Princeton University Press v. Michigan Document Services, Inc. | 74 F3d 1512 | February 12, 1996

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Princeton University Press v. Michigan Document Services, Inc.

74 F.3d 1512 (1996)

Withdrawn for N.R.S. bound volume

PRINCETON UNIVERSITY PRESS, MacMillan, Inc., and St. Martin's Press, Inc., Plaintiffs-Appellees,
v.
MICHIGAN DOCUMENT SERVICES, INC., and James M. Smith, Defendants-Appellants.

No. 94-1778.

United States Court of Appeals, Sixth Circuit.

Argued Sept. 15, 1995.
Decided Feb. 12, 1996.

David A. Nelson, Circuit Judge, delivered separate opinion concurring in part and dissenting in part.

[1515] On Appeal from the United States District Court for the Eastern District of Michigan; Barbara K. Hackett, Judge.

J. Michael Huget, James E. Stewart, Butzel, Long, Gust, Klein & Van Zile, Detroit, MI, Ronald S. Rauchberg (argued and briefed), Herman L. Goldsmith (briefed), Proskauer, Rose, Goetz & Mendelsohn, New York City, for Princeton University Press.

J. Michael Huget, Butzel, Long, Gust, Klein & Van Zile, Detroit, MI, Ronald S. Rauchberg, Herman L. Goldsmith, Proskauer, Rose, Goetz & Mendelsohn, New York City, Jon A. Baumgarten (briefed), Proskauer, Rose, Goetz & Mendelsohn, Washington, DC, for MacMillan, Inc. and St. Martin's Press, Inc.

David G. Chardavoyne (briefed), Louise A. Marcotty, Bodman, Long & Dahling, Detroit, MI, Susan M. Kornfield (argued and briefed), Bodman, Longley & Dahling, Ann Arbor, MI, for Michigan Document Services, Inc. and James M. Smith.

Lyman Ray Patterson (briefed), University of Georgia School of Law, Athens, GA, for amicus curiae Concerned Professors of Copyright Law.

Before: NELSON, RYAN, and MCKAY,[*] Circuit Judges.

RYAN, J., delivered the opinion of the court, in which MCKAY, J., joined. NELSON, J. (pp. 1524-28), delivered a separate opinion concurring in part and dissenting in part.

RYAN, Circuit Judge.

The plaintiffs, Princeton University Press, MacMillan, Inc., and St. Martin's Press, Inc., brought a copyright infringement action against the defendants, Michigan Document Services, Inc. and James M. Smith, president of MDS. The suit alleges that the defendants infringed copyrights held by the plaintiffs when MDS made multiple copies of excerpts from various materials provided by University of Michigan professors, compiled these copies into "coursepacks," and sold the coursepacks to students for a profit. The district court granted summary judgment to the plaintiffs, found that the defendants' infringement was "willful," and issued an injunction against the defendants. The defendants appeal the district court's decision, defending their copying practices primarily on the ground that the coursepacks are a "fair use" of the copyrighted works and therefore not an infringement. We agree with the defendants that their use is a "fair use" as defined in the Copyright Act of 1976, 17 U.S.C. § 107, and reverse.

[1516] I.

Michigan Document Services is a so-called "copy shop" and provides general photoreproduction services to the public. Some of its profits are derived from the sale of "coursepacks" to professors and students. Coursepacks are compilations of various copyrighted and uncopyrighted materials, which may include journal articles, newspaper articles, course notes or syllabi, sample test questions, and excerpts from books. Professors select the contents of the coursepacks and deliver the selected materials to MDS with an estimate of the number of students expected in the course. The professors assign the material to students enrolled in a particular class and inform these students that they may purchase the required materials in coursepack form at MDS if they wish. In the alternative, students arefree to make copies of the excerpted material at the library themselves, to copy the material from other students, or to purchase the original works. MDS prepares a master copy of all the materials obtained from the professor, creates a table of contents, identifies excerpts by author and name of the underlying work, numbers the pages, and then binds the copied excerpts together. These coursepacks are sold only to students for use in a particular course. They are not sold to the general public; any copies that are not purchased are simply discarded. The coursepacks are priced on a per-page basis, regardless of the contents of the page; that is, the fee for a page reproducing copyrighted materials is the same as the fee for a blank page.

We are specifically concerned in this case with six excerpts extracted from works to which plaintiffs hold the copyrights. Following the direction of several professors who brought the excerpts to the defendants for copying, MDS assembled the excerpts, along with other materials not at issue in this suit, into three coursepacks.-MDS copied 95 pages, or 30%, of Farewell to the Party of Lincoln: Black Politics in the Age of FDR, by Nancy J. Weiss; 45 pages, or 18%, of Public Opinion, by Walter Lippmann; 77 pages, or 18%, of The Nature of Human Values, by Milton Rokeach; 78 pages, or 16%, of Political Ideology: Why the American Common Man Believes What He Does, by Robert E. Lane; 52 pages, or 8%, of Social Psychology, by Roger Brown; and 17 pages, or 5%, of Where the Domino Fell: America and Vietnam, 1945 to 1990, by James S. Olson and Randy Roberts. Each of the requesting professors signed a declaration that he does not request copies of excerpts where he would otherwise have assigned the entire work to his students. MDS sold the coursepacks containing these six excerpts to students at the University of Michigan for use in the 1992 winter semester.

Each of the plaintiff publishers operates a department that receives and processes requests for permission to use any of that publisher's copyrighted works. The plaintiff publishers usually charge a fee for allowing others to copy portions of their works and generally share these fees with the authors. Sometimes the publishers grant permission to copy without charge, and other times they deny permission entirely.

