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Judges of the United States Court of Appeals for the Second Circuit. Here E, here E, here E. All persons having business before this, a stated term of the United States Court of Appeals for the Second Circuit. Drone here. Give your attention. You shall be heard. Thank you. Please be seated. We have two cases on our calendar this morning.
We will hear argument first in number 23, 1260, Hachette Book Group versus Internet Archive. Mr. Gratz. Good morning, Your Honors, and may it please the court I'm Joe Gratz with Morrison and Forster for Internet Archive. This case asks whether it is unlawful for a library to lend a book it has bought and paid
for to one patron at a time as libraries have always done. And the answer is no. Libraries have never had to pay publishers to lend the books they own and that result should not change with the advent of digital technology so long as only one patron at a time can still check out that particular copy. If the forms are considered distinct things in their separate markets for them, why
shouldn't the law recognize that converting the paper book into a digital book isn't just the same thing as passing around the paper book? And Your Honor, the use of digital technology to do something more efficiently that do the same thing more efficiently is something that the courts recognize as something that is
justified under for use. And it is for example what is going on in the Sony case where there is a different form that is more convenient using technology but that conversion is justified because it serves the purposes of copyright. But we say in Sony that the reason why it's transformative is because of the digital form we say it's because of the time shifting element which is different from the original
one. And it's not clear that that is the core of fair use that might be at the margins. But I guess my question is, didn't we say in Google Books that just converting a book into a digitized form is not transformative? What this court said in Google Books was that if what Google had been doing instead of making snippets available to everyone in the world at once was making the entire book
available to everyone in the world at once, that would be a tough fair use case. That's right. Google Books, so we would not have said that if Google Books were just allowing one person at a time to look at the entire book. That would be a very different set of facts in every fair use case. But did we say that it wasn't transformative that just converting a book into a more convenient form is not transformative? So just on the first factor, maybe other factors pointed in a different direction, but
just on the first factor, doesn't it suggest that the conversion doesn't make it transformative? So two points on that, Your Honor. The first is that in TVIs and redigit, this court characterized converting something using digital technology in a different form, taking a broadcast and turning it into a digital transmission is a form of transformativeness. But the second thing I want to say about that, Your Honor, is in Warhol, in particular,
the court divides this up and says, look, there are lots of different ways to be justified under the first factor. Some of them are differences in purpose, and some of them are justified for other reasons. And this is, at the very least, even if you don't find it transformative, a use that is justified for those other reasons and the justification here, as in Sony, is that you're just doing something you could do other ones.
They could hand the book to the patron. They could mail the book to the patron. That patron is entitled to read that book, just as that person was entitled to watch that television program in Sony. There's, in the real world, there's a lot more friction in the sort of market for passing a paper book from one person to another. And I'm imagining that that's priced into the price of the paper book.
Your premise is that a scanned digital version of that paper book is nothing more. It is tantamount to the same thing as the book. But we know there's a distinct market for those digital books. They're priced separately. So you're taking something from one market and you're inserting it into another market without ever having paid the premium in that new market. So two responses to your first is, the flip side of friction is added utility and convenience.
And this court says, and in Sony and this court's case is interpreting it, that increased convenience and efficiency of distribution, that is, the flip side of friction is something that is favored under the first factor. It's good if we are reducing, if we are increasing efficiency and reducing friction. But the other response here on our is, that's why it is so important to us that the data
under the, about what this does, in fact, in the real world, shows that there is not an effect on the market, either for digital lending by libraries through overdrive or any other market. Well, getting to that point of whether there is, I believe you're alluding to the fourth factor. I noticed in your brief, you were saying, I'm not sure if you're going to be able to
you had this sentence, internet archives policy is not to lend books published within the past five years because book sales generally peak within the first five, first years of publication. Isn't that a recognition or an admission that you recognize that there's value in the
electronic version of books and that you would not lend them without paying and that that would be an impact on the market. No, Your Honor. Why not? And the answer is the five year sort of delayed window is intended to be prophylactic. That is, it is ensuring that there is... prophylactic of what?
Against any concern that there would be a commercial impact. And that is why... Do you acknowledge that within five years of publication of a book or the release of a book that you're copying a book that you either get donated to you or somehow obtain most of these you weren't buying? You certainly weren't buying the e-book license.
You do acknowledge that copying the books and creating a digital format of the book and then lending it would have an impact on sales. Two answers, Your Honor. First, I don't not necessarily... And my answer to that is no. The five year rule is there in order to ensure that the publishers' concerns that they
have stated on that, which they state here today are addressed, right? Which is that sales generally peak within the first years of publication. And our right, and our response to that concern, which we do not think is well-founded, Your Honor, is okay, we won't lend during the first five years. But that was your policy from day one, right? That's right, and that is why we have been doing this without molestation by the publishers
since 2011. But it's your position that you could lend it out during the first five years and that would still be fair use? That would be a different case, Your Honor. And we've very... I think the answer to that is... My only reason is if you're just doing it in your discretion. So the answer to that is we think it would... We think that would be fair use, Your Honor, because we don't think that would have a market effect either. There might... If they could show there was, or if the facts were different, that's why fair use is
case by case, and if there were a case presenting those different facts, that might be different. Is the burden on them to show that there is market impact versus on you to show there's not? The burden on the fourth factor ultimately rests on us and we have Ampli met it by coming forward with this evidence of a lack of market harm in response to which they have come forward with no evidence whatsoever and just supposition.
So I think my answer is it certainly doesn't matter where the burden lies and I acknowledge that, you know, courts have said different things about where the burden lies, but even if the burden lies entirely on us, we have Ampli met it. But how the district court looked assess that evidence. Dr. Jorgensen's expert opinion and the second doctor's expert opinion, with regard to
Jorgensen, the concern is that the focus was just on the current impact or impact within a limited time period. Do you acknowledge that in addressing the fourth factor, one of the things courts can consider is not just current impact, but future impact? I agree that is what courts consider, but that is what Dr. Jorgensen was considering as well. And this is, I think, an important part that the district court didn't appreciate about
Dr. Jorgensen's analysis. Dr. Jorgensen was in analyzing not just has this had an effect right now in us at a smaller scale, but was assessing would this have an effect worth it as the publishers say they are afraid of, were it to scale up with lots and lots of libraries doing it? The way your position is even if it's totally pervasive, your library lending program, it
would never have an economic impact on the market for either ebooks or physical books. Yes, Your Honor, because there are natural limits. It does seem like it's a replacement for it, so why just intuitively would that be the case? For the same reason that the fact that there are 9,000 public libraries out there that are lending out these books right now does not have that impact, or at least it would not have a differential impact. Well, don't they have a limit that those libraries are subject to, it's not CDL, but
it's something equivalent to it? And they purchased those ebook licenses, correct? Well, and I am comparing the situation. I think that's the difference here. I am comparing this. I am comparing the situation, Your Honor, not to the overdrive licenses, but to the physical copies they own. And this is what's important about the scaling up question. We're CDL to scale up. There needs to be a copy that is bought and paid for from the publishers for every single.
But the libraries are not using technology like scribe to turn hard copy books into ebooks. They're purchasing e-licenses, correct? That's a big difference. Well, many libraries are using CDL and things that are, things that are in many ways like CDL to serve their purposes, and that's discussed in a number of the amicus briefs.
