11 Oral Arguments in the above-entitled cause
12 on September 15, 1995, before Judge McKay, Judge Nelson, and
13 Judge Ryan, transcribed by Cheryl McDowell, CSR-2662, a Notary
14 Public in and for the County of Livingston.
16 PROSKAUER ROSE GOETZ & MENDELSOHN
(By: Mr. Ronald S. Rachberg)
17 1585 Broadway
New York, New York 10036
18 Appearing on behalf of the Plaintiffs-Appellees.
19 BODMAN, LONGLEY & DAHLING LLP
20 (By: Ms. Susan M. Kornfield) 110 Miller, Suite 300
21 Ann Arbor, Michigan 48104
22 Appearing on behalf of the Defendants-Appellants.
1 September 15, 1995
2 – – –
3 MS. KORNFIELD: Good morning, Your Honors.
4 My name is Susan Kornfield, and I represent the
5 defendants, Michigan Document Services and Jim Smith.
6 Mr. Smith is in the courtroom today. I’d like to
7 reserve three minutes of my time for rebuttal.
8 JUDGE: Fine.
9 MS. KORNFIELD: The defendants appeal the
10 order of the District Court granting summary judgment
11 to the publishers in this fair use case. That order
12 prohibits students and professors from receiving from
13 Michigan Document Services the kind of photocopy
14 services they had been receiving for fifteen years.
15 We ask that the court reverse that grant of summary
16 judgment and enter summary judgment for the defendants.
17 In our briefs we raise a number of
18 issues and a number of defenses. Today I’d like to
19 focus on three points. The first point is the meaning
20 of the phrase the use of the work in the Fair Use
21 Statute. The second point is a proper analysis of the
22 fourth statutory factor, and the third point is the
23 social value of defendants’ services and the fact that
24 the students and the professors cannot receive those
25 services from the publishers.
1 The use of the work is both a factual
2 context and a legal context, and we have briefed the
3 issue of the way in which the professors take the
4 responsibility for selecting the works that are going
5 to be used by the students that semester, determine
6 which books are going to be required reading, which
7 works, if any, are going to be excerpted, the length
8 of the excerpt, the purpose for which the work is
9 excerpted, determines the order in which the materials
10 will appear if there are going to be a number of
11 materials for the classroom reading. The professor
12 then physically takes those materials to Michigan
13 Document Services and instructs MDS as to the number of
14 students who are enrolled in the class that term and
15 any requirements of that professor for those students.
16 MDS makes the copies.
17 The students are then told when they go
18 to class that they can stop by MDS and pick up their
19 personal copy or, if they wish, they can go to the
20 library and make their own copies and where it will
21 cost them about twice as much money. The students
22 who go to MDS pick up their course pack, use it in
23 connection with their classroom activities, reading,
24 studying, analyzing, and discussing.
25 The record shows that these facts are
1 all in the record, they are not disputed, and that
2 MDS either discards or recycles any leftover course
3 materials and makes no sales to the public, a fact
4 found by the District Court. Then, therefore, this
5 loop which begins with the professors making the
6 determinations about the classroom materials through
7 the excerpting, through making the copies of the
8 excerpts by the professors, dropping those off at MDS
9 who then makes the copies for the students, is a closed
10 loop which is the factual context for the use of the
11 work in this case.
12 Then we have the legal context. The
13 legal context for the use of the work begins with the
14 plain language of Section 107. Congress specifically
15 stated that a fair use of a work is not an infringement
16 of copyright. Congress stated that the fair use of a
17 work for purposes such as teaching, including multiple
18 copies for classroom use, was not an infringement of
19 copyright. So that phrase, multiple copies for
20 classroom use, indicated that congress understood the
21 use of the work is in the classroom or in connection
22 with the classroom. The copying of the work is a
23 separate act. It is intrinsic to the student’s ability
24 to make a classroom use of the works.
25 This court in National Rifle Association
1 versus Handgun Control noted that the legal focus of
2 the use of the work is the use of the work in the hands
3 of the individuals who study it and discuss it. For
4 example, in that case the NRA had prepared a list of
5 two hundred names of legislators. Handgun Control
6 Federation who had views opposite the NRA had two
7 hundred copies of that list made and distributed it to
8 its members.
9 This court analyzed the use of the work
10 by looking at the use of that NRA list in the hands of
11 Handgun Control and its members. This court found that
12 that use was a First Amendment kind of use to discuss
13 issues of public concern, to petition the government.
14 It also found that the use also served an educational
15 function. Had the NRA —
16 JUDGE: Is it, is it your contention, Miss
17 Kornfield, that the reproduction of the copyrighted
18 work for the purpose of teaching is always a fair use?
19 MS. KORNFIELD: No, Your Honor. We state
20 that it is a designated fair use by congress and by the
21 Supreme Court and indeed by this court. One must still
22 apply the other factors. But since the purpose of the
23 use is a point of reference for analyzing the other
24 four factors, the fact that it was used in this case
25 for teaching is a very relevant purpose.
1 Had the NRA sued the copy shop, we have
2 no doubt that this court would not have suddenly said,
3 oh, we’re not going to look at the use of the list in
4 the hands of Handgun Control or its members. We’re
5 going to forget the First Amendment purposes and the
6 educational purposes.
