Case 1:21-cv-03133-DLB Document 19 Filed 02/16/22 Page 1 of 28
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`ASSOCIATION OF AMERICAN
`PUBLISHERS, INC.,
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`
`Plaintiff,
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`Case No.: DLB-21-3133
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF MARYLAND
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`*
`
`*
`
`*
`
`
`*
`v.
`
`
`BRIAN E. FROSH, in his official capacity as *
`Attorney General of the State of Maryland,
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`Defendant.
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`
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`*
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`*
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`MEMORANDUM OPINION
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`The Association of American Publishers, Inc. (“AAP”) challenges the constitutionality of
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`a recently enacted Maryland law (“Maryland Act” or “the Act”) that requires publishers who offer
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`to license “electronic literary products” to “the public” to offer to license the same products to
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`Maryland public libraries on “reasonable terms.” Md. Code Ann., Educ. § 23-701 – 23-702. AAP,
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`the national trade association and principal public policy advocate for publishing houses in the
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`United States, filed a complaint against Brian E. Frosh in his official capacity as the Maryland
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`State Attorney General (“the State”) in which it alleged, inter alia, that the Maryland Act is
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`preempted by the Copyright Act, 17 U.S.C. § 101 et seq. ECF 1. AAP moved for a preliminary
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`injunction enjoining enforcement of the Maryland Act, which took effect on January 1, 2022. ECF
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`4. The State opposed the motion and moved to dismiss the complaint. ECF 10. AAP replied and
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`opposed, ECF 13, and the State replied, ECF 17. The Court held a virtual hearing on the
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`preliminary injunction motion on February 7, 2022. For the reasons set forth in this Memorandum
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`Opinion, plaintiff’s motion for a preliminary injunction is granted.
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`

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`Case 1:21-cv-03133-DLB Document 19 Filed 02/16/22 Page 2 of 28
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`I.
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`Background
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`The Copyright Clause of the Constitution empowers Congress “[t]o promote the Progress
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`of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive
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`Rights to their respective Writings and Discoveries . . . .” U.S. Const. art. I, § 8, cl. 8. Congress
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`exercised this constitutional authority when it enacted the Copyright Act. The Copyright Act
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`confers on the owner of a copyright certain “exclusive rights,” including the right to “distribute
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`copies or phonorecords of . . . copyrighted work to the public by sale or other transfer of ownership,
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`or by rental, lease, or lending.” 17 U.S.C. § 106(3).
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`The exclusive rights protected by the Copyright Act are limited in duration. 17 U.S.C.
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`§§ 302–05. Generally, copyright in a new work “endures for a term consisting of the life of the
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`author and 70 years after the author’s death.” Id. § 302(a).
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`[This] limited grant is a means by which an important public purpose may be
`achieved. It is intended to motivate the creative activity of authors and inventors
`by the provision of a special reward, and to allow the public access to the products
`of their genius after the limited period of exclusive control has expired.
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`Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 546 (1985) (quoting Sony Corp.
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`v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984)).
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`There are exceptions to the exclusive rights enumerated in 17 U.S.C. § 106. For example,
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`not considered copyright infringement is the “fair use” of protected material, which may include
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`“criticism, comment, news reporting, teaching (including multiple copies for classroom use),
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`scholarship, or research.” 17 U.S.C. § 107. Also not considered copyright infringement is the
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`reproduction of “damaged, deteriorating, lost, or stolen” copyrighted materials by libraries or
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`archives—an exception that allows those institutions to preserve the public record for future
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`generations. Id. § 108. A well-known exception is for the sale or disposition “of a particular copy
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`or phonorecord” protected by the Copyright Act. Id. § 109. This exception, known as the
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`2
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`statutorily codified “first sale doctrine,” prevents the far-reaching protections of copyright from
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`interfering with the bundle of rights held by the owners of personal property. Kirtsaeng v. John
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`Wiley & Sons, Inc., 568 U.S. 519, 523, 538–39 (2013).1
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`It is clear from the text and history of the Copyright Act that the balance of rights and
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`exceptions is decided by Congress alone. The Copyright Act contains an expansive express
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`preemption provision:
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`On and after January 1, 1978, all legal or equitable rights that are equivalent to any
`of the exclusive rights within the general scope of copyright as specified by section
`106 in works of authorship that are fixed in a tangible medium of expression and
`come within the subject matter of copyright as specified by section 102 and 103,
`whether created before or after that date and whether published or unpublished, are
`governed exclusively by this title. Thereafter, no person is entitled to any such right
`or equivalent right in any such work under the common law or statutes of any State.
