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CORPORATE DISCLOSURE STATEMENT
The following chart sets forth, with respect to those plaintiffs to
whom Rule 26.1 of the Federal Rules of Appellate Procedure is
applicable, any parent companies, subsidiaries, affiliates or
successors in interest that have issued shares to the public.
Parent Companies, Subsidiaries,
Affiliates or Successors in
Interest That Have Issued
Plaintiff Shares to the Public
Academic Press General Cinema Corporation;
The Neiman-Marcus Group, Inc.
Alan R. Liss, Inc. John Wiley & Sons, Inc.
Aspen Publishers, Inc. Wolters Kluwer N.V.
Birkhauser Boston Springer Verlag New York, Inc.
Butterworth & Co. Elsevier N.V., Amsterdam;
(Publishers) Ltd. Reed International P.L.C., London
CRC Press, Inc. The Times Mirror Company
The C.V. Mosby The Times Mirror Company
Company
Elsevier Science Elsevier N.V., Amsterdam;
Publishing Co., Inc. Reed International P.L.C., London
Grune & Stratton, Inc. W.B. Saunders Company;
General Cinema Corporation;
The Neiman-Marcus Group, Inc.
Harcourt Brace General Cinema Corporation;
Jovanovich Limited The Neiman-Marcus Group, Inc.
Human Sciences Press Plenum Publishing Corp.
J. Schweitzer Verlag H. Luchterhand Verlag GmbH & Co.;
Wolters Kluwer N.V., Netherlands
John Wiley & Sons John Wiley & Sons, Inc.;
Limited Wiley Heyden Ltd.
Little, Brown & Time, Inc.; Time Warner, Inc.
Company
Pergamon Press, Ltd. Elsevier N.V., Amsterdam;
Reed International P.L.C., London
Raven Press Wolters Kluwer N.V.
Scripta Technica, Inc. John Wiley & Sons, Inc.
Van Nostrand Reinhold Thomson Publishing Corporation
VCH Publishers, Inc. VCH Verlagsgesellschaft GmbH,
Weinheim, Germany
VNU Business Pittway Corp.
Publications Inc.
Walter De Gruyter, Inc. Walter De Gruyter & Company,
Berlin, Germany
Warren Gorham &
Lamont Research Institute of America, Inc.;
The Thomson Publishing Corporation
Williams & Wilkins Waverly, Inc.
Wolters Kluwer Wolters Kluwer N.V.
Academic Publishers
B.V.
Table of Contents
Page
Corporate Disclosure Statement . . . . . . . . . . . i
Table of Authorities . . . . . . . . . . . . . . . . viii
Guide to Abbreviations . . . . . . . . . . . . . . xviii
PRELIMINARY STATEMENT. . . . . . . . . . . . . . . . 1
QUESTIONS PRESENTED AND
QUESTIONS NOT PRESENTED. . . . . . . . . . . . . . . 5
STATEMENT OF THE CASE. . . . . . . . . . . . . . . . 7
A. The Litigants and Interested Third Parties 7
B. The Fair Use Proceedings and Trial Record 8
C. The Decisions Below . . . . . . . . . . . 9
STATEMENT OF FACTS . . . . . . . . . . . . . . . . . 10
A. Texaco Engages In Its Research Activities
(An Integral Part of Which Is the Systematic
Photocopying of Journal Articles) for the Sole
Purpose of Making a Profit. . . . . . . . 10
B. The Vital Economic Importance to Texaco of
Its Researchers Having Timely Access to
Journal Articles. . . . . . . . . . . . . 11
C. The Methods by Which Research Personnel at
Texaco and Other For-Profit Corporations
Regularly Learn About and Obtain
Photocopies of Entire Journal Articles. . 12
Circulation of Journals. . . . . . . 12
Literature Searches. . . . . . . . . 13
Other Methods. . . . . . . . . . . . 13
Library Copying. . . . . . . . . . . 14
D. The Importance to Research Personnel of
Speedy Circulation of Journals and How
Photocopying Reduces the Number of
Subscriptions Needed to Maintain Speedy
Circulation . . . . . . . . . . . . . . . 14
E. Dr. Chickering's Representative
Photocopying. . . . . . . . . . . . . . . 16
F. The Economic Benefits to Texaco and Other
For-Profit Industrial Corporations of Research
Scientists Using Photocopy Duplicates
in Their Work . . . . . . . . . . . . . . 17
G. There Are a Number of Readily Available
Ways to Provide Researchers with Access to
Journal Articles Other Than Unauthorized
Photocopying. . . . . . . . . . . . . . . 18
H. Unauthorized Photocopies Supersede Original
Articles and Authorized Photocopies . . . 19
I. Academic Press and Its Important Role in the
Dissemination of Scientific Information . 21
J. The Economic and Other Benefits to Scientist
Authors From Having Articles Published in
Journals. . . . . . . . . . . . . . . . . 24
K. The Copyright Clearance Center and the
Success of Its Photocopying Authorization
Services. . . . . . . . . . . . . . . . . 25
1. The Successful Development of CCC's
Photocopying Authorization Services. 25
2. The Substantial and Growing
Photocopying Authorizations Market . 30
L. Bell Labs' Successful Program Since 1978 of
Providing Journal Articles to its
Research Personnel Without Unauthorized
Photocopying. . . . . . . . . . . . . . . 31
M. Texaco's Unauthorized Photocopying Is Not a
Reasonable and Customary Practice . . . . 32
N. The Adverse Economic Effects on Copyright
Owners If the Widespread Photocopying
Practices Exemplified by Texaco Were
Permitted as Fair Use . . . . . . . . . . 34
ARGUMENT . . . . . . . . . . . . . . . . . . . . . . 36
I. THE PROPER STANDARD OF APPELLATE
REVIEW AND TEXACO'S ERRONEOUS
VERSION OF THE FACTS . . . . . . . . . . . . . 36
A. The Proper Standard of Appellate Review Is
Customary Deference to the Factual Findings
of the Trial Court in Accordance with the
"Clearly Erroneous" Rule and De Novo
Review of Its Conclusion Concerning Fair Use . 36
B. Texaco Presents an Erroneous Version of the
Facts . . . . . . . . . . . . . . . . . . 38
1. Profit-Motivated Commercial Purpose. 39
2. Texaco's Superseding, Non-
transformative Multiplication of Copies
of Original Journal Articles . . . . 40
3. There are a Number of Reasonable and
Practical Alternatives to Free
Unauthorized Photocopying of CCC-
Registered Journal Articles. . . . . 40
4. Harm, Including Lost Subscription Sales 41
5. Reasonable and Customary Practices . 42
II. STATUTORY FOUR FACTOR ANALYSIS AND
RELEVANT EQUITABLE CONSIDERATIONS
COMPEL REJECTION OF TEXACO'S FAIR USE
DEFENSE. . . . . . . . . . . . . . . . . . . . 42
A. The First Factor. . . . . . . . . . . . . 45
1. A Commercial Use For a Profit-
Motivated Purpose Disfavors Fair Use 45
2. A For-Profit Research Use or Purpose
Does Not Favor Fair Use. . . . . . . 47
3. Commercial Use in First Factor
Analysis Does Not Require The Sale or
Distribution of Copies . . . . . . . 51
4. Sony and Williams & Wilkins Do Not
Support Texaco's Position. . . . . . 52
5. If, As Is Doubtful, Legislative History
Concerning Section 108 Has Any
Bearing On Fair Use Under Section
107, It Disfavors Fair Use In This Case 53
6. Texaco's Photocopying Is A Non-
Transformative, Non-Productive,
Superseding Use That Very Strongly
Weighs Against Fair Use. . . . . . . 54
7. Texaco's Position Is Not Supported By
Any Claimed "Reasonable and
Customary Practice" of For-Profit
Research-Oriented Companies To
Engage In Free In-House Photocopying
Of Copyrighted Journal Articles. . . 56
B. The Second Factor . . . . . . . . . . . . 57
C. The Third Factor. . . . . . . . . . . . . 59
D. The Fourth Factor . . . . . . . . . . . . 62
1. Judge Leval's Determinations Are In
Full Accord With Well-Established
Principles Of Fourth Factor Analysis 62
a. Loss of Additional Subscription
Sales. . . . . . . . . . . . . 65
b. Loss of Licensing Revenues . . 65
2. Texaco's Many Contentions Concerning
The Fourth Factor And The CCC Are
Entirely Without Merit . . . . . . . 68
a. Scope of the Harm. . . . . . . 68
b. Potential Loss of Additional
Subscription Sales . . . . . . 68
c. Loss of Licensing Revenues . . 69
d. The CCC. . . . . . . . . . . . 71
CONCLUSION . . . . . . . . . . . . . . . . . . . . . 72
STATUTORY APPENDIX . . . . . . . . . . . . . . . . . A1
Table of Authorities
Cases Page
Guide to Abbreviations
Abbreviation Reference
A ______ Appendix, with referenced page number.
LA 73-142 Judge Leval's Opinion and Order rejecting
Texaco's fair use defense, as amended and
supplemented, with referenced page
number in Appendix.
LA 143-149 Judge Leval's Order of Certification under
28 U.S.C. 1292(b), with referenced page
number in Appendix.
T Br. _____ Brief of defendant-appellant Texaco Inc.,
with referenced page number.
AA Br. _____ Amicus Curiae brief on behalf of the
American Automobile Manufacturers
Association and the Chemical
Manufacturers Association, with
referenced page number.
AL Br. _____ Amicus Curiae brief on behalf of the
American Library Association, with
referenced page number.
AR Br. _____ Amicus Curiae brief on behalf of the
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, with
referenced page number.
Academic Press Academic Press, Inc., one of the plaintiffs
and the publisher of the Journal of
Catalysis.
Catalysis Journal of Catalysis
CCC Copyright Clearance Center.
Texaco Defendant-Appellant Texaco Inc.
Pollart Cross Cross Examination Testimony of Dale F.
Pollart, included in the trial record, with
referenced page number.
PX ___ Plaintiffs' Trial Exhibit Number, included
in the trial record.
TX ___ Texaco's Trial Exhibit Number, included
in the trial record.
BRIEF OF PLAINTIFFS-APPELLEES
PRELIMINARY STATEMENT
On a massive trial record studied with great care, Judge
Leval's extensive findings of fact fully support his legal
conclusion that there is no basis and justification for allowing
Texaco as part of its profit-motivated research activities to engage
in free unauthorized photocopying of entire copyrighted articles
published in scientific and technical journals registered with the
Copyright Clearance Center ("CCC"). His decision sets forth
with great clarity the many affirmative factual and legal reasons
in this case for upholding the copyright owners' exclusive rights
granted in Section 106 of the Copyright Act to reproduce or
authorize the reproduction of the copyrighted works, and for not
permitting those rights to be defeated by the "privilege" or
"limited exception" to those rights contained in the fair use
provisions of Section 107 of the Act.
Judge Leval engages in sound analysis of the four statutory
guidelines of Section 107 and other relevant considerations in
reaching the conclusion that the limited fair use privilege should
not be extended to the practices of Dr. Chickering, "a typical
Texaco researcher," in photocopying entire copyrighted journal
articles as part of his research work for Texaco. Judge Leval
followed a fact-intensive and scholarly approach in deciding that
the first fair use factor strongly favors plaintiffs because of
Texaco's superseding use of the original copyrighted work for a
profit-making commercial purpose; certain aspects of the second
factor favor plaintiffs although that factor tips in favor of Texaco
because of the factual content of the copyrighted works; the third
factor clearly favors plaintiffs because entire copyrighted works
are being photocopied; and the fourth factor powerfully favors
plaintiffs because journal publishers would suffer great immediate
and future economic harm by the loss of substantial actual and
future revenues if Texaco and other similar for-profit research-
oriented companies were permitted to engage in unauthorized free
in-house photocopying of entire copyrighted journal articles.
Judge Leval also found other relevant considerations that
strongly favor plaintiffs, particularly the success and efficacy of
the CCC, which was formed in 1978 by publishers, authors and
users in response to Congress's recommendation that an efficient
mechanism be established to license photocopying. As Judge
Leval found, the CCC is in large part responsible for creating an
actual photocopy licensing market producing millions of dollars
of revenues, that enables for-profit research-oriented companies to
obtain advance authorization to photocopy copyrighted articles in
CCC-registered journals using convenient and reasonably priced
procedures.
Texaco criticizes many aspects of Judge Leval's decision
without any legitimate basis. Stripping away Texaco's mis-
statements and mischaracterizations of that decision and the trial
evidentiary record, its argument really boils down to only three
major points. First, the widespread practice of photocopying
journal articles, an integral element of Texaco's research and
essential to its efficiency and success, deserves the shelter of fair
use simply because it serves the salutary purpose of advancing
that research, albeit profit-oriented. Second, free unauthorized
photocopying should be accorded fair use immunity because it is
supposedly "reasonable and customary." Third, this Court should
utterly disregard as irrelevant, and give no consideration in the
fair use analysis to the indisputable loss of present and future
revenues that plaintiffs will suffer if the fair use defense were
sustained; plaintiffs' willingness to license photocopying of
copyrighted journal articles; and the existence and success of the
CCC.
Judge Leval's rejection of each of these points is fully
supported factually and legally. As he found, research at Texaco
and similar for-profit companies would not be impeded or harmed
if they were unable to obtain "free" in-house photocopies of
journal articles since they can obtain and use authorized
photocopies of such articles through reasonable CCC-licensing
and other available means. As Judge Leval said, precious little
would be left of copyright protection under Section 106 of the
Copyright Act for scientific and educational material if all that
fair use required were that the copying was done for research or
educational purposes, and granting a fair use privilege would
have the reverse effect of impeding science by diminishing the
market incentives to publish such scientific material.
Extending fair use to this case would mean, Judge Leval
found, the loss to plaintiffs of substantial present and future
revenues from several existing sources: licensing by the CCC;
bilateral licensing agreements; royalties from the sale of
authorized photocopies by document delivery services; and the
sale of additional subscriptions by journal publishers. Such harm,
predicated on the existence of actual licensing and subscription
markets, is properly cognizable in fair use analysis, as Judge
Leval concluded, in making the required fourth factor evaluation
concerning the effect of unauthorized photocopying on "the
potential market for or value of the copyrighted work."
As for the claim that Texaco's photocopying should be
declared fair use because it is "reasonable and customary," there
is neither legal nor factual support for such a claim. No
American case and only a 230 year old English case, never
followed, has ever sustained fair use on that basis. There is, in
any event, as Judge Leval found, no factual basis for the claim,
as the past and current practices of many for-profit research-
oriented companies in obtaining and using only authorized
photocopies of entire copyrighted journal articles prove that free
in-house photocopying of such articles by Texaco is neither
reasonable nor customary.
Contrary to the contentions of Texaco and the amici, there
is nothing improper or "circular" in fourth factor analysis in
considering the consequences of plaintiffs' willingness to license
the copying of their copyrighted works, and in many prior fair
use cases, the Supreme Court, this Court and other courts have
properly considered the actual or potential licensing markets that
such willingness to license has created or would create. On the
facts of this case, the willingness of copyright owners to license,
together with the willingness of corporate photocopy users to
enter into licensing arrangements, have resulted in the creation of
actual licensing mechanisms and markets (through the CCC,
bilateral agreements and authorized document delivery services).
Those mechanisms and markets would be destroyed if Texaco's
typical photocopying practices were found by the courts to be fair
use. Destruction of those markets would immediately diminish
the value of plaintiffs' copyrights. It is therefore nonsense for
Texaco to argue that plaintiffs' willingness to license, and the
licensing markets that have resulted, should be disregarded in
fourth factor analysis of the adverse effect of Texaco's
photocopying practices on "the potential market for or value of
the copyright."
Plaintiffs' willingness to license, and the steps they and the
CCC have taken to make such licensing efficient and effective,
are also pertinent, as Judge Leval found, in refuting Texaco's
argument that the dissemination and use of information in journal
articles will be impeded, and therefore the progress of science
will be impeded, if free unauthorized in-house photocopying were
prohibited. Indeed, that argument rests on the false premise,
directly contrary to the fact, of an unwillingness by the publishers
to license photocopying of journal articles, and therefore an
unwillingness to allow broad dissemination and use of copies of
those articles. Moreover, the trial evidence concerning the
research, photocopying and licensing practices of many for-profit
research-oriented companies proves beyond any possible doubt
that such companies can successfully conduct their research
activities without impediment, and without harm to science, while
paying for permission to photocopy, just as they pay for all of the
other costs of that research. Texaco is no different.
At bottom, what this case is really all about is the desire of
Texaco, General Motors, Ford, Chrysler and the other corporate
amicus curiae to take a free ride " to obtain what they
acknowledge are valuable intellectual property rights without
paying anything for them. What they seek is the opportunity to
engage in free in-house photocopying of copyrighted journal
articles on a regular and widespread basis without in any way
compensating the copyright owner publishers through any of the
available methods. Those available methods of copyright
compliance are currently being utilized by 11 of Texaco's major
oil company competitors, and many other research-oriented
American companies, to obtain the important benefits of
photocopying entire journal articles and, at the same time, respect
the statutory rights of the copyright owners to authorize such
photocopying.
The record shows that in earning billions of dollars
annually Texaco spends upwards of $89 million annually to cover
all of the salary, equipment and other costs of engaging in its
profit motivated research activities, except they seek immunity
from the cost of paying the copyright owner publishers for the
right to photocopy journal articles. There is, therefore, no
conceivable reason for permitting Texaco to avoid paying the
publishers the expense of obtaining authorized copies of journal
articles that Texaco considers are integral to the conduct of its
research and valuable to it in conducting that research. Indeed,
the fact that such photocopying enhances the efficiency and
success, and therefore the profitability, of that research, is an
additional reason for requiring Texaco to pay for the privilege,
just as it pays for all other necessary research expenses. Thus,
there is no conceivable justification for requiring the publishers to
subsidize Texaco's profit-directed research activities, by depriving
those publishers of revenues they are currently receiving and
would receive from the exercise of their exclusive rights to
authorize copying.
QUESTIONS PRESENTED AND
QUESTIONS NOT PRESENTED
As the parties, the court below and the amici curiae all
recognize, the broad question presented in this test case is whether
for-profit research-oriented corporations, as exemplified by Texaco
and one of its typical researchers, can engage in free unauthorized
in-house photocopying of entire copyrighted articles published in
scientific and technical journals registered with the CCC (LA 148).
