American Geophysical Union, Plaintiffs-Counterclaim-Defendants-Appellees v. Texaco Inc., Defendant-Counterclaim-Plaintiff-Appellant. In Re Texaco Inc., Reorganized Debtors. Academic Press, Inc. v. Texaco Inc.

This interlocutory appeal presents the issue of whether, under the particular circumstances of this case, the fair use defense to copyright infringement applies to the photocopying of articles in a scientific journal. This issue arises on the appeal of defendant Texaco Inc. from the July 23, 1992, order of the United States District Court for the Southern District of New York (Pierre N. Leval, Judge) holding, after a limited-issue bench trial, that the photocopying of eight articles from the Journal of Catalysis for use by one of Texaco's researchers was not fair use. See American Geophysical Union v. Texaco Inc., 802 F.Supp. 1 (S.D.N.Y.1992). Though not for precisely the same reasons, we agree with the District Court's conclusion that this particular copying was not fair use and therefore affirm.

The District Court Proceedings. Plaintiffs American Geophysical Union and 82 other publishers of scientific and technical journals (the "publishers") brought a class action claiming that Texaco's unauthorized photocopying of articles from their journals constituted copyright infringement. Among other defenses, Texaco claimed that its copying was fair use under section 107 of the Copyright Act, 17 U.S.C. Sec. 107 (1988). Since it appeared likely that the litigation could be resolved once the fair use defense was adjudicated, the parties agreed that an initial trial should be limited to whether Texaco's copying was fair use, and further agreed that this issue would be submitted for decision on a written record.

Although Texaco employs 400 to 500 research scientists, of whom all or most presumably photocopy scientific journal articles to support their Texaco research, the parties stipulated--in order to spare the enormous expense of exploring the photocopying practices of each of them--that one scientist would be chosen at random as the representative of the entire group. The scientist chosen was Dr. Donald H. Chickering, II, a scientist at Texaco's research center in Beacon, New York. For consideration at trial, the publishers selected from Chickering's files photocopies of eight particular articles from the Journal of Catalysis.

In a comprehensive opinion, reported at 802 F.Supp. 1, the District Court considered the statutory fair use factors identified in section 107, weighed other equitable considerations, and held that Texaco's photocopying, as represented by Chickering's copying of these eight articles did not constitute fair use. The District Court certified its ruling for interlocutory appeal under 28 U.S.C. Sec. 1292(b) (1988).

Essential Facts. Employing between 400 and 500 researchers nationwide, Texaco conducts considerable scientific research seeking to develop new products and technology primarily to improve its commercial performance in the petroleum industry. As part of its substantial expenditures in support of research activities at its Beacon facility, Texaco subscribes to many scientific and technical journals and maintains a sizable library with these materials. Among the periodicals that Texaco receives at its Beacon research facility is the Journal of Catalysis ("Catalysis "), a monthly publication produced by Academic Press, Inc., a major publisher of scholarly journals and one of the plaintiffs in this litigation. Texaco had initially purchased one subscription to Catalysis for its Beacon facility, and increased its total subscriptions to two in 1983. Since 1988, Texaco has maintained three subscriptions to Catalysis.

Each issue of Catalysis contains articles, notes, and letters (collectively "articles"), ranging in length from two to twenty pages. All of the articles are received by the journal's editors through unsolicited submission by various authors. Authors are informed that they must transfer the copyright in their writings to Academic Press if one of their articles is accepted for publication, and no form of money payment is ever provided to authors whose works are published. Academic Press typically owns the copyright for each individual article published in Catalysis, and every issue of the journal includes a general statement that no part of the publication is to be reproduced without permission from the copyright owner. The average monthly issue of Catalysis runs approximately 200 pages and comprises 20 to 25 articles.

Chickering, a chemical engineer at the Beacon research facility, has worked for Texaco since 1981 conducting research in the field of catalysis, which concerns changes in the rates of chemical reactions. To keep abreast of developments in his field, Chickering must review works published in various scientific and technical journals related to his area of research. Texaco assists in this endeavor by having its library circulate current issues of relevant journals to Chickering when he places his name on the appropriate routing list.