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`17 U.S.C. § 301(a). This preemption provision effectuated Congress’s intent to “adopt[] a single
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`system of Federal statutory copyright from creation.” Pub. L. 94-553, Title I, § 101, Oct. 19, 1976,
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`90 Stat. 2572; H.R. Rep. 94-1476, 1976 WL 14045, at *129 (1976). Congress stated that “[t]he
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`1 The “first sale doctrine” allows libraries to lend hardcopy books and other tangible copyrighted
`materials to patrons. Hotaling v. Church of Jesus Christ of Latter-Day Saints, 118 F.3d 199, 203
`(4th Cir. 1997). The federal government has studied the possibility of expanding the first sale
`doctrine to cover digital works on more than one occasion. In 2001, the Register of Copyrights
`and the Assistant Secretary for Communication and Information of the Department of Commerce
`prepared a report in compliance with § 104 of the Digital Millennium Copyright Act of 1998, Pub.
`L. No. 105–304, 112 Stat. 2860, 2876. The Copyright Office recommended against expanding the
`first sale doctrine to digital transmissions in part because “[t]he risk that expansion of section 109
`[would] lead to increased digital infringement weigh[ed] heavily against such an expansion.” U.S.
`Copyright Office, DMCA Section 104 Report 96–101 (2001). Then, in 2016, the Department of
`Commerce’s Internet Policy Task Force prepared a “White Paper on Remixes, First Sale, and
`Statutory Damages.” Dep’t of Commerce Internet Policy Task Force, White Paper on Remixes,
`First Sale, and Statutory Damages (2016). The Task Force likewise recommended against
`expansion of the first sale doctrine to digital transmissions. Id. at 58. The Task Force found that
`“the risks to copyright owners’ primary markets as described by the Copyright Office in its 2001
`Report d[id] not appear to have diminished, or to have been ameliorated by the deployment of
`effective new technologies.” Id. To date, Congress has not expanded the first sale doctrine to
`digital transmissions. See 17 U.S.C. § 101 et seq.
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`3
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`intention of section 301 [was] to preempt and abolish any rights under the common law or statutes
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`of a State that [were] equivalent to copyright and that extend[ed] to works coming within the scope
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`of the Federal copyright law.” H.R. Rep. 94-1476, 1976 WL 14045, at *130. Section 301’s
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`“declaration of [that] principle” was “intended to be stated in the clearest and most unequivocal
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`language possible, so as to foreclose any conceivable misinterpretation of its unqualified intention
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`that Congress shall act preemptively, and to avoid the development of any vague borderline areas
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`between State and Federal protection.” Id.
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`Despite Congress’s clear intention to preempt state copyright laws, in early 2021 the
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`Maryland General Assembly introduced legislation with a two-part mission: (1) to require
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`publishers to offer to license copyrighted electronic literary products, such as ebooks and digital
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`audiobooks, to public libraries, and (2) to ensure the terms of such licenses would be fair. S.B.
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`432, 2021 Gen. Assembly, 442d Sess. (Md. 2021), 2021 Md. Laws Ch. 412; H.B. 518, 2021 Gen.
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`Assembly, 442d Sess. (Md. 2021), 2021 Md. Laws Ch. 411. The legislation attracted much
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`support—and opposition—from interested stakeholders with fundamentally divergent views on its
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`costs, benefits, and legality. Compare ECF 7-1, with ECF 10-4 & 10-6. On the one hand, public
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`libraries and their champions viewed the legislation as essential to ensuring public access to
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`copyrighted materials that publishers previously withheld from libraries or offered on
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`economically unfavorable terms. See, e.g., ECF 10-8, at 2–3. The proposed law, according to its
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`proponents, was reasonable and necessary to stop publishers from up-charging libraries for
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`licenses shackled with stringent time and use limitations. See, e.g., ECF 10-9, at 2–3. On the other
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`hand, publishers and other copyright holders saw the legislation as an unconstitutional
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`infringement on the rights conferred by the Copyright Act, most significantly the exclusive right
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`to distribute. See, e.g., Pallante Decl. ¶¶ 17–26, ECF 7, at 6–9. Opponents also maintained that,
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`4
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`by interfering with the profit-making of copyright holders, the legislation frustrated its own
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`purpose. Curbing copyright holders’ profits would prevent them from producing new content for
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`the public to enjoy. See, e.g., ECF 7-1, at 19–21.
