Michigan Document Services Case & Coursepacks

May 17, 1996

Table of Contents

TABLE OF AUTHORITIES

PRELIMINARY STATEMENT

ARGUMENT

I. THE DEFENDANTS' COPYING AND SALE OF THE PUBLISHERS' COPYRIGHTED MATERIAL WAS NOT A FAIR USE

A. Defendants Were Commercially Exploiting The Publishers' Copyrights

B. The Legislative History Of The Copyright Act
Should Be Considered And It Specifically
Disfavors Copying Like That In Suit

C. The Copying In Suit Was Qualitatively
And Quantitatively Significant

D. The Copying In Suit Injured The Publishers'
Actual And Potential Markets

E. There Is No Exemption For Educational
Copying

DEFENDANTS' INFRINGEMENTS WERE WILLFUL

CONCLUSION

Cases:

Addison-Wesley Publishing Co.. Inc. et al v.
New York University, et al.,1983
Copyright L. Dec. ¶ 25,544 (S.D.N.Y.
1983) . . . . . . . . . . . . . . . . . . . . . . . . Page 25

American Geophysical Union v. Texaco, Inc.,
60 F.3d 913 (2d Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . . passim

Basic Books, Inc. v. Gnomon Corp., 1980
Copyright L. Dec. ¶ 25,145 (D. Conn.
1980) . . . . . . . . . . . . . . . . . . . . . . . . Pages 7, 25

Basic Books. Inc. v. Kinko's Graphics Corp.,
758 F. Supp. 1522 (S.D.N.Y. 1991) . . . . . . . . . . . . . . . . . . . . . . . . passim

Bridge Publications, Inc. v. Vien,
827 F. Supp. 629 (S. D. Cal. 1993) . . . . . . . . . . . . . . . . . . . . . . . . Page 8

Campbell v. Acuff-Rose Music,
114 S. Ct. 1164 (1994) . . . . . . . . . . . . . . . . . . . . . . . . passim

Encyclopedia Britannica Educ. Corp. v.
Crooks, 542 F. Supp. 1156 (W.D.N.Y.
1982) . . . . . . . . . . . . . . . . . . . . . . . . Pages 14, 30

First Comics, Inc. v. World Color Press, Inc.,
884 F.2d 1033 (7th Cir. 1989), cert. denied,
493 U. S. 1075 (1990) . . . . . . . . . . . . . . . . . . . . . . . . Pages 10 11

Folsom v. Marsh, 9 F. Cas. 342 (C. C. D. Mass.
1841) . . . . . . . . . . . . . . . . . . . . . . . . Pages 7, 18, 19

Harper & Row, Publishers. Inc. v. Nation
Enter.,
471 U.S. 539 (1985) . . . . . . . . . . . . . . . . . . . . . . . . passim

Harper & Row, Publishers. Inc. v. Tyco
Copy Serv., 1981 Copyright L.
Dec. ¶ 25,230 (D. Conn. 1981) . . . . . . . . . . . . . . . . . . . . . . . . Page 25

Knitwaves, Inc. v. Lollytogs Ltd., 71 F. 3d 996
(2d Cir. 1995) . . . . . . . . . . . . . . . . . . . . . . . . Page 32

Los Angeles News Serv. v. Tullo, 973 F.2d 791
(9th Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . Pages 5, 6, 28

Macmillan Co. v. King, 223 F. 862
(D. Mass. 1914) . . . . . . . . . . . . . . . . . . . . . . . . Pages 9, 17, 30

Marcus v. Rowley, 695 F. 2d 1171
(9th Cir. 1983) . . . . . . . . . . . . . . . . . . . . . . . . Pages 12, 14, 29

Pacific & Southern Co. v. Duncan, 744 F.2d
1490 (11th Cir. 1984), cert. denied,
498 U. S. 1109 (1991) . . . . . . . . . . . . . . . . . . . . . . . . Page 28

Peer Int'l Corp. v. Pausa Records, Inc., 909
F.2d 1332 (9th Cir. 1990), cert. denied,
498 U. S. 1109 (1991) . . . . . . . . . . . . . . . . . . . . . . . . Page 28

Playboy Enterprises, Inc. v. Frena,
839 F. Supp. 1552, 1558 (M. D. Fla. 1993) . . . . . . . . . . . . . . . . . . . . . . . . Page 6

Respect Inc. v. Fremgen, 36 U.S.P.Q. 2d 1278

Sony Corp. v. Universal City Studios. Inc.,
464 U.S. 417 (1984) . . . . . . . . . . . . . . . . . . . . . . . . Pages 12, 29

Stewart v. Abend, 495 U. S. 207 (1990) . . . . . . . . . . . . . . . . . . . Pages 13, 22, 26

United States v. Steerwell Leisure Corp., 598
F. Supp. 171 (W.D.N.Y. 1984) . . . . . . . . . . . . . . . . . . . . . . . . Page 32

West Virginia Univ. Hosps., Inc. v. Casey,
499 U. S. 83 (1991) . . . . . . . . . . . . . . . . . . . . . . . . Page 13

Wihtol v. Crow,
309 F.2d 777 (8th Cir. 1962) . . . . . . . . . . . . . . . . . . Page 29

Willaims & Wilkins Co. v. United States,487
F.2d 1345 (Ct. Cl. 1973), aff'd by an
equally divided court, 420 U. S. 376
(1975) . . . . . . . . . . . . . . . . . . . . . . . . Pages 21, 23

Wolff v. Institute of Elec. & Electronics
Engineers, Inc., 768 F. Supp. 66
(S.D.N.Y. 1991) . . . . . . . . . . . . . . . . . . . . . . . . Page 28

Statutes And Rules:

U. S. Const. art. I, § 8, cl. 8 . . . . . . . . . . . . . . . . . . . . . . . . Page 8

Statutes and Other Authorities

17 U. S. C. § 101 . . . . . . . . . . . . . . . . . . . . . . . . Page 27

17 U. S. C. § 107 . . . . . . . . . . . . . . . . . . . . . . . . Pages 3, 4, 8, 13, 21

17 U. S. C. § 504(c) (1) . . . . . . . . . . . . . . . . . . . . . . . . Page 30

Legislative Materials

H. R. Rep. No. 1476, 94th Cong., 2d Sess.
(1976) . . . . . . . . . . . . . . . . . . . . . . . . passim

H. R. Conf. Rep. No. 1733, 94th Cong.,
2d Sess. (1976) . . . . . . . . . . . . . . . . . . . . . . . . Page 14

H. R. Rep. No. 2237, 89th Cong.,
2d Sess. (1966) . . . . . . . . . . . . . . . . . . . . . . . . Pages 25, 28

Other Authorities

2 Nimmer on Copyright, § 8.02 . . . . . . . . . . . . . . . . . . . . . . . . Page 10

3 Nimmer on Copyright, § 12.04 . . . . . . . . . . . . . . . . . . . . . . . . Page 10

3 Nimmer on Copyright, § 13.05 . . . . . . . . . . . . . . . . . . . . . . . . Pages 6, 21

Patry, Fair Use In Copyright Law . . . . . . . . . . . . . . . . . . . . . . . . Pages 6, 8, 22

