In terms of the fair use argument that could have been made, the Internet Archive's CDL obviously failed "nature of" and "amount and substantiality of", but I think it did not inherently fail "purpose and character" or "effect of the use", despite the decision saying it did.
In terms of concrete legal changes that could and should happen: "right of first sale" should be updated for digital, and include both "right to do format-shifting" (e.g. scanning physical to digital) and "right to lend copies digitally" (just like first-sale already explicitly allows physically).
The 4 fair-use test questions:
* How transformative the derived work is
* How much of the work is copied
* The expressive nature of the work
* The impact the derivation has on the market for the original
The Internet Archive:
* Copied works and made them directly available, deliberately avoiding transformation of any sort other than their accessibility.
* Copied them in their entirety.
* Exclusively copied books, the expressive work most legible to copyright law since the time of the framers.
* Made them available as a substitute for publisher-provided ebooks.
Any of these factors is enough to tank a fair use case. IA presented just about the worst possible fact pattern for all of them. This was an easy, straightforward decision to read. I didn't notice any point at which the 2nd Circuit had to stretch to reach the conclusion they did.
The four-factor test does not require that all factors pass. It's possible for a use to completely fail some of the factors but still qualify as fair use on the basis of the other factors.
No argument that CDL failed "amount and substantiality of"; they copied entire books. (This is, of course, exactly what they do with everything else, and that's not been a problem before.)
IA's "nature of" argument could have been reasonable for the subset of works that constituted nonfiction/educational material (there is a long history of the copying of those such work for educational use); that wouldn't have sufficed for other works, but it was a reasonable point for the subset of works it applied to.
For "purpose and character", the use was not hugely transformative, but it was turned into a different and more accessible form.
As for "effect of the use", I would argue that CDL was not in practice a substitute for most uses of a book or ebook. A book that you borrow, and have to return, can sometimes substitute for owning your own copy, but not always; in practice, the users of libraries and the users of bookstores overlap but I would venture that the majority of people who borrow a book from the library would not typically have bought the same book if the library didn't exist.
Suppose one built an automated apparatus that remotely opened a physical book and held individual pages up to a webcam for transmission to you on a video call. That's technically making a copy in the course of its operation, but you're still effectively reading the original physical book, with some assistance. (The Supreme Court ruling against Aereo would sadly probably be cited to shoot down such a model. That was a sad ruling as well; the opposite ruling would have enabled an incredible variety of uses and possibilities.) The 1:1 CDL mechanism seems effectively equivalent to that.
Is this true? A substitute is like for like. The IA lending provided them as a lend on the proviso that a physically purchased book is available and unused.
Its like saying that a Bookstore is competing with a Library. However the Library can only satisfy a small amount of Bookstore demand, and does so as a public good. They arent the same and the lending is downstream of a sale.
I guess you could make the argument that ebooks also have crippling anti consumer licenses so both are similar. But that just leads back to "The law should be different"