No. 94-1778

                  UNITED STATES COURT OF APPEALS

                      FOR THE SIXTH CIRCUIT

PRINCETON UNIVERSITY PRESS,        |
MACMILLAN, INC., and ST.           |
MARTIN'S PRESS, INC.               |
          Plaintiffs-Appellees,    |
                                   |    ON APPEAL from the
          v.                       >    United States District
                                   |    Court for the Eastern
MICHIGAN DOCUMENT SERVICES,        |    District of Michigan
INC., and JAMES M. SMITH,          |
          Defendants-Appellants.   |

               Decided and Filed February 12, 1996

         Before: NELSON, RYAN AND MCKAY,* Circuit Judges

*The Honorable Monroe G. McKay, Circuit Judge of the United
States Court of Appeals for the Tenth Circuit, sitting by
designation.

RYAN, J., delivered the opinion of the court, in which MCKAY, J.,
joined. NELSON, J., delivered a separate opinion concurring in
part and dissenting in part.

RYAN, Circuit Judge.  The plaintiffs, Princeton University Press,
Macmillan, Inc., and St. Martin's Press, Inc., brought a
copyright infringement action against the defendants, Michigan
Document Services, Inc., and James M. Smith, president of MDS.
The suit alleges that the defendants infringed copyrights held by
the plaintiffs when MDS made multiple copies of excerpts from
various materials provided by University of Michigan professors,
compiled these copies into "coursepacks," and sold the
coursepacks to students for a profit. The district court granted
summary judgment to the plaintiffs, found that the defendants'
infringement was "willful," and issued an injunction against the
defendants. The defendants appeal the district court's decision,
defending their copying practices primarily on the ground that
the coursepacks are a "fair use" of the copyrighted works and
therefore not an infringement. We agree with the defendants that
their use is a "fair use" as defined in the Copyright Act of
1976, 17 U.S.C. Section 107, and reverse.

                                I.

Michigan Document Services is a so-called "copy shop" and
provides general photoreproduction services to the public. Some
of its profits are derived from the sale of "coursepacks" to
professors and students. Coursepacks are compilations of various
copyrighted and uncopyrighted materials, which may include
journal articles, newspaper articles, course notes or syllabi,
sample test questions, and excerpts from books. Professors select
the contents of the coursepacks and deliver the selected
materials to MDS with an estimate of the number of students
expected in the course. The professors assign the material to
students enrolled in a particular class and inform these students
that they may purchase the required materials in coursepack form
at MDS if they wish. In the alternative, students are free to
make copies of the excerpted material at the library themselves,
to copy the material from other students, or to purchase the
original works. MDS prepares a master copy of all the materials
obtained from the professor, creates a table of contents,
identifies excerpts by author and name of the underlying work,
numbers the pages, and then binds the copied excerpts together.
These coursepacks are sold only to students for use in a
particular course. They are not sold to the general public; any
copies that are not purchased are simply discarded. The
coursepacks are priced on a per-page basis, regardless of the
contents of the page; that is, the fee for a page reproducing
copyrighted materials is the same as the fee for a blank page.

We are specifically concerned in this case with six excerpts
extracted from works to which plaintiffs hold the copyrights.
Following the direction of several professors who brought the
excerpts to the defendants for copying, MDS assembled the
excerpts, along with other materials not at issue in this suit,
into three coursepacks.  MDS copied 95 pages, or 30%, of Farewell
to the Party of Lincoln: Black Politics in the Age of FDR, by
Nancy J. Weiss; 45 pages, or 18%, of Public Opinion, by Walter
Lippmann; 77 pages, or 18%, of The Nature of Human Values, by
Milton Rokeach; 78 pages, or 16%, of Political Ideology: Why the
American Common Man Believes What He Does, by Robert E. Lane; 52
pages, or 8%, of Social Psychology, by Roger Brown; and 17 pages,
or 5%, of Where the Domino Fell: America and Vietnam, 1945 to
1990, by James S. Olson and Randy Roberts. Each of the requesting
professors signed a declaration that he does not request copies
of excerpts where he would otherwise have assigned the entire
work to his students. MDS sold the coursepacks containing these
six excerpts to students at the University of Michigan for use in
the 1992 winter semester.