Ringer, First Thoughts on the Copyright Act of 1976,
13 Copy Right 187 (1977) . . . . . . . . . . . . . . . . . . . . . . . . Page 13

Plaintiffs-Appellees ("the Publishers"), publishers who own the copyrights that the district court below held were infringed, submit this brief to supplement the brief they previously filed when this appeal was first heard (the "Publishers' Brief") This supplemental brief on rehearing is not a substitute for the Publishers' Brief, or for the Publishers' petition for rehearing. We address here only those points which, in view of the panel's now-vacated decision, warrant additional discussion.

This is a copyright infringement action in which publishers of works normally sold in educational markets, and licensed for photocopying in those markets, sued a copyshop chain that competes in those same markets. The copyshop, like other copyshops in the same business, copies and sells anthologies called "coursepacks" that consist of substantial excerpts of copyrighted works. The excerpts that will appear in a coursepack are chosen well before the commencement of a semester by teachers. The copyshop copies the excerpts, binds then together into a coursepack, and sells the resulting book to students at a profit. Unlike its competitors (including both traditional educational publishers and other copyshops), the copyshop whose activities are here at issue does not seek permission from the copyright holders and it does not pay anything to them for the intellectual property being copied and resold in the coursepacks. (The three coursepacks in suit may be found in the folder designated as R. 43.)

The undisputed facts are fully set forth with citations to the record at pages 2-12 of the Publishers' Brief.

The Publishers' Brief also sets forth (at 12-13) the procedural history to that point. Thereafter, on February 12, 1996, by a 2-1 vote, with Judges Ryan and Nelson split and the deciding vote cast by visiting Judge McKay from the Tenth Circuit, this Court reversed the judgment below and held (in "the Panel Opinion") that defendants' copying and sale of the Publishers' copyrighted material in coursepack books was a fair use as a matter of law. The panel majority's decision was an unprecedented departure from sound and well-established copyright principles. The decision, moreover, by allowing as much as 30% of a copyrighted work to be copied and sold, threatened immense harm to copyright holders and to the creation and dissemination of intellectual property. Why, one must ask, would any teacher assign a book whose price includes a reward for the intellectual labor that created it, when instead the teacher could custom-design a book, taking a third of this text, a third of that one, and so on, and save the students the price of compensatinq those responsible for writing and distributing the works being copied? The Publishers accordingly submitted a Petition For Rehearing With Suggestion For Rehearing En Banc. The petition received wide support from amici , including the Authors Guild and other author groups, the Association of American University Presses, and the Copyright Clearance Center.

On April 9, 1996, a majority of the active judges of this Court voted to vacate the Panel Opinion, requested supplemental briefing, and ordered rehearing.

I. THE DEFENDANTS' COPYING AND SALE OF THE PUBLISHERS'
COPYRIGHTED MATERIAL WAS NOT A FAIR USE

The premise of defendants' position is that the fair use defense permits professors and students to make copies themselves like those in suit; from that premise they conclude that a copyshop is also protected by the defense when it systematically makes such copies and sells them for profit. The panel majority adopted precisely that tack:

We hold that the Copyright Act does not prohibit professors and students who may make copies themselves from using the photoreproduction services of a third party in order to obtain those same copies at less cost.

(Panel Opinion, 13). Even if it were correct that professors and students could make copies like those at issue without permission and we show below (at 28-30) that it is decidedly not correct that this kind of systematic copying by anyone would be permitted -- defendants' for-profit business of selling the copyrighted works of others without permission from the copyright holders would still constitute infringement. The language of § 107 itself, the cases decided in the Supreme Court and in other circuits, and the legislative history all draw a distinction between purely commercial uses and not-for-profit uses, and show that the defendants' copying here was not fair use.

A. Defendants Were Commercially Exploiting The Publishers'
Copyrights.

The language of the Copyright Act itself distinguishes between the activities of copiers like defendants here and copiers like professors and students The fair use defense in § 107, in specifying the factors to be considered in a fair use analysis, provides that the first factor to be considered is

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

17 U.S.C. § 107(1) (emphasis supplied)

The professors who assign the readings in coursepacks and the students who read them may well have "nonprofit educational purposes." But those who establish businesses to profit by selling the coursepack books to students are plainly engaged in activities "of a commercial nature."

The defendants' approach, and that of the panel majority, is irreconcilably at odds with the Supreme Court's holding in Harper & Row Publishers Inc. v. Nation Enters., 471 U.S. 539 (1985). As Judge Nelson recognized in his dissent here:

The defendants' use of excerpts from the books at issue in this case is no' less commercial in nature than was The Nation Magazine's use of the excerpts from President Ford's book in Harper & Row. Like the students who purchased unauthorized coursepacks, the purchasers of The Nation did not put the contents of the magazine to commercial use -- but that did not stop the Supreme Court from characterizing the defendant's use of excerpts from the copyrighted book as "a publication [that] was commercial as opposed to nonprofit . . . " Harper & Row, 471 U.S. at 562.

(Panel Opinion, 22*)

In Harper & Row, the defendant commercial magazine argued that it could copy and sell excerpts of plaintiff's copyrighted material to its readers, who read the material as news ("news reporting" is specifically listed as a potential fair use in § 107, as is "multiple copies for classroom use"). The Supreme Court distinguished between the non-commercial purpose of the buyers and readers of The Nation Magazine and the profit-seeking purposes of the magazine itself, and held that the challenged use was commercial. 471 U.S. at 562. See also American Geophysical Union v. Texaco Inc., 60 F.3d 913, 922 (2d Cir 1994), stating that "courts will not sustain a claimed defense of fair use when the secondary use can fairly be characterized as a form of commercial exploitation, i.e., when the copier directly and exclusively acquires conspicuous financial rewards from its use of the copyrighted material." That, of course, is exactly what occurred here.

