Cambridge University Press v. J.L. Albert

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 16-15726
________________________
D.C. Docket No. 1:08-cv-01425-ODE
CAMBRIDGE UNIVERSITY PRESS,
OXFORD UNIVERSITY PRESS, INC.,
SAGE PUBLICATIONS, INC.,
Plaintiffs-Appellants,
versus
J. L. ALBERT,
in his official capacity as Georgia State University Associate Provost for
Information Systems and Technology,
KENNETH R. BERNARD, JR.,
in his official capacity as member of the Board of Regents of the University
System of Georgia, et al.,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_______________________
(October 19, 2018)
Before WILLIAM PRYOR, MARTIN, and ROSENBAUM, Circuit Judges.
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WILLIAM PRYOR, Circuit Judge:
This appeal requires us to decide whether the district court misinterpreted
our mandate in an earlier appeal and misapplied the defense of fair use, 17 U.S.C.
§ 107, in a dispute between three academic publishers and Georgia State
University about the University’s practice of distributing to students digital
excerpts of copyrighted works without paying the publishers. After a bench trial,
the district court ruled that the publishers established a prima facie case that 48
digital excerpts infringed their copyrights but that the University prevailed on an
affirmative defense of fair use for 43 of those excerpts. The publishers appealed.
We upheld the district court’s analysis of the first and fourth fair-use factors,
including its finding that widespread unlicensed use of 31 excerpts for which
licenses existed could cause substantial harm to the potential markets. But we
reversed and remanded for the district court to correct specific errors in its analysis
of fair use. One such error was the use of a mathematical formula to balance the
four statutory fair-use factors. Another was the insufficient weight the district court
gave to the severe threat of market substitution. On remand, the district court ruled
that the University prevailed on its fair-use defense for 44 of the 48 excerpts.
Contrary to our instructions, the district court again applied a mathematical
formula to balance the factors. It also revisited its market-harm analysis for the 31
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licensed excerpts and found that the threat of market harm supported fair use in all
but six of the 48 instances. Although the district court did not abuse its discretion
when it declined to reopen the record to allow the publishers to present new
evidence about the availability of digital licenses, the district court misinterpreted
our earlier decision and misapplied the statutory test of fair use. We affirm in part,
vacate in part, and remand with instructions.
I. BACKGROUND
We divide the background in three parts. First, we describe the facts and the
original proceedings in the district court. Second, we describe our decision in the
earlier appeal. Third, we describe the proceedings on remand.
A. The Facts and the Original Proceedings in the District Court
Cambridge University Press, Oxford University Press, Inc., and Sage
Publications, Inc. publish academic works. Cambridge Univ. Press v. Patton
(Cambridge II), 769 F.3d 1232, 1238 (11th Cir. 2014). The publishers “market
their books to professors who teach at universities and colleges” so that the
professors will “assign them as required reading” for their courses and “students
will purchase them.” Id. at 1238–39. The publishers also sell “licenses to use
excerpts of [their copyrighted] works.” Id. at 1276. In the past, professors
commonly assigned—and students purchased—paper “coursepacks” of licensed
excerpts. Id. at 1239. But it has become more common for universities to distribute
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digital excerpts electronically. Id. The publishers license users “to photocopy [and
to] digitally reproduce portions of their works.” Id. at 1240. They offer such
licenses, called “permissions,” both directly and through the Copyright Clearance
Center. Id.
Georgia State University, a public university in Atlanta, Georgia, provides
several ways to distribute excerpts of copyrighted works to students. The
University pays to use licensed excerpts in paper coursepacks that the University
bookstore assembles and sells to students. Id. at 1241 & n.4. The University also
maintains two systems for electronic distribution of course materials, “ERes” and
“uLearn.” Id. at 1239. Both programs enable University personnel to upload digital
copies of excerpts to University servers and allow students enrolled in a course to
download the excerpts. Id. Neither the University, see id. at 1238, nor the students,
see id. at 1240, pay for the use of the digital excerpts. This approach is “popular.”