The copies of the eight articles from Catalysis found in Chickering's files that the parties have made the exclusive focus of the fair use trial were photocopied in their entirety by Chickering or by other Texaco employees at Chickering's request. Chickering apparently believed that the material and data found within these articles would facilitate his current or future professional research. The evidence developed at trial indicated that Chickering did not generally use the Catalysis articles in his research immediately upon copying, but placed the photocopied articles in his files to have them available for later reference as needed. Chickering became aware of six of the photocopied articles when the original issues of Catalysis containing the articles were circulated to him. He learned of the other two articles upon seeing a reference to them in another published article. As it turned out, Chickering did not have occasion to make use of five of the articles that were copied.

The parties and many of the amici curiae have approached this case as if it concerns the broad issue of whether photocopying of scientific articles is fair use, or at least the only slightly more limited issue of whether photocopying of such articles is fair use when undertaken by a research scientist engaged in his own research. Such broad issues are not before us. Rather, we consider whether Texaco's photocopying by 400 or 500 scientists, as represented by Chickering's example, is a fair use. This includes the question whether such institutional, systematic copying increases the number of copies available to scientists while avoiding the necessity of paying for license fees or for additional subscriptions. We do not deal with the question of copying by an individual, for personal use in research or otherwise (not for resale), recognizing that under the fair use doctrine or the de minimis doctrine, such a practice by an individual might well not constitute an infringement. In other words, our opinion does not decide the case that would arise if Chickering were a professor or an independent scientist engaged in copying and creating files for independent research, as opposed to being employed by an institution in the pursuit of his research on the institution's behalf.

Fair use is a doctrine the application of which always depends on consideration of the precise facts at hand, see Campbell v. Acuff-Rose Music, Inc., --- U.S. ----, ----, 114 S.Ct. 1164, 1170, 127 L.Ed.2d 500 (1994); Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 549, 105 S.Ct. 2218, 2225, 85 L.Ed.2d 588 (1985); Wright v. Warner Books, Inc., 953 F.2d 731, 740 (2d Cir.1991); H.R.Rep. No. 1476, 94th Cong., 2d Sess. 65-66 (1976) ("no generally applicable definition [of fair use] is possible, and each case raising the question must be decided on its own facts"), and in this case the parties have helpfully circumscribed the scope of the issue to be decided by tendering for the District Court's decision the facts concerning the copying of eight particular articles. Our concern is whether the copying of these eight articles, as representative of the systematic copying that Texaco encouraged, was properly determined not to be fair use. Thus, the many background details stressed by each side are of only limited relevance in resolving this specific case.1

We consider initially the doctrine of fair use and its application to photocopying of documents. Seeking "to motivate the creative activity of authors ... by the provision of a special reward," Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417, 429, 104 S.Ct. 774, 782, 78 L.Ed.2d 574 (1984), copyright law grants certain exclusive rights in original works to authors, see 17 U.S.C. Secs. 102(a), 106, 201(a). However, the fair use doctrine "tempers the protection of copyright by allowing ... [the] use [of] a limited amount of copyrighted material under some circumstances." Twin Peaks Productions, Inc. v. Publications International, Ltd., 996 F.2d 1366, 1373 (2d Cir.1993). Traditionally conceived as based on authors' implied consent to reasonable uses of their works, see Harper & Row, 471 U.S. at 549-50, 105 S.Ct. at 2224-25, or on an exception to authors' monopoly privileges needed in order to fulfill copyright's purpose to promote the arts and sciences, see Campbell, --- U.S. at ----, 114 S.Ct. at 1169, the fair use doctrine has a lengthy and rich common-law history, see William F. Patry, The Fair Use Privilege in Copyright Law 1-63 (1985) [hereinafter Patry, The Fair Use Privilege ], and is now codified in section 107 of the Copyright Act, 17 U.S.C. Sec. 107.2

