After a nearly three-hour virtual hearing on February 7, federal judge Deborah L. Boardman is now set to rule on the Association of American Publishers’ December 16 motion for a preliminary injunction to bar Maryland state officials from enforcing the state's recently enacted library e-book law.

The hearing comes almost two months after the AAP first filed suit on December 9 alleging that Maryland's library e-book law forces publishers and authors to license works against their will. The law, which went into effect on January 1, requires that publishers offering e-books to consumers in state to also offer to license the works to public libraries on “reasonable” terms. On January 14, Maryland attorneys responded with a motion to dismiss the suit, which is still pending.

Opening the hearing, AAP attorney Scott Zebrak reiterated the AAP’s position that Maryland’s library e-book law is clearly preempted by federal copyright law. “I’m not one to exaggerate, but [the Maryland Act] is the definition of a preempted state law,” Zebrak told Boardman, repeating the AAP’s argument that the law functions as “a shadow copyright act.”

Arguing for the state of Maryland, assistant attorney general Sean Fitzgerald opened by telling the court that the state’s e-book law basically comes down to one word: balance. Fitzgerald said that Congress had carefully crafted the Copyright Act to balance a creator’s right to negotiate “a fair price” for their works with the public’s right to access those works. But that balance cannot be maintained, Fitzgerald told the court, if publishers can “arbitrarily” deny digital licenses to public libraries in the state or license works only on “demonstrably unfair” terms.

Boardman then began her questioning, grilling Fitzgerald for well over an hour, beginning with her concerns about the language of the Maryland law. Among her questions, Boardman noted that the Maryland law applies when a publisher offers an e-book to the public—but what does “the public” mean? Does it mean an offer to the Maryland public or to the public anywhere in the world?

Furthermore, Boardman pointed out, the statute says the publishers “shall offer,” to license works to libraries on “reasonable” terms, which Boardman interprets as “a command” to publishers. And who decides what is reasonable? Boardman asked, at one point questioning how she could not read the law as an “order to distribute" because it in effect would force publishers to negotiate licenses they might otherwise choose not to undertake. At one point, Boardman even suggested the library e-book market was "a different market" from the the consumer e-book market, because libraries lend their copies, a point Fitzgerald conceded.

While Boardman appeared sympathetic to the Maryland law's intent, she was clearly skeptical of the law's operation.

“What authority do I have at this point to consider a compelling state interest?” Boardman asked Fitzgerald. “Because I don’t disagree with you that there seems to be a compelling state interest in increasing the accessibility of e-books to the Maryland public. But what role does that play in a preemption analysis?”

Fitzgerald suggested the answer lies in the state’s authority to regulate against discriminatory contracts, and particularly in terms of libraries.

“The only reason why publishers will not enter into such contracts is because they are seeking to exclude public libraries while availing themselves of the Maryland public at large,” Fitzgerald said. “The holders of copyright have the right to exclude others from using their property and to content themselves with not licensing their product. But once they start putting their product into the marketplace they don’t have the right to do so a) free from regulation, and b) …they do not have the right to exclude a particular class, and in this case, such a special and important class of non-commercial entities, from their products.”

Fitzgerald reiterated the state's position that the Maryland Act is a "library protection statute" rather than a copyright law. "The Maryland Act is not requiring publishers to give their works away. It is not requiring them to divest themselves of the copyrights they have. What it’s saying is that you cannot discriminate and arbitrarily exclude libraries because that is inconsistent with over 100 years of library lending protected by the copyright act," Fitzgerald argued. "The Maryland act is achieving congressional intent, that’s why it’s not preempted. It’s not frustrating the objectives of Congress."

In turning to the AAP, Boardman began her questions by asking Zebrak to weigh in on the equity of access question. “It does seem to me that there is inequity and an unfairness on how publishers have treated public libraries,” Boardman said. Zebrak refused to concede the point.

“Your honor, I don’t understand the starting point of the question,” Zebrak replied, disputing that there is any issue with the library e-book market, which he characterized as flourishing. Zebrak suggested "this perceived unfairness" was due to the state relying on the word of library advocates in seeking to "substitute its judgment" for Congress. "What’s happening here is an end run by certain groups that want to divert copyright policy from the federal government to state legislatures, but it’s unambiguous that [copyright policy] is Congress's sole authority."

In the back-and-forth that it’s all about balance, and achieving the right balance, or a fair balance, or a reasonable balance, or a proper balance, all these words involve judgment. And that judgment is for Congress. It’s not for the state.

If Fitzgerald had sought to capture Maryland’s position in a single word (balance) Zebrak’s argument for the AAP could also be characterized by a single word: Congress. Zebrak consistently reminded the court that the Maryland law was improperly infringing on an area of policy and law decided exclusively at the federal level.