Id. “For example, during the Spring 2009 term, paper coursepacks were offered for
only about fifteen courses, while instructors in hundreds of courses made readings
available on ERes.” Id.
In 2008, the publishers filed a complaint against officials of the University
for direct, contributory, and vicarious copyright infringement, 17 U.S.C. §§ 106,
501(a); see also Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S.
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913 (2005) (acknowledging limited third-party liability for copyright violations),
and sought declaratory and injunctive relief. Cambridge II, 769 F.3d at 1241–42 &
n.6. The publishers alleged a pattern and practice of distributing substantial
unlicensed excerpts of their copyrighted works, and they sought to prove their
claims based on a representative sample of infringements. Id. at 1241–42. The
University asserted an affirmative defense of fair use, 17 U.S.C. § 107. Cambridge
II, 769 F.3d at 1242.
After a bench trial, the district court ruled that the University infringed the
copyrights of the publishers in five instances. See Cambridge Univ. Press v. Becker
(Cambridge I), 863 F. Supp. 2d 1190, 1363–64 (N.D. Ga. 2012). The district court
found that the publishers established a prima facie case for 48 instances of
infringement. See Cambridge II, 769 F.3d at 1237. But it ruled that the University
established its fair-use defense for 43 of the excerpts. Id. We summarize its
conclusions as relevant to this appeal.
The Copyright Act enumerates four “factors to be considered” in finding that
“the use made of a work in any particular case is a fair use” instead of an
infringement. 17 U.S.C. § 107. The first factor is “the purpose and character of the
use, including whether [it] is of a commercial nature or is for nonprofit educational
purposes.” Id. § 107(1). The second factor is “the nature of the copyrighted work.”
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Id. § 107(2). The third factor is “the amount and substantiality of the portion used
in relation to the copyrighted work as a whole.” Id. § 107(3). And the fourth factor
is “the effect of the use upon the potential market for or value of the copyrighted
work.” Id. § 107(4).
The district court found that “factor one strongly favor[ed]” a finding of fair
use for every excerpt because the University’s copying was for nonprofit
educational uses. Cambridge I, 863 F. Supp. 2d at 1225. It found that factor two
“favor[ed]” fair use for every excerpt because the academic works were
“informational in nature.” Id. at 1226–27. It found that factor three favored fair use
for 35 excerpts each of which was less than 10 percent or one chapter of the
original work but favored infringement for 13 excerpts that exceeded those bounds.
Cambridge II, 769 F.3d at 1251. And it found that factor four “strongly favored” a
finding of copyright infringement for 31 excerpts for which digital permissions
were available and “favored” fair use for 17 excerpts for which the publishers
failed to prove the availability of digital permissions. Id.
In its overall analysis of fair use for each excerpt, the district court “g[ave]
each of the four factors equal weight” and “treat[ed] the four factors as a simple
mathematical formula.” Id. at 1260. That is, the district court simply “add[ed] up”
its findings whether each factor favored fair use or infringement for each excerpt.
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Id. It found that “fair use applied whenever at least three of the four factors favored
[the University].” Id. at 1251. But when it initially weighed the factors together in
its overall analysis for some excerpts, the district court found a tie, with factor one
strongly favoring fair use, factor two favoring fair use, factor three favoring
infringement, and factor four strongly favoring infringement. See Cambridge I, 863
F. Supp. 2d at 1260, 1263, 1268, 1274, 1278, 1358, 1362. For seven such excerpts,
the district court broke the ties by reconsidering the weight of the third factor, the
fourth factor, or both. See id. at 1260, 1263–64, 1268–69, 1274, 1278, 1358–59,
1362–63. It found that evidence of the amount of past permissions revenues
“strengthen[ed]” the showing in favor of infringement on the fourth factor in four
instances, id. at 1260, 1268, 1278, 1363, but that it “undercut[]” the weight of the
showing in two instances, id. at 1264, 1274. It did not change any of its findings
that factor four favored infringement.
