*CORRECTED VERSION* 92-9341 _____________________________________________________________________ UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ________________________________________ AMERICAN GEOPHYSICAL UNION; ELSEVIER SCIENCE PUBLISHING CO. INC.; PERGAMON PRESS, LTD; SPRINGER-VERLAG, GmbH & CO., K.G.; JOHN WILEY & SONS, INC. and WILEY HEYDEN, LTD., on behalf of themselves and others similarly situated, Plaintiffs-Counterclaim- Defendants-Appellees, --v.-- TEXACO INC., Defendant-Counterclaim- Plaintiff-Appellant. (Caption continued on inside front cover) ________________________________________ ON APPEAL FROM AN INTERLOCUTORY ORDER OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK _______________________________________________________________________ *AMICUS CURIAE* BRIEF OF ASSOCIATION OF RESEARCH LIBRARIES, AMERICAN ASSOCIATION OF LAW LIBRARIES, SPECIAL LIBRARIES ASSOCIATION, MEDICAL LIBRARY ASSOCIATION, AMERICAN COUNCIL OF LEARNED SOCIETIES, NATIONAL HUMANITIES ALLIANCE, AND ASSOCIATION OF ACADEMIC HEALTH SCIENCES LIBRARY DIRECTORS _______________________________________________________________________ Ritchie T. Thomas, Esq. James V. Dick, Esq. Susan Neuberger Weller, Esq. SQUIRE, SANDERS & DEMPSEY 1201 Pennsylvania Avenue, N.W. Washington, D.C. 20004 (202) 626-6600 Attorneys for *Amicus Curiae* ASSOCIATION OF RESEARCH LIBRARIES, AMERICAN ASSOCIATION OF LAW LIBRARIES, SPECIAL LIBRARIES ASSOCIATION, MEDICAL LIBRARY ASSOCIATION, AMERICAN COUNCIL OF LEARNED SOCIETIES, NATIONAL HUMANITIES ALLIANCE, AND ASSOCIATION OF ACADEMIC HEALTH SCIENCES LIBRARY DIRECTORS Dated: March 4, 1993 (Corrected Version: March 10, 1993) ________________________________________ IN RE: TEXACO INC.; TEXACO CAPITAL INC., TEXACO CAPITAL N.V., Reorganized Debtors. ________________________________________ ACADEMIC PRESS, INC.; ALAN R. LISS, INC.; ALLERTON PRESS INC.; AMBIENT PRESS LTD.; AMERICAN ASSOCIATION FOR THE ADVANCEMENT OF SCIENCE, AMERICAN ASSOCIATION OF COST ENGINEERS, INC., AMERICAN CHEMICAL SOCIETY, AMERICAN CONFERENCE OF GOVERNMENTAL INDUSTRIAL HYGIENISTS, AMERICAN INSTITUTE OF PHYSICS, AMERICAN MATHEMATICAL SOCIETY, AMERICAN MEDICAL ASSOCIATION AMERICAN SOCIETY FOR BIOCHEMISTRY AND MOLECULAR, BIOLOGY, INC., AMERICAN SOCIETY FOR MICROBIOLOGY, ASPEN PUBLISHERS, INC., ASSOCIATION FOR SYMBOLIC LOGIC, BIRKHAUSER BOSTON, BLACKWELL, SCIENTIFIC PUBLICATIONS, LTD., THE BUREAU OF NATIONAL AFFAIRS, INC., BUSINESS MONTH CORPORATION, BUSINESS PUBLISHERS, INC., BUTTERWORTH & CO. (PUBLISHERS) LTD., THE C.V. MOSEBY COMPANY, CANNING PUBLICATIONS, INC., CENTER FOR COMPUTER/LAW, CORNELL UNIVERSITY, CRC PRESS, INC., DATA PROCESSING MANAGEMENT ASSOCIATION INC., EDITIONS SCIENTIFIQUES ELSEVIER, ELSEVIER SCIENCE PUBLISHERS B.V., ELSEVIER SCIENCE PUBLISHERS LTD., ELSEVIER SEQUOIA SA, FEDERATION OF SOCIETIES FOR COATINGS TECHNOLOGY, GROVE & STRATTON, INC., HARCOURT BRACE JOVANOVICH LIMITED (FORMERLY ACADEMIC PRESS INC. (LONDON) LTD.), HEMISPHERE PUBLISHING CO., HUMANA PRESS, HUMAN SCIENCES PRESS, INC. PUBLISHING CORPORATION, THE INFORMATION STORE, INC., INSTITUTION OF ELECTRICAL ENGINEERS/PETER PEREGRINUS LTD., INTERNATIONAL ACADEMY AT SANTA BARBARA, INC., J. SCHWEITZER VERLAG, JOHN WILEY & SONS LIMITED, KENNETH MASON PUBLICATIONS LTD., THE LAUX COMPANY, LAW & TECHNOLOGY PRESS, LITTLE, BROWN & COMPANY, MARCEL DEKKER, INC., MASSACHUSETTS MEDICAL SOCIETY, MBR PRESS, INC., MIT PRESS, MUNKSGAARD INTERNATIONAL PUBLISHERS LTD., MULTI-SCIENCE PUBLISHING CO. LTD., OPEN-APPLE, PHYSOLOGIA PLANTARUM, PJD PUBLICATIONS LTD., PLENUM PUBLISHING CORPORATION, PRINCETON UNIVERSITY PRESS, RAVEN PRESS, ROYAL AUSTRALASIAN ORNITHOLOGIST'S UNION, SCANNING MICROSCOPY INTERNATIONAL, INC., SCRIPTA TECHNICA, INC., SKY PUBLISHING CORPORATION, THE SOCIETY OF NAVAL ARCHITECTS AND MARINE ENGINEERS, SPRINGER-VERLAG NEW YORK INC., TECHNOLOGY CONFERENCES A/K/A T/C PRESS, TECHNOMIC PUBLISHING CO., INC., TISSUE CULTURE ASSOCIATION, INC., TRANSACTION PUBLISHERS, VAN NOSTRAND REINHOLD, VCH PUBLISHERS, INC., VNU BUSINESS PUBLICATIONS INC., W.B. SAUNDERS COMPANY, WALTER DE GRUYTER, INC., WARREN GORHAM & LAMONT, INC., WASHINGTON REGULATORY REPORTING ASSOC., WILLIAMS & WILKINS, INC., WOLTERS KLUWER ACADEMIC PUBLISHERS B.V., AMERICAN GEOPHYSICAL UNION, ELSEVIER SCIENCE PUBLISHING CO., INC., Petitioners-Appellees, --v.-- TEXACO INC., Respondent-Appellants. *CORPORATE DISCLOSURE STATEMENT* *Amici*, by their attorneys and pursuant to Rule 26.1, Fed. R. App. Proc., file their corporate disclosure statement as follows: 1. This *Amicus Curiae* Brief is filed on behalf of the following associations and organizations: Association of Research Libraries American Association of Law Libraries Special Libraries Association Medical Library Association American Council of Learned Societies National Humanities Alliance Association of Academic Health Sciences Library Directors 2. None of the *Amici* have any parent companies, subsidiaries or affiliates which issue or have issued shares to the public. TABLE OF CONTENTS PAGES PRELIMINARY STATEMENTS . . . . . . . . . . . . . . . . . 1 SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . 2 I. INTRODUCTION . . . . . . . . . . . . . . . . . . . 5 II. THE TRIAL COURT ERRED IN ITS APPLICATION AND BALANCING OF THE STATUTORY "FAIR USE" FACTORS . . . . . . . . . . . . . . . . 8 A. Factor One: The Purpose and Character of the Use . . . . . . . . . . . . . . . . . . 9 1. The Lower Court Erred in Focusing on the Commercial Nature of the User Rather Than the Socially Beneficial Research Purpose and the Limited, "Private" Character of the Immediate Use. . . . . . . . . . . . . . 10 a. Texaco's Immediate Research Use Is the Relevant Focus of the Factor One Inquiry . . . . . . . . . 10 b. Under Second Circuit Precedent, A Socially Beneficial Purpose Generally Outweighs the Possibility of Commercial Gain Even Where the Immediate Use Involves the Sale or Distribution of Multiple Copies of Allegedly Infringing Material. . . . 14 c. The Trial Court's "Commerciality" Analysis Is Unsupported As a Matter of Law and Perilous As a Matter of Policy . . . . . . . . . . 16 2. The Lower Court Erred in Placing Undue Weight On The "Productive vs. Non-Productive" Issue, and in Finding That Texaco's Copying was "Non-Productive". . . . . . . . . . . . . 18 a. The "Productive vs. Non-Productive" Distinction Is Not Determinative of Fair Use. . . . . . . . . . . . . 18 b. Texaco's Reproductive Use of the Copied Work Was "Productive" . . . . 19 B. Factor Three: The Amount and Substantiality of the Portion Used. . . . . . . . . . . . . . 23 C. Factor Four: The Effect of the Use Upon the Potential Market for or Value of the Copyrighted Work. . . . . . . . . . . . 27 1. The Lower Court Erred in Basing Its Finding On Royalties It Assumed Publishers Would Receive If the Researchers' Photocopying at Texaco Was Not Fair Use. . . . . . . . . . . . . 28 2. Other Harm That the Lower Court Postulated Is Based On Speculation and Is Not Shown to Be Substantial. . . . 33 D. The Lower Court's Balancing of Equitable Considerations Gave Insufficient Weight to the "Reasonable and Customary" Nature of the Use at Issue and Undue Weight to the CCC . . . . . . . . . . . . . . . . . . 35 III. THE TRIAL COURT'S CONCLUSIONS REGARDING THE APPLICATION OF SECTION 108 OF THE COPYRIGHT ACT TO JOURNAL ARTICLE COPYING AT TEXACO ARE BOTH INAPPROPRIATE AND WRONG. . . . . . . . . . . . 39 A. The Trial Court Erred In Purporting To Address The Applicability of Section 108 . . . . . . . . . . . . . . . . 39 B. The History and Background of Section 108. . . 39 C. The Trial Court Erred in Its Conclusion That Texaco's Scientists Made Copies for "Commercial Advantage" as That Term is Used in Section 108. . . . . . . . . . . . . . 42 D. The Trial Court Erred in Its Interpretation of the "Single Copy" Restriction of Section 108. . . . . . . . . . . . . . . . . . 46 IV. CONCLUSION . . . . . . . . . . . . . . . . . . . . 49 TABLE OF AUTHORITIES *CASES PAGES* *American Geophysical Union, et al. v. Texaco Inc.*, 802 F. Supp. (S.D.N.Y. 1992) . . . . . . . . . . *passim* *Arica Institute, Inc. v. Palmer*, 970 F.2d 1067 (2d Cir. 1992) . . . . . . . . . . 14, 31 *Berlin v. E.C. Publications, Inc.*, 329 F.2d 541 (2d Cir. 1964) . . . . . . . . . . . 7 *Consumers Union of U.S. v. General Signal Corp.*, 724 F.2d 1044 (2d Cir. 1983), *cert. denied*, 469 U.S. 823 (1984) . . . . . . . 15, 31 *Dow Jones & Co. v. Board of Trade*, 546 F. Supp. 113 (S.D.N.Y. 1982) . . . . . . . . 20, 24 *Haberman v. Hustler Magazine, Inc.*, 626 F. Supp. 201 (D. Mass. 1986) . . . . . . . . 24 *Harper & Row, Publishers, Inc. v. Nation Enters.*, 18, 20, 32 471 U.S. 539 (1985) . . . . . . . . . . . . . . . 35, 36 *Iowa State University Research Found., Inc. v. ABC, Inc.*, 621 F.2d 57 (2d Cir. 1980) . . . . . . . . . . . 35 *Key Maps, Inc. v. Pruitt*, 470 F. Supp. 33 (S.D. Tex. 1978) . . . . . . . . 24 *Mathieson v. Associated Press*, 23 USPQ 2d 1685 (S.D.N.Y. 1992) . . . . . . . . . 36 *Maxtone-Graham v. Burtchaell*, 803 F.2d 1253 (2d Cir. 1986), *cert. denied*, 481 U.S. 1059 (1987) . . . . . . 14, 31 *New Era Publications Int'l v. Carol Publishing Group*, 904 F.2d 152 (2d Cir. 1990) . . . . . . . . . . . 31 *New Era Publications Int'l v. Henry Holt & Co.*, 873 F.2d 576 (2d Cir. 1989) . . . . . . . . . . . 15 *Northcross v. Memphis Board of Education*, 412 U.S. 427 (1972) . . . . . . . . . . . . . . . 13 *Perales v. Sullivan*, 971 F.2d 1348 (2d Cir. 1991) . . . . . . . . . . 13 *Religious Technology Center v. Wollersheim*, 971 F.2d 364 (9th Cir. 1992) . . . . . . . . . . 36 *Rogers v. Koons*, 960 F.2d 301 (2d Cir. 1992) . . . . . . . . . . . 31 *Rosemont Enters., Inc. v. Random House, Inc.*, 366 F.2d 303 (2d Cir. 1966), *cert. denied*, 385 U.S. 1009 (1967). . . . . . . 14, 36 *Salinger v. Random House, Inc.*, 811 F.2d 90 (2d Cir.), *cert. denied*, 484 U.S. 890 (1987) . . . . . . . 31 *Sega Enterprises, Ltd. v. Accolade, Inc.*, 977 F.2d 1510 (9th Cir. 1993) . . . . . . . . . . 10, 11, 12 *Stewart v. Abend*, 495 U.S. 207 (1990) . . . . . . . . . . . . . . . 32 *Sony Corp. v. Universal City Studios, Inc.*, 464 U.S. 417 (1984) . . . . . . . . . . . . . . . *passim* *Triangle Publications, Inc. v. Knight-Ridder Newspapers, Inc.*, 626 F.2d 1171 (5th Cir. 1980) . . . . . . . . . . 24, 36 *Update Art, Inc. v. Maariv Israel Newspaper, Inc.*, 635 F. Supp. 228 (S.D.N.Y. 1986), *aff'd*, 843 F.2d 67 (2d Cir. 1988) . . . . . . . 31 *William & Wilkins Co. v. United States*, 487 F.2d 1345 (Ct. Cl. 1973), *aff'd by an equally divided Court*, 420 U.S. 376 (1975) . . . . . . . . . . . . . . . *passim* *Wright v. Warner Books, Inc.* 953 F.2d 731 (2d Cir. 1991) . . . . . . . . . . . 14 *CONSTITUTION, STATUTES AND RULES* United States Const. art. I, 8 . . . . . . . . . . . 2, 22 The Copyright Act: 17 U.S.C. 107 . . . . . . . . . . . . . . . . . 2, 8, 20 17 U.S.C. 107(1). . . . . . . . . . . . . . . . 9 17 U.S.C. 107(4) . . . . . . . . . . . . . . . 27 17 U.S.C. 108. . . . . . . . . . . . . . . . . .12, 39, 44 17 U.S.C. 108(a) . . . . . . . . . . . . . . . 46 17 U.S.C. 108(a)(1) . . . . . . . . . . . . . . 43 17 U.S.C. 108(d) . . . . . . . . . . . . . . . 41 17 U.S.C. 108(g) . . . . . . . . . . . . . . . 46 17 U.S.C. 108(g)(1) . . . . . . . . . . . . . . 47 17 U.S.C. 108(g)(2) . . . . . . . . . . . . . . 42 Federal Rules of Appellate Procedure Rule 29 . . . . . . . . . . . . . . . . . . . . 1 *LEGISLATIVE MATERIALS* *The Constitution of the United States of America: Analysis and Interpretation*, Sen. Doc. No. 39, 88th Cong., 1st Sess. (1964) . . . . . . . . . . . . . 6 *Copyright Law Revision, 1975: Hearings Before the House Subcommittee on Courts, Civil Liberties, and the Administration of Justice* 94th Cong., 1st Sess. (1975) . . . . . . . . . . . . . 43 *Copyright Law Revision: Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law*, 87th Cong., 1st Sess. (Comm. Print 1961) . . . . . . . . . . . . . 40 H.R. Rep. No. 83, 90th Cong., 1st Sess. (1967) . . . . 25 H.R. Rep. No. 1476, 94th Cong., 2d Sess. (1976). . . . *passim* H.R. Conf. Rep. No. 1733, 94th Cong., 2d Sess. (1976). 45 S. Rep. No. 473, 94th Cong., 1st Sess. (1975) . . . . . 25, 43 Library of Congress, *Final Report of the National Commission on the Technological Uses of Copyrighted Works*, App. A ("Summary of the Legislative History of Computer-Related Issues and the Photocopy Issue") 13, 89-104 (1979) ("CONTU Final Report) . . . . . . . . . 40, 41 *OTHER AUTHORITIES* Zechariah Chafee, Jr., *Reflections on the Law of Copyright* : *I*, 45 Colum. L. Rev. 503 (1945) . . . 