The panel majority's holding was also at odds with decisions in the other circuits, such as Los Angeles News Serv. v. Tullo, 973 F.2d 791 (9th Cir. 1992), where the defendant AVRS taped televised news reports and sold brief excerpts to interested parties. AVRS unsuccessfully tried to defend its sales of the "video clips" by arguing that the private use of the clips by its customers was the use that counted:

AVRS maintains its clients used the tapes for "research, scholarship and private study," and therefore AVRS's use must be considered fair use in light of Sony Corp. . . . Even assuming AVRS's representations of its' client use of the tapes to be accurate, Sony does not dictate the result for which AVRS argues. . . . Unlike the claim against the [VCR] distributor in Sony, [plaintiff's] claim against AVRS is not that AVRS is vicariously liable for alleged infringements by its customers but that it is directly liable for its own infringements. The difference is crucial: Under Sony, a VTR owner who tapes a copyrighted movie broadcast over a public television station to watch at home at a later time is protected by the fair use doctrine but a VTR owner who tapes the movie to sell copies to others without the copyright owner's consent is subject to a range of civil and criminal sanctions.

* * *

[AVRs's] purposes are "unabashedly commercial." . . . This factor weighs against [it].

973 F.2d at 797 (citations omitted) (emphasis supplied); see also, e.g., Pacific & Southern Co. v. Duncan, 744 F.2d 1490, 1496 (11th Cir. 1984), cert denied, 471 U.S. 1004 (1985) ("TV News Clips copies and distributes the broadcast for unabashedly commercial reasons despite the fact that its customers buy the tapes for personal use"); Playboy Enterprises, Inc. v. Frena, 839 F. Supp. 1552, 1558 (M.D. Fla. 1993) ("One who distributes copyrighted material for profit is engaged in a commercial use even if the customers supplied with such material themselves use it for personal use"); 3 Nimmer Copyright § 13.05(A) at 13-170 (same); Patry, Fair Use In Copyright Law, at 420 n.34 ("The courts have also properly rejected attempts by for-profit users to stand in the shoes of their customers making nonprofit or noncommercial uses"); and other authorities cited in the Publishers' Brief, 24-28.[FN 1]

Basic Books Inc. v. Kinko's Graphics Corp., 758 F. Supp. 1522 (S.D.N.Y. 1991), a case with facts identical to those here, a copyshop chain that sold coursepacks unsuccessfully argued that its use was a fair use because its customers used coursepacks for educational purposes:

The use of the Kinko's packets, in the hands of the students, was no doubt educational. However, the use in the hands of Kinko's employees is commercial Kinko's claims that its copying was educational and, therefore, qualifies as a fair use. . . . The extent of [Kinko's] insistence that theirs are educational concerns and not profitmaking ones boggles the mind.

Kinko's, 758 F. Supp. at 1531-32.

Defendants have tried to treat Kinko's as an aberrational decision, but as shown above the court's approach in Kinko's was consistent with that of the Supreme Court and other courts. Indeed, as far back as the seminal fair use case of Folsom v. Marsh, 9 F. Cas. 342, 344 (C.C.D. Mass. 1841), Justice Story held that defendant's abridgement and excerpting of the biography of George Washington was copyright infringement, notwithstanding that the ruling would necessarily "interfere, in some measure, with the very meritorious labors of the defendants, in their great undertaking of a series of works adapted to school libraries." 9 F Cas. at 349. Justice Story analyzed the defendant's use, not the ultimate use of the pupils at the school library, and accordingly ordered the defendant to account to the plaintiff for the profits it earned by selling the copyrighted material. 9 F. Cas. at 349.

Finally, the 1976 Report of the House of Representatives Committee on the Judiciary on Copyright Law Revision, part of the legislative history of the Copyright Act, specifically states that:

It would not be possible for a non-profit institution, by means of contractual arrangements with a commercial copying enterprise, to authorize the enterprise to carry out copying and distribution functions that would be exempt if conducted by the non-profit institution itself.

See H.R. Rep. No. 1476, 94th Cong., 2d Sess. at 74 (1976).

The harmful nature of defendants' commercial infringements is exacerbated here because MDS's use of the Publishers' copyrighted works resulted in sales of the copies in the same market as in which the Publishers sell. When a commercial use is competitive in this manner, the "commerciality" is even "more harmful to the copyright holder" and the first factor in § 107 cuts even more strongly against the defendant. See, e.g., Campbell v. Acuff-Rose Music, 114 S. Ct. 1164, 1171 (19?4) ("central purpose" of first factor inquiry "is to see . . . whether the new work merely 'supersedes the objects' of the original"); Bridge Publications Inc. v. Vien, 827 F. Supp. 629, 635 (S.D. Cal. 1993) (no fair use when defendant seller of educational materials used plaintiffs' work "for the same intrinsic purpose as plaintiffs"); Patry, Fair Use in Copyright Law at 425 (in performing "intrinsic purpose" analysis courts should examine whether "the defendant reproduce[d] the copyright owner's expression for the purpose of marketing the precise form of that expression"); see also authorities cited in the Publishers' Brief, 24-25.

Indeed, at deposition, when asked why he had placed a copyright symbol on material that he wrote, defendant Smith acknowledged that it was because "it would be improper for a competitor to use a work belonging to you in the same market." (R. 46 [Smith Deposition, 206~23 to 207:7].)

The panel majority avoided the necessary conclusion that defendants' exploitation of the Publishers' copyrighted works is commercial with the surprising conclusion that it is not an exploitation to begin with. The panel majority held that "MDS does not 'exploit' copyrighted material within the meaning of [Harper & Row] because its fee does not turn on the content of the materials, copyrighted or not, that it copies." (Panel Opinion, l3.)[FN 2]

This was a clear misreading. The reason that defendants are able to charge anything at all is because they are selling valuable intellectual property. That defendants do not charge "extra" for copyrighted pages is irrelevant. E.g., Macmillan Co. v. King, 223 F. 862 (D. Mass. 1914), where the defendant teacher created memoranda-summaries of portions of plaintiff's book for use in tutoring sessions. The teacher argued that his use was fair because, among other reasons, "his regular fees for instruction are fixed without regard to the use of the memoranda, and are the same whether the memoranda are used or not." 223 F. at 863. The teacher was held an infringer despite this argument. Id. at 866.

