Association of Research Libraries (ARL®)

ADDENDUM B

The MDS Decision and Fair Use for Coursepacks

March 5, 1996

Prepared for the Association of Research Libraries by
Kenneth D. Crews
Associate Professor of Law and of
Library and Information Science
Director, Copyright Management Center
Indiana University Purdue University at Indianapolis
755 West Michigan Street
Indianapolis, Indiana 46202-5195
Phone: (317) 274-4400
Fax: (317) 278-2300
kcrews@iupui.edu

Five years ago a Federal District Court in New York ruled that Kinko’s Graphic Corporation infringed copyrights, and did not exercise fair use, when it photocopied "coursepacks" comprising book chapters, and sold them to students for their required reading at nearby colleges and universities. The decision was widely publicized and debated in academic circles, and in intervening years many colleges and universities and their libraries have compiled and handled coursepacks with extraordinary caution. Typical post-Kinko’s advice regarding coursepacks generally calls for the copy shop--whether on or off campus--to secure permissions for all materials to be included. Many libraries also have responded to the "coursepack" collection of materials with trepidation. While libraries generally do not make coursepacks, librarians have raised questions about the appropriateness of adding coursepacks to collections or even keeping a coursepack at a traditional print reserve desk. The ruling against Kinko’s has stirred questions even about the lawfulness of isolated copies made at photocopy machines housed in the libraries.

Amidst this heightened sensitivity and caution about copyright infringement and coursepacks comes a decision rendered on February 12, 1996 by the Sixth Circuit Court of Appeals, based in Cincinnati, Ohio, which appears at first glance to have undone much of the ruling against Kinko’s. The latest decision, Princeton University Press v. Michigan Document Services, Inc., holds that an off-campus, for-profit photocopy shop may, as a matter of fair use, make coursepacks that include substantial portions of copyright protected books and sell them to students. At a minimum, the conflict between this case and Kinko’s exposes the turmoil and uncertainty that lies within fair use, and it ought to remind all members of the academic community that we need to respond critically to developments in copyright law. Fair use is a complex and fluid doctrine that defies sweeping conclusions in response to single cases.

We must, therefore, avoid hasty conclusions in the wake of this latest ruling from the Sixth Circuit. While the Kinko’s case actually went to trial and the judge ruled upon a full record of facts, the latest case--known as the MDS case--is a ruling on motions for summary judgment. No trial has occurred in this case. The judges have ruled only on whether they believe the facts, as the parties allege those facts, would constitute an infringement. Moreover, the MDS case is certain to be appealed. The plaintiff-publishers have announced their intention to seek a rehearing from the Court of Appeals, and if they are unsuccessful we can most likely expect an appeal to the U.S. Supreme Court. Many important developments in this case remain ahead.

We must also resist hurried statements about the relationship between the MDS case and the Kinko’s case. Some observers have stated that MDS "reverses" or "overturns" Kinko’s. Nothing of the sort is true. The Kinko’s decision was rendered by the Federal District Court--the lowest level in the federal court system--at the district based in Manhattan. Following that trial and verdict, the parties settled, and Kinko’s waived its opportunity to appeal the case. The MDS case began in a Federal District Court in Michigan, where the judge ruled in favor of the publishers on their motion for summary judgment. The copy shop appealed to the Sixth Circuit Court of Appeals, an intermediate court in the federal system with jurisdiction over the states of Michigan, Ohio, Kentucky, and Tennessee. That court now has ruled in favor of the copy shop. Although the Court of Appeals is a higher court, the Sixth Circuit has no authority to reverse or overturn a decision from another part of the country, such as the Kinko’s ruling. As a result, both decisions remain on the record. Each decision is authoritative on its particular facts within the geographical territories that the courts serve, and the decisions are instructive or persuasive for determining the law in the rest of the country. For those persons who live in the jurisdiction of the courts rulings in these cases, you may look to the decisions for direct guidance. For the rest of the country, however, we must struggle with the sharply conflicting opinions and the radically diverging results in these two cases.

How can we make sense of these conflicting developments? For those persons and organizations seeking to review standards that have arisen since the Kinko’s ruling, the MDS case offers some important guidance for possibly carving out a workable measure of fair use. As in all fair-use decisions, the particular facts at issue carry extraordinary importance. The MDS ruling details a variety of facts that seem to have persuaded the court that fair use may apply:

1. The instructor selected the materials to be included in the photocopied coursepacks.

2. The coursepacks were compiled for specific courses at the nearby campus, in this case the University of Michigan.

3. The coursepacks were sold only to students in the courses and not to the general public.

4. All unsold coursepacks were discarded and not sold to others or used for other purposes.

5. The purchase price of coursepacks was based solely on the number of pages and not on any evaluation of the materials.

6. The instructor signed a statement declaring that he or she would not have assigned the entire book for the students to purchase.

7. The materials included in the coursepack were either not central to the course or were not so lengthy as to justify purchase of the entire work.

8. The service provided by the copy shop was more efficient and more economical than photocopying of materials by the individual students or even by the instructor.

Fair-use cases are based not only on the particular facts, but on the relationship of those facts to four general factors that Congress instructed us to evaluate in the determination of whether or not a particular activity is fair use. Most of the court’s opinion focuses on these four factors, as outlined in the fair-use statute, Section 107 of the U.S. Copyright Act. Indeed, the court succinctly refused to be distracted from the four factors. In particular, it bluntly declined to apply the so-called "Classroom Guidelines" which were advocated by the plaintiff-publishers as an appropriate measure of fair use. Those guidelines are familiar to many academicians and librarians, and they include elaborate word counts and other highly specific measures of fair use for the reproduction of materials for classroom distribution. According to the MDS opinion, "The publishers reliance on the Classroom Guidelines is misplaced," and the court refused to replace statutory language with guidelines developed by private parties and endorsed in a congressional report.