Each of the plaintiff publishers operates a department that
receives and processes requests for permission to use any of that
publisher's copyrighted works. The plaintiff publishers usually
charge a fee for allowing others to copy portions of their works
and generally share these fees with the authors. Sometimes the
publishers grant permission to copy without charge, and other
times they deny permission entirely.

MDS did not seek permission to copy any of the six excerpts or
pay any royalties or permission fees for the use of the excerpts
before selling them to the students. Although only six excerpts
are at issue here; the president of MDS estimates that the
excerpts at issue are among several thousand such excerpts for
which permission to copy was never sought.

                                II

The publishers obtained preliminary injunctive relief against MDS
in the district court. The publishers and MDS then filed cross
motions for summary judgment as to liability and denied MDS's
motions for summary judgment. In its subsequent order and
judgment, the district court granted the publishers' motion for
summary judgment as to liability and denied MDS's motions for
summary judgment. The district court found that MDS had willfully
infringed the publishers' copyrights, and, pursuant to 17 U.S.C.
Section 504(c), awarded the publishers statutorily enhanced
damages of $5,000 per infringed work, for a total of $30,000,
plus attorneys fees. The district court enjoined MDS from
"copying any of plaintiffs' existing or future copyrighted works
without first obtaining the necessary permission." Princeton
Univ. Press v. Michigan Document Services, Inc., 855 F. Supp.
905, 913 (E.D. Mich. 1994).

This court determines de novo whether, viewing the evidence in
the light most favorable to the party against whom summary
judgment has been granted, the moving party has demonstrated that
there is no genuine issue of material fact and that it is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).
The question on review of a summary judgment is " whether the
evidence presents a sufficient disagreement to require submission
to a jury or whether it is so one sided that one party must
prevail as a matter of law.'" National Rifle Ass'n v. Handgun
Control Fed'n, 15 F.3d 559, 561 (6th Cir.) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)), cert. denied,
115 S. Ct. 71 (1994).

                               III.

The publishers allege that MDS's for-profit copying and
assembling of excerpts from copyrighted works violates the
publishers' exclusive copyrights. The publishers argue that MDS
and the publishers compete in the same market. The plaintiffs
publish textbooks, anthologies, collections of readings, and
other works designed to be useful in the college classroom. The
publishers hope that college professors will assign these books
and that students will purchase them. In addition to publishing
books themselves, the publishers licence others, including copy
shops like MDS, to use portions of their copyrighted works.

When a professor is dissatisfied with existing published
materials, he may designate the readings selected from a number
of sources that best suit his specialized purposes and request
that MDS, or a similar service, compile a coursepack of these
readings. The publishers argue that MDS, like the publishers
themselves, hopes that professors will assign, and students will
buy, its "books." The publishers emphasize that MDS advertises
its services and advertises the fact that coursepacks can be used
"to replace a conventional textbook." Thus the publishers
characterize MDS as a fellow competitor in the higher education
market -- a competitor who exploits their copyrighted materials
without paying the customary fee.

The publishers allege that the coursepacks prepared by MDS do not
constitute fair use of copyrighted works for a number of reasons:
the coursepacks have no transformative value; the coursepacks are
prepared for commercial purposes; the excerpts are of substantial
length and constitute the heart of each work as identified by the
requesting professor; the copyrighted works excerpted are
valuable, original works at the very core of copyright
protection, and MDS's refusal to pay permission fees affects an
established derivative market in which licensed users pay to copy
excerpts of copyrighted works for a variety of purposes.

The publishers rely on the legislative history of the Copyright
Act. Specifically, they rely on the Classroom Guidelines, which
House and Senate conferees "accept[ed] as part of their
understanding of fair use ... with respect to books and
periodicals" prior to enactment of the Copyright Act. H.R. REP.
NO. 1476, 94th Cong., 2d Sess. 68 (1976). The Classroom
Guidelines assure educators that non-profit copying for
educational purposes of "not more than 1,000 words" is fair use
when "[t]he inspiration and decision to use the work and the
moment of its use for maximum teaching effectiveness are so close
in time that it would be unreasonable to expect a timely reply to
a request for permission." H.R. REP. NO. 1476 at 68-71. The
Classroom Guidelines "prohibit[] ... [c]opying collective works."
H.R. REP. NO. 1476 at 69. The publishers argue that MDS's use of
the excerpts far exceeds the "safe harbor" of protection offered
by the Guidelines in that MDS copies excerpts that are much
longer than 1,000 words, copies for profit, creates anthologies,
and copies without permission although it has ample time to seek
permission from copyright holders.