7 This is the very same view of the use of
8 the work taken by the Supreme Court as we see in the
9 Acuff Rose case and Sony. In those two cases, for
10 example, in Acuff Rose, the Supreme Court did not care
11 that the CD manufacturer or the manufacturer of the
12 album or the tape had made multiple copies. The
13 Supreme Court’s analysis to determine whether it was a
14 fair use was on the use of the Roy Orbison song, Pretty
15 Woman, in the hands of 2 Live Crew. That was the focus
16 for whether the use was fair.
17 Likewise in Sony, even though Sony
18 is a for-profit corporation and it manufactured for
19 commercial purposes the VCRs, the Supreme Court noted
20 that no home viewers were sued in that case but that
21 the court was required to look at the use of those
22 copies of the broadcasted shows in the hands of the
23 home viewer to determine whether or not it was a fair
24 use, and the court noted that was a noncommercial use.
25 Thus, it’s critically important in this
1 copyright case to correctly focus on the use of the
2 work because that is going to have an effect then on
3 the analysis of the four factors. We see in going to
4 the first factor that the statute did not ask us to
5 look at the purpose of the copier or the character of
6 the copier. It directs the court’s attention to the
7 use of the work in the hands of the users, and that, of
8 course, are the students and professors.
9 MDS’s role is simply to make copies,
10 and we can see that it is merely a copier because as
11 the facts show, the undisputed facts, MDS charges a
12 per page fee regardless of what material is on that
13 page. Literally whether it is blank, whether it has
14 a table of contents, whether it has an excerpt from a
15 copyrighted work or public domain work, it’s the same
16 nickel a page, just like when I went to have my briefs
17 copied for this case, I went down the street, dropped
18 off my materials, said I needed twenty copies, went
19 back, got twenty copies, was charged a per page fee.
20 I’d like to next move to the proper
21 analysis of the fourth factor. As the court knows,
22 the Supreme Court has held that the effect of the use
23 upon the market is the most important factor. This
24 case establishes that the publishers have failed to
25 introduce any evidence whatsoever that there was even
1 one lost sale of one work. Instead the publishers
2 have an argument that goes like this. Since we own
3 the copyright on the work, we’re entitled to all of
4 the money that could be made by any use of the work
5 we are willing to charge for.
6 That’s a circular argument which the
7 District Court accepted. The reason this argument is
8 clearly circular is everyone would agree that if a use
9 is fair, no permission need be sought, no fees need be
10 paid. Thus, it is illogical for the publishers to say
11 but we’re willing to charge; therefore, the use can’t
12 be fair. That would eliminate from the realm of fair
13 use the very uses congress has identified because all a
14 publisher or any copyright owner would have to say is
15 we’re willing to charge for that use, and, in fact, in
16 this case we see that the publishers were willing to
17 charge for a fair use and the District Court allowed
18 the publishers to prevail without any evidence
19 whatsoever that the use was an infringement.
20 You can see the circularity that
21 other’s argument will also have the effect of allowing
22 publishers to permission out of existence the kinds of
23 designated fair uses in the first half of Section 107.
24 All they have to say is we’re willing to charge for
25 news reporting, we’re willing to charge for scholarship
1 and for research and for criticism and commentary. It
2 will allow what the Supreme Court has said cannot be
3 allowed and that is taking the limited statutory
4 monopoly and making it absolute because the professors,
5 the publishers, excuse me, will then have control over
6 the fair use market by simply stating we’re willing to
7 charge, we’ve set up systems to charge for it.
8 Finally, it will allow the publishers to
9 never have to introduce evidence of the impact of the
10 use of the work on the market for the work because all
11 they have to say is we’re willing to sell fragments,
12 and this is not, by the way, a derivative work. It is
13 not as the publishers have claimed a derivative use.
14 Derivative works as we know from the Copyright Act
15 require additional authorship and transformation.
16 This is the words of the statute multiple copies for
17 classroom use for purposes such as teaching.
18 JUDGE: Counsel, have they — does the record
19 reflect that they’ve said they are willing to sell
20 portions or that they’re willing to license the sale
21 of portions?
22 MS. KORNFIELD: Your Honor, it’s the same
23 thing. Well, it’s the same thing in that —
24 JUDGE: No, it isn’t the same thing. If they
25 are willing to produce it in their shop and sell it,
1 that’s different than being willing to license your
2 client to produce it and sell it.
3 MS. KORNFIELD: Your Honor, at the record on
4 page thirty-seven oh one, the publishers testified they
5 are not in the same business as Michigan Document
6 Services. Professors cannot go to them to have
7 materials like this.
8 JUDGE: That’s all I wanted to know.
9 MS. KORNFIELD: We can see then that the
10 failure to read the plain language of Section 107 by
11 the District Court, its decision to actually amend
12 the statute by inserting a new requirement and that
13 is that a fair user may not go to a copy shop to have
14 the copies made, the refusal of the District Court
15 to consider the testimony of the students and the
16 professors as relevant to a case involving the use by
17 the students and professors of these excerpts, the
18 fact that the District Court was willing to allow the
19 publishers to fail to meet the burden on the fourth
20 factor by merely reciting that they’re willing to
21 charge people to make these copies, and the failure
22 of the District Court to understand the distinction
23 between the copy of the work and the use of the work
24 requires the reversal of the grant of summary judgment.
25 And we can see then that the District Court’s focus on
1 money in this case, thinking that because Michigan
2 Document Services charges a fee to make copies, it was
3 somehow using the work, allowed the District Court then
4 to conclude that Mr. Smith was, and, yes, we’re not
5 only infringers, they were willful infringers because
6 the court said it was unreasonable for them to conclude
7 that their activities were lawful when they fit within
8 the terms of the statute.