The hypothetical that is posed by the publishers is, what if all of the 9,000 public libraries joined in, right? And started doing CDL. Wouldn't that have a market effect? And the answer is, those libraries have copies right now on paper that they are lending out, and they would presumably either have to buy more copies, which would be down to the benefit of publishers on paper for this purpose.
Or they would need to not physically lend those copies in order to lend them digitally. That's the premise of... Well, you know, there's a statutory carve out for libraries, right? Congress made clear that there's an authorization for libraries to lend out the books. Is it totally obvious that if Congress didn't provide that carve out that what libraries were doing, even if they scaled up, would fall under fair use?
Let me... Is your honor talking about if the libraries were lending... Well, part of your argument is this is just analogous to what libraries are doing with physical works. And therefore, we shouldn't treat it as the non-fair use. But you have to rely on the idea that it's fair use because there isn't a statutory carve out for the CDL program. But like the libraries can point to a statute that says, Congress said, regardless of what
fair use allows, there's an authorization for us to lend out our books. I don't know if we applied the fair use factors to somebody who just launched a library in the absence of that statutory authorization that it necessarily would say you're allowed to lend out all these books. So I'm asking, is it clear that it would? So like your premise is the libraries show that this is a fair use and we're just taking it one step further.
But do the libraries show that because Congress thought it was necessary to lay out that they have a specific authorization? Well, and let me answer that this way, which is to say, the libraries are clearly permitted under the law to lend out their physical books physically. Right, but that's because of Congress that passed a statute that said so. Section 109 says anyone, a library or not can lend out a physical object physically. The question is, if you are doing the exact same thing with the exact same physical object,
right, the same book that they bought. But you're not doing the exact same thing. So that statute, Section 109, talks about you can lend out the physical copy, but then it also specifically delineates when you can make a copy of it or a digital copy and it limits when you can distribute that. So why wouldn't it conflict with what Congress has specified to say, well, this is really just the same as the physical copy.
At Congress, address the question of creating a copy of the physical copy, right? And the answer to what Congress thought should happen here is in 108F4, where Congress says, nothing in Section 108 shall affect fair use, right? This is not intended. Right, so what I'm saying is you are relying on just the application of the fair use factors, whereas libraries don't have to do that. Libraries can rely on the first sale doctrine and what's laid out in Section 109.
So lending does not require fair use, that's right. And the only reason we are talking about fair use is because the technical problem. So you keep saying we're doing exactly what libraries are doing, but actually it's a totally different legal framework. There's a first sale doctrine for the physical copies, and then what you want to do is based on the fair use factors, which is a different section of the statute and different legal tests. We don't actually know if, in the absence of the first sale doctrine, whether a library
would meet the fair use factors. But you're on, what the role that fair use plays here is as a gap filler, because we are moving from doing the same thing in a way that doesn't make copies, which we can do as a library, to doing something, to doing the same thing in a way that does involve the making of copies.
It is exactly like Sony in that way, that move, that is doing something that does not require copies, watching TV when it's on. We're shifting to something that does require making copies simply as a technical and incidental matter that doesn't change the substance of what's going on. And that's the shift. But in so many different ways that there's one time broadcast and the transformative thing is that you have time shifting.
Here the difference is not time shifting, because you can always read books that you're convenience, so the difference is you can read it on an e-reader as opposed to carrying around a physical copy. That's the transformative character of it. That is what renders it justified. You are doing something, you are doing the same thing using technology in a more efficient or, as Sony says, more convenient way. It's footnotes 40. And it's going to be a question about, so under factor 4 you say that actually there's
one reason there's still be a market for e-books is because e-books are more attractive than digitized versions of physical books. Right? Because they have features and they're more user friendly or whatever. So what that kind of means is what you're saying is that your digital copies are more convenient or more attractive, I guess more convenient than physical books, but less convenient than
e-books. And so they kind of stand in between physical books and e-books. But in fact, if your product stands in between two available products for which there's a market, doesn't that tell us both that you must be interfering with a market and second that it can't really be transformative if it's a kind of middle position between two products that are protected by copyright? So this is that the same is true of any situation in which there is a use that is justified
or if this court's called it transformative where technology is being used to increase the efficiency or convenience of delivery. And as to the question whether there is a market harm for that, that is differential from what we as a library would otherwise be doing with that physical copy. That is where the evidence. Councillor, I'm trying to help me understand how I can reconcile two statements that you've
made on the record. One is even if 9,000 libraries joined the open libraries project, there would be no impact on the e-book market for the publishers. That's your position. Yet when it came to the Rule 56 one statement, there was evidence submitted that you did not dispute that when pitching to libraries to join the open libraries project, your CEO
said, you want to do this because you don't want to have to buy it again. You can have your patrons access all of these books free of cost. We can share catalogs. How do you drive those two? They don't seem to, if your pitch to libraries is join us and you get all these books for free, how does that reconcile with, hey, but we're going to have no impact on the e-book market?
The pitch is not join us and you will get these books for free. The pitch is you have a collection of physical materials that you have developed over time and you can lend it to your patrons. This is a way for you to lend your books. I get that. When they buy those books, they buy the physical copies to lend to their patrons one at a time or through an interlibrary change.
They also buy e-books to make those available to their patrons. We're focused here on e-books and impacting e-licensing. I have a hard time reconciling those two, specifically as to e-licensing. Why would libraries ever pay for an e-license if they could have internet archives, scan all the books, hard copies they buy and make them available on an unlimited basis?
Because overdrive, the e-licenses don't require those books to be in their physical collection. They don't have to go out and buy the book. They don't have to store the book. They don't have to catalog the book. That's just sort of their paying for rental. Wait, aren't they limited in terms of either the e-... As I understood it, the e-licenses are either you get to use it for a period of time or a
limited period of time, hence the pitch, you don't have to buy the content over and over again or a number of uses, you know, whether it's 150, however that is. So it's not exactly that once you buy a new book license, you get that book forever. And unlimited. Is it? I mean, they also have the, I forget the acronym, but the digital management registration.
Digital rights management. Digital rights management. That controls, which it seems similar to CDL in a way. So you're on the... You are right that the license terms that the publishers offer to libraries do not allow them to have electronic materials in their prominent collection, which is these libraries have print materials in their prominent collection. And if they want to use CDL as an alternative to rental, right, the overdrive scenario, they
need to buy those books. They need to store those physical books in order to have copies, the physical copies that can support those digital ends. So to answer your owner's question, why would any library ever pay for overdrive if CDL existed? The answer is those libraries in order to use CDL need to purchase and maintain physical books supporting those.
And this is generally the case that the library will have a physical copy and then also wants a digital copy. So if they already have a physical copy and they want a circulated digital copy now, in the absence of your program, they would have to license an ebook. But once the program is available, they don't need to and they can just digitize or rely on you to digitize the physical book they have, right? This offers them another way of using the access they've already got, the right they already
have to lend it to one patron at a time. In exactly the same way that the VCR and Sony allowed the person to access the material later instead of right now or. Which Con was saying the library now buys physical copies as well as ebooks. But one other point is that the publishers produce both physical copies and ebooks, right? So you're saying that your product is transformative as compared to the physical books.
But if we think of the copyright as in hearing and the literary work that is produced both in a physical copy and in an ebook, is does your product still look transformative? Is it compared to the ebook version that the publishers are producing? Our claim is not that mirror format shifting is transformative. Our claim is that is that this used like in Sony and TV and TVI's and the redigiglass
on TVIs is transformative or otherwise justified in the same way that the use in Sony was. Right. So it's saying it's transformative because it is a use of the physical book. If it were a use of the ebook that you just kind of rejiggered the ebook format and produced it in your format, you would say it's not transformative. But because you can act on the physical book as opposed to the ebook, you're saying it's a fair use of the physical book.
