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Controlled digital lending and new models of sharing
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Controlled digital lending and new models of sharing
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OYA RIEGER: Warm greetings. I'm Oya Rieger from Ithaka S+R. It's a great pleasure to moderate this session on controlled digital lending. As you know, one of the perennial topics in library publishing and information technology conferences is the outdated mode of copyright laws in the United States. With the changes during the last two decades and move to digital access and discovery, copyrights-- current copyright laws often pose very serious impediments.
OYA RIEGER: Especially, this last year, or the year that we are still going through with the pandemic, also even highlighted some of the challenges. And one of the tools or one of the strategies that we started looking even more deeply is controlled digital lending. Well, today it's a great pleasure to have two outstanding speakers, colleagues with us, to tell us a bit about what's happening in this realm, new developments in means of practices and policies.
OYA RIEGER: It's a great pleasure to introduce them. Our first speaker will be Kyle Courtney. He's a lawyer, librarian, and a teacher. Kyle is currently serving as the copyright advisor at the Harvard Library's Office of Scholarly Communication. His Copyright First Responders initiative is in its seventh year. It has been influential and engaging a range of libraries, archives, museums, and cultural institutions.
OYA RIEGER: He serves on boards and legal advisory committees for various open access and copyright initiatives. Our second speaker is Carlo Scollo Lavizzari. Carlo is an international attorney specializing in intellectual property protection. He has more than 18 years of experience in practicing law firms in Africa, Europe, and United States.
OYA RIEGER: Carlo is a strategist, and he's pretty skilled in problem solving and conflict resolution. He participates actively in global advocacy, and is a frequent speaker and presenter at conferences, and he's also an author of numerous publications. Now with great pleasure, I'll turn it over to Kyle to start us. Thank you.
KYLE K. COURTNEY: Welcome. My name is Kyle Courtney. I'm a copyright advisor. Oop.
SPEAKER: You were a little quick. Do that one more time just so that we have a clean intro.
KYLE K. COURTNEY: Oh, sorry.
SPEAKER: That's OK. Go ahead.
KYLE K. COURTNEY: Hello. My name is Kyle Courtney. I'm corporate advisor at Harvard Library working out of the Office for Scholarly Communication, and today I'm going to be talking to you about controlled digital lending and new models of sharing. However, to frame this conversation, I just wanted to start at the top. Obviously, I'm discussing US law here as an example.
KYLE K. COURTNEY: And I just want to note that under US law, copyright is enshrined in the Constitution as promoting the progress of science of the useful arts by securing for limited times to authors and inventors the exclusive right to their writings and discoveries. In 1790, copyright law had its first act in the United States, which was actually titled An Act for the Encouragement of Learning. And I want you to remember that as we're coming in from our 10,000-foot view on what's copyright's role really, and its interaction with libraries when they're lending materials?
KYLE K. COURTNEY: Copyright is best represented, I think, by this three-part stage here where there is a bundle of rights represented by the bundle of sticks. And during that time, the creator that owns that bundle has a limited economic monopoly, which is life of the author plus 70 years. Of course, according to the constitutional narrative, to promote the progress of science and the useful arts, after those rights expire, it drops into the public domain.
KYLE K. COURTNEY: But, of course, libraries don't just rely on this public domain status in order to loan books. We don't lock up our stacks and materials. We loan stuff during that economic monopoly, during that time period where we're waiting for things to drop into the public domain. Now, that the bundle of rights is also part and parcel-- part of the statue too which says, hey, these rights are the exclusive rights by which the copyright holder owns and manages their copyright.
KYLE K. COURTNEY: So they have the right to make copies, reproduce the work, prepare derivative works, distribute copies, perform the works, and display the works. Now, that's important because those rights, again, as I said, reside with the copyright holder. So if I write a book, I have these rights, or maybe I give them to a publisher and they have these rights. But libraries have a special mission.
KYLE K. COURTNEY: They serve a balanced role in copyright. Let's talk about the first side, which is the economic purpose of copyright. Worldwide, libraries spend billions on copyrighted materials to build collections every year. These include books, journals, videos, and art. But as I said, libraries also serve another purpose, that use in access purpose, the encouragement of learning that we heard about when copyright law was first passed in the United States.
KYLE K. COURTNEY: And US libraries circulate almost $2 billion copyrighted items a year. Well, how can they do that despite the fact that the bundle of rights is owned by the copyright holder? And that's because copyright itself is a balancing act, not just the library's role, but it's the same balancing act-- rights versus exceptions. The majority of the act, as it's here outlined in Title 17 of the US Code, is filled with numerous statutory exceptions that are part of copyright law.
KYLE K. COURTNEY: This is how copyright promotes the progress in science and the useful arts. Without these exceptions, it would just be the rights. But as you can see, there are almost more limitations and exceptions than there are rights. And what are these? These statutory copyright exceptions allow individuals to exercise one of those exclusive bundles of rights of the copyright holder without obtaining permission or without payment of any licensing fee.
KYLE K. COURTNEY: And that should explain in some aspects of how libraries do what we do. We legally can loan books and make digitization and do all sorts of other stuff because of fair use and first sale, which were two of those many exceptions. Just to review very briefly, fair use, which is part of the copyright access, notwithstanding section 106, meaning that bundle of rights-- notwithstanding those bundle of rights, you can make fair uses as long as the purpose is criticism, commentary, news reporting, teaching, scholarship, or research.
KYLE K. COURTNEY: These are considered not infringements. And there's a whole four-factor balancing test. But again, this is viewed best as a right. Despite the fact that the copyright holder has these rights, we get to do certain things. One of the other aspects that's important for a library's role in making things available is the fact that we have a specific exception to the distribution right.
KYLE K. COURTNEY: That's a third part of that bundle of rights that the copyright holder owns. And first sale is where that comes into play. Notwithstanding section 106(3), the distribution right, the owner of a particular copy is entitled without the authority of the copyright owner to sell or otherwise dispose of the possession of that copy. Now, that's a critical thing that happens. First sale, when it was introduced into the statute, says if you have a first authorized sale of a particular copy, then the copyright owner can't prevent you to loan it downstream or to sell it downstream.
KYLE K. COURTNEY: This is also [INAUDIBLE] internationally as exhaustion of rights. Now, here in the US, and also overseas, first sale doctrine is an important aspect of a lot of commerce and industry. First of all, libraries are permitted to lend patrons books they acquired. That's how we can loan a book, and we never have to pay the copyright holder again. Used CD, bookstores, used record stores-- they can sell copyrighted protected works without having to pay a licensing fee, without having to pay the copyright holder again, because those are previously purchased and acquired.
KYLE K. COURTNEY: And eBay, for example, relies on this provision when they sell any one of their copyrighted works, the users can sell their works. Now, this is a natural thing that occurs, something we take advantage of, we may not study as well. But in the last 20 years or so, we've seen the movement to digital books, that idea that there's a physicality that exists with books.
KYLE K. COURTNEY: Well, now we have e-books. And the move to digital interfered with a lot of library rights because it was just not as easy because of a topic called licensing. So when we have licensing and contract law interact with copyright law the outcome is not the same. A license is a contract-- an agreement between the two parties to specific terms. So this is the problem with e-books and e-media is there they're sold subject to licenses that can modify, change, or alter that which exists in the copyright law.
KYLE K. COURTNEY: So presently, the licensing and sale of digital content exists in a legal realm that is separate from copyright law but affects copyright law. And this is why we saw in 2011, HarperCollins introduced a 26-checkout limit on library e-books because the license said so. The idea was that this was supposedly mimicking the lifespan of the book. But I know and you probably know, there are hundreds, if not thousands, of books that have been checked out thousands of times.