MDS did not seek permission to copy any of the six excerpts or pay any royalties or permission fees for the use of the excerpts before selling them to the students. Although only six excerpts are at issue here; the president of MDS estimates that the excerpts at issue are among several thousand such excerpts for which permission to copy was never sought.

II.

The publishers obtained preliminary injunctive relief against MDS in the district court. The publishers and MDS then filed cross motions for summary judgment. In its subsequent order and judgment, the district court granted the publishers' motion for summary judgment as to liability and denied MDS's motions for summary judgment. The district court found that MDS had willfully infringed the publishers' copyrights, and, pursuant to 17 U.S.C. § 504(c), awarded the publishers statutorily enhanced damages of $5000 per infringed work, for a total of $30,000, plus attorney fees. The district court enjoined MDS from "copying any of plaintiffs' existing or future copyrighted works without first obtaining the necessary permission." [1517] Princeton Univ. Press v. Michigan Document Services, Inc., 855 F.Supp. 905, 913 (E.D.Mich.1994).

1 This court determines de novo whether, viewing the evidence in the light most favorable to the party against whom summary judgment has been granted, the moving party has demonstrated that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The question on review of a summary judgment is " 'whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one sided that one party must prevail as a matter of law.' "National Rifle Ass'n v. Handgun Control Fed'n, 15 F.3d 559, 561 (6th Cir.) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2511-12, 91 L.Ed.2d 202 (1986)), cert. denied, --- U.S. ----, 115 S.Ct. 71, 130 L.Ed.2d 26 (1994).

III.

The publishers allege that MDS's for-profit copying and assembling of excerpts from copyrighted works violates the publishers' exclusive copyrights. The publishers argue that MDS and the publishers compete in the same market. The plaintiffs publish textbooks, anthologies, collections of readings, and other works designed to be useful in the college classroom. The publishers hope that college professors will assign these books and that students will purchase them. In addition to publishing books themselves, the publishers license others, including copy shops like MDS, to use portions of their copyrighted works.

When a professor is dissatisfied with existing published materials, he may designate the readings selected from a number of sources that best suit his specialized purposes and request that MDS, or a similar service, compile a coursepack of these readings. The publishers argue that MDS, like the publishers themselves, hopes that professors will assign, and students will buy, its "books." The publishers emphasize that MDS advertises its services and advertises the fact that coursepacks can be used "to replace a conventional textbook." Thus, the publishers characterize MDS as a fellow competitor in the higher education market-a competitor who exploits their copyrighted materials without paying the customary fee.

The publishers allege that the coursepacks prepared by MDS do not constitute fair use of copyrighted works for a number of reasons: the coursepacks have no transformative value; the coursepacks are prepared for commercial purposes; the excerpts are of substantial length and constitute the heart of each work as identified by the requesting professor; the copyrighted works excerpted are valuable, original works at the very core of copyright protection; and MDS's refusal to pay permission fees affects an established derivative market in which licensed users pay to copy excerpts of copyrighted works for a variety of purposes.

The publishers rely on the legislative history of the Copyright Act. Specifically, they rely on the Classroom Guidelines, which House and Senate conferees "accept[ed] as part of their understanding of fair use ... with respect to books and periodicals" prior to enactment of the Copyright Act. H.R.REP. NO. 1476, 94th Cong., 2d Sess. 68 (1976) U.S.Code Cong. & Admin.News 1976 at 5659, 5681. The Classroom Guidelines assure educators that non-profit copying for educational purposes of "not more than 1,000 words" is fair use when "[t]he inspiration and decision to use the work and the moment of its use for maximum teaching effectiveness are so close in time that it would be unreasonable to expect a timely reply to a request for permission." H.R.REP. NO. 1476 at 68-71 U.S.Code Cong. & Admin.News 1972 at 5659, 5681-5684. The Classroom Guidelines "prohibit[ ] ... [c]opying ... used to create ... anthologies, compilations or collective works." H.R.REP. NO. 1476 at 69 U.S.Code Cong. & Admin.News 1972 at 5659, 5682. The publishers argue that MDS's use of the excerpts far exceeds the "safe harbor" of protection offered by the Guidelines in that MDS copies excerpts that are much longer than 1,000 words, copies for profit, creates anthologies, and copies without permission although it has ample time to seek permission from copyright holders.

[1518] MDS, on the other hand, emphasizes that the public has a right to make fair use of a copyrighted work, and to exercise that right without requesting permission from, or paying any fee to, the copyright holder. Because the primary purpose of the Constitution's Copyright Clause is not to enrich authors and inventors but to encourage the progress of science and the production of creative works for the public good, only unfair uses of copyrighted materials are prohibited; fair uses are affirmatively guaranteed to the public. The defendant therefore argues that MDS's production of coursepacks at the direction of professors cannot violate copyright law because the mere mechanical photoreproduction of materials is not a "use" of those materials in the first place. Further, MDS alleges, the classroom use of the coursepacks promotes learning without undue harm to the incentives to create original works; any copying done at the direction of professors who are making fair use of the materials is therefore authorized as necessary and incidental to that fair use.

Professors select materials to expose their students to theories, facts, and recent developments in the field that are most relevant to the individual professor's classroom goals. When the materials selected are not so central to the course or are not so lengthy as to justify, in the professor's judgment, requiring students to purchase the entire original work in which the relevant portions appear, a professor may seek to compile a coursepack of excerpts. Rather than produce multiple copies of the relevant selections themselves or require their students to spend time producing individual copies from scarce library materials, professors request that MDS, or a similar service, copy and assemble the excerpts selected; MDS produces better copies at less cost than individual students could.