9 Since that court’s opinion as this court
10 knows, in November there was a filing of an Amicus
11 brief by eleven copyright scholars. Those scholars
12 stated that not only is Mr. Smith’s conduct perfectly
13 lawful and been clearly not willful but the conduct of
14 the publishers is unlawful. We think the filing of
15 that brief by the Amici scholars certainly at a minimum
16 takes care of the issue of willful infringement.
17 The third point I wanted to make was
18 that the students and professors cannot receive from
19 the publishers the services they receive from MDS which
20 gets to your point, Judge McKay. The dissent in this
21 court’s decision in Acuff Rose pointed out that there
22 are certain factors a court may consider even though
23 they are not a part of the four statutory factors, and
24 the dissent in that opinion stated the social value of
25 parity was something to be considered.
1 Here the social value is the education
2 of America’s students. In a situation where the
3 professors have already testified these excerpts were
4 not a substitute for the work, the professors were not
5 going to assign the work, it was a substitute in this
6 case for the students going to the library and making
7 their own copies of the work at twice the price. It’s
8 a case where the professors have testified that they
9 are authors, they desire that their works be excerpted
10 when the professor has elected to not assign that work
11 to the students. In this case the professors have
12 testified it’s an incentive for them to create works
13 when they will be excerpted and will be available to
14 students for study and analysis and commentary and,
15 furthermore, that the publishers’ tactics are a
16 disincentive for them to create additional works of
18 There’s also social value to the fact
19 that Michigan Document Services conforms its practices
20 to the Copyright Act. As you note in Mr. Smith’s
21 affidavit, he has gone through great lengths to get
22 an understanding of the copyright law. He’s not a
23 lawyer, he’s not a copyright lawyer, he’s not a college
24 graduate, but he did read Section 107 of the Copyright
25 Act, 1985 or 1986. He is very familiar with how the
1 professors excerpt works and how his services are
2 provided to the students. The publishers, on the
3 other hand, have testified that their policies are
4 established without regard to the Copyright Act.
5 The court then compounded its error by
6 entering a clearly unconstitutional injunction. I have
7 apparently the only client in the country who cannot
8 copy the Declaration of Independence when it appears
9 in the papers of Thomas Jefferson, a work that is
10 published by Princeton University Press, and that’s
11 because Judge Hackett held that Michigan Document
12 Services and Mr. Smith may not copy any portion of any
13 work that is published by these three publishers
14 without going through whatever process the publishers
15 feel is appropriate or that they want Mr. Smith to go
17 Thus, there’s no requirement in the
18 District Court’s injunction that the work be original,
19 there’s no requirement that it be owned by these
20 publishers, only that it be published by them. There
21 is no focus on whether the work is in the public domain
22 or whether it’s a third-party work. There’s no focus
23 on the nature of the work as to whether or not it is a
24 factual and informational work or at the other end of
25 the continuum and is largely a creative work. There’s
1 no requirement now for a case-by-case analysis as the
2 Supreme Court requires. There’s no examination into
3 the statutory factors or other defenses or other
4 factors. There’s no need for these publishers now to
5 comply with the requirements of the Copyright Act and
6 actually register their works, and it gives perpetual
7 copyright. Currently all works before 1918 are in the
8 public domain in the United States. My client would be
9 prohibited from copying any of those if they appeared
10 in a work by these three publishers. This injunction
11 injures not only the students and the professors; it
12 injures authors, it injures society, and it injures
13 legitimate business.
14 Thus, the facts in the record
15 demonstrate that the District Court could never have
16 granted summary judgment for the publishers in this
17 case. There are no facts that support that this is an
18 infringement because as we walk through each of the
19 four statutory factors as we did in our brief, the use
20 by the professors and the students falls squarely
21 within the literal terms of the statute and how those
22 terms have been interpreted by the Supreme Court.
23 The District Court’s grant of summary
24 judgment for the plaintiffs violated all of the rules
25 about granting summary judgment. The evidence of
1 Michigan Document Services and of Mr. Smith was to be
2 believed and was not to be discredited or ignored or
4 JUDGE: You’re kind of approaching the end.
5 You’ve gone a little over your time.
6 MS. KORNFIELD: I am, in fact, on my last
7 paragraph, Your Honor.
8 JUDGE: Okay.
9 MS. KORNFIELD: The — all justifiable
10 inferences were to be drawn in favor of MDS and in
11 favor of Mr. Smith. The District Court was not to
12 weigh the evidence or to determine the truth of the
13 matter which is exactly what the District Court did,
14 and while it could have granted summary judgment to the
15 defendants, at a minimum it had to deny the publishers’
16 motion and set this case for a jury trial.
17 Our closing quote, Your Honor, is from
18 Judge Hackett. Judge Hackett stated copyright law must
19 be protected, and although she wrote that sentence at
20 the time that she found against my clients, we quote
21 that sentence today to ask this court to protect
22 copyright law and to enforce Section 107 as written and
23 to reverse the order of the District Court and grant
24 summary judgment for the defendants. Thank you.
25 JUDGE: Thank you, ma’am.
1 Counsel, if it will assist you in
2 planning your presentation, if you’d like to take
3 twenty minutes or a little bit longer, please feel free
4 to do so.