Similarly, in Harper & Row, the price of an issue of The Nation did not turn on whether the issue included copyrighted works of others. The Nation was exploiting the Ford memoirs whether or not it charged more for the issue that included them. 471 U.S. at 562-63. Earning profits by selling the copyrighted works of others is plainly an "exploitation" of those works, regardless of the pricing mechanism adopted by the seller

The panel majority's misunderstanding of Harper & Row is akin to defendants' argument that MDS, unlike the Publishers, is a mere "printer," and "Publishers use the work; printers do not." (See Defendants' Brief, 24-25.) The fundamental infirmity in this position is that it necessarily posits that those who invest the most intellectual effort into works that incorporate prior copyrighted material -- and thereby fulfill the social goal of advancing learning by building on what came before in new works -- are to be afforded the least amount of fair use protection. There is no support for such a proposition. Printers, moreover, are undoubtedly liable for their "mere" reproduction of copyrighted works. See, e.g., Respect Inc. v. Fremgen, 36 U.S.P.Q.2d 1278 (N.D. Ill. 1995) (printer liable for unauthorized act of reproduction); 3 Nimmer Copyright § l2.04[A][2] (printer liable for infringement with respect to "acts of printing"); § 8.02[C] (printer liable for acts of copying even when copies are not sold).

The only authority that defendants cite in support of their "mere printer" argument is the plainly irrelevant decision in First Comics. Inc. v. World Color Press, Inc., 884 F.2d 1033 (7th Cir. 1989), cert. denied, 493 U.S. 1075 (1990). (Defendants' Brief, 25.) In First Comics, a comic book publisher sued its printer for price discrimination. The Court stated that it was illegal to price-discriminate only in sales of goods, not in sales of services, and concluded that because the defendant printer was selling a service, there could be no cognizable claim of price discrimination. In the course of setting forth that conclusion, the Court said:

[A]t the printing stage the comic books lack real value to any entity other than [plaintiff publisher] [Defendant printer] cannot sell the finished comic books to any other buyer since [plaintiff] holds the copyright. . .

In conclusion, if MDS can freely copy and re-sell works simply because they copy inexpensively and the copies will be used in the classroom, then the Publishers, all in the business of selling educationally useful works that can be used in the classroom (like the six books in suit that were used in the classroom), should be able to freely copy from each other as well. For that matter, why would plaintiff Princeton University Press -- a not for profit corporation with the express mission of promoting scholarship and learning -- ever pay royalties to anyone? As the Supreme Court has noted, that state of affairs would soon eviscerate the Copyright Law:

[A]s one commentator has noted: "If every volume that was in the public interest could be pirated away by a competing publisher . . . the public [soon] would have nothing worth reading."

Harper & Row, 471 U.S at 559 (1985)

That the works in which the Publishers hold copyrights can have educational purposes and so are assigned by professors to students; that students are willing to pay money for copies of the assigned materials; that defendants are able to build a profitable business on meeting the demands of the market -- under the unanimous authorities discussed above and in the Publishers' Brief, these facts establish that defendants' copying and selling is commercial and therefore disfavored.

B. The Legislative History Of The Copyright Act Should Be
Considered And It Specifically Disfavors Copying Like
That In Suit

The panel majority's conclusion (Panel Opinion, 10) that consideration of any legislative history is inappropriate because the four factors set forth in § 107 of the Copyright Act are "unambiguous" is foreclosed by controlling cases.[FN 3] The Supreme Court has repeatedly consulted the legislative history of the fair use provision of the Copyright Act, as have other circuits. Harper & Row, 471 U.S. at 549-53; Acuff-Rose Music, 114 S Ct. at 1170; Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 447, 450- 51 (1984); see also Texaco, 60 F.3d at 919 n.5 (Classroom Guidelines are "persuasive authority marking out certain minimum standards for educational fair uses"); Marcus v. Rowley, 695 F.2d 1171, 1178 (9th Cir. 1983).

The only authority cited by the panel majority for its contrary conclusion was a non-copyright case cited by the defendants (Defendants' Reply Brief, 13), that goes no further than to recite the familiar rule that "unambiguous" statutory language cannot "be expanded or contracted" with legislative history. West Virginia Univ. Hosps. Inc. v. Casey, 499 U.S 83, 98-99 (1991). However, use of legislative history in the fair use context does not expand or contract the statutory language but instead elucidates the meaning and scope of the generalities of the statute.

Not only has the Supreme Court relied on legislative history; it has expressly justified doing so, approvingly citing the view expressed by the former Register of Copyrights that, because the Copyright Act represents a series of careful compromises by affected groups, consultation of the legislative history is particularly appropriate.[FN 4]

During the deliberations that led to the enactment of § 107 of the 1976 Copyright Act, members of Congress requested representatives of the educational and publishing communities to meet and to develop guidelines that would express the extent to which copying small amounts for educational purposes would be fair use and thus not copyright infringement. In the meetings that followed "most of the discussion of section 107 . . . centered around questions of classroom reproduction, particularly photocopying." H.R. Rep. No. 1476, 94th Cong., 2d Sess. at 66 n.27 (1976). The result of those discussions was a series of guidelines relating to classroom photocopying called the "Agreement On Guidelines For Classroom Copying In Not-For-Profit Educational Institutions," contained in H.R. Rep. No. 1476, 94th Cong., 2d Sess. (1976), known as the "Classroom Guidelines." The Classroom Guidelines may be found within the full 1976 House Report reprinted in volume 5, at Appendix 4, of Professor Nimmer's treatise (see pages 4-28 through 4-31 of Nimmer). They may also be found in the CCH Copyright Law Reporter, volume 1, at ¶ 15,816 (also reproducing the full 1976 House Report)

According to both the House and Conference Reports where the Classroom Guidelines appear, they represent Congress's view on educational fair use. H.R. Rep. No. 1476, 94th Cong., 2d Sess. at 72 (1976) ("The [House] Committee believes the guidelines are a reasonable interpretation of the minimum standards of fair use"); H.R. Cont. Rep. No. 1733, 94th Cong.1 2d Sess. at 70 (1976) ("The [House and Senate] conferees accept as part of their understanding of fair use the Guidelines"); see also, e.g., Texaco, 60 F.3d at 919 n.5 (Classroom Guidelines are "persuasive authority marking out certain minimum standards for educational fair uses"); Marcus v. Rowley, 695 F.2d at 1178 (Classroom Guidelines "represent the Congressional Committees' view of what constitutes fair use [and], while they are not controlling on the court, they are instructive on the issue of fair use in this [classroom copying] case"); Encyclopedia Britannica Educ. Corp. v. Crooks, 542 F. Supp. 1156, 1175 (W.D.N.Y. 1982) ("the Congressional Reports on the 1976 Copyright Legislation are helpful in outlining acceptable fair use limits in educational settjngs")

The Classroom Guidelines offer a "safe harbor" for copying for educational purposes provided that:

1. It is not-for-profit copying;
2. The excerpts copied are "not more than l,000 words ";
3. "The inspiration and decision to use the work and the moment of its use for maximum teaching effectiveness are so close in time that it would be unreasonable to expect a timely reply to a request for permission;"
4. Not more than nine instances of multiple copying otherwise within the "safe harbor" are undertaken for any course in any given semester; and
5. The students are charged no more than the actual cost of copying.

