In a key fair use ruling, the Second Circuit Court of Appeals on Tuesday affirmed Judge Harold Baer’s October 2012 verdict in the Authors Guild vs. HathiTrust case.

The copyright infringement suit was first filed by the Authors Guild in September, 2011, as a parallel action to the Guild’s suit against Google. Guild attorneys had argued that the HathiTrust, a digital preservation effort created by a collective of research libraries, was built with millions of “unauthorized” scans created by Google, putting the authors work at risk, and depriving them of a potential licensing market.

In his ruling, however, Judge Baer rejected those arguments, writing that he could not imagine “a definition of fair use” that would compel him to shut down what he called an “invaluable contribution to the progress of science and cultivation of the arts.”

In its decision Tuesday, a three-judge panel of the Second Circuit upheld Baer’s fair use analysis, holding that the scanning of entire works for the purpose of creating a full‐text searchable database is “a quintessentially transformative use.” The court also held that scanning entire works—and, indeed creating multiple copies of those works—was also permissible.

“Because it was reasonably necessary for the [HathiTrust] to make use of the entirety of the works in order to enable the full‐text search function, we do not believe the copying was excessive,” the court ruled, adding that additional copies made by the HathiTrust were also “reasonably necessary in order to facilitate the [HathiTrust’s] legitimate uses.”

And, finally, perhaps most importantly, the court dismissed the Authors Guild’s contention that the scanning harmed their market, explaining that the fourth factor of fair use analysis turns only on “harm that results because the secondary use serves as a substitute for the original work.”

The Authors Guild had argued that the massive scanning project deprived authors of a chance to develop a market for licensing books for digital search. The court, however, held that “this theory of market harm does not work under Factor Four, because the full‐text search function does not serve as a substitute for the books that are being searched.”

The Authors Guild had also argued that the program created the risk of a “security breach that might impose irreparable damage,” but the court, noting the HathiTrust’s rigorous security measures, brushed off such concerns. “We see no basis in the record on which to conclude that a security breach is likely to occur, much less one that would result in the public release of the specific copyrighted works belonging to any of the plaintiffs in this case.”

The decision also upheld the HathiTrust’s program to offer access to the print disabled, finding that a reading of both case law and legislative history supported this kind of use. This part of the decision could have a far-reaching impact, emboldening other programs to makes works accessible for the print disabled.

In a minor point, the court also upheld the lower court’s decision that an Orphan Works project undertaken by the HathiTrust (and since discontinued) was not ripe for adjudication.

The American Library Association, which backed the HathiTrust, saw the decision as a major victory for libraries. "The Second Circuit today affirmed more than a lower court decision—it affirmed that the fair use of copyrighted material by libraries for the public is essential to copyright law," said ALA president Barbara Stripling in a statement. "ALA is pleased that the court recognizes the tremendous value of libraries in securing the massive record of human knowledge on behalf of the general public and in providing lawful access to works for research, educational, and learning purposes, including access for people with disabilities."

The decision does not augur well for the Authors Guild’s recent appeal of Judge Denny Chin’s decision in the Google case, a case that turns largely on the same arguments and evidence—although, with Google, there is a commercial element, and, unlike the HathiTrust, Google actually displays “snippets.”

In a line it its decision, the Second Circuit noted that it was “important” that the HathiTrust does not display any of the work made available for searching. How important, we may soon find out.

Meanwhile, in another minor blow to the Authors Guild, the Second Circuit decision also affirmed that the Authors Guild does not in fact have standing to bring copyright infringement suits on behalf of its members. In practice, however, that will have little import. Copyright litigation can simply be pressed with Guild members as named plaintiffs, and historically, the AG has not brought infringement actions.