5 MR. RACHBERG: Thank you, Your Honor. My
6 name is Ronald Rachberg, and I represent the plaintiff-
7 appellees in this matter.
8 The undisputed facts in this case at
9 their core show that both the plaintiffs and the
10 defendants are engaged in the business of selling
11 educational materials to students and attempting to
12 make some profits in those sales. I accept Princeton
13 University Press, one of the plaintiffs, which
14 ultimately is a not-for-profit company pursuing a
15 scholarly mission, but it, too, is in the business
16 in its pursuit of its mission in trying to sell
17 educational materials to students.
18 Princeton, Macmillan, St. Martin’s Press
19 all publish textbooks, anthologies, compilations of
20 other readings, scholarly works and other works that
21 they hope will find a market among students. So,
22 too, the defendant publishes books, compilations of
23 readings, he calls them course packs but they are
24 books, anthologies, three of them are in the record,
25 and the defendant sells those books to students, and
1 so the defendants, too, are trying to obtain some
2 portion of the substantial market that exists among
3 students at colleges and universities for educational
5 JUDGE: Counsel, let me ask you a sequential
6 question. Do you dispute that a professor could copy
7 this material as it is on a rented copy machine rented
8 from Xerox?
9 MR. RACHBERG: I don’t think that question
10 has to be answered in this case.
11 JUDGE: I want the answer to it.
12 MR. RACHBERG: Well, the publishers have
13 not — I understand Your Honor wants the answer and —
14 JUDGE: Are you arguing that this, there’s
15 something about this material that would prevent a
16 professor from copying it without violating the
17 copyright laws?
18 MR. RACHBERG: If the question is could a
19 professor produce a book like this or could a
20 university prepare a book like this and sell it to
21 students in the same way that Michigan Document Service
22 does, I would point out that it may well be that the
23 answer is no. There are classroom guidelines that were
24 adopted by the congress as part of the legislative
25 history of the Copyright Act that express what congress
1 said is the congressional intent in defining the extent
2 of fair use of copying for purposes of education, that
3 describe how far a —
4 JUDGE: Have you asserted in the trial court
5 or in your brief here that this material is material
6 that the university, that a professor could not
7 duplicate on a rented copy machine in the professor’s
9 MR. RACHBERG: No, Your Honor, we have not
10 made that argument.
11 JUDGE: All right. Now, have you disputed
12 that the professor could make multiple copies and
13 distribute them to the students in the class?
14 MR. RACHBERG: We have not made that
15 argument, either.
16 JUDGE: You’ve not made that argument. Do
17 you make that argument now?
18 MR. RACHBERG: No, Your Honor. The argument
19 that —
20 JUDGE: Could the professor, have you made
21 the argument that the professor could not charge the
22 students the per page rental cost of the machine? In
23 other words, if the rental is on a per page basis for
24 the copy machine, that the professor could not charge
25 the students the reimbursement of that cost of
1 duplicating these exact materials.
2 MR. RACHBERG: We have not made that
4 JUDGE: Okay.
5 MR. RACHBERG: The argument we do make,
6 Your Honor, is the difference between copying by a
7 professor or by a college or by a student which are
8 not-for-profit copies and copying by a commercial copy
9 shop that’s in the business of promoting this kind of
11 JUDGE: Well, let me ask you this. Could you
12 then sue Xerox for renting its machine to the professor
13 on a per page basis?
14 MR. RACHBERG: Well, the question then I
15 suppose would be whether Xerox is a contributory
16 infringer. Xerox is not making the copy; someone
17 else is, in this case MDS. I think the teaching of
18 the Sony case is that if the manufacturer of equipment
19 has a substantial noninfringing purpose, then the
20 manufacturer is not a contributory infringer. So I
21 don’t believe we could sue Xerox. I do believe we can
22 sue the commercial copy shop that’s in the business of
23 advertising and promoting and selling these works.
24 These people, Mr. Smith and MDS, advertise, they send
25 fliers out that promote this service, they write
2 JUDGE: What service, sir?
3 MR. RACHBERG: The business of making these
4 books and selling them to students. It’s a business
5 that they advertise and sell just as the plaintiffs
6 advertise in order to sell their products.
7 JUDGE: Do they advertise the content of each
8 course pack or any course pack?
9 MR. RACHBERG: The advertisements that we
10 have seen have not advertised the content of the course
11 packs. They’ve advertised the availability of the
12 course packs and the fact that they are substitutes
13 for books published by the plaintiffs. They have
14 advertised that their books can be used in place of
15 textbooks. They say that explicitly in their fliers.
16 JUDGE: I understand. Supposing the
17 professor in Judge McKay’s hypothet has a ne’er-do-well
18 son who can’t get a job and is hanging around the
19 University of Michigan bothering the professor, and so
20 the professor says to the son, look, I’m too busy to be
21 doing what I’ve been doing for these kids, you do it
22 and I’ll ask the kids if they’ll give you fifty cents
23 for each of the course packs. Do you argue that that
24 is forbidden under the Copyright Act?
25 MR. RACHBERG: Your Honor, I think the best
1 way to answer that question, and, Judge McKay, I think
2 this applies to your questioning as well, is to refer
3 to one of the cases that has considered questions along
4 these exact lines which is Los Angeles News Service
5 against Tullo, a case that went to the Ninth Circuit
6 Court of Appeals and a case that involves excerpts of
7 video broadcasts, news broadcasts that were copied by
8 the defendant and sold to users who were able to claim
9 a fair use just as professors and students may be able
10 to claim a fair use here.