22 Pierre N. Leval, *Toward a Fair Use Standard*, 103 Harv. L. Rev. 1105 (1990) . . . . . . . . . . . . 19, 30 L. Ray Patterson, *Free Speech, Copyright, and Fair Use*, 40 Vand. L. Rev. 1 (1987). . . . . . . . . . . . 21 L. Ray Patterson, *Understanding Fair Use* 55 Law & Contemp. Probs. 249 (1992). . . . . . . . . . 30 Lloyd L. Weinreb, *Fair's Fair: A Comment on the Fair Use Doctrine*, 103 Harv. L. Rev. 1137 (1990). . . 19 1935 "Gentlemen's Agreement," reprinted in Leon E. Seltzer, *Exemptions and Fair Use in Copyright*, at App. E (1978) . . . . . . . . . . . . . 37 This *amicus curiae* brief is submitted on behalf of the Association of Research Libraries, the American Association of Law Libraries, the Special Libraries Association, the Medical Library Association, the American Council of Learned Societies, the National Humanities Alliance, and the Association of Academic Health Sciences Library Directors ("*Amici*"). Pursuant to F.R.A.P. 29, this brief is being conditionally filed with the Motion of these *amici* for leave to file, and supporting memorandum and affidavits. The identity and interests of these *amici* are described in that Motion. These *amici* support the position of Appellant Texaco Inc. ("Texaco"), that this Court should reverse the Opinion and Order entered by the Hon. Pierre N. Leval, U.S.D.J., of the United States District Court for the Southern District of New York, on July 23, 1992, as modified, *American Geophysical Union, et al. v. Texaco Inc.*, 802 F.Supp. 1 (S.D.N.Y. 1992) ("*Texaco*"). *STATEMENT OF JURISDICTION* *Amici* adopt and incorporate herein the Statement of Jurisdiction in the Brief of Appellant Texaco Inc. *STATEMENT OF ISSUE PRESENTED FOR REVIEW* *Amici* adopt and incorporate herein the Statement of Issue Presented for Review in the Brief of Appellant Texaco Inc. *STATEMENT OF THE CASE* *Amici* adopt and incorporate herein the Statement of the Case in the Brief of Appellant Texaco Inc. *SUMMARY OF ARGUMENT* The decision of the lower court, if upheld, threatens a longstanding, reasonable and customary practice in for-profit and non-profit institutions alike -- the spontaneous photocopying of single copies of published scientific, technical, and other research and scholarly journal articles, notes and comments by researchers, scientists, and scholars for their own research use. The lower court's rejection of Texaco's "fair use" claim would impose substantial, additional costs on researchers and their employers or institutions, hampering scientific, medical and scholarly research in the United States. It would thus impair, not promote, the constitutional objective of the Copyright Act, "the Progress of Science and Useful Arts." U.S. Const., art. I, 8. The trial court committed multiple errors in its application and balancing of the statutory "fair use" factors under Section 107 of the Copyright Act, 17 U.S.C. 107. With regard to factor one ("the purpose and character of the use"), the lower court erred, first, by focusing on the commercial nature of the user rather than the socially beneficial research purpose and limited, private character of the immediate use. Contrary to the lower court's conclusion, the copies of plaintiffs' articles made by Texaco's researchers were not "for commercial gain," because they were not sold or otherwise distributed, and any commercial exploitation of the articles by Texaco was attenuated, remote, and uncertain. Any presumption of commercial use is also overridden by the facts that the copying was conducted for a socially beneficial purpose (*i.e.*, research); was limited in scope (single copies); and was non- public in character. Second, the lower court erred in placing undue weight on the distinction between "productive" and "non- productive" uses, and in finding that Texaco's copying was "non- productive." Not only is the distinction between "productive" and "non-productive" uses not determinative of fair use, but also the use of the articles by Texaco's scientists should properly be viewed as "productive" under Supreme Court authority ignored by the lower court. The lower court also erred in its conclusion that factor three ("the amount and substantiality of the portion used") favored plaintiffs. The court applied a "general rule" -- that the copying of entire works precludes fair use -- that is not an accurate reflection of historic case law and is contrary to Supreme Court precedent and to legislative history indicating Congress considered copying of journal articles to be fair use in appropriate circumstances. The lower court's conclusion that factor four ("the effect of the use upon the potential market for or value of the copyrighted work") favors plaintiffs is similarly based on a flawed analysis which poses a major threat to the continued viability of the fair use exception and expands the monopoly of copyright proprietors beyond constitutional limits. The trial court's conclusion is based on the faulty premise that the mere existence of procedures (however imperfect) for the payment of royalties to publishers somehow establishes their legal right to collect them, and it ignores Supreme Court and Second Circuit precedent restricting the analysis to market impact. Moreover, any suggestion that the practice of Texaco's scientists had a significant, adverse effect on a relevant market is based on the lower court's own speculation, not the record. The lower court also erred in its balancing of the equitable considerations at issue. It failed to give due weight to the "reasonable and customary" practice of personal use copying by scientists and researchers, and it vastly overstated the legal and factual significance and effectiveness of existing licensing mechanisms and procedures. Finally, both the fact and the substance of the lower court's analysis of Section 108 of the Copyright Act are in error. The applicability of Section 108 was not before the trial court; it therefore should not have purported to apply the substantive provisions of that section at all. Its substantive analysis only compounded the error. First, its conclusion that Texaco's scientists made copies for "commercial advantage," as that term is used in Section 108, flies in the face of legislative history expressly stating that the type of copying at issue here is *not* for "commercial advantage." Second, the trial court's conclusion that Texaco's scientists violated the "single copy" restriction of Section 108 disregards the plain language of that section. The lower court's opinion, in short, is permeated with errors which, if not corrected by this Court, pose grave threats to researchers, scientists, and scholars, and to the libraries they use. *ARGUMENT* I. *INTRODUCTION* The decision of the lower court ignores manifested Congressional intent and misapplies fair use principles to reach a result that imperils spontaneous, personal copying of scientific, technical, medical, and other scholarly journal articles and excerpts by researchers and clinicians at for-profit organizations, copying that is necessary for the efficient use of these materials and that has long been considered reasonable and customary. If upheld, the lower court's decision would impose, at the least, substantial and unexpected new costs on the use of these materials, and, for many researchers, substantially decrease or even deny access to them. The resulting new costs and obstacles would hamper research in all disciplines, including education, science, medicine, social sciences, law, and engineering, and the development of all products based on information. There is no reason to believe that, if the lower court's decision is upheld, there would be a countervailing increase in research or in publication of scientific articles. To the contrary, no new incentives would be provided researchers and authors. The authors of these journal articles are not compensated for their work by publishers and, as they assign their copyrights to the publishers, 802 F. Supp. at 6, they will receive none of the royalties the publishers seek to extract. Thus, the lower court's ruling would lead to a potentially massive transfer of funds from users of articles and reports in scientific, technical, medical, legal, social science and other journals, to publishers' publications, such as the *Journal of Catalysis*, and to publishers who, the record shows, already are highly profitable. *Id*. at 27. Moreover, despite the lower court's heavy reliance on Texaco's profit objectives,(1) clearly erroneous elements of its Section 107 and Section 108 analysis narrow rights under those provisions in ways that have a potential for threatening fair use, spontaneous, personal copying even at non-profit institutions. If the lower court's errors are not corrected, they ultimately could have a damaging effect on research, study, and teaching that spreads beyond the for-profit section. The constitutional clause that authorizes "the creation and bestowal of monopolistic privileges" on authors and inventors limits Congress both "as to the purpose and duration of the rights granted." *See* The Constitution of the United States of America: Analysis and Interpretation, Sen. Doc. No. 39, 88th Cong., 1st Sess. 317 (1964). The Supreme Court held in *Sony Corp. v. Universal City Studios, Inc.*, 464 U.S. 417, 429 (1984) ("*Sony*") that: The monopoly privileges that Congress may authorize are neither unlimited nor primarily designed to provide a special private benefit. Rather, the limited grant is a means by which an important public purpose may be achieved. Congressional authority to enact legislation establishing copyright protection for works of authorship is limited by the principle that open communication of knowledge and ideas is an essential characteristic of a free society. The grant of a monopoly to the written expression of knowledge and ideas must be viewed as a special exception, to be given a scope no broader than the purpose for which the exception is granted. Since Congress has no power to confer any "exclusive rights" which would be incompatible with the constitutional objective of promoting the progress of science and the arts, any copyright law must be interpreted in the light of the constitutional grant of authority on which it depends. The principles that a copyright monopoly may be enforced only to the extent that to do so will "promote the Progress of Science and Useful Arts" and that the judiciary should be reluctant to "expand the protections afforded by copyright without explicit legislative guidance," *Sony*, 464 U.S. at 431, are particularly applicable to the present case.(2) As observed by this Court, in order to serve the constitutional purpose, "[c]ourts in passing upon particular claims of infringement must occasionally subordinate the copyright holder's interest in a maximum financial return to the greater public interest in the development of art, science and industry." *Berlin v. E.C. Publications, Inc.*, 329 F.2d 541, 544 (2d Cir. 1964). A decision for plaintiffs in this case will interfere seriously with the "Progress of Science" and will in no way promote that progress. This Court should not endorse such a novel extension of copyright that would have such a clearly unconstitutional effect. However, it is not necessary for this Court to reach this constitutional issue, because, as the following analysis shows, Congress never intended that the provisions of the Copyright Act would be used to bar the unrelated making of single photocopies of published, scientific, journal articles by researchers (or libraries at their request) for their own research use, when that copying does not significantly substitute for subscriptions to the works concerned. II. THE TRIAL COURT ERRED IN ITS APPLICATION AND BALANCING *OF THE STATUTORY "FAIR USE" FACTORS * The introductory sentence of Section 107 of the Copyright Act, 17 U.S.C. 101 *et seq.*, provides in relevant part that: "Notwithstanding the provisions of section 106, *the fair use of a copyrighted work*, including such use by reproduction in copies . . . , for purposes such as criticism, comment, news reporting, teaching (including multicopies for classroom use), scholarship, or research, *is not an infringement of copyright*." 