Eleventh Circuit Sets Parameters of Fair Use Defense

In a 129-page opinion, the Eleventh Circuit Court of Appeals has provided a detailed analysis of the 'fair use' defense under the Copyright Act, as applied to digital course materials offered by a public university. Cambridge University Press v. Patton, Nos. 12-14676 & 12-15147 (11th Cir. 2014). Three publishing houses specializing in academic works ' Cambridge University Press, Oxford University Press, and Sage Publications ' sued a number of administrators and regents of Georgia State University (GSU) for copyright infringement, for permitting professors to make digital copies of book excerpts available to students without paying any license fees. In considering 74 instances of infringement allegedly occurring during three academic terms in 2009, the U.S. District Court for the Northern District of Georgia determined that there was no infringement in 26 cases, that the fair use defense applied in 43 cases, and that GSU had infringed without any defense in five cases. The court entered a narrow injunction against GSU, but concluded that GSU was the prevailing party and awarded it costs and attorneys' fees. The Eleventh Circuit concluded that the District Court had erred in applying the fair use factors and remanded the case for a 'holistic analysis' in which the factors were to be applied differently and more carefully balanced, rather than being accorded equal weight.

The plaintiffs publish advanced scholarly works for use in upper-level undergraduate and graduate courses, not large, general textbooks for entry-level courses. In addition to single author works, they publish compilations of works by multiple authors. Those works are marketed to professors at universities and colleges. The professors may assign excerpts from those books rather than the entire books to their students. They may do that by placing the book on reserve at the campus library, by preparing bound, photocopied, paper 'coursepacks' containing excerpts from multiple works, or by distributing digital excerpts over the Internet.

GSU, a public university in Atlanta, uses two digital distribution systems for course materials: an electronic reserve system managed by GSU's library staff, and a course management system under which professors can upload digital copies of materials directly to their course web sites. The systems are popular with students and have largely replaced paper coursepacks. Students buy paper coursepacks from the GSU bookstore, but pay for digital materials only indirectly, through tuition and fees. Such systems are available nationwide, not just at GSU. Whereas GSU pays licensing fees for materials in paper coursepacks (utilizing well-established channels such as Copyright Clearance Center (CCC)), the plaintiffs alleged that thousands of digitized copyrighted works are made available on GSU's electronic systems without license payments. Under GSU guidelines in effect when the suit was filed in 2008, professors could post digital copies of excerpts consisting of up to 20% of a work without obtaining a license. GSU raised the fair use defense that any alleged use of copyrighted materials was for the purpose of teaching, scholarship or research and for nonprofit educational purposes.

During 2009, GSU adopted a new copyright policy that required professors to fill out a 'Fair Use Checklist' for each excerpt, similar to the policies in effect at other universities. If the factors favoring fair use outnumber the contrary factors, the professor may rely on fair use. Where fewer than half the factors favor fair use, the professor should seek permission from the rights holder. The District Court concluded that only alleged infringements occurring after the policy was adopted would be considered.

The fair use doctrine, an affirmative defense to copyright infringement, was developed in judicial decisions and codified in '107 of the Copyright Act of 1976. Careful consideration of four factors is required: 1) the purpose of the allegedly infringing use; 2) the nature of the copied work; 3) the size and significance of the copied portions; and 4) the effect of the alleged infringement on the potential market for or value of the original work. The District Court determined that the first factor strongly favored GSU in all cases because the use was for teaching students and scholarship, strictly for nonprofit educational purposes. The court found that the second factor also favored GSU in all instances because the books were all properly classified as information, within the spectrum of factual material. The court then adopted a mechanical test for the amount of copying of not more than 10% of the pages in any book or one chapter. For the last factor, the court determined that it weighed in plaintiffs' favor where a digital license was available from CCC or the publisher and in GSU's favor where permission was not readily available. The District Court also found that royalties were not an important incentive for academic writers, who publish primarily to enhance their professional reputation and contribute to academic knowledge, and that making small free excerpts available to students would further the spread of knowledge without significantly impacting the plaintiffs' revenues. If at least three of the four factors favored GSU, the court concluded that the fair use defense applied. If applying the factors resulted in a tie, the court reviewed and reweighed the importance of each factor for the work in question.

