Prof. Jane C. Ginsburg, Columbia University School of Law
October 31, 2014
In Cambridge University Press v. Becker,1 three academic publishers sued Georgia State University for systematically infringing their copyrights by implementing a policy that permitted faculty members to make excerpts from the plaintiffs’ works as electronic course reserves through the university library’s website. The plaintiffs identified 75 instances of alleged infringement during the three full semesters after the Copyright Policy was adopted.
Faculty members had assigned the excerpts at issue as supplemental (but often required) reading in graduate or upper-level undergraduate courses in language or social science. The books from which the excerpts came were generally not textbooks, but rather single-author monographs or edited collections of multiple chapters by a variety of authors. The “great majority” of the excerpts at issue constituted “a chapter or less from a multi-chapter book.”2 The average copied excerpt constituted about 10 percent of the book from which it was copied “(though some were considerably more and some were considerably less).”3 Excerpts placed on electronic reserve were available by password only to students enrolled in the course, and only during the semester in which the student was enrolled, but students could create permanent retention copies by downloading or printing the reserve readings for their courses.
Following a bench trial, the district court found all but five instances of the copying to be fair use, principally because it adopted a bright-line presumption in favor of fair use if the defendant copied no more than 10 percent of the pages of a book containing fewer than 10 chapters, or up to but not more than one chapter of a book with 10 or more chapters (the court ruled that the full book, rather than separate chapters or other smaller increments, supplied the reference point for the quantum of copying). The Eleventh Circuit, on Oct. 17, 2014, ruling that the district court’s 10-percent-off-the-top approach was inconsistent with the statutory direction to apply all fair use factors, reversed and remanded for a reweighing of all the factors particularly in light of the fourth factor (impact on the potential market for the work). While the district court’s 10-percent presumption was indeed problematic, it had the merit of imposing a clear standard (at least for copying below that threshold). The appellate court’s insistence on case-by-case evaluation may be more consonant with the statute, but its analysis of cognizable economic harm is both murky and highly contentious.
With respect to the fourth factor, the district court acknowledged the significance of the market for licensing excerpts, and the deleterious impact on the value of the work were licensing fees to go unpaid. But the court concluded that “[f]or loss of potential license revenue to cut against fair use, the evidence must show that licenses for excerpts of the works at issue are easily accessible, reasonably priced, and that they offered excerpts in a format which is reasonably convenient for users.”4 Otherwise the unlicensed use would likely be ruled “fair.” For many of the works at issue, the district court concluded that the record did not establish that licenses for digital copies of the works were available in 2009 when the defendants put the excerpts at issue on electronic reserve. Where “digital permissions were not shown to be available,” the court ruled that the defendants’ use “caused no actual or potential damage to the value of the books’ copyrights.”5 Where digital permissions were available, by contrast, the court ruled that the fourth factor would weigh heavily against fair use.6 In other words, the court instituted a “license it or lose it” system. Or, more accurately, the court gave 10 percent off the top to the educational institution (in effect, a social welfare subsidy) and then imposed a solution akin to a compulsory license. Except that where compulsory licenses in copyright have traditionally been creatures of legislation, with government-set rates, here the district court in effect compelled the copyright owners to license, lest the use be allowed for free, but left the rate-setting to the parties, subject, perhaps, to judicial verification that the licenses “are easily accessible [and] reasonably priced.”7
Although it condemned the 10-percent presumption, the Eleventh Circuit largely sustained the district court’s analysis of market harm, particularly with respect to the issue of licensing revenue. The court acknowledged that programs for academic permissions existed, notably the licenses offered by the Copyright Clearance Center, a consortium of publishers, but nonetheless declared:
[I]t is not determinative that programs exist through which universities may license excerpts of Plaintiffs’ works. In other words, the fact that Plaintiffs have made paying easier does not automatically dictate a right to payment…. The goal of copyright is to stimulate the creation of new works, not to furnish copyright holders with control over all markets. Accordingly, the ability to license does not demand a finding against fair use.
Nevertheless, “it is sensible that a particular unauthorized use should be considered ‘more fair’ when there is no ready market or means to pay for the use, while such an unauthorized use should be considered ‘less fair’ when there is a ready market or means to pay for the use…. Put simply, absent evidence to the contrary, if a copyright holder has not made a license available to use a particular work in a particular manner, the inference is that the author or publisher did not think that there would be enough such use to bother making a license available. In such a case, there is little damage to the publisher’s market when someone makes use of the work in that way without obtaining a license, and hence the fourth factor should generally weigh in favor of fair use.”8
The court did acknowledge, in footnote, that there might be reasons other than indifference for a publisher to fail to offer a digital license:
Of course, it need not always be true that a publisher’s decision not to make a work available for digital permissions conclusively establishes that the publisher envisioned little or no demand, and that the value of the permissions market is zero. After all, a number of other factors might influence a publisher’s distribution decision: the publisher may not yet have figured out how to sell work in a different medium, or it might want to restrict circulation in one medium to promote another.9
But, back in the subsequent text, the court seems to have cast to the winds its below-the-line caution. Rather, it reinforced the suggestion that a publisher, or perhaps any copyright owner, had best license every form of reproduction and distribution of its works, lest the inference arise that the copyright owner deliberately disregarded any uncovered exploitation, thereby inviting unlicensed fair users to move into the unoccupied markets. The court continued:
If a publisher makes licenses available for some uses but not for others, this indicates that the publisher has likely made a reasoned decision not to enter the licensing market for those uses, which implies that the value of that market is minimal….