So and if that's true, then maybe your argument says it doesn't even matter if it interferes with the market for ebooks because we're just saying we can make fair use of the physical books. Well, and let me let me separate out two things for you, Ron. The question of what is the purpose and is that a justified purpose and is increasing the utility of a copy that's already out there or someone's access to a copy that's already
out there as in Sony and TVIs, is that a justification? Is a first factor question? And okay, let's say that's a justification. If it should that, what's the effect on the market and how should we think about that in opposition to this purpose that- Right. So you're saying that we shouldn't think about ebooks when thinking about whether it's transformative but we should think about them in terms of the market impact.
I think you have to think about them in terms of the market impact because the plaintiffs have told you to, right? And we've shown why there isn't a market impact there. With respect to why this use is justified, under the first factor- If your first factor analysis relies on distinguishing between the ebooks and the physical books and saying it's a fair use of the physical book, even if it wouldn't be a fair use of the ebook, why wouldn't you say, well, all the factors should focus on the comparison of our
product as versus the physical book. This is exactly what was going- this is exactly what the plaintiff said and what was going on in Sony as well. They said, well, you don't need to tape these movies off the air. We'll rent you a tape. We'll sell you a tape. You can get those benefits this other way just by paying us. You shouldn't be able to use technology yourself with the access you already have to get those benefits. That is the same thing that's going on here.
We are using technology in order to get that benefits- Right, but doesn't the argument you just said imply that it actually doesn't matter if it has an impact on that other market because you can use technology on the physical book and it, like in Sony, it wouldn't matter if it has impact on video rentals. And why wouldn't you say, you know, our position is that it wouldn't matter even if it had an impact on ebooks? Two answers, Your Honor. The first is, I think there is a separation between, is this inefficiency enhancing purpose
that is aiding the copyright laws purpose of the creation dissemination of knowledge versus what's the effect on the market, right? That's important too. We need to talk about that. The other thing that, like, but those are, I think, separate factors that all go into this stew that get considered together in light of the purposes of copyright. But the second thing I'll say is, I think even in articulating why, even in its gloss on
Sony, TVI has said, well, it's got to be a situation where there isn't a significant effect on the rights holders markets. And what we did, she said about that, is the reason it wasn't is it was to someone who already had an entitlement to receive that content because they could have put up an antenna just as here it is someone who is entitled to receive the content because it's the one person who checked out the book and we could mail it.
You said the purpose of the creation and dissemination of knowledge. But like you would acknowledge you're not creating knowledge, you're just increasing the dissemination of it, right? Because you are copying the book. The purpose for which we are doing this is to aid in the creation and dissemination of knowledge. Sony wasn't either, right? But the court said that that was part of their purpose. I get it. And it's not just positive, but for the purpose of the analysis, you're not creating, you're not doing anything, you're not adding to the artistic work.
You're just making it more easily accessible. Two answers you're on are first. We actually are in parts of our functionality, the plaintiffs aren't wisely, aren't challenging. Like the Wikipedia links where we are, where people are able to... Yeah, but the way that works is like snippet view, right? You can click on it and go to the particular part of the book. But if you want the whole book, you have to do it through CDL. Again, this is not... That's not really part of CDL, the Wikipedia links, right?
So they rely on CDL so they can find them, but yes, the other place I would point around was just like in Google Books, like they have digitized all the books. They could just make the full text of all of them available. And we would have said that that might be a problem, but the snippet view is something different. I agree that that is the distinction there. And here, the distinction is, it's not that something is being made available to everyone in the world at once, as in Google Books, it is being made available to the one person
who has checked out the library book. And on the topic of how this aids in scholarship and in the creation of knowledge, in addition to simplest dissemination, I would point your honors to the author's alliance brief in particular where there are scholars talking about the importance of this for their scholarly work. How does the capital records, I've sort of... I understand the only one person at a time, but isn't that exactly the argument we're
rejecting in the capital records case where they said, no, we're just... We're not letting you copy your digital file and reproduce it. We're letting you lose your own access to it in favor of someone else gaining access to it. And we rejected that. So I agree, Your Honor, that the redigit case was not a finding of fair use. And that case is different from this one along a number of axes.
The most important, I think, is that it was commercial from the point of view of the service and commercial from the point of view of the user where this is non-commercial from the point of view both of the... But we said it wasn't transformative. We didn't rely on the commercial nature. We said this isn't transformative. This just provides a market for resale of digital files, which is kind of what you're saying is this provides a way to utilize the physical books one at a time that otherwise might be
sitting on a shelf by making them available one at a time to anybody anywhere in the country in the world who wants them. And the difference, Your Honor, is we are relying on a analogy to, and in fact, we are simply engaging in, library lending that otherwise could take place and otherwise would take place with respect to a particular physical copy. Whereas in redigit, that just... With constraints that impact the value of the library's ability to do that that are
very much tied to the physical instantiation of the book, right? That's right. You can't rely on that one book to serve the serial needs of people globally because the costs of sending the book would exceed the costs of just getting another book on the other side of the world. I don't think I agree with that, Your Honor, and I don't think the record supports it.
Libraries do lots of things with books, right? Libraries do interlibrary loan. Libraries send books all over the world. Libraries, and that is because when a library has bought a book, there is a limitation on what the library can do. The library has to keep and store the book and that costs money, and the library can only check it out to one person at a time. And that is a very... And if they want to check it out to more people at a time, they need to buy more copies. And that is exactly why what we are doing is simply lending out the physical object by
different means. Whereas what was going on in redigit was far more sort of ethereal, which led to the court saying, you know what, this is actually just a sort of... This is just a download site. I don't see this as sort of meaningfully analogous. Of course, it wasn't just a download site because it forced the transferor of the digital
file to sever their access to that file and the technology purportedly ensured that they wouldn't be able to ever use it again. If they had a physical phonographic record or a CD or something like that from the olden days, they would have been able to go to a record store and sell it as a used record. And this was nothing more than a perfect analogy to that in the new digital era.
And the court didn't know. But what's important, I think, is the redigit case itself acknowledges that using technology to make delivery more efficient is a justification. In that case, it was not a sufficient justification because of commerciality, because of a lot of other issues that are not present here. So let me just ask, I mean, we have said, I think on multiple occasions we've described
the recast M looking at one case, recasting of a novel as an ebook as paradigmatic derivative work to which the author would have the rights rather than a transformative work. I take it, we have to either say we were wrong overrule that or maybe declare it dicked out. I don't know, in order to embrace your position, we'd have to reject that contention.
No, Your Honor. What Your Honors need to do, I think, is understand that in opposition to or in the context of the way the Supreme Court talks about these issues in the War Hall case, which is looking not at whether the thing itself is itself transformative, right? But instead looking to whether the purpose for which the thing itself is being used is
a different non-substitute of purpose or whether there is some other justification for the use. In particular, the place they leave that out most clearly is in footnote 8 in War Hall. But come on, in War Hall, you have a photograph and then Andy War Hall does a painting which you'd think adds a lot of creative, something extra to the photograph and the Supreme
Court says, well, you know, they're all just pictures, they appear on the cover of a magazine, it's all really the same purpose. So if that's what the Supreme Court says in War Hall where we would think that there's a lot of creative activity going on into the reported fair use, if you're just digitizing the book, you know, shouldn't we say, well, look, it's just to get let people read the book. And so it's really the same purpose. In War Hall, they were saying, look, we are using this for the same purpose, but we have
done a physical transformation, right? We have not made a transformative purpose, it's just illustrating a magazine article about War Hall, but because of our physical transformation, that renders it transformative. And what the Court said is, you need to look at the use and the purpose of the use and ask whether it's the same purpose or where the purpose is related, as for example, in Google Oracle, whether the use is otherwise justified.