KYLE K. COURTNEY: But the license said every time you have 26 checkouts, you have to pay for a new license. And that's what the contract said. So again, it interfered with the ability to loan freely. Also, we saw just last year, Macmillan introduced a two-month embargo because they said that libraries were cannibalizing their e-book sales. And again, it's because libraries traditionally loan books to users.
KYLE K. COURTNEY: So all of these were reflected because of the underscoring licensing that evolves in these collections. And licensing can affect collection development, interlibrary loan, document delivery, a lot of stuff. And it can prevent you from loaning books in the same way. Now, recently we saw a number of closures. This issue was already reaching ahead, but the pandemic really intensified the need to deal with these particular issues.
KYLE K. COURTNEY: But the problem was the library pandemic narrative was the fallacy of licensing culture. Libraries are closed, so they can't perform their normal functions. Legally acquired books were now trapped in libraries. It's estimated as much as 650 million books during the height of the closures were left on the shelves, so no print access, no ILL, no reserves, no document delivery.
KYLE K. COURTNEY: They even went so far as saying you couldn't read books allowed in storytime without permission online. And there was this fallacy that electronic access requires permission or licensing only. There were free versions that were made available in that summer free, but suddenly print had no value, and this was upsetting. And one of the questions that came out is-- during this time is, why didn't the library get permission or a license to distribute works?
KYLE K. COURTNEY: And that's because we don't usually do that. Under US Copyright Law, libraries do not need permission to lend the books they purchased. And libraries have been doing this work for decades. Libraries are already using electronic document delivery, interlibrary loan, creating virtual reading rooms, making digital displays. These are things we have over either fair use or first sale. But the latest issue that really came to a head recently was controlled digital lending.
KYLE K. COURTNEY: And this is a notion where you're using technology to replicate that library's right to loan the legally acquired books in a digital format under controlled conditions. The idea is that we're replicating those rights that already exist with the physical works. Now, I wrote a paper about this with Dave Hansen prior to the pandemic in 2018 called "A White Paper on Controlled Digital Lending of Library Books." It's updated, and the publication is forthcoming this year.
KYLE K. COURTNEY: But it's very much based on that concept that can't we already do this-- if the licenses weren't necessarily in the way? Or if we have physical collections in our locked up stacks, could we digitize them and make them available? Because first sale is one of the powers that we have, that the owner of a particular copy allows us to sell or otherwise dispose of or loan these works.
KYLE K. COURTNEY: And this should be a familiar system, it's just being done technologically. So you purchase a copy for your library. You check it out to one person at a time. It's for a limited time period, and then it's returned and it's made available to the next person. And you repeat this, and no permission is needed from the copyright holder. And again, why?
KYLE K. COURTNEY: Because libraries do not need permission to lend books. That's built into the code. So the idea of the CDL methodology is a combination of first sale, fair use, and technical know-how. We have this six-part methodology here, which we have talked about frequently, but I just wanted to review them briefly here. First, if you have a book, and you want to digitize it, ensure that the original works are acquired lawfully, you apply CDL only to the works that are owned and not licensed.
KYLE K. COURTNEY: Because again, the licenses are not selling books to libraries, they are renting books to libraries. But we'll talk more about that. Then you have to limit the total number of copies in any format in circulation at any time to the number of physical copies that you own. You maintain that own-to-loan ratio. So if you have one physical copy and you digitize it, you can only loan that one digital copy one at a time, again, replicating the physicality of it.
KYLE K. COURTNEY: And then you lend each digital version to that single user replicating the physical copy, and you limit that time. If you have a loan period of 30 days or two weeks, you make that a parallel policy. And then you use DRM to prevent wholesale copying redistribution, meaning you're not allowing them to copy that whole digital book and send it further.
KYLE K. COURTNEY: The idea is that they couldn't necessarily do that with the physical, but you don't want to move into infringement territory by allowing them to distribute that digital copy. So again, the idea is that you take a work that you have on your shelf in CDL. You digitize it. You put that physical copy away. It is no longer going to be loaned.
KYLE K. COURTNEY: It is put in a salt mine. It is made inaccessible. And then you loan that digital copy as if it was the physical copy, only you do it under technical limits that prevents downloading, that prevents copying, that's done with a limited duration. Now, for risk purposes, maybe you're careful with market harm. Maybe you don't do the newest books.
KYLE K. COURTNEY: Maybe you look for pre-existing licensing. Or you focus on low-risk works. These are all methodologies that you can utilize. Now, again, this is not a new concept. This has been harnessed for a while. Controlled digital lending continues to be adopted now. Now over 80 libraries have harnessed the CDL system to loan digital copies or reserves, including these libraries here.
KYLE K. COURTNEY: And you'll note there's some publishers that are even using controlled digital lending as well. In addition to HathiTrusts-- emergency temporary access service-- I view Hathi as the CDL of reserves, so to speak. Hathi's emergency temporary access service only allows authorized users, which are the Hathi partner library patrons, to access these works, the access to specific digitized versions of the books.
KYLE K. COURTNEY: So if my library has these books, those are the books we're allowed to access online. They have to be legally held by us, and that they are only loaned for limited times. Usually, it's an hour with a renewable nother hour, and you're maintaining that own-to-loan ratio, and no reproduction or distribution is permitted. So you're using technology to access these remote books online and read and access them, which is part of this.
KYLE K. COURTNEY: Now, a lot of people look at this and they say, oh, well, is this fair use or first sale? It's a little of both. But one of the important aspects of that fair use scenario is that fourth factor, and this is what we hear a lot when we're discussing controlled digital lending. These are the four factors as they're outlined here under fair use-- the purpose of the use, the nature, and the amount used.
KYLE K. COURTNEY: But just for the moment, let's look at that fourth factor in regards to how CDL operates-- the effect upon the use of the potential market for the value of the copyrighted work-- meaning if you're making a fair use, it can't impact the market. So let's look at how copyright and friction work with CDL. Let's say the library owns a legitimate copy of the book. For physical access under first sale, it lets many users access the book, but you have to wait your turn.
KYLE K. COURTNEY: I borrow the book. I loan it to-- I read it. It comes back to the library, then the next person can get that book. Digital CDL access is eliminating the friction that exists. Technology can decrease the waiting time. Once the user is done, it transfers to the next user.
KYLE K. COURTNEY: That's enhancing legal access. That's opening the access. And friction is not protected by copyright. That idea that you have to wait for the book to be brought back to the desk, then you have to email that person, they have to come to the library and get that book-- what if we could eliminate that friction with technology? And again, is this a familiar system?
KYLE K. COURTNEY: Yes, this is a system that we use in print-- a purchased copy checked out to one person at a time for a limited time, made available to the next person, and you put it on repeat. Now, again, is this harming the market? Well, I'm of the opinion that digital loans like this under CDL do not negatively affect the market under fair use any differently that the legal use is already permitted by libraries when lending books physically under first sale.
KYLE K. COURTNEY: And this is how this interacts. I have purchased that book. The library has purchased that book, which means we're going to use it to loan. And every time we loan, it's not harming a sale, or it's the legal use already permitted because Congress built this into the Copyright Act that libraries can loan their materials, that libraries are capable of harnessing first sale and fair use to give access to collections that the users can't necessarily acquire themselves.
KYLE K. COURTNEY: So again, libraries do not need permission to lend these books. And this is what the CDL model is based upon. We are replicating that which is in the physical in the modern environment. Now, what may solve all of these problems, by the way, or make all of this controversy around digital loans going away, if the publishers would stop selling-- stop treating libraries like the enemy and sell us books with rights.
KYLE K. COURTNEY: If we could get at libraries-- they could stop using restrictive licensing when selling e-books or other e-media libraries, this would be a problem. Stop restricting the rights of libraries via license. Actually, sell the book to libraries, even if it's an e-book, even if it's any kind of e-media like you do in print, and trust libraries who are often the authors' and publishers' best customers, to use technology to provide the same access and controls for these materials in the same way that they've done for hundreds of years, and let libraries loan books in a modern, digital environment.