As with the development of other easy and accessible means of mechanical reproduction of documents, the invention and widespread availability of photocopying technology threatens to disrupt the delicate balances established by the Copyright Act. See 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright Sec. 13.05[E], at 13-225 to 13-226 (1994) [hereinafter Nimmer on Copyright ] (noting that "unrestricted photocopying practices could largely undercut the entire law of copyright"); see also Sony, 464 U.S. at 467-68 n. 16, 104 S.Ct. at 801-02 n. 16 (Blackmun, J., dissenting) (recognizing that the "advent of inexpensive and readily available copying machines ... has changed the dimensions" of the legal issues concerning the practice of making personal copies of copyrighted materials). As a leading commentator astutely notes, the advent of modern photocopying technology creates a pressing need for the law "to strike an appropriate balance between the authors' interest in preserving the integrity of copyright, and the public's right to enjoy the benefits that photocopying technology offers." 3 Nimmer on Copyright Sec. 13.05[E], at 13-226.

Indeed, if the issue were open, we would seriously question whether the fair use analysis that has developed with respect to works of authorship alleged to use portions of copyrighted material is precisely applicable to copies produced by mechanical means. The traditional fair use analysis, now codified in section 107, developed in an effort to adjust the competing interests of authors--the author of the original copyrighted work and the author of the secondary work that "copies" a portion of the original work in the course of producing what is claimed to be a new work. Mechanical "copying" of an entire document, made readily feasible and economical by the advent of xerography, see SCM Corp. v. Xerox Corp., 463 F.Supp. 983, 991-94 (D.Conn.1978), aff'd, 645 F.2d 1195 (2d Cir.1981), cert. denied, 455 U.S. 1016, 102 S.Ct. 1708, 72 L.Ed.2d 132 (1982), is obviously an activity entirely different from creating a work of authorship. Whatever social utility copying of this sort achieves, it is not concerned with creative authorship.

Though we have been instructed to defer to Congress "when major technological innovations alter the market for copyrighted materials," Sony, 464 U.S. at 431, 104 S.Ct. at 783, Congress has thus far provided scant guidance for resolving fair use issues involving photocopying, legislating specifically only as to library copying, see 17 U.S.C. Sec. 108, and providing indirect advice concerning classroom copying.3 See generally 3 Nimmer on Copyright Sec. 13.05[E]. However, we learn from the Supreme Court's consideration of copying achieved by use of a videotape recorder that mechanical copying is to be assessed for fair use purposes under the traditional mode of analysis, including the four statutory factors of section 107. See Sony, 464 U.S. at 447-56, 104 S.Ct. at 791-96. We therefore are obliged to apply that analysis to the photocopying that occurred in this case.

We must first identify precisely the copyrighted works alleged to be infringed, since certain arguments made on appeal seem to focus on different works. The publishers typically hold two separate sets of copyrights in their journal publications. As a consequence of the publishers' requirement that authors transfer their copyrights when their articles are accepted for publication, the publishers usually possess the copyrights that subsist in each individual article appearing within their journals.4 Moreover, to the extent that the compilation of a journal issue involves an original work of authorship, the publishers possess a distinct copyright in each journal issue as a collective work, see 17 U.S.C. Sec. 103; see also 17 U.S.C. Sec. 101 (defining "compilation" and "collective work"). See generally Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 356-61, 111 S.Ct. 1282, 1293-96, 113 L.Ed.2d 358 (1991) (discussing extent of copyright protection in compilations and collective works).

From the outset, this lawsuit concerned alleged infringement of the copyrights in individual journal articles, copyrights assigned by the authors to the publishers. More specifically, by virtue of the parties' stipulation, this case now concerns the copyrights in the eight articles from Catalysis found in Chickering's files, copyrights now owned by Academic Press. There are no allegations that raise questions concerning Academic Press's potential copyrights in whole issues or annual volumes of Catalysis as collective works.

Fair use serves as an affirmative defense to a claim of copyright infringement, and thus the party claiming that its secondary use of the original copyrighted work constitutes a fair use typically carries the burden of proof as to all issues in the dispute. See Campbell, --- U.S. at ----, 114 S.Ct. at 1177. Moreover, since fair use is a "mixed question of law and fact," Harper & Row, 471 U.S. at 560, 105 S.Ct. at 2230, we review the District Court's conclusions on this issue de novo, though we accept its subsidiary findings of fact unless clearly erroneous, see Twin Peaks, 996 F.2d at 1374.