The court’s analysis of the four factors may be summarized as follows:

1. Purpose and Character of the Use. The court found that this case involved mixed purposes. The copy shop was unquestionably seeking to make a profit, but the ultimate purpose of the coursepacks was to serve the non-profit educational objectives of the University of Michigan. Even in the hands of the private for-profit copy shop, the court adopted a sympathetic characterization of the defendant’s purposes, finding that MDS was not exploiting the copyright itself by charging fees for coursepacks based on the quality of content. Instead, MDS was offering a service in fulfillment of educational objectives. Moreover, the court concluded that photocopying is an integral part of teaching and the accomplishment of teaching objectives. The opinion underscores a footnote in a recent Supreme Court opinion that identifies a specific right to make multiple copies of works for classroom teaching to an extent that may not be allowed for other fair-use purposes. The court also concluded that the selection of custom materials and their compilation into a coursepack is "transformative," which also helped tip this first factor toward fair use. Overall, the court was persuaded that MDS’s purpose favored fair use.

2. The Nature of the Copyrighted Work. The court offered little analysis and ultimately reached no meaningful conclusion about this factor. It recognized that non-fiction works, which were at issue in this case, may be used or subject to fair use more extensively than fiction, but the court also refused to conclude that all uses of such materials would be fair. The court ultimately reached no determination about this factor and its effect on the fair-use analysis.

3. The Amount and Substantiality of the Portion Used. The court focused its inquiry on "whether the quantity and value of the materials used were reasonable in relation to the purpose of the copying." The court also looked for evidence of whether the amount copied superseded or fulfilled demand for the original work. The quantity of each book photocopied ranged from 5% to 30% of the original work. The plaintiffs submitted a declaration that permission would have been denied to photocopy at least one of the excerpts, and that the photocopying was so extensive that the publisher would have required a purchase of the book rather than allow the copying to proceed. The court dismissed such claims as irrelevant and focused instead on the statement signed by each instructor at the time of placing an order with MDS, in which the instructor declared that he or she would not have assigned the work to the class. In addition, the court relied on the lack of evidence that the excerpts were anything other than the amounts needed to serve the "limited classroom purposes" for the coursepacks. In the end, the court resolved that this factor also favored fair use.

4. Effect of the Use upon the Potential Market for or Value of the Copyrighted Work. The court put the burden on the publishers to present proof of some likelihood of harm to their market caused by the photocopying. The court found no such proof on the record, other than "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." Market effects based on lost revenues from permission fees were central to the analysis in the recent rulings against Texaco Inc. for photocopying by research scientists. The Texaco cases held that Texaco could have paid fees to the Copyright Clearance Center for permission to make photocopies, and its failure to do so had an adverse effect on that particular market for the works. Some observers have criticized that reasoning as "circular," because it requires an analysis of royalty fees in order to determine whether royalty fees even ought to be paid. The MDS decision endorsed that critique and concluded, "Evidence of lost permission fees does not bear on market effect." The court added, "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." Once again, the court underscored the limited utility of the coursepacks and the instructors statement that they would not have assigned the purchase of the book to conclude that "there is no evidence of market effect." The court adopted a line of reasoning frequently espoused by academicians and librarians: "If it had any effect at all, use of the excerpted materials enhanced the prospect that the original works might later be of interest to the student."

In its reasoning and conclusions, the MDS decision stands in nearly complete contradistinction to the Kinko’s decision of 1991. Listservs and professional meetings are already exploring and analyzing its significance. Like the Kinko’s decision before, the MDS ruling will undoubtedly undergo thorough analysis and extensive scholarly critique. It will also help to shape policies and behavior at libraries, colleges, and universities far beyond the University of Michigan. Unlike the Kinko’s ruling, however, the MDS decision is not the end of this case. We have months and possibly years of future appeals. In the meantime, we might contemplate the following observations and consider the following actions:

1. Libraries, copy shops, and other organizations located within the Sixth Circuit are clearly best positioned to advance any opportunities for fair use identified in the MDS decision, subject to appeals of the case. A reversal on appeal, however, can place even past claims of fair use in jeopardy.

2. For the rest of the country, the decision underscores that fair use is confusing and complex and depends on the specific circumstances in any case. We should at a minimum be wary of simplistic rules. Sweeping requirements of permission for everything in a coursepack are as overbroad as sweeping claims of fair use. In fact, even the Kinko’s decision refused to adopt a complete prohibition on photocopying in coursepacks, and the private settlement in that case allowed at least brief excerpts in coursepacks without further permission.

3. "Guidelines" on fair use, such as the Classroom Guidelines, are interpretations or recommendations or suggestions about the meaning of fair use as applied to particular circumstances. They are not the law, and they have not been read into the law in the MDS case or in any other ruling from any American court.

4. Libraries and other organizations should rely only cautiously on the MDS ruling in the development of new policies and practices pending its appeal. Any changes based on this decision should be reviewed immediately upon further developments. Indeed, the case reminds us that fair use is a flexible and transitory concept constantly in need of regular review and fresh understanding.

Copyright 1996, Kenneth D. Crews. Permission is hereby granted to reproduce and distribute copies of this work for nonprofit educational and nonprofit library purposes, provided that copies are distributed at or below cost, and that the author, source, and copyright notice are included on each copy. You may also include this work in coursepacks for nonprofit education even if the copies are made by a for-profit copy shop. This permission is in addition to rights granted under Sections 107, 108, and other provisions of the U.S. Copyright Act. For inclusion on a World Wide Web home page, please link to the Association of Research Libraries site at http://www.arl.org/.