The trial focused on the practices of that typical researcher, Dr.
Chickering, in making or obtaining photocopies of the entirety of
each of 8 copyrighted articles published in Catalysis in furtherance
of his research activities for Texaco. In determining that fair use
question, there are a number of subsidiary issues to be resolved,
including whether each of the four statutory guidelines, and any
other relevant considerations, favors plaintiffs or Texaco, and the
weight to be given to each of those factors in reaching an overall
conclusion on the fair use question.
In making those fair use determinations on this appeal, the
many factual findings made by the court below are to be accepted
as true in all respects because, with a few unsupported exceptions
that we discuss later, Texaco does not contend that those factual
findings are clearly erroneous or lack evidentiary basis. Thus, no
genuine issues on this appeal concern the facts as found by the
court below. (As discussed later, Texaco wrongly argues otherwise,
contending that Judge Leval's decision is in all respects open to de
novo appellate review and that his post-trial findings of fact are not
to be given the normal deference and are not subject to the clearly
erroneous rule.)
Nor are there any factual or fair use issues presented on this
appeal concerning the activities and photocopying practices of non-
profit scientific research institutions, universities, government
agencies, hospitals, museums, news organizations, law firms, the
judiciary, law libraries, public and court libraries, and other entities
in which most of the membership of many of the amici curiae carry
on their activities. There is no evidentiary record concerning those
activities and practices, and Judge Leval made no finding or
determinations concerning them. He confined his analysis and
rulings to the trial record, which focused on the research and
photocopying practices of Texaco and other profit-motivated
research-oriented industrial companies, and the publication, sale,
licensing and use of scientific and technical journals including those
registered with the CCC and articles appearing in such journals.
There is also no issue on this appeal concerning Section 108
of the Copyright Act, except to the extent that Texaco and the amici
claim that the legislative history of that section sheds light on fair
use (T Br.19; AR Br. 13-14, 44-47). As Texaco acknowledges (T
Br. 19), its separate 108 defense was not part of the trial below
and remains for future adjudication as to copies made by the Texaco
library. We agree with the library amici curiae that this Court
should make clear that nothing in its decision on the fair use issues
decides any possible future issues under Section 108 concerning
library copying. (AR Br. 7 n.1; AL Br. 2 n.3.)
STATEMENT OF THE CASE
A. The Litigants and Interested Third Parties
Plaintiffs in this action are 83 publishers of scientific and
technical journals, among which are 20 non-profit learned societies
and educational institutions that publish such journals, including the
American Association for the Advancement of Science, American
Chemical Society, American Geophysical Union, American Institute
of Physics, American Medical Association, Cornell University,
Massachusetts Medical Society, MIT Press, and Princeton
University Press. Texaco, the defendant in this test case, is
supported on its appeal by the American Automobile Manufacturers
Association (whose members are General Motors, Ford and
Chrysler), the Chemical Manufacturers Association (whose members
include Texaco) and two other amicus curiae groups consisting of
various library and related associations.
The result in this case will affect not only the plaintiff
publishers, the CCC, authorized document delivery services, Texaco
and its corporate supporters, but also the many industrial companies
that have entered into annual CCC and other photocopying licenses.
As of time of trial, there were 110 CCC corporate licensees,
including Exxon, Mobil, ARCO and eight other major petroleum
company competitors of Texaco, and such other well-known for-
profit research-oriented corporations as Allied Signal, AT&T and its
Bell Labs division, Dow Corning, DuPont, Eastman Kodak, General
Electric, IBM, Monsanto, Olin, PPG, Polaroid, Texas Instruments,
3M, Union Carbide, United Technologies, and USX (LA 87;
A 272-73).
B. The Fair Use Proceedings and Trial Record
Plaintiffs' complaint, filed in 1985, alleged copyright
infringement by Texaco with respect to articles published in journals
registered with the CCC (A 12-33). Texaco's answer pleaded a host
of technical copyright defenses concerning transfer, ownership and
registration of copyrights, copyrightability, and a 108 library
copying privilege, together with a defense and counterclaim of fair
use under 107 of the Act (A 34-47). The proceedings were
subsequently stayed due to the filing of Texaco's Chapter 11
petition. After the stay was lifted, proceedings resumed in earnest
in late 1989, and in accordance with the parties' agreement and the
court's approval, were limited to the issue of fair use, the core of
Texaco's defense in this case. (LA 78; A 150.)
From the 400 to 500 research scientists employed by Texaco,
plaintiffs examined the files of ten randomly selected scientists at
Texaco's nearby Beacon, New York research center. Those ten files
contained more than 1,000 photocopies of articles from journals
registered with the CCC, including, from Dr. Chickering's files, 25
photocopies of articles published in Catalysis and 30 photocopies of
articles from other journals. Photocopies of eight of those Catalysis
articles were ultimately selected as the exemplars to be used in the
fair use trial, a procedure the parties adopted in their court-ordered
stipulation for convenience and to avoid untoward discovery
expenses with respect to largely duplicative matters. (LA 78, 145,
147.) Plaintiffs stipulated that the complaint would be dismissed in
its entirety if the fair use defense were upheld as to each of those
articles. (LA 75, 78 & n.1, 79, 110 n.14; A 150.)
The trial proceedings, as a result of agreement between the
parties with the concurrence and support of Judge Leval, consisted
of four successive and alternating evidentiary submissions. Each of
these submissions included the written testimony of trial witnesses,
excerpts from the testimony of a number of deposition witnesses,
and scores of documentary exhibits and interrogatory answers.
Cross-examination of the trial witnesses, originally scheduled for the
courtroom, was conducted, to the extent each of the parties elected
to do so, at their attorneys' offices, and the written transcripts of
such cross-examination were submitted as part of the trial record.
The trial record consists of the testimony of 14 trial
witnesses, 7 of whom were cross-examined; extracts from the
testimony of 20 deposition witnesses; and 527 exhibits (including
8 interrogatory answers). Those witnesses included a number of
Texaco executives and research and library personnel, senior
executives of Academic Press, the CCC and the Bell Labs division
of AT&T, and two experts, one called by each side. The 31-
volume trial record has been reduced for the purposes of this appeal
to a 7-volume Appendix.
C. The Decisions Below
Judge Leval made extensive findings of fact throughout his
67-page opinion (LA 73-142; 802 F. Supp. at 1-28) that led to his
determinations that three of the four statutory factors and the
important equitable considerations weighed heavily and strongly
against fair use in this case (LA 94-106, 109, 110, 111-15, 120-36,
141). Taking all of these matters into account, and applying
relevant legal principles, Judge Leval concluded that there was no
basis for Texaco's affirmative defense of fair use under Section 107
of the Copyright Act as to the representative eight articles
photocopied by Dr. Chickering.
Granting certification under 1292(b), Judge Leval perceived,
as did the parties, a strong public interest in immediate appellate
review of the "issue of fair use, as to the practices of a
representative Texaco researcher" because "photocopying of
copyrighted scientific material is extremely widespread in
commercial research-oriented profit-motivated companies." (LA
147-48; 802 F. Supp. at 28-30.)
STATEMENT OF FACTS
A. Texaco Engages In Its Research Activities
(An Integral Part of Which Is the Systematic
Photocopying of Journal Articles) for the Sole
Purpose of Making a Profit
Texaco, whose revenues and profits run in the billions of
dollars (A 2834; see also A 2730-2833), conducts profit-motivated
scientific research at six facilities in the United States (including the
Beacon, New York research center) where it employs about 400-500
scientists. (LA 75; A 2271-72, 2277.) Texaco spends about $89
million annually on that scientific research, not as an "exercise in
philanthropy," but, as Judge Leval found, "solely for [its own]
commercial advantage." (LA 75, 136 & n.24; A 2273-74, 2278-79;
see 932, 906, 945-47.) Those expenditures cover every element of
Texaco's research activities, including salaries of the scientists and
support staff, and the expenses of equipment, chemicals, offices,
laboratories, journal subscriptions, information services, photocopy
machines, paper and other photocopying supplies. The sole
exception is that Texaco seeks to be relieved of the expense of
obtaining permission to photocopy copyrighted journal articles. As
Judge Leval found, and the parties agree, photocopying such journal
articles is fostered and maintained by Texaco as a regular practice
by its research and library personnel, and is an integral part, and
very helpful to the more efficient and successful conduct, of
Texaco's research activities. (LA 76-77; A 935, 469-70; see also
A 1336, 730-32.)
The research conducted for Texaco by Dr. Chickering and his
colleagues is aimed solely at making money for Texaco. This is a
crucial fact Texaco seeks to ignore and obscure (T Br. 6-7). As
Texaco's former Director of Petroleum Research put it, the purpose
of the research is "to maintain our competitive position and
maximize Texaco's profitability." (A 2223.) The target of its
research activities, as Texaco's 1988 Annual Report said, is "on
enhancing profitability" (A 2373) and as the 1987 Annual Report
expressed it:
Texaco's research activities are geared to a profit-
center concept: developing new products responsive to
the demands of the marketplace; cost-reducing
manufacturing process improvements; and technology
to operate oil fields more efficiently.
(A 2369.)
On the basis of this and an overwhelming body of other
evidence in the trial record (A 932, 934, 938-45, 2223, 2239-40,
2369, 2373, 2376), it is indisputable, as Judge Leval found, that
Texaco conducts its scientific research activities (of which, as has
been mentioned and which we discuss later, the regular and
widespread practice of photocopying entire journal articles is an
integral part) solely "for commercial gain" and "to improve
Texaco's commercial performance," "for the purpose of producing
profits." (LA 105, 106; see also his many related findings at
LA 75, 105, 122 and 136.)
B. The Vital Economic Importance to Texaco of Its
Researchers Having Timely Access to Journal Articles
Equally indisputable are Judge Leval's findings that scientific
and technical journal articles play an essential role in the research
programs of companies such as Texaco by disseminating the results
of scientific research being conducted elsewhere. (LA 76, 111,
114.) Journal articles are the primary and sometimes only source
of new scientific information on the narrowly focused, highly
specialized topics commercial research scientists deal with. (A 726-
27, 742-45, 746-50, 1036-37, 1056, 4244, 1119, 1143, 456, 905,
1333-34.) They are essential because, as the former head of
Texaco's Beacon research center emphasized,
1. Without awareness of new developments, our
people could continue to pursue work already
conducted and reported by others. In
reinventing the wheel, we would waste time,
manpower and money repeating work already
patented by someone else, rather than using the
reported work as a springboard to novel
developments that would be the property of
Texaco.
2. Unless our technical people continue to educate
themselves about new developments in their
fields, they rapidly become obsolete and of
reduced value to the Company.
(A 2239-40; accord A 2223.)
In such circumstances, as Judge Leval found, it is "of great
importance for scientists doing research to keep abreast of the
publication of such articles" in order to take advantage of new ideas
and developments and to avoid duplicating work already done or
demonstrated to be fruitless. (LA 76.)
C. The Methods by Which Research Personnel at
Texaco and Other For-Profit Corporations
Regularly Learn About and Obtain Photocopies
of Entire Journal Articles
As Judge Leval found (LA 76, 77, 80, 130-31; see LA 111-
12 n.14), and as is undisputed (T Br. 7), it is the regular and
systematic practice of research scientists at for-profit industrial
corporations such as Texaco, as exemplified by Dr. Chickering, to
learn about journal articles and then make or obtain photocopies of
those articles and create files of photocopies for use in their work.
(A 727, 739, 746-47, 753, 1334, 949-52, 457-58, 594, 809-11.)
This occurs in several ways:
Circulation of Journals. Researchers primarily learn of
journal articles by having their companies circulate journals to them.
(LA 76-77, 80, 114; A 751; see A 949, 905, 457, 372-73, 374-75,
638-40, 675-77, 823.) Typically, a researcher is on the routing list
for a number of journals of special pertinence to that researcher's
work " in Dr. Chickering's case eight such journals including
Catalysis. (A 905, 457, 372-73, 374-75, 638-40, 675-77, 823, 949,
831-32, 848-49, 2239-40, 1515, 549; see A 366, 1505-1508, 1509-
1511.) It is the systematic practice of researchers at Texaco and
other research-motivated companies to photocopy articles from the
circulation issues before passing them on (LA 76-77, 80, 104, 114;
A 949, 457-58, 548, 551-53, 557-58, 562-63, 587-88, 594-95, 367,
395-96, 401-02, 403-06, 652-54, 667-68, 693-94, 695-98, 700-701,
703-04, 751, 1334), and this practice is economically very beneficial
to Texaco, as is more fully discussed later.
Literature Searches. It is also the widespread practice for
research scientists at Texaco and other similar companies to have
specially trained information service professionals in the company
library perform computerized literature searches and automatic
updates of such searches in connection with particular projects or
experiments. These literature searches and updates generate
bibliographic lists of journal articles and other materials, from
which the researchers regularly request photocopies of articles.
(A 993-1006, 1008-10, 806-08, 815-18, 822-26, 858-59, 2111,
2260-63, 2264, 950, 445-46, 541-47, 601-05, 611-15, 641, 642-47,
670-72, 673-74, 679-81, 746-47, 751-52, 1367-68, 912-15.)
Other Methods. Researchers at Texaco and other for-profit
industrial corporations also learn about and then make or obtain
photocopies of journal articles as the result of seeing references to
them in published abstracts of journal articles and Current Contents
(a compendium of journal tables of contents) circulated by their
companies to alert them to new journal articles, and in other journal
articles or in patents. Researchers also provide each other with
references or photocopies of journal articles, and route photocopies
to a number of other colleagues. (A 1841-1979, 752, 850-56, 857,
659-60, 678, 683, 688) (LA 76-77; A 1368, 949-50, 568, 595, 649-
50, 704-05, 707, 714.)
Library Copying. Personnel at Texaco's Beacon library
regularly make photocopies of journal articles in response to
individual requests by Texaco research scientists. In addition, the
Beacon library makes photocopies of articles to satisfy requests
made at several other Texaco libraries, and those libraries provide
photocopies to Beacon upon request. (LA 77; A 463, 469, 810-11,
812-13; see A 814, 817-19, 824, 439-41.)
D. The Importance to Research Personnel of Speedy
Circulation of Journals and How Photocopying
Reduces the Number of Subscriptions Needed to
Maintain Speedy Circulation
Instead of purchasing separate subscriptions for each of its
research personnel, Texaco routinely circulates an original journal
issue among groups of 15 or more research scientists. The Journal
of Catalysis routing list, for example, has ranged from 15 to 38
researchers including Dr. Chickering. (A 549, 1515, 905, 457, 372-
75, 638-40, 675-77, 949, 823-26, 831-32, 848-49, 2239-40; see
A 1505-08, 1509-11, 366.)
"It is important," as Judge Leval found, "that scientific and
technical journals be promptly circulated so that research scientists
are made promptly aware of new published studies in the areas of
their work." (LA 114; A 456-57, 554-56, 569-70, 581-83, 584-86,
668-69, 726-27, 731-32, 742-44, 754-55, 1333-34, 1056, 4244, 924,
925-26, 927-29, 1516, 1515, 2223, 2239-40, 2265, 1530; see also
A 746-48.) As Texaco's former Director of Petroleum Research
wrote, when there is "very slow circulation and loss in timeliness .
. . [a]n inestimable penalty is incurred because technical persons
cannot effectively avail themselves of new developments in current
literature." (A 1530.)
Rapid circulation with a minimum number of subscriptions
is made possible by in-house photocopying. As Judge Leval found,
photocopying "permits the scientists to defer reading [the circulation
copy], and to keep possession of an additional copy without
hoarding the original issue of the journal, so that the original can
circulate without delay among colleagues (each of whom may do
likewise), or return to the library where all colleagues will have
access to it." (LA 104; see related findings at LA 76-77, 80, 114;
A 754-55, 367, 395-96, 668.) Thus, "the principal feature of the
photocopying is its capacity to give numerous Texaco scientists
their own copy based on Texaco's purchase of an original." (LA
102.) This practice is widespread and prevails in other for-profit
industrial corporations as well. (LA 76-77, 80; A 949, 457-58, 548,
551-53, 557-58, 562-63, 587-88, 594-95, 367, 395-96, 401-02, 403-
06, 652-54, 667-68, 693-94, 695-98, 700-01, 703-04, 751, 754-55,
1334.)
Even with the use and benefits of photocopying, Texaco
increased its subscriptions to Catalysis from 1 to 2 in 1983, and
then to 3 in 1989, as Judge Leval found, "in order to speed up the
circulation process." (LA 114; A 803, 1516-28, 2222-28, 569-70.)
This and the other evidence discussed clearly supports Judge
Leval's factual finding that in the absence of photocopying, Texaco
"would increase the number of subscriptions somewhat" to maintain
the speedy circulation of journals (LA 114):
The evidence shows that scientists will make a
photocopy of an article in order not to slow down the
circulation process. If that photocopying stopped, the
circulation would slow down; scientists would hold
onto an issue for a longer time before continuing its
routing. To 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.
There is, therefore, no basis for Texaco's and the amici's contention
(T Br. 31, 32, 34; AR Br. 34-35) that the evidence does not support
Judge Leval's factual finding that Texaco's unauthorized
photocopying reduces the number of subscriptions Texaco would
otherwise purchase if it elected not to obtain authorized photocopies
of journal articles through CCC and other available means.
E. Dr. Chickering's Representative Photocopying
A total of 55 photocopies of copyrighted journal articles made
by or for Dr. Chickering for use in his work for Texaco were found
in his files, including the eight Catalysis articles selected as a
representative test sample for this fair use test case (the "Eight
Articles"). (See LA 79; PX-1016-1089; A 450, 457-69, 536-81,
594-95.) These were just the photocopies he had made over the
years at Texaco and had not discarded by the time his files were
reviewed in 1989. (See LA 110 n.14.)
Dr. Chickering's photocopying practices are illustrative of the
systematic practices of researchers at Texaco and other for-profit
industrial corporations. (LA 111 n.14, 147.) He regularly makes
or obtains photocopies of entire journal articles in most of the ways
described above, retains them in his photocopy files, and refers to
them from time to time in connection with his work. (A 594-95,
536-40, 457-58.) In particular, with respect to the Eight Articles,
Dr. Chickering made or had someone make copies of six of the
articles when the original issues of Catalysis containing those
articles were circulated to him. (A 458-62, 464-67, 1443, 1459,
1463, 1474, 1479, 1487.) He obtained the other two from the
Texaco Library after seeing a reference to them elsewhere. (A 463-
64, 469, 1470, 1498.)