II. The Enumerated Fair Use Factors of Section 107

Section 107 of the Copyright Act identifies four non-exclusive factors that a court is to consider when making its fair use assessment, see 17 U.S.C. Sec. 107(1)-(4). The District Court concluded that three of the four statutory factors favor the publishers. As detailed below, our analysis of certain statutory factors differs somewhat from that of the District Court, though we are in agreement on the ultimate determination. Our differences stem primarily from the fact that, unlike the District Court, we have had the benefit of the Supreme Court's important decision in Campbell, decided after Judge Leval issued his opinion.

A. First Factor: Purpose and Character of Use

The first factor listed in section 107 is "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes." 17 U.S.C. Sec. 107(1). Especially pertinent to an assessment of the first fair use factor are the precise circumstances under which copies of the eight Catalysis articles were made. After noticing six of these articles when the original copy of the journal issue containing each of them was circulated to him, Chickering had them photocopied, at least initially, for the same basic purpose that one would normally seek to obtain the original--to have it available on his shelf for ready reference if and when he needed to look at it. The library circulated one copy and invited all the researchers to make their own photocopies. It is a reasonable inference that the library staff wanted each journal issue moved around the building quickly and returned to the library so that it would be available for others to look at. Making copies enabled all researchers who might one day be interested in examining the contents of an article in the issue to have the article readily available in their own offices. In Chickering's own words, the copies of the articles were made for "my personal convenience," since it is "far more convenient to have access in my office to a photocopy of an article than to have to go to the library each time I wanted to refer to it." Affidavit of Donald Chickering at 11 (submitted as direct trial testimony) [hereinafter Chickering testimony ]. Significantly, Chickering did not even have occasion to use five of the photocopied articles at all, further revealing that the photocopies of the eight Catalysis articles were primarily made just for "future retrieval and reference." Id.

It is true that photocopying these articles also served other purposes. The most favorable for Texaco is the purpose of enabling Chickering, if the need should arise, to go into the lab with pieces of paper that (a) were not as bulky as the entire issue or a bound volume of a year's issues, and (b) presented no risk of damaging the original by exposure to chemicals. And these purposes might suffice to tilt the first fair use factor in favor of Texaco if these purposes were dominant. For example, if Chickering had asked the library to buy him a copy of the pertinent issue of Catalysis and had placed it on his shelf, and one day while reading it had noticed a chart, formula, or other material that he wanted to take right into the lab, it might be a fair use for him to make a photocopy, and use that copy in the lab (especially if he did not retain it and build up a mini-library of photocopied articles). This is the sort of "spontaneous" copying that is part of the test for permissible nonprofit classroom copying. See Agreement on Guidelines for Classroom Copying in Not-For-Profit Educational Institutions, quoted in Patry, The Fair Use Privilege, at 308.5 But that is not what happened here as to the six items copied from the circulated issues.

As to the other two articles, the circumstances are not quite as clear, but they too appear more to serve the purpose of being additions to Chickering's office "library" than to be spontaneous copying of a critical page that he was reading on his way to the lab. One was copied apparently when he saw a reference to it in another article, which was in an issue circulated to him. The most likely inference is that he decided that he ought to have copies of both items--again for placement on his shelf for later use if the need arose. The last article was copied, according to his affidavit, when he saw a reference to it "elsewhere." Chickering testimony at 22. What is clear is that this item too was simply placed "on the shelf." As he testified, "I kept a copy to refer to in case I became more involved in support effects research." Id.

