#e-reserves

The GSU opinion is out, and it's good news for the University. Of 48 allegedly infringing excerpts that were up for reevaluation on remand, 41 were found to be fair use. After being chided by the 11th Circuit for her overly-deterministic analysis of the four statutory fair use factors, Judge Orinda Evans has dutifully given us 220 pages of less-mechanical-looking analysis.

(Though there was this little gem, which I swear is there just to tweak the noses of the appellate panel.)

The beauty of her original opinion’s mechanical analysis (and I’m not usually a fan of bright lines and thresholds!) was that it gave folks guidance about what would be clearly fair (or not) in the future when it comes to non-transformative use of scholarly books, using metrics (number of pages or chapters, etc.) that they could easily apply. Her new analysis, stripped of its bright lines and clear arithmetic, seems to amount to nothing more than her opinion about whether the use will substantially harm the market value (actual and potential) for the works used. How much harm is “substantial”? Well, in several places Judge Evans says the harm must be so extensive as to risk undermining the publishers’ entire motivation to publish the work. So, it would need to eat their entire profit margin (or enough that they decide it’s not worth the bother to publish). And in at least one place she seems to suggest that, because there is no marginal cost for a publisher to offer to license use of excerpts from a work, there is no real harm when GSU decides not to pay the license. This is heady stuff, and could offer a very wide berth for educational fair use of electronic excerpts.

What gives me pause is that the decision process here seems to involve knowledge of very specific market data about each individual work you want to use. Distributing excerpts of 25 pages of a 500 page book might be fair use if the book has made very little revenue from electronic licensing in recent years, but it might not be fair if licensing revenue was higher. That’s all fine and good for a judge looking at hundreds of pages of discovery, but what about a professor, ex ante? How can a prof learn this information? I don’t know; it’s closely-held business information that was only revealed in this case because it was litigated.

All that said, my prediction about this opinion has always been that, if it follows scrupulously the Circuit Court’s insistence on indeterminacy, then there will of course be very little guidance for future fair users on the face of the opinion. BUT, clever readers can start building their Excel spreadsheets, loading in the relevant data about each use, along with the outcomes, and looking for the (unstated) thresholds or patterns in the opinion. Start your engines!

A couple of last thoughts: It's fabulous that Judge Evans makes crystal clear that this case is only about non-transformative uses. Now, she (and the appellate court) used a definition of "non-transformative" that conflicts with all the case law I know of ("mirror-image copies" are non-transformative; tell that to HathiTrust and Dorling-Kindersley). But leaving that aside, this very tricky framework has virtually nothing to do with transformative uses. All the market hoo-ha that comes in under factor four would be irrelevant in such cases.

And it's also fabulous that Judge Evans is again awarding attorneys fees and costs to GSU. Now, presumably, those fees have climbed even higher. Perhaps now Oxford, Cambridge, and Sage (and their paymasters at the CCC and AAP) will decide it's time to stop paying GSU to kick their butts in court.

On Friday, October 17, 2014, the Eleventh Circuit released its long-awaited decision in the Georgia State University (GSU) e-reserves case. Some key takeaways from the majority opinion include:

Affirms that fair use is applied on a case-by-case basis;

Rejects bright-line rules, such as using a ten-percent-or-one-chapter rule to allow fair use (a rule that the district court adopted);

Affirms that even if a use is non-transformative, a nonprofit educational purpose can still favor fair use;

Rejects applicability of the coursepack copying cases;

Finds that a publisher’s failure to offer a license will tend to weigh in favor of fair use in terms of the fourth fair use factor; and

Gives weight to a publisher’s incentive to publish, rather than focusing on the author’s incentive to create.

Another positive aspect of the case is the Eleventh Circuit’s discussion of the purpose of copyright, affirming the fact (as has long been held by the Supreme Court) that copyright is not a natural right of the author, but rather, is designed to stimulate creativity and progress for the public good. Nancy Sims has an excellent analysis of the court’s ruling covering what she liked and didn’t like from the opinion.

It is important to note that while the case has been reversed and remanded, the Eleventh Circuit did not rule against GSU. Instead, the Eleventh Circuit directed the district court to revisit its fair use analysis and not to take an arithmetic approach to the four fair use factors (rejecting the notion that if three of the factors favor fair use, but one disfavors fair use, then fair use will always apply).

In fact, most of the publishers’ arguments were actually rejected by the Eleventh Circuit. Kevin Smith has a great summary of five arguments advanced by the publishers that were ultimately rejected by the Eleventh Circuit.

Thus, e-reserves remain alive and well, though the exact policies on fair use for e-reserves at some institutions may need to be revisited in light of this case, particularly those that rely on a checklist. Although the Eleventh Circuit’s methodology is binding only on Alabama, Florida and Georgia, this case is persuasive authority in other jurisdictions.