As Judge Leval found (LA 81), Dr. Chickering made or
obtained the photocopies of the Eight Articles for use in his work
for Texaco. (A 449, 457-69, 594-95, 536-40.) Nothing suggests
that he made or obtained the photocopies for his "personal use" in
the sense that his photocopying was in some way not related to his
work for Texaco. (LA 81, 122.)
Moreover, as later discussed, using photocopies saved
Dr. Chickering time and increased his productivity, thereby
immediately saving Texaco the cost of that time, in turn improving
Texaco's profitability. (A 457-58, 459-67, 581-83, 584-91.)
F. The Economic Benefits to Texaco and Other For-Profit
Industrial Corporations of Research Scientists Using
Photocopy Duplicates in Their Work
Photocopying, whether free or not, produces a number of
economic benefits in the research activities of a for-profit research-
oriented company such as Texaco. It produces immediate economic
benefits by saving Texaco money in a number of ways that enhance
Texaco's profitability. First, it saves researchers' time, and saving
researchers' time saves Texaco money, thereby improving its
profitability. Every hour saved is money saved by Texaco. Dr.
Chickering, for example, who, at the time of his testimony, was
paid a salary of about $58,000 for about 2000 hours of work per
year, cost Texaco about $29 per hour. (A 2291.) Other researchers
were paid salaries up to $149,000 per year. (A 2295.)
Judge Leval found, and the parties agree, that making and
using photocopies saves the time of Texaco's researchers in several
ways: it saves the time they would otherwise have to spend
locating articles or going to the library to read articles, because
photocopies retained in their photocopy files are immediately at
hand; it saves the time they would otherwise have to spend
repeating experiments or dealing with poor results because of errors
made in taking notes of articles (including complex equations,
diagrams and other data); it saves the time they would otherwise
have to spend taking notes of the articles, instead of more easily
annotating or highlighting material in photocopies; and it saves time
because it is quicker for researchers to assist colleagues by
providing them with photocopies rather than just references to those
articles. (See LA 77-78; A 459-60, 461, 462, 584-87, 595, 935,
954-58, 727-32, 739-42, 754-55, 757-60, 1333-35.) The time that
is saved means the saving of the cost of that time, and it becomes
time that researchers can otherwise spend doing more valuable work
for their companies. (A 955, 757; see A 582-83.)
The value to Texaco of the time of its researchers was
highlighted in several internal Texaco memoranda concerning the
adverse economic consequences to Texaco of researchers having to
spend time going to the library to read journal articles " just that
one additional cost would be "over $58,000 per year." (A 1515,
2240, 2223.) As a corollary to this, internal Texaco memoranda
highlight the inestimable penalty that Texaco would suffer from its
researchers becoming obsolete as the result of the reluctance of
many of those researchers to spend time traveling to the Texaco
Beacon library to read articles. (A 2240, 1515; see A 731-32, 759-
60.)
Texaco also derives economic benefits from researchers using
photocopies in the laboratory, for in that way they avoid damaging
or destroying the original, and Texaco is saved the cost it would
otherwise incur of replacing the damaged originals. (A 727-28,
729-30, 740-41, 1335-36; see A 463.)
G. There Are a Number of Readily Available Ways to
Provide Researchers with Access to Journal Articles
Other Than Unauthorized Photocopying
Judge Leval found that there are a number of convenient
ways that research personnel can be provided with ready access to
journal articles other than by making unauthorized in-house
photocopies. (LA 112-15, 127-29, 131-32.) He found that these
include the purchase of some additional subscriptions to maintain
speedy circulation (LA 114), and that authorized photocopies of
journal articles are readily available by obtaining advance
permission to photocopy through the CCC or pursuant to
agreements directly with publishers, or by purchasing photocopies
from document delivery services that have obtained photocopying
authorization either through CCC or directly from publishers. (LA
112-115, 128-29, 131-32.)
These methods of providing research personnel with ready
access to journal articles without engaging in unauthorized
photocopying are illustrated in the practices of AT&T Bell
Laboratories ("Bell Labs"), which are described later. Texaco itself
has obtained permission to photocopy directly from publishers, has
purchased additional subscriptions, and has purchased photocopies
from document delivery services. (A 803, 820-21, 860-62, 917-18,
1514-15, 2111, TEX-032.) Texaco ignores Judge Leval's finding
(LA 113) and the record evidence when it claims (T Br. 31, 36) that
document delivery services are not a viable alternative. Whatever
brief time lag may exist in obtaining the photocopies, there is no
evidence that it interferes with research efforts. In addition to
Texaco's own purchases of photocopies from authorized document
delivery services, Bell Labs' purchase of photocopies from such
services demonstrates that purchasing photocopies in that manner
does not interfere with research activities. (A 1423H.)
Texaco and the amici are also wrong in contending (T Br. 40
n.21; AA Br. 10) that there was no evidence to support Judge
Leval's finding that obtaining permissions directly from publishers
is a viable option. As Judge Leval found (LA 128), Bell Labs
exemplifies a research-intensive corporation that has obtained
photocopying permission directly from many publishers as one
component of its program to provide its research personnel with
ready access to journal articles without claiming a privilege of free
photocopying. Bell Labs has entered into about 206 agreements
with publishers covering about 350 journals that are not registered
with CCC. (LA 128; A 1423E.)
H. Unauthorized Photocopies Supersede Original Articles
and Authorized Photocopies
As part of its research activities, "Texaco simply makes
mechanical photocopies of the entirety of relevant articles." (LA
99.) These copies of the original are not "employed as part of a
larger whole for some new purpose." (LA 99.) As Judge Leval
found:
The principal purpose of Texaco's copies is to
supersede the original and permit duplication, indeed,
multiplication. A scientist can make a copy, to be read
subsequently and kept for future reference, without
preventing the circulation of the journal among co-
workers. This kind of copying contributes nothing
new or different to the original copyrighted work. It
multiplies the number of copies.
(LA 99-100; LA 104.)
As Judge Leval also found,
[W]here three subscriptions to Catalysis are serving the
needs of hundreds of scientists, the principal feature of
the photocopying is its capacity to give numerous
Texaco scientists their own copy based on Texaco's
purchase of an original. The most prominent feature
of this copying is that the copies supersede the original
and multiply its presence. Thus even if some
transformative purpose was present in transferring the
article from its journal into a slender photocopy, that
use is overshadowed by the primary aspect of the
copying, which is to multiply copies.
(LA 102.)
That free in-house photocopies are substitutes for originals
and authorized photocopies of journal articles is conclusively
demonstrated by the fact that researchers at Texaco and other for-
profit industrial corporations use the unauthorized photocopies for
the same purpose that originals or authorized photocopies are used
" to obtain and use the information for their work. (A 584, 952-
53, 954, 753-55, 667-68; see also A 1513.)
As Judge Leval found, researchers read photocopies rather
than originals to obtain the information in the article for their work;
they take photocopies rather than originals into the laboratory to
refer to the article in the course of experiments in order to avoid
damaging the original; they photocopy articles for later reading and
use, rather than hoarding the original, to speed the circulation of the
original journal issue; they make notes on and highlight
photocopies, rather than doing so on the originals; they circulate
photocopies rather than originals to their colleagues in order to
share work-related information; and they retain photocopies rather
than originals in their files for later use and re-use in their work.
(LA 77-78, 80, 104, 114).
Originals, however, can serve the very same purposes. While
research personnel might prefer to take a photocopy rather than the
original into the laboratory in order to avoid damaging the original,
or prefer to highlight or make notes on a photocopy rather than
marking up the original, the original can be used in those very same
ways. Similarly, the original journal article, clipped from the issue
in which it appeared, could just as easily be kept in the researchers'
files as a photocopy. The only difference would be that it would
cost companies such as Texaco a great deal more money to provide
each researcher with originals, or to replenish originals as they were
damaged or used. Texaco is thus wrong when it claims (T Br. 23-
24) that its photocopy duplicates of journal articles are a non-
superseding use of the original.
Furthermore, it is undisputed that an authorized photocopy is
identical in all respects to an unauthorized photocopy, and therefore
use of unauthorized photocopies supersedes the use of authorized
photocopies.
I. Academic Press and Its Important Role in the
Dissemination of Scientific Information
Academic Press, the publisher of Catalysis, is a major for-
profit publisher of scientific, technical and medical journals.
(A 1035-36.) It currently publishes 105 journals, and since 1965
has created 70 new journals in response to the needs of the
scientific community, a testament to the important role publishers
play in the advancement of science. (LA 81, 107, 135; A 1036,
1050, 1057.)
Catalysis, published since 1962, contains highly technical
Articles, Notes and Letters to the Editors (collectively "articles") on
experimental studies in various types of catalysis and chemical
reactions at surfaces. (LA 81-82; A 1046-48, 1061; see A 1443-
1458, 1459-1462, 1463-69, 1470-73, 1474-78, 1479-86, 1487-97,
1498-1504.) The subscription rate for institutions ranged from
$112.00 in 1972 to $828.00 in 1989, while the discounted
subscription rate for individuals has been about one-half of the
institutional rate. (LA 82-83; A 1048, 4248-49, 1545, 1207-09.)
In addition to subscription sales, Academic Press receives
revenue from granting permission to photocopy copyrighted journal
articles: (a) TRS and AAS photocopying permissions fees paid to
CCC, and (b) royalties paid by a document-delivery service that has
an agreement with Academic Press authorizing it to sell photocopies
of copyrighted articles. (A 254, 263, 1051-52, 4242-43, 4244,
4300, 1796, 2317.) Revenue information for Academic Press and
Catalysis is set forth in A 4242-44, 4300.
Publishers such as Academic Press play an important role in
creating scientific and technical journals, in ensuring the scientific
importance and accuracy of the published information, and in
getting the journals distributed to the research community as quickly
as possible. Academic Press establishes the criteria that govern the
publication of the articles, chooses the scientific editors who make
publication decisions based on those criteria, and monitors the
journals' performance through discussions with members of the
scientific community. In this way Academic Press ensures that the
journals are meeting the needs of the scientific community and are
disseminating scientifically correct and important new information.
(A 1036, 4244, 1056-58, 1059-60, 1061, 1062, 1063-64, 1066,
1067-68, 1073-74, 726-27, 742-45, 456-57, 1333-34.)
Academic Press also undertakes the financial risk of
publishing the journals. It generally takes five to ten years before
a scientific or technical journal first earns an annual profit, if ever,
and even then it takes many years to recoup the losses incurred
during the unprofitable period. (A 4245-46, 1128-30, 1016, 3802.)
This is confirmed by the experience of Catalysis. (A 4246, 3802.)
Currently 20 of Academic Press's journals are unprofitable, and 15
have been published between two and twelve years. (A 4245.)
There is therefore no room for Texaco's spurious contention (T Br.
5 n.2) that there is no evidentiary basis for Judge Leval's well-
founded factual finding that "the publication of scientific journals
requires a large investment and a long period of losses endured in
the hope of reaching eventual profitability." (A 135.)
Publishers such as Academic Press, by creating the vehicles
that have allowed scientific authors to have their work widely
disseminated, have been instrumental in causing articles to be
written. (A 726-27, 744-45, 1036-37, 4244, 1056, 1060, 1061; see
A 1337-38, 1374.) As Judge Leval found:
[W]ithout publishers prepared to take the financial risk
of publishing and disseminating such articles, there
would be no reason for authors to write them; even if
they did, the articles would fail to achieve distribution
that promoted the progress of science.
(LA 107; see LA 135.)
J. The Economic and Other Benefits to Scientist Authors
From Having Articles Published in Journals
Virtually all articles in Academic Press journals result from
unsolicited manuscripts submitted by scientists. The journals are
able to obtain unsolicited manuscripts because of their reputations
for quality and the benefits to researchers from having articles
published in such journals. (A 726, 743-45, 766, 1061-62, 932-33,
1333, 1337-38, 669.)
Judge Leval found (LA 133) that even though authors are
generally not paid for articles, they "have a substantial economic
motivation as well as other interests in having their studies
published in prestigious journals." This is because "such
publication enhances their professional reputations in a manner that
translates itself into remuneration. The remuneration is achieved
through growth of prestige and a consequent ability to demand
greater salaries or more prestigious and powerful positions." (LA
133; A 726, 743-45, 766, 1061-62, 932-33, 1333, 1337-38, 669.)
In particular, for-profit industrial corporations such as Texaco take
publication into account in granting raises and promotions, and
grant awards to their employees for having articles published.
(A 766.)
K. The Copyright Clearance Center and the Success of
Its Photocopying Authorization Services
As Judge Leval found (LA 83-84), CCC is a non-profit
central clearing-house established in 1977 by publishers, authors and
photocopy users in response to a congressional recommendation that
an efficient mechanism be established to license photocopying. Its
Board of Directors is comprised of representatives of publishers,
authors and photocopy users. (A 257, 259-60, 261; see A 1980-90.)
At the time of trial, approximately 8,000 publishers (including
Academic Press and the other 82 plaintiffs) had registered
approximately 1.5 million publications with CCC. (A 1052, 268-69,
254; see A 2102, 3699-3727.)
Judge Leval made extensive findings of fact (LA 83-88, 113-
15, 127-29, 131-32) regarding CCC's photocopying authorization
services, which he found to be "reasonable" and "efficient" (LA
115, 127), and which he found "would also satisfy the needs of
Texaco's scientists for photocopies at a reasonable cost and burden
to Texaco." (LA 114-15, 129). As the U.S. Register of Copyrights
also stated, CCC's photocopying authorizations services are
"straightforward and effective." (PX-1672 at C000467.) Judge
Leval found there is an actual, existing, substantial market in which
major research-oriented for-profit corporations pay millions of
dollars annually for permission to photocopy (LA 87-88), which
would be destroyed if Texaco's fair use claim is upheld by the
courts.
1. The Successful Development of CCC's Photocopying
Authorization Services. CCC currently offers two services " the
TRS and the AAS " by which users obtain blanket advance
permission to photocopy copyrighted material in publications
registered with CCC, thus eliminating the need to obtain permission
on an article-by-article basis before copying. Under both
services, publishers individually set fees for the photocopying of
copyrighted material in their CCC-registered publications. The
photocopying permissions fees vary from publisher to publisher;
Academic Press's fees for Catalysis are $2.00 or $3.00 per article,
depending upon publication date. (LA 84, 87; A 261-63, 1051-52,
1306, 1319.)
CCC developed the TRS in 1977 with substantial assistance
from the Manager of Information Services at Exxon, who was a
member of CCC's Board of Directors. (A 252-53, 4302.) The TRS
gives photocopy users advance permission to photocopy, for their
internal use or for the internal use of specific clients, any
copyrighted material in CCC-registered publications, provided they
subsequently report and pay for such photocopying. The
straightforward TRS reporting methods are described in A 252-53,
261-62, 278. (LA 84-86.) The user decides for itself whether a
photocopying transaction need not be reported because, for example,
the copied material is in the public domain. (A 2436-37, 306-07,
320-28.) To make the TRS more attractive to users, in 1983 CCC
eliminated the requirement that specific articles be identified
because photocopy users were concerned that such an identification
might reveal their research activities. (LA 85; A 2079-80, 2353-54;
see A 2311-14, 2448-51.)
Texaco's contention (T Br. 40-41, 12) that under the TRS
users are charged for photocopying articles in which the publishers
do not own the copyrights is thus incorrect since, under the TRS, it
is the user who determines whether the copying needs to be
reported. Moreover, Judge Leval properly rejected Texaco's
assertion that publishers are improperly claiming ownership of
copyrights in certain articles, finding there was no evidence
supporting Texaco's "remote and conjectural claim" and that such
claims were not properly the subject of the fair use trial. (LA 137-
138.) Indeed, the evidence submitted by plaintiffs showing that
Texaco's contentions are meritless amply supports Judge Leval's
finding. (A 1090-93, 1013-15, 1427-28, 866-68, 291-92, 628A-
628N, 447A-447C.)
Participation in the TRS increased over its first four years of
operation, but by 1982 CCC decided to create an alternative service
for major corporations. Many companies had told CCC they were
unwilling to set up the administrative systems necessary for full
compliance with the TRS (LA 86), while others expressed a
willingness to pay for their photocopying under a licensing service
that would eliminate the need to report individual transactions.
(A 266-67, 2031-32, 2044, 2048, 2055, 2060-62.)
Judge Leval found that the unwillingness expressed by certain
companies to implement the TRS's administrative requirements did
not mean those requirements were unreasonable or that those
companies would not have used the TRS if CCC were unwilling to
offer an alternative. (LA 132 and n.23.) "Considering the features
of the TRS objectively," Judge Leval found that the TRS was "a
reasonable practicable solution for the industrial user community,"
and that users who declared their unwillingness were using their
bargaining power to negotiate for something they liked better.
(LA 132.)
Texaco and the amici's argument that the TRS is supposedly
administratively too burdensome (T Br. 11; AA Br. 32-33) was
factually rejected by Judge Leval, who found "[t]he evidence shows
that the administrative burdens for a user complying with TRS are
modest and manageable." (LA 132 & n.23.) The relative ease with
which users can report copying under the TRS is amply shown by
the trial record evidence. (A 278-79, 301-02, 1053-54, 2425, 2431-
34, 2450-51, 1443, 1549.) That the TRS is neither impracticable
nor unduly burdensome is further proved by the fact that Bell Labs
pioneered the successful use of a TRS reporting system in 1978 and
has continued to use it to the present time. (See pp. 31-32.) Other
companies, such as General Electric, Exxon, DuPont, Procter &
Gamble, Atlantic Richfield and IBM have also successfully used the
TRS. (A 2054.)
In response to the concerns expressed by large corporate
users, CCC (with the assistance of two expert econometricians from
MIT and Harvard and the cooperation of certain major industrial
corporations) developed the AAS and began offering it in 1983.
(LA 86, 127.) The AAS gives the corporate user an annual blanket
license to make unlimited numbers of photocopies, for internal use,
of copyrighted material in the 1.5 million publications registered
with the CCC. No reporting is required, except during limited
photocopying surveys, and the licensee may select one of three
methods for calculating the license fee, all based on the publishers'
individually set photocopying fees. (LA 86-89; A 252-53, 262,
267-68, 280-86, 294-99; see A 1991, 1995.) CCC has continued to
refine the AAS over the years. (A 267-68, 280-83, 294-99, 2046-
47, 2069.) As of time of trial, an average annual corporate AAS
license fee was $75,000. (A 269-70, 4298-99.)