The photocopying of these eight Catalysis articles may be characterized as "archival"--i.e., done for the primary purpose of providing numerous Texaco scientists (for whom Chickering served as an example) each with his or her own personal copy of each article without Texaco's having to purchase another original journal.6 The photocopying "merely 'supersede[s] the objects' of the original creation," Campbell, --- U.S. at ----, 114 S.Ct. at 1171 (quoting Folsom v. Marsh, 9 F.Cas. 342, 348 (No. 4,901) (C.C.D.Mass.1841)), and tilts the first fair use factor against Texaco. We do not mean to suggest that no instance of archival copying would be fair use, but the first factor tilts against Texaco in this case because the making of copies to be placed on the shelf in Chickering's office is part of a systematic process of encouraging employee researchers to copy articles so as to multiply available copies while avoiding payment.

Texaco criticizes three aspects of the District Court's analysis of the first factor. Relying largely on the Supreme Court's discussion of fair use in Sony, the District Court suggested that a secondary user will "win" this first factor by showing a "transformative (or productive) nonsuperseding use of the original, or [a] noncommercial use, generally for a socially beneficial or widely accepted purpose." 802 F.Supp. at 12. The District Court then concluded that Texaco's copying is "neither transformative nor noncommercial," id. at 13: not transformative because Texaco "simply makes mechanical photocopies of the entirety of relevant articles" and the "primary aspect" of Texaco's photocopying is to multiply copies, see id. at 13-15; and not noncommercial because, though it facilitates research, this research is conducted solely for commercial gain, see id. at 15-16.

Texaco asserts that the District Court mischaracterized the inquiry under the first factor and overlooked several relevant considerations. First, Texaco contends that the District Court inappropriately focussed on the character of the user rather than the nature of the use in labeling Texaco's copying as commercial. Texaco claims that its status as a for-profit corporation has no bearing on the fair use analysis, and that its use should be considered noncommercial since it photocopied articles in order to aid Chickering's research. Texaco emphasizes that "research" is explicitly listed in the preamble of section 107, a circumstance that Texaco contends should make its copying favored under the first factor and throughout the entire fair use analysis.7

Second, Texaco contends that the District Court put undue emphasis on whether its use was "transformative," especially since the Supreme Court appears to have rejected the view that a use must be transformative or productive to be a fair use. See Sony, 464 U.S. at 455 n. 40, 104 S.Ct. at 795 n. 40 ("The distinction between 'productive' and 'unproductive' uses may be helpful in calibrating the balance [of interests], but it cannot be wholly determinative."). Texaco asserts that the "transformative use" concept is valuable only to the extent that it focusses attention upon whether a second work unfairly competes with the original. Texaco states that in this case, where the photocopies it made were not sold or distributed in competition with the original, the nontransformative nature of its copying should not prevent a finding of fair use. Texaco also suggests that its use should be considered transformative: photocopying the article separated it from a bulky journal, made it more amenable to markings, and provided a document that could be readily replaced if damaged in a laboratory, all of which "transformed" the original article into a form that better served Chickering's research needs.

Finally, Texaco claims that it should prevail on the first factor because, as the District Court acknowledged, the type of photocopying it conducted is widespread and has long been considered reasonable and customary. Texaco stresses that some courts and commentators regard custom and common usage as integral to the fair use analysis. See, e.g., Williams & Wilkins Co. v. United States, 487 F.2d 1345, 1353-56, 203 Ct.Cl. 74 (1973), aff'd by equally divided Court, 420 U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975); Lloyd L. Weinreb, Fair's Fair: A Comment on the Fair Use Doctrine, 103 Harv.L.Rev. 1137, 1140 (1990) [hereinafter Weinreb, Fair's Fair ]. We consider these three lines of attack separately.