H.R. Rep. No. 1476 at 68-7l.

The copying in this case is well outside the Classroom Guidelines. It was done for profit. Each excerpt is far longer than the 1,000 words provided in the Guidelines (the shortest excerpt exceeds 8,000 words). The professors decided to assign the coursepacks in advance, before the start of the semester (when there was time to seek permission) and there were many more than nine works copied in each coursepack. MDS, to make its profit, charged students more than its actual cost.

In addition, and perhaps most importantly, the Classroom Guidelines, in accordance with repeated condemnation of anthologizing in the reports of the relevant congressional' committees involved in the legislative process, specifically "prohibi[t] . . . [c)opying used to create . . . anthologies, compilations, or collective works." H.R. Rep. No. 1476 at 69. In this regard, the Classroom Guidelines recognize that when the copying by educators leads to the creation and sale of complete books, even if those books are not attractively bound, the likelihood of adverse impact on the legitimate business interest of publishers is likely to be all the greater. Having departed from the approach of the Supreme Court and other courts by categorically ruling out any consultation of legislative history, the majority failed even to mention, much less to be guided by, consistent and repeated statements throughout the lengthy revision process, that unauthorized educational anthologies containing excerpts from copyrighted works are unlikely to be fair use because of the substantial harm they pose to the incentives of copyright law. (See Publishers' Petition For Rehearing, 14-15.)

C. The Copying In Suit Was Qualitatively And Quantitatively
Significant.

The publishers have previously demonstrated that copying far less extensive than that in suit has been held to be impermissible. (Publishers' Brief, 29-31.)

While the third fair use factor (amount of copying) is not to be applied mechanically, and necessarily relates to the fourth factor (market harm) as well, there is surely no basis for defendants' argument that copying of from 5% to 30% of a book was permissible in this case as long as the copied amount was not a substitute for a sale of the full book itself. The panel majority accepted this argument, noting that "Each of the professors who delivered the materials at issue to MDS signed a statement that he would not otherwise have assigned the copyrighted work to the class." (Panel Opinion, 15-16).

An affidavit that a customer of the copier would not have purchased an entire work at the copyright owner1s lawfully set price establishes no defense to infringement through the copying of an excerpt. For example, in Macmillan v. King, 223 F. 862 (D. Mass. 1914), discussed above at page 9, the plaintiff's textbook was already assigned to the class, and as a result, the court found that "[t]he evidence can hardly be said to show that the infringing outlines have injured the sale of the book. " Id. at 867. Nonetheless, the court held that defendant's creation of summaries of parts of the book, even when used solely in conjunction with the already-purchased. book, was not a fair use:

It is true that the whole book has not been thus dealt with, but the copyright protects every substantial component part of the book, as well as the whole.

Id. at 866.

Moreover, notwithstanding defendants' argument here, adopted by the panel majority, that one may copy large portions of copyrighted works so long as the copying is not from the "heart" of the work, and that all of the copying here was "just those portions that the professor deemed instructive for his particular classroom purposes" (see Panel Opinion, 15-16), there is simply no requirement, anywhere, that copying must involve the "heart" of a work in order to be infringement. In Harper & Row, for example, a case that did involve the unauthorized taking of the "heart" of President Ford's memoirs, the Court also stated that the importance of an excerpt that was photocopied verbatim, as were the excerpts here, should be measured in terms of the commercial usefulness of such verbatim copying to the defendant1s product:

[T]he fact that a substantial portion of the infringing work was copied verbatim is evidence of the qualitative value of the copied material, both to the originator and to the plagiarist who seeks to profit from marketing someone elseVs copyrighted expression.

471 U.S. at 564-65. Here, defendants' coursepacks are educationally useful because they contain verbatim excerpts of educationally useful works published by the Publishers. Otherwise, no student would have bought the coursepacks and defendants would not have been able to "profit from marketing someone else's copyrighted expression," as occurred in Harper & Row.

The panel majority also held that the excerpts in suit were not qualitatively significant because they were limited to material that was of use to the professors in teaching specific classes. That approach was rejected in Folsom v. Marsh:

It is said, that the defendant has selected only such materials, as suited his own limited purpose as a biographer. That is, doubtless true; and he has produced an exceedingly valuable book. . . . It is certainly not necessary, to constitute an invasion of copyright, that the whole of a work should be copied, or even a large portion of it, in form or substance. If so much is taken, that the value of the original is sensibly diminished, or the labors of the original author are substantially to an injurious extent appropriated by another, that is sufficient, in point of law, to constitute a piracy pro tanto. The entirety of the copyright is the property of the author; and it is no defence, that another person has appropriated a part, and not the whole, of any property.

9 F Cas. at 348 (emphasis Supplied).

In any event, it is undisputed that it can be very difficult in the context of educationally useful works to find a "heart" of the work, because different teachers will want to take different excerpts for different classes. Indeed, defendants argue that "there was no 'heart' of the educational works" that they copied and that "[o]ne student testified that he has seen one work excerpted four different ways for four different classes." (Defendants' Brief, at 29.) This further confirms that an educationally useful work has as many "hearts" as there are professors willing to assign excerpts from it. If each professor across the country assigned the parts of a work that are most relevant to his or her class, there would soon be no body, much less a "heart," left for anybody to take. As Justice Story recognized in Folsom v. Marsh:

[I]f the defendants may take three hundred and nineteen letters, included in the plaintiffs' copyright, and exclusively belonging to them, there is no reason why another bookseller may not take [an]other five hundred other letters, and a third, one thousand letters, and so on, and thereby the plaintiffs' copyright be totally destroyed.

9 F. Cas. at 348. It is, of course, the economic value of excerpts from socially useful materials like George Washington's letters and the Publishers' educational works here at issue that makes them so attractive to copyists like defendants in the first instance, and that makes them so susceptible of being destroyed through countless copies, across the country, of "those portions that the professor deemed instructive for his particular classroom purposes."

D. The Copying In Suit Injured The Publishers' Actual And
Potential Markets.

Sony held that market harm to copyright holders should be presumed when the defendants' use is commercial. 464 U.S. at 450. In Acuff-Rose Music, 114 S. Ct. at 1l77, the Court did not presume harm because "[n]o 'presumption' or inference of market harm that might find support in Sony is applicable to a case involving something beyond mere duplication for commercial purposes." (emphasis added). If any case involves no more than "mere duplication for commercial purposes," it is this one. MDS's sales should therefore be presumed to cause economic harm to the Publishers.