17 U.S.C. 107 (emphasis added). The statute further provides that four non-exclusive factors shall be considered in determining whether the use made of a work in any particular case is or is not a fair use. District Judge Leval concluded that three of the four factors (factors one, three, and four) favored the plaintiff. *Amici* contend that his conclusions with respect to those three factors are based on fundamental errors of law. A. *Factor One: The Purpose and Character of the Use* The first statutory factor to be considered in the fair use analysis 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). The lower court found that this factor favored the plaintiff principally because it viewed Texaco's copying of the article at issue as "not of the transformative, nonsuperseding type that has historically been favored under the fair use doctrine." 802 F. Supp. at 13. It further found that Texaco's copying was "for commercial gain" and therefore did not "come within the class of copying that has prevailed under the first factor because of its nonprofit educational or social value." *Id.* With respect to the first factor, the lower court's opinion is in error for at least two major reasons: (1) in concluding that Texaco's copying was for commercial gain, the lower court improperly emphasized the commercial objectives of the user organization and failed to focus on the purpose and character of the immediate use, *i.e.*, the making of single photocopies for individual, personal use in direct support of research (one of the presumptively fair uses specified in the introductory sentence of Section 107) rather than the sale or public distribution of multiple copies; and (2) the lower court gave undue weight to the supposed "non-productive" nature of Texaco's copying, and erred in finding Texaco's use to be "non- productive." 1. The Lower Court Erred in Focusing on the Commercial Nature of the User Rather Than the Socially Beneficial Research Purpose and the Limited, *"Private" Character of the Immediate Use * The lower court expressly found that Texaco's "copiers are scientists, they are using their copies to assist in socially valuable scientific research, and they do not resell the copies." 802 F. Supp. at 16. That finding should have swung the first factor in Texaco's favor notwithstanding the undeniable fact that Texaco is a commercial entity which employs scientists and others in order to maintain and improve its competitiveness and profitability. Where, as here, the copying itself is undertaken for a recognized, socially beneficial purpose such as scientific research, and is both limited in scope (*i.e.*, single copies) and "private" in nature (*i.e.*, for individual or "in-house" use), it is insignificant that the copying may ultimately prove to be one small step on the path toward any possible commercial application. a. Texaco's Immediate Research Use Is the Relevant * Focus of the Factor One Inquiry * The critical "commerciality" inquiry, of which the lower court lost sight, focuses on the purpose and character of the immediate use of the copied work, not the commercial nature of the user. This principle is well illustrated by a recent Ninth Circuit case, *Sega Enterprises, Ltd. v. Accolade, Inc.*, 977 F.2d 1510 (9th Cir. 1993) ("*Sega*"), decided after the lower court issued its opinion herein. In *Sega*, defendant Accolade, a manufacturer of video game cartridges, disassembled the copyrighted computer program of the plaintiff, a video game console manufacturer. Using the "object code" it obtained, Accolade manufactured video game cartridges compatible with Sega's "Genesis" video game console. *Id.* at 1514-15. The Ninth Circuit found the first factor to favor Accolade. *Id.* at 1522. In words directly applicable here, it stated that the use at issue "was an *intermediate* one only and thus any commercial 'exploitation' was *indirect* or *derivative*." *Id.* (emphasis added). More specifically, it found: [A]lthough Accolade's ultimate purpose was the release of Genesis-compatible games for sale, its direct purpose in copying Sega's code, and thus *its direct use of copyrighted material, was simply to study* the functional requirements for Genesis compatibility so that it could modify existing games and make them usable with the Genesis console. *Id.* (emphasis added). It concluded "that Accolade copied Sega's code for a legitimate, essentially non-exploitative purpose, and the commercial aspect of its use can best be described as of minimal significance." *Id.* at 1533. Similarly, the commercial aspect of Dr. Chickering's photocopying can best be described as of minimal significance. As the lower court found, Dr. Chickering photocopied particular articles because they were pertinent to research that he was conducting or expected to conduct in the future. 802 F. Supp. at 6. As with Accolade, Dr. Chickering's direct purpose was solely "in-house" research and study. His use of the copyrighted material was, therefore, legitimate and non-exploitative. The commercial aspects of Dr. Chickering's ultimate purpose, "creat[ing] new products and process for Texaco," *id.* at 16, like those of Accolade, were too attenuated and indirect to merit a finding of overriding commercial use.(3) This analysis of the "commerciality" element of factor one is buttressed by analogy to a related section of the Copyright Act, 17 U.S.C. 108.(4) Section 108(a) permits qualifying libraries to make single photocopies of articles for researchers, if *inter alia*, the copies are made "without any purpose of direct or indirect commercial advantage." The legislative history of Section 108(a) states that the photocopying of journal articles by libraries of profit-making institutions, absent a "systematic effort to substitute photocopying for subscriptions, would be covered by Section 108, even though copies are furnished to the employees of the organization for use in their work." H.R. Rep. No. 1476, 94th Cong., 2d Sess. 74 (1976). Such photocopying is covered by Section 108 because it: would ordinarily not be considered 'for direct or indirect commercial advantage,' since the 'advantage' referred to in this clause must attach to the *immediate commercial motivation behind the reproduction or distribution itself, rather than to the ultimate profit-making motivation behind the enterprise* in which the library is located. *Id.* (emphasis added). Thus, in connection with a related provision of the same Act, in which a commercial character or profit motive for the use would be potentially disqualifying,(5) Congress clearly intended the "commerciality" inquiry to focus on the immediate use rather than an attenuated connection to any possible future commercial application by a profit-making entity. As a matter of statutory construction, the clear Congressional intent with respect to this aspect of Section 108 is directly relevant to the proper interpretation of the parallel aspect of Section 107(1). *See Perales v. Sullivan*, 948 F.2d 1348, 1355 (2d Cir. 1991) ("[S]imilar language in two different sections of the same law should be given similar interpretation."); *see also* *Northcross v. Memphis Board of Education*, 412 U.S. 427, 428 (1972). Yet the trial judge failed even to acknowledge the plain Congressional intent behind Section 108(a), and the relevance of that intent to Section 107(1). b. Under Second Circuit Precedent, A Socially Beneficial Purpose Generally Outweighs the Possibility of Commercial Gain Even Where the Immediate Use Involves the Sale or Distribution of Multiple Copies of Allegedly Infringing *Material * The Second Circuit has held that factor one generally favors defendants where a socially beneficial purpose underlies the use at issue, notwithstanding the possibility of ultimate commercial gain. Thus, in *Arica Institute, Inc. v. Palmer*, 970 F.2d 1067, 1077 (2d Cir. 1992), this Court wrote: "Where defendant's use is for purposes of 'criticism, comment . . . scholarship [or] research,' (citation omitted) there will be a 'strong presumption that factor one favors the defendant,'" *citing Wright v. Warner Books, Inc.*, 953 F.2d 731, 736 (2d Cir. 1991) (strong presumption that factor one favors the defendant if defendant's use of the work fits within the description of uses set forth in the introductory sentence of Section 107, *e.g.*, criticism, scholarship, or research). Uses such as criticism, scholarship, and research are presumed to confer a public benefit which outweighs any ultimate commercial aspect of the use. In *Rosemont Enterprises, Inc. v. Random House, Inc.*, 366 F.2d 303, (2d Cir. 1966), *cert*. *denied*, 385 U.S. 1009 (1967), for example, this Court wrote: "Whether an author or publisher reaps economic benefits from the sale of a biographical work, or whether its publication is motivated in part by a desire for commercial gain . . . has no bearing on whether a public benefit may be derived from such a work." In *Maxtone-Graham v. Burtchaell*, 803 F.2d 1253, 1262 (2d Cir. 1986), *cert*. *denied*, 481 U.S. 1059 (1987), this Court similarly held that the "educational elements" of an allegedly infringing work "far outweigh[ed] the commercial aspects of the book," noting that the "commercial nature of the use is a matter of degree, not an absolute."(6) In the Second Circuit cases cited above, the defendants' immediate use involved the sale of books or use of advertisements containing allegedly infringing material. Multiple copies of such material were publicly distributed. This Court nevertheless found a public benefit that overrode the significance of profit motivation and tipped factor one in favor of the defendants. In this case, too, the immediate use is imbued with a public benefit -- scientific research -- but involves neither multiple copies nor public sale or distribution, and is only remotely connected to the possibility of future corporate profits. Thus, there is even greater reason to discount any commercial aspect of Texaco's use. While the Second Circuit has not been confronted with such a fact pattern until now, the holdings of its prior cases, reinforced by the logic of *Sega* and the legislative history of Section 108(a), compel the conclusion that factor one properly favors Texaco. c. The Trial Court's "Commerciality" Analysis Is Unsupported As a Matter of Law and Perilous As *a Matter of Policy * The trial judge correctly recognized that a profit motive does not by itself disqualify the use of copyrighted material from fair use protection. 802 F. Supp. at 12. But he then went on to hold, in effect, that the existence of a profit-making motive is disqualifying where the secondary use is superseding (or non-productive), rather than transformative (or productive). *Id.* at 13-15. This distinction may be useful when the immediate use involves the sale or public distribution of multiple copies of allegedly infringing material. There is no authority or rationale for applying it to the situation presented here, however, where the secondary use is in direct support of scientific research, is non-public, is limited in scope, and where any commercial exploitation stemming from the use is at best remote and uncertain. *See* discussion at Section II.A.2 *infra*. The lower court's test regarding the "commerciality" element of Section 107(1) is not only unsupported as a matter of law, but also fraught with peril as a matter of policy. From the perspective of the libraries which are members of the *amici* associations and from the perspective of scholars and researchers who use those libraries, the lower court's analysis of this element could, if upheld, have a serious adverse impact on scholarship and research in the United States. Under the lower court's analysis, making single photocopies for an individual's own use in connection with scholarship or research is a superseding (non-productive) use. Thus, the lower court would find that such use favors the user under factor one only if the individual is engaged in a wholly non-profit endeavor. If the individual is employed by a profit-making enterprise or there is a possibility of commercial exploitation, however remote, the lower court would find the use to be presumptively unfair under factor one. This analysis leads to anomalous results,(7) demonstrating the need, particularly in the area of scholarship and research, to focus on the immediate use of the copyrighted work rather than the profit-making status of the user or the user's employer. Under a proper analysis of factor one, a presumption against fair use exists where the immediate use of the copied material is clearly commercial, *e.g.