KYLE K. COURTNEY: And not just now during the pandemic, but forever. Because the publisher's mission may involve next fiscal quarter. But librarians' mission for preservation and access looks at the next 100 years. Let libraries continue this mission unfettered by restrictive licensing and remain a vital function in society as they've been called by Congress and the courts.
KYLE K. COURTNEY: So that's how we could utilize CDL, and utilize less restrictive licensing to increase access to our collections. So thank you for your time here today. I welcome some questions and discussions as we go live. And if you want to hear more about this, I'm on Twitter @KyleKCourtney.
CARLO SCOLLO LAVIZZARI: Hello, everyone. This is Carlo Lavizzari. I'm a intellectual property lawyer, and I'm very thankful to NISO to have invited me to speak to you as part of a panel. And the subject we want to bring to your attention here is called controlled digital lending. And as my grounding is in intellectual property, I will approach this problem from a legal point of view than the technicalities of how one would do this, or how on a technical standards level, this form of access can take place.
CARLO SCOLLO LAVIZZARI: So I look forward to a very lively discussion, and put simply forward the position that is known to me, that many publishers have regarding the notion of controlled digital lending of which my co-panelist has written a white paper as a co-author, and we shall hopefully have time to discuss and move the discussion forward as a result.
CARLO SCOLLO LAVIZZARI: So essentially, the concept of lending is one that comes from the print world. So it's intuitive perhaps to think that an e-book can be lent. But the effect of what happens is there is either a access software as a service, or there is a download of a copy that is temporarily available, but the manner in which lending and in print and electronically happens is not identical and actually quite different.
CARLO SCOLLO LAVIZZARI: So in practice, the lending results that I'm aware of is, in fact, achieved through licensing, typically licensing models between publishers and consortia of libraries or libraries, that then have the license rights to make e-books available temporarily to their patrons. In some countries, there are lending schemes that are administered by collective licensing organizations.
CARLO SCOLLO LAVIZZARI: But again, those are mostly for print books where physical copies are being lent. Also, the term lending in the academic publishing and scientific professional publishing is often used for interlibrary lending or interlibrary document supply. These other notions should be distinguished from the e-lending we are discussing today as digital lending, as there are different markets and different rules in place.
CARLO SCOLLO LAVIZZARI: Perhaps a common thing is that licensing also plays a large role in these scenarios, but they have some materially different elements and should be distinguished from the lending of e-books. Generally, publishers are open to the concept of lending. There's obviously always the risk of market cannibalization where things might get out of control, where copies intended for lending get out of that lending system and into the market, or where enterprising companies procure copies, let's say, from illegal sources and dress up as libraries.
CARLO SCOLLO LAVIZZARI: They call themselves archives or libraries. But in fact, are an accumulation of unlawfully sourced content, and they are then making money by selling access directly or indirectly to [INAUDIBLE] content. Again, that is not something we will chiefly discuss today, as that is simply a form of piracy that is not really sustainable for the entire creative supply chain.
CARLO SCOLLO LAVIZZARI: In many scenarios, library associations in Europe at the time of the digital single market said one should perhaps create additional exceptions from copyrights, exclusive rights, and allow lending basically on the notion of digital is not different. Simply add another exception, and allow what would be permissible in the print world with e-books by having another exception.
CARLO SCOLLO LAVIZZARI: The difficulty for publishers mainly is that under such a scenario, e-lending has no natural boundaries. So whereas, libraries serve a geographically subscribed number of patrons in the analog world, in the digital world, that plays-- geography plays almost no role. So you naturally would have libraries really competing with one another to a far greater extent if one were to simply replicate exceptions in a digital world.
CARLO SCOLLO LAVIZZARI: So to arrive at a ecosystem of lending, licensing to publishers seems in fact a better way forward. I have listed here for you some of the risks publishers see with sort of introducing a perhaps facile exception for e-lending and what it might do to the market of books, which would disappoint, I'm sure, many authors who would see their royalties diminish.
CARLO SCOLLO LAVIZZARI: From a legal point of view, at least, I can give you a view from Europe and from reading the world-- WIPO copyright treaty, WIPO being the World Intellectual Property Organization, a UN body that deals with IP throughout the world, to perhaps complement the discussions taking place in the US.
CARLO SCOLLO LAVIZZARI: I'm, of course, fully aware that in the US there are ongoing court cases, and that the views between publishers, rights holders, authors, and library associations or proponents of digital lending are really diverging vastly. So in the world, let's say, outside the US, even though the US is part of WIPO, it's clear that e-lending comprises not so much the right of distribution, but the right of making available and the so-called communication to the public right.
CARLO SCOLLO LAVIZZARI: These are truly the electronic transmission rights, the right of communication to the public and the making available right. In the US, these rights are often also loosely referred to as distribution, or digital distribution. But it is important to realize that the character of a right of communication under the WIPO treaty and EU legislation is very different from a right of distribution of a physical print copy.
CARLO SCOLLO LAVIZZARI: And that is so because of what in the USA is called the doctrine of first sale, the first sale doctrine, which in Europe and elsewhere is called the doctrine of exhaustion of rights, or in the case of changing from one country to another, cross border supply, international exhaustion. The notion that once a copy of a tangible copy of a book is sold, what the seller then does with that copy is no longer controllable by the rights holder.
CARLO SCOLLO LAVIZZARI: That is, however, limited to that specific copy. So the exhaustion or the first sale is, in fact, the sale of the physical carrier. And in that sense, also, the impact on the rights holder's market is to some extent sterilized to that individual copy on a tangible carrier. In a digital scenario and with e-books, it is plain that no such thing really happens.
CARLO SCOLLO LAVIZZARI: What happens is a copy and they download, or a communication across a electronic network, online network, or access like software as a service, where, in fact, no copy is ever really downloaded. It is just kind of streamed to the user on the user's device. So the notion that the first sale doctrine or the exhaustion doctrine would inform a digital form of landing is, in my view, erroneous.
CARLO SCOLLO LAVIZZARI: And I will go through some of the case law that has happened in Europe to illustrate these points. An additional feature of the electronic world, whether offline or online, are so-called Technical Protection Measures-- TPMs, as they are known. They are also, in fact, introduced by the very same WIPO treaty I mentioned earlier.
CARLO SCOLLO LAVIZZARI: And cracking these codes or hacking through them is not permitted except on the very limited circumstances. In the US, for instance the Copyright Office engages in rulemaking when it is legal to remove technical protection measures, such as in circumstances to make works available for visually impaired and print-disabled persons if rights holders do not, in fact, accommodate accessible copies that are not protected by technical protection measures.
CARLO SCOLLO LAVIZZARI: So here we come to some of the legal sources I wanted to bring to the attention for purposes of our discussion. I already mentioned the WIPO organization, a UN sub-body specialized in IP. And the acronyms there-- the WIPO Copyright Treaties-- WCT-- there is a corresponding treaty on sound recordings called phonograms and performances.
CARLO SCOLLO LAVIZZARI: And then there is the last one, the Beijing Treaty on Audiovisual Performances, which obviously concerns film and audiovisual, acting, works of art, et cetera. I have listed here for you simply an agreed statement that exists in each of those three treaties, the last one being the Beijing Treaty. And when reading this, I have highlighted in bold the part that is material.
CARLO SCOLLO LAVIZZARI: So while the exhaustion and first sale doctrine really exhausts the right of distribution, it is clear that under these treaties, copies and original copies refer exclusively to fixations and fixed copies that can be put into circulation as tangible objects. So I think this a great statement, which by its very nature all the parties' signature including the US would have agreed to, illustrates why unlike the lending of tangible copies, an electronic copy where there is no tangible copy will not, in fact, engage the right of distribution.