And there is ample justification, both in Oracle Google, and in this case, for why even though there isn't a physical transformation of the content, the use in this way is justified as serving the purpose of the copyright, because we are doing the same thing to the same person that we could do, we just don't have to pay for post-posed. But you haven't...
Go ahead. You have not addressed the National Emergency Library. That's been sort of silent today. So given your statement now, you would agree that the National Emergency Library was a violation of copyright, because it wasn't one-to-one, correct? I would not agree. I mean, you were allowing multiple users to use the same digital copy of a hard book.
The National Emergency Library does present different facts and different justifications you're under. And the recommendation in that circumstance is not primarily that there was a technical control, as there is in CDL, making sure that only... That only there was a matched physical copy, but instead the justification that there was a global pandemic and all of the libraries were closed.
And so no one could access any of the books in any of the libraries during that particular period. And doing the NEL today, I think I am sort of... I am fine to say that would be a substantially less justification if any justice... Well, you're not even willing to say that that would be okay. That that would not be okay under copyright. You're saying it would be... The National Emergency Library... If your client engaged in a program similar to NEL, that would not violate copyright.
If they did that outside of the National Emergency, I don't think that would be likely to be found to be fair use here on earth. That's not my question. My question is, would you agree? Would you be willing to concede today that that would be a copyright violation? If they were to do the NEL today, would that be a copyright violation? I don't think that would be a very strong, fair use case, but I don't think that would be a very strong, fair use case, your honor.
And the reason for that is the justification for the NEL. No, I understand the justification and your argument. I'm trying to understand where does it end? Where's the slippery slope? Because you may be saying that today and tomorrow come in and say, well, but now we found another use which the one-to-one doesn't really... We're not limited to the one-to-one lending.
This is why... This is why it is so important that courts consider fair use and Congress has instructed courts to consider fair use on a case-by-case basis. When I... In many cases, you'll hear a counselor, you will. That would be a different case, your honor. In fair use, that really matters because everything goes into the stew. And I don't think that's a stew that would be fair use if... If in a situation where you just...
That would be precisely the hypothetical in Google Books, which this court has said would be a strong claim, right? That would be very different from what is presented to the court here. And so all this court needs to decide is whether with these limits on as to these works that were all available electronically, right? These 127 works as to these limits on these facts, whether this is fair use or not.
This court should find that it is because... So we also have to decide whether the NEL is also a fair use, right? That's also before us. So is your argument for why it's a fair use because given that the libraries were closed, your unlimited lending of the digital version is a kind of rough approximation of the number of physical copies that might be out there or is the argument that in a world in which the physical libraries were closed, all bets are off and we can just kind of lend as
many digital copies as people want to read. So I think the answer is those are both available... Those are both testifications for the NEL. First, what's the one that you think is right? So the one that I think is right is it was a global pandemic, all the libraries were closed. We have never seen that before and I hope we will never see it again. And under those particular circumstances, lifting the lending caps while keeping an eye on what was going on was justified.
I think one can also look at it and say, you know what? I actually want to know numerically what happened, right? I want to have a sense that this wasn't just a free-for-all that actually caused people to read these books, who wouldn't have been able to read these books in a world where all the libraries were open. And that's why we offer the analysis that says, well, look, the highest lending count
for any book was whatever. The lie in the which and the wardrobe at this particular time on this particular day and it doesn't come anywhere near the number of copies in libraries that were closed. That's... It's not in itself an independent sort of... It's a reason not to be worried about the consequences of the argument that goes in the unique circumstance where all of the libraries are closed. Yeah, I think I have that argument.
Okay, Mr. Gratz, you've reserved time for a rebuttal, so we'll hear from you again. But let's turn to the appellee, Ms. McNamara. Thank you. Good morning, Your Honors. It was with McNamara for Appalees. May it please the court. I want to start by reframing and step back to really focus on the practical realities of what Internet Archive is doing and what is before this court.
Internet Archive is asking this court to disregard the controlling law of this court as well as the Supreme Court. And what it is seeking is a radical change in the law that if accepted would disable the digital economy. Not just for books, but for movies, for music, for TV and the like.
Without license or payment, Internet Archive is making a complete, exact digital copy of the publisher's print books and distributing them around the world so that they can be read the exact same purpose for which the publishers are publishing these works. Can I ask, we had a lot of analogies to sort of interlibrary loan and things that libraries
already do with their books. In your view is the interlibrary loan practice that's common throughout. Does that rely on fair use? Is that rely on the first sale doctrine in the statutory authorization specifically for that? I think it's relies entirely on the first sale doctrine, Your Honor, under Section 109, as authorized by Congress. You are still distributing the physical copy of the book.
And as Your Honor recognized, there's a lot of friction involved with distribution of physical copies that is significantly different than what is capable with digital copies. That's why they are two independent markets with very distinct capabilities and the law and the digital economy button with books as everything else turns on the fact very key
principles that the copyright owner owns the right to distribute their works in different formats and to distribute them under the terms for which they deem to be appropriate. But IA simply usurps those rights and offers a direct substitute for the publisher's e-book. And that's got more basic questions.
So if Congress had not codified the first sale doctrine, it didn't have Section 109 that authorizes libraries. It only had to rely on the fair use doctrine. Would it be obvious that you could do whatever you want with a physical book? Like would that, would libraries fall under fair use if we didn't have the first sale doctrine in the statute? Yes, I think it would, Your Honor. I mean, I think the Supreme Court, the physical books, the Supreme Court, is recognized that
you have an unlimited right to distribute physical books. It's not simply because it was codified in Section 109. And what's happening here? Okay, so if that's just a fair use to do whatever you want once you purchase the physical book, why can't I make a copy of the physical book? Because you are changing it into a different format, which is an entirely different market.
You are doing what this court has repeatedly said is not fair use. You are repackaging and republishing the works in a different format. HathiTrust said that, infinity versus Kirkwood said that. That is the law of this circuit. There is nothing. I'm sorry. If you're repackaging, but you're redistributing it only on a one-to-one basis. So let's say a library's physical copy gets damaged.
I think that there's a concession that is a circumstance in which a library can scan the book and make a digital copy. There are very limited circumstances under Section 108 in which it allows libraries to make copies. One is for preservation. One is the circumstance your honor is alluding to. So what was not recognized in the argument you just heard is that the copyright office
and Congress over the last decade has repeatedly been approached to say, you need to think about the digital economy. You need to think about digital works. You need to think about the first sale doctrine and whether that should apply in the digital world. They have consistently rejected the changes to the law, both by the copyright office as
well as Congress. And one of our amiki briefs from the very legislators who were involved in that established that this is an entirely different market. And what underscores that this is a different market your honors is that 93% of public libraries license ebooks. And those license ebooks are already being distributed to hundreds of millions of users around.
And you said a moment ago that the first sale doctrine would be justified by fair use even in the absence of express statutory authorization. But you just now pointed to the limited authorization of libraries to create digital copies as a reason why the company shouldn't be able to do so now. But if you were to recognize that the fair use kind of operates independently, what is the role of that statute that limits when the library can generate digital copies?