MDS, on the other hand, emphasizes that the public has a right to
make fair use of a copyrighted work, and to exercise that right
without requesting permission from, or paying any fee to, the
copyright holder. Because the primary purpose of the
Constitution's Copyright Clause is not to enrich authors and
inventors but to encourage the progress of science and the
production of creative works for the public good, only unfair
uses of copyrighted materials are prohibited; fair uses are
affirmatively guaranteed to the public. The defendant therefore
argues that MDS's production of coursepacks at the direction of
professors cannot violate copyright law because the mere
mechanical reproduction of materials is not a "use" of those
materials in the first place. Further, MDS alleges, the classroom
use of the coursepacks promotes learning without undue harm to
the incentives to create original works; any copying done at the
direction of professors who are making fair use of the materials
is therefore authorized as necessary and incidental to that fair
use.

Professors select materials to expose their students to theories,
facts, and recent developments in the field that are most
relevant to the individual professor's classroom goals. When the
materials selected are not so central to the course or are not so
lengthy as to justify, in the professor's judgment, requiring
students to purchase the entire original work in which the
relevant portions appear, a professor may seek to compile a
coursepack of excerpts. Rather than produce multiple copies of
the relevant selections themselves or require their students to
spend time producing individual copies from scarce library
materials, professors request that MDS, or a similar services,
copy and assemble the excerpts selected; MDS produces better
copies at less cost than individual students could.

MDS notes that professors receive no commissions or other
economic benefit from delivering coursepack materials to MDS, and
that the publishers lose no sales since the copyrighted works
would not otherwise have been assigned. Thus, even assuming that
the mechanical photoreproduction of excerpts does amount to "use"
under the Copyright Act, MDS argues that its production of copies
for academic use does not violate copyright law.

                               IV.

Modern copyright law is derived from the Framers' conviction that
providing a secure economic incentive to individuals is the best
way to stimulate development of "Science and useful Arts" to the
ultimate benefit of the general public: "The Congress shall have
Power ... [t]o promote the Progress of Science and useful Arts,
by securing for limited Times to Authors and Inventors the
exclusive Right to their respective Writings and Discoveries."
U.S. CONST. Art 1, Section 8, cl. 8.

The Supreme Court has acknowledged repeatedly "the inherent
tension in the need simultaneously to copyrighted material and to
allow others to build upon it," Campbell v. Acuff-Rose Music,
Inc., 114 S.Ct. 1164, 1169 (1994), and thereby maximize progress.
Although monopoly protection of the financial interests of
inventors and authors is necessary "to stimulate creativity and
authorship, excessively broad protection would stifle, rather
than advance," intellectual progress. Pierre N. Leval, Toward a
Fair Use Standard, 103 HARV. L. REV. 1104, 1109 (1990). For
progress in "Science and useful Arts" to occur, others must be
permitted to build upon and refer to the creations of prior
thinkers. Accordingly, three judicially created doctrines have
been fashioned to limit the copyright monopoly and its
potentially stifling effects: first, copyright law does not
protect ideas but only their creative expression; second, facts
are not protected, regardless of the labor expended by the
original author in uncovering them; and, third, the public may
make "fair use" of the copyrighted works. MDS relies most heavily
on the fair use doctrine.

The Copyright Act both establishes a general grant of monopoly
powers to holders of copyrights and codifies the "fair use"
doctrine as an exception to that broad grant. Section 106 of the
Copyright Act confers exclusive rights upon individual creators,
providing in relevant part as follows:

     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.

17 U.S.C. Section 106.

Section 107 carves out an exception to the exclusive rights
conferred in Section 106, permitting members of the public to use
copyrighted works for "fair" purposes:

     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, 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.