CARLO SCOLLO LAVIZZARI: And since it doesn't engage that right, there can also be no exhaustion or first sale doctrine. When it comes to case law in the EU, I would like to also highlight the differences that exist in the EU between protecting copyright works generally and software, which in part is also protected by copyright in the EU and also the US. Although for software there is also trade secret protection, and in some cases, patent protection.
CARLO SCOLLO LAVIZZARI: In the EU, a case called Usoft made it clear that, in fact, where a user has software licenses and subsequently the business gets sold or goes bankrupt and the business is purchased by an auction, the licenses are not invalidated, and the software can be used by whoever the acquirer is. So for software, the European Court of Justice has adapted the concept of first sale doctrine or an exhaustion to the situation of software.
CARLO SCOLLO LAVIZZARI: What is material, though, is that in the Usoft case, or in the software market, whoever acquires old equipment with existing software licenses on them, is very likely to require updates, and is very likely to become a future customer of the very same software producers, software publishers. And in that sense, that market simply operates in a materially different way from entertainment or informational products that are protected by copyright.
CARLO SCOLLO LAVIZZARI: The leading case in Europe today is the so-called TOM Kabinet case, which clearly established that, in fact, e-lending is not really lending in the legal sense, but involves a communication to the public. It is not a distribution. And in that scenario, the TOM Kabinet organization that purported to create the business as sort of a book club premised on the validity of e-lending under exceptions in Europe could not work.
CARLO SCOLLO LAVIZZARI: When that case was fought, it was interesting that TOM Kabinet fully agreed that if publishers had not sold e-books but licensed them in any case, it's legal argument would have failed. So I'd say even if TOM Kabinet actually would have won that case, most likely the business would not have been made by TOM Kabinet, but probably Amazon and competitors would have used that ruling to a far greater success, stratifying that market to the chagrin of the somewhat attempted trailblazer or trailblazer [INAUDIBLE] that TOM Kabinet became.
CARLO SCOLLO LAVIZZARI: Cases that preceded TOM Kabinet are, however, also illustrative. And I mentioned-- one I've already mentioned, Usoft, but the VOB public lending case originally gave the hope to library associations that e-lending was a concept one could take from print to digital with relative ease. In that case, the same European Court of Justice held that e-lending under an exception can be possible, where it is one use or one copy at the time, and provided the technology is so good that, in fact, no future uses can be made after the lending period is over.
CARLO SCOLLO LAVIZZARI: In reality, such technology does not exist and did not exist then. And the European Court of Justice further added that this kind of adapted lending would only apply where the e-book has, in fact, been legally purchased, and has been so legally purchased with the consent of the rights holder of the distribution right. So you can imagine that similar to the argument or the concession in the TOM Kabinet speech, publishers would usually license rather than sell e-books to public libraries precisely to make sure that the lending and the times a book can be lent before it needs to be repurchased.
CARLO SCOLLO LAVIZZARI: Some numbers that were used early on were sort of around 25 times, 26 times-- in some Nordic countries, 6 times or 7 times-- and that these models could persist. So the fact of even though VOB public lending may be viewed as a victory for library associations and the VOB, a reading sort of line by line or the fine print of that decision would reveal to you that, in fact, the judgment is what I would call a Pyrrhic victory.
CARLO SCOLLO LAVIZZARI: Public lending was found to theoretically be imaginable as legal based on technology that is safe for them today. And also, only if the holder of the distribution right were to consent. So that points, again, to licensing and developing negotiated licenses being a more pragmatic way forward. I also mentioned the Allposters case for its peculiarity.
CARLO SCOLLO LAVIZZARI: It is-- it arose between the VOB public lending and TOM Kabinet, and must have, to some extent, colored the atmosphere and colored the reasoning of TOM Kabinet. Allposters was a company or is a company that transfers posters to canvas using literally the original colors used through a chemical process from posters, and applying that to canvas.
CARLO SCOLLO LAVIZZARI: So in terms of being an illustrative case, it's clearly not an electronic case, but it involves the complete destruction of the original, sort of a analog replica of the erstwhile US theory forward and delete, that in prior settings before the controlled digital lending debate, was touted as a possible theory for transferring lending into the digital world.
CARLO SCOLLO LAVIZZARI: The Allposters' case made clear that even where the original legitimately purchased copy gets destroyed in the process of transferring in the case of Allposters from a poster to a canvas, that is still not an engagement of the distribution right, and is, in fact, a reproduction which requires consent. So this case arising after VOB public lending destroyed the notion of the sort of one user one use at the time in the sense that even the destruction of the original was not good enough to persuade the court that this activity could be legal.
CARLO SCOLLO LAVIZZARI: I reference, as it will no doubt come up in the discussions, the US ReDigi case, and assuming that many people in the audience are from a US background, I will not delve deeply into the case, but mention that I think it compares in its approach very much to the TOM Kabinet case, and holding that yeah, it's not a distribution case but a communication to the public case.
CARLO SCOLLO LAVIZZARI: I come here to the concluding thoughts for purposes of introducing the topic and look so much forward to the debate. I would put the following things sort of on the table in contradistinction probably to my co-panelist, Kyle, that what is key is, in fact, the correct market analysis. I think the four cases from the EU-- one good thing about them, irrespective of the outcome, is the close analysis that was paid by the court.
CARLO SCOLLO LAVIZZARI: I would say digital is different in this case. And I list some attributes that make out the difference. The quality and electronic copy doesn't degrade. That is a important factor which leads many licensing solutions to limit the number of lending one can do before having to repurchase an e-book. The speeds, ease, and limited costs at which e-books can be replicated and transferred and transferred over large distances make it a very different ecosystem than a print book.
CARLO SCOLLO LAVIZZARI: I think, based on these different characteristics, it shows that it would be highly simplistic to just go and say, oh, yeah, let's just apply the same principles. Surely if they worked in book print, they must work in the digital online world as well. And then the further notions of software leading the way, again, it comes down to correct market analysis where once you bought into a software, you become kind of almost like a locked-up market for the software publisher.
CARLO SCOLLO LAVIZZARI: So to some extent, having a new company, being the owner of a second-hand software package, is almost a bonus. It's a new lease on life. I don't think the same can be said for e-books. There's no guarantee that that person purchasing an e-book or lending an e-book would suddenly become a customer anew.
CARLO SCOLLO LAVIZZARI: And to debunk the notion that whatever can technically be done should be done, Charles Clark, a lawyer present at the time of those WIPO treaties, referring to the technical protection measure said that the answer to the machine is in the machine, again, underlining the notion that digital is different, and different solutions are required. And I would just add here that machines are very useful tools.
CARLO SCOLLO LAVIZZARI: But ultimately, the social fabric, the markets, the ecosystem remains what is important. And to give a sensible answer to the machine, one still needs sound licensing principles. With this, I hope that we can have a fascinating debate and get into the notions of digital lending of first sale, or as we call it, exhaustion without being exhausted.
CARLO SCOLLO LAVIZZARI: We can discuss about fair use and library exceptions and see where there might be scope to have some consensus, or at least know why we disagree and on what. Thank you very much.
OYA RIEGER: Thanks for listening to Kyle and Carlo's presentation. We hope that they have raised some questions and comments that you would like to share when we meet again on February 24. Especially, I'm sure there will be some questions about COVID-19 pandemic, and as many libraries have relied on controlled digital lending to provide access to physical collections that have been inaccessible.