Texaco's contention (T Br. 40-41, 12) that the manner in
which the AAS license fee is calculated is unfair because, in
calculating the amount of the fee, articles in which publishers
allegedly own no rights are included, is another of Texaco's myriad
arguments below that was properly rejected by Judge Leval.
(LA 138; see pp. 26-27.) Judge Leval found that the AAS provides
a workable and effective mechanism for conveying permission to
photocopy. (LA 127-28.) Texaco has introduced no evidence that
the method by which the AAS license fee is calculated has rendered
the AAS in any way ineffective or unworkable. To the contrary,
Judge Leval's finding that the AAS was "reasonable" and
"effective" is based on the trial evidence, including the fact that 110
major for-profit industrial corporations (including eleven of
Texaco's competitors) have voluntarily taken AAS licenses, with
their fees being calculated in the manner attacked by Texaco, and
there is no evidence that any of them have complained that there
was anything unfair or improper about the manner in which the fee
was calculated. Moreover, neither Texaco nor anyone else is
compelled to take an AAS license if they do not want to. They can
report their photocopying under the TRS, under which they decide
whether to report the photocopying of a particular article.
Each of the three methods for calculating the AAS license fee
(A 280-84, 294-96) attempts to calculate the fee in a practicable
way on the basis of the prospective licensee's anticipated
photocopying of material in CCC-registered publications. The
individual articles being photocopied during the limited
photocopying surveys are not identified because CCC
accommodated photocopy users' objections to disclosing that
information. (A 296.) Although photocopies from all
copyrighted publications are reported during the survey, only the
photocopying from CCC-registered publications is used in
calculating the license fee. (A 281.)
Because the license fee is based on survey data that does not
identify individual articles, it is possible that there may be articles
copied for which permission would not be needed, for example, a
public domain article. Any potential over-inclusiveness is merely
a necessary tradeoff by photocopy users using the AAS (rather than
the TRS) in exchange for avoiding the costs associated with having
to report each photocopying transaction. (See also p. 71.)
Judge Leval found that the AAS and TRS services provide a
reasonable, practicable, and efficient method of licensing
photocopying (LA 113, 114-5, 127-29, 131-32), and that "Texaco
could conveniently, and without undue administrative burden, retain
the benefits of photocopying at will, simply by complying with one
of the CCC's licensing systems." (LA 129.)
2. The Substantial and Growing Photocopying
Authorizations Market. CCC's development of the photocopying
authorizations market through its TRS and AAS services has
resulted in user payments (through 1989) of almost $28 million in
fees for permissions and licenses to photocopy " almost $9.7
million under the TRS and over $18.2 million under the AAS. As
of March 1990 CCC had distributed over $9.3 million to publishers,
and is obligated to distribute the remainder of the fees received (less
an average service charge of 30%) which it has deferred distributing
(with the agreement of the copyright owners) to cover start-up and
certain other costs. (LA 88; A 1993, 4299-4300, 285.) CCC's
revenues and distributions to publishers have increased each year.
(LA 88; A 270, 4298-4300.)
At the end of 1989, there were approximately 400 users
reporting under the TRS. As of September 1990, there were 110
AAS licensees, including eleven of Texaco's major petroleum
company competitors and many other major research-oriented
corporations. (LA 87-88; A 269-70, 4298, 272-73; see p. 7.)
L. Bell Labs' Successful Program Since 1978 of Providing
Journal Articles to its Research Personnel Without
Unauthorized Photocopying
AT&T Bell Laboratories is a prime example of a major
industrial research institution that, in sharp contrast to Texaco, has
implemented a system enabling its research personnel to have ready
access to journal articles without engaging in unauthorized
photocopying.
Like Texaco, Bell Labs maintains large collections of
scientific and technical journals in a number of libraries and
individual departments. (A 1423C.) In 1978, the year in which the
1976 Copyright Act took effect, Bell Labs implemented uniform
procedures governing the photocopying of copyrighted material,
whether done at library photocopying centers, at self-service
machines in libraries, departments and hallways, or at special
microform printers in the libraries. (A 1423D-I.)
Bell Labs initially obtained advance permission to photocopy
through the TRS and by entering into direct photocopying
permissions agreements with publishers of non-CCC-registered
publications. It currently has about 206 direct agreements with
publishers covering about 350 journals. (LA 128; A 1423E.) Bell
Labs became an AAS licensee in 1986, and since then has also
continued to use the TRS for photocopies that are not for its internal
use and therefore not covered by the AAS license. (A 1423B.)
When its employees need a copy of material for which Bell
Labs does not have advance permission to photocopy, it either
obtains photocopying permission from the publisher or, if it cannot
do so, purchases an authorized photocopy of the article from a
document delivery service. Thus, Bell Labs has never had to resort
to unauthorized photocopying, even when it was unable to obtain
permission to photocopy. (A 1423H-I.)
The unchallenged evidence concerning Bell Labs' program
since 1978 proves beyond question that it is possible for a research-
intensive corporation to provide its employees with complete and
useful access to journal articles through licensing from CCC and a
combination of other methods without any resort to free or
unauthorized photocopying.
M. Texaco's Unauthorized Photocopying Is Not a
Reasonable and Customary Practice
The trial record evidence shows that a number of readily
available, reasonably priced and effective means exist, other than
unauthorized in-house photocopying, for providing research
personnel at companies such as Texaco with additional originals or
photocopies of copyrighted journal articles (including the TRS and
AAS services of the CCC, blanket license agreements with
individual publishers and purchasing photocopies from authorized
document delivery services). (See pp. 18-19.) It also shows that a
substantial number of major for-profit research-oriented companies
have been successfully employing one or more of those means for
many years to provide their research personnel with ready access to
journal articles (pp. 25-31).
On the basis of that trial record evidence, much of which we
have reviewed in the prior pages of this brief, Judge Leval rejected
Texaco's contention that its unauthorized photocopying of entire
copyrighted journal articles was a "reasonable and customary
practice." (LA 125-32.) He found that such practices were not
"reasonable" because of the readily available alternatives to
unauthorized photocopying and that they were not "customary"
because many large corporations (including 11 of Texaco's
competitors) have been using the CCC's licensing services and one
or more of the other alternatives to free photocopying to provide
their research personnel with ready access to journal articles. (LA
125-32).
Moreover, since the advent of modern photocopying
technology in the early 1960's (see T Br. 21), publishers of
scientific and technical journals have consistently opposed the
notion that unauthorized photocopying of copyrighted works was an
acceptable norm. During the 10 years of legislative deliberations
preceding passage of the Copyright Act of 1976, publishers
consistently voiced their objections about photocopying without
permission and made efforts, ultimately successful in Section
106(1), to make clear that the copyright owner had the exclusive
right to reproduce or authorize the reproduction of the copyrighted
work (thus eliminating the ambiguity perceived and relied on by the
majority in Williams & Wilkins Co. v. United States, 487 F.2d 1345,
1350-52 (Ct. Cl. 1973, aff'd by an equally divided Court, 420 U.S.
376 (1975) majority). Indeed, that Congress did not view free
unauthorized photocopying as fair use is reflected in its
recommendation that an efficient mechanism be established to
license photocopying, which resulted in the formation of CCC. (LA
83-84.)
N. The Adverse Economic Effects on Copyright Owners If
the Widespread Photocopying Practices Exemplified by
Texaco Were Permitted as Fair Use
There is an enormous demand among researchers at for-profit
industrial corporations such as Texaco for access to journal articles.
(LA 111; pp. 11-15.) That demand is being fulfilled in large part
by the widespread and systematic practice of making in-house
photocopies of journal articles (LA 126; pp. 12-15), a practice that
generates substantial economic and other benefits for the company
(pp. 17-18).
Judge Leval found that free in-house photocopying of
copyrighted journal articles by and for researchers at industrial
corporations such as Texaco deprives publishers of significant
revenue (LA 111-15):
It is clear that, if the making of unauthorized
photocopies is found not to be fair use, Texaco will
nonetheless continue to provide its scientists with
copies, so long as there exists a means of doing so that
is not excessively expensive or burdensome. The
publishers have persuasively shown that there exist
convenient and reasonably priced procedures by which
Texaco could obtain the necessary additional copies for
its scientists. If court rulings established that the
existing practice of making photocopies violates
plaintiffs' copyright, Texaco would resort to one or
more of these procedures to provide its scientists with
copies that are necessary for their research, and
Texaco's doing so would add significantly to the
plaintiffs' revenues and the value of its copyrights.
(LA 111-12.)
In the same vein, Judge Leval said that he
finds that if Texaco stopped making "free"
photocopies, it would fill this gap through some
combination of the methods discussed and, in doing so,
would add significant value to the publishers'
copyrights. It is impossible to predict which of the
possible procedures Texaco would employ to achieve
speed and efficiency, to avoid administrative burden
and to control expense. But it is clear that whatever
combination of procedures Texaco used, the
publishers' revenues would grow significantly.
(LA 115.) Specifically, he found that, absent such free copying,
Texaco would do any one or more of (a) purchasing some
additional subscriptions to maintain needed rapid circulation of
journals, (b) obtaining permission to photocopy under CCC's TRS
or AAS services, (c) ordering photocopies from document delivery
services that pay royalties to the publishers, and (d) entering into
blanket licenses with individual publishers. (LA 113-15.)
With respect to subscriptions, Judge Leval found (A 114) that
rapid circulation of journals is essential to researchers' work, and
that free in-house photocopying plays a major role in maintaining
rapid circulation. If this photocopying stopped, circulation would
slow down, and Texaco would add at least some subscriptions to
speed up circulation, as it did in the past when it increased its
subscriptions to Catalysis to speed up circulation. (LA 114; pp. 14-
15.)
ARGUMENT
I. THE PROPER STANDARD OF APPELLATE REVIEW
AND TEXACO'S ERRONEOUS VERSION OF THE FACTS
A. The Proper Standard of Appellate Review Is Customary
Deference to the Factual Findings of the Trial Court
in Accordance with the "Clearly Erroneous" Rule and
De Novo Review of Its Conclusion Concerning Fair Use
Texaco is wrong in arguing that fair use trial decisions are
open to full or de novo appellate review, that the usual clearly
erroneous rule does not apply and that this Court need not accord
normal deference to the district court's trial findings (T Br. 15). It
is correct, in accordance with Harper & Row Pub., Inc. v. Nation
Enters., 471 U.S. 539, 560 (1985), and this Court's decisions in
New Era Pub. Int'l ApS v. Carol Pub. Group, 904 F.2d 152, 155
(2d Cir.), cert. denied, 498 U.S. 921 (1990), and Arica Inst., Inc. v.
Palmer, 970 F.2d 1067, 1077 (2d Cir. 1992) (see T Br. 15), that the
district court's ultimate conclusion concerning whether a particular
use is a fair use under 107 is a mixed question of law and fact,
and therefore that conclusion is subject to full or de novo appellate
review. However, as Texaco fails to point out, the trial court's
findings of fact in a fair use case, just as in any other case, are
subject to the "clearly erroneous" standard of review set forth in
Rule 52(a) of the FRCP. As this Court has said, "[t]he four factors
listed in Section 107 raise essentially factual issues" and thus the
fair use defense turns on "an examination of the facts in each
case".
Here, as in Weissmann v. Freeman, 868 F.2d 1313, 1324-25
(2d Cir.), cert. denied, 493 U.S. 883 (1989), the clearly erroneous
standard is to be applied with respect to the statutory fair use
factors. Analogously, the issue of "likelihood of confusion" in
Lanham Act trademark infringement cases requires the examination
and balancing of eight factors, and as to that, this Court has also
recently held that findings of fact of the district court "are subject
to reversal only if they are clearly erroneous, while the ultimate
balancing of the factors is reviewed de novo by our Court." Nikon,
Inc. v. Ikon Corp., No. 92-9356, slip op. at 1603 (2d Cir. Jan. 20,
1993); Bristol-Myers Squibb Co. v. McNeil-P.P.C., Inc., 973 F.2d
1033, 1043-44 (2d Cir. 1992).
In addition, under Rule 52(a) the clearly erroneous standard
applies to factual findings whether based directly on the evidence
or made as inferences drawn from the evidence. Anderson v. City
of Bessemer City, 470 U.S. 564, 574 (1985); Hygrade Envelope
Corp. v. Gibraltar Factors Corp., 366 F.2d 584, 588 (2d Cir. 1966)
(Friendly, J.). That Judge Leval made his factual findings on the
basis of a written record also does not alter the application of the
"clearly erroneous" standard. FRCP 52(a) ("Findings of fact,
whether based on oral or documentary evidence, shall not be set
aside unless clearly erroneous...."); see Anderson v. City of
Bessemer City, 470 U.S. at 573-74; Bristol-Myers Squibb Co. v.
McNeil - P.P.C., Inc., 973 F.2d at 1043 (2d Cir.); Allied Chem. Int'l
Corp. v. Companhia de Navegacao Lloyd Brasileiro, 775 F.2d 476,
481 (2d Cir. 1985), cert. denied, 475 U.S. 1099 (1986); Weissmann
v. Freeman, 868 F.2d at 1322 (2d Cir.). It is the function of the
district court to review and study the entire trial record, which Judge
Leval did. It is not the function of this appellate court, as Texaco
intimates, to duplicate that effort by reviewing the trial record de
novo, or to act as a fact finder, except to resolve a contention that
a finding of fact was clearly erroneous. See Harper & Row, 471
U.S. at 560; Anderson v. City of Bessemer City, 470 U.S. at 573-74;
Icicle Seafoods, Inc. v. Worthington, 475 U.S. 709, 714 (1986); cf.
Amadeo v. Zant, 486 U.S. 214, 228 (1988) ("no excuse for the
Court of Appeals to ignore the dictates of Rule 52(a) and engage in
impermissible appellate fact finding.")
Texaco is also wrong when it claims (T Br. 15 n.7) that
plaintiffs have the burden of proving that Texaco's use was not fair.
Fair use is an affirmative defense on which the defendant bears the
burden of proof. To that effect see, e.g., Harper & Row, 471 U.S.
at 562; Maxtone-Graham v. Burtchaell, 803 F.2d 1253, 1255 (2d
Cir. 1986), cert. denied, 481 U.S. 1059 (1987); Wainwright Sec.,
Inc. v. Wall St. Transcript Corp., 558 F.2d 91, 97 (2d Cir. 1977),
cert. denied, 434 U.S. 1014 (1978); Rubin v. Boston Mag. Co., 645
F.2d 80, 85 (1st Cir. 1981).
B. Texaco Presents an Erroneous Version of the Facts
Disregarding the proper standard of appellate review, Texaco
disputes, mischaracterizes or ignores many of Judge Leval's
important factual findings. In essence, it presents a rehash of its
version of the facts, often based on snippets of evidence, that it
submitted in its post-trial briefing to Judge Leval, and which he
rejected. Texaco makes no contention that any of Judge Leval's
factual findings lack evidentiary support, except in those instances
that we have discussed elsewhere and refuted. Moreover, Texaco's
baseless contention that Judge Leval failed to analyze the
circumstances surrounding the copying by Dr. Chickering of the
eight sample articles, and its astonishing insinuation that Judge
Leval failed to base his findings and determinations on the extensive
trial record, are contradicted by the face of Judge Leval's 67-
page decision and his 1292(b) certification order. Here we review
several, but by no means all, of the many instances where Texaco
wrongly attempts in this Court to recast and reargue the facts.
1. Profit-Motivated Commercial Purpose. Judge Leval
found, and Texaco acknowledges, that it is the regular practice of
Texaco's scientists, as typified by Dr. Chickering, to make and use
photocopies of entire copyrighted journal articles in the conduct of
their research for Texaco. (LA 76, 77, 80, 130-131.) Texaco,
however, contends here, as it did below, that such photocopying "is
done for the purpose of advancing science, rather than for
commercial gain." (LA 104-05; T Br. 6-7, 16-21.) This flies in the
face of Judge Leval's explicit rejection of that factual contention
(LA 105) and his findings that such research, in which the use of
photocopies of journal articles is an integral and important element
that is fostered and maintained by Texaco, is solely for Texaco's
"own commercial gain," and that such photocopying "was carried
on in a commercial context for the purpose of producing
profits. . . ." (LA 75, 105, 106, 122, 136.) Texaco and the amici
also misstate those findings in saying that Judge Leval found a
"commercial purpose" simply because Texaco "is a for-profit
entity." (T Br. 16, 20-21; AR Br. 11-12; AA Br. 22-24.)
Moreover, Judge Leval rejected (LA 105) Texaco's contention (T
Br. 6-7) concerning the purported altruistic purposes of Texaco
scientists' speaking and writing activities, a contention that was
refuted by Texaco's own General Manager of Research and
Development, who testified that such activities were sanctioned and
motivated purely by Texaco's self-interest (A 932-34).
2. Texaco's Superseding, Non-transformative
Multiplication of Copies of Original Journal Articles. Although
Texaco acknowledges (T Br. 22-23), as Judge Leval found (LA 99-
102, 104, 106), that photocopying by Dr. Chickering and his
colleagues merely produces exact duplicates of original journal
articles and is not a transformative use, Texaco nevertheless
contends on this appeal that those copies do not supersede or
perform the same functions as the originals. (T Br. 7-8, 24) Those
same contentions were advanced by Texaco in the court below and
rejected by Judge Leval. (LA 99-100, 102; see pp. 19-21.) He
found that "the principal purpose of Texaco's copies is to supersede
the original, and permit duplication"; "the major purpose of such
photocopying has been multiplication of copies . . . so that the
original can circulate without delay"; "the principal feature of the
photocopying is its capacity to give numerous Texaco scientists
their own copy based on Texaco's purchase of an original"; and
"the most prominent feature of this copying is that the copies
supersede the original and multiply its presence." (LA 99-100, 102)
3. There are a Number of Reasonable and Practical
Alternatives to Free Unauthorized Photocopying of CCC-
Registered Journal Articles. Texaco renews (T Br. 11-12, 31, 36,
40-41) the many contentions that it made, and which were rejected
in the court below (LA 111-15, 127-32), that there are no realistic
alternatives to free unauthorized photocopying. It makes a number
of contentions, as it did below, that the CCC permissions and
licensing services (the TRS and AAS) are ineffective, unfair and
unworkable (T Br. 11-12, 40-43), entirely disregarding Judge
Leval's rejection of those contentions and his many detailed
findings that the services administered by the CCC are reasonably
priced, convenient and effective. (LA 113-115, 127-129, 131-132.)