“Congress decides copyright policy,” Zebrak told the court. “In the back-and-forth that it’s all about balance, and achieving the right balance, or a fair balance, or a reasonable balance, or a proper balance, all these words involve judgment. And that judgment is for Congress. It’s not for the state. Whatever interest [the state] thinks it has, the state cannot substitute its judgment for that of Congress. This is an area fully for Congress.”

Asked by Boardman whether a copyright holder has the right to “exclude a swath of the public” from access, as Fitzgerald said was driving the law, Zebrak first denied any such thing was happening in the marketplace. But he also insisted that a copyright holder “absolutely” has the right to refuse a license to any “person or entity”—including libraries.

“Congress has granted a very carefully balanced set of rights and exceptions. And our exclusive rights don’t say ‘you have the exclusive right to decide whom to distribute to or not distribute to, except you must always just distribute to public libraries if they want it.’ That’s not what the statute says. The statute gives [copyright holders] exclusive rights. This is all in the area that Congress regulates. The state can have views on these things. But it can’t regulate what is regulated by Congress.”

Critically, Zebrak insisted the Maryland law is clearly, "irreconcilably" preemepted by copyright law, explaining to Boardman that, contrary to Fitzgerald's claims, the Maryland Act is in obvious conflict with the exclusive rights granted under federal copyright law.

"The state is making it an impossibility to comply with both the state and the federal law," Zebrak told the court. "The only way for us to as publishers fulfill our obligation to authors...would be, unless you wanna risk civil liability or potentially be put in jail, to acquiesce and bend the knee to the state regulation, and to substitute its policy for Congress's determination on how to best calibrate copyright."

Injunctive Relief?

Despite its length, the hearing offered no surprises as both sides stuck to and amplified the arguments laid out in their briefs. And though Boardman clearly appeared skeptical of the Maryland law's potential intrusion on the exclusive rights of copyright holders, it is unclear whether she heard enough to clear the high bar necessary to grant the AAP's motion for a preliminary injunction blocking the law at this stage.

At one point, Boardman acknowledged that the case law at issue, while offering some guidance, was not totally on point. In particular, the discussion focused heavily on a 1999 decision in Orson Inc. v. Miramax, a case that involved the commercial distribution of art films in local theaters in Pennsylvania. In its arguments, the AAP has argued the case is very much on point, because it clearly lays out that, whatever good intentions a state may have, it cannot enact laws that compel copyright holders to license their works or otherwise infringe on a rights holder's exclusive rights.

Maryland attorneys, however, insist the Orson case is distinguishable, because it deals only with commercial exploitation, not nonprofit public institutions like the public library. Furthermore, Fitzgerald insisted the Orson case was "analytically different" from the Maryland Act as well, because Orson dealt with an exclusive first run arrangement in which the copyright holder agreed to distribute through one entity first, then perhaps to the world at large. In the case of the Maryland Act, the publishers are pursuing the opposite: offering the work to the public at large, but discriminating against one class of consumer.

In order to win a preliminary injunction, parties must satisfy a four factor test. Factor one must show a likelihood of success on the merits; Factor two requires showing there will be “irreparable harm” without an injunction. Factor three focuses on the “balance of equities.” And factor four requires an injunction be in the public interest. If any one of the factors tips against the moving party, the injunction must be denied.

At the hearing, Boardman focused mostly on the irreparable harm issue. And while that issue is complicated by the fact that the law has not yet been invoked, the AAP's main argument is straightforward: The Maryland law represents a Constitutional injury because it infringes upon copyright holders' exclusive rights, and a Constitutional injury is by definition irreparable harm. But Zebrak also told Boardman that calculating damages would also be impossible if the law is allowed to stand only to be struck down in a year or so, because the court could not effectively measure the impact of excess library lending on consumer sales. "You can't unring that bell," Zebrak said.

Fitzgerald, meanwhile, insisted the AAP had not met its burden on any of the four factors, and implored Boardman to deny the injunction, saying to grant it would "rubber stamp" publishers' decisions to discriminate against libraries. And he took aim at the idea that the rise in the business of library e-book lending indicated a well-functioning market.

"Of course [digital library lending is booming], because taxpayers are footing the bill," Fitzgerald argued. "Libraries will always do whatever they can to get these products. But it doesn’t mean the market is balanced. Saying that libraries are accessing these products does not equate to publishers are licensing them on fair terms, or not embargoing libraries. It doesn’t mean that this market practice is sustainable, which is the goal of the Maryland Act. And it is a powerful enough market ill that the general assembly passed and Maryland Act unanimously. And in an era where bipartisanship can be few and far between, I think that’s a testament to how apparent this market inequity really is."

While Boardman could not give an exact date, she told the parties she understood the urgency with the case, and promised to deliver a speedy decision.