MDS notes that professors receive no commissions or other economic benefit from delivering coursepack materials to MDS, and that the publishers lose no sales since the copyrighted works would not otherwise have been assigned. Thus, even assuming that the mechanical photoreproduction of excerpts does amount to a "use" under the Copyright Act, MDS argues that its production of copies for academic use does not violate copyright law.

IV.

Modern copyright law is derived from the Framers' conviction that providing a secure economic incentive to individuals is the best way to stimulate development of "Science and useful Arts" to the ultimate benefit of the general public: "The Congress shall have Power ... [t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." U.S. CONST. art. I, § 8, cl. 8.

The Supreme Court has acknowledged repeatedly "the inherent tension in the need simultaneously to protect copyrighted material and to allow others to build upon it," Campbell v. Acuff-Rose Music, Inc., --- U.S. ----, ----, 114 S.Ct. 1164, 1169, 127 L.Ed.2d 500 (1994), and thereby maximize progress. Although monopoly protection of the financial interests of inventors and authors is necessary "to stimulate creativity and authorship, excessively broad protection would stifle, rather than advance," intellectual progress. Pierre N. Leval, Toward a Fair Use Standard, 103 HARV.L.REV. 1105, 1109 (1990). For progress in "Science and useful Arts" to occur, others must be permitted to build upon and refer to the creations of prior thinkers. Accordingly, three judicially created doctrines have been fashioned to limit the copyright monopoly and its potentially stifling effects: first, copyright law does not protect ideas but only their creative expression; second, facts are not protected, regardless of the labor expended by the original author in uncovering them; and, third, the public may make "fair use" of the copyrighted works. MDS relies most heavily on the fair use doctrine.

The Copyright Act both establishes a general grant of monopoly powers to holders of copyrights and codifies the "fair use" doctrine as an exception to that broad grant. Section 106 of the Copyright Act confers exclusive rights upon individual creators, providing in relevant part as follows:

[1519] Subject to sections 107 through 120, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords;

(2) to prepare derivative works based upon the copyrighted work;

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.

17 U.S.C. § 106.

Section 107 carves out an exception to the exclusive rights conferred in section 106, permitting members of the public to use copyrighted works for "fair" purposes:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include-

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

17 U.S.C. § 107.

234 The four fair use factors "are to be ... weighed together, in light of the purposes of copyright," Campbell, 510 U.S. at ----, 114 S.Ct. at 1171 (citing Leval, supra, at 1110-11), and "[t]he primary objective of copyright is not to reward the labor of authors, but '[t]o promote the Progress of Science and useful Arts.' " Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 349, 111 S.Ct. 1282, 1289, 113 L.Ed.2d 358 (1991) (quoting U.S. CONST. art. I, § 8, cl. 8). Thus, the "fair use" concept embodied in section 107 may be understood generally to permit a secondary use that "serves the copyright objective of stimulating productive thought and public instruction without excessively diminishing the incentives for creativity." Leval, supra, at 1110. An evaluation of fair use therefore "involves a difficult balance between the interests of authors and inventors in the control and exploitation of their writings and discoveries on the one hand, and society's competing interest in the free flow of ideas, information, and commerce on the other hand."Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429, 104 S.Ct. 774, 782, 78 L.Ed.2d 574 (1984). Despite statutory mention of "teaching" and "multiple copies for classroom use" as possible fair uses, § 107, "the mere fact that a use is educational and not for profit does not insulate it from a finding of infringement." Campbell, 510 U.S. at ----, 114 S.Ct. at 1174. Thus, here, the use must be examined under all four factors as must any other allegedly infringing work.

5 The four statutory factors are unambiguous. Therefore, we need not resort to the legislative history. Congress could easily have enacted the Classroom Guidelines into law by including the Guidelines in the language of section 107; it chose instead to establish four broad factors to be considered in a case-by-case analysis of all alleged fair uses, even classroom uses, of copyrighted material. We are bound by Congress' decision. The publishers' reliance on the Classroom Guidelines is misplaced; we may not permit the statutory text enacted by both Houses of Congress "to be expanded or contracted by the statements of individual legislators or committees during the course of the enactment process." West Virginia Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 98-99, 111 S.Ct. 1138, 1146-47, 113 L.Ed.2d 68 (1991). Thus, we rely exclusively upon the language of the Copyright Act, and its construction in the case law, to determine whether MDS's compilation into coursepacks of excerpts selected by professors is a "fair use" of the copyrighted materials.

[1520] V.

A.

678 The first factor that courts must evaluate in a fair use determination is "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes." 17 U.S.C. § 107(1). There are two parts to this test: (1) the degree to which the challenged use has transformed the original, and (2) the profit or nonprofit character of the use. Ordinarily, analysis under the first factor centers on "whether the new work merely 'supersede[s] the objects' of the original creation ... or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is 'transformative.' " Campbell, 510 U.S. at ----, 114 S.Ct. at 1171 (citations omitted). Because works that are transformative are more likely to promote science and the arts, transformative works are likely to be found to be fair uses, whereas works that merely copy the original are likely to be found to be infringements of the copyrighted work.However, the Supreme Court has noted in dictum that "[t]he obvious statutory exception to this focus on transformative uses is the straight reproduction of multiple copies for classroom distribution." Id. at n. 11. Thus, although the transformative value of the coursepacks is slight, the fact that the coursepacks are "multiple copies for classroom use" preserves MDS's claim of "fair use."

Further, the transformative value is slight but not nonexistent. The coursepack is essentially a new product comprising selected portions of other works, and perfectly customized to the classroom professor's individualized purpose. A professor may select precisely the materials that he feels are most instructive in the course, with constant opportunity to alter the whole, from time-to-time, by altering the mix. Coursepacks are particularly helpful in newly conceived interdisciplinary courses that draw small portions from a number of traditional, established disciplines. The publishing industry does not offer such highly customized and current materials, and indeed is not equipped to do so.