17 U.S.C. Section 107.

The four fair use factors "are to be ... weighed together, in
light of the purposes of copyright," Campbell 114 S.Ct. At 1171
(citing Leval, supra, at 1110-11), and "[t]he primary objective
of copyright is not to reward the labor of authors, but  [t]o
promote the Progress of Science and useful Arts.'" Feist
Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340,349
(1991)(quoting U.S. CONST. art I, Section 8, cl. 8). Thus, the
"fair use" concept embodied in Section 107 may be understood
generally to permit a secondary use that "serves the copyright
objectives of stimulating productive thought and public
instructions without excessively diminishing the incentives for
creativity." Leval, supra, at 1110. An evaluation of fair use
therefore "involves a difficult balance between the interests of
authors and inventors in the control and exploitation of their
writings and discoveries on the one hand, and society's competing
interest in the free flow of ideas, information, and commerce on
the other hand." U.S. 417, 429 (1984). Despite statutory mention
of "teaching" and "multiple copies for classroom use" as possible
fair uses, Section 107, "the mere fact that a use is educational
and not for profit does not insulate it from a finding of
infringement." Campbell, 114 S. Ct. At 1174. Thus, here, the use
must be examined under all four factors as must any other
allegedly infringing work.

The four statutory factors are unambiguous. Therefore, we need
not resort to the legislative history. Congress could easily have
enacted the Classroom Guidelines into law by including the
Guidelines in the language of section 107; it chose instead to
establish four broad factors to be considered in a case-by-case
analysis of all alleged fair uses, even classroom uses, of
copyrighted material. We are bound by Congress' decision. The
publishers' reliance on the Classroom Guidelines is misplaced; we
may not permit the statutory text enacted by both Houses of
Congress "to be expanded or contracted by the statements of
individual legislators or committees during the course of the
enactment process." West Virginia Univ. Hosps., Inc. v. Casey,
499 U.S. 83, 98-99 (1991). Thus, we rely exclusively upon the
language of the Copyright Act, and its construction in the case
law, to determine whether MDS's compilation into coursepacks of
excerpts selected by professors is a "fair use" of the
copyrighted materials.

                                V.

                                A.

The first factor that courts must evaluate in a fair use
determination 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). There are two parts
to this test: (1) the degree to which the challenged use has
transformed the original, and (2) the profit or nonprofit
character of the use. Ordinarily, analysis under the first factor
centers on "whether the new work merely  supercede[s] the
objects' of the original creation ... or instead adds something
new, with a further purpose or different character, altering the
first with new expression, meaning, or message; it asks, in other
words, whether and to what extent the new work is
 transformative'" Campbell, 114 S.Ct. at 1171 (citations
omitted.) Because works that are transformative are more likely
to promote science and the arts, transformative works are likely
to be found to be fair uses, whereas works that merely copy the
original are likely to be found to be infringements of the
copyrighted work. However, the Supreme Court has noted in dictum
that "[t]he obvious statutory exception to this focus on
transformative uses is the straight reproduction of multiple
copies for classroom distribution." Id. at n.11. Thus, although
the transformative value of the coursepacks is slight, the fact
that the coursepacks are "multiple copies for classroom use"
preserves MDS's claim of "fair use."

Further, the transformative value is slight but not nonexistent.
The coursepack is essentially a new product comprising selected
portions of other works, and perfectly customized to the
classroom professor's individualized purpose. A professor may
select precisely the materials that he feels are most instructive
in the course, with constant opportunity to alter the whole, from
time to time, by altering the mix. Coursepacks are particularly
helpful in newly conceived interdisciplinary courses that draw 
small portions from a number of traditional, established
disciplines. The publishing industry does not offer such highly
customized and current materials, and indeed is not equipped to
do so.

The other element of the first "fair use" factor is whether the
purpose of the use is commercial or nonprofit and educational.
Id. at 1174. The "fact that a publication [is] commercial as
opposed to nonprofit is a separate factor that tends to weigh
against a finding of fair use." Harper & Row, Publishers, Inc. v.
Nation Enterprises, 471 U.S. 539, 562 (1985). The central inquiry
"is not whether the sole motive of the use is monetary gain but 
whether the user stands to profit from exploitation of the
copyrighted material without paying the customary price." Id.