Like, isn't the question here that we should just decide whether this particular use of a digital copy is a fair use? Or does the fact that Congress delineated circumstances under which digital copies could be made does that limit what we should read into other parts of the statute? Well this Court in Reditchee said the latter, your honor. It made, it looked at that very question. It looked at the provisions under the copyright act and said that those issues have been considered
by the legislature as well as the copyright office and chose to not change. But then your argument actually is that, yeah, okay, there's a statute that talks about fair use, but there's a more specific statute that says when libraries can digitize books and that should control the fair use statute. Correct, your honor. That should control. And that's what was decided by this Court. They said that if you want to change the law, your job is to go to Congress.
We're not in the position to change the statute towards you. In terms of what the statute says, the statute says, okay, you could do whatever you want with a physical book, but you can only create a digital copy for archival purposes or other limited purposes, but you're not allowed to distribute it. Correct, your honor. It does not envision in any way the practices of Internet Archive, which is digitizing
literally millions of copies of books and making them available around the world to users. This is not. Your argument actually would be before we even get to the fair use factors, we should just say that Congress has resolved the question on when libraries can digitize books. Right, is that your first position? I think that fair use generally acts as an overlays, so I think one does need to consider
the fair use factors. And as the Court did below, I'm not sure that I would go so far as to say this has just been precisely resolved by Section 108. I think 108 dictates that it would not allow such a thing that it would be contrary to the provisions of the statute, but then we look at fair use and we analyze fair use in
the factors and as found below. It would be a weird result if the fair use section of the statute somehow nullified or overrode the digital copy section of the statute. So is your would it be a contradiction if we decided that Internet Archive is right that the fair use statute authorizes this use, but it's not consistent with the library digitization section of the statute?
I think that, I mean that's an interesting question here on it. I don't think it really would be, if it still serves the purposes under the Supreme Court, if this served a different purpose under Warhol, which is the central question and clearly here the precise same purpose is being used here. They're creating these digital works in order to have them read by their users.
That is the exact same purpose. I do not say it's not transformative, it doesn't meet the fair use factors. I guess I was curious if like we thought it did meet the fair use factors might that still not be an available argument, given that there's a separate section that specifically addresses digitization by libraries or making a copy by libraries. Well, I think that's like you're suggesting that they do kind of operate independently, but we should be more wary about deciding it's a fair use because of the specific statute.
Not necessarily that it controls, that seems to be what you're saying. I think that's correct. And I'm sorry. No, I was, were you going to go into a new thought or go ahead? All right, so this, the common sense inference that these digitized books are competing in some sense in an existing market or in a potential market is very strong.
I think the court recognized that. One of the things I'm struggling with a little bit of having read the public resource ASTM versus public resource decision from the DC circuit is that there was a similarly arguably compelling inference to be drawn there. The industry standard books which get sold and help fund the organizations that put out
those standards were being put online for free. And that would support the events that that's going to cut into their sales. And the DC circuit said, well, not so fast, we still need to go through the process of actually presenting evidence and evaluating that evidence to determine market impact. We can't simply assume that that must be the case because our intuition tells us that.
Why isn't that also true here? For two reasons, Your Honor. First of all, with the ASTM case that you're referencing, it's important to understand the score that what drove that case was that these standards had been enacted into law. When the standards were not enacted into law, the DC circuit held that was not a fair use.
They didn't need any further evidence. They didn't need anything. It was Ipso facto not a fair use. Here clearly, catcher in the rye has not been implemented into law as a standard on how a teenage boy should operate. And I think that, and you could say that, about virtually every work that is at issue here. So ASTM is completely in-applicant.
And in fact, it supports our position. But more to Your Honor's point about the market harm and whether there needs to be further evidence. I want to underscore a couple of points. First, the standard is not whether actual harm has occurred already. The standard is whether the actions, if unrestricted and widespread, would act as harm.
And as this court underscored in TVIs, I think, or rather, well, it's hard. Well, it's very good to us. What is necessary is a showing by a preponderance of the evidence that some meaningful likelihood of future harm exists. If the intended use is for commercial gain, that likelihood may be presumed. But if it is for a non-commercial purpose, the likelihood must be demonstrated. I know you have an argument about commercial purpose, but assuming we think it's a non-commercial purpose, hasn't this Supreme Court said that even for likelihood of future harm, you need
some kind of demonstration of the market harm. You can't just rely on speculation, right? Well, and we're not relying on speculation. So what's the evidence? What's the demonstration that we think the Supreme Court said we need to have? The demonstration is two-fold, Your Honor. We have two avenues. First of all, and I think this is important to focus on, is that this court in Warhol,
in analyzing the fourth factor, said that there is a new surpassing of the market when the infringers target audience and the nature of the work are the same. That is precisely the situation here. We have the same target audience, people to read e-books. We have the exact same content. Under what we mean? That was found. Do we know that?
Is that totally clear? I mean, so if you're time-shift videos, it might be that some people watch it at the broadcast and other people watch it at the time-shift at time. It might be that digitizing the books means you're reaching a whole new audience. Why isn't that also an inference that's possible from the record? Well, that really goes to the first factor in the efficiencies, Your Honor. That isn't the market issue, which I'm happy to address.
But let me answer you. Let me answer you. Whether it's targeting the same audience, and I'm saying, well, it's not totally obvious to me that it is targeting the same audience. So I just want to know how I know that it is. It's targeting the same audience because the audience is readers, the specific audience, are readers who want to read books and check them out from libraries. That's the exact same audience. That is our market. That is we're making, there are hundreds of millions of dollars being paid in license fees
by libraries across the country. So if you focus on the e-books that are licensed to the libraries, then it really is the same audience because you could have somebody who was renting an e-book from a library or somebody who was renting the CDL version of the book from the same library. Exactly. It's the same content. And it's the same audience. And you mentioned two things you would point to to show that it's been established here
that it would have an impact on the future market, e-book market for publishers. What's the second thing? Okay, well, the first thing is lost licensing fees. That is a stipulated fact in this record. It is not disputed that Internet Archive refuses to pay the standard license fees being paid by libraries. Well, I actually have a follow-up question on that.
There was something in their brief that I read that they tried to purchase an e-book licensing and they were told by one of the publishers, not both publishers that are part of the group, that they could not enter into any licensing. And I'm not sure if I'm going outside of the record, but they certainly made the reference to that. Can you respond to that?
Yes, Your Honor. The way the only way that IA has entertained licensing is to not get a license. They want to obtain a physical digital copy with no restrictions, that not even DRM restrictions. They say, well, we would, of course, put on DRM. But they want an unrestricted license with no terms whatsoever.
It is for the copyright owner to determine the terms. The digital economy, as it exists now, exists because of the terms put on digital works. They are unique works. They can be distributed around the world. So the answer is the license they wanted to get was open and your client was not willing to enter into a license like that.
Okay. The fact that you're that two parties could not have a meeting of the minds on a license, as was found in TVIs, does not change this analysis. According to the issue of that you were just talking about not only the ASTM case, but Judge Manashi's question about the first and fourth factor.
