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Internet Archive: Digital Lending is Fair Use, Not Copyright Infringement * TorrentFreak
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They already have it set up so that libraries have to pay them a subscription for their digital lending.
What IA were doing was scanning in physical books and then lending one digital copy per physical book scanned.
At least, that's what they did until the covid lockdowns. Then they temporarily removed the download restriction, and the lawsuit was in response to that.