11 But the copying there was not made
12 by the users. The copying was made by Tullo, the
13 defendant, a commercial copier that made the copies and
14 sold them, and the court there drew the distinction
15 between copying that can be made not for profit by the
16 user and copying that’s made commercially by a seller.
17 They gave the example, for example —
18 JUDGE: Mr. Rachberg, how about indulging me
19 by answering my question? Do you want me to put it
21 MR. RACHBERG: No, I recall your question,
22 Your Honor.
23 JUDGE: Do you argue that that is forbidden
24 by the Copyright Act?
25 MR. RACHBERG: Your Honor, the only argument
1 that we make today and that we need to make is the
2 argument that the commercial for-profit sales —
3 JUDGE: No. Pardon me, Mr. Rachberg. It’s
4 customary in this circuit that when one of the members
5 of the court puts a question to counsel, counsel
6 attempts to answer the question even if counsel thinks
7 it’s a dumb question. Would you indulge me by
8 answering the question whether you believe, I’ll change
9 the verb, or think, still another verb, that on the
10 hypothet I put to you, there would be a violation of
11 this section of the Copyright Act?
12 MR. RACHBERG: Your Honor, may I answer in
13 terms of the arguments that my clients are making? I
14 don’t mean to evade your question and I don’t mean any
15 disrespect. I’m trying to be responsive.
16 In terms of my own belief, I believe
17 that the classroom guidelines would indicate that the
18 copying that you have described would be inconsistent
19 with the copyright law. The vast lengthy, the size
20 of the excerpts, they’re being aggregated into an
21 anthology as opposed to occasional and sporadic
22 individual elements, the fact that they’re more than a
23 thousand words, the amount specified in the classroom
24 guidelines for the safe harbor, the fact that
25 permission is available from the publishers when
1 sought, all in terms of my belief indicate that such
2 copying even when done by a not-for-profit institution
3 would be a copyright infringement.
4 But, at the same time, I hasten to add
5 that is not the argument that these plaintiffs made
6 below. It is not the arguments these plaintiffs make
7 here. The position that has been advanced in this case
8 has consistently attempted and I attempt today to
9 distinguish between the not-for-profit copying done by
10 professors or students or universities on the one hand
11 and the for-profit copying done by commercial copy
12 shops like Smith that are profiting by selling works
13 that belong to the plaintiffs.
14 JUDGE: What does this rather voluminous
15 record show as to the effect of the for-profit use that
16 you’ve described upon the potential market for or value
17 of the copyrighted work, the fourth statutory factor?
18 MR. RACHBERG: The record is clear in
19 showing, clear and I should say undisputed in showing
20 that each of these three plaintiffs has a permissions
21 department that receives thousands of requests each
22 year for permission to reproduce excerpts from their
23 published works. There is a functioning, viable,
24 established market for requests for and the granting
25 of permission to copy lengthy excerpts from these
2 JUDGE: What you’re arguing is that the fact
3 that your market for permission is what is damaged, not
4 your market for the works from which the excerpts are
6 MR. RACHBERG: We are arguing the damage to
7 the market for permissions, and that market the Supreme
8 Court has repeatedly held is one of the markets that
9 does belong to a copyright holder and it’s one of the
10 markets that when considering the fourth factor in a
11 fair use analysis the Supreme Court has repeatedly
12 referred to. In the Harper & Row case, sales by
13 Harper & Row of its book were not claimed to be
14 affected by the nation’s copying of a few hundred words
15 from the book. The copying by the magazine hurt the
16 ability of Harper & Row to license the publication of
17 an excerpt, and that was harm sufficient to make the
18 use unfair in the Harper & Row case.
19 In Stuart v. Abend, the Supreme Court
20 dealt with the making of a movie based on a short
21 story. Sales of the short story were not harmed. The
22 harm was the loss of the license fee to get a license
23 to make a movie. That was harm and it was fourth
24 factor harm, and it led to a finding of no fair use.
25 So, too, here where these publishers
1 have an existing market where Mr. Smith’s and MDS’s
2 competitors, the record below shows that most of the
3 competitors, I say most because there’s some as to
4 which there’s no information in the record. To the
5 extent there’s information in the record, all of
6 Mr. Smith’s competitors ask for permission and pay
7 license fees when they make these books. Universities
8 take the position that that’s the way it should be done
9 and universities also apply for permission and pay.
10 JUDGE: In light of the, in light of the
11 Supreme Court decisions you’ve cited, are you
12 contending that it doesn’t make any difference whether
13 your argument on the fourth factor is circular as Miss
14 Kornfield says it is or would you deny that it, in
15 fact, is a circular argument?
16 MR. RACHBERG: I would deny that it’s
17 circular. The suggestion of circularity as argued by
18 my adversary could be made equally to the Harper & Row
19 case. If that was a fair use, then there would have
20 been no loss of licensing income. In Stewart v. Abend,
21 if that was a fair use, there would have been no loss
22 of licensing. That circularity argument is made all
23 the time. In the Texaco case recently, the Second
24 Circuit addressed circularity in specific and said that
25 the argument does not pertain when there exist
1 reasonable or traditional or even potential markets in
2 which the people who own the copyrights can receive
3 license fees.