OYA RIEGER: And it's going to be really interesting and helpful to hear Kyle and Carlo's points about what we learned, and how we can implement those changes as we move ahead. Until we see each other again, stay well. [MUSIC PLAYING]
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OYA RIEGER: Warm greetings. I'm Oya Rieger from Ithaka S+R. It's a great pleasure to moderate this session on controlled digital lending. As you know, one of the perennial topics in library publishing and information technology conferences is the outdated mode of copyright laws in the United States. With the changes during the last two decades and move to digital access and discovery, copyrights-- current copyright laws often pose very serious impediments.
OYA RIEGER: Especially, this last year, or the year that we are still going through with the pandemic, also even highlighted some of the challenges. And one of the tools or one of the strategies that we started looking even more deeply is controlled digital lending. Well, today it's a great pleasure to have two outstanding speakers, colleagues with us, to tell us a bit about what's happening in this realm, new developments in means of practices and policies.
OYA RIEGER: It's a great pleasure to introduce them. Our first speaker will be Kyle Courtney. He's a lawyer, librarian, and a teacher. Kyle is currently serving as the copyright advisor at the Harvard Library's Office of Scholarly Communication. His Copyright First Responders initiative is in its seventh year. It has been influential and engaging a range of libraries, archives, museums, and cultural institutions.
OYA RIEGER: He serves on boards and legal advisory committees for various open access and copyright initiatives. Our second speaker is Carlo Scollo Lavizzari. Carlo is an international attorney specializing in intellectual property protection. He has more than 18 years of experience in practicing law firms in Africa, Europe, and United States.
OYA RIEGER: Carlo is a strategist, and he's pretty skilled in problem solving and conflict resolution. He participates actively in global advocacy, and is a frequent speaker and presenter at conferences, and he's also an author of numerous publications. Now with great pleasure, I'll turn it over to Kyle to start us. Thank you.
KYLE K. COURTNEY: Welcome. My name is Kyle Courtney. I'm a copyright advisor. Oop.
SPEAKER: You were a little quick. Do that one more time just so that we have a clean intro.
KYLE K. COURTNEY: Oh, sorry.
SPEAKER: That's OK. Go ahead.
KYLE K. COURTNEY: Hello. My name is Kyle Courtney. I'm corporate advisor at Harvard Library working out of the Office for Scholarly Communication, and today I'm going to be talking to you about controlled digital lending and new models of sharing. However, to frame this conversation, I just wanted to start at the top. Obviously, I'm discussing US law here as an example.
KYLE K. COURTNEY: And I just want to note that under US law, copyright is enshrined in the Constitution as promoting the progress of science of the useful arts by securing for limited times to authors and inventors the exclusive right to their writings and discoveries. In 1790, copyright law had its first act in the United States, which was actually titled An Act for the Encouragement of Learning. And I want you to remember that as we're coming in from our 10,000-foot view on what's copyright's role really, and its interaction with libraries when they're lending materials?
KYLE K. COURTNEY: Copyright is best represented, I think, by this three-part stage here where there is a bundle of rights represented by the bundle of sticks. And during that time, the creator that owns that bundle has a limited economic monopoly, which is life of the author plus 70 years. Of course, according to the constitutional narrative, to promote the progress of science and the useful arts, after those rights expire, it drops into the public domain.
KYLE K. COURTNEY: But, of course, libraries don't just rely on this public domain status in order to loan books. We don't lock up our stacks and materials. We loan stuff during that economic monopoly, during that time period where we're waiting for things to drop into the public domain. Now, that the bundle of rights is also part and parcel-- part of the statue too which says, hey, these rights are the exclusive rights by which the copyright holder owns and manages their copyright.
KYLE K. COURTNEY: So they have the right to make copies, reproduce the work, prepare derivative works, distribute copies, perform the works, and display the works. Now, that's important because those rights, again, as I said, reside with the copyright holder. So if I write a book, I have these rights, or maybe I give them to a publisher and they have these rights. But libraries have a special mission.
KYLE K. COURTNEY: They serve a balanced role in copyright. Let's talk about the first side, which is the economic purpose of copyright. Worldwide, libraries spend billions on copyrighted materials to build collections every year. These include books, journals, videos, and art. But as I said, libraries also serve another purpose, that use in access purpose, the encouragement of learning that we heard about when copyright law was first passed in the United States.
KYLE K. COURTNEY: And US libraries circulate almost $2 billion copyrighted items a year. Well, how can they do that despite the fact that the bundle of rights is owned by the copyright holder? And that's because copyright itself is a balancing act, not just the library's role, but it's the same balancing act-- rights versus exceptions. The majority of the act, as it's here outlined in Title 17 of the US Code, is filled with numerous statutory exceptions that are part of copyright law.
KYLE K. COURTNEY: This is how copyright promotes the progress in science and the useful arts. Without these exceptions, it would just be the rights. But as you can see, there are almost more limitations and exceptions than there are rights. And what are these? These statutory copyright exceptions allow individuals to exercise one of those exclusive bundles of rights of the copyright holder without obtaining permission or without payment of any licensing fee.
KYLE K. COURTNEY: And that should explain in some aspects of how libraries do what we do. We legally can loan books and make digitization and do all sorts of other stuff because of fair use and first sale, which were two of those many exceptions. Just to review very briefly, fair use, which is part of the copyright access, notwithstanding section 106, meaning that bundle of rights-- notwithstanding those bundle of rights, you can make fair uses as long as the purpose is criticism, commentary, news reporting, teaching, scholarship, or research.
KYLE K. COURTNEY: These are considered not infringements. And there's a whole four-factor balancing test. But again, this is viewed best as a right. Despite the fact that the copyright holder has these rights, we get to do certain things. One of the other aspects that's important for a library's role in making things available is the fact that we have a specific exception to the distribution right.
KYLE K. COURTNEY: That's a third part of that bundle of rights that the copyright holder owns. And first sale is where that comes into play. Notwithstanding section 106(3), the distribution right, the owner of a particular copy is entitled without the authority of the copyright owner to sell or otherwise dispose of the possession of that copy. Now, that's a critical thing that happens. First sale, when it was introduced into the statute, says if you have a first authorized sale of a particular copy, then the copyright owner can't prevent you to loan it downstream or to sell it downstream.
KYLE K. COURTNEY: This is also [INAUDIBLE] internationally as exhaustion of rights. Now, here in the US, and also overseas, first sale doctrine is an important aspect of a lot of commerce and industry. First of all, libraries are permitted to lend patrons books they acquired. That's how we can loan a book, and we never have to pay the copyright holder again. Used CD, bookstores, used record stores-- they can sell copyrighted protected works without having to pay a licensing fee, without having to pay the copyright holder again, because those are previously purchased and acquired.
KYLE K. COURTNEY: And eBay, for example, relies on this provision when they sell any one of their copyrighted works, the users can sell their works. Now, this is a natural thing that occurs, something we take advantage of, we may not study as well. But in the last 20 years or so, we've seen the movement to digital books, that idea that there's a physicality that exists with books.
KYLE K. COURTNEY: Well, now we have e-books. And the move to digital interfered with a lot of library rights because it was just not as easy because of a topic called licensing. So when we have licensing and contract law interact with copyright law the outcome is not the same. A license is a contract-- an agreement between the two parties to specific terms. So this is the problem with e-books and e-media is there they're sold subject to licenses that can modify, change, or alter that which exists in the copyright law.
KYLE K. COURTNEY: So presently, the licensing and sale of digital content exists in a legal realm that is separate from copyright law but affects copyright law. And this is why we saw in 2011, HarperCollins introduced a 26-checkout limit on library e-books because the license said so. The idea was that this was supposedly mimicking the lifespan of the book. But I know and you probably know, there are hundreds, if not thousands, of books that have been checked out thousands of times.