*, the copier attempts to sell competing copies for his own financial enrichment. But a presumption in favor of fair use exists where single copies are made for immediate and "private" use by the individual scholar or researchers engaged in his or her research pursuits, regardless of the nature of the individual's employer or the source of research funding. 2. The Lower Court Erred in Placing Undue Weight on the "Productive vs. Non-Productive" Issue, and in Finding That Texaco's Copying was "Non- *Productive" * a. The "Productive vs. Non-Productive" Distinction Is Not Determinative of Fair *Use * In its factor one analysis, the lower court placed undue weight on whether the copying at Texaco was "productive" or "non- productive." It held that if the use of the copied material is deemed "commercial," a defendant can succeed under factor one only by showing that the use nevertheless was "productive" (which it defines as a "nonsuperseding use of the original"). 802 F. Supp. at 12-13. In so holding, the lower court disregarded the Supreme Court's ruling in *Sony*, that "[t]he distinction between 'productive' and 'unproductive' uses . . . [is not] wholly determinative" of fair use, 464 U.S. at 455 n.40, and ignored the Court's instruction that "productivity" is only to be considered as one of a multitude of factors in a "sensitive balancing of interests" under the first part of the four-pronged fair use test. *Id.* *See also* *Harper & Row, Publishers, Inc. v. Nation Enterprises*, 471 U.S. 539, 561 (1985) ("[P]roductive use is simply one factor in a fair use analysis.") Rather than follow established Supreme Court precedent, the lower court applied its own "productivity" test, which it used to analyze the conduct of Texaco's scientists in this case.(8) *Amici* do not suggest that the "productive" nature of use cannot be considered as part of a fair use analysis. However, it is not the primary or determinative factor to be evaluated to the exclusion of all others. Thus, the lower court's first factor "test" misapplies the law, and its holding thereunder should be reversed. b. Texaco's Reproductive Use of the Copied *Work Was "Productive" * In its analysis of this issue, the lower court also erred in holding that Texaco's use of the copied works was not productive. The court summarily dismissed Texaco's argument that its use of the copied material for "socially valuable scientific research", 802 F. Supp. at 16, was "productive," by stating: "[that] is not the kind of productivity that was intended by the discussions and holdings." *Id*. at 14. It held that the use involved no more than "simply mak[ing] mechanical photocopies of the entirety of relevant articles," *id*. at 13, and "contribute[d] nothing new or different to the copyrighted work." *Id*. Again, the court's narrow analysis of what constitutes a "productive use" thwarts the purpose and intent behind the fair use doctrine. In the preamble to Section 107, Congress provided a guiding illustration of fair uses, including criticism, comment, news reporting, teaching, scholarship, and research. 17 U.S.C. 107. Whether or not these types of uses are presumptively determinative of the first fair use factor, they undoubtedly are the types of uses courts have identified as "productive" uses. *See* *Harper & Row*, 471 U.S. at 561 ("The fact that an article is originally 'news' and therefore productive use is simply one factor in a fair use analysis."); *Sony*, 464 U.S. at 455 n.40 ("A teacher who copies to prepare lecture notes is clearly productive. But so is a teacher who copies for the sake of broadening his personal understanding of his specialty. Or a legislator who copies for the sake of broadening her understanding of what her constituents are watching; or a constituent who copies a news program to help make a decision on how to vote").(9) The reproduction for research purposes of the articles at issue in this case is not any less "productive" than these other recognized and enumerated productive uses. The lower court's rigid test appears to reject Texaco's research purpose as a productive use solely because the articles copied were not immediately (at the point of reproduction at the photocopying machine) incorporated into a new, tangible and non- identical work. In the court's eyes, Texaco's "copy of the original [was not] employed as part of a larger whole, for some new purpose," and this was "the type of superseding copying that has been disfavored since the earliest discussion of the doctrine and [which] was thought by many to preclude a finding of fair use *prior to the Supreme Court's decision in Sony*." 802 F. Supp. at 13 (emphasis added). This rationale ignores not only Supreme Court precedent, but also history and reality, to reach a result that implies that even notetaking by a scholar researching a critical work or a scientist preparing an experiment is "non-productive." The court's rationale ignores history because it takes no account of the fact that at the time the fair use doctrine was developed and for much of its history, the copyright law accorded copyright owners of books only the exclusive rights to print, reprint, publish or vend their works, and did not limit copying of such works. *See* *Williams & Wilkins Co. v. United States*, 487 F.2d 1345, 1350 (Ct. Cl. 1973), *aff'd by an equally divided Court*, 420 U.S. 376 (1975); L. Ray Patterson, *Free Speech, Copyright, and Fair Use*, 40 Vand. L. Rev. 1, 37 (1987). Distinctions among holdings characterized by Judge Leval as distinctions between "productive" and "non-productive" uses therefore related to instances of publications of the copyright owners' works, that is, public, competitive uses. In that context, according preferred status to publications that in some way modify or comment on the original work may be logical. In the context of private research or study, where an exact record of the original expression is needed, but the copy does not compete with the original, such a distinction has nothing to recommend it. The lower court's opinion also ignores reality by failing to recognize the fact that research is not a simple, one-step process, particularly the sophisticated type of research in which Dr. Chickering was engaged. The creation of a new and "nonsuperseding" work, which incorporates and thus uses the earlier copied work, is necessarily a laborious process for any researcher. Study and research may ultimately beget tangible results, which may in turn be used and copied by future researchers for use in their research efforts. This is how a civilized society progresses, and precisely how the fair use exception must function to fulfil the constitutional objective to "promote the Progress of Science and Useful Arts." U.S. Const. art. 1, 8; *see* Zechariah Chafee, Jr., *Reflections on the Law of Copyright: I*, 45 Colum. L. Rev. 503, 511 (1945). Even where tangible results are not achieved, the researcher would have, at the least, "broaden[ed] his personal understanding of his specialty." *Sony*, 464 U.S. at 455 n.40. It is difficult to imagine a court holding that the efforts of an individual scientist or other scholar to keep current on developments in his or her field of specialty is not only "non- productive" but constitutes copyright infringement. Yet that is precisely what the lower court did. Under the lower court's analysis, moreover, the republication of a quotation from another author's work in a work of criticism would be a "productive" use, but the copying of that quotation in conducting research for the critical work would be a "non-productive," "superseding" use. A rationale that yields this preposterous result is manifestly flawed. In view of these multiple errors of analysis, the lower court's analysis under the first fair use factor should be soundly rejected. The reproduction of the copied materials by Texaco's researchers was a productive use for a socially beneficial purpose, limited in scope and non-public in character. Properly assessed, the balance under factor one is in Texaco's favor. B. Factor Three: The Amount and Substantiality of the *Portion Used * The lower court gave only cursory consideration to the third factor, holding that because Dr. Chickering copied the entirety of selected *Catalysis* articles relevant to his research "[t]his factor clearly favors plaintiffs." 802 F. Supp. at 17. In reaching this conclusion, the lower court ignored the legislative history of Section 107 and an important teaching of the Supreme Court in *Sony* (the only judicial authority the court cited) and alluded to a general rule -- that the copying of entire works precludes fair use -- which is not an accurate reflection of historic case law and is contrary to the Supreme Court's holding in *Sony*. 1. The Copy of an Entire Copyrighted Work Can Be a *Fair Use * The "suggest[ion] that the copying of an entire copyrighted work, any such work, cannot ever be 'fair use,' . . . is an overbroad generalization, unsupported by the decisions and rejected by years of accepted practice." *Williams & Wilkins*, 487 F.2d at 1353.(10) The Supreme Court clearly agrees, because in *Sony* it held that the recording of entire television programs for private, noncommercial time-shifting use in the home was a fair use of copyrighted television programs. *See* 464 U.S. at 447-56. The legislative history of Section 107 shows that Congress specifically considered the photocopying of entire journal articles to be a fair use in appropriate circumstances. The House Judiciary Committee Report notes that "[a]lthough the works and uses to which the doctrine of fair use is applicable are as broad as the copyright law itself, most of the discussion of Section 107 [during development of the 1976 Copyright Act] has centered around questions of classroom reproduction, particularly photocopying." H.R. Rep. No. 1476 at 66. Although enactment of a specific provision was considered, the Judiciary Committee decided Section 107's fair use provisions were adequate to shield reproduction for classroom use. *Id*. at 66-67. With respect to the application of the Section 107 criteria to photocopying for classroom use, the Committee referred to a pertinent discussion in its 1967 report (H.R. Rep. No. 83, 90th Cong., 1st Sess. 32-35 (1967)) which, with some changes, is also set forth in the Senate Report on S.22 (S. Rep. No. 473, 94th Cong., 1st Sess. 63-65 (1975)). H.R. Rep. No. 1476 at 67. As contained in the Senate Report, that discussion listed the copying of an article in a collective work (such as a periodical issue) as an example of fair use: The educators have sought a limited right for a teacher to make a single copy of an "entire" work for classroom purposes, but it seems apparent that this is not generally intended to extend beyond a "separately cognizable" or "self-contained" portion (for example, a single poem, story, or *article* in a collective work), and that no privilege is sought to reproduce an entire collective work (for example, an encyclopedia volume, a periodical issue or a sizable integrated work published as an entity) (a novel, treatises, monograph, and so forth). With this limitation, and subject to the other relevant criteria, the requested privilege of making a single copy appears appropriately to be within the scope of fair use. S. Rep. No. 473 at 64 (emphasis added). The House Judiciary Committee, and subsequently the Conference Committee, also endorsed as "a reasonable interpretation of the minimum standard of fair use," H.R. Rep. No. 1476 at 72, guidelines for classroom use photocopying negotiated by representatives of publishers and certain educational organizations.(11) Although they are considered by many to be otherwise too limited, the guidelines specifically approve the copying of periodical articles and other entire works.(12) In view of these provisions, it is clear that Congress did not consider the photocopying of entire periodical articles, short stories, or short essays as necessarily inimical to fair use. Thus, Judge Leval's cursory treatment of the third factor, in which he concludes that the mere fact that entire articles were copied conclusively places factor three on the publishers' side of the scales, is grossly in error. Application of his analysis to the copying of scholarly or technical journal articles by or for professors for classroom use would imperil copying that the House and Senate Committees expressly stated was fair use. In *Sony*, the Supreme Court held that the copying of *entire* programs by VCR users did not militate against a finding of fair use "when one considers the nature of a televised copyrighted audiovisual work . . . and that time-shifting merely enables a viewer to see such a work which he had been invited to witness in its entirety free of charge." 