The court held that the 2009 policy caused five instances of infringement and required that it be amended to limit copying to the 10%/one chapter rule, prohibit the copying of multiple chapters from the same book, provide better guidelines for determining the effect an excerpt would have on the market for or value of the copyrighted work, and provide strict measures to prevent unwarranted distribution of the excerpts. The court awarded GSU over $2.89 million in attorneys' fees and costs as the prevailing party.

On appeal, the Eleventh Circuit started its analysis with the purpose of copyright law ' 'to promote the creation of new works for the public good by providing authors and other creators with an economic incentive to create.' It then noted that some unpaid use of copyrighted materials must be allowed to avoid placing overbroad restrictions on the use of copyrighted works. However, too much unpaid copying, the court observed, could extinguish the economic incentive to create provided by the copyright laws. The fair use doctrine is a transaction cost on authors that promotes the public benefit copyright law is intended to achieve by limiting the scope of the monopoly granted to authors, providing 'breathing space' without stifling creativity. The public receives an implied license for fair use of the copyrighted work, but cannot take too in the name of fair use.

The Eleventh Circuit stressed that the proper scope of the fair use doctrine is an evidentiary question, where the court determines how much, in a perfect market, fair users can capture of the value of the market for the work before the market is so diminished that the author loses incentive to propagate the work. If copyright owners and fair use implied licensees cannot reach an agreement on the appropriate boundaries of the implied license, a court must do it for them, using the tools in '107 of the Copyright Act and making case-by-case and work-by-work evaluations. Although '107 provides the example of 'teaching (including multiple copies for classroom use), scholarship, or research,' that does not make such uses presumptively 'fair.' The fair use doctrine, noted the court, is an 'equitable rule of reason.'

The District Court properly evaluated each individual work rather than the 'nebulous cloud of infringements' allegedly caused by GSU's 'ongoing practices.' However, the Eleventh Circuit concluded that the District Court improperly took a mechanical 'add up the factors' approach, finding fair use if at least three of the factors favored GSU, without considering the relative weight of each factor in each particular case. The four factors must be balanced, not treated in isolation from each other. A particular factor might, in a given situation, be more or less important.

The 'Coursepack Cases'

The publishers first argued that the 'Coursepack Cases' should govern the analysis because the same fair use calculus should be used to evaluate electronic course materials and materials in paper format. In Basic Books, Inc. v. Kinko's Graphics Corp., 758 F. Supp. 1522 (S.D.N.Y. 1991), the court found that Kinko's infringed publisher copyrights by copying excerpts without permission and selling them for profit in bound, paper coursepacks for college students. In Princeton Univ. Press v. Michigan Document Services, Inc., 99 F.3d 1381 (6th Cir. 1996) (en banc), the court found that a commercial copyshop could not use the fair use defense where, without permission, it reproduced substantial portions of copyrighted academic works in bound, paper coursepacks sold to University of Michigan students. The Eleventh Circuit found that a work-by-work fair use analysis was still necessary, rather than adopting the Coursepack Cases without careful consideration of the individual circumstances of the GSU excerpts.

Factor One: Purpose and'Character of the Use

The Eleventh Circuit observed that whether the use is appropriate depends on: 1) the extent to which the use is transformative rather than a merely superseding use; and 2) whether the use is of a commercial or nonprofit educational nature. However, the mere fact that a use is educational and non-profit does not make it fair use. In this case, the use was merely superseding, not transformative, serving the same function as the original work. Transformative uses are less likely to supplant the market for the original work. Because GSU uses the verbatim excerpts for the same purpose as the original works ' reading material for university students ' they are not transformative. As a court's focus should be on the use and not simply on the user, GSU's educational purpose is not dispositive. If GSU stood to profit from exploiting the copyrighted material without paying the price (the licensing fee), its use might not be fair. In this case, GSU does not obtain an enhanced reputation, valuable authorship credit, or other measurable, indirect benefit from distributing the excerpts to students. Therefore, its use to provide the public benefit of furthering the education of students is weighty enough to favor a fair use finding despite its non-transformative nature. However, although the District Court correctly found that the first factor favored GSU, the supplanting nature of that use must be considered under the fourth factor ' the effect on the potential market for the work.