The other element of the first "fair use" factor is whether the purpose of the use is commercial or nonprofit and educational. Id. at ----, 114 S.Ct. at 1174. The "fact that a publication [is] commercial as opposed to nonprofit is a separate factor that tends to weigh against a finding of fair use." Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 562, 105 S.Ct. 2218, 2231-32, 85 L.Ed.2d 588 (1985). The central inquiry "is not whether the sole motive of the use is monetary gain but whether the user stands to profit from exploitation of the copyrighted material without paying the customary price." Id.

The coursepacks at issue are "used" at two levels. One "use," MDS's production and sale of the coursepacks, is clearly a for-profit "use," and one, the students' use of the coursepacks in the classroom, is entirely non-profit and educational. The publishers argue that the only relevant "use" under the first factor in this suit against MDS is MDS's sale of the coursepacks to students, not the use of the purchased coursepacks in the classroom. We disagree. Congress specifically mentioned "teaching (including multiple copies for classroom use)," § 107 (emphasis added), as an illustration of a possible fair use. The language of section 107 incorporates copying (implicit in "multiple copies") within the illustrative use of "teaching." Congress specifically anticipated the use of "multiple copies" for the purpose of "teaching"; we cannot examine the production of multiple copies in a vacuum, ignoring their educational use. The copying in this case is not a use unto itself; it is the mechanical component of the process that makes the material available for classroom use. The language of the statute, "including multiple copies for classroom use," requires us to consider copying as an integral part of "teaching." Therefore, we consider both the mechanical production of the copies and the classroom use of the excerpts in evaluating "the purpose and character of the use" and its commercial or nonprofit educational nature.

9 Because Congress "eschewed a rigid, bright-line approach to fair use," [1521] Sony, 464 U.S. at 448 n. 31, 104 S.Ct. at 792 n. 31, our mandate is to conduct "a sensitive balancing of interests," id. at 455 n. 40, 104 S.Ct. at 795 n. 40, considering all the circumstances. We must determine whether MDS stood "to profit from exploitation of the copyrighted material without paying the customary price." Harper & Row, 471 U.S. at 562, 105 S.Ct. at 2231. In the context of this case, we find the undisputed fact that MDS can produce "multiple copies for classroom use," at a profit, for less than it would cost the professors or students to produce them to be significant. The publishers declined at oral argument to argue that the professors and students may not copy these excerpts and assemble them privately for their own educational purposes. The professors and students, who might otherwise copy the materials themselves, have assigned the task of copying to a professional service that can perform the copying more efficiently. On these facts, the for-profit provision of this service does not weigh against a finding of fair use. Here, MDS obtains a profit by providing a service. MDS charges on a per-page basis, regardless of content; MDS does not extract an extra fee for reproducing materials that are copyrighted. MDS does not "exploit" copyrighted material within the meaning of Harper & Row, 471 U.S. at 562, 105 S.Ct. at 2231, because its fee does not turn on the content of the materials, copyrighted or not, that it copies. It does not, of course, select the materials to be copied or determine the amount to be excerpted. The business of producing and selling coursepacks is more properly viewed as the exploitation of professional copying technologies and the inability of academic parties to reproduce printed materials efficiently, not the exploitation of copyrighted, creative materials. We hold that the Copyright Act does not prohibit professors and students who may make copies themselves from using the photoreproduction services of a third party in order to obtain those same copies at less cost.

Thus, the coursepacks fit within the exception to the "transformative" quality requirement, and the predominant character of the use of excerpts in coursepacks is not commercial but "nonprofit educational." The first factor therefore favors a finding of fair use.

B.

101112 The second fair use factor, "the nature of the copyrighted work," 17 U.S.C. § 107(2), recognizes that fair use is more difficult to establish when the work being used is at "the core of intended copyright protection." Campbell, 510 U.S. at ----, 114 S.Ct. at 1175. Factual compilations, such as telephone book listings, with only a small element of creativity and originality may be used more freely than creative works. Feist, 499 U.S. at 348-51, 111 S.Ct. at 1289-91. The materials copied in this case are much closer to the core of work protected by copyright than to the mere compilations of raw data in the phone books in Feist. The excerpts used in the coursepacks are substantially creative, containing original analysis and creative theories. Although some of the copyrighted works contain non-original material not protected by copyright, each excerpt contains far more than the "minimal degree of creativity" that qualifies it as "independently created by the author" and therefore original. Id. at 344-48, 111 S.Ct. at 1286-89.

13 The fact that the excerpts in this case are extracted from works that may be categorized as "non-fiction" does not mean that any use is fair use. Rather, monopoly protections accrue "equally to works of fiction and nonfiction." Harper & Row, 471 U.S. at 546, 105 S.Ct. at 2223. Copyright protections are intended to induce the creation of new material of potential historical value, not just fictional works, and therefore extend to the excerpts here at issue.

The second factor, on these facts, does little more than confirm that the works at issue are protected by copyright and may only be used "fairly." Thus, the fair use examination properly proceeds to evaluate factors three and four to determine whether this use of the excerpts is fair.

C.