The district court granted partial declaratory and injunctive relief to the
publishers, but it awarded attorney’s fees and costs to the University, 17 U.S.C.
§ 505.
B. The Earlier Appeal
In the earlier appeal, we reversed, vacated, and remanded. Cambridge II,
769 F.3d at 1284. As relevant here, we upheld the district court’s analysis of
factors one and four. See id. at 1267, 1279, 1281, 1283. But we instructed the
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district court to correct its “erroneous application of factors two and three” and its
errors in “[weighing and] balancing the four fair use factors” in its overall analysis.
Id. at 1283.
We held that the district court got two things right in Cambridge I: its
analysis of the first factor and its analysis of the fourth factor. On the first factor,
we agreed that “the nonprofit educational nature” of the University’s use favored
the fair-use defense. Id. at 1267; see also id. at 1283 (“The District Court did not
err in holding that the first factor . . . favors fair use.”). But we cautioned that the
University’s “nontransformative” use, verbatim copying that served “the same
intrinsic purpose” for which the works were originally published, id. at 1263, made
“the threat of market substitution . . . significant,” id. at 1267.
We also held “that the District Court’s analysis under the fourth factor was
correct.” Id. at 1279; see also id. at 1281 (“[T]he District Court did not err in its
application of the fourth factor.”); id. at 1283 (“With regard to the fourth factor . . .
the District Court did not err.”). But we held that “the District Court erred by not
affording the fourth factor additional weight in its overall fair use calculus.” Id. at
1281. Indeed, we found important errors in “the District Court’s overarching fair
use methodology.” Id. at 1259.
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We held that the district court erred when it “g[ave] each of the four factors
equal weight, essentially taking a mechanical ‘add up the factors’ approach,” and
that it should not have “treat[ed] the four factors as a simple mathematical
formula.” Id. at 1260. We explained that “a given factor may be more or less
important . . . under the specific circumstances of [a particular] case.” Id. In this
case, we emphasized that the district court “should have afforded [factor four]
more significant weight in its overall fair use analysis” because “the threat of
market substitution is severe.” Id. at 1283; accord id. at 1275, 1276 n.31, 1281. We
also reminded the district court that “the four statutory factors may not be treated
in isolation, one from another. All are to be explored, and the results weighted
together, in light of the purposes of copyright.” Id. at 1260 (alteration adopted)
(quoting Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 578 (1994)).
We also held that the district court erred in its analyses of the second and
third factors. Although the district court initially found that factor two favored fair
use and weighed equally with the other three factors, we explained that “the
District Court should have held that the second factor was neutral, or even
weighted against fair use,” for excerpts in which “evaluative, analytical, or
subjectively descriptive material” predominated, and that “the second fair use
factor is of relatively little importance in this case.” Id. at 1270. As for the third
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factor, we held that the district court erred in creating “a 10 percent-or-one-chapter
safe harbor” for fair use. Id. at 1275. We explained that the district court was
required to assess each excerpt “individually, considering the quantity and the
quality of the material taken.” Id.. And we explained that it was required to
determine “whether that taking was excessive in light of” not only “the educational
purpose of the use” but also “the threat of market substitution.” Id. at 1275. We
also mentioned the “ample precedents that explain that excessive verbatim copying
weighs against fair use under factor three.” Id. at 1274 n.30.
We vacated the orders that granted partial declaratory and injunctive relief to
the publishers and awarded attorney’s fees and costs to the University. Id. at 1283–
84. Because the relief that the district court ordered was based on its erroneous
fair-use analysis, we remanded for the district court to correct its analysis to be
“consistent with [our] opinion.” Id. at 1284.
C. The Proceedings on Remand
On remand, the publishers moved to reopen the record to introduce new
evidence that digital licenses had been available for the 17 excerpts for which the
publishers did not establish license availability at trial. The district court dismissed
the motion without prejudice. The publishers later filed the declaration of an
officer of the Copyright Clearance Center, Debra J. Mariniello, stating that digital
licenses were available in 2009 for the 17 excerpts. The district court refused to
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admit the declaration and struck all references to it from the publishers’ brief.