But the Publishers here did not rest on the Sony presumption. Instead, they submitted uncontroverted evidence of the existence of their permissions departments that regularly process and respond to requests for permission and receive income by licensing uses exactly like those in suit. (Publishers' Brief, 4-5.) The loss of such licensing revenues is consistently recognized as a legally cognizable form of market harm. The majority had to disregard myriad licensing cases in order to hold otherwise. (See Publishers' Brief, 32-36.)

The defendants argued, and the panel majority agreed, that the Publishers' uncontroverted evidence of lost permission fees should be disregarded on the grounds of "circularity:"

Evidence of lost permission fees does not bear on market effect. The right to permission fees is precisely what is at issue here. It is circular to argue that a use is unfair, and a fee therefore is required, on the basis that a fee is otherwise required.

(Panel Opinion, 18.) The majority provided no citations for this conclusion. The defendants cited one authority in support of the circularity argument, footnote 19 in Williams & Wilkins Co. v. United States, 487 F.2d 1345 (Ct. Cl. 1973), aff'd an equally divided Court, 420 U.S. 376 (1975) (Defendants' Brief, 31.)

Professor Nimmer's treatise, which the Supreme Court has repeatedly cited with approval, calls the Court of Claims' holding in Williams & Wilkins "seriously in error, with implications that might well justify its description by one of the dissenting judges as 'the Dred Scott decision of copyright law.'" 3 Nimmer Copyright § l3.O5[E], at 13-104 (citation omitted). The implications of Williams & Wilkins are indeed devastating: for example, there is no reason the circularity argument would not similarly apply when an infringer sells complete copies of entire books. If MDS made multiple copies of a full book and sold them to students who used them in course work, and if the copyright holders challenged those sales on the grounds that they replaced sales of the copyrighted books, MDS would argue that the copyright holders' claims were circular because the copyright holders' entitlement to the sales in question would only be established if MDS's copying of the entire book was not a fair use.

Williams & Wilkins, decided before the 1976 Copyright Act, is also irreconcilable with the language of § 107 itself, which specifically directs the courts to consider "the effect of the use upon the potential market for or value of a copyrighted work." That "potential market" language would be rendered meaningless if the circularity argument were correct -- All new markets for copyrighted works would be developed by infringers, who would say that they are having no impact on existing markets and that considerations of the impact on the potential market is irrelevant because it is circular.

Professor Patry, rejecting such circular reasoning, states,

A preferable approach is to give effect to the plain meaning of the term "potential" to include not only uses currently being exploited, but also uses that the copyright owner might have an interest in exploiting in the future. If the copyright owner is required to demonstrate that such an interest already exists, many potential sources of income would be excluded from the analysis.

Patry, Fair Use In Copyright Law, p. 558.

The circularity argument, moreover, was implicitly rejected by the Supreme Court in Stewart v. Abend and Harper & Row. In both cases, theSupreme Court found fourth factor market harm because the copyright holder lost the royalty it would have charged for a use like defendants' The concept that the lost royalty income should be disregarded was not even addressed by the Supreme Court in those cases.

These Supreme Court authorities are entirely irreconcilable with the panel decision here refusing to consider the Publishers' lost royalties, and require the opposite result from that reached by the panel majority.

The correct view is that when there is an existing functioning market that defendants' infringements interfere with, fourth factor market harm should be found. In the Texaco case, the Second Circuit So held:

Texaco is correct, at least as a general matter, when it contends that it is not always appropriate for a court to be swayed on the fourth factor by the effects on potential licensing revenues. Only an impact on potential licensing revenues for traditional, reasonable, or likely to be developed markets should be legally cognizable when evaluating a secondary use's "effect upon the potential market for or value of the copyrighted work.>/P>

* * *

[S]ince there currently exists a viable market for licensing these rights for individual journal articles, it is appropriate that potential licensing revenues for photocopying be considered in a fair use analysis.

60 F.3d at 930.

The dispositive fact here is that there is a longstanding and functioning market in which fees are paid to copy excerpts by numerous copy shops (including defendants' competitors in Ann Arbor), college bookstores, traditional educational publishers, and others. (In Williams & Wilkins, which involved copying by a nonprof it government research library, there was no functioning market for photocopy licenses. 487 F.2d at 1345, 1360.) The Publishers' works have value in this market and defendants harm that value by taking the material without paying the fee the market sets.[FN 5]

The uncontroverted evidence demonstrates that each plaintiff has a department that regularly processes and passes upon permission requests. (R. 42 [Van Rheinberg Declaration, ¶[ 2]; R. 42 [Fisher Declaration, ¶ 2]; R. 42 [Mullen Declaration, ¶ 2].) Defendants do not dispute the existence of the departments; in fact, they knew about those departments and did business with them before this action started and before the decision in Kinko's was issued. (R. 46 [Smith deposition 176:5 to 181:11; 188:8 to 191:6; 196:22 to 199:17].)

In the Kinko's case, decided in 1991, the eight plaintiff- publishers established that they had in place permissions departments that responded to requests to copy excerpts coursepacks and captured the income from such licensing. See, e.g., 758 F. Supp. at 1529 n.4 ("Plaintiffs derive a significant part of their income from textbook sales and permissions fees"); see also 758 F. Supp. at 1534.

Indeed, any contention that charging permission fees to copy excerpts is a new practice is further belied by several suits in the early 1980's where publishers -- including, again, two of the plaintiffs here -- brought enforcement actions against coursepack makers like MDS, in order to protect their economically valuable permissions licenses These cases were resolved by consent decrees that adopted the standards of the Classroom Guidelines and thus ensured that the plaintiffs would continue to be compensated for copying like that in suit. See Basic Books. Inc. v. Gnomon Corp., 1980 Copyright L Dec. ¶ 25,145 (D. Conn. 1980) (Princeton University Press, plaintiff); Addison-Wesley Publishing Co. v. New York Univ., 1983 Copyright L. Dec. ¶ 25,544 (S.D.N.Y. 1983) (Macmillan Inc.'s predecessor, plaintiff); Harper & Row Publishers Inc. v. Tyco Copy Serv., Inc., 1981 Copyright L. Dec ¶ 25,230 (D. Conn. 1981); see also R. 61 Exhibit G, pp. 1344-45, submitted by defendants (uncontroverted deposition testimony from St. Martin's Press establishing existence of its classroom permissions business at least as far back as fifteen years ago).