KYLE K. COURTNEY: But the license said every time you have 26 checkouts, you have to pay for a new license. And that's what the contract said. So again, it interfered with the ability to loan freely. Also, we saw just last year, Macmillan introduced a two-month embargo because they said that libraries were cannibalizing their e-book sales. And again, it's because libraries traditionally loan books to users.
KYLE K. COURTNEY: So all of these were reflected because of the underscoring licensing that evolves in these collections. And licensing can affect collection development, interlibrary loan, document delivery, a lot of stuff. And it can prevent you from loaning books in the same way. Now, recently we saw a number of closures. This issue was already reaching ahead, but the pandemic really intensified the need to deal with these particular issues.
KYLE K. COURTNEY: But the problem was the library pandemic narrative was the fallacy of licensing culture. Libraries are closed, so they can't perform their normal functions. Legally acquired books were now trapped in libraries. It's estimated as much as 650 million books during the height of the closures were left on the shelves, so no print access, no ILL, no reserves, no document delivery.
KYLE K. COURTNEY: They even went so far as saying you couldn't read books allowed in storytime without permission online. And there was this fallacy that electronic access requires permission or licensing only. There were free versions that were made available in that summer free, but suddenly print had no value, and this was upsetting. And one of the questions that came out is-- during this time is, why didn't the library get permission or a license to distribute works?
KYLE K. COURTNEY: And that's because we don't usually do that. Under US Copyright Law, libraries do not need permission to lend the books they purchased. And libraries have been doing this work for decades. Libraries are already using electronic document delivery, interlibrary loan, creating virtual reading rooms, making digital displays. These are things we have over either fair use or first sale. But the latest issue that really came to a head recently was controlled digital lending.
KYLE K. COURTNEY: And this is a notion where you're using technology to replicate that library's right to loan the legally acquired books in a digital format under controlled conditions. The idea is that we're replicating those rights that already exist with the physical works. Now, I wrote a paper about this with Dave Hansen prior to the pandemic in 2018 called "A White Paper on Controlled Digital Lending of Library Books." It's updated, and the publication is forthcoming this year.
KYLE K. COURTNEY: But it's very much based on that concept that can't we already do this-- if the licenses weren't necessarily in the way? Or if we have physical collections in our locked up stacks, could we digitize them and make them available? Because first sale is one of the powers that we have, that the owner of a particular copy allows us to sell or otherwise dispose of or loan these works.
KYLE K. COURTNEY: And this should be a familiar system, it's just being done technologically. So you purchase a copy for your library. You check it out to one person at a time. It's for a limited time period, and then it's returned and it's made available to the next person. And you repeat this, and no permission is needed from the copyright holder. And again, why?
KYLE K. COURTNEY: Because libraries do not need permission to lend books. That's built into the code. So the idea of the CDL methodology is a combination of first sale, fair use, and technical know-how. We have this six-part methodology here, which we have talked about frequently, but I just wanted to review them briefly here. First, if you have a book, and you want to digitize it, ensure that the original works are acquired lawfully, you apply CDL only to the works that are owned and not licensed.
KYLE K. COURTNEY: Because again, the licenses are not selling books to libraries, they are renting books to libraries. But we'll talk more about that. Then you have to limit the total number of copies in any format in circulation at any time to the number of physical copies that you own. You maintain that own-to-loan ratio. So if you have one physical copy and you digitize it, you can only loan that one digital copy one at a time, again, replicating the physicality of it.
KYLE K. COURTNEY: And then you lend each digital version to that single user replicating the physical copy, and you limit that time. If you have a loan period of 30 days or two weeks, you make that a parallel policy. And then you use DRM to prevent wholesale copying redistribution, meaning you're not allowing them to copy that whole digital book and send it further.
KYLE K. COURTNEY: The idea is that they couldn't necessarily do that with the physical, but you don't want to move into infringement territory by allowing them to distribute that digital copy. So again, the idea is that you take a work that you have on your shelf in CDL. You digitize it. You put that physical copy away. It is no longer going to be loaned.
KYLE K. COURTNEY: It is put in a salt mine. It is made inaccessible. And then you loan that digital copy as if it was the physical copy, only you do it under technical limits that prevents downloading, that prevents copying, that's done with a limited duration. Now, for risk purposes, maybe you're careful with market harm. Maybe you don't do the newest books.
KYLE K. COURTNEY: Maybe you look for pre-existing licensing. Or you focus on low-risk works. These are all methodologies that you can utilize. Now, again, this is not a new concept. This has been harnessed for a while. Controlled digital lending continues to be adopted now. Now over 80 libraries have harnessed the CDL system to loan digital copies or reserves, including these libraries here.
KYLE K. COURTNEY: And you'll note there's some publishers that are even using controlled digital lending as well. In addition to HathiTrusts-- emergency temporary access service-- I view Hathi as the CDL of reserves, so to speak. Hathi's emergency temporary access service only allows authorized users, which are the Hathi partner library patrons, to access these works, the access to specific digitized versions of the books.
KYLE K. COURTNEY: So if my library has these books, those are the books we're allowed to access online. They have to be legally held by us, and that they are only loaned for limited times. Usually, it's an hour with a renewable nother hour, and you're maintaining that own-to-loan ratio, and no reproduction or distribution is permitted. So you're using technology to access these remote books online and read and access them, which is part of this.
KYLE K. COURTNEY: Now, a lot of people look at this and they say, oh, well, is this fair use or first sale? It's a little of both. But one of the important aspects of that fair use scenario is that fourth factor, and this is what we hear a lot when we're discussing controlled digital lending. These are the four factors as they're outlined here under fair use-- the purpose of the use, the nature, and the amount used.
KYLE K. COURTNEY: But just for the moment, let's look at that fourth factor in regards to how CDL operates-- the effect upon the use of the potential market for the value of the copyrighted work-- meaning if you're making a fair use, it can't impact the market. So let's look at how copyright and friction work with CDL. Let's say the library owns a legitimate copy of the book. For physical access under first sale, it lets many users access the book, but you have to wait your turn.
KYLE K. COURTNEY: I borrow the book. I loan it to-- I read it. It comes back to the library, then the next person can get that book. Digital CDL access is eliminating the friction that exists. Technology can decrease the waiting time. Once the user is done, it transfers to the next user.
KYLE K. COURTNEY: That's enhancing legal access. That's opening the access. And friction is not protected by copyright. That idea that you have to wait for the book to be brought back to the desk, then you have to email that person, they have to come to the library and get that book-- what if we could eliminate that friction with technology? And again, is this a familiar system?
KYLE K. COURTNEY: Yes, this is a system that we use in print-- a purchased copy checked out to one person at a time for a limited time, made available to the next person, and you put it on repeat. Now, again, is this harming the market? Well, I'm of the opinion that digital loans like this under CDL do not negatively affect the market under fair use any differently that the legal use is already permitted by libraries when lending books physically under first sale.
KYLE K. COURTNEY: And this is how this interacts. I have purchased that book. The library has purchased that book, which means we're going to use it to loan. And every time we loan, it's not harming a sale, or it's the legal use already permitted because Congress built this into the Copyright Act that libraries can loan their materials, that libraries are capable of harnessing first sale and fair use to give access to collections that the users can't necessarily acquire themselves.
KYLE K. COURTNEY: So again, libraries do not need permission to lend these books. And this is what the CDL model is based upon. We are replicating that which is in the physical in the modern environment. Now, what may solve all of these problems, by the way, or make all of this controversy around digital loans going away, if the publishers would stop selling-- stop treating libraries like the enemy and sell us books with rights.
KYLE K. COURTNEY: If we could get at libraries-- they could stop using restrictive licensing when selling e-books or other e-media libraries, this would be a problem. Stop restricting the rights of libraries via license. Actually, sell the book to libraries, even if it's an e-book, even if it's any kind of e-media like you do in print, and trust libraries who are often the authors' and publishers' best customers, to use technology to provide the same access and controls for these materials in the same way that they've done for hundreds of years, and let libraries loan books in a modern, digital environment.