14 The third factor considers "the amount and substantiality of the portion [1522] used in relation to the copyrighted work as a whole." 17 U.S.C. § 107(3). In the context of a musical parody's use of a copyrighted song, the Supreme Court interpreted this factor to inquire whether the quantity and value of the materials used were reasonable in relation to the purpose of the copying, noting that "the extent of permissible copying varies with the purpose and character of the use." Campbell, 510 U.S. at ----, 114 S.Ct. at 1175. As the Supreme Court acknowledged, "[t]he facts bearing on this factor will also tend to address the fourth [factor, which evaluates market effect], by revealing the degree to which the parody may serve as a market substitute for the original or potentially licensed derivatives." Id. Thus, we ask whether such substantial portions of a copyrighted work were used that a coursepack is "composed primarily of [the] original, particularly [the original's] heart, with little added or changed" such that the coursepack merely supersedes the copyrighted work, "fulfilling demand for the original." Id. at ----, 114 S.Ct. at 1176.

There is no evidence that the six excerpts in the coursepacks are so substantial as to supersede the original works. The publishers have submitted a declaration stating that, in accordance with established practices, permission would have been denied, even if sought, with regard to the excerpt from Public Opinion, by Walter Lippmann. The publisher considers the excerpt so lengthy and the published edition sufficiently inexpensive that the book should have been purchased rather than copied with permission, for a fee. The declarant opined that copying 46 pages would adversely affect book sales, but offered no factual evidence in this regard. The fact that the publisher would prefer the book to be purchased is not relevant to our analysis. Each of the professors who delivered the materials at issue to MDS signed a statement that he would not otherwise have assigned the copyrighted work to the class. Nothing in the record contradicts these declarations.

The lengthiest excerpt used in one of the coursepacks comprised only 30% of Farewell to the Party of Lincoln: Black Politics in the Age of FDR, by Nancy J. Weiss, the original copyrighted work. Other excerpts ranged from 5% to 18% of the original works. There is no evidence to suggest that even the 30% selected from Weiss's book extracted the heart of the work rather than just those portions that the professor deemed instructive for his limited classroom purposes. Cf. Harper & Row, 471 U.S. at 565-66, 105 S.Ct. at 2223-24. Given the uncontroverted declarations of the professors that they would not have chosen to assign the original works even if copied excerpts were not available, there is no basis for us to conclude that the portions extracted from the copyrighted works were so substantial that the resulting coursepacks superseded the originals. As the district court noted, the six excerpts at issue in this case "are truly 'excerpts,' and do not purport to be replacements for the original works." Princeton, 855 F.Supp. at 910.

The record cannot support a finding that the copyrighted works at issue were excerpted so substantially that the coursepacks superseded the original works. Thus, the third factor favors a finding of fair use.

D.

151617 The fourth fair use factor is "the effect of the use upon the potential market for or value of the copyrighted work." 17 U.S.C. § 107(4). Under this factor, courts must consider the extent of market harm caused by the particular actions of the alleged infringer and "whether unrestricted and widespread conduct of the sort engaged in by the defendant ... would result in a substantially adverse impact on the potential market for the original." Campbell, 510 U.S. at ----, 114 S.Ct. at 1177 (internal quotation marks omitted). The fourth factor is the single most important element of fair use, Harper & Row, 471 U.S. at 566, 105 S.Ct. at 2223-24, and "must take account not only of harm to the original but also of harm to the market for derivative works." Id. at 568, 105 S.Ct. at 2234.

18 Because the record before us contains no evidence that the market for the original work, or for derivative works, was affected by the use of excerpts in coursepacks, the resolution of this factor turns on [1523] the assignment of the burden of proof on market effect. TheSony Court assigned the burden of proof on market effect to the party alleging infringement, 464 U.S. at 451, 104 S.Ct. at 793, whereas the Campbell Court assigned the burden of proof on market effect to the proponent of the fair use defense, 510 U.S. at ---- - ----, 114 S.Ct. at 1177-79.[1] The rule articulated in Sony is the one that is applicable to this case because both Sony and the case at hand involve noncommercial uses of a copyrighted work whereas Campbell articulated the rule for commercial uses of a copyrighted work. A commercial use may be presumed to affect the market whereas no such assumption of market effect may be made with regard to a nonprofit educational use. Sony, 464 U.S. at 451, 104 S.Ct. at 793.

In Sony, the Court held:

A challenge to a noncommercial use of a copyrighted work requires proof either that the particular use is harmful, or that if it should become widespread, it would adversely affect the potential market for the copyrighted work.... What is necessary is a showing by a preponderance of the evidence that some meaningful likelihood of future harm exists. If the intended use is for commercial gain, that likelihood may be presumed. But if it is for a noncommercial purpose, the likelihood must be demonstrated.

Id. Accordingly, because we have determined that the use of the excerpts at issue in the coursepacks is for nonprofit educational purposes, we do not apply a presumption of market harm against MDS's use.

19 Rather, it is the publishers' burden to demonstrate at least a meaningful likelihood that future harm to a potential market for the copyrighted works will occur. Works or uses that creators of original works would "in general develop or license others to develop" make up the market for potential derivative uses. Campbell, 510 U.S. at ----, 114 S.Ct. at 1178. The plaintiffs did not demonstrate that the coursepacks affected the market for the original copyrighted works or the potential market for derivative works, such as publishedanthologies, nor did they demonstrate any "meaningful likelihood of future harm," Sony, 464 U.S. at 451, 104 S.Ct. at 793, to any market. Rather, the plaintiffs limited their allegations and demonstrations of "market effect" to evidence of lost permission fees resulting from defendants' refusal to seek permission and pay fees for the copying and selling of excerpts from copyrighted works.

20 Evidence of lost permission fees does not bear on market effect. The right to permission fees is precisely what is at issue here. It is circular to argue that a use is unfair, and a fee therefore required, on the basis that the publisher is otherwise deprived of a fee. The publishers must demonstrate a likelihood that MDS's use of the excerpts replaces or affects the value of the copyrighted works, not just that MDS's failure to pay fees causes a loss of fees, to which the plaintiffs may or may not have been entitled in the first instance. Given the uncontroverted fact that professors would not have assigned the copyrighted works in the absence of available coursepack compilations of excerpts, it appears that there is no damage to the market for the original work.