Texaco contends here, as it did below, that document delivery
services are an ineffective method of obtaining authorized
photocopies of journal articles, again disregarding the evidence
concerning its own use of such services and Judge Leval's findings
that such services are effective (LA 112-14, 128). It also contends
here, as it did below, that bilateral agreements or blanket licenses
with individual publishers of journals are not an effective means of
obtaining permission to photocopy journal articles, when Judge
Leval rejected those contentions, and instead found that such
agreements or licenses, like document delivery services, are a
relatively inexpensive and prompt means for obtaining working
copies of journal articles. (LA 112-13, 128.)
4. Harm, Including Lost Subscription Sales. Judge
Leval found that if Texaco's practice of making unauthorized
photocopies were not permitted, it would nonetheless continue to
provide its scientists with copies so long as there are available
means to obtain such copies that are not excessively expensive or
burdensome. He found that a number of those available means
actually exist, including CCC licensing systems, bilateral or blanket
licensing agreements and the purchase of copies from authorized
document delivery services. Also, as Judge Leval found, if
photocopying stopped or were not permitted, Texaco would
purchase a modest number of additional subscriptions to assure the
needed prompt circulation of journals. Although, as Judge Leval
said, it would be impossible to predict which one or more of those
possible procedures Texaco would employ as the means of
providing copies of journal articles to its scientists, he found that
Texaco would use some combination of those methods and "it is
clear that whatever combination of procedures Texaco used, the
publishers' revenues would grow significantly." (LA 115; 111-15,
127-32) (emphasis added)
Here, Texaco does not contest Judge Leval's factual findings
concerning the great harm plaintiffs would suffer from loss of CCC
and other licensing revenues, and instead contends as a legal matter,
wrongly as we discuss later, that such harm should not be
considered in fourth factor analysis. As to subscription sales,
however, Texaco contends here, as it did below, that from a factual
standpoint plaintiffs would not suffer cognizable harm from the loss
of potential sales of additional subscriptions if photocopying stopped
or were not permitted, a contention that Judge Leval rejected based
on that evidence. (LA 114; see pp. 14-15.) Similarly, Texaco
renews its contention here (T Br. 31, 36), which Judge Leval
rejected, that plaintiffs would not suffer harm from the loss of
revenues resulting from the activities of authorized document
delivery services. (LA 113.)
5. Reasonable and Customary Practices. Texaco again
contends, as it did below, (T Br. 2, 7-9, 26-28; see AR Br. 5, 6, 36-
40), that free unauthorized photocopying of entire copyrighted
journal articles by Texaco and other for-profit research-oriented
companies is a "reasonable and customary" practice. Judge Leval
rejected those contentions. He found that, whatever may have been
the case prior to 1978, the development and use since that time of
CCC and other licensing procedures undercuts any basis for finding
that such free unauthorized in-house photocopying by Texaco and
other for-profit research-oriented companies is either "reasonable"
or "customary." He based those findings on the existence of readily
available, reasonably priced, efficient means of obtaining authorized
photocopies or additional originals and the use of such means by a
substantial number of research-oriented profit-motivated companies.
(LA 125-32.)
II. STATUTORY FOUR FACTOR ANALYSIS AND
RELEVANT EQUITABLE CONSIDERATIONS COMPEL
REJECTION OF TEXACO'S FAIR USE DEFENSE
Section 106(1) of the Copyright Act of 1976 grants the
copyright owner, subject to fair use under 107, the exclusive rights
"to reproduce the copyrighted work in copies" and to authorize
others to reproduce the copyrighted work (thus clearing up an
ambiguity that existed under the 1909 Act (see LA 123)). By
granting such exclusive rights, and thus establishing marketable
rights in accordance with the constitutional concept (see LA 89), the
copyright protection offered under 106 "supplies the economic
incentive to create and disseminate ideas." Harper & Row, 471
U.S. at 558; Mazer v. Stein, 347 U.S. 201, 219 (1954).
In contrast, fair use under 107, as the Supreme Court and
this Court have held, is a "privilege" allowing the abridgement or
copying of copyrighted material in special circumstances without
obtaining permission of or compensating the copyright owner that
deprives that owner of the usual benefits of copyright protection
under 106. As such, fair use is a "limited exception" to the
property rights conferred by the Copyright Act. Maxtone-Graham
v. Burtchaell, 803 F.2d at 1255 (2d Cir.).
The fair use doctrine is simply an effort "to prevent rigid
application of the Copyright Act" when it would unreasonably
prevent the dissemination of information or stifle creativity.
Nothing in the record remotely suggests that dissemination of
information would be impaired, or creativity in research would be
stifled, if Texaco's claim of fair use were disallowed. To the
contrary, access to the information is readily available through use
of originals and authorized photocopies.
In addition, the fair use doctrine, as this Court has observed,
is "not a license for corporate theft, empowering a court to ignore
a copyright whenever it determines the underlying work contains
material of possible public importance." Iowa State Univ. Research
Found., Inc. v. ABC, Inc., 621 F.2d 57, 61 (2d Cir. 1980). In
essence, this is Texaco's principal argument " that research is of
public importance and therefore for that reason alone fair use should
be allowed. (This subject is also later discussed.)
Moreover, fair use is not a haven for copiers who can afford
to pay for permission to copy. It would be "fundamentally at odds
with the scheme of copyright" to permit fair use as a means of
"depriving copyright owners of their right in the property precisely
when they encounter those users who could afford to pay for it."
Harper & Row, 471 U.S. at 559. Texaco, General Motors,
Chrysler, Ford and the members of the Chemical Manufacturers
Association are precisely the type of companies that can afford to
pay for their use of others' intellectual property, just as, at the time
of trial, 110 AAS licensees were paying for that use.
In the end, fair use is an equitable doctrine " an equitable
rule of reason developed by the courts that was codified in the 1976
Act (LA 120). And, as this Court has instructed, even before
undertaking the traditional four factor analysis, "the equitable
considerations that exist in the case at bar" must be considered.
Weissmann v. Freeman, 868 F.2d at 1324 (2d Cir.).
Here, as Judge Leval found, there are no equitable or other
reasons why Texaco should be allowed to engage in systematic in-
house photocopying of copyrighted articles in CCC-registered
journals, without paying for permission to make those photocopies.
(LA 120-21.) There is no reason why publishers of scientific and
technical journals should be compelled to subsidize the research
activities that Texaco engages in solely for its own "commercial
gain", and this is doubly true since Texaco pays for all of the other
costs necessary to carry on those research activities. Rejecting
Texaco's claim of fair use will not harm scientific research because
plaintiffs are not seeking to prohibit or limit the photocopying of
journal articles, or to deny Texaco and other companies access to or
the use of original journal articles. On the other hand, if the courts
were to accept Texaco's claim of fair use, it would mean the
destruction of the multi-million-dollar photocopying licensing
market that has been built up through great effort over the last 15
years at the recommendation of Congress.
Texaco retains every option and may proceed in any way it
chooses. It can pay for photocopying CCC-registered journal
articles through the TRS (see LA 129 n.22), or obtain an AAS
blanket annual CCC license; it can buy authorized photocopies from
authorized document delivery services as it has done in the past
(A 860-62, 917-18); it can, as it has done, purchase additional
subscriptions to maintain speedy circulation of journals (LA 110-
111); or, it can decide to do none of these things, and revert to
practices it and others followed before the modern age of low-cost
photocopying. (A 957.) The issue is solely one of economics.
Judge Leval's straightforward statutory four factor analysis
confirms the lack of any justification for Texaco's defense of fair
use and clearly supports his rejection of Texaco's contentions.
A. The First Factor
The many factual findings made and discussed by Judge
Leval that Texaco's copying is a commercial use for a profit-
motivated purpose, and that it is a superseding use which is neither
transformative nor productive, led inexorably to his conclusion that
the first factor strongly disfavors fair use. (LA 96-106, 136.)
1. A Commercial Use For a Profit-Motivated Purpose
Disfavors Fair Use. The authorities are unanimous that a
commercial use for a profit-motivated purpose is presumptively
unfair. Sony, 464 U.S. at 451; Harper & Row, 471 U.S. at 562
(quoting Sony); Stewart v. Abend, 495 U.S. 207, 237 (1990); Rogers
v. Koons, 960 F.2d 301, 309 (2d Cir.), cert. denied, 113 S. Ct. 365
(1992); Association of Am. Med. Coll. v. Cuomo, 928 F.2d at 525
(2d Cir.).
This principle simply executes the explicit first factor
statutory command that in each particular case the court must
consider the "purpose and character of the use, including whether
such use is of a commercial character or is for non-profit
educational purposes." Thus, as this Court stated last year, the
first factor "asks whether the original was copied in good faith to
benefit the public or primarily for the commercial interests of the
infringer." Rogers v. Koons, 960 F.2d at 309 (2d Cir.); accord
MCA, Inc. v. Wilson, 677 F.2d 180, 182 (2d Cir. 1981); Pacific &
Southern Co. v. Duncan, 744 F.2d 1490, 1496 (11th Cir. 1984),
cert. denied, 471 U.S. 1004 (1985). As the Supreme Court
expressed the point in authoritative fashion, "the crux of the
profit/non-profit distinction [made by Section 107(1)] is . . . whether
the user stands to profit from exploitation of the copyrighted
material without paying the customary price." Harper & Row, 471
U.S. at 562; Rogers v. Koons, 960 F.2d at 309 (2d Cir.) (same).
In whichever way the test is articulated, Texaco engages in
unauthorized copying for its own commercial interests, and stands
to profit from such copying without paying the customary price.
Applying these principles, Texaco's commercial use of copies
of the copyrighted work for a profit-motivated purpose strongly
disfavors the claim of fair use, and its contentions otherwise (T Br.
17-21) are without merit. This is doubly true here because the
copying itself adds to Texaco's profitability by increasing research
efficiency and saving time and effort, and thus saving the financial
cost of such additional time and effort.
Of course, a commercial use for a profit-motivated purpose
is not, ipso facto, disqualified from fair use protection. A court "
in reaching its ultimate conclusion whether a particular use is or is
not a fair use " must consider and weigh all of the facts pertaining
to this and the other interrelated statutory factors and to equitable
considerations. (LA 93.) Thus, there may be easy illustrations of
a commercial for-profit use of an insubstantial portion of a
copyrighted work where the copyright owner will not suffer any
cognizable actual or potential harm, that would qualify as fair use.
Here, however, there is no semblance of any such circumstances.
Accordingly, Texaco's commercial for-profit copying strikes
decisively against fair use in first factor analysis.
2. A For-Profit Research Use or Purpose Does Not
Favor Fair Use. Texaco stretches fair use doctrine out of shape in
contending that it is entitled to engage in free unauthorized in-house
photocopying of entire copyrighted journal articles simply because
such copying is done for the salutary purpose of conducting
scientific research. Judge Leval properly rejected any such
contention, since precious little copyright protection would remain
for any scientific or educational material if that were sufficient to
warrant fair use. (LA 100-01.) Similarly, the Supreme Court
rejected Texaco's argument, in a different context, when it held in
Harper & Row that the court below had erred in concluding that the
unauthorized use of the copyrighted material "was excused by the
public's interest" in the subject matter of that material. 471 U.S. at
569; id. at 555-59. As the Supreme Court emphasized in Harper &
Row,
It is fundamentally at odds with the scheme of
copyright to accord lesser rights in those works that
are of greatest importance to the public.
471 U.S. at 559.
There is additionally a significant difference for fair use
purposes between non-profit research and commercial profit-
motivated research, as pointed out by the U.S. Register of
Copyrights in his 1983 Report:
[R]esearch in applied physics, for example, performed
by an employee of an aerospace firm, and similar
research by a graduate student in a university, may
both involve the photocopying of the same scholarly
articles but the copyright consequences are different:
the former copying is of a clearly commercial nature,
and less likely to be fair use.
Report of the Register of Copyrights - Library Reproduction of
Copyrighted Works (17 U.S.C. 108) 85 (1983). A leading
commentator has made the same point, as applied to first factor
analysis, and the statutory dichotomy between for-profit and non-
profit purposes, when he observed:
It is sometimes alleged that commercial entities such
as drug, chemical, or manufacturing corporations are
engaged in "research" within the meaning of Section
107. . . . Such entities are engaged in for-profit
activities; and . . . under normal circumstances, for-
profit "research" is not eleemosynary or altruistic and
thus should be considered a presumptively unfair
commercial use.
W. Patry, The Fair Use Privilege in Copyright Law 416-17 (1985)
("Patry, Fair Use").
The first sentence of Section 107 non-inclusively identifies
criticism, comment, news reporting, teaching, scholarship or
research as possible purposes qualifying for fair use treatment. The
text of that sentence does not say, and does not mean, that any
unauthorized copying of copyrighted material for any of those
purposes is fair use. In that respect, the Supreme Court has
declared authoritatively that this enumeration merely provides
several examples of the kind of uses that may, in a given case, be
found to be fair use after a full four factor analysis, and none of
which is presumptively a fair use: "This [statutory] listing was not
intended to be exhaustive, or to single out any particular use as
presumptively a "fair" use." Harper & Row, 471 U.S. at 561
(citations omitted). Moreover, the text of the first factor requires
consideration and weighing of "the commercial or nonprofit
character" of the activity Sony, 464 U.S. at 449; Harper & Row,
471 U.S. at 562 ("the profit/nonprofit distinction").
Accordingly, and observing the statutory distinction between
non-profit and for-profit uses, the Supreme Court and appellate and
district courts on many occasions have determined, based on the
particular facts involved, that the unauthorized copying of
copyrighted material for "news reporting" or for educational
purposes (two of the purposes explicitly mentioned in the first
sentence of Section 107) were "commercial uses" weighing against
fair use in first factor analysis. Indeed, this Court in Weissmann
gave no weight to the fact that the purpose of the use was for
"teaching", "scholarship" and "research" and awarded the first factor
to the copyright owner because that use was superseding, non-
productive and motivated by professional advancement. 868 F.2d
at 1324 (see LA 141).
Thus, the outcome of first factor analysis does not rest on
whether the unauthorized copying was done for one of the purposes
enumerated in the first sentence of Section 107. Although this
Court has indicated that if the unauthorized copying falls into one
of those categories there is a strong, but not irrebuttable
presumption that the first factor favors fair use, that presumption,
even assuming it applies to for-profit research, has been rebutted
here by the clearly commercial, superseding nature of Texaco's use.
Furthermore, in each of the three recent cases in which that
suggestion was made, the factual circumstances were altogether
different from those involved here. None of those cases involved
for-profit scientific purposes or the superseding copying of the
entirety of the copyrighted work. Each of those cases involved non-
superseding copying of a small portion of a copyrighted work.
Also, unlike the present case, the allegedly infringing work in each
of those cases was a new work into which the plaintiff's work had
been incorporated, and the kind of use in question had historically
been held by courts to be a fair use. See Arica Inst., Inc. v. Palmer,
970 F.2d at 1077-78 (2d Cir.) (a minor portion of plaintiff's work
included in defendant's book " a work of criticism, comment,
scholarship and research); Wright v. Warner Books, Inc., 953 F.2d
731, 736, 738 (2d Cir. 1991) (quotations and paraphrases of a very
small portion of the original work included in defendant's
biography); New Era v. Carol Pub., 904 F.2d at 156 (2d Cir.) (a
small number of selected quotations included in defendant's
biography). See also Judge Leval's discussion of these decisions,
and their possible impact here. He concludes that this Court did not
intend to adopt a categorical test for the first factor, and that
plaintiffs should in any event prevail in this case as the result of the
overall inquiry, because of the decisive effect in their favor of the
third and fourth factors and equitable considerations. (LA 140-41).
Also, neither Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d
1510 (9th Cir. 1992), amended, 1993 U.S. App. LEXIS 78 (9th Cir.
1993) nor Atari Games Corp. v. Nintendo of Am., Inc., 975 F.2d
832 (Fed. Cir. 1992), supports Texaco's position that the research
purpose of Dr. Chickering's copying favors fair use for first factor
purposes. (See T Br. 17; AR Br. 11-12, 16; AA Br. 22-23.) Those
cases involved entirely different circumstances. In both, the courts
were being asked to prohibit reverse engineering of unreadable
computer object codes where access to unprotected ideas and
functional elements was physically impossible in the absence of the
copying inherent in the reverse engineering. Sega, 977 F.2d at
1514, 1518, 1520, 1526; Atari, 975 F.2d at 843-44. Thus, in Sega
the court stressed repeatedly that it was finding fair use only
because "disassembly provides the only means of access to those
elements of the code that are not protected by copyright. . . ." 977
F.2d at 1518; id. at 1514, 1520, 1526; accord Atari, 975 F.2d at
843-44. In stark contrast to those circumstances, Texaco cannot
make any claim that unauthorized in-house photocopying of entire
journal articles is the only possible means of access to unprotected
ideas and information contained in journal articles. Texaco's
research personnel have ready access to all of the ideas and
information contained in the journal articles simply by reading
original journal issues or reading authorized photocopies obtained
by any of the readily available means.
For these and the other reasons discussed by Judge Leval, he
was correct in rejecting Texaco's contentions that the research
purpose of its unauthorized photocopying favored fair use in first
factor analysis or that such research purpose ipso facto rendered that
copying fair use.
3. Commercial Use in First Factor Analysis Does Not
Require The Sale or Distribution of Copies. There is no basis for
Texaco's contention that a commercial use for a profit-motivated
purpose requires the sale or distribution of unauthorized copies of
the copyrighted work by the alleged infringer. This ignores the
ordinary meaning of the words used in the statutory first factor, the
"profit/non-profit" distinction made in that text, the absence of any
such purported requirement in the statute, and prior judicial
authority establishing for first factor purposes that an internal use
can be "commercial." E.g., Sega Enters. Ltd. v. Accolade, 977 F.2d
at 1522-23; Allen-Myland, Inc. v. IBM Corp., 746 F. Supp. at 534;
Telerate Sys., Inc. v. Caro, 689 F. Supp. at 229; Schuchart &
Assocs. Pro. Eng., Inc. v. Solo Serve Corp., 220 U.S.P.Q. 170, 181-
82 (W.D. Tex. 1983); Aitken, Hazen, Hoffman, Miller, P.C. v.
Empire Constr. Co., 542 F. Supp. 252, 260 (D. Neb. 1982). See
also Herbert v. Shanley Co., 242 U.S. 591, 594-95 (1917).