The less transformative, the product is, the less likely it would, well, let me remember, the more transformative, the less likely it would impact the market, correct? So there is a correlation between the first and the fourth factor. Oh, absolutely. The course repeatedly recognized that there's an interplay between the first and the fourth
factor. And that when you have a situation like here where something is utterly non-transformative, then, and it clearly acts as a direct substitute, then the fourth factor starts, you know, as the report was dramatically torn or it should be decided to favor the plaintiff. What about the evidence that certainly the district court cited to it, admissions or
undisputed evidence in the 56th statement about pitching CDL or pitching, joining the open library project as a way to save money. And are you relying on that at all as a basis to show? Absolutely, Your Honor. It's very rare in a record that you have actual admitted evidence that shows that a party
is intending to supplant your market. And that's what we have in this record. The Internet Archive on this appeal tries to dismiss this as rhetorical flourishes. These pitches were made to hundreds of libraries and hundreds of slide decks provided to libraries with this exact same pitch. You don't have to buy it again.
There is only one way to read that. They are instructing them. Join open libraries project. You can get the free digital books from us and you do not have to pay the going price of the license fee. They have did that over and over again. Your Honor also raised the five year rule, which is another admission of the fact that this is a sub-plant. They say this is a policy, but as you properly noted, in their appeal brief, they admit that
this policy is implemented because they recognize that a vast majority of books are sold in the first year or two. But what they're trying to do is basically change the copyright law again so that there's a five year limitation on copyright law. They also show that they're actually not trying to make money off of it and they don't really want to interfere with your copyright, but they have this purpose to expand access
to the works as much as possible without interfering with the copyright holders' profits from it. It seems like it should be a point in their favor that they're trying not to undermine the profits of the copyright holder, right? A couple of points on that. First of all, the Supreme Court in Harper and the Road made clear that every copyright and infringer can make an argument that they're expanding access to a work, and that is
not sufficient to change the equation. But also, Your Honor, with regard to, again, the non-profit status of Internet Archive has to be considered as Campbell made clear on a continuum where you're weighing the transformative use against commerciality or non-profit status. But I want to underscore. Let me push that, though, because so does your position rest in significant part on the
District Court's non-profit analysis, so if we conclude that that's off, that your case is significantly weakened? Absolutely not, Your Honor, that is not our position. If this court were to find that Internet Archive's actions were entirely non-commercial, and I think that's, there's a lot in the record that puts that into question, but let me set that aside right now and make clear.
If this court were to conclude that Internet Archive's actions are entirely non-commercial, given the utter lack of transformativeness and the clear substitute effect, the first factor still weighs strongly in favor of the publishers. So this, that our position on fair use generally and the first factor specifically does not turn
or change on how this court adopts the non-profit issue. But let me focus for one moment on just a little bit of the evidence here on the commerciality of Internet Archive. Unlike most libraries, Internet Archive is owned by an individual largely who has funded
this, and he, that Brewster Kale, as you well know. And every, virtually every page of the Internet Archive has a button that says you can buy this on better world books, which is giving an incredible amount of PR and certain revenue that drives between them. The revenue that they've gotten the whole time is like $5,000.
Well, the whole time is just that it was like a year and a half that we're talking about Your Honor, but that just goes to the fact of what the observation and wringles that books are unique is that generally, not always, but generally when you read the book once you don't need to read it again or buy it. And they're offering it free. So that doesn't, that doesn't speak to the fact that you're suggesting that once they
read the digital version, there's no reason for them to click on the link and buy a physical copy, right? But it's still giving infinite PR promotion to a commercial entity that is code. They read a book and they see a link for better world books and they go buy other books. That's the argument that it just kind of drives traffic to the better world book sites, but it's not really about, they won't profit from the sales of that book because once somebody reads the digital copy, they don't want a physical copy, that's your argument.
Well, as in my experience, most public libraries do not have links to commercial sister corporations on their on their sites. And that makes Internet Archive unique. In addition to the fact that Brewster Kale made it clear when he was acquiring better world books, that the path to millions of books was, and the quote is, arm and arm with, with
better world books. They are arm and arm with a for profit entity. That is a distinct element that that hits you, but I want to underscore. You're even if you find your opponent's site to the Texaco case for support that the fact that there are nonprofit organization makes a difference.
And I looked at Texaco and it seemed to me that in Texaco, it was the flip side, right? The district court said, hey, you're a for profit corporation. Therefore, factor one, ways against you, and that the second circuit said, well, that doesn't entirely determine the issue of factor one, whether it's transformative or not.
Can you respond to their argument on Texaco? Yes, Your Honor. With Texaco, it was looking at whether there were incidental benefits that ultimately were giving commercial advantage to Texaco. And what was critical in the Texaco case is that this was a systematic use. That was great concern for the second circuit.
Here we are dealing with a systematic use with a putative, I mean, it is a nonprofit, but with a nonprofit with a lot of commercial elements. But that doesn't, it comes back to the continuum point I was making, Your Honor. Is you, all of this on the first factor, you, commerciality does not create a first factor
ending against the defendant necessarily if there uses highly transformative. Your position is we can decide the first factor without even reaching the commercial, correct the commercial, the, this is so utterly transformative and so utterly, it's substantive. I'm sorry, it's utterly derivative is your position. Exactly, it's a derivative work.
And there's, and it's doing nothing than repackaging and repurposing the derivative work. I want to also because I talked about licenses, there's two elements of market harm that is established here. And, and you know, I've, as I've indicated, the loss licensing fees exist and there's undisputed, there's no expert testimony contrary, neither their experts addressed the loss licensing
fees. The only argument that Internet archive has made in response to this and honestly, I think its mere sophistry is that they say that they don't harm the market, there, there, there is no market in control digital lending. But of course, there's no market in control digital lending. Control digital lending is predicated on infringement and the nonpayment of any fees.
And I also want to make underscore that the publishers do not have to show a reduction in license fees for the, for the fourth factor to weigh decidedly in our favor. That, that very point was rejected by this court in wringle. And but, what your reaction is to the colloquy I had with Mr. Gratz about the interplay between
the arguments on the fourth factor and the first one, that on the first factor, they're arguing that it's transformative only looking at what they do to the physical book, but that the fourth factor, it's about the market harm for the market for physical books and ebooks. Is that a problem for him because he's being inconsistent or is it a problem for you? Because it suggests that we might be able to discount the market for ebooks because we're
really focused on the comparison with physical books. I think you can't divorce them. First of all, the law tells you to weigh the two factors together. That, that is the critical analysis. But I think that what you find with the internet archives position in this case is they often talk out of both sides of their mouth. They underscore and try to, you know, piggyback on the TVI's utility observation by, by
emphasizing the great efficiencies that are allowed and given through the ebooks and that transformation. But those are the very, efficiencies like you can get them to rural people easier, disabled, people. But those are the precise same efficiencies that are being served by the publishers here. They are simply usurping those efficiencies.
Yes, it's not paying. Really in question that if the comparator on the transformative issue were between the digital book and the ebook, that it really wouldn't be transformative because it is just a different version of a digital book. But he's saying, well, we have a right to use our physical copy and this is a transformative use of the physical copy. Is that the right way to think about it? Are you suggesting that actually the book is something more than the physical copy?
And so when we think about the CDL version of the book, we should compare it both to the physical copy and to the ebook because those are both versions of the book that the publisher produces. They are not distributing the physical copy you're on. That's the whole point to control digital lending. That is not the right way to think about it. They are taking the physical copy and transforming it into a nude and different format with different capabilities that has a different market.