The coursepacks at issue are "used" at two levels. One "use,"
MDS's production and sale of the coursepacks, is clearly for a
nonprofit "use," and one, the students' use of the coursepacks in
the classroom, is entirely non-profit and educational. The
publishers argue that the only relevant "use" under the first
factor in this suit against MDS is MDS's sale of the coursepacks
to the students, not the use of the purchased coursepacks in the
classroom. We disagree. Congress specifically mentioned "teaching
(including multiple copies for classroom use)," Section 107, as
an illustration of a possible fair use. The language of Section
107 incorporates copying (implicit in "multiple copies") within
the illustrative use of "teaching." Congress specifically
anticipated the use of "multiple copies" for the purpose of
"teaching"; we cannot examine the production of multiple copies
in a vacuum, ignoring their educational use. The copying in this
case is not a use unto itself; it is the mechanical component of
the process that makes the material available for classroom use.
The language of the statute, "including multiple copies for
classroom use," requires us to consider copying as an integral
part of "teaching." Therefore, we consider both the mechanical
production of the copies and the classroom use of the excerpts in
evaluating "the purpose and character of the use" and its
commercial or nonprofit educational nature.

Because Congress, "eschewed a rigid, bright-line approach to fair
use," Sony, 464 U.S. at 448 n.31, our mandate is to conduct "a
sensitive balancing of interests," id. at 455 n. 40, considering
all the circumstances. We must determine whether MDS stood "to
profit from exploitation of the copyrighted material without
paying the customary price." Harper & Row, 471 U.S. at 562. In
the context of this case, we find the undisputed fact that MDS
can produce "multiple copies for classroom use," at a profit, for
less than it would cost the professors or students to produce
them to be significant. The publishers declined at oral argument
to argue that the professors and students may not copy these
excerpts and assemble them privately for their own educational
purposes. The professors and students, who might otherwise copy
the materials themselves, have assigned the task of copying more
efficiently. On these facts, the for-profit provision of this
service does not weigh against a finding of fair use. Here, MDS
obtains a profit by providing a service. MDS charges on a 
per-page basis, regardless of content; MDS does not extract an 
extra fee for reproducing materials that are copyrighted. MDS 
does not "exploit" copyrighted material within the meaning of 
Harper & Row, 471 U.S. at 462, because its fee does not turn on 
the content of the materials, copyrighted or not, that it copies.
It does not, of course, select the materials to be copied or
determine the amount to be excerpted. The business of producing
and selling coursepacks is more properly viewed as the
exploitation of professional copying technologies and the
inability of academic parties to reproduce printed materials
efficiently, not the exploitation of copyrighted, creative
materials. We hold that the Copyright Act does not prohibit
professors and students who may make copies themselves from using
the photoreproduction services of a third party in order to
obtain those same copies at less cost.

Thus, the coursepacks fit within the exception to the
"transformative" quality requirement, and the predominant
character of the use of excerpts in coursepacks is not commercial
but "nonprofit educational." The first factor therefore favors a
finding of fair use.

                                B.

The second fair use factor, "the nature of the copyrighted work,"
17 U.S.C. Section 107(2), recognizes that fair use is more
difficult to establish when the work being used is at "the core
of intended copyright protection." Campbell, 114 S. Ct. At 1175.
Factual compilations, such as telephone book listings, with only
a small element of creativity and originality may be used more
freely than creative works. Feist, 499 U.S. at 348-51. The
materials copied in this case are much closer to the core of work
protected by copyright than to the mere compilations of raw data
in the phone books in Feist. The excerpts used in the coursepacks
are substantially creative, containing original analysis and
creative theories. Although some of the copyrighted works contain
non-original material not protected by copyright, each excerpt
contains far more than the "minimal degree of creativity" that
qualifies it as "independently created by the author" and
therefore original. Id. at 344-48.

The fact that the excerpts in this case are extracted from works
that may be categorized as "non-fiction" does not mean that any
use is fair use. Rather, monopoly protections accrue "equally to
works of fiction and nonfiction." Harper & Row, 471 U.S. at 546.
Copyright protections are intended to induce the creation of new
material of potential historical value, not just fictional works,
and therefore extend to the excerpts here at issue.

The second factor, on these facts, does little more than confirm
that the works at issue are protected by copyright and may only
be used "fairly." Thus, the fair use examination properly
proceeds to evaluate factors three and four to determine whether
this use of the excerpts is fair.

                                C.

The third factor considers "the amount and substantiality of the
portion used in relation to the copyrighted work as a whole." 17
U.S.C. Section 107(3). In the context of a musical parody's use
of a copyrighted song, the Supreme Court interpreted this factor
to inquire whether the quantity and value of the materials used
were reasonable in relation to the purpose of the copying varies
with the purpose and character of the use." Campbell, 144 S. Ct.
at 1175. As the Supreme Court acknowledged, "[t]he facts bearing
on this factor will also tend to address the fourth [factor,
which evaluates market effect], by revealing the degree to which
the parody may serve as a market substitute for the original or
potentially licensed derivatives." Id. Thus, we ask whether such
substantial portions of a copyrighted work were used that a
coursepack is "composed primarily of [the] original, particularly
[the original's] heart, with little added or changed" such that
the coursepack merely supersedes the copyrighted work,
"fulfilling demand for the original." Id. at 1176.