Texaco repeatedly contends that its unauthorized in-house
photocopying does not compete with plaintiffs' copyrighted work.
Certainly the unauthorized in-house copying of journal articles by
Texaco and other for-profit research-oriented companies supplants
the great existing and future demand to obtain authorized
photocopies or additional originals of those articles through any one
or more of the readily available means, and in that important sense
free photocopying competes with plaintiffs' efforts to sell journal
subscriptions and license photocopying of journal articles.
(LA 113-14.) See Weissmann, 868 F.2d at 1326 (2nd Cir.).
4. Sony and Williams & Wilkins Do Not Support
Texaco's Position. In his decision, Judge Leval at some length
discusses and correctly analyzes the Sony and Williams & Wilkins
decisions and the pertinent distinctions between those cases and the
facts of this one (LA 121-25, 127, 129), including among many
other things, in both those cases, the non-profit non-commercial
purposes of the copying and the absence of harm to the copyright
owners. In light of that, we need not discuss those matters further,
except to address one new contention Texaco has advanced here,
that it did not make below, concerning Williams & Wilkins.
Texaco is wrong (T Br. 20) in now attempting to equate the
facts here to the facts in Williams & Wilkins Co. v. United States,
487 F.2d 1345 (Ct. Cl. 1973), aff'd by an equally divided Court,
420 U.S. 376 (1975). In Williams & Wilkins, as the majority
emphasized, the hallmark of the entire duplicating enterprise was
"untainted" by commercial or profit-making purpose on the part of
the two government agencies making the photocopies, the National
Institutes of Health ("NIH") and the National Library of Medicine
("NLM") (487 F.2d at 1354; LA 99). Nevertheless, purportedly
showing that the copying was being done for a commercial profit-
motivated purpose, Texaco refers to the distribution of photocopies
by the NLM and NIH of medical journal articles to scientists at
drug companies and to practicing doctors. First, this is wrong
because the copying (the alleged infringing acts) was not being done
by the drug companies or doctors, but by non-profit government
agencies solely, as the majority in Williams & Wilkins concluded,
for non-profit/non-commercial purposes. See Los Angeles News
Serv. v. Tullo, 973 F.2d 791, 797 (9th Cir. 1992). Second, only
12% of the copies were distributed to drug company scientists or
doctors, 487 F.2d at 1349, 1374, a fact referred to by the Williams
& Wilkins minority as one of many facts they considered as support
for their view that the copying was not fair use. 487 F.2d at 1366-
67, 1374. Here, of course, Texaco's photocopying is entirely for a
commercial profit-motivated purpose.
5. If, As Is Doubtful, Legislative History Concerning
Section 108 Has Any Bearing On Fair Use Under Section 107,
It Disfavors Fair Use In This Case. As we have pointed out, and
as Texaco acknowledges (T Br. 19), as to library copying, its 108
defense has not been tried or adjudicated and therefore no Section
108 issues are involved in this appeal. However, Texaco argues
wrongly that the legislative history concerning Section 108 helps
show that Texaco's unauthorized photocopying of journal articles is
not a "commercial use" under the first fair use factor of 107. (T
Br. 18-19; see AR Br. 13-14, 44-47.)
As Judge Leval correctly pointed out, Section 108 explicitly
provides that none of its provisions "in any way affects the right of
fair use". (LA 137; 108(f)(4).) Also, the language in 108(a)(1)
concerning "direct or indirect commercial advantage" does not
appear in 107; it does appear in 110(4) and the legislative history
of that section makes clear that such phrase covers activities "in
connection with any commercial or profit making enterprise."
S. Rep. No. 94-473 at 77; H.R. Rep. No. 94-1476 at 85.
In advancing its contentions on this subject, Texaco relies on
selected quotations in the House Report on 108 (T Br. 19), but
fails to refer to a very important point made in the same House
Report, and completely fails to discuss relevant portions of the
Senate and Conference reports. See H.R. Report No. 94-1476 at 74-
75 (it is only "[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.
. . ." that should not be considered copying for "indirect or direct
commercial advantage"); S. Rep. No. 94-473 at 67 (indicating that
a "commercial organization should purchase the number of copies
of a work that it requires [for its employees], or obtain the consent
of the copyright owner to the making of photocopies"); id. at 70
(the systematic reproduction of copies of "articles or other
contributions to copyrighted collections or periodicals . . . whether
or not multiple copies are reproduced" is not authorized); H.R.
Conf. Rep. No. 94-1733, 94th Cong., 2d Sess. at 73-74 (1976) ("the
isolated, spontaneous making of single photocopies by a library . . .
in a for-profit organization without any commercial motivation . . .
would come within the scope of Section 108").
Clearly, the evidence establishes that Texaco's systematic,
profit motivated, unauthorized photocopying practices that have an
immediate commercial motivation and economic benefit are not the
"isolated," "spontaneous" and "without any commercial motivation"
practices referred to in the legislative history (pp. 17-18).
Accordingly, if and to the extent the legislative history concerning
Section 108 is relevant, it adds to the reasons for disfavoring fair
use in this case.
6. Texaco's Photocopying Is A Non-Transformative,
Non-Productive, Superseding Use That Very Strongly Weighs
Against Fair Use. Judge Leval's discussion of this subject, on the
facts of this case, leads inexorably to the conclusion that the first
statutory factor concerning purpose and use very strongly disfavors
fair use. (LA 93-96, 99-104.) Indeed, where copies duplicate and
supersede the original, as a general rule fair use is precluded.
Harper & Row, 471 U.S. at 550 ("the fair use doctrine has always
precluded a use that "supersede[s] the use of the original""); United
Tel. Co. v. Johnson Pub. Co., 855 F.2d 604, 610 (8th Cir. 1988)
(same); Folsom v. Marsh, 9 F. Cas. 342, 345 (C.C. Mass. 1841);
Basic Books, Inc. v. Kinko's Graphics Corp., 758 F. Supp. at 1530
(copying "that merely repackages or republishes the original is
unlikely to pass the test" under the first factor); 3 M. Nimmer & D.
Nimmer, Nimmer on Copyright 13.05[B], at 13-102.28(12) (1992)
("[i]f both plaintiff's and defendant's works are used for the same
purpose, then . . . the defense of fair use should not be available. . .
.") (emphasis omitted); id. at 13-102.28(21); see also Wainwright
Sec., Inc. v. Wall St. Transcript Corp., 558 F.2d 91, 96 (2d Cir.
1977), cert. denied, 434 U.S. 1014 (1978); Marcus v. Rowley, 695
F.2d 1171, 1175 (9th Cir. 1983).
Texaco's contention (T Br. 25-26; AL Br. 11-12), made in
reliance on Consumers Union of U.S., Inc. v. General Signal Corp.,
724 F.2d 1044 (2d Cir. 1983), cert. denied, 469 U.S. 823 (1984),
that Dr. Chickering made the photocopies supposedly to duplicate
accurately certain material in the articles and this favors fair use, is
entirely misplaced. On this point Consumers Union is not good
law, as Texaco fails to point out. See New Era Pub. Int'l ApS v.
Henry Holt Co., 884 F.2d 659, 661 (2d Cir. 1989), cert. denied, 493
U.S. 1094 (1990) (the language in Consumers Union indicating that
verbatim copying for accurate reporting favors fair use is "an
incorrect statement of the law. . . .") Moreover, in Consumers
Union, the court found the copying in question " 29 words out of
an article of 2100 words " to be "insubstantial", 724 F.2d at 1050,
and its discussion of concern for accuracy was not a part of its first
factor analysis, 724 F.2d at 1049. In addition, in Consumers Union
and the other cases cited in the ALA brief (p. 12), the courts were
concerned with the copier's need to report facts accurately to the
public, and emphasized the modest, minimal or limited amount
copied. (See LA 103-04.)
As to Texaco's contention that its use of unauthorized
photocopies is ipso facto "productive" because it is part of scientific
research, we need not reiterate what we have said earlier in
commenting on Judge Leval's determination that such use is not
"productive", as that term is understood in fair use doctrine. Nor
need we reiterate what was said before (pp. 19-21, 40) concerning
the lack of any basis for Texaco's contention (T Br. 23-24) that its
use of photocopies is not a superseding use because researchers
prefer to work with photocopies rather than originals. As to
Texaco's contention (T Br. 16) based on the reference in 107 "to
fair use by reproduction in copies," the comments made in the
House and Senate Reports concerning 107 provide a complete
refutation. That reference is "not intended to give those kinds of
reproduction any special status under the fair use provision or to
sanction any reproduction beyond the normal and reasonable limits
of fair use." H. R. Rep. No. 94-1476 at 66; S. Rep. No. 94-473 at
62. Copying of the entirety of a copyrighted work, as occurred
here, is ordinarily not fair use. See authorities cited in n.32. There
is, in the end, no genuine argument that can be advanced by Texaco
that its use of photocopies is anything other than superseding, non-
productive and non-transformative.
7. Texaco's Position Is Not Supported By Any Claimed
"Reasonable and Customary Practice" of For-Profit Research-
Oriented Companies To Engage In Free In-House Photocopying
Of Copyrighted Journal Articles. Judge Leval's factual finding
that there is no such "reasonable and customary" practice ends the
matter. (LA 129-30.) In any event, there is no basis for any claim
that the concept of "reasonable and customary practices" plays a
role in fair use adjudication.
No American case has ever found fair use based on the
existence of a customary practice of quotation, abridgment, or any
other form of unauthorized copying. The only decision to that
effect, and on which Texaco relies (T Br. 26-27), is one rendered
more than two centuries ago in England, Dodsley v. Kinnersley, 27
Eng. Rep. 270, 271 (Ch. 1761). Its approach has not been followed
by American courts. In fact, American courts that have considered
the question have rejected any contention, similar to the one Texaco
advances, that custom or practice plays any role in fair use
adjudication. See Bellsouth Adv. & Pub. Corp. v. Donnelley Info.
Pub., Inc., 719 F. Supp. 1551, 1561 (S.D. Fla. 1988), aff'd, 933
F.2d 952 (11th Cir. 1991), vac'd & reh'g en banc granted, 977 F.2d
1435 (11th Cir. 1992) (industry practice "is not relevant to the fair
use defense"); Maxtone-Graham v. Burtchaell, 631 F. Supp. 1432,
1436 (S.D.N.Y.), aff'd, 803 F.2d 1253 (2d Cir. 1986), cert. denied,
481 U.S. 1059 (1987) (whether or not a custom existed was
irrelevant); Meeropol v. Nizer, 417 F. Supp. 1201, 1210 (S.D.N.Y.
1976), rev'd on other grounds, 560 F.2d 1061 (2d Cir.), cert.
denied, 434 U.S. 1013 (1977) ("Fair use is a legal question to be
determined by the court not by alleged industry practices"); see
also, Walter v. Steinkopff, 3 Ch. D. 489 (1892) (in which the
custom of newspapers to copy from each other was no justification
for infringement). Moreover, none of the courts in the American
cases cited by Texaco (T Br. 26 n.11) actually considered evidence
of alleged industry custom in determining whether the use was a
fair use, or indicated that any such evidence should be considered.
* * *
In every respect, first factor analysis disfavors fair use, in our
judgment, conclusively.
B. The Second Factor
In considering the "the nature of the copyrighted work,"
Judge Leval determined that "the aspect" that favors plaintiffs is
that the articles are created and published with the purpose and
intention of benefitting from copyright protection and that the
copyright law in implementing the constitutional objective was
intended to provide such protection in factual circumstances such as
those presented here. (LA 106.) Moreover, when the copyrighted
work "represents an investment of time in anticipation of a financial
return," that fact weighs against fair use in second factor analysis.
Rogers v. Koons, 960 F.2d 301, 310 (2d Cir.), cert. denied, 113 S.
Ct. 365 (1992); accord MCA, Inc. v. Wilson, 677 F.2d 180, 182 (2d
Cir. 1981). And as Judge Leval found specifically with respect to
Catalysis, and comparable journals:
[c]opyright protection is vitally necessary to the
dissemination of scientific articles . . . . Copyright
protection is essential to finance the publications that
distribute them. . . . If cheap photoduplications could
be freely made and sold at a fraction of the
subscription price, Catalysis would not sell many
subscriptions; it could not sustain itself, and articles of
this sort would simply not be published. And without
publishers prepared to take the financial risk of
publishing and disseminating such articles, there would
be no reason for authors to write them; even if they
did, the articles would fail to achieve distribution that
promoted the progress of science.
(LA 107). See Harper & Row, 471 U.S. at 558 ("By establishing
a marketable right . . . copyright supplies the economic incentive to
create and disseminate ideas.").
Nevertheless, Judge Leval concluded that the second factor
favors Texaco because of the factual content of such articles and
prior decisions indicating that ""the scope of fair use is greater with
respect to factual rather than nonfactual works"." (LA 107-08; New
Era Pub. v. Carol Pub., 904 F.2d at 157 (2d Cir.).) However,
notwithstanding their factual content, the journal articles are
expressions of highly original, creative and imaginative thinking,
containing new theories, new hypotheses, and new solutions to
difficult problems. They are as much or more creative than other
works containing factual information that have been found by this
and other courts to be creative. See Association of Am. Med.
Coll. v. Cuomo, 928 F.2d at 524 (2d Cir.) (Medical Colleges
Admission Test is a "creative, imaginative, and original" work);
College Entrance Exam. Bd. v. Cuomo, 788 F. Supp. 134, 141
(N.D.N.Y. 1992) (various graduate school entrance tests); Allen-
Myland, Inc. v. IBM Corp., 746 F. Supp. at 534 (computer
microcode was a creative work because it was the product of
substantial creative effort); Hi-Tech Video Prod., Inc. v. Capital
Cities/ABC, Inc., 804 F. Supp. 950, 956 (W.D. Mich. 1992) (video
travelogue). Moreover, the public interest in not restraining the free
flow of factual information, see Harper & Row, 471 U.S. at 563, is
not implicated here because journal articles remain freely available.
Although we believe that consideration of all these matters
should have led Judge Leval to award the second factor to plaintiffs,
in our judgment the rejection of the fair use defense based on
consideration and weighing of all the four statutory factors and
other equitable considerations is not affected even if second factor
analysis favors Texaco.
C. The Third Factor
Because copying an entire copyrighted work ordinarily
militates against a finding of fair use, Judge Leval correctly
concluded that "[t]his factor clearly favors the plaintiffs, as
Chickering has copied the entirety of the [eight] copyrighted articles
in question." (LA 109.)
The copying here is substantial not only from a quantitative
standpoint, but from a qualitative one as well. "[T]he fact that a
substantial portion of the infringing work was copied verbatim is
evidence of the qualitative value of the copied material. . . ."
Harper & Row, 471 U.S. at 656. Accord Cable/Home Comm. Corp.
v. Network Prods., Inc., 902 F.2d 829, 845 (11th Cir. 1990). Here,
Dr. Chickering and the other Texaco research personnel make or
obtain copies of entire articles, thus conclusively showing that these
articles are qualitatively significant. Only in an unusual exceptional
case like Sony or Williams & Wilkins, neither of which are
appropriate to the facts presented here (see LA 121; those cases are
at "the remote extremities" of fair use), has copying an entire work
been held to be fair use.
Texaco does not dispute the fact that entire articles were
copied and it ignores the explicit text of the third statutory factor
that commands consideration of "the amount and substantiality of
the portion used in relation to the copyrighted work as a whole"
(emphasis supplied). Instead, Texaco advances the same baseless
argument that Judge Leval rejected below (LA 109-10), that
copying the entirety of a copyrighted journal article is not a
quantitatively or qualitatively substantial taking because each article
is published in a larger copyrighted work " the journal issue. (T
Br. 28-29.)
There can be no doubt that each article is a separate
copyrighted work. As Judge Leval found, an individual article
becomes a copyrighted work long before it is published in a
particular journal, since copyright inheres in all original, fixed
"works of authorship" from the moment of creation (LA 110). 17
U.S.C.A. 102(a), 302(a) (West 1977 & Supp. 1992). Moreover,
the provisions of the Copyright Act covering collective works make
it abundantly clear that a journal article is a copyrighted work in
and of itself, apart from the other articles and the journal
collectively. See 17 U.S.C.A. 101 (West 1977) (defining
"collective work" as an assemblage of "separate and independent
works"); id. 201(c) ("Copyright in each separate contribution to a
collective work is distinct from copyright in the collective work as
a whole. . . .").
It makes no difference that Academic Press, for reasons of
convenience and economy (LA 110), simultaneously registers both
the individual articles and the issue of Catalysis in a manner
prescribed by the Copyright Office. The manner of registration
simply has nothing to do with whether each article is a separate
copyrighted work.
A number of decisions confirm Judge Leval's conclusion that
the "copyrighted work" against which the copying is measured is
the article, not the larger publication in which it may appear. See
Consumers Union of U.S., Inc. v. General Signal Corp., 724 F.2d
at 1050 (2d Cir.); Weissmann v. Freeman, 868 F.2d at 1325 (2d
Cir.); Hustler Mag., Inc. v. Moral Majority, Inc., 796 F.2d at 1154-
55; Pacific & Southern Co. v. Duncan, 744 F.2d at 1497; Quinto v.
Legal Times of Wash., Inc., 506 F. Supp. 554, 560 (D.D.C. 1981).
Even the Williams & Wilkins majority recognized that photocopying
an entire article was copying an entire copyrighted work, for it felt
obliged to go to some effort to reject the established legal principle
that copying the entire work generally cannot be fair use. 487 F.2d
at 1353; see id. at 1366 (Cowen, C.J., dissenting).
Texaco's contentions concerning the third factor are baseless
and misleading. Judge Leval correctly awarded the third factor to
plaintiffs.
D. The Fourth Factor
The fourth factor requires an examination of the facts to
determine "the effect of the use on the potential market for or value
of the copyrighted work," an inquiry which Judge Leval conducted.
As a result he made a series of factual findings that the actual and
potential markets for the copyrighted work would be greatly
harmed, and the value of those copyrighted works would be very
substantially diminished by the unauthorized copying of those
works, as exemplified by Dr. Chickering. (LA 111, 120, 125.) On
this basis, Judge Leval concluded that the evidence "powerfully
demonstrated" plaintiffs' entitlement to prevail as to the fourth
factor (LA 111), giving "strong support to the conclusion that this
copying is not a fair use." (LA 120.)
