Nonprofit Educational Use is Fair Use and Trumps Lack of Transformation

Cambridge University Press, Oxford University Press and Sage Publications sued Georgia State University (GSU) for copyright infringement.  GSU made scanned materials from plaintiff’s books available to students over the Internet without obtaining permission or paying plaintiffs.  The district court ruled that the fair use defense protected GSU in forty-three instances and that GSU infringed in five instances.  The Eleventh Circuit ruled that the district court erred in its fair use analysis and reversed and remanded the case.

Here, we are called upon to determine whether the unpaid copying of scholarly works by a university for use by students—facilitated by the development of systems for digital delivery over the Internet—should be excused under the doctrine of fair use.

(Opinion pdf page 5).

The central issue in this case is under what circumstances GSU must pay permissions fees to post a digital copy of an excerpt of Plaintiffs’ works to ERes or uLearn (GSU’s course content websites).

(Opinion pdf page 11).

According to the Eleventh Circuit, 

The proper scope of the fair use doctrine in a given case boils down to an evidentiary question. As a conceptual matter, in making fair use determinations, we must conjure up a hypothetical, perfect market for the work in question, consisting of the whole universe of those who might buy it, in which everyone involved has perfect knowledge of the value of the work to its author and to potential buyers, and excluding for the moment any potential fair uses of the work. Then, keeping in mind the purposes animating copyright law—the fostering of learning and the creation of new works—we must determine how much of that value the implied licensee-fair users can capture before the value of the remaining market is so diminished that it no longer makes economic sense for the author—or a subsequent holder of the copyright—to propagate the work in the first place.

(Opinion pdf page 51).

17 U.S.C. §107 is the fair use statute.

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.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

The Eleventh Circuit agreed that the district court’s work by work analysis was the correct approach.  However, the district court erred by mechanically adding up the four fair use factors.  The weight that should be given to a particular factor varies from case to case.

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

Considerations under the first factor include the extent to which the use is transformative and whether the use is for a nonprofit educational purpose.  The word “transformative” is not in the statute.  These considerations should not be applied in such a way as to create categories of presumptively fair use. 

A transformative work alters the original work with new expression, meaning or message. 

Allowing would-be fair users latitude for transformative uses furthers the goal of copyright, to promote science and the arts.  This is because transformative works possess a comparatively large share of the novelty copyright seeks to foster. At the same time, transformative uses are less likely, generally speaking, to negatively impact the original creator’s bottom line, because they do not merely supersede the objects of the original creation and therefore are less likely to supplant the market for the copyrighted work by fulfilling demand for the original.

(Opinion pdf page 62).

The Eleventh Circuit found that GSU’s use of the plaintiff’s works was not transformative.  GSU merely converted portions of the original books into digital format.  There was no new meaning or purpose.  The transformative use analysis is not dispositive in determining whether the first factor weighs in favor of fair use. 

GSU’s use was for a nonprofit educational purpose and not a commercial purpose.  Despite that, the Eleventh Circuit ruled that GSU’s educational use was still a for-profit use.  GSU profits from its use of plaintiff’s works because GSU collects tuition and fees from the students but does not pay licensing fees to the plaintiffs.  The Eleventh Circuit then stated that the profit analysis is better determined under the third factor, the amount and substantiality of the original work that was used.

The Eleventh Circuit ultimately agreed with the Second Circuit that the focus of the  commercial/nonprofit dichotomy is on whether the secondary user’s unauthorized use captures significant revenues as a direct consequence of copying the original work.  Courts are more likely to find fair use when the secondary use produces a value that benefits the broader public interest.

Although GSU certainly benefits from its use of Plaintiffs’ works by being able to provide the works conveniently to students, and profits in the sense that it avoids paying licensing fees, Defendants’ use is not fairly characterized as commercial exploitation. Even if Defendants’ use profits GSU in some sense, we are not convinced that this type of benefit is indicative of commercial use. There is no evidence that Defendants capture significant revenues as a direct consequence of copying Plaintiffs’ works. At the same time, the use provides a broader public benefit—furthering the education of students at a public university.

Thus, we find that Defendants’ use of Plaintiffs’ works is of the nonprofit educational nature that Congress intended the fair use defense to allow under certain circumstances. Furthermore, we find this sufficiently weighty that the first factor favors a finding of fair use despite the nontransformative nature of the use.

(Opinion pdf pages 72 – 73).

2.  The nature of the copyrighted work.

Some works, such as fictional creations, are closer to the intended essence of copyright protection.  Fair use is more difficult to establish for works involving greater creativity than works that are highly factual.  “Creativity” in this context means a higher degree of originality and inventiveness. 

We find that the District Court erred in holding that the second factor favored fair use in every instance. Where the excerpts of Plaintiffs’ works contained evaluative, analytical, or subjectively descriptive material that surpasses the bare facts necessary to communicate information, or derives from the author’s experiences or opinions, the District Court should have held that the second factor was neutral, or even weighed against fair use in cases of excerpts that were dominated by such material. That being said, the second fair use factor is of relatively little importance in this case.

(Opinion pdf page 81.)

3.  The amount and substantiality of the portion used in relation to the copyrighted work as a whole.

Did the secondary user use more of the work than was necessary?  According to the Eleventh Circuit, the first and fourth factors are both intertwined with the third fair use factor.

The inquiry is whether the amount taken is reasonable in light of the purpose of the use and the likelihood of market substitution.

(Opinion pdf page 83).

