> In a similar way, I could _borrow_ books from the library, take them home and digitise them, then return the library book while retaining the digital _copy_. I'm pretty sure this is not allowed under copyright law.
Its, on first glance, a violation of the copyright owner's exclusive rights to create copies, sure.
Whether its actually infringement or not depends on whether it falls in one of the exceptions to the exclusive rights, such as fair use. Copying a library book and just to keep it for yourself does not seem likely to do that.
> However, if I go one step further, commercialising my collection of digitised books by providing them online to everyone in the world in a searchable format - but removing every few pages - that somehow makes the original copyright infringement legal?...
Quite possibly. Fair use is funny that way, because the boundaries are not crisply defined but anything that falls within it is an exception to the exclusive rights of copyright, transforming what would otherwise be infringement into non-infringement.
> I suggest if they bought every book that they digitise, they would then have the right to index those books so that they could offer their fair use service to people.
If the service is fair use, then whether they own physical copies or not is immaterial, since the users ownership of physical copies of the work is not one of the factors called to be considered in fair use analysis.
You don't acquire a right to fair use of a copyrighted work by purchasing a copy of the work, everyone has an inherent right to fair use (which was a judicially identified limitation of Constitutional character before being enshrined in statute) inherently.