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`The parties here dispute the scope of the problem the legislation purported to solve. The
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`State paints a picture of an inflexible publishing industry that “increasingly offer[s] ebooks and
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`digital audiobooks that [it] will not share with libraries.” ECF 10-4, at 2. Maria Pallante, the Chief
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`Executive Officer of AAP, controverts that depiction of the relationship between publishers and
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`libraries. Pallante Decl., ¶¶ 1–26, ECF 7, at 1–9. In her December 16, 2021 declaration, she stated
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`that “[l]ibrary and ebook and audiobook lending” was “thriving.” Id. ¶ 14, ECF 7, at 5. She also
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`reported that in 2020 “more than 100 public library systems exceed[ed] one million digital
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`checkouts on the ebook lending platform of a library aggregator named OverDrive.” Id. ¶ 15, ECF
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`7, at 6. Globally, “430 million ebooks were borrowed . . . in 2020.” Id. “In 2021, 129 library
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`systems [were] on track to . . . break[] [2020’s] all-time [lending] record.” Id. ¶ 16, ECF 7, at 6.
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`The Authors Guild, which testified in opposition to the legislation, described the legislation as
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`“responding to the practice by a dominant player of deliberately withholding its electronic books
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`from libraries with a law that [swept] in thousands of small publishers and self-published authors
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`who cannot manage distribution and licensing at scale.” ECF 7-1, at 25. Motivating the
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`legislation’s proponents, according to the Authors Guild, was a negative response to “[t]he
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`practices of one or two actors in the industry.” Id.
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`Proponents of the legislation additionally decried the terms on which electronic literary
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`products were offered to libraries. Licenses typically lasted only two years for products that may
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`be lent a designated number of times to one individual at a time. Blackwell Decl. ¶¶ 5(a)–(c), ECF
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`10-3, at 3–4. The cost of the licenses also far exceeded the cost of personal use licenses offered to
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`5
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`the public. Id. ¶ 5(d), ECF 10-3, at 5. For example, a book on the New York Times Best Sellers
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`list in December 2020 cost an individual consumer $22.05, but a license for the same product cost
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`libraries $95.00. ECF 10-8, at 4. From the perspective of AAP and other opponents of the law,
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`comparing electronic literary product licenses offered to libraries with licenses for the same
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`products offered to individuals is like comparing apples with oranges. Personal use licenses are
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`sold to and used by only one person. Library licenses are used by multiple library customers for
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`short periods over the course of the term of the license.
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`Heated public debate notwithstanding, the legislation was passed unanimously and became
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`law on May 30, 2021, without the Governor’s signature. 2021 Md. Laws Ch. 411 & 412. The
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`Maryland Act, Md. Code Ann., Educ. §§ 23-701 – 23-702, took effect on January 1, 2022. Id.
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`The substantive provision of the Act provides:
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`Subject to subsections (b) and (c) of this section, a publisher who offers to license
`an electronic literary product to the public shall offer to license the electronic
`literary product to public libraries in the State on reasonable terms that would
`enable public libraries to provide library users with access to the electronic literary
`product.
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`Md. Code Ann., Educ. § 23-702(a). “Electronic literary product” is defined as either
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`(1) [a] text document that has been converted into or published in a digital format
`that is read on a computer, tablet, smart phone, or other electronic device; or (2)
`[a]n audio recording of a text document, read out loud in a format that is listened to
`on a computer, tablet, smart phone, or other electronic device.
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`Id. § 23-701(b). A publisher is “a person in the business of manufacturing, promulgating, and
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`selling books, audio books, journals, magazines, newspapers, or other literary productions,
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`including those in digital form, that consist of text, imagery, audio recording, or any combination
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`6
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`of text, image, and audio recording.” Id. § 23-701(c). The Act does not define “the public,”
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`“public libraries in the State,” or “reasonable terms.”2
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`Subsection (b) of the Act, “Terms of license,” sets forth certain licensing terms that are
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`acceptable. It provides:
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`The terms of a license under subsection (a) . . . may include: (1) [a] limitation on
`the number of users a public library may simultaneously allow to access an
`electronic literary product; (2) [a] limitation on the number of days a public library
`may allow a user to access an electronic literary product; and (3) [t]he use of
`technological protection measures that would prevent a user from: (i) [m]aintaining
`access to an electronic literary product beyond the access period specified in the
`license; and (ii) [a]llowing other users to access an electronic literary product.