They are not just using the physical copy to the, they create that argument out of there. No, I get that. But when I'm deciding whether this is a transformative use of a copyrighted work, am I thinking about whether it's a transformative use of the physical copy that the owner has purchased or is the book something larger than that? And I'm supposed to think about whether it's a fair use of the book as instantiated in
any product that the publisher produces that reflects, that distributes that work, which would include the physical copy as well as the ebook. That's my question. What you look at according to Warhol is the purpose of the use. And the purpose, even if they're setting aside a physical copy when they have, they've created this digital copy and they're distributing the digital copy, which as you've noted is
a draw. No, but you make this argument that it actually, it's the same purpose as the physical book. But even if we agreed that it was a different purpose to make it more convenient or accessible or whatever, that is the purpose of the ebook. And so I'm just asking, like, does that factor into the transformative, the first factor analysis or not? It sounds like you actually are kind of buying into the idea that we are comparing the CDL
version to the physical copy and the ebook only comes into play when we're doing the fourth factor. No, no, I'm not buying that at all, Your Honor. I think because the first factor is looking at this, you look at not just the purpose, but does this act as a substitute. And via this transformation, they're not, say again, they are not distributing physical books. They cannot rely on physical books as the basis here.
They are transforming these physical books into ebooks and that is what they are distributing. But it's not transformative, right? I'm just thinking, Jamal, you say transforming. Actually, that very point has been made by this court that you transform a book when you create or work when you create it into a new format. But that is not the type of transformativeness that the first factor looks at.
You're converting it to a derivative form, not a transformative form. Correct. And I believe in the discussion of Redigee that you were emphasizing about, I think, appropriately that that was a similar fact pattern where the defendant there had instituted a system where they were trying to maintain that this was one to one and largely the same.
But Redigee was dealing with what we would submit a similar contrived construct in order to make an argument or some defense of what they were doing. In the same way, control digital lending is a contrived construct that was put together at the behest of Internet Archive back in 2018 when they confronted the fact that libraries
didn't want to deal with them. Libraries didn't want to give copies of their works to be digitized because they were concerned about copyright arguments. So they got in a room together with various people and contrived this principle of control digital lending to rationalize what they were doing. But the question is what fair use is, right? People get together and decide, like, can we use it to this extent?
What are the limits of how the fair use factors would be applied? I mean, it's not nefarious to sit down and decide whether you're proposing to do something that's covered by fair use or not, right? Correct. And I want, you're absolutely correct. And I want to get to a point that you were alluding to about the question of fact. And I think I've answered that with saying there's no question of fact or expert testimony on the licensing substitution, which under TVIs and Ringgold and other cases is sufficient.
And even if you get to the substitute effect and the impact on our customer sales, there also is no question of fact here. There it is undisputed in this record that, and you heard it today, and you indicated it, that only nine public libraries have signed on to their open libraries project.
But there are 9,000 public libraries systems in this country. If even half of those chose to change their practices, if this court were given the green light to the actions of Internet Archive, and even half of them didn't purchase licensed books or licensed ebooks, it would eviscerate the library market, and it would have a dramatic
impact on the consumer market, because you cannot compete with free. If you generate the library market and impact the consumer market, you're talking about the market for ebooks? Yes. They would have an interference with the market for physical books. I think it would, but I think their own expert, they tried to rely on their expert reemers,
but she was the first to recognize that these are distinct markets, and you can't really look at lost print books in order to evaluate the impact on the market with ebooks because they're distinct markets. You think it would probably have an impact eventually if this became so widespread and so unrestricted, the operative standard, it would have an effect on print books as well.
But what is before your honors are the markets in the library ebook market as well as the consumer ebook market, and there can be little questions that the impact would be dramatic, swift, and devastating. Let me ask you a slightly different question. You distinguished the ASTM case earlier because that's the case involving the publication of industry standards that then is adopted by the federal government as part of the regulation,
and I understand that distinction. They were already law. So they weren't putting anything out there digitally that wasn't already available. And I think in that case, because they were putting something out there that was already adopted into law, factors one, two, and three weighed heavily in favor of fair use.
And the court, it seems to me, said, when it came to the fourth factor, it was equivocal, and still enruled in favor of fair use. If we, if factors one, two, and three were to be found in favor of the publishers, and
this court were uncertain as to the fourth factor, is it necessary for the fourth factor to be in the publisher's favor in order for the publishers to succeed or for an affirmance? Well, first of all, there's a wealth of evidence that establishes the fourth factor clearly. No, I'm not suggesting the response.
It's a hypothetical. Okay, okay. Well, if, if, you know, there's a, it's a numbers game, and if you've the three factors, unequivocally favor the plaintiff, then, and the fourth factor is it best equivocal, and I would argue strenuously that it is not equivocal. But if the fourth factor was at best equivocal, then it still would decidedly be this court
should affirm, and it's decidedly ways in the publisher's favor. Because your opponents, both sides stipulated there was, there were no disputed facts. Both sides moved for cross summary, for summary judgment. But your opponents in one of their briefs said, but if the court is inclined to buy into this common sense argument, then there's an issue of disputed fact.
And so that's what I'm trying to get it, and wondering if you want to respond to that. Well, I think that there was a vast majority of undisputed facts. I don't think that there was a stipulation in the rectate that all facts are undisputed. I'm sure that Mr. Gratz would agree with me on that. But the vast majority and the key facts that drive the decision are undisputed, including the facts on the fourth factor.
Atturning also to the facts of ASTM, which you were referencing your honor, it's important to note there that there were two cases in the 23rd, 2023 case of ASTM. It found that the fourth factor still was not working for the defendant. In part, because the evidence showed that what had been incorporated into law was not
necessarily the current best practices. The law was a little slow to capture what best practices and standards are. So there was still a market to purchase the new developing standards. There was a found to be a significant market that existed that would be impacted here. And then again, I want to underscore with ASTM, it was not found to be fair use when the
standards had not been enacted into law. We don't have anything remotely comparable here. So I would like in closing, Your Honor, because I think my time is... That's fine. That's not close. That I just want to touch on because it hasn't been addressed too much. That IA's brief and amiki try to create the impression that the public interest is
on their side. And it is not. The protection of copyright is in the US Constitution and federal law because it creates an incentive for writers and artists to create new works to benefit our broader society. Internet archives, control digital lending is in direct conflict with that basic principle.
And as I previously... You don't really think people are going to stop writing books because of the control digital lending to you? Well, I think publishers are going to go down the tubes if they do not have the revenues. I'm not going to publish your books. You think that that's really... I do, Your Honor. There's no question. I mean, and the standard here is not, will this eliminate... No, I understand. ...the...
It's just a part. But this question about balancing the incentive to create a work with the larger distribution of it, that is the question to be decided in this case. It's not... Exactly. But I get it. It's your argument. That's fine. I mean, as in Redigee, this court recognized that any secondary use that competes as an effective substitute, which is precisely the situation here, impedes the purpose of copyright,
which is the incentive to create new works by enabling the creator to profit from them. For all the reasons set forth in our briefs, Your Honor, for this record and what's has been said today, we've strongly urged the court to affirm the decision below. Thank you very much, Ms. McAumara. We'll turn back to Mr. Gratz on Rebell.
I would like to begin where we left off with Ms. McAumara's closing, which is the question of incentives. The copyright should not grant anyone more economic power than is necessary to achieve the incentive to create. And, Judge Manashi, I think you are... You are a comment that this isn't really... Nobody's going to not write a book or publish a book because of CDL.
