Copyright, fair use and the for-profit sector

Information Outlook, May, 2002 by James S. Heller

INTERPRETING COPYRIGHT LAW IN LIBRARIES IS NOT AN EASY TASK. Applying the fair use provision (section 107) and the library exemption (section 108) of the Copyright Act to the for-profit sector is particularly difficult. In determining whether a particular activity is permitted as a fair use under the section 108 exemption, one must distinguish between the different types of for-profit institutions. On one hand are copyshops, such as Kinkos, which generate income from making copies. Similar to copyshops are for-profit companies -- such as TDI Library Services and Instant Information Systems -- whose business is to provide document delivery services for a fee. Then there are companies, such as the Texaco corporation or law firms, whose business is not to make copies, but who instead reproduce copyrighted works only incidentally.

Because they are not libraries, copyshops and fee-based document delivery companies do not qualify for the section 108 library exemption. And because they are in the business of making and distributing copies, it is doubtful that copying they do for their customers could qualify as a fair use. Copyshops and document delivery suppliers, however, are different from companies that do not directly profit from making copies for their customers. A review of selected litigation involving publishers and the for-profit sector sheds light on the application of the fair use doctrine and library exemption in the for-profit sector.

Litigation Involving Copyshops

Publishers took on copyshops in the 1980's, beginning with a successful lawsuit by Basic Books against the Gnomon Corporation, which operated several stores in the Northeast. Gnomon was enjoined by a Connecticut federal district court from making copies of journal articles and book chapters, putting them together as compilations and selling them.

Two subsequent cases received greater publicity than the Gnomon case, probably because the end-users were university students. In Basic Books, Inc. v. Kinko's Graphics Corp. (1), the copyshop was sued by several publishers for making photocopies of copyrighted articles and portions of books and compiling them in what are commonly called "coursepacks." Kinkos maintained that the copying was educational because it was done for students at the request of their instructors. The federal district court disagreed and described the copying as non-educational and commercial. The court concluded that Kinkos was a willful infringer, criticizing its internal policies and procedures and its failure to educate and adequately supervise their employees.

The second case, decided in the 1990s, involved Michigan Document Service, a copyshop in Ann Arbor. In the "MDS" case (2), a decision by a three-judge panel of the U.S. Court of Appeals for the Sixth Circuit in favor of the copyshop was later reversed by the entire court. Unlike the Kinkos case, the original appeals court panel called MDS's copying "educational" and held that its producing coursepacks for students at the University of Michigan was a fair use. The entire court reversed and held that MDS's systematic and premeditated copying for commercial motivation was infringing. (The court also noted that MDS's copying went beyond what was agreed to in the classroom guidelines envisioned by Congress that were included in the legislative history of the 1976 Copyright Act) (3).

Litigation Involving For-Profit Document Deliverers

In the early 1990s West Publishing Co., a publisher of law books, sued several for-profit information brokers for infringement. One defendant (Aaron-Smith) settled with West and agreed not to copy and distribute the proprietary features from West caselaw reporters, such as headnotes and synopses of the published court decisions. The other defendant, Faxlaw, was enjoined from copying and distributing the proprietary features of West publications.

Litigation Involving Businesses and Corporations for In-House Copying

In the early 1980s, Harper & Row Publishers sued pharmaceutical corporations American Cyanamid and E.R. Squibb for in-house duplication of copyrighted journal articles. Both cases resulted in out-of-court settlements, with each company agreeing to join and pay royalties to the Copyright Clearance Center (CCC), a clearinghouse for the receipt of royalties. Under the Squibb settlement, the parties agreed that Squibb could be excluded from reporting and paying royalties for up to six percent of their copying, which was considered fair use.

A decade later, newsletter publisher Washington Business Information sued the Collier, Shannon & Scott law firm for making cover-to-cover copies of newsletters and sending them to attorneys throughout the firm. The firm reportedly paid a huge amount of money to the publisher to settle the lawsuit. (4) In 1999, LeBoeuf, Lamb, Greene & MacRae (a large New York-based law firm) purchased a multi-year photocopying license with the CCC and paid an undisclosed settlement to avoid a copyright infringement suit brought by four publishers.