Hachette v. Internet Archive: The End of 'Controlled Digital Lending' as a Fair-Use Theory

Hachette Book Group, Inc. v. Internet Archive, 115 F.4th 163 (2d Cir. 2024), No. 23-1260, decided September 4, 2024, is the definitive appellate rejection of “controlled digital lending” (CDL) as a fair-use defense. It is also one of the first major appellate applications of Andy Warhol Foundation v. Goldsmith, and it demonstrates how that decision’s recalibration of the first fair-use factor operates in practice.

At a glance

• Case: Hachette Book Group, Inc. v. Internet Archive, 115 F.4th 163 (2d Cir. 2024), No. 23-1260
• Decided: September 4, 2024; panel of Judges Menashi, Robinson, and Kahn
• Holding: The Internet Archive’s scanning of print books and lending of digital copies is not fair use; all four § 107 factors favored the publishers
• Status: Final — the Internet Archive announced in December 2024 that it would not seek certiorari

The practice at issue

The Internet Archive scanned print books it owned and lent digital copies to users. Under its controlled-digital-lending model, it purported to maintain a one-to-one ratio between physical copies owned and digital copies loaned at any given time — the asserted analogy being to a traditional library lending a physical book. During the early months of the COVID-19 pandemic, the Archive launched a “National Emergency Library” that suspended even that ratio, allowing many simultaneous borrowers of a single scanned title. Four major publishers — Hachette, Penguin Random House, HarperCollins, and Wiley — sued. The Southern District of New York granted summary judgment for the publishers, and the Second Circuit affirmed across all four statutory factors.

Transformative use, properly cabined

The center of gravity is the first factor — the purpose and character of the use. The Internet Archive argued that its lending was transformative because it made print works newly accessible in digital form and advanced the public-interest mission of libraries. The court rejected the characterization. Converting a print book into a digital file does not add new expression, meaning, or message; it changes the medium while serving the same fundamental purpose as the original — delivering the author’s text to a reader. That is the signature of a derivative use, not a transformative one.

This conclusion is a direct application of Warhol, in which the Supreme Court reoriented the first-factor inquiry toward whether the secondary use shares the same purpose as the original and functions as a substitute for it. Hachette applies that gloss with discipline. Two points deserve emphasis. First, the court declined to let the worthiness of an institutional mission transmute a substitute into a transformation; good purposes do not supply transformative meaning. Second — and importantly for the doctrine — the court treated the Internet Archive as a non-commercial actor and yet still resolved the first factor against it. That demonstrates a proposition often misunderstood: non-commerciality is a thumb on the scale, not a trump card, and it cannot rescue a use that lacks transformative purpose.

The remaining factors and the centrality of licensing

The second factor (the works were published, expressive material near the core of copyright’s concern) and the third (the copying was wholesale — entire books, not excerpts) followed for the publishers without difficulty. The fourth factor — effect on the market — received the most attention and weighed heavily against the Archive.

The court credited concrete harm to the publishers’ established e-book licensing market. Publishers license e-books and audiobooks to libraries through defined channels and terms; a free digital surrogate generated by self-scanning competes directly with those licensed offerings and threatens the very market that licensing was designed to create. The existence of a functioning licensing market is what made the substitution cognizable as harm. Where a licensed alternative exists, a free substitute that bypasses it will reliably trigger the fourth factor.

Open questions

Hachette forecloses CDL as a fair-use theory in the Second Circuit, but several questions remain. The decision does not address every configuration of library digitization — for instance, the treatment of orphan works, out-of-print titles with no functioning licensing market, or accessibility-driven reproduction for print-disabled patrons, each of which presents a different fourth-factor profile. Nor does it resolve how the analysis would change absent an established licensing market to be displaced. Those gaps are where future litigation, if any, will concentrate.

Implications

• For libraries and archives: Within the Second Circuit, scanning owned print copies and lending digital surrogates is infringement. The lawful route to digital lending runs through licensing, not self-digitization.
• For publishers and authors: The decision fortifies the e-book and audiobook licensing market by confirming that a free self-scanned substitute is not a fair use.
• For fair-use practice generally: Hachette confirms a post-Warhol tightening. Secondary users who rely on a change of format or platform, or on the laudability of their purpose, without a genuine change in expressive meaning should expect the first factor to turn against them — and the fourth to follow wherever a licensing market exists.

Frequently asked questions

What is controlled digital lending? A model in which a library scans a print book it owns and lends the digital copy, purporting to keep the number of digital loans tied to the number of physical copies it holds. The Second Circuit held the practice is not fair use.

Did the one-to-one ratio save the Internet Archive? No. The court found the use non-transformative and market-harming regardless of the lending ratio; the “National Emergency Library,” which abandoned the ratio entirely, only sharpened the point.

Is the ruling final? Yes. The Internet Archive announced in December 2024 that it would not petition the Supreme Court, so the Second Circuit’s decision and injunction stand.

Authorities and sources

• Hachette Book Group, Inc. v. Internet Archive, 115 F.4th 163 (2d Cir. 2024), No. 23-1260 (Sept. 4, 2024). Holding and citation corroborated by the U.S. Copyright Office Fair Use Index and a case summary (Wikipedia).
• Analysis: client alerts from Venable LLP and Ropes & Gray LLP confirming the panel, decision date, and four-factor holding.