court found that such use is not "transformative" (as was the full-text searchable database) and appears to create "derivative works over which the author ordinarily maintains control," it found that "transformative" use is not "absolutely necessary" for a finding of fair use. In particular, the legislature and Supreme Court have both stated that making copyrighted materials accessible for the use of blind people is protected by the fair use doctrine. The Court further found that in the "unique circumstances presented by print‐disabled readers," (i) the extent of the libraries' retention of the works is reasonable, and (ii) that the market for books accessible to the handicapped is so insignificant that the value of the copyrighted material would not suffer. Accordingly, the Court held that "the doctrine of fair use allows the Libraries to provide full digital access to copyrighted works to their print-disabled patrons."

The Court also considered whether the HDL could preserve digital copies of the scanned books and permit its member libraries to replace their copies if (i) the member already owned an original,(ii) the member's original copy was lost, destroyed or stolen, and (iii) a replacement copy was not available at a fair price. The Court found that this issue was not ripe for its determination primarily because the district court record had not established whether any of the plaintiffs' copyrighted materials were irreplaceable at a fair price and, "thus, would be potentially subject to being copied by the Libraries in case of the loss or destruction of an original." If the plaintiffs' works could be replaced at a fair price, then the works would not be replaced by the HDL. Accordingly, the Court held this claim did not "present a live controversy for adjudication," vacated the district court's judgment "insofar as it adjudicated this issue without first considering whether plaintiffs have standing to challenge the preservation use of the HDL", and remanded for the district court to make that determination.

Finally, the Court held that the plaintiffs' claims against defendant the University of Michigan regarding its project known as the "Orphan Works Project" or "OWP" was not ripe for adjudication, because the program had been suspended after the case commenced, and it was unclear whether the University would reinstitute the OWP in a manner that would infringe the plaintiffs' copyrights and cause them harm.

The trajectory of the Second Circuit's application of the "transformative" use doctrine continues its climb in HathiTrust, following on the heels of the Courts' expansive application of fair use in Cariou v. Prince. With the Google Books case coming up next, and other Circuits having already adopted the transformative use test, the copyright bar is readying itself for transformative use as the fair use paradigm of the 21st century, particularly as digital technologies continue to push the envelope of an aging Copyright Act.

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This page contains a single entry from the blog posted on June 13, 2014 12:25 PM.

The previous post in this blog was Law in a Flash: A Quick (But Insightful) Discussion of Legal Considerations for Flash-Sale Sites.

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