Factor Two: Nature of The Copyrighted Work

In analyzing the second factor ' the nature of the copyrighted work ' the Eleventh Circuit noted that copying highly creative works or unpublished works is less likely to be fair use. The District Court erred in holding that the second factor favored GSU in every case, without examining whether the excerpts contained evaluative, analytical, or subjectively descriptive material, more than bare facts. The Eleventh Circuit found that the court should have held the second factor was neutral or weighed against fair use, but also that the second factor had relatively little importance in this case because the copied works were not fictional or unpublished.

Factor Three: Amount and Substantiality of the Copied Portion

The third factor considers whether GSU 'helped themselves overmuch' to the copyrighted works, in light of the purpose and character of GSU's use, which intertwines it with the first and fourth factors. The District Court abdicated its duty in applying the 10%/one chapter safe harbor across the board, rather than making individualized determinations. The Eleventh Circuit approved taking into account whether the amount copied was excessive in relation to GSU's educational purposes, measured against the length of the entire book, including whether the copied material was the heart of the work.

Fourth Factor: Effect of the Use on the Market or Value of the Work

The Eleventh Circuit noted that the fourth factor depends on the extent of market harm caused by the infringer's actions and whether unrestricted and widespread conduct of that type would have a substantially adverse impact on the potential market for the copyrighted work. The issue is whether GSU's use, if everyone did it, would cause substantial economic harm that would materially impair the publishers' incentive to publish the works. The importance of the fourth factor varies with the amount of harm and the relative strength of the other three factors. Because GSU's use is nontransformative and fulfills the same purpose the publishers intend for their works, the Eleventh Circuit concluded that the threat of market substitution is great and increases the importance of the fourth factor in this case. CCC's various programs to provide academic permissions provide a workable market for GSU to purchase licenses for excerpts and make it less fair for GSU to use the excerpts without paying. A publisher's decision to make licenses available for some uses and not for others can imply the unlicensed market is not valuable.

The District Court correctly determined that uses for which a license was available caused substantial harm to the potential market and uses for which no license was available weighed in favor of fair use. The Eleventh Circuit also held that the District Court correctly required the publishers to show whether licenses were available or there was a potential future market, even though fair use is an affirmative defense on which GSU has the burden of proof, but concluded that the District Court erred in not giving the fourth factor greater weight because the threat of market substitution is severe. On remand, the District Court must make a more holistic analysis of the four factors, as applied to each copied work.

The Concurring Opinion

Concurring Judge Vinson put a heavy emphasis on the fact that GSU always paid to make paper coursepackets and never paid for the digital equivalents, in large part to save money, concluding that this was a 'rather simple case' of infringement without fair use. He observed that a proper fair use analysis would focus on the use of the work, not on the user. He observed that distributing a work via hyperlink instead of a printing press does not make the use fair and neither 'churches, charities, nor colleges get a free ride in copyright.'

Comment

As noted in the majority opinion, whether a use is transformative is of great importance to the fair use analysis. However, what is 'transformative' is similar to what is 'pornographic,' often depending on the eye of the beholder. A transformative use usually means that the user has added something new to the original work in expression, meaning, or message, or has used the work for a new purpose. Several recent cases, Cariou v. Prince, 714 F.3d 694 (2d Cir. 2013)('appropriation' artist's use of photographer's work), Authors Guild, Inc. v. Google, Inc., No. 05 Civ. 8136 (DC) (S.D.N.Y. 2013) (wholesale copying of entire books), and Authors Guild, Inc. v. HathiTrust, 755 F.3d 87 (2d Cir. 2014) (university library whole copying of entire books), turn heavily on the courts' conclusions that the works in question were transformative, not on whether the uses were commercial.

Judith L. Grubner is a partner in the IP Practice Group of Arnstein & Lehr LLP and a member of this newsletter's Board of Editors. She may be contacted via e-mail at
[email protected].