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`Id. § 23-702(b). The Act forbids licensing terms that “include a limitation on the number of
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`electronic literary product licenses a public library may purchase on the same date the electronic
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`literary product license is made available to the public.” Id. § 23-702(c).
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`The Act includes a penalties provision. A violation of the Act “shall constitute an unfair,
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`abusive, or deceptive trade practice and is subject to enforcement in accordance with Title 13,
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`Subtitle 4 of the Commercial Law Article.” Id. § 23-702(d). Title 13, Subtitle 4 of Maryland’s
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`Commercial Law Article states: “A merchant who engages in a violation of [that] title is subject
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`to a fine not exceeding $10,000 for each violation[,]” and “[a] merchant who has been found to
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`have engaged in a violation of [that] title and who subsequently repeats the same violation is
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`2 The parties dispute the meaning of the term “the public.” AAP argues “the public” means the
`broader public, not just members of the Maryland public—an interpretation that would trigger the
`Act’s requirements when a publisher offers to license an electronic literary product to anyone in
`the world. The State argues “the public” means the public in Maryland. At the hearing, the State
`essentially conceded that where ebooks and audiobooks are offered online to any interested buyer,
`they are being offered to the public in Maryland. As for the undefined terms “public libraries in
`the State” and “reasonable terms,” AAP claims that they are unconstitutionally vague, and
`therefore, that the Act violates the Due Process Clause. ECF 1, ¶¶ 103–10. The due process claim,
`which is not at issue in this preliminary injunction motion, is the subject of the State’s motion to
`dismiss.
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`7
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`Case 1:21-cv-03133-DLB Document 19 Filed 02/16/22 Page 8 of 28
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`subject to a fine not exceeding $25,000 for each subsequent violation.” Md. Code Ann., Com.
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`Law § 13-410(a)–(b). Maryland’s Attorney General “may seek an injunction to prohibit a person
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`who has engaged or is engaging in a violation of [that] title from continuing or engaging in the
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`violation.” Id. § 13-406(a). In such circumstances, “the Attorney General is entitled to recover
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`the costs of the action for the use of the State.” Id. § 13-409. Similarly, any aggrieved party may
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`bring an action for damages “to recover for injury or loss sustained by him as the result of a practice
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`prohibited by [that] title” and may be entitled to “reasonable attorney’s fees.” Id. § 13-408(a)–(b).
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`Criminal penalties are also possible: “[A]ny person who violates any provision of [the Act] is
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`guilty of a misdemeanor and, unless another criminal penalty is specifically provided elsewhere,
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`on conviction is subject to a fine not exceeding $1,000 or imprisonment not exceeding one year or
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`both, in addition to any civil penalties.” Id. § 13-411(a).
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`On December 9, 2021, three weeks before the Act was scheduled to take effect, plaintiff
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`AAP filed suit against the Attorney General of Maryland Brian Frosh in his official capacity. ECF
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`1. In its complaint, AAP alleges that (i) the Maryland Act is expressly preempted under the
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`Copyright Act (Count I), (ii) the Maryland Act is preempted by the Copyright Act under conflict
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`preemption principles (Count II), (iii) the Act violates the Dormant Commerce Clause of the
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`Constitution (Count III), and (iv) the Act violates the Due Process Clauses of the Fifth and
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`Fourteenth Amendments (Count IV). Id. ¶¶ 75–110. Soon after filing the complaint, AAP filed a
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`motion for a preliminary injunction based on its express and conflict preemption claims.
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`II.
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`Preliminary Injunction Standard
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`Prior to the entry of a final judgment, a court may enter a preliminary injunction. Fed. R.