That is exactly right. And that is why the fourth factor does not weigh against this use. Well, I was suggesting that, Ms. McAumara. But you could see the intuition that if in fact, all whenever a publisher produces a book, it's going to be digitized and available to everybody for free immediately. It might actually... Would eliminate the incentive of publishers to publish and distribute books. And of course, it wouldn't because you'd need to buy a copy for everybody who was going
to read it at once, just like with any other use of a print book. That's why... Well, that is the dynamic. I mean, if I'm creating a product and then the product is immediately pirated and I never make money off of it, it's going to eliminate my incentive to produce the product. And then in the future, I won't do so. That is the... But I said to her, that is the question to be decided here, whether it creates that change in incentives. That is the question to be decided here, whether this materially impairs the incentives,
whether this has a meaningful and significant effect on the potential market for the work. And we have shown that it does not with our data. But you're reducing the market from the number of people who might want to read... Let's look at even the paper books. They'll pretend like take out the digital market for a second. The number of people who might want to read it ever, down to the number of people who
might want to read it simultaneously. And if you put digital books into the mix, it's the same idea, right? And so you're... It's not a free for all. You've got a restriction on it, but the restriction doesn't... By design, it shrinks that it saves a lot of libraries and other people money by shrinking the number of copies, whether they're licenses or books, that have to be bought.
Well, I think if your honor is setting up a hypothetical comparative world where everybody who needed to... Everybody who wanted to read a book had to buy their own copy, right? I acknowledge that this is a different... This is a different world than that, but that is not the comparator because libraries can buy books and lend them. And that is all that is happening here except it is happening in a more efficient and digital
way. Which means that efficiency will have an impact on the number of copies that get sold, right? So it may or may not, Your Honor, that efficiency may or may not have an effect on either the number of copies that get sold or on the market for the overdrive service, which has a variety of different sort of different aspects and benefits over and above CDL. I mean, CDL is largely sort of image-scanned images of pages of paper books because it's
the paper book. The overdrive service has a lot of many. You can flow the text. You can do different features and that is one reason why that is one explanation for the data that you see that there is no reduction in demand for overdrive. Regardless of whether there's a... You're talking about the COVID... What data are you talking about that shows us that? Right.
Is this COVID comparison? So that's right. And here is a... This is a point that I want to sort of dig into a little bit, which is the data in Dr. Jorgensen's analysis. Is the question, what would happen if there effectively weren't any meaningful caps on the concurrent number of lens?
What would happen to the market for overdrive in that circumstance? Because that's the hypothetical posed by the plaintiff. Look, if everybody joined in, there might be an effect of very high number of concurrent lens. And what Dr. Jorgensen's analysis shows is, even in that circumstance, it doesn't affect the market for overdrive lending.
And the reason... And there's a variety of possible reasons for that. One of them, as I think Judge Manashi hypothesizes, look, if they won't get to do it this way, they might not have done it at all. There is their library might not have it. Another is they wanted to use it in this way and not that way. Another is the privacy issues that are discussed at length in the Amicus briefs. There are a lot of reasons why we think overdrive would be just fine in a world in which libraries
can lend their existing physical collections, that they can lend physically now in that more efficient way. And that's why we think that is the comparator. There was a conversation during the argument about, well, what's the comparator? What do you compare to? And you compare to what we could do already, right?
You compare to lending this physical... The struggle I'm having with your response to these questions is on the one hand you want to say, look, this is transformative because it's efficient and we can get people to read more books faster. They don't have to go to libraries. The efficiency is the value of this to the public.
But at the same time, you're saying, but that efficiency has absolutely no impact on whether the publishers can sell the e-books or the hard copies. And it sounds wonderful when you're saying it, but when I step back and listen, I'm having trouble reconciling those two. So and I think one point I want to maybe sort of helpful to hear on in reconciling these
two is digital technology is sort of beneficial to society and it has come along and it's made some things more efficient. It's made other things a lot worse, right? But it's made some things more efficient. And what the publishers are saying is we get to keep all of that benefit and we get to decide who gets to use the digital technology and how. And we get to set the rules and you can track you and we're going to.
But could that happen? We said about photocopiers. We can photocopy books, right? The technology allowed books to be photocopied. That doesn't mean that someone has the right to buy a book and make 100 copies of it and make it available. So yes, technology creates efficiency, but that efficiency could also violate copyright. So what about my hypothetical?
Does that mean when copyers came out and books weren't printed in the same way or manuscripts now could be copied? Forget the preservation issue of manuscripts, the exception for that. So yeah, certainly around. I think the answer is the big fair use library fights of the 1970s were about photocopiers.
And they decided where the line was. Taking all of the factors into account, taking the publishers arguments into account, taking the libraries arguments into account and they didn't decide libraries can't have photocopiers in them. And they also didn't decide libraries can just like make extra copies of their books. They can carry you, you can make a copy of the page. And that's the question.
They did decide that libraries can't make extra copies of their books, but even if they had a one to one. So if the library makes a Xerox copy of a book and it says, well, I want to preserve the original copy. So I'm going to keep that in storage and just circulate the Xerox copy. That still would actually violate the statute, which says that they can circulate the original, but the copy can be made only for archival purposes.
So isn't that the closest analogy to what you're doing? You're making a copy of a physical book and you're distributing it and keeping the physical book in storage. If they did that with a copy, with like a physical copy of the book, we know that actually they wouldn't be allowed to do that, right? In that hypo, you don't get the increase in efficiency and convenience that this court has said is favoring fairies. But you've been saying all along, all we're doing is exactly what a library would be doing.
But actually a physical library cannot make a physical copy of a book and circulate it in place of the original copy. It can't do that, right? So if it can't do that, then you're not doing just what a library is doing. So your argument actually depends on the physical, the digital copy being transformative and the physical copy not being transformative. And that's the thing that makes the difference, not the one-to-one ratio and the analogy to physical books.
Well, Your Honor, whether it would be taking everything into, taking everything into account fairies for a library to make a copy of a book that was whatever fragile or something, and put the original in storage and circulate the photocopy. I think that is a case that would need to be decided on its own facts. It would not involve what Sony and TVI's and what Redigree talking about them involved,
which is an increase in efficiency that comes from the book. I'm saying that there's a transformative nature of the digital copy that wouldn't exist in the photocopy. But that's, and I think it's different from saying we're just doing what a library can otherwise do. So, I think that is, that increase in efficiency is one of the things that makes this justified in a way that were there not that increase in it.
And they're saying the increase in efficiency is the thing that makes this not justified. I just want to return to a couple of other items that were discussed. But why do you make one final point since we're so far over time? Let me make one final point, Your Honor. In the one final point I have to make is there is some discussion of ASTM and what ASTM, the proposition ASTM stands for is there's a lot of other factors going on in ASTM.
But as to the market harm factor, supposition and quote unquote, and sort of quote unquote common sense, don't carry the day where there isn't some evidence. And we are in a better position than the defendant to the ASTM case where in that case, there was just an absence of data, right? There was the plaintiff had not come forward after a really long time they had been doing
this to show any harm or any sort of data reason there would be harm here. We have data showing that the market that she is talking about, that is the market for the licensing of this two libraries would not be affected by what we are doing even were to become widespread for the reasons that I was discussing with Terje Robinson, that
is that what was happening during the period that Dr. Jorgensen analyzed was analogous to a situation where this practice became widespread. And we have that argument. Thank you very much, Mr. Gratz. The case is submitted. Thank you, Your Honor. We will hear argument next in case number 22, 31, 25.