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I don't think the current ePUB standard allows for passwords. But let's assume it will someday.
You protect your book with a password, John Doe buys it, he has the password and can read the book, he gives the book to his daughter, along with the password so she can read it too. But the daughter's ebook reader does not work fine with passwords, so she extracts the files from the epub file (which is a zip) and packs them in a new epub, with no password. Then she shares the now unprotected file with her husband and brother-in-law... and the snow ball keeps rolling.
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