In a 129-page opinion, the Eleventh Circuit Court of Appeals has provided a detailed analysis of the 'fair use' defense under the Copyright Act, as applied to digital course materials offered by a public university. Cambridge University Press v. Patton, Nos. 12-14676 & 12-15147 (11th Cir. 2014). Three publishing houses specializing in academic works ' Cambridge University Press, Oxford University Press, and Sage Publications ' sued a number of administrators and regents of Georgia State University (GSU) for copyright infringement, for permitting professors to make digital copies of book excerpts available to students without paying any license fees. In considering 74 instances of infringement allegedly occurring during three academic terms in 2009, the U.S. District Court for the Northern District of Georgia determined that there was no infringement in 26 cases, that the fair use defense applied in 43 cases, and that GSU had infringed without any defense in five cases. The court entered a narrow injunction against GSU, but concluded that GSU was the prevailing party and awarded it costs and attorneys' fees. The Eleventh Circuit concluded that the District Court had erred in applying the fair use factors and remanded the case for a 'holistic analysis' in which the factors were to be applied differently and more carefully balanced, rather than being accorded equal weight.

The plaintiffs publish advanced scholarly works for use in upper-level undergraduate and graduate courses, not large, general textbooks for entry-level courses. In addition to single author works, they publish compilations of works by multiple authors. Those works are marketed to professors at universities and colleges. The professors may assign excerpts from those books rather than the entire books to their students. They may do that by placing the book on reserve at the campus library, by preparing bound, photocopied, paper 'coursepacks' containing excerpts from multiple works, or by distributing digital excerpts over the Internet.

GSU, a public university in Atlanta, uses two digital distribution systems for course materials: an electronic reserve system managed by GSU's library staff, and a course management system under which professors can upload digital copies of materials directly to their course web sites. The systems are popular with students and have largely replaced paper coursepacks. Students buy paper coursepacks from the GSU bookstore, but pay for digital materials only indirectly, through tuition and fees. Such systems are available nationwide, not just at GSU. Whereas GSU pays licensing fees for materials in paper coursepacks (utilizing well-established channels such as Copyright Clearance Center (CCC)), the plaintiffs alleged that thousands of digitized copyrighted works are made available on GSU's electronic systems without license payments. Under GSU guidelines in effect when the suit was filed in 2008, professors could post digital copies of excerpts consisting of up to 20% of a work without obtaining a license. GSU raised the fair use defense that any alleged use of copyrighted materials was for the purpose of teaching, scholarship or research and for nonprofit educational purposes.

During 2009, GSU adopted a new copyright policy that required professors to fill out a 'Fair Use Checklist' for each excerpt, similar to the policies in effect at other universities. If the factors favoring fair use outnumber the contrary factors, the professor may rely on fair use. Where fewer than half the factors favor fair use, the professor should seek permission from the rights holder. The District Court concluded that only alleged infringements occurring after the policy was adopted would be considered.

The fair use doctrine, an affirmative defense to copyright infringement, was developed in judicial decisions and codified in '107 of the Copyright Act of 1976. Careful consideration of four factors is required: 1) the purpose of the allegedly infringing use; 2) the nature of the copied work; 3) the size and significance of the copied portions; and 4) the effect of the alleged infringement on the potential market for or value of the original work. The District Court determined that the first factor strongly favored GSU in all cases because the use was for teaching students and scholarship, strictly for nonprofit educational purposes. The court found that the second factor also favored GSU in all instances because the books were all properly classified as information, within the spectrum of factual material. The court then adopted a mechanical test for the amount of copying of not more than 10% of the pages in any book or one chapter. For the last factor, the court determined that it weighed in plaintiffs' favor where a digital license was available from CCC or the publisher and in GSU's favor where permission was not readily available. The District Court also found that royalties were not an important incentive for academic writers, who publish primarily to enhance their professional reputation and contribute to academic knowledge, and that making small free excerpts available to students would further the spread of knowledge without significantly impacting the plaintiffs' revenues. If at least three of the four factors favored GSU, the court concluded that the fair use defense applied. If applying the factors resulted in a tie, the court reviewed and reweighed the importance of each factor for the work in question.

