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496 LIMITATIONS ON EXCLUSIVE RIGHTS: FAIR USE
Princeton University Press v.
Michigan Document Services, Inc.
99 F.3d 1381 (6th Cir. 1996 en banc)
DAVID A. NELSON, Circuit Judge.
This is a copyright infringement case. The corporate defendant, Michigan
Document Services, Inc., is a commercial copyshop that reproduced substantial segments
of copyrighted works of scholarship, bound the copies into “coursepacks,” and sold the
coursepacks to students for use in fulfilling reading assignments given by professors at
the University of Michigan. The copyshop acted without permission from the copyright
holders, and the main question presented is whether the “fair use” doctrine codified at 17
U.S.C. § 107 obviated the need to obtain such permission.
Answering this question “no,” and finding the infringement willful, the district
court entered a summary judgment order in which the copyright holders were granted
equitable relief and were awarded damages that may have been enhanced for willfulness.
Princeton Univ. Press v. Michigan Document Servs., Inc., 855 F. Supp. 905 (E.D. Mich.
1994). A three-judge panel of this court reversed the judgment on appeal, but a majority
of the active judges of the court subsequently voted to rehear the case en banc. The appeal
has now been argued before the full court. We agree with the district court that the
defendants’ commercial exploitation of the copyrighted materials did not constitute fair
use, and we shall affirm that branch of the district court’s judgment. We believe that the
district court erred in its finding of willfulness, however, and we shall vacate the damages
award because of its possible linkage to that finding. . . .
Ann Arbor, the home of the University of Michigan, is also home to several
copyshops. Among them is defendant Michigan Document Services (MDS), a
corporation owned by defendant James Smith. We are told that MDS differs from most,
if not all, of its competitors in at least one important way: it does not request permission
from, nor does it pay agreed royalties to, copyright owners.
Mr. Smith has been something of a crusader against the system under which his
competitors have been paying agreed royalties, or “permission fees” as they are known in
the trade. The story begins in March of 1991, when Judge Constance Baker Motley, of the
United States District Court for the Southern District of New York, decided the first
reported case involving the copyright implications of educational coursepacks. See Basic
Books, Inc. v. Kinko’s Graphics Corp., 758 F.Supp. 1522 (S.D.N.Y.1991), holding that a
Kinko’s copyshop had violated the copyright statute by creating and selling coursepacks
without permission from the publishing houses that held the copyrights. After Kinko’s, we
are told, many copyshops that had not previously requested permission from copyright
holders began to obtain such permission. Mr. Smith chose not to do so. He consulted an
attorney, and the attorney apparently advised him that while it was “risky” not to obtain
permission, there were flaws in the Kinko’s decision. Mr. Smith also undertook his own
study of the fair use doctrine, reading what he could find on this subject in a law library.
He ultimately concluded that the Kinko’s case had been wrongly decided, and he
publicized this conclusion through speeches, writings, and advertisements. His
advertisements stressed that professors whose students purchased his coursepacks would
not have to worry about delays attendant upon obtaining permission from publishers.
Not surprisingly, Mr. Smith attracted the attention of the publishing industry. Three
publishers—Princeton University Press, MacMillan, Inc., and St. Martin’s Press, Inc.—