Photoreproductions of limited excerpts, even if bound, are poor substitutes for a published work for any use beyond the precise scope of the course. For example, it is unlikely that students who wish to build a personal library of books from their college years for future reference will retain loosely bound photoreproduction coursepacks of limited excerpts; unwieldy coursepacks may be inconvenient and unattractive to display and may or may not contain the material sought later in life.

Moreover, the students who used the coursepacks were not a market for purchase of the original works; the professors would not otherwise have required students to purchase the original works. If it had any effect at all, use of the excerpted materials enhanced[1524] the prospect that the original works might later be of interest to the student. Students might purchase the copyrighted works when, for example, taking other courses in the same discipline, conducting more extensive research into a subject "touched upon" in an excerpt, or doing graduate work in a broader field to which the excerpted material later appeared relevant and was recalled.

Therefore, we must conclude that there is no evidence of market effect and that the fourth, and most important factor, weighs decisively in favor of "fair use."

E.

2122 The four factors specifically set forth in section 107 for consideration are not an exclusive list of the factors relevant to a fair use determination. We confront here an additional consideration. More than one hundred authors declared on record that they write for professional and personal reasons such as making a contribution to the discipline, providing an opportunity for colleagues to evaluate and critique the authors' ideas and theories, enhancing the authors' professional reputations, and improving career opportunities. These declarants stated that their primary purpose in writing is not for monetary compensation and that they advocate wide dissemination ofexcerpts from their works via coursepacks without imposition of permission fees. The fact that incentives for producing higher education materials may not revolve around monetary compensation is highly relevant. Copyright law seeks to encourage the use of works to the greatest extent possible without creating undue disincentives to the creation of new works. The inclusion of excerpts in coursepacks without the payment of permission fees does not deprive authors and inventors of the rewards that the record indicates authors value, such as recognition. Finding that the excerpts at issue here were used fairly would deprive the authors of their share of permission fees assessed for the copies. However, the record indicates that monetary compensation is a secondary consideration for authors in this field, and the permission fees, while significant in the aggregate to publishing companies, are likely to amount to a mere pittance for individual authors. MDS's use of the copyrighted works appears to provide the authors with incentive to create new works, thereby advancing the progress of science and the arts, rather than to discourage them from doing so.

Thus, an additional factor, incentives to create in this specialized field, weighs in favor of a finding of fair use.

VI.

Because the statutory factors, plus author incentives, dictate a finding of fair use, we conclude that MDS did not infringe upon the copyrights of the publishers in this case. We REVERSE the district court and order summary judgment for the defendants on the basis of fair use.

DAVID A. NELSON, Circuit Judge, concurring in part and dissenting in part.

A generation ago, I suspect, this would have been an easy case for us. The notion that it could be "fair use" for a commercial vendor, acting without authorization from the copyright holder, to copy and sell as much as 30 percent of a copyrighted work of scholarship is a notion that would once have seemed patently absurd.

Changes in technology, and concomitant changes in commercial duplication services and in teaching practices, may have made such a notion seem less patently absurd today. Indeed, my colleagues' rationale for concluding that the defendants' unauthorized coursepacks represent a fair use of the copyrighted materials impresses me as sufficiently plausible to justify reversal of the district court's finding of willfulness. I concur in today's judgment insofar as it vacates the enhanced damages awarded on the strength of the district court's finding that the defendants acted willfully.

I do not concur in the majority's resolution of the fair use question itself. The question of fair use ought to be decided in favor of the plaintiff publishers, in my view, or at the very least ought to be the subject of a trial.

[1525] I

Of the four statutory factors that must be considered in determining whether a particular use of a copyrighted work is "fair," the most important is the one set forth in 17 U.S.C. § 107(4). See Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 566, 105 S.Ct. 2218, 2223, 85 L.Ed.2d 588 (1985), citing 3 M. Nimmer, Copyright § 13.05[A], at 13-76 (1984). I turn first to this factor, "the effect of the use upon the potential market for or value of the copyrighted work."

The burden of proof as to market effect rests with the copyright holder if the challenged use is of a "noncommercial" nature. The burden rests with the alleged infringer, on the other hand, if the challenged use is "commercial" in nature. Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 451, 104 S.Ct. 774, 793, 78 L.Ed.2d 574 (1984). My colleagues on the panel conclude that the plaintiff publishers have the burden of proof because the use being challenged here is "noncommercial." I respectfully disagree.

It is true that the use to which the materials are put by the students who purchase the coursepacks is noncommercial in nature. But the use of the materials by the students is not the use that the plaintiff publishers are challenging. What the publishers are challenging is the duplication of copyrighted materials for sale by a for-profit corporation that has decided to maximize its profits-and give itself a competitive edge over other copy shops-by declining to pay licensing fees to the holders of the copyrights.

The defendants' use of excerpts from the books at issue in this case is no less commercial in nature than was The Nation Magazine's use of the excerpts from President Ford's book in Harper & Row. Like the students who purchase unauthorized coursepacks, the purchasers of The Nation did not put the contents of the magazine to commercial use-but that did not stop the Supreme Court from characterizing the defendant's use of excerpts from the copyrighted book as "a publication [that] was commercial as opposed to nonprofit...." Harper & Row, 471 U.S. at 562, 105 S.Ct. at 2231. And like the use that is being challenged in the case now before us, the use challenged in Harper & Row was "presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright." Id., quoting Sony, 464 U.S. at 451, 104 S.Ct. at 793.

