The online digital library Internet Archive today lost its appeal to lend out scanned e-books without the approval of publishers.

The U.S. Court of Appeals for the Second Circuit rejected the nonprofit’s claim in a lawsuit with a coalition of book publishers that its digitized library of books can legally operate under the fair use doctrine.

In March 2020, during the COVID-19 pandemic, the archive introduced the National Emergency Library, NEL. Previously, the 1.4 million books in the archive could be checked out only one at a time for individual use under a “controlled digital lending” system.

NEL made it so anyone had access to any book at any time. The archive later reintroduced a cap, but that didn’t stop a group of the world’s biggest publishers, Hachette, Penguin Random House, Wiley and HarperCollins, stating that the online library constituted “digital piracy on an industrial scale.”

In a traditional library, publishers must pay licensing fees for access to their books, but no such payment occurs with the Internet Archive’s digitized library. Copies are purchased or donated, and the books are simply scanned. The publisher and the authors don’t receive payment when someone takes out one of the books.

The archive argued that its system fell under transformative fair use much like a traditional library so does not violate copyright law. The decision today ruled that the system is “not transformative.” It was stated that the “books serve the same exact purpose as the originals: making authors’ works available to read.”

The archive also argued that its library does not harm sales, which the court disagreed with.

“While IA claims that prohibiting its practices would harm consumers and researchers, allowing its practices would – and does – harm authors,” the court concluded. “With each digital book IA disseminates, it deprives publishers and authors of the revenues due to them as compensation for their unique creations.”

Chris Freeland, director of library services at the Internet Archive, said he was “disappointed” and would “continue to defend the rights of libraries to own, lend, and preserve books.”

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