4 JUDGE: Counsel, let me —
5 MR. RACHBERG: If I just may finish —
6 JUDGE: I’m sorry.
7 MR. RACHBERG: — the answer to Judge
8 Nelson’s question, there is no circularity here because
9 we’re not trying to establish in this case the right to
10 get license fees. What we have is a longstanding
11 permissions market under which we always have obtained
12 license fees. It’s even referred to in the 1966 House
13 Report cited in our brief, that longstanding market,
14 the fact that authors depend on license fees for the
15 reproduction of excerpts and anthologies, that
16 thousands of permissions and substantial income is
17 what’s threatened by Mr. Smith, and that’s fourth
18 factor harm, not in a circular way. I’m sorry, Judge
20 JUDGE: Counsel, I want to — I haven’t lived
21 with this law like you have, but there’s some difficult
22 distinctions that need to be made, and my questions are
23 not meant as traps. But I want to give you just one
24 more hypothetical to try to focus on where you perceive
25 the breaking point to be here, at least one more
2 If the professor has designated on a
3 slip of paper these materials and says to the students
4 it’s up to you to either use the two or three reserve
5 copies I have or to go get them Xeroxed and they take
6 them to this defendant, the students individually take
7 them to the defendant and pay this defendant to copy
8 and collate and bind them, is that a violation by this
9 defendant as you understand the analysis under existing
11 MR. RACHBERG: Yes, I believe it would be. I
12 believe that for a commercial copy shop to copy
13 copyrighted material —
14 JUDGE: Then would you give me an analytical
15 distinction between why that activity would be a
16 violation and it would not be a violation for Xerox
17 to rent machines to professors on a per page basis?
18 MR. RACHBERG: I believe when Xerox rents a
19 machine to a university, it does not retain control
20 over what the university copies on that machine. The
21 university might make infringing copies and the
22 university might make noninfringing copies. Xerox
23 can’t control that and, therefore, Xerox doesn’t have
24 that responsibility. Since there is a substantial
25 opportunity for that machine to be used in a
1 noninfringing way, Xerox can’t be charged if someone
2 instead misuses it in an infringing way. That’s my
3 understanding of the holding of the —
4 JUDGE: But what I’m just looking at is,
5 trying to understand is whether making a profit from
6 the replication of otherwise exempt materials, however
7 it is made, is the breaking point in this case.
8 MR. RACHBERG: I think I would state it
9 slightly differently.
10 JUDGE: Whether it’s the duplication or it’s
11 the making of the copy because I assume the professor
12 could go pay this copy shop to make copies for the
13 professor if the professor wanted to on a per page
14 basis or are you arguing it couldn’t?
15 MR. RACHBERG: What I’m, what I’m arguing is
16 that leaving aside the possibility that not-for-profit
17 educational copying can be infringing for the moment
18 because it can be and the cases, the cases that have
19 considered educational copying —
20 JUDGE: But I take it this case did not go
21 off on that ground that this would be an infringement
22 for the professor to make these copies individually.
23 MR. RACHBERG: Well, as I said, let’s assume
24 for the sake of your question, Your Honor, that the
25 copying if done by the professor on a copy machine
1 that belonged to him or the university would be
2 noninfringing. For purposes of the question, I
3 accept that.
4 I am then arguing that if instead of
5 the copying being done that way at the not-for-profit
6 institute of the college, if instead a student goes to
7 a copy shop that’s in the business of making money by
8 duplicating and they make money by duplicating
9 copyrighted materials, then you’ve got the commercial
10 motives, the profiting, and the copying all in one
11 place, and I think that’s a violation of the Copyright
12 Act and that’s what we argue here, and I also believe
13 that that’s consistent with, with congressional intent
14 and with the decided cases.
15 The congress distinguished between
16 not-for-profit copying and copying for profit in the
17 legislative history. The congress distinguished
18 between the not-for-profit copying that an educational
19 institution could do and the possibility that the
20 educational institution would ask a for-profit copying
21 establishment to do the copying, and this is quoted in
22 our brief, and said those are different cases. What
23 can be done by not-for-profits can’t be done for
25 So I think to focus on a breaking
1 point, I think that’s the breaking point; whatever is
2 permissible to the not-for-profit is not permissible
3 to those who are in money, who are trying to make
4 money out of it.
5 JUDGE: Miss Kornfield suggests that in
6 addition to the four statutory factors, we are entitled
7 to consider nonstatutory factors as well. In referring
8 to my dissent in Acuff Rose, she suggests that social
9 utility could be such a factor. Could you say a word
10 on the social utility of what it is that this copy shop
11 though operating for profit is actually doing?
12 MR. RACHBERG: I, of course, agree that other
13 factors may be considered including social utility, but
14 I don’t believe that the social utility of course packs
15 is at issue here.
16 It is, of course, correct that these
17 books have social utility. They are useful in
18 education. There’s no question about it. The reason
19 that they are useful in education is that an enormous
20 amount of intellectual effort by authors has gone into
21 creating the copyrighted works that are found in this
22 book sold by MDS, and those, and the copyright owners
23 of the product of that intellectual labor have the
24 exclusive right to profit by selling copies of the
25 copyrighted work. So I would certainly agree that
1 this book has social utility, just as the plaintiffs’
2 works have social utility. But that doesn’t, that
3 doesn’t lead to the conclusion that they can be copied
4 at will.