464 U.S. at 449. The lower court erred in not taking such factors into account in its third factor analysis. *See* 802 F. Supp. at 17. It should have considered that Dr. Chickering's copying of articles in scientific journals, to which Texaco was a paid subscriber, merely allowed him (a) to use the material in a laboratory conveniently and without endangering the originals, and (b) to postpone the reading of an article from the time the journal issue is circulated to him to some later, more convenient time.(13) In these circumstances, the third factor does not militate against a finding of fair use, and Judge Leval's contrary ruling was error. C. Factor Four: The Effect of the Use Upon the *Potential Market for or Value of the Copyright Work* The final statutory factor to be considered in the fair use analysis is "the effect of the use upon the potential market for or value of the copyrighted work." 17 U.S.C. 107(4). The lower court found that the plaintiffs "powerfully demonstrated entitlement to prevail as to the fourth factor." 802 F. Supp. at 18. The lower court reached this conclusion by means of a gravely flawed analysis, which poses a major threat to the continued viability of the fair use exception and expands the monopoly of copyright proprietors beyond constitutional limits. 1. The Lower Court Erred in Basing Its Finding On Royalties It Assumed Publishers Would receive If the Researchers' Photocopying at Texaco Was *Not Fair Use * Texaco contended below that its scientists needed photocopies for their research purposes, not multiple originals. *Id*. As the lower court observed, Texaco argued that if it "stopped making photocopies for Chickering and his colleagues, Texaco would not replace those photocopies by purchasing numerous additional subscriptions or by purchasing back issues and back volumes." *Id*. at 19. The lower court "accept[ed] . . . that Texaco would not fill [its] need [now being supplied by photocopies] by enormously enlarging the number of its subscriptions."(14) *Id*. It nevertheless concluded that factor four weighed strongly in plaintiffs' favor because: The plaintiffs have shown that there are a variety of other avenues Texaco could and would follow to provide its scientists promptly and relatively inexpensively with working copies of articles for their files (which would produce revenues for the publishers). These include the ordering of photocopies from document delivery services that would pay royalties to the publishers, the negotiation of blanket licenses with individual publishers, and the use of a CCC [Copyright Clearance Center] license under either the TRS [Transactional Reporting Service] or the AAS [Annual Authorization Service]. *Id*. The court, in other words, was persuaded that factor four tipped in plaintiffs' favor not because the challenged practice significantly restricted the number of original copyrighted works Texaco would purchase from plaintiffs, but because mechanisms (such as the CCC) existed whereby plaintiffs could extract royalties from Texaco (directly or indirectly) for making the working photocopies Texaco's scientists desired. The lower court's conclusion in this regard is erroneous as a matter of law. First, it conflicts with the statute because the court's rationale focuses on the value of the *copyright* and not, as directed by Section 107(4), on the market for or value of the "copyrighted *work*." Second, it necessarily assumes its conclusion -- that Texaco's photocopying is not a fair use and that plaintiffs therefore have a right to collect royalties for the reproduction of articles in their journals. The mere existence of mechanisms or procedures for the payment of royalties cannot establish the legal right of plaintiffs to collect them. If it did, fair use defendants would virtually never succeed with respect to the fourth factor, and it would become meaningless. A fair use by definition involves uncompensated use of copyrighted materials. That a plaintiff will obtain more revenue when it is paid for the use of its work than when it is not, is no more than a tautology that fails to advance the fair use analysis at all. Judge Leval appeared at points in his opinion to appreciate the circular nature of plaintiffs' argument. His opinion, for example, quoted his own law review article as follows: By definition every fair use involves some loss of royalty revenue because the secondary user has not paid royalties. Therefore, if an insubstantial loss of revenue turned the fourth factor in favor of the copyright holder, this factor would never weigh in favor of the secondary user. And if we then gave serious deference to the proposition that it is 'undoubtedly the single most important element of fair use,' fair use would become defunct. 802 F. Supp. at 21 n.18, *quoting*, Leval, *Toward A Fair Use Standard*, at 1124-25. But he then falls into the very trap he foresaw, writing "[i]f the copyright owner would be receiving significantly higher revenue but for the defendant's uncompensated copying, the standard is satisfied." 802 F. Supp. at 20. By focusing exclusively on the *ability* of plaintiffs to extract additional royalties, Judge Leval ignores whether they have a *right* to do so and renders the fourth factor virtually impossible for defendants to fulfill. The role of alleged lost royalty income was correctly analyzed in *Williams & Wilkins*. In that case, as in the instant case below, the trial judge inferred that the defendants' photocopying resulted in a loss of royalty income. 487 F.2d at 1357. But the Court of Claims rejected this measure of harm: It is wrong to measure the detriment to plaintiff by loss of presumed royalty income -- a standard which necessarily assumes that plaintiff had a right to issue licenses. That would be true, of course, only if it were first decided that the defendant's practices did not constitute "fair use." In determining whether the company has been sufficiently hurt to cause these practices to become "unfair," one cannot assume at the start the merit of the plaintiff's position, *i.e.*, that plaintiff had the right to license. That conclusion results only if it is first determined that the photocopying is "unfair." *Id*. at 1357 n.19; *see also* L. Ray Paterson, *Understanding Fair Use*, 55 Law & Contemp. Probs., 249, 263 (1992). A proper analysis of factor four focuses not on the plaintiff's ability to collect additional revenue, for that will frequently be present, but on whether the defendant's practice has a significant, adverse effect on actual or potential demand for the original work or for a derivative of the original work. Such an effect will generally be found only when a defendant's secondary use competes with (and therefore reduces demand for) a plaintiff's copyrighted work or a derivative work. As this Court wrote in *Consumers Union of U.S. v. General Signal Corp.*, 724 F.2d 1044, 1044, 1050 (2d Cir. 1983), *cert*. *denied*, 469 U.S. 823 (1984), "[t]he fourth factor is aimed at the copier who attempts to usurp the demand for the original work." It continued: The theory behind the copyright laws is that creation will be discouraged if demand can be undercut by copiers. Where the copy does not compete in any way with the original, this concern is absent. *Id*. at 1051. These words were quoted approvingly in the more recent Second Circuit opinion in *New Era Publications International v. Carol Publishing Group*, 904 F.2d 152, 160 (2d Cir. 1990).(15) Supreme Court cases in this area also consistently emphasize the impact of the defendant's conduct on the marketability of the copyrighted work (or a derivative work) rather than the loss of any royalty income which resulted from the alleged infringement. In *Sony*, for example, the fourth factor favored Sony in large part because "respondents failed to demonstrate that time-shifting [of television programs using Sony's Betamax] would cause any likelihood of non-minimal harm to the potential market for, or value of, their copyrighted works." 464 U.S. at 456. In that case, the potential royalty revenue to plaintiffs if Betamax users were required to pay royalties whenever they taped a program for private viewing would have been immense, yet that calculation played no role whatever in the Supreme Court's analysis of the effect of such use on the market for plaintiffs' copyrighted works.(16) The lower court's emphasis on the loss of potential royalties for the right to make the fair use copies skewed its analysis of the fourth factor in a way that biases the factor in all but *de minimis* cases even against private, academic and research uses of copyrighted works. This narrows fair use and expands copyright proprietors' monopoly unreasonably, with adverse effects on scholarship and scientific research. 2. Other Harm That the Lower Court Postulated Is Based On Speculation and Is Not Shown to Be *Substantial * When the loss of potential royalty income from the making of the fair use copies is properly removed from the factor four analysis, it is clear that the plaintiffs have suffered no significant or "non-minimal" harm to the market for their copyrighted works. Such harm would be present only if the copying by Texaco's scientists usurped demand for the original or derivative works. It does not, because (unlike the cases noted above in which the fourth factor was found to favor plaintiffs) Texaco's copies do not compete in the marketplace with plaintiffs' originals or with any derivative of plaintiffs' originals. Indeed, Texaco's copies are neither sold nor otherwise distributed at all. They therefore have no potential for reducing demand for plaintiffs' works beyond Texaco itself, and that possibility was substantially excluded by the trial court's conclusion that Texaco would not significantly increase its journal subscriptions if it stopped making photocopies. 802 F. Supp. at 19. The lower court, did, however, opine that if photocopying were stopped, circulation of subscription copies would slow, and "[t]o speed up the circulation, it seems likely that Texaco would add at least a modest number of subscriptions to *Catalysis* which would increase Academic Press' revenues." *Id*. At best, this conclusion is highly speculative. It assumes that Texaco (and other similarly situated institutions) would continue to pay the premium "institutional" subscription rates charged by many publishers, even if precluded from making necessary copies of articles at the request of scholars or researchers. It also assumes that Texaco -- and, by extension, others to whom publishers would attempt to apply a favorable decision -- has a substantially expandable budget for serial subscriptions. We are aware of no evidence in the record to support these counterintuitive assumptions. It is at least as likely that circulation of subscription copies would be allowed to suffer whatever slowing, if any, was experienced; and if subscriptions to one or more journals were increased, subscriptions to others would be commensurately reduced or eliminated and greater reliance placed on other sources such as public or university libraries when access to less used publications was required. *See* *Williams & Wilkins*, 487 F.2d at 1358.(17) D. The Lower Court's Balancing of Equitable Considerations Gave Insufficient Weight to the "Reasonable and Customary" Nature of the Use at *Issue and Undue Weight to the CCC * Having analyzed each of the four statutory factors in Section 107, the lower court properly addressed additional equitable considerations. *Sony*, 464 U.S. at 448 & n.31; *Iowa State University Research Foundation, Inc. v. ABC, Inc.*, 621 F.2d 57, 60 (2d Cir. 1980); *see* 802 F. Supp. at 21-22. The lower court's balancing of the equities in this case, however, weighed custom and practice far too lightly and the CCC far too heavily. The lower court expressly acknowledged that "[i]t is commonplace for scientists . . . in industry generally . . . to make for themselves (or to request from the company library) photocopies of particular articles that are expected to be useful in their work." 802 F. Supp. at 4. It also stated that "Texaco's strongest argument may be that photocopying has become 'reasonable and customary,' [*Harper & Row*], 471 U.S. at 550, 105 S. Ct. at 2225, and that failure to permit it would substantially harm scientific research, as *Williams & Wilkins* found." 