There is no evidence that the six excerpts in the coursepacks are
so substantial as to superseded the original works. The
publishers have submitted a declaration stating that, in
accordance with established practices, permission would have been
denied, even if sought, with regard to the excerpt from Public
Opinion, by Walter Lippmann. The publisher considers the excerpt
so lengthy and the published edition sufficiently inexpensive
that the book should have been purchased rather than copied with
permission, for a fee. The declarant opined that copying 46 pages
would adversely affect book sales, but offered no factual
evidence in this regard. The fact that the publisher would prefer
the book to be purchased is not relevant to our analysis. Each of
the professors who delivered the materials at issue to MDS signed
a statement that he would not otherwise have assigned the
copyrighted work to the class. Nothing in the record contradicts
these declarations.

The lengthiest excerpt used in one of the coursepacks comprised
only 30% of Farewell to the Party of Lincoln: Black Politics in
the Age of FDR, by Nancy J. Weiss, the original copyrighted work.
Other excerpts ranged from 5% to 18% of the original works. There
is no evidence to suggest that even the 30% selected from Weiss's
book extracted the heart of the work rather than just those
portions that the professor deemed instructive for his limited
classroom purposes. Cf. Harper & Row, 471 U.S. at 565-66. Given
the uncontroverted declarations of the professors that they would
not have chosen to assign the original works even if copied
excerpts were not available, there is no basis for us to conclude
that the portions extracted from the copyrighted works were so
substantial that the resulting coursepacks superseded the
originals. As the district court noted, the six excerpts at issue
in this case "are truly  excerpts,' and do not purport to be
replacements for the original works." Princeton, 855 F. Supp. at
910.

The record cannot support a finding that the copyrighted works at
issue were excerpted so substantially that the coursepacks
superseded the original works. Thus, the third factor favors a
finding of fair use.

                                D.

The fourth fair use factor is "the effect of the use upon the
potential market for or value of the copyrighted work." 17 U.S.C.
Section 107(4). Under this factor, courts must consider the
extent of market harm caused by the particular actions of the
alleged infringer and "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 the
original." Campbell, 114 S. Ct. at 1177 (internal quotations
marks omitted). The fourth factor is the single most important
element of fair use, Harper & Row, 471 U.S. at 566, and "must
take account not only for harm to the original but also of harm
to the market for derivative works." Id. at 568.

Because the record before us contains no evidence that the market
for the original work, or for derivative works, was affected by
the use of excerpts in coursepacks, the resolution of this factor
turns on the assignment of the burden of proof on market effect.
The Sony Court assigned the burden of proof on market effect to
the party alleging infringement, 464 U.S. at 451, whereas the
Campbell Court assigned the burden of proof on market effect to
the proponent of the fair use defense, 114 S. Ct. At 1177-79.(1)
The rule articulated in Sony is the one that is applicable to
this case because both Sony and the case at hand involve
noncommercial use of a copyrighted work whereas Campbell
articulated the rule for commercial uses of a copyrighted work. A
commercial use may be presumed to affect the market whereas no
such assumption of market effect may be made with regard to a
nonprofit educational use. Sony, 464 U.S. at 451.

     In Sony, the Court held:

     A challenge to a noncommercial use of a copyrighted work
     requires proof either that the particular use is harmful, or
     that if it should become widespread, it would adversely
     affect the potential market for the copyrighted work. ...
     What is necessary is a showing by a preponderance of the
     evidence that some meaningful likelihood of future harm
     exists. If the intended use is for commercial gain, that
     likelihood may be presumed. But if it is for a noncommercial
     purpose, the likelihood must be demonstrated.

Id. Accordingly, because we have determined that the use of the
excerpts at issue in the coursepacks is for nonprofit educational
purposes, we do not apply a presumption of market harm against
MDS's use.