Cambridge Univ. Press v. Becker (Cambridge III), No. 1:08-cv-1425, slip op. at 18
(N.D. Ga. Mar. 31, 2016).
The district court changed its fair-use analysis in response to our decision in
Cambridge II. In the new analysis, factor one “favor[ed] fair use in all cases,” but
“not strongly.” Id. at 11 (internal quotation marks omitted); see also id. at 18. The
district court did not revisit its earlier first-factor analysis for any of the excerpts.
Instead, in its new fair-use analysis for each excerpt, the district court simply
repeated the finding that “[f]actor one favors fair use.” Id. at 24, 29, 34, 39, 43, 47,
53, 56, 60, 64, 70, 73, 79, 83, 88, 91, 95, 98, 101, 103, 106, 110, 114, 120, 124,
130, 133, 137, 140, 144, 146, 150, 155, 158, 161, 165, 170, 174, 179, 183, 187,
191, 196, 201, 205; see also id. at 20, 52, 69.
The district court changed its second-factor analysis for each excerpt. It
found that factor two favored a finding of fair use in two instances, see id. at 131,
145, that it was neutral in 34 instances, see id. at 22, 26, 30, 44, 57, 61, 70, 74, 80,
89, 93, 100, 102, 105, 108, 111, 115, 121, 135, 139, 142, 151, 156, 163, 166, 176,
180, 184, 190, 193, 203, 206; see also id. at 52, 69, and that it favored
infringement in 12 instances, see id. at 37, 40, 50, 54, 67, 85, 97, 125, 148, 159,
172, 198.
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The district court also changed its earlier third-factor analysis for each
excerpt. It found that factor three favored fair use for 37 excerpts, 34 of which had
benefited from its earlier 10-percent-or-one-chapter safe harbor. See id. at 22, 26,
31, 44, 52, 54, 57, 61, 69, 71, 75, 80, 94, 100, 102, 105, 108, 111, 116, 121, 126,
132, 135, 142, 145,148, 152, 156, 160, 164, 167, 172, 177, 180, 185, 193, 203. The
district court also found that the third factor favored fair use for three excerpts that
exceeded its earlier safe harbor. Compare id. at 57, 131–32, 176–77, with
Cambridge I, 863 F. Supp. 2d at 1273–74, 1310, 1346. For two excerpts, the
district court found that the price of the unpaid permissions “would have been
excessive” and that the high price “allow[ed]” the district court “to look more
favorably” on the unpaid use of a greater “quantity” of material. Cambridge III,
slip op. at 116, 176 (emphases omitted).
The district court changed its fourth-factor analysis for the 31 excerpts for
which it had originally found that “factor four strongly disfavored fair use.” Id. at
11. Under its new analysis, the district court stated that factor four would only
“initially favor [the publishers]” in those instances. Id. at 12. Then, based on its
reading of Cambridge II, the district court offered the University three ways to
prove that the fourth factor actually favored fair use in a particular instance:
[1] [T]he Court of Appeals held that Defendants may seek to prove
that in fact, the demand for excerpts of a particular copyrighted work
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was so limited that repetitive unpaid copying of excerpts from that
work would have been unlikely even if unpaid copying of excerpts
was a widespread practice in colleges and universities. In such a case
the actions of Defendants in using unpaid excerpts would not have
caused substantial damage to the potential market for the copyrighted
work to such a degree that Plaintiffs would lose the incentive to
publish the work. [2] Defendants may also seek to prove that their
actions (even assuming widespread availability of unpaid excerpts)
did not substantially affect the value of the copyrighted work in 2009.
. . . [3] Defendants may also seek to prove that the portion of the
market captured by unpaid use is so slight that it would have had no
effect on the author’s or the Plaintiffs’ decision to propagate the work
in the first place.