Here’s what the court had to say on each of the four use factors:

Factor One (the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes): While GSU’s use was non-transformative, the nonprofit educational purpose of the e-reserves favors fair use.

The Eleventh Circuit upheld the district court’s finding on the first factor, determining that while the use of the Plaintiffs’ works was not transformative, the first factor favored GSU nonetheless. The court noted that the excerpts posted in the e-reserve system were verbatim copies converted into a digital form and were used for the same intrinsic purpose as the works. However, because GSU’s use was for a nonprofit educational purpose rather than a commercial purpose, the first factor favored GSU.

In finding that GSU’s use was for a nonprofit educational purpose, the court noted that the Supreme Court and Congress have favored fair use for educational purposes. The Eleventh Circuit noted that the user was a nonprofit educational institution and that the use of the works was clearly for educational purposes. It discussed the ways that GSU could have profited from the use or “commercially exploited” the work, but concluded that while Defendants could have profited from the use of the works (for example through collection of student tuition and fees) such reasoning is circular because any unlicensed use of a copyrighted work results in profit to the user and thus no use would qualify as nonprofit under the first factor. The Eleventh Circuit noted that GSU’s use of the works “provides a broader public benefit—furthering the education of students at a public university.” In sum, “despite the recent focus on transformativeness under the first factor, use for teaching purposes by a nonprofit, educational institution such as Defendants’ favors a finding of fair use under the first factor, despite the nontransformative nature of the use.”

Factor Two (nature of the copyrighted work): Factual works may include original expressive contents and relay more than bare facts, but this factor is of relatively little importance.

Here, the Eleventh Circuit states that highly creative works are entitled to greater protection, while the use of factual or informational work is more likely to favor fair use. The Eleventh Circuit rejected the district court’s holding that the second factor favored fair use in every instance because of the factual nature of the works-at-issue and found that the works still included expressive content. The court stated that where the works “surpass[] the bare facts necessary to communicate information, or derives from the author’s experiences or opinions, the District Court should have held that the second factor was neutral, or even weighed against fair use in cases of excerpts that were dominated by such material.” However, the court acknowledges that “the second fair use factor is of relatively little importance in this case,” noting that the works were neither fictional nor unpublished.

Factor Three (amount and substantiality of the portion used in relation to the copyrighted work as a whole): Blanket ten-percent-or-one-chapter rule is not appropriate; bright line rules must be avoided.

The Eleventh Circuit rejected the district court’s formulation favoring fair use under the third factor where GSU copied no more than ten-percent of a work or one chapter in the case of a book with then or more chapters. The court notes, “We must avoid ‘hard evidentiary presumption[s] . . . and ‘eschew[] a rigid bright-line approach to fair use.’” The Eleventh Circuit rejects this formulation even as a starting point in the analysis, finding that “application of the same non-statutory starting point to each instance of infringement is not a feature of a proper work-by-work analysis.”

In its discussion of the third factor, the Eleventh Circuit also rejected the Classroom Guidelines as indicative of what is permitted under fair use. The Eleventh Circuit noted that the Classroom Guidelines “do not carry force of law,” and furthermore, these guidelines “were intended to suggest a minimum, not maximum, amount of allowable educational copying that might be fair use, and were not intended to limit fair use in any way.” Here, the Eleventh Circuit references the coursepack cases, but finds that while they may provide guidance, they are not binding authority (both in terms of jurisdiction and the context).

Factor Four (effect of the use upon the potential market for or value of the copyrighted work): Market substitution is the primary concern; failure to offer a license should generally weigh in favor of fair use.

On the fourth factor, the Eleventh Circuit noted that the adverse impact of primary concern is market substitution and “[t]he central question . . . is not whether Defendants’ use of Plaintiffs’ works caused Plaintiffs to lose some potential revenue. Rather it is whether Defendants’ use—taking into account the damage that might occur if ‘everybody did it’—would cause substantial economic harm such that allowing it would frustrate the purposes of copyright by materially impairing Defendants’ incentive to publish the work.” The Eleventh Circuit’s apparent focus on the incentive to publish is a bit unusual, given that courts are generally focused on an author’s incentive to create rather than a publisher’s incentive to publish. Given the weight the Eleventh Circuit has given to a publisher’s incentive, academics should strongly consider open access publication options.

On the licensing point, the Eleventh Circuit found that “it is not determinative that programs exist through which universities may license excerpts of Plaintiffs’ works. In other words, the fact that Plaintiffs have made paying easier does not automatically dictate a right to payment . . . the ability to license does not demand a finding against fair use.” Furthermore, the court pointed to the lack of an available license as an “inference that the author or publisher did not think that there would be enough such use to bother making a license available” and in such cases, “the fourth factor should generally weigh in favor of fair use.

Finally, the Eleventh Circuit stated that the district court should have afforded the fourth factor greater weight due to the nontransformative nature of GSU’s use (as opposed to finding that each factor weighed equally in the district court’s arithmetic approach).