As we reach the two-year anniversary of COVID-19 lockdowns in the United States, remote work remains a part of daily life. Over half of Americans whose jobs permit them to work from home are doing so, and 78% of those currently working from home all or most of the time would like to continue to do so. This elevated interest in remote or hybrid work in the third year of the pandemic, along with similar waves of remote education, has led to an increased demand for digital access to information, including digital libraries and electronic books. Some state legislatures, recognizing the interest in expanded digital access, have proposed legislation to address this demand, once again pitting authors and publishers against libraries and digital platforms.

Controlled Digital Lending and Digital Rights Management

When libraries provide access to e-books, they typically do so through a process known as controlled digital lending (“CDL”) in which libraries convert physical, lawfully obtained hard copies of books into digital versions that can be more easily accessed by readers while still adhering to copyright law. This benefits users who couldn’t normally afford to purchase these works, users who live in geographic areas not well-served by local libraries, and those who rely on assistive technology such as optical character recognition for text conversion.

It is well understood that it would be unfair to the author if libraries distributed unlimited electronic copies of their work. Proponents of CDL generally recognize guidelines and outer limits libraries should follow to respect the authors of the copyrighted material they seek to distribute. First, libraries must legally own or obtain licenses for the physical books they intend to digitize before doing so. Next, libraries should maintain an “owned to loan” ratio where libraries are not lending more copies than they own at any given time. And finally, to maintain this ratio, libraries should implement technological protections to prevent unlawful copying of digitized texts, in some form of Digital Rights Management (“DRM”). These limits are meant to allow greater e-book access to the public while also fairly compensating authors for their creativity and labor.

We’ve previously discussed the principles behind, and the arguments for and against, DRM, but for the purposes of this insight, DRM is the general term for methods intended to allow digital access to a work while still protecting that work’s copyright and is a key feature of how libraries obtain permission to engage in CDL. These methods typically fall under two categories: access controls and copy controls. Access controls involve allowing or disallowing access to the work via some form of permission. Typical examples include licenses, keys and activation codes. An access control could be a requirement to enter a password (in the form of a word, fingerprint, or even your own face) prior to viewing an e-book. By contrast, copy controls exist to prevent the reproduction of the work. This could be encryption which limits the number of devices a work may be accessed on or the prevention of copying altogether. An example of copy control would be a feature of an app used to read e-books that prevents the reader from taking screenshots or screen recordings.

What Are the Arguments Against CDL and DRM?

While proponents of CDL recognize that mechanisms like DRM are necessary to protect copyright, those against it often believe that it’s not good enough. Many publishers and authors argue that CDL is a form of glorified digital piracy by infringing on their exclusive right to copy and distribute works. Libraries are the largest purchaser of books, and CDL pits publishers against their biggest customers. Authors don’t receive any compensation when libraries digitize copies of their books without permission, and the burden often falls on the copyright owner to ensure that libraries are following the generally accepted guidelines including monitoring the “owned-to-loaned” ratio and implementing effective DRM technology. Tech-savvy users often create workarounds for access and copy controls, and without effective methods to prevent infringement, authors are at an even greater disadvantage in being able to protect their works. These arguments, while not new, are exacerbated by the rise in people working or learning from home who need access to increased digital content and state legislation which has sought to address this demand.

What Have State Legislatures Done in Response?

The past few months have seen the balance shift towards libraries, with multiple state legislatures introducing and passing legislation in favor of encouraging greater access to digital libraries through e-book licensing. Maryland unanimously passed a law which would require publishers who offer digital e-book licenses to the public to also offer to license the same product to public libraries in the state on “reasonable terms.” The law, which has been challenged in court (see below), does not explicitly define reasonable terms but rather would incentivize publishers into negotiating with libraries to work out licensing agreements.

Those in favor of this type of legislation point to the higher prices charged by publishers for e-book licenses, the restrictions that often accompany these licenses and the heightening of these concerns following the shuttering of in-person operations during COVID-19. Libraries stress that high prices and licenses severely impact their ability to provide the community with access to digital content and that managing complex digital licenses shifts their focus and resources away from serving users and acquiring books from new authors. These arguments are obviously compelling and help explain why these bills have easily passed state legislatures. However, the bills have faced strong opposition by authors and publishers.

The Association of American Publishers (“AAP”) argues that this type of legislation is not only flawed, but unconstitutional. Because copyright law in the United States is governed at the federal level, it argues that any conflicting state legislation would be preempted by federal copyright law. The United States Copyright Office, in an opinion letter to the state of Maryland, notes that while this specific legal question has not yet been addressed by U.S. courts, it agrees that the legislation would likely be preempted.

As background, under Section 301 of the Copyright Act “all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright…are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.” Courts have interpreted this to mean that state claims are preempted if 1) the work is within the scope of the subject matter of copyright and 2) the rights granted under state law are equivalent to any exclusive rights within the scope of federal copyright. Wrench LLC v. Taco Bell Corp., 256 F.3d 446 (6th Cir. 2001).

Lawsuits and Vetoes

The AAP filed suit against the state of Maryland in federal court on December 9, 2021, seeking to block the law, with a preliminary hearing held on February 7, 2022 before the U.S. District Court for the District of Maryland. The International Publishers Association and the Federation of European Publishers have issued messages of support in favor of the suit, citing some concern that the law would negatively impact the works of foreign authors in the United States.

On February 16, 2022, a preliminary injunction was granted in favor of the AAP, with the court stating that “the Maryland Act…is likely preempted under the Supremacy Clause” and that Congress, rather than state legislatures, should act to strike a balance between the ability of libraries to provide their services in the digital age and the ability of authors to own their work. Ass’n of Am. Publishers v. Frosh, No. DLB-21-3133, 2022 U.S. Dist. LEXIS 27892, at *31 (D. Md. Feb. 16, 2022).

A similar bill in the New York legislature passed with near-unanimous support, but Governor Kathy Hochul vetoed it on December 29, 2021. AAP president and CEO Maria Pallante thanked the governor for “taking decisive action to protect the legal framework that has long incentivized the American private sector to invest in, publish, and distribute original works of authorship to the public.”

American Library Association (“ALA”) president Patty Wong called the decision “unfortunate and disappointing” and emphasized the importance of “protecting New Yorkers’ access to digital books through the library.” In Governor Hochul’s decision to veto the bill, the governor primarily spoke to concerns about the bill’s constitutionality and potential preemption by federal copyright law.

Conclusion

Similar bills have been introduced in Massachusetts, Rhode Island and Connecticut, and as the case continues in Maryland, more developments are anticipated. Publishers and libraries are frequently at odds concerning digital products, and this situation is no different. Perhaps more interesting is the issue of preemption: if Maryland is successful against the challenge, does that suggest that individual states can dictate their own copyright law? Connecticut’s e-book lending bill, unlike Maryland’s, includes a definition of the “reasonable terms” publishers should negotiate with libraries, but the question may be whether these state-dictated “reasonable terms” should be dictated at all.

We’ll certainly be keeping an eye on the ongoing Maryland lawsuit and other state legislation. If you’re a librarian or copyright holder seeking to better understand your rights concerning electronic books and media, contact us at Lutzker & Lutzker and we’ll provide an analysis tailored to you.