The strength of the Sony presumption may vary according to the context in which it arises, and the presumption disappears entirely where the challenged use is one that truly transforms the original work into a new artistic creation. See Campbell v. Acuff-Rose Music, Inc., --- U.S. ----, ----, 114 S.Ct. 1164, 1176, 127 L.Ed.2d 500 (1994). The case at bar involves mere duplication for commercial purposes, as I see it, but I readily concede that the presumption may be weaker in the present case than it would be in many other contexts. There is a presumption of unfairness here, nonetheless, and I am not persuaded that the defendants have rebutted it.

If I am wrong about the existence of the presumption-if the challenged use is not commercial, in other words, and if the plaintiff publishers have the burden of proving an adverse effect upon either the potential market for the copyrighted works or the potential value of the works-I believe that the publishers have carried the burden of proving a diminution in potential market value.

One test for determining market harm-a test endorsed by the Supreme Court in both Sony and Harper & Row-is evocative of Kant's categorical imperative. "[T]o negate fair use," the Supreme Court has said, "one need only show that if the challenged use 'should become widespread, it would adversely affect the potential market for the copyrighted work.' " Harper & Row, 471 U.S. at 568, 105 S.Ct. at 2234, quoting Sony, 464 U.S. at 451, 104 S.Ct. at 793 (emphasis supplied in part). Under this test, as I read the record, it is reasonably clear that the plaintiff publishers have succeeded in negating fair use.

The record shows that most of the copy shops that compete with the defendants in the sale of coursepacks pay modest "permission fees" for the privilege of duplicating and selling excerpts from copyrighted works. In the early 1990s, it appears, the three plaintiffs [1526] were collecting permission fees at a rate that approached a total of $.5 million a year. If copy shops across the nation were to start doing what the defendants have been doing here, this revenue stream would shrivel and the potential value of the copyrighted works of scholarship published by the plaintiffs would be diminished accordingly.

The defendants contend that the permission fee argument is circular. In support of this contention they cite the dissenting opinion inAmerican Geophysical Union v. Texaco, Inc., 37 F.3d 881, 900 et seq. (2d Cir.) (Jacobs, J., dissenting), amended & superseded,60 F.3d 913 (1994), cert. dismissed, 516 U.S. 1005, 116 S.Ct. 592, 133 L.Ed.2d 486 (1995), and a footnote in a Court of Claims decision, Williams & Wilkins Co. v. United States, 203 Ct.Cl. 74, 487 F.2d 1345, 1357 n. 19 (1973), aff'd by an equally divided court,420 U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975). But the potential uses of the copyrighted works at issue in the case before us obviously include the selling of licenses to copy portions of the works for inclusion in coursepacks, and the likelihood that publishers actually will license such copying is a demonstrated fact. A licensing market actually exists here, as it did not in Williams & Wilkins orAmerican Geophysical. I believe that this is a "protectable derivative market," to use the terminology employed by the Supreme Court inCampbell, 510 U.S. at ----, 114 S.Ct. at 1178. If so, there is no circularity in saying-as I do say-that the potential for destruction of the protectable derivative market by widespread circumvention of the plaintiffs' permission fee system is enough, under the Harper & Rowtest, "to negate fair use."

My final point with regard to the fourth statutory factor is that an absence of market harm is not supported by the affidavits of the three professors who assigned one or more of the copyrighted works to be read by the students in their classes. None of these affidavits shows that the professor executing the affidavit would have refrained from assigning the copyrighted work at issue if the position taken by the copyright holder had been sustained beforehand.

It is true that Professor Victor Lieberman, who assigned the excerpt from the Olson and Roberts book on America and Vietnam, raises questions about the workability of the permission systems of "many publishers." In 1991, Professor Lieberman avers, a Kinko's copy shop to which he had given materials for inclusion in a coursepack experienced serious delay in obtaining permissions from unnamed publishers. Professor Lieberman does not say that a timely permission could not have been obtained from the publisher of the Olson and Roberts book, however, and he does not say that he would have refrained from assigning the work if the copy shop had been required to pay a permission fee for it.

It is also true that the publisher of one of the copyrighted works in question here (Public Opinion, by Walter Lippmann) would have turned down a request for permission to copy the 45-page excerpt that the defendants included in a coursepack prepared to the specifications of Professor Donald Kinder. The excerpt was so large that the publisher would have preferred that students buy the book itself, and the work was available in an inexpensive paperback edition. But Professor Kinder does not say that he would have refrained from assigning the excerpt from the Lippmann book if it could not have been included in the coursepack. Neither does he say that he would have refrained from assigning any of the other works mentioned in his affidavit had he known that the defendants would be required to pay permission fees for them.

The third professor, Michael Dawson, assigned a 95-page excerpt from the book on black politics by Nancy Weiss. Professor Dawson does not say that a license was not available from the publisher of the Weiss book, and he does not say that the license fee would have deterred him from assigning the book.

II

The other statutory factors are less important, except insofar as they touch on the fourth factor. I shall deal with them relatively briefly.

[1527] A

As to "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes," 17 U.S.C. § 107(1), I have already explained my reasons for concluding that the challenged use is of a commercial nature. I recognize, of course, that the first sentence of 17 U.S.C. § 107 lists "teaching (including multiple copies for classroom use)" as one of the purposes for which the reproduction of a copyrighted work may constitute a non-infringing fair use. The quoted language may or may not suggest that the professors themselves could properly make multiple copies of large excerpts from the copyrighted works without paying permission fees, but it does not suggest to me that independent contractors who are not members of the teaching profession are free to do so.