The court held that the 2009 policy caused five instances of infringement and required that it be amended to limit copying to the 10%/one chapter rule, prohibit the copying of multiple chapters from the same book, provide better guidelines for determining the effect an excerpt would have on the market for or value of the copyrighted work, and provide strict measures to prevent unwarranted distribution of the excerpts. The court awarded GSU over $2.89 million in attorneys' fees and costs as the prevailing party.

On appeal, the Eleventh Circuit started its analysis with the purpose of copyright law ' 'to promote the creation of new works for the public good by providing authors and other creators with an economic incentive to create.' It then noted that some unpaid use of copyrighted materials must be allowed to avoid placing overbroad restrictions on the use of copyrighted works. However, too much unpaid copying, the court observed, could extinguish the economic incentive to create provided by the copyright laws. The fair use doctrine is a transaction cost on authors that promotes the public benefit copyright law is intended to achieve by limiting the scope of the monopoly granted to authors, providing 'breathing space' without stifling creativity. The public receives an implied license for fair use of the copyrighted work, but cannot take too in the name of fair use.

The Eleventh Circuit stressed that the proper scope of the fair use doctrine is an evidentiary question, where the court determines how much, in a perfect market, fair users can capture of the value of the market for the work before the market is so diminished that the author loses incentive to propagate the work. If copyright owners and fair use implied licensees cannot reach an agreement on the appropriate boundaries of the implied license, a court must do it for them, using the tools in '107 of the Copyright Act and making case-by-case and work-by-work evaluations. Although '107 provides the example of 'teaching (including multiple copies for classroom use), scholarship, or research,' that does not make such uses presumptively 'fair.' The fair use doctrine, noted the court, is an 'equitable rule of reason.'

The District Court properly evaluated each individual work rather than the 'nebulous cloud of infringements' allegedly caused by GSU's 'ongoing practices.' However, the Eleventh Circuit concluded that the District Court improperly took a mechanical 'add up the factors' approach, finding fair use if at least three of the factors favored GSU, without considering the relative weight of each factor in each particular case. The four factors must be balanced, not treated in isolation from each other. A particular factor might, in a given situation, be more or less important.

The 'Coursepack Cases'

The publishers first argued that the 'Coursepack Cases' should govern the analysis because the same fair use calculus should be used to evaluate electronic course materials and materials in paper format. In Basic Books, Inc. v. Kinko's Graphics Corp. , 758 F. Supp. 1522 (S.D.N.Y. 1991), the court found that Kinko's infringed publisher copyrights by copying excerpts without permission and selling them for profit in bound, paper coursepacks for college students. In Princeton Univ. Press v. Michigan Document Services, Inc. , 99 F.3d 1381 (6th Cir. 1996) ( en banc ), the court found that a commercial copyshop could not use the fair use defense where, without permission, it reproduced substantial portions of copyrighted academic works in bound, paper coursepacks sold to University of Michigan students. The Eleventh Circuit found that a work-by-work fair use analysis was still necessary, rather than adopting the Coursepack Cases without careful consideration of the individual circumstances of the GSU excerpts.

Factor One: Purpose and'Character of the Use

The Eleventh Circuit observed that whether the use is appropriate depends on: 1) the extent to which the use is transformative rather than a merely superseding use; and 2) whether the use is of a commercial or nonprofit educational nature. However, the mere fact that a use is educational and non-profit does not make it fair use. In this case, the use was merely superseding, not transformative, serving the same function as the original work. Transformative uses are less likely to supplant the market for the original work. Because GSU uses the verbatim excerpts for the same purpose as the original works ' reading material for university students ' they are not transformative. As a court's focus should be on the use and not simply on the user, GSU's educational purpose is not dispositive. If GSU stood to profit from exploiting the copyrighted material without paying the price (the licensing fee), its use might not be fair. In this case, GSU does not obtain an enhanced reputation, valuable authorship credit, or other measurable, indirect benefit from distributing the excerpts to students. Therefore, its use to provide the public benefit of furthering the education of students is weighty enough to favor a fair use finding despite its non-transformative nature. However, although the District Court correctly found that the first factor favored GSU, the supplanting nature of that use must be considered under the fourth factor ' the effect on the potential market for the work.