Rather, it is the publishers' burden to demonstrate at least a
meaningful likelihood that future harm to a potential market for
the copyrighted works will occur. Works or uses that creators of
original works would "in general develop of license others to
develop" make up the market for potential derivative uses.
Campbell, 114 S. Ct. at 1178. The plaintiffs did not demonstrate
that the coursepacks affected the market for the original
copyrighted works or the potential market for derivative works,
such as published anthologies, nor did they demonstrate any
"meaningful likelihood of future harm," Sony, 464 U.S. at 451, to
any market. Rather, the plaintiffs limited their allegations and
demonstrations of "market effect" to evidence of lost permission
fees resulting from defendants' refusal to seek permission and
pay fees for the copying and selling of excerpts from copyrighted
works.

Evidence of lost permission fees does not bear on market effect.
The right to permission fees is precisely what is at issue here.
It is circular to argue that a use is unfair, and a fee therefore
required, on the basis that the publisher is otherwise deprived
of a fee. The publishers must demonstrate a likelihood that MDS's
use of the excerpts replaces or affects the value of the
copyrighted works, not just that MDS's failure to pay fees causes
a loss of fees, to which the plaintiffs may or may not have been
entitled in the first instance. Given the uncontroverted fact
that professors would not have assigned the copyrighted works in
the absence of available coursepack compilations of excerpts, it
appears that there is no damage to the market for the original
work.

Photoreproductions of limited excerpts, even if bound, are poor
substitutes for a published work for any use beyond the precise
scope of the course. For example, it is unlikely that students
who wish to build a personal library of books from their college
years for future reference will retain loosely bound
photoreproduction coursepacks of limited excerpts; unwieldy
coursepacks may be inconvenient and unattractive to display and
may or may not contain the material sought later in life.

Moreover, the students who used the coursepacks were not a market
for purchase of the original works; the professors would not
otherwise have required students to purchase the original works.
If it had any effect at all, use of the excerpted materials
enhanced the prospect that the original works might later be of
interest to the student. Students might purchase the copyrighted
works when, for example, taking other courses in the same
discipline, conducting more extensive research into a subject
"touched upon" in an excerpt, or doing graduate work in a broader
field to which the excerpted material later appeared relevant and
was recalled.

Therefore, we must conclude that there is no evidence of market
effect and that the fourth, and most important factor, weighs
decisively in favor of "fair use."

                                E.

The four factors specifically set forth in section 107 for
consideration are not an exclusive list of the factors relevant
to a fair use determination. We confront here an additional
consideration. More than one hundred authors declared on record
that they write for professional and personal reasons such as
making a contribution to the discipline, providing an opportunity
for colleagues to evaluate and critique the authors' ideas and
theories, enhancing the authors' professional reputations, and
improving career opportunities. These declarants stated that
their primary purpose in writing is not for monetary compensation
and that they advocate wide dissemination of excerpts from their
works via coursepacks without imposition of permission fees. The
fact that incentives for producing higher education materials may
not revolve around monetary compensation is highly relevant.
Copyright law seeks to encourage the use of works to the greatest
extent possible without creating undue disincentives to the
creation of new works. The inclusion of excerpts in coursepacks
without the payment of permission fees does not deprive authors
and inventors of the rewards that the record indicates authors
value, such as recognition. Finding that the excerpts at issue
here were used fairly would deprive the authors of their share of
the permission fees assessed for the copies. However, the record
indicates that monetary compensation is a secondary consideration
for authors in this field, and the permission fees, while
significant in the aggregate to publishing companies, are likely
to amount to a mere pittance for individual authors. MDS's use of
the copyrighted works appears to provide the authors with
incentive to create new works, thereby advancing the progress of
science and the arts, rather than to discourage them from doing
so.

Thus, an additional factor, incentives to create in this
specialized field, weighs in favor of a finding of fair use.

                               VI.

Because the statutory factors, plus author incentives dictate a
finding of fair use, we conclude that MDS did not infringe upon
the copyrights of the publishers in this case. We REVERSE the
district court and order summary judgment for the defendants on
the basis of fair use.

                             END NOTE

1. Campbell, 114 S. Ct. at 1177-79, held that, because fair use
is an affirmative defense, its proponent would have difficulty
carrying the burden of demonstrating fair use without favorable
evidence about relevant markets," and that a silent record on the
fourth factor "disentitled the proponent of the defense" to
summary judgment.

   
   
       
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