Courts consider both the quantity and the quality of the materials used in answering this question.

The Eleventh Circuit ruled that the district court erred in applying a blanket 10% or one chapter gauge in determining whether a particular use was a fair use.  The Eleventh Circuit agreed with the other aspects of the district court’s analysis of the third fair use factor.

We find that the District Court properly considered whether the individual instances of alleged infringement were excessive in relation to Defendants’ pedagogical purpose, properly measured the amounts taken in all cases based on the length of the entire book, and properly declined to tie its analysis under the third factor to the Classroom Guidelines or to the coursepack cases. However, we find that the District Court erred in applying a 10 percent-or-one-chapter safe harbor in it analysis of the individual instances of alleged infringement. The District Court should have analyzed each instance of alleged copying individually, considering the quantity and the quality of the material taken—including whether the material taken constituted the heart of the work—and whether that taking was excessive in light of the educational purpose of the use and the threat of market substitution.

(Opinion pdf pages 91 – 92.)

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

Under this factor, courts examine 1) the market harm caused by the alleged infringer and 2) whether the potential market would be substantially and adversely impacted by unrestricted and widespread conduct of the kind engaged in by the alleged infringer.

Market substitution is the primary adverse impact under consideration. 

Market harm is a matter of degree, and the importance of the fourth factor will vary, not only with the amount of harm, but also with the relative strength of the showing on the other factors.  Because Defendants’ use is nontransformative and fulfills the educational purposes that Plaintiffs, at least in part, market their works for, the threat of market substitution here is great and thus the fourth factor looms large in the overall fair use analysis.

(Opinion pdf page 93).

The analysis focuses not on whether this individual defendant caused the plaintiff to lose some potential revenue.  The focus is on the economic harm that would be caused if everybody did it. 

In its individual analysis under the fourth factor of each of the forty-eight works for which it found Plaintiffs had made a prima facie case of infringement, the District Court performed a sufficiently nuanced review of the evidence regarding license availability. Where the evidence showed that there was a ready market for digital excerpts of a work in 2009, the time of the purported infringements, the District Court found that there was small—due to the amount of money involved—but actual damage to the value of Plaintiffs’ copyright.  The District Court also properly took into account that widespread use of similar unlicensed excerpts could cause substantial harm to the potential market. Thus, where there was a license for digital excerpts available, the District Court generally held that the fourth factor weighed against a finding of fair use. In close cases, the District Court went further and examined the amount of permissions income a work had generated in order to determine how much this particular revenue source contributed to the value of the copyright in the work, noting that where there is no significant demand for excerpts, the likelihood of repetitive unpaid use is diminished. Where there was no evidence in the record to show that a license for digital excerpts was available—as was the case for seventeen works published by Oxford and Cambridge—the District Court held that the fourth factor weighted in favor of fair use. We find that the District Court’s analysis under the fourth factor was correct, and that the District Court properly took license availability into account in determining whether the fourth factor weighted for or against fair use.

(Opinion pdf pages 99 – 101).

Summarizing, the Eleventh Circuit held that the district court did not err in holding that the first factor favors fair use.  The district court erred in holding that the second fair use factor favors fair use in every case.  The district court erred in in applying a blanket 10% or one chapter gauge in determining whether a particular use was a fair use.  The district court did not err in its analysis of the fourth factor, but did err in the weight it gave the fourth factor in its overall fair use analysis.

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.

(Opinion pdf page 111).

This case is Cambridge University Press v. Patton, Nos. 12-14676 & 12-15147, Eleventh Circuit Court of Appeals. 

Judge Tjoflat wrote the majority opinion, which Judge Marcus joined.

Judge Vinson wrote a concurring opinion to reverse and remand the case.  But he thought that the district court erred in broader and more serious ways that the majority opinion indicated.  He thought that both the district court’s methodology and analysis were flawed.

Fair use is a common law doctrine and remains so, even though it was codified in the Copyright Act of 1976. 

A proper fair use analysis should focus primarily on the use of the work, not on the user. So, in analyzing fair use in a given case, the court should step back a little, just as you would at an art museum, and view the work and its use in its entirety. Viewed in this way, and after applying traditional common law principles to the use at issue here, this is a rather simple case. Checking the four statutory factors to ensure that they have been considered merely affirms the conclusion that what GSU is doing is not fair use.

(Opinion pdf page 115).

This case arises out of a university-wide practice to substitute paper coursepacks (the functional equivalent of textbooks) that contained licensed copyrighted works with digital coursepacks that contained unlicensed copyrighted works. This was done for the vast majority of courses offered at GSU and, as will be seen, it was done primarily to save money.

Defendants have the burden to show by a preponderance of the evidence why this aggregated use in electronic form is fair use — when the exact same use in paper form is not. In my view, they have not even come close to doing so.

(Opinion pdf pages 116 – 117).

Judge Vinson thinks that actual use does not differ in the move from paper coursepacks to digitial coursepacks and that the real reason the move was made was to save money.  That’s not a fair use.

Judge Vinson disagreed with the majority that “the first factor weighs in favor of fair use just because the works are being used for educational purposes at a non-profit university.”  (Opinion pdf page 122).  Judge Vinson thinks that the nontransformative use weighs heavily against a fair use finding.

Judge Vinson also disagreed that the district court’s fourth factor analysis was correct.  The proper question is whether some meaningful likelihood of future harm exists and does not require a showing of lost profits. 

I agreee with Judge Vinson that GSU’s use was not a fair use.

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