802 F. Supp. at 25. But the court ultimately rejected these equitable arguments on the ground that they "depend . . . on the absence of a convenient, reasonable licensing system." *Id.* Texaco's scientists need to stop making individual copies of copyrighted material, the lower court reasoned, because such a "convenient, reasonable licensing system" is now in place which permits the practice to continue on a compensated basis. It wrote: The monumental change since the decision of *Williams & Wilkins* in 1973 has been the cooperation of users and publishers to create workable solutions to the problem. Most notable has been the creation of the CCC, and its establishment of efficient licensing systems -- the TRS, established in 1978, followed by the AAS, established in 1983. *Id.* at 24. "Reasonably priced, administratively tolerable licensing procedures are available [through] the CCC]," the court stated "that can protect the copyright owners' interests without harming research or imposing excessive burdens on users." *Id.* at 25. The lower court's rejection of Texaco's "commonplace" use as a fair use improperly discounts the significance of longstanding custom and practice. As the Supreme Court has stated, "the fair use doctrine was predicated on the author's implied consent to 'reasonable and customary' use when he released his work for public consumption." *Harper & Row*, 471 U.S. at 550 (1985).(18) The making of single photocopies for research and scholarly purposes has been recognized as customary for decades. *See* *Williams & Wilkins*, 487 F.2d at 1350, 1355- 56. Library photocopying, for example, has been a generally accepted, customary practice conducted with the blessing of publishers since at least the beginning of this century. *Id.* Under the 1935 "Gentleman's Agreement," representatives of publishers agreed that a library could make single photocopies of articles from copyrighted works for use by scholars. *Id.*(19) The lower court's ringing endorsement of the CCC as having altered longstanding custom is wholly unjustified. First, as discussed at length above, the mere fact that a mechanism exists for the payment of royalties cannot by itself create a legal right to collect such royalties. *See supra* Section II.C.1. Put differently, the decision of publishers to promote the CCC should not be permitted to restrict or eliminate the existing rights of users. The CCC is no more than a means for complying with the law if it has been determined that a particular use is not a fair use; it cannot by itself diminish the scope of users' rights. Second, the fact that many of the fees collected by the CCC may be "reasonable" now is no guarantee that they will remain so in the future, particularly if the lower court's opinion is upheld. Licensing fees are unregulated and, as the *Williams & Wilkins* court found, they cannot be effectively regulated by the courts. *See* 487 F.2d at 1360. The publishers who participate in the CCC are free to raise their fees to levels which effectively would prevent many users from making the copies they need in connection with research or other socially beneficial purposes, thus impairing the constitutional objectives of the copyright laws. And, the right to grant a license for a royalty, reasonable or otherwise, implies the right to withhold a license. Third, the record does not show that the CCC represents all or even a preponderance of publishers of scientific, technical and medical journals. It does not show that the CCC has even minimal participation by publishers of law, social science, humanities, or other journals. Separate licenses still would need to be negotiated by libraries and other users, at considerable time and expense, with publishers not represented in the CCC. In short, the CCC cannot be said to have changed longstanding custom, and it provides no comfort to *amici* and others who are gravely concerned that if the customary practice in which Texaco's scientists engaged is not deemed a fair use, research and scholarship in this country will be seriously harmed. The equitable considerations in this case strongly reinforce the conclusions that each of the four statutory factors properly favors Texaco. III. THE TRIAL COURT'S CONCLUSIONS REGARDING THE APPLICATION OF SECTION 108 OF THE COPYRIGHT ACT TO JOURNAL ARTICLE *COPYING AT TEXACO ARE BOTH INAPPROPRIATE AND WRONG * The lower court devoted a portion of its opinion to the application of Section 108 of the Copyright Act to the challenged practices of Texaco's researchers. *See* 802 F. Supp. at 27-28. Section 108 declares that, in certain circumstances, the reproduction and distribution of single copies or phonorecords of copyrighted works by libraries or archives is not an infringement of copyright. 17 U.S.C. 108. A. The Trial Court Erred In Purporting To Address The *Applicability of Section 108 * Although some of the copies of scientific journal articles or letters used by Dr. Chickering were made at his request by the Beacon library, the lower court's Section 108 analysis is inappropriate, because the issue before it was limited by stipulation to whether the copying at Texaco was fair use within *Section 107* of the Copyright Act. *See* 802 F. Supp. at 28. This Court therefore should hold that the lower court erred in purporting to address the applicability of Section 108 at all. Moreover, the lower court's Section 108 analysis is wrong on every point, and should be expressly disavowed by this Court. B. *The History and Background of Section 108* Section 108 was the product of extensive Congressional consideration of conflicting views of libraries and copyright proprietors regarding the extent to which libraries should be permitted, without incurring copyright liability, to reproduce and distribute journal articles and small parts of copyrighted works at the request of library users, and entire books and other copyrighted works for security or replacement purposes.(20) As early as July, 1961, the Copyright Office recommended enactment of a provision that would permit qualifying libraries to supply "a single photocopy of one article in any issue of a periodical, or a reasonable part of any other publication, . . . when the applicant states in writing that he needs and will use such materials solely for his own research."(21) In the years that followed, several efforts were made to develop such a provision but (with the exception of a provision authorizing limited reproduction of unpublished works for purposes such as preservation) none was included in the initial efforts to compose a general revision of the copyright law. Publishers claimed that proposed provisions would permit too much, while libraries were concerned the proposals might preclude the exercise of rights long considered reasonable and customary. *See* CONTU Final Report, *supra* note 5, at 92. In 1969, the Senate Judiciary Subcommittee on Patents, Trademarks and Copyrights referred to the full Committee a copyright revision bill that included, in Section 108, provisions recognizing that the libraries could, without incurring copyright liability, make single copies of copyrighted works in specified circumstances, including, subject to certain conditions, "at the request of a user of the collection of the library or archives, including a user who makes his request though another library or archives." *Id.* at 97. Over the next several years, numerous hearings were held in the House and Senate, and successive iterations of these provisions were developed. *Id.* at 97-101. But it was not until August 3, 1976, when the House Judiciary Committee completed its revisions and reported H.R. 2223 (the House version of the omnibus copyright revision bill), that Section 108 attained its final form. Section 108 expressly recognizes, in subsection (d) that, at the request of a user, libraries may, without copyright liability, make single copies from their collection (or from the collection of another library) of one article or other contribution to a copyrighted collection or periodical issue, or of a small part of any other copyrighted work. 17 U.S.C. 108(d).(22) This right is subject to the conditions that: the copy becomes the property of the user; the library has no notice that the copy would be used for a purpose other than private study, scholarship, or research; and the library has a warning of copyright on its order form and at the place where copy orders are accepted. *Id.* This right extends to single copies of the same material on separate occasions, but not in the circumstances where a library has substantial reason to believe it is engaged in the "related or concerted" reproduction of multiple copies of the same material, or where a library engages in "systematic" reproduction or distribution of copies.(23) It is this authority that the court below misinterpreted. C. The Trial Court Erred in Its Conclusion That Texaco's Scientists Made Copies for "Commercial *Advantage" as That Term is Used in Section 108 * The lower court erroneously stated that Section 108 is inapplicable to copying at Texaco because the provision applies only if "the reproduction or distribution is made without any purpose of direct or indirect commercial advantage," 802 F. Supp. at 27 (*quoting* 17 U.S.C. 108(a)(1)), and "Texaco makes the copies solely for commercial advantage." *Id.* at 27. The latter assertion is based not on any sale, lease, or other disposition of the copies by Texaco, but solely on the fact that the articles were photocopied to help Texaco's scientists in their research, which the court considered was conducted ultimately with a view to increasing Texaco's profits. *Id.* at 27-28. The court's rationale misconstrues the statute. Section 108's legislative history makes clear that the section's provisions apply to libraries at for-profit entities as well as libraries at non-profit institutions. The House Judiciary Committee's Report on H.R. 2223 -- in which Section 108 took its final form -- states that: The reference to "indirect commercial advantage" has raised questions as to the status of photocopying done by or for libraries or archival collections within industrial, profit-making, or proprietary institutions (such as the research and development departments of chemical, pharmaceutical, automobile, and oil corporations, the library of a proprietary hospital, the collections owned by a law or medical partnership, etc.)(24) . . . . *Isolated, spontaneous making of single photocopies by a library in a for-profit organization, without any systematic effort to substitute photocopying for subscriptions or purchases, would be covered by section 108, even though the copies are furnished to the employees of the organization for use in their work.* Similarly, for-profit libraries could participate in interlibrary arrangements for exchange of photocopies, as long as the reproduction or distribution was not "systematic." *These activities, by themselves, would ordinarily not be considered "for direct or indirect commercial advantage," since the "advantage" referred to in this case must attach to the immediate commercial motivation behind the reproduction or distribution itself, rather than to the ultimate profit-making motivation behind the enterprise in which the library is located*. On the other hand, Section 108 would not excuse reproduction or distribution if there were a commercial motive behind the actual making or distribution of the copies, if multiple copies were made or distributed, or if the photocopying activities were "systematic" in the sense that their aim was to substitute for subscriptions or purchases. H.R. Rep. No. 1476 at 74-75. (emphasis added).(25) The House- Senate Conference adopted the House version of Section 108, including a key revision of the limitation on "systematic" photocopying in Section 108(g)(2). It also declined to adopt the Senate Committee's view that the prohibition on indirect commercial advantage precluded libraries in for-profit organizations from enjoying Section 108 protection for the provision of photocopies of copyrighted materials to employees engaged in furtherance of the organization's commercial enterprise.