KYLE K. COURTNEY: And not just now during the pandemic, but forever. Because the publisher's mission may involve next fiscal quarter. But librarians' mission for preservation and access looks at the next 100 years. Let libraries continue this mission unfettered by restrictive licensing and remain a vital function in society as they've been called by Congress and the courts.
KYLE K. COURTNEY: So that's how we could utilize CDL, and utilize less restrictive licensing to increase access to our collections. So thank you for your time here today. I welcome some questions and discussions as we go live. And if you want to hear more about this, I'm on Twitter @KyleKCourtney.
CARLO SCOLLO LAVIZZARI: Hello, everyone. This is Carlo Lavizzari. I'm a intellectual property lawyer, and I'm very thankful to NISO to have invited me to speak to you as part of a panel. And the subject we want to bring to your attention here is called controlled digital lending. And as my grounding is in intellectual property, I will approach this problem from a legal point of view than the technicalities of how one would do this, or how on a technical standards level, this form of access can take place.
CARLO SCOLLO LAVIZZARI: So I look forward to a very lively discussion, and put simply forward the position that is known to me, that many publishers have regarding the notion of controlled digital lending of which my co-panelist has written a white paper as a co-author, and we shall hopefully have time to discuss and move the discussion forward as a result.
CARLO SCOLLO LAVIZZARI: So essentially, the concept of lending is one that comes from the print world. So it's intuitive perhaps to think that an e-book can be lent. But the effect of what happens is there is either a access software as a service, or there is a download of a copy that is temporarily available, but the manner in which lending and in print and electronically happens is not identical and actually quite different.
CARLO SCOLLO LAVIZZARI: So in practice, the lending results that I'm aware of is, in fact, achieved through licensing, typically licensing models between publishers and consortia of libraries or libraries, that then have the license rights to make e-books available temporarily to their patrons. In some countries, there are lending schemes that are administered by collective licensing organizations.
CARLO SCOLLO LAVIZZARI: But again, those are mostly for print books where physical copies are being lent. Also, the term lending in the academic publishing and scientific professional publishing is often used for interlibrary lending or interlibrary document supply. These other notions should be distinguished from the e-lending we are discussing today as digital lending, as there are different markets and different rules in place.
CARLO SCOLLO LAVIZZARI: Perhaps a common thing is that licensing also plays a large role in these scenarios, but they have some materially different elements and should be distinguished from the lending of e-books. Generally, publishers are open to the concept of lending. There's obviously always the risk of market cannibalization where things might get out of control, where copies intended for lending get out of that lending system and into the market, or where enterprising companies procure copies, let's say, from illegal sources and dress up as libraries.
CARLO SCOLLO LAVIZZARI: They call themselves archives or libraries. But in fact, are an accumulation of unlawfully sourced content, and they are then making money by selling access directly or indirectly to [INAUDIBLE] content. Again, that is not something we will chiefly discuss today, as that is simply a form of piracy that is not really sustainable for the entire creative supply chain.
CARLO SCOLLO LAVIZZARI: In many scenarios, library associations in Europe at the time of the digital single market said one should perhaps create additional exceptions from copyrights, exclusive rights, and allow lending basically on the notion of digital is not different. Simply add another exception, and allow what would be permissible in the print world with e-books by having another exception.
CARLO SCOLLO LAVIZZARI: The difficulty for publishers mainly is that under such a scenario, e-lending has no natural boundaries. So whereas, libraries serve a geographically subscribed number of patrons in the analog world, in the digital world, that plays-- geography plays almost no role. So you naturally would have libraries really competing with one another to a far greater extent if one were to simply replicate exceptions in a digital world.
CARLO SCOLLO LAVIZZARI: So to arrive at a ecosystem of lending, licensing to publishers seems in fact a better way forward. I have listed here for you some of the risks publishers see with sort of introducing a perhaps facile exception for e-lending and what it might do to the market of books, which would disappoint, I'm sure, many authors who would see their royalties diminish.
CARLO SCOLLO LAVIZZARI: From a legal point of view, at least, I can give you a view from Europe and from reading the world-- WIPO copyright treaty, WIPO being the World Intellectual Property Organization, a UN body that deals with IP throughout the world, to perhaps complement the discussions taking place in the US.
CARLO SCOLLO LAVIZZARI: I'm, of course, fully aware that in the US there are ongoing court cases, and that the views between publishers, rights holders, authors, and library associations or proponents of digital lending are really diverging vastly. So in the world, let's say, outside the US, even though the US is part of WIPO, it's clear that e-lending comprises not so much the right of distribution, but the right of making available and the so-called communication to the public right.
CARLO SCOLLO LAVIZZARI: These are truly the electronic transmission rights, the right of communication to the public and the making available right. In the US, these rights are often also loosely referred to as distribution, or digital distribution. But it is important to realize that the character of a right of communication under the WIPO treaty and EU legislation is very different from a right of distribution of a physical print copy.
CARLO SCOLLO LAVIZZARI: And that is so because of what in the USA is called the doctrine of first sale, the first sale doctrine, which in Europe and elsewhere is called the doctrine of exhaustion of rights, or in the case of changing from one country to another, cross border supply, international exhaustion. The notion that once a copy of a tangible copy of a book is sold, what the seller then does with that copy is no longer controllable by the rights holder.
CARLO SCOLLO LAVIZZARI: That is, however, limited to that specific copy. So the exhaustion or the first sale is, in fact, the sale of the physical carrier. And in that sense, also, the impact on the rights holder's market is to some extent sterilized to that individual copy on a tangible carrier. In a digital scenario and with e-books, it is plain that no such thing really happens.
CARLO SCOLLO LAVIZZARI: What happens is a copy and they download, or a communication across a electronic network, online network, or access like software as a service, where, in fact, no copy is ever really downloaded. It is just kind of streamed to the user on the user's device. So the notion that the first sale doctrine or the exhaustion doctrine would inform a digital form of landing is, in my view, erroneous.
CARLO SCOLLO LAVIZZARI: And I will go through some of the case law that has happened in Europe to illustrate these points. An additional feature of the electronic world, whether offline or online, are so-called Technical Protection Measures-- TPMs, as they are known. They are also, in fact, introduced by the very same WIPO treaty I mentioned earlier.
CARLO SCOLLO LAVIZZARI: And cracking these codes or hacking through them is not permitted except on the very limited circumstances. In the US, for instance the Copyright Office engages in rulemaking when it is legal to remove technical protection measures, such as in circumstances to make works available for visually impaired and print-disabled persons if rights holders do not, in fact, accommodate accessible copies that are not protected by technical protection measures.
CARLO SCOLLO LAVIZZARI: So here we come to some of the legal sources I wanted to bring to the attention for purposes of our discussion. I already mentioned the WIPO organization, a UN sub-body specialized in IP. And the acronyms there-- the WIPO Copyright Treaties-- WCT-- there is a corresponding treaty on sound recordings called phonograms and performances.
CARLO SCOLLO LAVIZZARI: And then there is the last one, the Beijing Treaty on Audiovisual Performances, which obviously concerns film and audiovisual, acting, works of art, et cetera. I have listed here for you simply an agreed statement that exists in each of those three treaties, the last one being the Beijing Treaty. And when reading this, I have highlighted in bold the part that is material.
CARLO SCOLLO LAVIZZARI: So while the exhaustion and first sale doctrine really exhausts the right of distribution, it is clear that under these treaties, copies and original copies refer exclusively to fixations and fixed copies that can be put into circulation as tangible objects. So I think this a great statement, which by its very nature all the parties' signature including the US would have agreed to, illustrates why unlike the lending of tangible copies, an electronic copy where there is no tangible copy will not, in fact, engage the right of distribution.