5 Course packs are created by companies
6 that pay royalties. Course packs are created by
7 companies that act consistently with the copyright
8 law, ask for permission, and pay royalties. To the
9 extent we know about the seven copy shops that compete
10 with MDS in the Ann Arbor area, they all apply for
11 permission and pay royalties and they’re still in
12 business. The record reflects in the documents
13 submitted by Wayne State University in which they
14 stated university policy that copyrighted excerpts
15 should not be included in course packs unless
16 permission is obtained. They stated that
17 Barnes & Noble has assured the university that it
18 will produce the course parks and get the permissions
19 acting through a national permission service.
20 So the issue is not will students get
21 course packs or not. The issue is not will professors
22 get course packs or not. Students and professors will
23 get course packs because there are people who are in
24 the business of providing those course packs who pay
25 royalties to the copyright holders who are responsible
1 for the intellectual labor that gives them the value.
2 The issue is whether Mr. Smith and his company, MDS,
3 can have a competitive advantage over all those who are
4 in the same business that he is and who are —
5 JUDGE: Is that an issue, Mr. Rachberg?
6 MR. RACHBERG: I beg your pardon?
7 JUDGE: Is that an issue or does that merely
8 beg the question?
9 MR. RACHBERG: I believe that’s at the heart
10 of the issue. The heart of the issue is that there is
11 an existing permissions market. People do pay
12 royalties, the publishers, the copyright holders are
13 being compensated for the intellectual property with
14 the exception of Mr. Smith. I think that’s what shows
15 the fourth factor harm and, therefore, shows why
16 there’s copyright infringement here.
17 JUDGE: Excuse me. I’m troubled how a
18 showing that there are copy shops who pay the requested
19 permission fee helps us to decide whether the law
20 requires the requested permission fee must be paid.
21 MR. RACHBERG: It’s back in a sense to the
22 circularity point I believe that Miss Kornfield tried
23 to argue, and as my answer consistent with the Second
24 Circuit’s opinion in the Texaco case is that it is not
25 circular to refer to a longstanding, well-established,
1 existing market in which publishers are paid license
2 fees for the creation of works that are based on their
3 copyrighted works, and when instead of receiving those
4 license fees someone just takes the copyrighted works
5 without permission and without paying the fees that
6 publishers ordinarily charge, then I think there has
7 been a disruption of the ordinary, usual markets, an
8 interruption of the flow of monies that ordinarily come
9 to the copyright holder for the intellectual labor,
10 and, therefore, harm, economic harm to the work and
11 fourth factor harm as well. It’s in that sense that I
12 believe the case law does establish that you can
13 consider these, these royalty payments.
14 JUDGE: Fifteen minutes is getting pretty
15 long in the tooth, Mr. Rachberg. Would that be a
16 convenient place for you to stop or do you have a brief
17 conclusion you’d like to give us?
18 MR. RACHBERG: I’d like to add just a
19 word on the point that the injunction here was
20 unconstitutional. The injunction here does not extend
21 to the copying of uncopyrighted works. It is an
22 injunction that expressly prohibits only the copying
23 of copyrighted works. So the idea that the Declaration
24 of Independence can’t be copied or anything like that
25 is simply a fiction in this case. The injunction only
1 prohibits the copying of the copyrighted works of these
2 plaintiffs. I thought it was important to —
3 JUDGE: Let me mirror that just a little,
4 counsel. If they use your book as the source of the
5 constitution, do you take the position that that, that
6 is covered —
7 MR. RACHBERG: No, Your Honor.
8 JUDGE: — by the injunction?
9 MR. RACHBERG: No, Your Honor. If one of our
10 works reproduces the constitution, the constitution, it
11 would not be a copyright infringement to copy those
12 pages of the book, period. No question about that.
13 JUDGE: Thank you, sir.
14 Miss Kornfield?
15 MS. KORNFIELD: Your Honor, as we can see
16 by the argument by opposing counsel, they are back
17 to arguing issues that they did not allege in the
18 pleadings. They did not allege that they owned
19 copyrights in course pack books. They allege they
20 own copyrights in six works. The fact that they
21 happen to be bound with other materials is a matter
22 of convenience for the students.
23 MDS does not create and does not sell
24 books, and we trust that the court understands the
25 distinction between what a book is and what a
1 collection of selected readings are. The seven volume
2 joint appendix that we filed with the court is not
3 a seven volume book. It’s the selection of the
4 particular materials that were referenced for these
5 briefs. That is exactly what the course packs are
6 as all of the evidence in the record states.
7 The misstatement by counsel that these
8 are books is an attempt, of course, to try and divert
9 the focus of the court from what is going on which is
10 making copies for those people who have the right to
11 make their own copies. We would not be here arguing
12 that MDS could do for the students what they cannot do
13 for themselves or for the professors what they cannot
14 do for themselves. So we contend, we always have, that
15 the fair use rights of the students and professors is a
16 required finding in order to know whether the copying
17 by MDS for them is legal or is not legal.
18 The issue then of authors, it’s quite
19 curious in this case when we are the ones who have a
20 hundred and sixty affidavits on file from authors, the
21 authors have testified that they want their works
22 excerpted for purposes such as classroom use and
23 teaching when the professor is not otherwise going to
24 assign them the book, and as we see, Professor Brown
25 who is the author of one of the excerpts at issue
1 signed such an affidavit. He said he is dismayed that
2 these publishers have brought this lawsuit against MDS.
3 JUDGE: Of course, he doesn’t own the
4 copyright, does he?