(26) Therefore, Judge Leval's interpretation of the "direct or indirect commercial advantage" limitation in Section 108 was rejected by Congress in favor of a more liberal view, which recognizes that for-profit institutions have Section 108 rights, subject to the limitations on related or concerted making of multiple copies and systematic reproduction and distribution, provided that there is no "immediate commercial motivation behind the reproduction or distribution itself." *See* H.R. Rep. No. 1476 at 75. D. The Trial Court Erred in Its Interpretation of the *"Single Copy" Restriction of Section 108 * In addition, the lower court misunderstood the limitation of Section 108 reproduction to "no more than one copy . . . of a work." *See* 17 U.S.C. 108(a). The court opined that: A library that qualifies under 108 could deliver a maximum of one copy of a particular item to Texaco . . . . Texaco's Beacon library . . . does not comply with this restriction. If Chickering obtains a copy of an article, there is no procedure barring his Texaco colleagues from copying the same article. In all likelihood, numerous Texaco scientists make copies of the same article when they pertain to matters that are important to Texaco research. Nor is there any procedure in place limiting a single Texaco scientist to a single copy. 802 F. Supp. at 28. The lower court was in error in two respects.(27) First, subsection 108(g) expressly states that "the rights of reproduction and distribution under this section extend to the isolated and unrelated reproduction or distribution of a single copy of phonorecord of the same material *on separate occasions*." 17 U.S.C. 108(g) (emphasis added). Therefore, the lower court is wrong in asserting that Section 108 did not authorize Dr. Chickering or another Texaco scientist to have more than a single copy of any one journal article made by the Beacon library. The law permits more than one copy to be made, provided the reproductions and distributions of the individual copies are isolated and unrelated.(28) Second, this same provision permits the library to make individual copies of the same article for several different Texaco scientists, provided the library is not aware and has no substantial reason to believe it is engaged "in the related or concerted reproduction or distribution of multiple copies or phonorecords of the same material." *See* 17 U.S.C. 108(g)(1). There is no evidence in the record that the Beacon library was aware or had any reason to believe that any copying it performed involved related or concerted reproduction or distribution of multiple copies. Thus, the copying and distribution involved in this case is not outside Section 108's provisions, even if "numerous Texaco scientists make copies of the same articles [or, more properly in this context, have such copies made for them by the library] when they pertain to matters that are important for Texaco's research," as speculated by the lower court, 802 F. Supp. at 28, and even if for that reason alone such copying could be regarded as "related or concerted reproduction" within the meaning of Section 108(g)(1) -- which we strongly dispute.(29) Therefore, if this Court considers the applicability of Section 108 to the copying of journal articles by Texaco researchers, it must reject the lower court's analysis. Under a proper analysis, it will find that -- insofar as the record addresses the Section 108 criteria -- there is no basis in the record for holding Section 108 inapplicable to the copies made by the Beacon library for Dr. Chickering. IV. *CONCLUSION* For the reasons stated herein, *amici* urge this Court to reverse the lower court's decision and to rule that the photocopying at issue herein is a fair use. *Amici* further ask this Court expressly to reject the lower court's gratuitous and erroneous conclusions regarding Section 108. Respectfully submitted, ______________________________ Ritchie T. Thomas, Esq. James V. Dick, Esq. Susan Neuberger Weller, Esq. SQUIRE, SANDERS & DEMPSEY 1201 Pennsylvania Avenue, N.W. Washington, D.C. 20004 (202) 626-6600 Attorneys for *Amicus Curiae* ASSOCIATION OF RESEARCH LIBRARIES, AMERICAN ASSOCIATION OF LAW LIBRARIES SPECIAL LIBRARIES ASSOCIATION, MEDICAL LIBRARY ASSOCIATION, AMERICAN COUNCIL OF LEARNED SOCIETIES, NATIONAL HUMANITIES ALLIANCE, AND ASSOCIATION OF ACADEMIC HEALTH SCIENCES LIBRARY DIRECTORS Dated: March 4, 1993 (Corrected Version: March 10, 1993) *Certificate of Service* I hereby certify that a Corrected Version of the foregoing *Amicus Curiae* Brief of Association of Research Libraries, American Association of Law Libraries, Special Libraries Association, Medical Library Association, American Council of Learned Societies, National Humanities Alliance, and Association of Academic Health Sciences Library Directors was mailed this 10th day of March, 1993, by first class mail, postage, to the following:* Thomas Smart, Esq. Richard A. De Sevo, Esq. Kaye, Scholer, Fierman, Hays & Handler 425 Park Avenue New York, New York 10022 Joseph P. Foley Texaco Inc. 2000 Westchester Avenue White Plains, New York 10650 S.R. Kay, Esq. Proskauer Rose Goetz & Mendelsohn 1585 Broadway New York, New York 10036 ______________________________ Ritchie Thomas *The original *Amicus Curiae* Brief was served on the noted individuals on March 4, 1993. FOOTNOTES 1. The lower court's opinion places great emphasis on Texaco's for-profit status, the size of its income and revenues, and the court's view that the copying was carried on in a commercial context for the purpose "of producing profits." *See* 802 F. Supp. at 16, 27 & n. 25. Should this Court affirm the lower court's determination -- as these *amici* strongly believe it should not -- it should draw a sharp and explicit line between the facts of this case and copying by and for researchers, scholars, and teachers at non-profit institutions. 2. *See* L. Ray Patterson, *Understanding Fair Use*, 55 Law & Contemp. Probs. 249, 263 (1992). 3. The *Sega* court also found an overriding "public benefit" under factor one because "the challenged use serves a public interest," 977 F.2d at 1523, *i.e.*, "Accolade's identification of the functional requirements for Genesis compatibility has led to an increase in the number of independently designed video game programs offered for use with the Genesis console. *Id.* If the proliferation of compatible video game programs is, as in *Sega*, a public benefit justifying the copying of a work for study purposes under the first fair use factor, then surely the acknowledged socially beneficial objectives of research science justify the copying of the works at issue here. 4. As discussed in Section III of this brief, the applicability of Section 108 to the copying at issue was not before the lower court under the stipulation that governed the trial below. Nevertheless, the language and legislative history of Section 108 are relevant to an understanding of the "commerciality" element of Section 107(1). 5. The photocopying of copyrighted works, particularly in educational and research contexts, was a major consideration of Congress in the development of both Section 107 and Section 108 of the 1976 Copyright Act. *See* Library of Congress, *Final Report of the National Commission on the Technological Uses of Copyrighted Works*, App. A ("Summary of the Legislative History of Computer-Related Issues and the Photocopy Issue"), 89-104 (1979) ("CONTU Final Report"). 6. *See also* *New Era Publications Int'l v. Henry Holt & Co.*, 873 F.2d 576, 583 (2d Cir. 1989) ("As long as a book can be classified as a work of criticism, scholarship, or research, as can the book here, the [first] factor cuts in favor of the book's publisher. . . ."); *Consumers Union of U.S. v. General Signal Corp.*, 724 F.2d 1044, 1049 (2d Cir. 1983), *cert. denied*, 469 U.S. 823 (1984) (public benefit of consumer education justified, under factor one, the accurate use of allegedly infringing material in commercial advertisements). 7. -- If a scholar's or researcher's efforts are funded by grants from the government or non-profit foundations, then the reproduction of single copies by or for that individual would be a fair use. But if a portion of his or her funding was in the form of grants from for-profit corporate sources, then the same reproduction may not be regarded as a fair use even though the subject and objective of the research were identical. -- If a doctor or medical researcher is employed by a non- profit hospital, the making of a single copy of an article in connection with that individual's research efforts is presumptively a fair use. But the same reproduction of the same article in connection with the same research effort would be presumed to be unfair if undertaken by a doctor or medical researcher employed by a for-profit hospital or in private practice. -- In the legal context, reproduction of a single copy of an article, treatise, case note, or other copyrighted work would presumptively be a fair use under factor one if undertaken by or on behalf of a lawyer employed by the government or a non-profit public interest organization, but the logic of the lower court's analysis would dictate that the same reproduction of the same work would presumptively be unfair under factor one if undertaken by an associate or partner of a private law firm (unless, perhaps, the law firm attorney was working on behalf of a *pro bono* client). 8. Judge Leval has written that he "believes the answer to the question of justification [for copying] turns primarily on whether, and to what extent, the challenged use is *transformative* [or productive]." Pierre N. Leval, *Toward A Fair Use Standard*, 103 Harv. L. Rev. 1105, 1111 (1990) (emphasis in original). He evidently adopted and applied this standard despite his express recognition that this approach was rejected by the Supreme Court in *Sony*. *Id*. at 1111 n.29. His position on the importance of the "productive" nature of a reproductive use also has been criticized elsewhere as being far too limiting and as overstating the usefulness of this factor in a fair use analysis. *See* Lloyd L. Weinreb, *Fair's Fair: A Comment on the Fair Use Doctrine*, 103 Harv. L. Rev. 1137, 1143 (1990). 9. *See also* *Dow Jones & Co. v. Board of Trade*, 546 F. Supp. 113, 119 (S.D.N.Y. 1982) ("[A]n illustrative, but not exclusive list of productive uses is found in the first sentence of 17 U.S.C. 107."); *Williams & Wilkins Co. v. United States*, 487 F.2d 1345, 1350, 1353 (Ct. Cl. 1973), *aff'd by an equally divided Court*, 420 U.S. 376 (1975) ("a scholar can make a handwritten copy of an entire copyrighted article for his own use . . . and he could have his secretary make a typed copy for his personal use and files;" "[A] library could supply single photocopies of entire copyrighted works to attorneys or courts for use in litigation."). 10. *See also* *Triangle Publications, Inc. v. Knight-Ridder Newspapers, Inc.*, 626 F.2d 1171, 1177 & n.15 (5th Cir. 1980) (quoting *Williams & Wilkins*); *Dow Jones & Co. v. Board of Trade*, 546 F. Supp. 113, 120-21 (S.D.N.Y. 1982) ("[I]t would make no sense . . . to adopt the notion that copying an entire work can never be fair use."); *Haberman v. Hustler Magazine, Inc.*, 626 F. Supp. 201, 212 (D. Mass. 1986) (copying of photograph (the entire work) held to be fair use); *Key Maps, Inc. v. Pruitt*, 470 F. Supp. 33, 38 (S.D. Tex. 1978) (300 copies of copyrighted maps held fair use). 11. The Judiciary Committee Report makes clear that the guidelines do not necessarily define the limits of fair use photocopying of copyrighted materials for classroom use. H.R. Rep. No. 1476 at 68. 12. The guidelines state: "A single copy may be made of any of the following by or for a teacher at his or her individual request for his or her scholarly research or use in teaching or preparation to teach a class: . . . [a]n article from a periodical or newspaper, . . . [a] short story, short essay or short poem, whether or not from a collective work . . . ." *Id*. 13. The lower court's effort (in another context) to distinguish this time-shifting use in *Sony* is a failure. The Court states that: The Supreme Court's finding in *Sony* that the making of time-shifting copies caused no economic loss to the copyright owners has no application here. Here the free photocopying practiced by large numbers of research scientists employed by a large research- oriented company deprives the publishers of substantial revenues. 