With regard to the works for which digital permissions were unavailable, Plaintiffs choose to enter those works into some markets – print copies of the whole work, or perhaps licenses for paper copies of excerpts – but not the digital permission market. This tells us that Plaintiffs likely anticipated that there would be little to no demand for digital excerpts of the excluded works and thus saw the value of that market as de minimis or zero. If the market for digital excerpts were in fact de minimis or zero, then neither Defendants’ particular use nor a widespread use of similar kind would be likely to cause significant market harm. Of course, if publishers choose to participate in the market the calculation will change.10
The last sentence just quoted reinforces the license-it-or-lose-it message sounded by the district court. But both courts looked only to the state of plaintiffs’ digital licensing in 2009, and therefore gave no consideration to plaintiffs’ current exploitation of the digital licensing market. Had plaintiffs sued for damages (a remedy that the Eleventh Amendment would have in any event precluded because Georgia State University is a state institution), freezing the fair use inquiry in 2009 would have been appropriate. But plaintiffs sought only prospective injunctive relief, so one would think that on remand the district court should allow evidence of the scope of their digital licensing today. If that is not an option, then would the publishers have to initiate a new action, assuming any repeat claim would not be res judicata? The problem of the frozen record further reinforces the license-it-or-lose-it lesson; as soon as any new mode of exploitation points up on the horizon, the copyright owner had better enter the new market immediately, in order to ward off other early entrants, since suing without first developing the licensing market apparently betokens failure.
Against this somewhat apocalyptic forecast, one might recognize that the defendant was a nonprofit educational institution, and that the court’s fourth-factor analysis might be rooted in that context. Perhaps a commercial entity would not enjoy the same fair use entitlement to exploit a new market currently undeveloped by the copyright owner. But the court did not distinguish commercial and non-commercial users for purposes of the fourth factor; rather, as the court stressed, the (non) commercial nature of the use is a factor-one issue. Where the use furthers nonprofit educational purposes it is “more likely to be fair,”11 but even a commercial use, particularly a “transformative one” (which Georgia State’s use was not12) might well weigh in favor of the defendant. If the fourth factor looks only to the plaintiff’s occupation of the market, without consideration of the commerciality of the defendant’s exploitation, then license-it-or-lose-it risks becoming a threat of general application.
That said, it is in fact very difficult to ascertain the Eleventh Circuit’s bottom line in the Georgia State case. In concluding, the court stated:
With regard to the fourth factor – the effect of Defendants’ use on the market for the original – the District Court did not err. However, because Defendants’ unpaid copying was nontransformative and they used Plaintiffs’ works for one of the purposes for which they are marketed, the threat of market substitution is severe. Therefore, the District Court should have afforded the fourth fair use factor more significant weight in its overall fair use analysis.13
If the district court “did not err,” then it correctly determined that the plaintiffs suffered little cognizable harm as to the works for which they were not offering digital licenses in 2009. But then how can “the threat of market substitution [be] severe”? On the other hand, if the district court’s finding of no market effect was not erroneous, what difference would giving the fourth factor “more significant weight” in the overall fair use analysis make? More confusing still, the Eleventh Circuit held that the “District Court’s designation of Defendants as the prevailing party and consequent award of fees and costs were predicated on its erroneous fair use analysis.”14 While the vacating of that portion of the district court’s order might suggest that a re-weighing of the fourth factor could mean that the defendant ultimately will not prevail, the Eleventh Circuit also vacated the injunction respecting the five instances in which the district court rejected the fair use defense. There again, the district court’s “legally flawed methodology in balancing the four fair use factors and erroneous application of factors two and three [the improper 10-percent presumption]”15 required revisiting the result, which could suggest that even as to those five instances, reassessment of the fourth factor could produce a different outcome. If the district court erred on the side of false clarity, the Eleventh Circuit’s correction substitutes true obscurity.
Comments From Our Readers
I am Emeritus Professor of Economics at Université de Montréal. I published an economic theory article in 2012 on fair use/dealing in RERCI in relation to the 2004 CCH decision of the Supreme Court of Canada. The CCH case is in some aspects similar to the U.S. Case discussed by Jane Ginsburg. My article can be downloaded from SSRN at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2101080