My colleagues find it significant that the defendant copy shop can profitably produce multiple copies for less than it would cost the professors or the students to produce them. Most of the copy shops with which the defendants compete have been paying permission fees, however, and I assume that these competitors can still perform the copying on a more cost-effective basis than the professors or students can. This strikes me as a more significant datum than the ability of a black market copy shop to beat the do-it-yourself cost.

As to the degree to which the challenged use has transformed the original copyrighted work, which is another element in the first statutory factor, the majority opinion finds the transformative aspect of the coursepacks to be "slight." I agree. If you make verbatim copies of 95 pages of a 316-page book, you have not transformed the 95 pages very much-even if you juxtapose them to excerpts from other works and package everything conveniently. This kind of mechanical "transformation" bares little resemblance to the creative metamorphosis accomplished by the parodists in the Campbell case.

B

The second statutory factor, "the nature of the copyrighted work," is not in dispute here. The defendants acknowledge that the excerpts copied for the coursepacks contained creative material, or "expression;" it was certainly not telephone book listings that the defendants were reproducing.

C

The third statutory factor, "the amount and substantiality of the portion used in relation to the copyrighted work as a whole," may have more significance for the 95-page excerpt from the black politics book than for the 17-page excerpt from the Vietnam book. But all of the excerpts far exceed the 1,000 word limit that the legislative history of the Copyright Revision Act of 1976 suggests as a benchmark for "educational" copying. See H.R.Rep. No. 1476, 94th Cong. 2nd Sess. (1976); H.R.Conf.Rep. No. 1733, 94th Cong. 2nd Sess. (1976).

My colleagues would give no consideration to the legislative history of the Copyright Revision Act, their theory being that the statutory fair use factors are unambiguous. But the fair use issue has long been the most troublesome one in the whole law of copyright, seeAcuff-Rose Music, Inc. v. Campbell, 972 F.2d 1429, 1439 (6th Cir.1992) (Nelson, J., dissenting), and the 1976 legislation did not make it any less so. The Classroom Guidelines incorporated in the legislative history clearly lack the force of law, but this does not mean that we must shut our eyes to them altogether. See Harper & Row, 471 U.S. at 549-553, 105 S.Ct. at 2224-27, where the Supreme Court turned for guidance not only to the house report cited above, but to an earlier senate report "discussing fair use of photocopied materials in the classroom...." Id. at 553, 105 S.Ct. at 2226. And see Campbell, 510 U.S. at ----, 114 S.Ct. at 1170, where the Court likewise turned to the congressional committee reports for guidance.

The conference committee that reported out the bill enacted in 1976 did not consider the compilation of anthologies to be fair use. The defendants' coursepacks are anthologies, of course, and the excerpts they contain are much longer than the 1,000-word standard suggested as a safe harbor by the conferees. The guidance offered by the legislative history [1528] of the statute that codified the fair use doctrine is far from irrelevant, in my view.

III

I take as the text for my concluding part Justice Stewart's well-known exposition of the correct approach to "ambiguities" (see Sony, 464 U.S. at 431, 104 S.Ct. at 783) in the copyright law:

"The immediate effect of our copyright law is to secure a fair return for an 'author's' creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good. 'The sole interest of the United States and the primary object in conferring the monopoly,' this Court has said, 'lie in the general benefits derived by the public from the labors of authors.' ... When technological change has rendered its literal terms ambiguous, the Copyright Act must be construed in light of this basic purpose."Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2044, 45 L.Ed.2d 84 (1975) (footnotes and citations omitted).

The majority opinion attaches considerable weight to the assertions of numerous academic authors that they do not write primarily for money[1] and that they want their published writings to be freely copyable. The suggestion is that unlicensed copying will "stimulate artistic creativity for the general public good."

This suggestion would be more persuasive, I think, if the record did not demonstrate that licensing income is significant to the publishers. It is the publishers who hold the copyrights, of course-and the publishers obviously need economic incentives to publish scholarly works, even if the scholars do not need direct economic incentives to write such works.

The writings of most academic authors, it seems fair to say, lack the general appeal of works by a Walter Lippmann, for example. (Lippmann is the only non-academic author whose writings are involved in this case.) One suspects that the profitability of at least some of the other books at issue here is marginal. If publishers cannot look forward to receiving permission fees, why should they continue publishing marginally profitable books at all? And how will artistic creativity be stimulated if the diminution of economic incentives for publishers to publish academic works means that fewer academic works will be published?

If the decision in this case stands, and if our sister circuits follow our lead, it seems likely that some academics will find it harder to get their books published. Perhaps these academics will not perish as a result-electronic samizdats may turn out to be the wave of the future, for all I know-but book publishing as we have known it will clearly have taken a hit. An unfair hit, in my judgment.

I respectfully dissent from this court's resolution of the fair use issue.

[*] The Honorable Monroe G. McKay, Circuit Judge of the United States Court of Appeals for the Tenth Circuit, sitting by designation.

[1] Campbell, 510 U.S. at ---- - ----, 114 S.Ct. at 1177-79, held that, because fair use is an affirmative defense, "its proponent would have difficulty carrying the burden of demonstrating fair use without favorable evidence about relevant markets," and that a silent record on the fourth factor "disentitled the proponent of the defense" to summary judgment.

[1] I imagine that most of these academics are acquainted with the pertinent dictum of Dr. Johnson, see Campbell, 510 U.S. at ----, 114 S.Ct. at 1174, and to my ear, at least, their testimony has the ring of truth. One might almost view what they say as an admission against interest.

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Case Information

September 19, 2014

1996-02-12

Ryan

74 F3d 1512

No. 94-1778.

United States Court of Appeals, Sixth Circuit

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