Factor Two: Nature of The Copyrighted Work

In analyzing the second factor ' the nature of the copyrighted work ' the Eleventh Circuit noted that copying highly creative works or unpublished works is less likely to be fair use. The District Court erred in holding that the second factor favored GSU in every case, without examining whether the excerpts contained evaluative, analytical, or subjectively descriptive material, more than bare facts. The Eleventh Circuit found that the court should have held the second factor was neutral or weighed against fair use, but also that the second factor had relatively little importance in this case because the copied works were not fictional or unpublished.

Factor Three: Amount and Substantiality of the Copied Portion

The third factor considers whether GSU 'helped themselves overmuch' to the copyrighted works, in light of the purpose and character of GSU's use, which intertwines it with the first and fourth factors. The District Court abdicated its duty in applying the 10%/one chapter safe harbor across the board, rather than making individualized determinations. The Eleventh Circuit approved taking into account whether the amount copied was excessive in relation to GSU's educational purposes, measured against the length of the entire book, including whether the copied material was the heart of the work.

Fourth Factor: Effect of the Use on the Market or Value of the Work

The Eleventh Circuit noted that the fourth factor depends on the extent of market harm caused by the infringer's actions and whether unrestricted and widespread conduct of that type would have a substantially adverse impact on the potential market for the copyrighted work. The issue is whether GSU's use, if everyone did it, would cause substantial economic harm that would materially impair the publishers' incentive to publish the works. The importance of the fourth factor varies with the amount of harm and the relative strength of the other three factors. Because GSU's use is nontransformative and fulfills the same purpose the publishers intend for their works, the Eleventh Circuit concluded that the threat of market substitution is great and increases the importance of the fourth factor in this case. CCC's various programs to provide academic permissions provide a workable market for GSU to purchase licenses for excerpts and make it less fair for GSU to use the excerpts without paying. A publisher's decision to make licenses available for some uses and not for others can imply the unlicensed market is not valuable.

The District Court correctly determined that uses for which a license was available caused substantial harm to the potential market and uses for which no license was available weighed in favor of fair use. The Eleventh Circuit also held that the District Court correctly required the publishers to show whether licenses were available or there was a potential future market, even though fair use is an affirmative defense on which GSU has the burden of proof, but concluded that the District Court erred in not giving the fourth factor greater weight because the threat of market substitution is severe. On remand, the District Court must make a more holistic analysis of the four factors, as applied to each copied work.

The Concurring Opinion

Concurring Judge Vinson put a heavy emphasis on the fact that GSU always paid to make paper coursepackets and never paid for the digital equivalents, in large part to save money, concluding that this was a 'rather simple case' of infringement without fair use. He observed that a proper fair use analysis would focus on the use of the work, not on the user. He observed that distributing a work via hyperlink instead of a printing press does not make the use fair and neither 'churches, charities, nor colleges get a free ride in copyright.'

Comment

As noted in the majority opinion, whether a use is transformative is of great importance to the fair use analysis. However, what is 'transformative' is similar to what is 'pornographic,' often depending on the eye of the beholder. A transformative use usually means that the user has added something new to the original work in expression, meaning, or message, or has used the work for a new purpose. Several recent cases, Cariou v. Prince , 714 F.3d 694 (2d Cir. 2013)('appropriation' artist's use of photographer's work), Authors Guild, Inc. v. Google, Inc. , No. 05 Civ. 8136 (DC) (S.D.N.Y. 2013) (wholesale copying of entire books), and Authors Guild, Inc. v. HathiTrust , 755 F.3d 87 (2d Cir. 2014) (university library whole copying of entire books), turn heavily on the courts' conclusions that the works in question were transformative, not on whether the uses were commercial.

Judith L. Grubner is a partner in the IP Practice Group of Arnstein & Lehr LLP and a member of this newsletter's Board of Editors. She may be contacted via e-mail at
[email protected].