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`Civ. P. 65(a). Such an injunction “protect[s] the status quo and . . . prevent[s] irreparable harm
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`during the pendency of a lawsuit ultimately to preserve the court’s ability to render a meaningful
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`8
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`judgment on the merits.” United States v. South Carolina, 720 F.3d 518, 524 (4th Cir. 2013)
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`(quoting In re Microsoft Corp. Antitrust Litig., 333 F.3d 517, 525 (4th Cir. 2003)). In other words,
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`a preliminary injunction enables the Court to ensure that, should the plaintiff prevail, the relief
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`sought will be available to it to the same extent as when it filed suit. See id. “A preliminary
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`injunction is ‘an extraordinary remedy that may only be awarded upon a clear showing that the
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`plaintiff is entitled to such relief’ and may never be awarded ‘as of right.’” Mountain Valley
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`Pipeline, LLC v. W. Pocahontas Props. Ltd. P’ship, 918 F.3d 353, 366 (4th Cir. 2019) (quoting
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`Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22, 24 (2008)); see also Leaders of a Beautiful
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`Struggle v. Balt. Police Dep’t, 2 F.4th 330, 339 (4th Cir. 2021) (en banc).
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`A plaintiff seeking preliminary injunctive relief bears the burden of proof and must meet
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`“a high bar” by “[s]atisfying . . . four factors.” SAS Inst., Inc. v. World Programming Ltd., 874
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`F.3d 370, 385 (4th Cir. 2017); Direx Israel, Ltd. v. Breakthrough Med. Corp., 952 F.2d 802, 812
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`(4th Cir. 1991). The plaintiff must clearly show “[1] that [it] is likely to succeed on the merits, [2]
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`that [it] is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance
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`of equities tips in [its] favor, and [4] that an injunction is in the public interest.” Winter, 555 U.S.
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`at 20; The Real Truth About Obama, Inc. v. Fed. Election Comm’n, 575 F.3d 342, 346–47 (4th
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`Cir. 2009), vacated on other grounds, Citizens United v. FEC, 558 U.S. 310 (2010), aff’d, The
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`Real Truth About Obama, Inc. v. FEC, 607 F.3d 355 (4th Cir. 2010) (per curiam) (discussing
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`Winter factors). Each factor must be “satisfied as articulated.” Pashby v. Delia, 709 F.3d 307,
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`320–21 (4th Cir. 2013) (quoting The Real Truth, 575 F.3d at 347).
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`III. Discussion
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`Plaintiff asks this Court to enjoin enforcement of the Maryland Act pending resolution of
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`this case because the Act is expressly preempted by and conflicts with the Copyright Act. AAP
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`9
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`claims its members will suffer irreparable harm if the Act is not enjoined, that the balance of the
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`equities weighs in favor of preliminary injunctive relief, and that the public interest would be
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`served by an injunction. ECF 4 & 4-1. After considering the parties’ written submissions and
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`arguments of counsel, the Court finds plaintiff has clearly satisfied the four preliminary injunction
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`factors.
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`A. Likelihood of Success on the Merits
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`To secure a preliminary injunction, a plaintiff must “make a ‘clear showing’ that [it is]
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`likely to succeed at trial, [but it] need not show a certainty of success.” Pashby, 709 F.3d at 321
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`(internal citations omitted); Di Biase v. SPX Corp., 872 F.3d 224, 230 (4th Cir. 2017). Therefore,
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`AAP bears the burden of clearly showing the Maryland Act is likely to be found preempted by the
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`Copyright Act.
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`The preemption doctrine stems from the Supremacy Clause. The Supremacy Clause
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`provides that the “Constitution, and the laws of the United States which shall be made in pursuance
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`thereof[,] . . . shall be the supreme law of the land . . . .” U.S. Const. art. VI, cl. 2. It is “[a]
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`fundamental principle of the Constitution . . . that Congress has the power to preempt state law.”
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`Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363, 373 (2000) (citing U.S. Const. art. VI, cl.
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`2; Gibbons v. Ogden, 9 U.S. (1 Wheat.) 1, 211 (1824); Savage v. Jones, 225 U.S. 501 (1912);
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`California v. ARC Am. Corp., 490 U.S. 93 (1989)).
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`“Federal law may preempt state law in three ways: by ‘express preemption,’ ‘field
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`preemption,’ and ‘conflict preemption.’” W. Star Hosp. Auth. Inc. v. City of Richmond, Va., 986
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`F.4th 354, 360 (4th Cir. 2021) (quoting H & R Block E. Enters., Inc. v. Raskin, 591 F.3d 718, 722
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`(4th Cir. 2010)). Plaintiff moves for an injunction based on express and conflict preemption.
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`Express preemption occurs when “Congress expressly states its intent to preempt state law.”
