The IA are trying to drum up support by stating that the publishers want to destroy libraries, which obviously makes them sound really awful. But publishers just want the IA to stop offering their copyrighted works for free to anyone at all times without paying any kind of license fee, which is not how a library works.
It is how a library works if the books are printed on paper. Or parchment or papyrus, I guess.
But if the books are digital, suddenly it becomes magically illegal to do anything without consent of the publisher because it now violates copyright to give your copy to somebody else. And the publisher is arguing that it's morally reprehensible for someone to attempt to build a digital equivalent to lending for physical books.
A library is able to lend out physical books because it bought the books. The publisher got paid when the book was purchased. Plus only one person can borrow a given physical library book at a time.
As noted by several other people here, the IA's model of e-lending only allows one person to borrow the ebook at a time, and that is the model that the lawsuit is trying to shut down. (There was a period of 12 weeks where the lending was unlimited, but that period ended 2½ years ago, and this lawsuit isn't over that period but the program as a whole.) IA also bought the books from the publishers. So the only real difference is that IA digitized the book itself and lent out the digital copy.
The fact that a library can lend out a physical book, but not a scanned copy of a book, with all else being equal (having paid for the books, one person borrowing a copy per paid for book) is a blatant power grab by publishers, who have never liked libraries but couldn't really do anything about them before.
It isn't how a library works in basically every country in the world for books printed on paper except the US. Almost every other state pays authors a royalty when their books are loaned out by a library.
Sort of. The publishers have always hated the concept. They simply never chose to file any lawsuit until the National Emergency Library came about. The trouble with lawsuits is they might be ruled the other way, providing explicit precedent that something is allowed (such as in 2013 when the Supreme Court ruled that importing and selling international editions of textbooks is legal). Sometimes the threat of litigation has a stronger chilling effect than actual litigation. But not here—IA saw an opportunity to push the boundaries, and took it. And the publishers probably think uncontrolled digital lending is an easier battle to win than controlled digital lending.
The plaintiffs argued against Controlled Digital Lending specifically today. Publishers are indeed trying to win the harder battle in an effort to shut down not just IA's digital lending, but all libraries'.
No, that was probably what pushed them over the edge, but the lawsuit also claims that transforming a physical work to a new medium without consent is illegal.
(For example, libraries are not allowed to convert their VHS collection to DVD and lend them out)
It may also end up with the judge explicitly allowing CDL and slapping them on the wrist for uncontrolled lending. That would be like winning the lottery but it's not impossible.