Id. at 12–13. The district court suggested that the relevant evidence for these
showings would generally come from “the records of permissions sales for
excerpts from the book.” Id. at 13.
The district court also adjusted its method of balancing the four factors. It
explained that the “initial, approximate respective weights of the four factors” were
“25% for factor one, 5% for factor two, 30% for factor three, and 40% for factor
four.” Id. at 14. “If a particular factor ha[d] noteworthy strength or weakness, the
weight of that factor w[ould] be adjusted” in the district court’s new analysis. Id. at
13.
Despite these changes to its analysis, the district court reached similar
bottom-line results. It again found fair use for each of the 43 excerpts for which it
had originally done so. And it found fair use in one instance where it had
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previously found infringement. Compare Cambridge I, 863 F. Supp. 2d at 1359
(finding that the University’s use of two chapters from The Power Elite, by C.
Wright Mills, was unfair), with Cambridge III, slip op. at 200–01 (finding that the
use of The Power Elite was fair).
The district court again found fair use for the vast majority of excerpts in
large part because it reversed most of its original fourth-factor findings. On
remand, the district court found that the fourth factor supported fair use in 42 of 48
instances. See Cambridge III, slip op. at 24, 28–29, 34, 42, 46, 52, 55, 60, 63, 69,
73, 83, 87, 91, 95, 98, 101, 103, 106, 109, 114, 119, 124, 129, 132, 136, 140, 143,
146, 149, 154, 158, 160, 164, 169, 174, 177, 182, 186, 190, 195, 200. The district
court left unchanged only six of its 31 original findings that the threat of market
harm weighed against fair use for excerpts for which licenses were available. See
id. at 38, 52, 68, 78, 204, 210.
The district court granted partial declaratory and injunctive relief against the
University. But it ruled that the University was the “prevailing side and [was]
entitled to an award of costs and attorneys’ fees.” Id. at 212. After the Supreme
Court decided Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979 (2016), the
publishers moved for reconsideration of the fee award, but the district court denied
the motion.
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II. STANDARDS OF REVIEW
“Fair use involves both questions of law and questions of fact.” Cambridge
II, 769 F.3d at 1255. “After a bench trial, we review a district court’s conclusions
of law de novo and a district court’s factual findings for clear error.” Id.
(alterations adopted) (quoting Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223,
1230 (11th Cir. 2009)). “We review de novo the district court’s interpretation and
application of this court’s mandate” in an earlier appeal. Cox Enters., Inc. v. News-
Journal Corp., 794 F.3d 1259, 1272 (11th Cir. 2015) (emphasis added). And we
review the denial of a motion to reopen the record for abuse of discretion. See
Elston v. Talladega Cty. Bd. of Educ., 997 F.2d 1392, 1405 (11th Cir. 1993).
III. DISCUSSION
We divide our discussion in two parts. First, we explain that the district court
misinterpreted our mandate and misapplied the test of fair use. Second, we explain
that the district court did not abuse its discretion when it declined to reopen the
record. Because we hold that the district court committed reversible errors, we
reverse, vacate, and remand.
A. The District Court Erred when It Made Its New Findings of Fair Use.
The district court misinterpreted our mandate and misapplied the test of fair
use on remand. In Cambridge II, we instructed the district court to correct its
“erroneous application of factors two and three” and its errors in weighing the four
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factors in its overall analysis of fair use for each excerpt. Cambridge II, 769 F.3d at
1283. But the district court exceeded this limited mandate, revisiting its 31 earlier
findings that factor four favored infringement and reversing all but six of them.
The district court again applied a mathematical formula in its overall analysis of
fair use. And it erroneously considered the high price of permissions when it found
that factor three favored fair use for two excerpts.
1. The District Court Erred when It Revisited Factor Four.
The publishers argue that the district court “failed . . . to follow this Court’s
remand instructions” when it revisited its earlier findings that factor four favored
infringement. The University responds that the district court correctly changed its
approach to reflect our decision in Cambridge II. We agree with the publishers.