802 F. Supp. at 22. The lower court's assertion that the fair use photocopying by scientists deprives publishers of substantial revenues is based on its assumption that royalties should be paid for the copies made. If the same assumption were made with respect to the videotaped copies of television programs involved in *Sony*, the potential royalty revenues involved would have been enormous. 14. The court did find that "it seems likely that Texaco would add at least a modest number of subscriptions to *Catalysis* which would increase Academic Press' revenues." 802 F. Supp. at 19. This finding, which is highly speculative, is discussed below. 15. *See also* *Arica Inst., Inc. v. Palmer*, 970 F.2d 1067, 1078 (2d Cir. 1992) (fourth factor favored defendant; "We find that these infringing aspects of [defendant's book] will have a negligible effect on the market for [plaintiff's biography]."); *Rogers v. Koons*, 960 F.2d 301, 312 (2d Cir. 1992) (fourth factor favored plaintiff; defendant's sculpture, incorporating plaintiff's photograph, could reduce demand for other derivative works); *Salinger v. Random House, Inc.*, 811 F.2d 90, 99 (2d Cir. 1987), *cert*. *denied*., 484 U.S. 890 (1987) (fourth factor favored plaintiff; impairment of the potential market for plaintiff's copyrighted work was "likely"); *Maxtone-Graham v. Burtchaell*, 803 F.2d 1253, 1264 (2d Cir. 1986), *cert*. *denied*, 481 U.S. 1089 (1987) (fourth factor favored defendant; allegedly infringing book "poses no more than an insignificant threat of economic damage"* to the actual or potential market for plaintiff's work); *Update Art, Inc. v. Maariv Israel Newspapers, Inc.*, 635 F. Supp. 228, 232 (S.D.N.Y. 1986), *aff'd*, 843 F.2d 67 (2d Cir. 1988) (fourth factor favored plaintiff; defendant's smaller copy of poster "is likely to reduce the demand for [plaintiff's] original poster"). 16. In *Harper & Row*, the Supreme Court held that the defendant's publication of an article containing numerous verbatim quotations from the unpublished memoirs of President Ford, to which plaintiff had been granted the exclusive first serial rights, was not a fair use. The Court found that the fourth factor favored the plaintiff, not because the defendant failed to pay royalties for its use of the quotations, but because the defendant's publication of the quotations impaired the marketability of the original. 471 U.S. at 566-69. Similarly, in the Supreme Court's most recent elaboration of the fair use doctrine, *Stewart v. Abend*, 495 U.S. 207 (1990), the Court found that the fourth factor favored the plaintiff in a case involving the distribution and exhibition of a derivative work (a motion picture) which infringed the rights of the copyright owner of the preexisting work (a magazine story). The Court's rationale was that distribution of "the film impinged on the ability to market new versions of the story," *id*. at 238, not that the copyright owner lost royalty income in connection with the distribution and exhibition of the film. 17. The lower court further erred in considering "Academic Press' growing subscription revenues and glowing profitability," 802 F. Supp. at 19, to be irrelevant to its inquiry as to whether or not the market for or value of its copyrighted works had been harmed by the photocopying by Texaco's researchers. If there were any validity to the publishers' claim that the shift to use of photocopying machines for making single copies of reference material for personal use is depriving them of substantial subscription revenue, there should be some evidence of this effect. Effects cannot simply be assumed. *See* *Williams & Wilkins*, 487 F.2d at 1359. The record of this case contains no concrete evidence of such harm; it shows quite the contrary. 18. This Court has held that custom is relevant in determining whether a use is fair. In *Rosemont Enterprises, Inc. v. Random House, Inc.*, 366 F.2d 303, 307 (2d Cir. 1966), *cert. denied*, 385 U.S. 1009 (1967), for example, this Court reversed a district court's determination that a biographer's quotation of a previous work was not fair use, writing: "It is both *reasonable* and *customary* for biographers to refer to and utilize earlier works dealing with the subject of the work and occasionally to quote directly from such works." (emphasis added). *See* *Religious Technology Ctr. v. Wollersheim*, 971 F.2d 364, 367 (9th Cir. 1992); *Triangle Publications, Inc v. Knight- Ridder Newspapers*, 626 F.2d 1171, 1176 (5th Cir. 1980); *Mathieson v. Associated Press*, 23 USPQ 2d 1685 (S.D.N.Y. 1992); Weinreb, *supra* note 8, at 1140. 19. The Agreement provided in part, that: A library, archives office, museum, or similar institution owning books or periodical volumes in which copyright still subsists may make and deliver a single photographic reproduction or reduction of a part thereof to a scholar representing in writing that he desires such reproduction in lieu of loan of such publication or in place of manual transcription and solely for the purposes of research; provided: (1) That the person receiving it is given due notice in writing that he is not exempt from liability to the copyright proprietor for any infringement of copyright by misuse of the reproduction constituting an infringement under the copyright law; (2) That such reproduction is made and furnished without profit to itself by the institution making it . . . . The statutes make no specific provision for a right of a research worker to make copies by hand or by typescript for his research notes, but a student has always been free to "copy" by hand; and mechanical reproductions from copyright material are presumably intended to take the place of hand transcriptions, and to be governed by the same principles governing hand transcription . . . . 1935 "Gentlemen's Agreement," *reprinted in* Leon E. Seltzer, *Exemptions and Fair Use in Copyright*, at App. E (1978). 20. Libraries considered that the making and distribution of single copies for archival and replacement purposes and in response to requests by users and other libraries were customary activities that merely continued longstanding custodial, lending and interlibrary loan practices, and did not significantly deprive authors or publishers of purchases or subscriptions. *See generally* CONTU Final Report, *supra* note 5, at 90. Publishers, on the other hand, who saw the increasingly ubiquitous copying machine as a potential source of windfall revenue, expressed concern that interlibrary networking of photocopies could have a damaging effect on publishers, and, ultimately, on the survival of publications such as journals. *Id.* These competing viewpoints proved difficult to resolve, a difficulty that contributed to the long gestation of the 1976 Copyright Act. 21. *Copyright Law Revision: Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law*, 87th Cong., 1st Sess. 25 (Comm. Print 1961); *see also* CONTU Final Report, *supra* note 5, at 89-104. 22. Other provisions of Section 108 state that, in specified circumstances, qualifying libraries and archives have express rights to make and distribute copies: (a) of unpublished works for purposes of preservation or security or for deposit for research use in another library; (b) of published works to replace copies lost, stolen, deteriorating, or damaged, if an unused replacement cannot be found at a fair price; and (c) of entire published or unpublished works, or substantial parts of such works, if a copy cannot be obtained at a fair price, the copy becomes the property of the user, and the library has no reason to believe the copy will be used for any purpose other than private study, scholarship, or research. 17 U.S.C. 108. 23. The statute states that the limitation in the case of "systematic" photocopying is not to be interpreted to prevent a library from participating in interlibrary arrangements that do not have, as their purpose or effect, that participants receive photocopies in such aggregate quantities as to substitute for a subscription to or purchase of a work. 17 U.S.C. 108(g)(2). 24. The "questions" to which the report refers were raised late in the 1976 Act's development because of suggestions that Section 108 rights might be generally unavailable to libraries or archives in profit-making organizations. This position was typified by language in the Senate Judiciary Committee Report on parallel legislation earlier adopted by the Senate. *See* S. Rep. No. 473 at 67. One of those who suggested clarification would be appropriate was the Registrar of Copyrights, Barbara Ringer, who stated in her testimony to the House Subcommittee that the interpretation of the phrase "without any purpose of direct or indirect commercial advantage" was a problem with respect to special libraries. *Copyright Law Revision: Hearings before the Subcommittee on Courts, Civil Liberties, and the Administration of Justice of the House Judiciary Committee on H.R. 2223*, 94th Cong., 1st Sess. 18091-04 (1975). The House Committee's resolution was to reject the Senate Committee's interpretation in favor of the one that made Section 108 available to libraries in for-profit institutions. 25. The House Judiciary Committee essentially equated "direct commercial advantage" with the sale of copies, and "indirect commercial advantage" with copying that substitutes for subscriptions or purchases *See* H.R. Rep. No. 1476 at 74-75. 26. The Conference Committee Report states that: Another point of interpretation involves the meaning of "indirect commercial advantage," as used in Section 108(a)(1), in the case of libraries or archival collections within industrial profit-making, or proprietary institutions. As long as the library or archives meets the criteria in Section 108(a) and the other requirements of this section, including the prohibitions against multiple and systematic copying in subsection (g), the conferees consider that the isolated, spontaneous making of single photocopies without any commercial motivation, or participation by such a library or archives in interlibrary arrangements, would come within the scope of section 108. H.R. Conf. Rep. No. 1733, 94th Cong. 2nd Sess. 73-74 (1976). This statement is not a model of clarity. Nevertheless, it manifestly does not adopt the Senate Report's restrictive view. The "without any commercial motivation" clause in the second sentence must refer to the act of "making . . . single photocopies," which immediately precedes it, rather than to the ultimate objective of the research concerned or of the enterprise in which the copies are made. It thus relates to the limitations imposed by subsection 108(g)(1) and (2), consistent with the House Report. 27. In addition, this part of the trial court's opinion relies heavily on speculation. 28. If, for example, Dr. Chickering were, while using it in the laboratory, to damage the copy of an article from *Catalysis* made for him, Section 108 would permit the library (if it meets the other requirements of Section 108) to provide him a replacement copy at his request. 29. The "related or concerted reproduction" to which Section 108(g)(1) refers must be reproductions that are related by more than the mere common interest of the researchers or students involved in a particular line of research or study. Were such common interest alone to suffice to make the separate copying of an article for two or more researchers "related," Section 108 would be reduced to an authorization merely to make one copy of an article for all time. Moreover, contrary to plaintiffs' representations there is no evidence the library was engaged in systematic reproduction or distribution within the meaning of Section 108(g)(2). Plaintiffs' characterization of Texaco's copying as "systematic," which was not adopted by the court below, is wrong and misleading. It is based on the mere volume of the copying by researchers at Texaco. As stated by the House Report: "[A] library in a profit-making institution would not be authorized to: . . . use a single subscription or copy to supply its employees, on request, with single copies of material relevant to their work, where the arrangement is 'systematic' *in the sense of deliberately substituting photocopying for subscription or purchase*." H.R. Rep. No. 1476, 94th Cong., 2d Sess. 74-75. (emphasis added). However, "[i]solated, spontaneous making of single photocopies by a library in a for-profit organization, without any systematic effort to substitute photocopying for subscriptions or purchases, would be covered by Section 108, even though the copies are furnished to the employees of the organization for use in their work." *Id.* at 75.