1. Commercial use. We generally agree with Texaco's contention that the District Court placed undue emphasis on the fact that Texaco is a for-profit corporation conducting research primarily for commercial gain. Since many, if not most, secondary users seek at least some measure of commercial gain from their use, unduly emphasizing the commercial motivation of a copier will lead to an overly restrictive view of fair use. See Campbell, --- U.S. at ----, 114 S.Ct. at 1174; see also Maxtone-Graham v. Burtchaell, 803 F.2d 1253, 1262 (2d Cir.1986) (noting that if "commercial" nature of a secondary use is overemphasized in the analysis, "fair use would be virtually obliterated"), cert. denied, 481 U.S. 1059, 107 S.Ct. 2201, 95 L.Ed.2d 856 (1987). See generally 3 Nimmer on Copyright Sec. 13.05[A][c], at 13-162 to 13-163 (categorical rule against commercial uses unwarranted since this "would cause the fair use analysis to collapse in all but the exceptional case of nonprofit exploitation"). Though the Supreme Court had stated in Sony that every commercial use was "presumptively" unfair, see 464 U.S. at 451, 104 S.Ct. at 793, that Court and lower courts have come to explain that the commercial nature of a secondary use simply " 'tends to weigh against a finding of fair use.' " Campbell, --- U.S. at ----, 114 S.Ct. at 1174 (quoting Harper & Row, 471 U.S. at 562, 105 S.Ct. at 2231); accord Rogers v. Koons, 960 F.2d 301, 309 (2d Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 365, 121 L.Ed.2d 278 (1992); Sega Enterprises Limited v. Accolade, Inc., 977 F.2d 1510, 1522 (9th Cir.1992); Maxtone-Graham, 803 F.2d at 1262.

Indeed, Campbell warns against "elevat[ing] ... to a per se rule" Sony 's language about a presumption against fair use arising from commercial use. --- U.S. at ----, 114 S.Ct. at 1174. Campbell discards that language in favor of a more subtle, sophisticated approach, which recognizes that "the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use." Id. [at ----, 114 S.Ct.] at 1171. The Court states that "the commercial or nonprofit educational purpose of a work is only one element of the first factor enquiry" id. [at ----, 114 S.Ct.] at 1174, and points out that "[i]f, indeed, commerciality carried presumptive force against a finding of fairness, the presumption would swallow nearly all of the illustrative uses listed in the preamble paragraph of Sec. 107...." Id.

We do not mean to suggest that the District Court overlooked these principles; in fact, the Court discussed them insightfully, see 802 F.Supp. at 12-13. Rather, our concern here is that the Court let the for-profit nature of Texaco's activity weigh against Texaco without differentiating between a direct commercial use and the more indirect relation to commercial activity that occurred here. Texaco was not gaining direct or immediate commercial advantage from the photocopying at issue in this case--i.e., Texaco's profits, revenues, and overall commercial performance were not tied to its making copies of eight Catalysis articles for Chickering. Cf. Basic Books, Inc. v. Kinko's Graphics Corp., 758 F.Supp. 1522 (S.D.N.Y.1991) (revenues of reprographic business stemmed directly from selling unauthorized photocopies of copyrighted books). Rather, Texaco's photocopying served, at most, to facilitate Chickering's research, which in turn might have led to the development of new products and technology that could have improved Texaco's commercial performance. Texaco's photocopying is more appropriately labeled an "intermediate use." See Sega Enterprises, 977 F.2d at 1522-23 (labeling secondary use "intermediate" and finding first factor in favor of for-profit company, even though ultimate purpose of copying was to develop competing commercial product, because immediate purpose of copying computer code was to study idea contained within computer program).

We do not consider Texaco's status as a for-profit company irrelevant to the fair use analysis. Though Texaco properly contends that a court's focus should be on the use of the copyrighted material and not simply on the user, it is overly simplistic to suggest that the "purpose and character of the use" can be fully discerned without considering the nature and objectives of the user.8

Ultimately, the somewhat cryptic suggestion in section 107(1) to consider whether the secondary use "is of a commercial nature or is for nonprofit educational purposes" connotes that a court should examine, among other factors, the value obtained by the secondary user from the use of the copyrighted material. See Rogers, 960 F.2d at 309 ("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."); MCA, Inc. v. Wilson, 677 F.2d 180, 182 (2d Cir.1981) (court is to consider "whether the alleged infringing use was primarily for public benefit or for private commercial gain"). The commercial/nonprofit dichotomy concerns the unfairness that arises when a secondary user makes unauthorized use of copyrighted material to capture significant revenues as a direct consequence of copying the original work. See Harper & Row, 471 U.S. at 562,