The Congress recognized the importance of this market 30 years ago. In the 1966 House Report it was noted that:

education is the textbook publishers' only market, and . . . many authors receive their main income from licensing reprints in anthologies and textbooks; if an unlimited number of teachers could prepare and reproduce their own anthologies, the cumulative effect would be disastrous.

H.R. Rep. No. 2237, 89th Cong., 2d Sess. at 62 (1966) (emphasis supplied). The evidence of an existing market that has existed for years -- the very type of market envisioned by the Texaco court -- is overwhelming.

Defendants also argue that the use of excerpts in coursepacks stimulates increased book sales. (Defendants' Brief1 31.) Even if this were somehow true, it would make no difference. The use in Stewart v. Abend, for example, would also increase interest in and sales of plaintiff `s work but was nonetheless found unfair. 495 U.S. at 237. The owner of a copyright in a story is entitled to both the royalty from a motion picture producer and the increased sales of the story. Similarly, Harper & Row was entitled to royalties from the publication of an excerpt and the increased sales of President Ford's memoirs that publication of the excerpt might stimulate. See also Acuff-Rose Music, 114 S. Ct. at 1177 n.21 (use of song that enjoys increased sales via unauthorized inclusion in film is not fair use).

The panel majority also concluded that there had been no harm shown to "the potential market for derivative works, such as published anthologies." (Panel Opinion, 18; emphasis in original.) This portion of the panel majority's opinion is not clear, but it seems that the majority considered defendants' anthologies not to be "published", and that this had significance for purposes of fair use analysis. The published anthologies the majority would seem to have in mind consist of printed pages perfect bound in soft or hard covers; the defendants' anthologies consist of photocopied pages that are spiral bound in a less attractive format. The rights of the copyright holder surely do not turn on such differences.

The coursepack in suit entitled "History of the Vietnam Era" (R. 43, No. 35) contains an excerpt from St. Martin's Press's Vietnam war anthology entitled Light At The End Of The Tunnel: A Vietnam War Anthology (at p. 259). Specifically, MDS copied The Tet Offensive by Larry Berman, which had been included in the St. Martin's Press anthology with permission of the copyright holder. (See id. at p 261).

Under the majority's approach, St Martin's Press was required to obtain permission when it published its anthology including Larry Berman's work because it was a "published" anthology. MDS, however, could copy the same excerpt without seeking permission because the MDS anthology is somehow different. Such an outcome is not Sustainable.

The majority's reference to "derivative works" in this context was also misplaced "Derivative work" has a technical definition in § 101 of the Copyright Act; the majority apparently has concluded that it does not extend to defendants' anthologies. This would make no difference. The statutory direction in § 107 to consider the impact on the markets for the copyrighted work makes no mention of derivative works and plainly extends to all markets for the copyrighted work. Our undisputed showing that there is a market in which copyshops and others pay license fees to include excerpts from copyrighted works in coursepacks, and that defendants are depriving the Publishers of income from that market, therefore establishes harmful impact regardless of whether defendants' coursepacks are derivative works.

The cases confirm the irrelevance of whether a coursepack is a derivative work. They recognize that copyright holders earn licensing income from authorizing copying which would not result in the creation of derivative works, and they find fourth factor market harm for fair use purposes when such licensing income is lost. See, e.g., Texaco (photocopying); Los Angeles Times v. Tullo (videotaping); Wolff v. Institute of Elec. & Electronics Engineers, Inc., 768 F. Supp. 66, 69 (S.D.N.Y. 1991) (photographs); Peer Int'l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1336 (9th Cir. 1990) (music), cert. denied, 498 U.S. 1109 (1991); see also H.R. Rep. No. 2237, 89th Cong., 2d Sess. at 62 (1966) (licensing of reprints in classroom anthologies).

E. There Is No Exemption For Educational Copying.

Finally, we note our belief that this case does not require a decision about what professors and students may or may not do. As the Kinko's court said: "Expressly, the decision of this court does not consider copying performed by students, libraries, nor on-campus copy-shops, whether conducted for profit or not." 758 F. Supp. at 1537 n.13.

Here, however, the panel majority assumed as a central basis for its holding that the copying in suit would be exempt from liability if it had been conducted by professors and students. This is not correct.

It is certainly the case that a professor or student -- like anyone else -- may on an isolated occasion copy a small amount of material and successfully assert fair use. But the systematic copying and distribution of anthologies comprised of substantial excerpts from copyrighted materials is not a fair use, regardless of who performs it.

While the commercial nature of defendants' use here weighs heavily against them, it is not necessary for a finding of infringement. "The mere fact that a use is educational and not for profit does not insulate it from a finding of infringement. . . . Acuff-Rose Music, 114 5. Ct. at 1174 (1994); see also, e.g., Sony, 464 U.S. at 450 ("Even copying for noncommercial purposes may impair the copyright holder's ability to obtain the rewards that Congress intended him to have"); Harper & Row, 471 U.S. at 561 (there are no "presumptive categories" of fair use); Marcus v. Rowley, 695 F.2d at 1175 ("a finding of a nonprofit educational purpose does not automatically compel a finding of fair use").

We note first, that the copying in suit, even if performed by a nonprofit student or educator, is well outside the scope of the Classroom Guidelines, and indeed is stated by them to be "prohibited" (because "anthologizing" is "prohibited"). (See above at 15- l6.)

The courts have, on at least four prior occasions, held that verbatim, substantial, copying of course materials for distribution to students is a copyright infringement and not fair use, even in the absence of a profit motive. For cases where the copying was no more harmful to the copyright holder than that here, see Marcus v. Rowley, 695 F.2d at 1175 (summary judgment granted against defendant teacher who copied eleven pages from another teacher's home economics instructional book; copying for same purpose as original 1sweighs against fair use"); Wihtol v. Crow, 309 F.2d 777 (8th Cir. 1962) (no fair use where defendant teacher arranged plaintiff's original musical composition for school choirs and distributed copies); Macmillan Co. v. King, 223 F. 862 (D. Mass. 1914) (professor who tutored students infringed plaintiff's work by providing students with memoranda quoting and paraphrasing sections of plaintiff's work); see also Encyclopedia Britannica Educ. Corp. v. Crooks, 542 F. Supp. 1156 (W.D.N.Y. 1982) (denying fair use defense asserted by non-profit educational consortium that copied plaintiff's educational films for use in schools); See Publishers' Brief, 18.