1. Judge Leval's Determinations Are In Full Accord
With Well-Established Principles Of Fourth Factor Analysis.
The fourth factor "is undoubtedly the single most important element
of fair use." Harper & Row, 471 U.S. at 566; Rogers v. Koons, 960
F.2d at 311 (2d Cir.); Weissmann v. Freeman, 868 F.2d at 1325 (2d
Cir.). This is true because the underlying concept of constitutional
and statutory copyright protection is to create marketable rights that
supply economic incentives to create and disseminate ideas in
published works. Thus, in the overall weighing process involved in
making a fair use determination, the greater the economic harm
caused by the unauthorized use, the more a fair use will be
disfavored, because of the greater adverse effect on those economic
incentives. Conversely, the absence of economic harm caused by
the unauthorized use strongly favors a fair use, because no
economic incentive would be adversely affected. Rogers v. Koons,
960 F.2d at 312 (2d Cir.).
Nevertheless, in traditional fourth factor analysis relatively
little need be shown by the copyright owner concerning harm to
prevail on the fourth factor. "Actual present harm need not be
shown" and it is not "necessary to show with certainty that future
harm will result" from the use. Sony, 464 U.S. at 451. See, e.g.,
Salinger v. Random House, Inc., 811 F.2d 90, 99 (2d Cir. 1984),
cert. denied, 484 U.S. 890 (1987); Meeropol v. Nizer, 560 F.2d at
1070 (2d Cir.).
Sony went on to formulate an additional concept, particularly
favorable to copyright owners in commercial settings, when it
declared that although it is necessary in the case of non-commercial
unauthorized use to show "by a preponderance of the evidence that
some meaningful likelihood of future harm exists," in the case of a
commercial unauthorized use, the likelihood of meaningful future
harm should be "presumed." Sony, 464 U.S. at 451. Accord
Rogers v. Koons, 960 F.2d at 312 (2d Cir.); Association of Am.
Med. Coll. v. Cuomo, 928 F. 2d at 525 (2d Cir.); Financial Info.,
Inc. v. Moody's Investors Serv., Inc., 751 F. 2d 501, 510 (2d Cir.
1984), cert. denied, 484 U.S. 820 (1987).
This "commercial use" presumption of harm disfavoring a fair
use under the fourth factor is thus interrelated with the "commercial
use" presumption disfavoring a fair use under the first factor. Sony,
464 U.S. at 451; Association of Am. Med. Coll. v. Cuomo, 928 F.2d
at 525 (2d Cir.); Financial Info., Inc. v. Moody's Investors Serv.,
Inc., 751 F.2d at 510 (2d Cir.); Narell v. Freeman, 872 F.2d 907,
914 (9th Cir. 1989). It can be presumed that if the copier is making
a commercial use of the copyrighted work (first factor), the copier
would be willing to pay an economically reasonable amount for that
use, and therefore it can be presumed that failure to pay causes
harm to the copyright owner (fourth factor). As a matter of
economics, and as actual experience with the CCC and other
available licensing means has proved, the profit-motivated copier
will be willing to pay to the copyright owner an amount equal to or
less than the economic value to that copier of making that use.
Fourth factor actual or potential harm is not simply the harm
caused by the particular unauthorized use being considered (here,
Dr. Chickering's unauthorized copying of eight Catalysis articles),
which itself may be sufficient, but also the harm, often more
important, that would flow from widespread conduct of the kind
engaged in by defendant (here, the unauthorized photocopying of
journal articles by personnel at Texaco and other profit-motivated
companies). See Sony 464 U.S. at 451; Harper & Row, 471 U.S.
at 568 (quoting Sony); Rogers v. Koons, 960 F.2d at 312 (2d Cir.);
H.R. Rep. No. 90-83, 90th Cong., 1st Sess. 35 (1967) ("Isolated
instances of minor infringements, when multiplied many times,
become in the aggregate a major inroad on copyright that must be
prevented."); 3 Nimmer on Copyright 13.05[A][4] at 13-102.26
(the question is not "the extent of damages to plaintiff caused by the
particular activities of the defendant," but rather "whether
unrestricted and widespread conduct of the sort engaged in by the
defendant would result in a substantially adverse impact on the
potential market" for plaintiff's work.). Judge Leval, therefore,
correctly concluded that fourth factor harm is not determined solely
on the basis of what Academic Press lost as the result of Dr.
Chickering's copying of the Eight Articles, but "[i]n appraising the
effect of Texaco's photocopying on the values of the publishers'
copyrights, Chickering's eight copies are considered as
representative, and not as the universe of alleged infringement."
(LA 110 n.14.)
On the basis of what has been said, Judge Leval's findings
and the trial evidence make clear that the widespread unauthorized
photocopying of the kind typified by Dr. Chickering, if permitted
as fair use, would cause great actual economic harm to the existing
and potential markets for the copyrighted works, and thereby greatly
diminish the value of those copyrights. The factual and
evidentiary showing of such harm here is so real and great "
including the loss and dismantling of existing CCC and other
journal licensing mechanisms " there is no need, as has often
occurred in other cases where fair use defenses have been rejected,
to theorize about potential future harm, or to invoke evidentiary or
substantive presumptions disfavoring fair use. Indeed, no prior fair
use case has ever involved a greater showing of such clear and
irrefutable actual and potential harm. Fourth factor considerations,
therefore, powerfully disfavor Texaco's fair use defense.
As Judge Leval found, there is a great need in conducting
profit-motivated research to obtain and use photocopies of
copyrighted journal articles and if Texaco stopped making ""free"
photocopies" it would fulfill that need through some combination
of the readily available methods (LA 111-12). In doing that, the
publishers' revenues would grow significantly and the value of their
copyrights would be enhanced (LA 112, 113, 115). Thus, as Judge
Leval found, if Texaco's free unauthorized in-house photocopying
were permitted, the markets for and the values of the copyrights
would be substantially diminished (LA 120). As Judge Leval
found, there are two readily demonstrable types of harm that
plaintiffs have and will suffer.
a. Loss of Additional Subscription Sales. If unautho-
rized photocopying were not permitted and a company such as
Texaco elected not to make or obtain authorized photocopies of
journal articles, it is clear, as Judge Leval found (LA 114), that a
company such as Texaco would purchase a modest number of addi-
tional subscriptions to assure the necessary prompt circulation of
journal issues to researchers. That is needed to avoid the many
penalties of decreased efficiency, difficulties in research and adverse
effects on profitability if circulation of those journals were delayed.
Since, for example, the cost of an annual subscription to Catalysis
is about $825 (A 1545), even one or two additional subscriptions
purchased by each of the many petroleum and chemical companies
interested in that field would add many thousands of dollars of
revenue.
b. Loss of Licensing Revenues. Massive actual harm
would be suffered by the copyright owners from the unauthorized
photocopying of the type typified by Dr. Chickering in the loss of
its existing and future revenues resulting from the permissions and
licensing programs administered by the CCC. Additional actual
harm would also result from the loss of existing and future licensing
revenues from bilateral or blanket license agreements and from the
loss of royalties from authorized document delivery services that
sell authorized copies of journal articles.
None of this is theorizing. The truth is established beyond
dispute by Judge Leval's findings based on the evidence concerning
the CCC and the other available means of obtaining authorized
copies or additional originals, and the evidence concerning the
practices of many companies which avail themselves of such means
to conduct their research successfully by using authorized copies
and compensating the copyright owners for that use.
The loss of actual or potential revenues from licensing the
copyrighted work is, of course, cognizable under conventional
fourth factor analysis, and Texaco's contentions otherwise, which
we discuss later, are entirely unfounded. The exclusive rights to
reproduce or authorize the reproduction of the copyrighted work are
marketable rights that can be exploited in different ways. A
copyrighted book may be sold in as many copies as are published
and purchased; the copyright owner may also exploit the copyright
by licensing paperback rights, or by licensing a newspaper or
magazine to publish a chapter or serialize the entire book. A
copyrighted film may be rented to theater owners or may be
licensed to home video distributors and licensed for pay-per-view,
cable and broadcast television presentation or other use. Theater
plays or musicals may be licensed for performance and print. In the
music field, records or tapes may be sold, and performances are
regularly licensed through ASCAP, BMI or other means. In the
computer field, multiple copies of programs are sold or a single
copy is licensed for multiple reproduction and use. Thus among the
means by which marketable rights afforded by copyright protection
are exploited by copyright owners, licensing often figures most
prominently.
For example, in both Harper & Row and Stewart v. Abend,
the loss of potential licensing revenues due to the unauthorized use
adversely affected the value of the copyrighted work and therefore,
for purposes of fourth factor analysis, fair use was disfavored. 471
U.S. at 568 (quoting 3 Nimmer on Copyright 13.05[B], at [13-
102.28(4) (1992)]; 495 U.S. 207 (1990). As the Supreme Court
explained, there is harm under the fourth factor if there is an
adverse effect upon "the value of any of the rights in the
copyrighted work. . . ." Harper & Row, 471 U.S. at 568. In
Harper & Row, the harm was the loss of a portion of the fee the
copyright owner was to receive for granting a pre-publication
license to Time Magazine for permitting the publication of a small
portion of President Ford's memoirs. In Stewart v. Abend the loss
which would have occurred if the unauthorized use were permitted
was the opportunity to license rights in the story to other film
makers.
There are many other cases in this and other courts where
fourth factor harm was recognized to include the loss or potential
loss of revenues from licensing or the sale of rights that would
occur if the unauthorized use were permitted as fair use. Financial
Info., Inc. v. Moody's Investor Serv., Inc., 751 F.2d at 509-10 (2d
Cir.) ("[I]f Moody's were unable to copy from [plaintiff's works,
plaintiff] might be in a position to license that use for a fee"); DC
Comics, Inc. v. Reel Fantasy, Inc., 696 F.2d at 28 (2d Cir.) ("one
of the benefits of ownership of copyrighted material is the right to
license its use for a fee."); Meeropol v. Nizer, 560 F.2d at 1070 (2d
Cir.) (harm to letters because the "market . . . for the sale of motion
picture rights might be affected"); United Tel. Co. v. Johnson Pub.
Co., 855 F.2d at 610 (permitting defendant to use plaintiff's
copyrighted data would defeat plaintiff's "market in licensing" that
data); Hi-Tech Video Prod., Inc. v. Capital Cities/ABC Inc., 804 F.
Supp. at 955 ("deprivation of a would-be licensing fee . . .
constitutes sufficient harm"); Basic Books, Inc. v. Kinko's Graphics
Corp., 758 F. Supp. at 1534 (loss of permissions fees for granting
permission to photocopy portions of plaintiff's copyrighted works
weighed heavily against fair use); Richard Anderson Photography
v. Brown, 1990 U.S. Dist. LEXIS 19846 at 5 (W.D. Va. 1990) (loss
of potential licensing fees "clearly affects the value of the
copyrighted work"); Telerate Sys., Inc. v. Caro, 689 F. Supp. at
229-30 (defendant's use deprived plaintiff of the "opportunity to
charge for the privilege of copying"); Craft v. Kobler, 667 F. Supp.
120, 129 (S.D.N.Y. 1987) (possibility of future lost license fees);
D.C. Comics, Inc. v. Unlimited Monkey Bus., Inc., 598 F. Supp.
110, 113, 118 (N.D. Ga. 1984) (defendant's use caused harm to
plaintiff's business of licensing use of "SUPERMAN" name,
character, costumes and images).
Accordingly, in statutory fourth factor analysis, the courts
have consistently and correctly considered the adverse effects of the
unauthorized use of actual and potential licensing markets for the
copyrighted work and thus on the value of that work.
2. Texaco's Many Contentions Concerning The Fourth
Factor And The CCC Are Entirely Without Merit. Texaco
advances a multitude of contentions in a vain attempt to show that
no actual or potential harm will occur under fourth factor analysis
if Dr. Chickering's unauthorized use of copyrighted works were
permitted as fair use.
a. Scope of the Harm. For the reasons previously
discussed (pp. 63-64), Texaco is wrong in contending that
consideration of harm must be limited to what Academic Press lost
by reason of Dr. Chickering's photocopying of the eight articles
(T Br. 35-36), and the two cases it cites do not support its
contention.
b. Potential Loss of Additional Subscription Sales.
Texaco does not challenge consideration of lost subscription sales
under fourth factor analysis, but instead contends wrongly (T Br.
32-35), as has been previously shown (pp. 14-15), that Judge
Leval's "factual inferences" concerning lost additional subscription
sales lack basis in and are contrary to the record.
c. Loss of Licensing Revenues. Texaco does not dispute
that if the unauthorized copying typified by Dr. Chickering were
permitted as fair use, substantial harm would be suffered by loss of
CCC and other licensing revenues, thus diminishing the value of the
copyrights. Instead, Texaco argues, as it did unsuccessfully below,
that this harm should be ignored and disregarded in fourth factor
analysis. That argument, in whatever form it takes, is groundless
in view of the authorities and reasons previously discussed,
establishing that the loss of licensing revenues is harm to be
considered under fourth factor analysis.
Texaco ignores all of that well grounded authority and
wrongly relies on the unsound reasoning of Williams & Wilkins
footnote 19, which has never been followed by any court.
Fourth factor analysis does not, in and of itself, decide the ultimate
issue of fair use as that footnote presumes. Rather, as the footnote
overlooks, fourth factor analysis requires evaluation of the "effect
of the use upon the potential market for or value of the copyrighted
work" as one of the elements, albeit an important one, to be
weighed in the over-all determination of fair use. It is therefore
necessary to determine what would happen economically if Dr.
Chickering's unauthorized use, and widespread unauthorized use of
the same type, were permitted, and it is clear that the effect would
be that the copyright owners would lose the substantial licensing
revenues they would otherwise earn if the use were not permitted.
Under the flawed reasoning of footnote 19, the defendant would
always claim that whatever harm plaintiff has suffered, whether lost
sales or lost licensing revenues, such harm should not be considered
because if the defendant's use is a fair use, the plaintiff would not
be entitled to the lost revenues. That would read the statutory
fourth factor out of fair use analysis. Moreover, in Williams &
Wilkins there was only claimed theoretical lost future royalty
income and no demonstrable lost licensing revenues, as here.
Texaco's contention based on Sony (T Br. 38-39) is
groundless because in that case there was no evidence, as here, that
users actually paid or were prepared to pay license fees. Texaco's
further contention that fair use analysis cannot consider the
willingness of a copyright owner to grant a license is also wrong.
The need for photocopies of journal articles, plaintiffs' willingness
to license photocopying through CCC and other means, and users'
willingness to pay for the right to make or obtain authorized
photocopies, have together created an actual licensing market that
would be adversely affected, indeed destroyed, if unauthorized
photocopying was permitted. Also, as a result of plaintiffs'
willingness to license, there is no basis for any claim that the
progress of science will be impeded, since for-profit research-
oriented companies, such as Texaco, are afforded the opportunity to
obtain authorized photocopies of journal articles through reasonably
available means.
Texaco's contention (T Br. 41) that consideration of licensing
income for fourth factor analysis involves a "quintessentially
legislative judgment" is inexplicable. In the 1976 Act, codifying the
fair use doctrine, Congress has commanded the courts in the fourth
factor to continue to consider the economic effects of the
unauthorized use in determining whether that use is a fair use.
d. The CCC. Texaco makes a number of factual
contentions, which Judge Leval rejected and which have been
previously discussed, concerning the TRS and AAS permissions and
licensing services administered by the CCC. In addition, Texaco
contends that because the AAS license fee is calculated in an
allegedly unfair manner (a factual contention also rejected by Judge
Leval), the AAS constitutes copyright misuse. That argument was
advanced below by Texaco, together with a number of other
arguments, that Judge Leval rejected in saying at the conclusion of
his decision that "Texaco's other points are without merit." (LA
138.) In any event, it is questionable whether a defense of
copyright misuse exists, and even if it did, it would constitute a
separate defense for future adjudication, since a claim of misuse has
never been considered as an element of the fair use inquiry.
Moreover, the Supreme Court and this Court have made
unmistakably clear that a blanket annual license, such as the AAS,
is an appropriate method of granting and obtaining permission to
copy from specified copyrighted works; is a practical means of
accommodating the needs of users for rapid access to the repertory
of copyrighted works and the copyright owners' right to be
compensated; and eliminates the burdens and costs of individual
reporting by users. Broadcast Music, Inc. v. Columbia
Broadcasting Sys., Inc., 441 U.S. 1, 20-22 (1979); Buffalo
Broadcasting Co. v. American Soc'y of Composers, Authors & Pub.,
744 F.2d 919, 927 (2d Cir. 1984), cert. denied, 469 U.S. 1211
(1985). As Judge Leval found, the AAS annual license service
accomplishes these three goals for copyrighted articles published in
CCC-registered journals (LA 113-15, 127-29).
Texaco's various other contentions concerning the purported
inadequacy or inefficiency of the CCC were rejected by Judge Leval
who concluded, based on all of the evidence that it was an efficient
and workable mechanism. (LA 115, 127.)
In the end, there is nothing to Texaco's many contentions
concerning the fourth factor. On the facts and on the law, there
cannot be the slightest doubt that great harm would be inflicted on
the copyright owners if the unauthorized use were permitted and
there is no justification for permitting Texaco and others like it to
inflict that harm.
CONCLUSION
There is not a single good reason to sustain Texaco's defense
of fair use and there are many good reasons to reject it. Judge
Leval's decision should therefore be affirmed, with costs pursuant
to 28 U.S.C. 1912.
Dated: New York, New York
April 19, 1993
Respectfully submitted,
PROSKAUER ROSE GOETZ
& MENDELSOHN
Of Counsel: 1585 Broadway
New York, New York 10036
Stephen Rackow Kaye (212) 969-3000
Jon A. Baumgarten
James F. Parver Attorneys for Appellees
Christopher A. Meyer
Karen E. Clarke
Susan L. Hochman
STATUTORY APPENDIX
The full text of Section 106 of the Copyright Act, 17 U.S.C. 106,
is as follows:
106.Exclusive rights in copyrighted works
Subject to sections 107 through 120, the owner
of copyright under this title has the exclusive rights to
do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies
or phonorecords;
(2) to prepare derivative works based upon the
copyrighted work;
(3) to distribute copies or phonorecords of the
copyrighted work to the public by sale or other transfer
of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic,
and choreographic works, pantomimes, and motion
pictures and other audiovisual works, to perform the
copyrighted work publicly; and
(5) in the case of literary, musical, dramatic,
and choreographic works, pantomimes, and pictorial,
graphic, or sculptural works, including the individual
images of a motion picture or other audiovisual work,
to display the copyrighted work publicly.