CARLO SCOLLO LAVIZZARI: And since it doesn't engage that right, there can also be no exhaustion or first sale doctrine. When it comes to case law in the EU, I would like to also highlight the differences that exist in the EU between protecting copyright works generally and software, which in part is also protected by copyright in the EU and also the US. Although for software there is also trade secret protection, and in some cases, patent protection.
CARLO SCOLLO LAVIZZARI: In the EU, a case called Usoft made it clear that, in fact, where a user has software licenses and subsequently the business gets sold or goes bankrupt and the business is purchased by an auction, the licenses are not invalidated, and the software can be used by whoever the acquirer is. So for software, the European Court of Justice has adapted the concept of first sale doctrine or an exhaustion to the situation of software.
CARLO SCOLLO LAVIZZARI: What is material, though, is that in the Usoft case, or in the software market, whoever acquires old equipment with existing software licenses on them, is very likely to require updates, and is very likely to become a future customer of the very same software producers, software publishers. And in that sense, that market simply operates in a materially different way from entertainment or informational products that are protected by copyright.
CARLO SCOLLO LAVIZZARI: The leading case in Europe today is the so-called TOM Kabinet case, which clearly established that, in fact, e-lending is not really lending in the legal sense, but involves a communication to the public. It is not a distribution. And in that scenario, the TOM Kabinet organization that purported to create the business as sort of a book club premised on the validity of e-lending under exceptions in Europe could not work.
CARLO SCOLLO LAVIZZARI: When that case was fought, it was interesting that TOM Kabinet fully agreed that if publishers had not sold e-books but licensed them in any case, it's legal argument would have failed. So I'd say even if TOM Kabinet actually would have won that case, most likely the business would not have been made by TOM Kabinet, but probably Amazon and competitors would have used that ruling to a far greater success, stratifying that market to the chagrin of the somewhat attempted trailblazer or trailblazer [INAUDIBLE] that TOM Kabinet became.
CARLO SCOLLO LAVIZZARI: Cases that preceded TOM Kabinet are, however, also illustrative. And I mentioned-- one I've already mentioned, Usoft, but the VOB public lending case originally gave the hope to library associations that e-lending was a concept one could take from print to digital with relative ease. In that case, the same European Court of Justice held that e-lending under an exception can be possible, where it is one use or one copy at the time, and provided the technology is so good that, in fact, no future uses can be made after the lending period is over.
CARLO SCOLLO LAVIZZARI: In reality, such technology does not exist and did not exist then. And the European Court of Justice further added that this kind of adapted lending would only apply where the e-book has, in fact, been legally purchased, and has been so legally purchased with the consent of the rights holder of the distribution right. So you can imagine that similar to the argument or the concession in the TOM Kabinet speech, publishers would usually license rather than sell e-books to public libraries precisely to make sure that the lending and the times a book can be lent before it needs to be repurchased.
CARLO SCOLLO LAVIZZARI: Some numbers that were used early on were sort of around 25 times, 26 times-- in some Nordic countries, 6 times or 7 times-- and that these models could persist. So the fact of even though VOB public lending may be viewed as a victory for library associations and the VOB, a reading sort of line by line or the fine print of that decision would reveal to you that, in fact, the judgment is what I would call a Pyrrhic victory.
CARLO SCOLLO LAVIZZARI: Public lending was found to theoretically be imaginable as legal based on technology that is safe for them today. And also, only if the holder of the distribution right were to consent. So that points, again, to licensing and developing negotiated licenses being a more pragmatic way forward. I also mentioned the Allposters case for its peculiarity.
CARLO SCOLLO LAVIZZARI: It is-- it arose between the VOB public lending and TOM Kabinet, and must have, to some extent, colored the atmosphere and colored the reasoning of TOM Kabinet. Allposters was a company or is a company that transfers posters to canvas using literally the original colors used through a chemical process from posters, and applying that to canvas.
CARLO SCOLLO LAVIZZARI: So in terms of being an illustrative case, it's clearly not an electronic case, but it involves the complete destruction of the original, sort of a analog replica of the erstwhile US theory forward and delete, that in prior settings before the controlled digital lending debate, was touted as a possible theory for transferring lending into the digital world.
CARLO SCOLLO LAVIZZARI: The Allposters' case made clear that even where the original legitimately purchased copy gets destroyed in the process of transferring in the case of Allposters from a poster to a canvas, that is still not an engagement of the distribution right, and is, in fact, a reproduction which requires consent. So this case arising after VOB public lending destroyed the notion of the sort of one user one use at the time in the sense that even the destruction of the original was not good enough to persuade the court that this activity could be legal.
CARLO SCOLLO LAVIZZARI: I reference, as it will no doubt come up in the discussions, the US ReDigi case, and assuming that many people in the audience are from a US background, I will not delve deeply into the case, but mention that I think it compares in its approach very much to the TOM Kabinet case, and holding that yeah, it's not a distribution case but a communication to the public case.
CARLO SCOLLO LAVIZZARI: I come here to the concluding thoughts for purposes of introducing the topic and look so much forward to the debate. I would put the following things sort of on the table in contradistinction probably to my co-panelist, Kyle, that what is key is, in fact, the correct market analysis. I think the four cases from the EU-- one good thing about them, irrespective of the outcome, is the close analysis that was paid by the court.
CARLO SCOLLO LAVIZZARI: I would say digital is different in this case. And I list some attributes that make out the difference. The quality and electronic copy doesn't degrade. That is a important factor which leads many licensing solutions to limit the number of lending one can do before having to repurchase an e-book. The speeds, ease, and limited costs at which e-books can be replicated and transferred and transferred over large distances make it a very different ecosystem than a print book.
CARLO SCOLLO LAVIZZARI: I think, based on these different characteristics, it shows that it would be highly simplistic to just go and say, oh, yeah, let's just apply the same principles. Surely if they worked in book print, they must work in the digital online world as well. And then the further notions of software leading the way, again, it comes down to correct market analysis where once you bought into a software, you become kind of almost like a locked-up market for the software publisher.
CARLO SCOLLO LAVIZZARI: So to some extent, having a new company, being the owner of a second-hand software package, is almost a bonus. It's a new lease on life. I don't think the same can be said for e-books. There's no guarantee that that person purchasing an e-book or lending an e-book would suddenly become a customer anew.
CARLO SCOLLO LAVIZZARI: And to debunk the notion that whatever can technically be done should be done, Charles Clark, a lawyer present at the time of those WIPO treaties, referring to the technical protection measure said that the answer to the machine is in the machine, again, underlining the notion that digital is different, and different solutions are required. And I would just add here that machines are very useful tools.
CARLO SCOLLO LAVIZZARI: But ultimately, the social fabric, the markets, the ecosystem remains what is important. And to give a sensible answer to the machine, one still needs sound licensing principles. With this, I hope that we can have a fascinating debate and get into the notions of digital lending of first sale, or as we call it, exhaustion without being exhausted.
CARLO SCOLLO LAVIZZARI: We can discuss about fair use and library exceptions and see where there might be scope to have some consensus, or at least know why we disagree and on what. Thank you very much.
OYA RIEGER: Thanks for listening to Kyle and Carlo's presentation. We hope that they have raised some questions and comments that you would like to share when we meet again on February 24. Especially, I'm sure there will be some questions about COVID-19 pandemic, and as many libraries have relied on controlled digital lending to provide access to physical collections that have been inaccessible.
OYA RIEGER: And it's going to be really interesting and helpful to hear Kyle and Carlo's points about what we learned, and how we can implement those changes as we move ahead. Until we see each other again, stay well. [MUSIC PLAYING]
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