5 MS. KORNFIELD: He does not own the copyright
6 but he is the author, and Mr. Rachberg’s argument was
7 authors want these permissions collected. Your Honor,
8 the evidence in the record is that they do not when the
9 professors were not otherwise going to assign the book.
10 We also see the reliance on Supreme
11 Court cases that, of course, have nothing to do with
12 the copying of multiple copies for classroom use. The
13 reference to Harper & Row is a case about a stolen
14 manuscript where the Supreme Court referenced the fact
15 that it was stolen or purloined I think seventy-two
16 times in that case. We would not be arguing that Mr.
17 Smith could reproduce excerpts of stolen manuscripts
18 which result in the loss of a contract and that result
19 in the publication of a work that had not been
20 published. That is not before the court. Harper & Row
21 is completely inapplicable.
22 Additionally, the reference to the
23 classroom guidelines is very strange in light of the
24 fact that the classroom guidelines are not the law.
25 Section 107 of the Copyright Act is the law. Congress
1 specifically identified the making of multiple copies
2 for classroom use for purposes such as teaching as the
3 kind of use that is typically found to be fair.
4 The idea that their permissions system
5 is at all relevant, we note that Mr. Rachberg failed to
6 inform the court that for twenty years in this country
7 the copy shops around the country, four thousand seven
8 hundred of them according to Mr. Ternes whose affidavit
9 is also in the record, were making copies just the way
10 that MDS makes copies. There were no **END OF TAPE,
11 START NEW TAPE** business in any way other than had
12 been conducted for two decades in this country is
14 The permissions departments he refers
15 to are to give permission for uses that would otherwise
16 be infringing. For example, if one publishing company
17 wishes to create an anthology, it will have to contact
18 another publishing company if it wishes to use a
19 substantial part of that work and create a book to
20 sell. That is not the making of multiple copies for
21 classroom use.
22 The — also, the fact that the reference
23 to Tullo as a case that Mr. Rachberg claims supports
24 his position, in page five, Your Honors, of our reply
25 brief we point out that Tullo is a case where the
1 defendant systematically copied news programs in hopes
2 that down the road someone might come to them and buy
3 these materials. This is a case where I had said
4 earlier it’s a closed loop. It begins with the
5 professors who themselves do the excerpting, the
6 selecting, who make the copies, who determine the
7 order, who drops it off at MDS, who makes the copies
8 for those students and then who discards or recycles
9 the remaining materials. It is not a case about sale
10 to the public.
11 The reference to Stuart v. Abend is also
12 a misrepresentation. That case was about the making of
13 a derivative work. Stuart v. Abend involved a decision
14 by the Supreme Court as to whether an individual who
15 had promised to assign his renewal right and then who
16 died, in fact, whether the renewal right was assigned.
17 One of the issues raised by Stuart in that case who
18 lost the case was that they had invested a lot of money
19 in taking that book or that story and creating a movie,
20 and the Supreme Court noted that it was simply the
21 scheme that congress had set up and they could not
22 violate the plain language of the statute, and if the
23 copyright owner of the derivative work had an argument
24 with that, they had to take it to congress.
25 These publishers are in the wrong forum.
1 If they don’t like the fact that congress stated that
2 multiple copies for classroom use for purposes such as
3 teaching is a fair use and is not an infringement, they
4 can’t bring that argument here. My client’s activities
5 are perfectly within the scope of the act as all of the
6 evidence supports.
7 And, finally, I think it’s fair to say
8 the only argument the publishers have is they’re losing
9 money. Well, as we’ve pointed out, their losing money
10 argument is false. MDS doesn’t sell excerpts. MDS
11 provides the photocopy services to those who could do
12 it for themselves and, by the way, at half the price
13 the university would charge them. Thus, if the issue
14 came down to money, if it did, the Supreme Court ruling
15 in Acuff Rose takes care of that argument. The Supreme
16 Court has said even if there is a commercial use which
17 we contend there is not here but even if there is,
18 that’s a factor. It’s not dispositive, and there are
19 numerous cases cited by the Supreme Court and cited by
20 the defendants where the fact that there happens to be
21 money made does not mean the use is not fair.
22 JUDGE: Have you reached a convenient
23 stopping point?
24 MS. KORNFIELD: I’ve reached my stopping
25 point, Your Honor.
1 JUDGE: Very good.
2 MS. KORNFIELD: Thank you.
3 JUDGE: The case will be submitted and the
4 clerk may call the next case.
6 (Oral argument concluded.)
1 STATE OF MICHIGAN )
2 COUNTY OF LIVINGSTON )
3 CERTIFICATE OF NOTARY PUBLIC
4 I, Cheryl McDowell, of the firm of
5 HURON REPORTING SERVICE, a Notary Public within and
6 for the County of Livingston, State of Michigan, duly
7 commissioned and qualified, do hereby certify that
8 the oral arguments in the before-entitled cause on
9 September 15, 1995 were transcribed by me by means of
10 Stenography; afterwards transcribed upon a computer
11 under my personal supervision; and that the attached
12 is a true and correct transcript of the oral arguments
13 then given by the attorneys to the best of my ability.
14 IN WITNESS WHEREOF, I have hereunto set my
15 hand and affixed my Notarial Seal in Ann Arbor, County
16 of Washtenaw, State of Michigan, this _______ day of
17 _____________________, 1996.
Cheryl McDowell, CSR-2662
20 Notary Public, Livingston County
State of Michigan
21 Commission Expires September 13, 1999
HURON REPORTING SERVICE, INC.