The full text of Section 107 of the Copyright Act, 17 U.S.C. 107,
as amended October 24, 1992, is as follows:
107.Limitations on exclusive rights: Fair use
Notwithstanding the provisions of sections 106
and 106A, the fair use of a copyrighted work,
including such use by reproduction in copies or
phonorecords or by any other means specified by that
section, for purposes such as criticism, comment, news
reporting, teaching (including multiple copies for
classroom use), scholarship, or research, is not an
infringement of copyright. In determining whether the
use made of a work in any particular case is a fair use
the factors to be considered shall include"
(1) the purpose and character of the use,
including whether such use is of a commercial nature
or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion
used in relation to the copyrighted work as a whole;
and
(4) the effect of the use upon the potential
market for or value of the copyrighted work.
The fact that a work is unpublished shall not
itself bar a finding of fair use if such finding is made
upon consideration of all the above factors.
FOOTNOTES
1. The texts of Sections 106 and 107 are set forth in the
Statutory Appendix to this brief. See pages 42-43 for the authorities
establishing that fair use under 107 is a privilege and limited
exception to the exclusive rights granted copyright owners in 106.
2. Texaco's reference to the fact that as of the time of trial only
19% of the Fortune 500 companies were CCC licensees (T Br. 12)
is misleading because a large number of those companies do not
engage in significant scientific and technical research. Currently, as
we have been advised, there are more than 225 CCC industrial
corporate licensees, who include about 28% of the Fortune 500
companies and 64% of the Fortune 100 companies.
3. Subject matter jurisdiction of this copyright infringement
action rests on 28 U.S.C. 1331 and 1338(a), and, as to damages,
also on 28 U.S.C. 1334, since in Texaco's Chapter 11 proceedings
the 83 plaintiffs filed proofs of claim for damages, subsequently
transferred to the court below for determination (A 53, 160-72).
4. As to Texaco's commercial exploitation of the patents
resulting from this research, see A 933-34, 2369, Pollart Cross pp.
19-21; see also A 916.
5. The five other Texaco researchers deposed in this action all
engaged in the various photocopying practices described above.
(A 368-69, 376-77, 381-96, 398-404, 407-414, 417-434, 608-09,
614-15, 617-21, 626-28, 646-50, 652-54, 658, 662, 667-68, 674,
682-83, 685-89, 692-95, 699-701, 703-05, 707-713, 715-18; see also
A 751-53, 1367-68.)
6. The amici are therefore wrong when they suggest that
"personal use" copying is what is involved in this case. (AR Br. 5,
6, 7, 10.) Judge Leval made a specific factual finding rejecting that
contention as made by Texaco in the proceedings below. (LA 81,
122.)
7. A 377-82, 385-86, 388-89, 395-96, 402, 415-17, 431-33, 459,
461-63, 465, 467, 536-38, 550, 564-66, 578, 609-10, 651, 661, 663-
66, 668, 689-91, 695, 697-98, 703-06, 727-30, 740-41, 746-48, 752-
55, 935-36, 952-54.
8. There is no evidentiary or other basis for the assertions that
the institutional rate is double the individual rate because journal
issues sent to institutional subscribers are used by and circulated to
many people (T Br. 4-5) or because publishers expect copies to be
made (AL Br. 13 n.6). The institutional rate is the "proper
subscription rate for the journal" and individual subscriptions are
sold at "a steeply discounted rate" as a "service to the community."
Often the personal subscription rate either provides no profit or may
not even cover the cost of providing the subscription. (A 1207-09.)
9. Texaco mischaracterizes Academic Press's profits as having
been "extraordinary." (T Br. 5, see A 3802, 4320-21, 4363.) In
doing that, Texaco also irresponsibly repeats what it did below in
making what Judge Leval called a "demagogic effort to undermine
publishers' rights by tarring them as wealthy profiteers24 [that]
carries no force in copyright analysis, which does not begrudge
copyright profits." (LA 135-36.) In note 24, Judge Leval added
that this was "an odd argument . . . to be made by an oil company
that reported over $2.4 billion net income for fiscal 1989 on
revenues of over $34 billion." (LA 136.)
10. Users learn that a publication is registered with CCC in a
number of ways: (i) from masthead statements in the front of the
journals, (ii) from catalogs and supplements distributed to TRS
users, and (iii) from Schedule A to the AAS license. The
information needed to report photocopying under the TRS, in the
case of Academic Press, is found in standardized fee codes at the
bottom of the first page of each copyrighted article and on the
masthead page. (LA 85 n.5; A 1443, 1459, 1463, 1471, 1474,
1479, 1487, 1499, 1547-1794, 1053-54, 4242, 1069, 278-79.)
11. AAMA's suggestion (Br. 33) that under the TRS a company
may report and pay for copying an article written by the company's
employee when it should not be required to do so, simply ignores
the fact that it is the company itself that decides whether to report
a particular photocopying transaction. Moreover, the author's
affiliation is readily apparent from the face of the article. See, e.g.,
A 1443, 1463, 1479, 1487.
12. Under all three methods, the annual license fee is determined
on the basis of data derived from limited photocopying surveys,
factored by the licensee's employee population and the copying fees
individually set by the publishers. (LA 87; A 281-85, 294-95.)
13. If the licensee photocopies more than what is anticipated or
photocopies more articles with higher photocopy fees than
anticipated, there is no surcharge.
14. The license fee is calculated on the basis of limited
photocopying surveys designed by outside experts, during which
each employee who makes a photocopy from a copyrighted
publication is required to make an extra copy of the front cover or
title page, and indicate on it the number of pages copied and the
number of copies made. (A 295-96.)
15. The automobile manufacturers make a new and unfounded
contention (AAMA Br. 13, 33, 34-35) that, apart from reporting
titles of articles, reporting to the CCC the names of the journals that
were photocopied raises problems of research confidentiality. There
is no evidence that any company ever had such a problem or ever
made such a claim, or that the CCC conveys that information to any
competitor or anyone else. Moreover, companies reporting
photocopying under the TRS or as part of the AAS license surveys
plainly do not find that any such risk exists.
16. Texaco misstates the record when it claims that only $4.2
million has been distributed to publishers (T Br. 12).
17. Publishers' photocopying has no bearing on the existence of
the custom Texaco contends exists. They have little occasion to
photocopy copyrighted materials of other publishers. A 1251, 1281-
82, 1288-89, 868, 899-901. Texaco's evidence of publishers'
photocopying consists of only a few isolated instances (T Br. 26)
when a photocopy may have been made. Texaco has introduced no
evidence that publishers systematically photocopy entire copyrighted
articles without permission, and there is no evidence whatsoever
concerning the nature, purpose and frequency of any such copying.
18. See Justice Blackmun's reference to the "recent advent of
inexpensive and readily available copying machines" as having
"changed the dimensions of the problem" of harm to the copyright
owner. Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S.
417, 467 n.16 (1984) (dissent). A description of the history and
development of modern photocopying is provided in Van Dyk
Research Corp. v. Xerox Corp., 478 F. Supp. 1268, 1272-1279,
1285, 1288-1302 (D.N.J. 1979), aff'd, 631 F.2d 251 (3d Cir. 1980),
cert. denied, 452 U.S. 905 (1981).
19. See, e.g., 1983 Report of the Register of Copyrights at 160,
161-62, App. IV at 162 (comments by attorney for Academic
Press's parent, HBJ), App. VI at 37, 99-100 (comments regarding
negative impact of photocopying on small publishers of scholarly
works and decline in sales of offprints since 1969); Copyright Law
Revision, 1975: Hearings Before the House Subcomm. on Courts,
Civil Liberties, and the Administration of Justice, 94th Cong., 1st
Sess. 239, 311 (1975) (Association of American Publishers
testimony regarding attempts to establish a photocopying
permissions clearinghouse and HBJ comments concerning the need
for compensation for photocopying); Copyright Law Revision, 1973:
Hearings on S. 1361 Before the Senate Subcomm. on Patents,
Trademarks, and Copyrights, 93d Cong., 1st Sess. 127, 129, 131,
139, 149 (1973) (testimony by several publishers in opposition to
a proposed statutory provision permitting photocopying of single
journal articles); Copyright Law Revision, 1967: Hearings on S.
597 Before the Senate Subcomm. on Patents, Trademarks, and
Copyrights, 90th Cong., 1st Sess. 975 (1967) (testimony on
economic harm to publishers from photocopying); Copyright Law
Revision, 1965: Hearings Before Subcomm. No. 3 of the House
Comm. on the Judiciary, 1431, 1460, 1513 (1965) (same).
20. D.C. Comics, Inc. v. Reel Fantasy, Inc., 696 F.2d 24, 28 (2d
Cir. 1982); Meeropol v. Nizer, 560 F.2d 1061, 1068 (2d Cir.), cert.
denied, 434 U.S. 1013 (1977); see Weissmann v. Freeman, 868 F.2d
at 1326 (2d Cir.).
21. As to these matters, Texaco makes the following statement (T
Br. 12) as its introduction to Judge Leval's decision:
Without analyzing the circumstances surrounding the
copying of any of the eight articles and rarely referring
to any part of the `voluminous submitted record' (A
146), Judge Leval held that Dr. Chickering's copying
was not fair use.
22. Harper & Row, 471 U.S. at 547. Association of Am. Med.
Coll. v. Cuomo, 928 F.2d 519, 523 (2d Cir.), cert. denied, 112
S. Ct. 184 (1991); Rosemont Enters. v. Random House, Inc., 366
F.2d 303, 306 (2d Cir. 1966), cert. denied, 385 U.S. 1009 (1967).
23. Consumers Union of U.S., Inc. v. General Signal Corp., 724
F.2d 1044, 1048 (2d Cir. 1983), cert. denied, 469 U.S. 823 (1984);
Association of Am. Med. Coll. v. Cuomo, 928 F.2d at 523 (2d Cir.).
24. See Sony Corp. of Am. v. Universal City Studios, Inc., 464
U.S. 417, 448 (1984); Harper v. Row, 471 U.S. at 560; LA 120-21.
25. The ordinary meaning of the word "commercial" is an
activity relating to commerce or trade, looking toward financial
profit or having profit as the primary aim. Webster's New
International Dictionary (2d ed. 1934), (3d ed. 1964); Webster's
New Twentieth Century Dictionary (2d. ed. 1979); Webster's Ninth
New Collegiate Dictionary (1988); Oxford English Dictionary Vol.
II (1978).
26. See Telerate Sys., Inc. v. Caro, 689 F. Supp. 221, 229
(S.D.N.Y. 1988) ("customary price" was the price normally charged
by the plaintiff); New Line Cinema Corp. v. Bertlesman Music
Group, Inc., 693 F. Supp. 1517, 1526 (S.D.N.Y. 1988) (finding that
defendant "stands to profit financially by using Freddy [the
copyrighted work] without making the usual licensing arrangements.
. . ."). Here, the customary price for obtaining additional original
journal articles or copies of such articles depends on the available
means selected by the user to obtain those originals or copies.
Thus, the customary price may be the licensing or permission fees
charged through CCC-administered services, the fee under bilateral
or blanket licensing agreements, the cost of purchasing photocopies
from authorized document delivery services, or the cost of
additional subscriptions.
27. Contrary to the contention made at AR Br. 17-18 & n.7, the
fact that two scientists may carry on the same research, one for a
profit-motivated purpose and one for a non-profit purpose, does not
mean that the fair use result must be the same or that a different
result would be anomalous.
28. News reporting: E.g., Harper & Row, 471 U.S. at 562; Iowa
State Univ. Research Found., Inc. v. ABC, Inc., 621 F.2d at 61 (2d
Cir.); Hi-Tech Video Prod., Inc. v. Capital Cities/ABC, Inc., 804 F.
Supp. 950, 955 (W.D. Mich. 1992); Radji v. Khakbaz, 607 F. Supp.
1296, 1300 (D.D.C. 1985); Quinto v. Legal Times of Wash., Inc.,
506 F. Supp. 554, 560 (D.D.C. 1981); Pacific & Southern Co. v.
Duncan, 774 F.2d at 1496.
Educational purposes: E.g., Basic Books, Inc. v. Kinko's
Graphic Corp., 758 F. Supp. 1522, 1531-32 (S.D.N.Y. 1991);
Association of Am. Med. Coll. v. Mikaelian, 571 F. Supp. 144, 152-
53 (E.D. Pa. 1983), aff'd, 734 F.2d 3 (3d Cir. 1984); Educational
Testing Servs. v. Katzman, 793 F.2d 533, 543 (3d Cir. 1986); Allen-
Myland, Inc. v. IBM Corp., 746 F. Supp. 520, 534 (E.D. Pa. 1990);
Weissmann v. Freeman, 868 F.2d at 1324 (2d Cir.). In particular,
the verbatim copying of copyrighted works for use by students has
not been a justification for finding fair use. Basic Books, Inc. v.
Kinko's Graphics Corp., 758 F. Supp. at 1531; Marcus v. Rowley,
695 F.2d 1171 (9th Cir. 1983); Wihtol v. Crow, 309 F.2d 777 (8th
Cir. 1962); Encyclopaedia Britannica Educ. Corp. v. Crooks, 542
F. Supp. 1156 (W.D.N.Y. 1982); Macmillan Co. v. King, 223 F.
862 (D. Mass. 1914).
29. These are the kind of cases Congress contemplated would
result in fair use protection. In legislative reports concerning 107,
it is indicated that "the sort of activities the Courts might regard as
fair use" involve either the taking of a small portion of a
copyrighted work (for example, the "quotation of short passages in
a scholarly or technical work") or the creation of a new work. H.R.
Rep. No. 94-1476, 94th Cong., 2d Sess. 65 (1976); S. Rep. No. 94-
473, 94th Cong., 2d Sess. 62 (1975).
30. Wright v. Warner Books, Inc., 953 F.2d at 740 (2d Cir.); Lish
v. Harper's Mag. Found., 807 F. Supp. 1090, 1100 (S.D.N.Y.
1992).
31. That a work is creative weighs against a finding of fair use
under the second factor. See Harper & Row, 471 U.S. at 563.
32. Sony, 464 U.S. at 450: Rogers v. Koons, 960 F.2d at 311 (2d
Cir.); Weissmann v. Freeman, 868 F.2d at 1325 (2d Cir.) (quoting
3 Nimmer on Copyright, 13.05[A][3] at [13-102.24-.25 (1992)];
Hustler Mag., Inc. v. Moral Majority, Inc., 796 F.2d 1148 (9th Cir.
1986); Pacific & Southern Co. v. Duncan, 744 F.2d 1490, 1497
(11th Cir. 1984), cert. denied, 471 U.S. 1004 (1985); Strauss v.
Hearst Corp., 1988 Copyright L. Dec. (CCH) 26,244 at p. 21,721
(S.D.N.Y. 1988). It is only in an exceptional case like Sony or
Williams & Wilkins that copying an entire work has been found to
be fair use, and in each case the court found that the copying was
done for a non-profit, non-commercial purpose and there was no
harm to the copyright owner.
33. Registration of a collective work includes registration of the
copyright in each individual article for which copyright ownership
has been transferred to the registrant, as is made clear in
publications of the Copyright Office, copies of which (Circular 62,
Circular R62, Instructions for Short Form SE) were submitted to
Judge Leval as annexes, with relevant portions marked, to Plaintiffs'
Post-Trial Sur-Reply Memorandum Concerning Fair Use, which is
included in the record on appeal. See Gordon & Breach, Science
Pubs., Inc. v. Information on Demand, Inc., No. C-88-1695 EFL,
slip. op. at 2-3 (N.D. Cal. Sept. 8, 1989). Because the eight articles
were properly registered, the jurisdiction and standing arguments
raised by the ALA (AL Br. 15-15 & n.7) are also meritless.
34. It is undisputed, as Judge Leval found (LA 110 n.14, 148),
that photocopying of entire journal articles is widespread at for-
profit, research-oriented companies. Furthermore, the "evidence
submitted . . . supports the inference of voluminous photocopying
in the aggregate by Texaco's scientists, that would justify very
substantial license fees if such copying is not fair use." (LA 110
n.14)
35. The inference that Judge Leval drew from the facts in
evidence that Texaco would purchase a modest number of additional
subscriptions if it chose not to pay for permission to photocopy is
a correct and permissible inference. See Schulz v. Pennsylvania
R.R., 350 U.S. 523, 526 (1956) (function of the factfinder is to
reach conclusions based on "proof of circumstances from which
inferences can fairly be drawn"); Sidney Blumenthal & Co. v. Rossie
Velvet Co., 89 F.2d 29, 31 (2d Cir. 1937) (proper for trial judge's
conclusion to be based on inference drawn from proven facts);
United States Lighterage Corp. v. Petterson Lighterage & Towing
Corp., 142 F.2d 197, 199 (2d Cir. 1944) (same).
36. The decision in Williams & Wilkins has been severely
criticized by copyright scholars, one of whom agreed with a
dissenting judge in that case that it is the "Dred Scott decision of
copyright law" (see LA 123 n.19).
37. Neither the Supreme Court nor the Second Circuit has ruled
on the question and "[t]he copyright misuse doctrine has been ill
received in the lower courts." Broadcast Music, Inc. v. Hearst/ABC
Viacom Entertainment Servs., 746 F. Supp. 320, 328 (S.D.N.Y.
1990) (citing cases). The copyright misuse defense has been
rejected repeatedly; courts have either doubted its validity, or
assumed its validity but found its demanding requirements not met.
See, e.g., United Tel Co. v. Johnson Pub. Co., 855 F.2d at 611-612
(citing cases); 3 Nimmer on Copyright 13.09[A] at 13-143-44. It
has been upheld on the merits only rarely, in cases that involved
obvious restraints on competition. PRC Realty Sys., Inc. v. National
Ass'n of Realtors, 1992 U.S. App. LEXIS 18017 (4th Cir. Aug. 4,
1992); Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970, 972-73 (4th
Cir. 1990); QAD. Inc. v. ALN Assocs., Inc., 770 F. Supp. 1261
(N.D. Ill. 1991); M. Whitmark & Sons v. Jensen, 80 F. Supp. 843
(D. Minn. 1948). Here, calculation of the license fee (which is
based on individually set publishers' fees) is not being used to
restrain competition.
.
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