Among the rewards Congress assured to copyright holders is the ability to sell to their intended market, including the ability to earn license fees for the reproduction of substantial excerpts, even if the reproduction is done by not-for-profit educational copiers. Copying like defendants' here would be infringing regardless of by whom it was conducted. However, the issue of professor and student copying is not before the Court.

II. DEFENDANTS' INFRINGEMENTS WERE WILLFUL

In view of the district court1s decision to award statutory damages in the "standard" range under 17 U.S.C. § 504(c)(l) (the award was $5,000 per work infringed, well within the standard available damages of from $500 to $20,000 per work infringed), rather than the enhanced damages available for willful infringements (up to $100,000 per work infringed), it is doubtful if defendants have standing to appeal the district court's willfulness finding. Assuming arguendo, however, that the court's willfulness finding has some practical consequence here, it was plainly correct.

The facts demonstrating detendants' willfulness are set forth in the Publishers' Brief at 9-12. Most significantly, after Kinko's held that copying like defendants' was infringing, defendant Smith consulted a lawyer, who said that defendants' business of selling coursepacks without the copyright holders' permission was a "very risky proposition," that Smith could well be sued, and that he, like other copyshop owners, should "heed Kinko's warning." (Publishers' Brief, 10.) Smith decided to ignore his lawyer's advice. He instead began a massive advertising campaign boasting that his disregard of the Kinko's decision enabled him to undercharge his competitors, other copyshops that obeyed the law. (Publishers' Brief, 11.)

After this litigation began, the Publishers sought and obtained a preliminary injunction; Judge Hackett addressed Smith directly in the Courtroom and told him that it was infringement to build his business on selling the property of others His response was to vow publicly to continue to infringe until coerced into stopping. He did indeed continue his practice as to the works of all publishers except the three plaintiffs directly protected by the injunction. (Publishers' Brief, 11-12.)

Smith's claim to have a subjectively sincere belief that his conduct is not infringing makes no difference. The undisputed facts of his refusal to accept his lawyer's advice to the contrary, and his inability to heed the contrary conclusion of the district judge, demonstrate the willfulness of his conduct. Smith's and MDS's is a knowing, and consistently defiant, course of conduct.

The cases discussed at pages 45-47 of the Publishers' Brief demonstrate that the defendants are willful infringers as a matter of law. There is no requirement that a defendant have subjective knowledge that he is infringing. See, e.g., Knitwaves, Inc. v. Lollytogs Ltd., 71 F.3d 996, 1010 (2d Cir. 1995) ("To show willfulness, Knitwaves was not required to prove Lollytogs' actual knowledge that it was infringing"); see also United States v. Steerwell Leisure Corp., 598 F. Supp. 171 (W.D.N.Y. 1984), where the Court found the defendants to be willful infringers, holding:

A defendant is on sufficient notice [that he may be a willful copyright infringer] as long as the law is clear enough so that he is informed that the course of conduct he contemplates may fall perilously close to the line which separates what is legal from that which is not.

598 F. Supp. at 173 (emphasis supplied) (material in brackets added). Steerwell was a criminal case. If the standard articulated there is enough to support a finding of criminal willfulness, it is certainly enough to establish willfulness here.

There is no factual issue here about Smith's state of mind; however unlikely it may be, for purposes of their summary judgment motion below the Publishers took as true his claim that he studied copyright law closely and did not have a subjective belief that he was violating it. The issue is the objective reasonableness of those beliefs. Once Smith had read Kinko's, had been advised by his lawyer, and heard the district judge, he could not reasonably have held-such a belief, and yet he continued to infringe.

For all the foregoing reasons, the decision of the district court should be upheld.

Dated: May 17, 1996

Footnotes

Footnote 1
Defendants have argued (Reply Brief, 5) that "in those cases, the copier conceived of a product for sale to the public and decided what to copy." This is not correct. In the video clip cases (e.g., Tullo and Pacific & Southern, above), it is the customers who decide what copied material is of interest to them and should be copied and sold to them. Additionally, there is no doubt that defendants here "conceived of a product for sale" as surely as did, for example, the defendants in Tullo and Pacific & Southern. And defendants here actively advertised those products in order to stimulate demand for them. (Publishers' Brief, 4; 10-11.) Finally, there is no reason to make the identity of who decides what to copy significant in a fair use analysis.

Footnote 2
The three coursepacks at issue here are almost entirely composed of material from published books and periodicals, which no doubt are copyrighted. (See R. 43, Nos. 33, 34 and 35, the coursepacks in suit, each of which has a table of contents setting forth the material copied therein.)

Footnote 3
Although defendants argue on the one hand that the four fair use factors are "unambiguous," they also argue, in this same appeal, that "the four factors are nearly indeterminate." (Defendants' Brief, 42.)

Footnote 4
See Stewart v Abend, 495 U.S. 207, 225 (1990), citing Ringer, First Thoughts on the Copyright Act of 1976, 13 Copyright 187, 188-89 (1977). With respect to photocopying and fair use, that article observed that the fair use defense in § 107 "must be read with the exhaustive legislative reports, fleshing out the probable application of the 'fair use' doctrine in classroom situations," citing reports the Publishers cite here.

Footnote 5
That students are willing to spend money on coursepacks is irrefutable evidence that the material in the coursepacks has economic value. The panel majority found relevant the fact that students could buy copyrighted excerpts from MDS for less money than from other sources, including the university copy machines. (Panel Opinion, 14.) As Judge Nelson observed, however, the only relevance of the low prices of a "black market" copyshop like MDS is not that it can beat the university machines, but that it can beat its competitors, who also sell to students but obey the law and pay required fees. (Panel Opinion, 26.) Defendants submitted no evidence that suggested that students are unwilling or unable to pay the costs of coursepacks that come from typical copyshops that obtain permission and pay royalties. If MDS were to obtain permission like its competitors, and its prices were like everyone else's, there is no reason to believe that students would stop buying coursepacks or that their education would be harmed.

I, HERMAN L. GOLDSMITH, certify that on May 16th, 1996 I served two true copies of the attached "SUPPLEMENTAL BRIEF OF PLAINTIFFS-APPELLEES PRINCETON UNIVERSITY PRESS, MACMILLAN, INC. AND ST. MARTIN'S PRESS, INCORPORATED" upon defendants-appellants MICHIGAN DOCUMENT SERVICES, INC. and JAMES M. SMITH at the address designated by them for that purpose, Bodman, Longley & Dahling, 110 Miller, Suite 300, Ann Arbor, Michigan 48104, by depositing the papers enclosed in a prepaid sealed wrapper, properly addressed, in an official depository under the care and custody of The United States Postal Service within New York State.