For an actor like that, you want to take cases that you can win to court, to establish precedent step by step. You want to settle cases you might lose out of court to avoid establishing precedent to your disadvantage. In this way, you can slowly change the interpretation of the law.

Taking this to court is seen as a mistake because it was a predictable loss and established a harsh precedent.

Internet Archive had lent books on a 1 reader for 1 physical copy basis for a long time, and the publishers didn't want to take it to court because the judge would need to weigh the rights of a person purchasing a physical good against copyright. They might no like the decision. It suited them to leave it untested.

Internet Archive chose to lend unlimited copies and pursue the matter to its conclusion in court rather than settling out of court.

Assuming Internet Archive were well advised, knew they would lose, and still chose to create this situation and go to court, you have to wonder why.

Are they trying to create an unacceptable legal precedent so that they can get the law changed? Some other reason I am not seeing?