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`10
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`Decohen v. Capital One, N.A., 703 F.3d 213, 223 (4th Cir. 2012) (citing Cox v. Shalala, 112 F.3d
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`151, 154 (4th Cir. 1994)). Conflict preemption “occurs when a state law ‘actually conflicts with
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`federal law.’” Anderson v. Sara Lee Corp., 508 F.3d 181, 191 (4th Cir. 2007) (quoting S. Blasting
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`Servs., Inc. v. Wilkes Cnty., 288 F.3d 584, 590 (4th Cir. 2002) (quoting Hillsborough Cnty. v.
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`Automated Med. Labs., Inc., 471 U.S. 707, 713 (1985))).
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`“The Supreme Court has instructed that conflict preemption ‘includes cases where
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`compliance with both federal and state regulations is a physical impossibility, and those instances
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`where the challenged state law stands as an obstacle to the accomplishment and execution of the
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`full purposes and objectives of Congress.’” South Carolina, 720 F.3d at 529 (quoting Arizona v.
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`United States, 567 U.S. 387, 399–400 (2012)). “Determining whether a state law ‘stands as an
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`obstacle’ to federal law is a two-step process.” Va. Uranium, Inc. v. Warren, 848 F.3d 590, 599
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`(4th Cir. 2017). “First, [a court] determine[s] Congress’s ‘significant objective[s]’ in passing the
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`federal law.” Id. (quoting Williamson v. Mazda Motor of Am., Inc., 562 U.S. 323, 330 (2011)). A
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`court “then turn[s] to whether the state law stands ‘as an obstacle to the accomplishment of a
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`significant federal regulatory objective.’” Id. (quoting Williamson, 562 U.S. at 330).
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`Congress passed the Copyright Act to serve public goals by protecting private rights. It
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`achieved those objectives by “implement[ing] a nationally uniform system for the creation and
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`protection of rights in a copyrighted work.” Orson, Inc. v. Miramax Film Corp., 189 F.3d 377,
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`382 (3d Cir. 1999) (en banc) (citing Goldstein v. California, 412 U.S. 546, 561 (1973)). To attain
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`national uniformity, Congress included a preemption provision. 17 U.S.C. § 301(a). “Federal
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`Copyright Act preemption is ‘broad and absolute.’” OpenRisk, LLC, v. Microstrategy Servs.
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`Corp., 876 F.3d 518, 523 (4th Cir. 2017) (quoting United States ex rel. Berge v. Bd. of Trs., 104
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`F.3d 1453, 1464 (4th Cir. 1997)).
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`It is clear the Maryland Act likely stands as an obstacle to the accomplishment of the
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`purposes and objectives of the Copyright Act. The Maryland Act commands that, if a publisher
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`offers to license an electronic literary product to the public at large, the publisher “shall offer to
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`license” the same product to libraries “on reasonable terms that would enable public libraries to
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`provide library users with access to the electronic literary product.” Md. Code Ann., Educ. § 23-
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`702(a). The Act’s “offer to license” requirement is triggered when a publisher offers to license
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`the product “to the public”—an act publishers do online every day through various websites and
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`apps. Publishers could avoid the Act’s reach only by refraining entirely from offering their ebooks
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`and audiobooks to the public. Forcing publishers to forgo offering their copyrighted works to the
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`public in order to avoid the ambit of the Act interferes with their ability to exercise their exclusive
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`right to distribute. Alternatively, forcing publishers to offer to license their works to public
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`libraries also interferes with their exclusive right to distribute. This is especially so because the
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`Act does not allow copyright holders to limit the number of licenses libraries may purchase; they
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`may purchase as many licenses as they wish. Id. § 23-702(c).
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` Although, as the State points out, the Act requires only an “offer to license” and does not
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`explicitly require publishers to grant licenses to libraries, this is a distinction without a difference.
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`Any publisher who does not offer to license to libraries the same electronic literary products they
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`offer to the public faces steep civil—and even criminal—penalties under Maryland’s Consumer
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`Protection Act, Md. Code Ann., Com. Law § 13-401 et seq. The practical impact of the Act is that
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`publishers will be forced to offer their products to libraries—whether they want to or not—lest
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`they face a civil enforcement action or criminal prosecution. And libraries—now able to purchase
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`licenses for ebooks and audiobooks on terms “that would enable [them] to provide library users
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`with access” to the digital products—have made clear their intent to accept those offers. This
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`forced transaction between publishers and libraries effectively strips publishers of their exclusive
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`right to distribute their copyrighted work—a right that necessarily includes the right to decide
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`whether, when, and to whom to distribute. See Stewart v. Abend, 495 U.S. 207, 220, 229 (1990)
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`(copyright holders “hold[] a bundle of exclusive rights in the copyrighted work,” including “the
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`capacity [to] arbitrarily . . . refuse to license [to] one who seeks to exploit the work.”) (citing Fox
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`Film Corp. v. Doyal, 286 U.S. 123, 127 (1932)); Fox Film Corp., 286 U.S. at 127 (“The owner of
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`the copyright, if he pleases, may refrain from vending or licensing and content himself with simply
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`exercising the right to exclude others from using his property.”).3
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`As far as the Court is aware, no court has considered whether a state law that requires
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`copyright owners to offer to license copyrighted works conflicts with the Copyright Act. The most
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`analogous case is the Third Circuit’s decision in Orson, Inc. v. Miramax Film Corporation, 189
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`F.3d 377 (3d Cir. 1999) (en banc). In Orson, the Third Circuit considered whether § 203-7
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`(“Pennsylvania law”) of the Pennsylvania Feature Motion Picture Fair Business Practices Law
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`conflicted with § 106 of the Copyright Act. 189 F.3d at 379. The plaintiff, a Philadelphia theater
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`owner, sued Miramax Film Corporation under the Pennsylvania law, which provided:
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`No license agreement shall be entered into between distributor and exhibitor to
`grant an exclusive first run or an exclusive multiple first run for more than 42 days
`without provision to expand the run to second run or subsequent run theatres within
`the geographical area and license agreements and prints of said feature motion
`picture shall be made available by the distributor to those subsequent run theatres
`that would normally be served on subsequent run availability.
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`3 The State argues that the Supreme Court’s statements in Stewart and Fox Film that a copyright
`holder may exercise its exclusive rights by refusing to license its work to others applies only to
`copyright holders who choose to hoard their works and not to copyright holders who choose to
`make their works available to the public. ECF 17, at 4. The Court disagrees. Such a result would
`run contrary to the Copyright Act’s grant of an exclusive right to distribute during the term of the
`copyright. Even after a publisher has chosen to license its work to one or several members of the
`public, it retains the right to distribute or refrain from distributing the same work to other members
`of the public. See Orson, 189 F.3d at 385.
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`Id. The plaintiff alleged it featured films in the geographic area where Miramax distributed films,
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`yet it “rarely received second-run movies after the forty-second day of play at [another area theater]
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`despite repeated requests.” Id.
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`The Third Circuit held the state law was preempted. The Court reasoned that if the state
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`law “directly regulate[d] a right that is protected by federal copyright law, it must of necessity,
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`[have] be[en] preempted under conflict preemption principles.” Id. at 385. It recognized that
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`§ 106 of the Copyright Act grants copyright owners the exclusive right to distribute their
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`copyrighted works. Id. at 379. This exclusive right “encompasse[d] the right to refuse to license”
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`and “to decide to whom [rights holders] will transfer the [copyrighted] work.” Id. at 385–86 (citing
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`Stewart, 495 U.S. at 228–29). The preempted law “require[d] the distributor to expand its
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`distribution after forty-two days by licensing another exhibitor in the same geographic area, even
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`if such expansion [was] involuntary and uneconomic.” Id. at 385. “A distributor who exercise[d]
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`its federal right to grant an exclusive license to an exhibitor of choice [would have been] subject
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`to liability under the Pennsylvania Act for refusing to grant licenses to other exhibitors in the same
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`geographic area after the forty-second day.” Id. The Third Circuit found the Pennsylvania law
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`“would impose on copyright holders, contrary to their exclusive rights under § 106, an obligation
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`to distribute and make available other copies of the work following their initial decision to publish
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`and distribute copies of the copyrighted item.” Id. at 386.
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`Although the Maryland Act and the Pennsylvania law are not identical, they are sufficiently
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`similar that the reasoning in Orson applies here. Both state laws implicate the exclusive right to
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`distribute, which encompasses the right to refuse to distribute. Like the Pennsylvania law, the
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`Maryland Act imposes on publishers—against their will and interests—an obligation to offer to
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`license copyrighted work to one portion of the public following their initial decision to offer to
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`Case 1:21-cv-03133-DLB Document 19 Filed 02/16/22 Page 15 of 28
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`license the same work to a different portion of the public. If publishers exercise their right to
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`refrain from offering to license their copyrighted work to libraries,