In deciding this appeal, we are bound by the decision in Cambridge II, just
as the district court was bound to apply its mandate. The doctrine of the law of the
case “preclude[s] courts from revisiting issues that were [already] decided.”
Schiavo ex rel. Schindler v. Schiavo, 403 F.3d 1289, 1291 (11th Cir. 2005). In
particular, “findings of fact and conclusions of law by an appellate court are
generally binding in all subsequent proceedings in the same case in the trial court
or on a later appeal.” Transamerica Leasing, Inc. v. Inst. of London Underwriters,
430 F.3d 1326, 1331 (11th Cir. 2005) (quoting Heathcoat v. Potts, 905 F.2d 367,
370 (11th Cir. 1990)). And under the mandate rule, which “is nothing more than a
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specific application of the ‘law of the case’ doctrine,” id. (quoting Piambino v.
Bailey, 757 F.2d 1112, 1120 (11th Cir. 1985)), “[a] district court[,] when acting
under an appellate court’s mandate, ‘cannot vary it, or examine it for any other
purpose than execution; or give any other or further relief; . . . or intermeddle with
it, further than to settle so much as has been remanded,’” Litman v. Mass. Mut. Life
Ins. Co., 825 F.2d 1506, 1510–11 (11th Cir. 1987) (quoting In re Sanford Fork &
Tool Co., 160 U.S. 247, 255 (1895)). “The trial court must implement both the
letter and the spirit of the mandate, taking into account the appellate court’s
opinion and the circumstances it embraces.” Piambino, 757 F.2d at 1119 (citations
omitted).
The district court interpreted our earlier decision to instruct it to change its
fourth-factor analysis for the 31 excerpts for which digital permissions were
available, Cambridge III, slip op. at 11–13, but the district court misinterpreted our
mandate. In its original decision, the district court found that the fourth factor
“weigh[ed] heavily” against fair use in all 31 instances where the publishers made
digital licenses available. See Cambridge I, 863 F. Supp. 2d at 1239. Our decision
in Cambridge II upheld those 31 findings. We held that “the District Court did not
err in its application of the fourth factor.” Cambridge II, 769 F.3d at 1281; see also
id. at 1279 (“[T]he District Court’s analysis under the fourth factor was correct
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. . . .”); id. at 1283 (“With regard to the fourth factor . . . the District Court did not
err.”). The only error we identified in the district court’s treatment of the fourth
factor was that, in weighing and balancing the relative importance of the factors, it
undervalued the “severe” threat of market harm posed by the University’s
“nontransformative” copying. Id. at 1283; see also id. at 1267, 1275, 1281.
We did not instruct the district court to revisit its earlier findings that factor
four favored infringement when we instructed it to reweigh the factors on remand.
Indeed, we explained that, “[a]lthough . . . the District Court’s method for
weighing the four factors against one another was erroneous, this does not mean
that the District Court’s reasoning under each of the four factors [was] also
necessarily flawed.” Id. at 1260. And we repeatedly held that, although it should
have weighed both factor one and factor four differently, the district court “did not
err” in its application of those two factors. See id. at 1283. On remand, the district
court correctly declined to revisit its first-factor analysis for any of the excerpts. It
followed our instruction to change only how “strongly” factor one weighed in
favor of fair use in its overall analysis for each excerpt. See Cambridge III, slip op.
at 11, 18. In contrast, the district court changed all but six of its original findings
that factor four favored infringement instead of giving those findings “more
significant weight in its overall fair use analysis,” Cambridge II, 769 F.3d at 1283.
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The University contends that the district court correctly revisited its earlier
findings that factor four favored infringement because Cambridge II announced a
new standard of market harm, but the University misreads our earlier decision. It
stresses that we described the “central question under the fourth factor” as whether
a use “would cause substantial economic harm such that allowing it would frustrate
the purposes of copyright by materially impairing [the publishers’] incentive to
publish the work.” Id. at 1276 (emphasis omitted). But we used this description of
market harm—which merely echoed longstanding precedent, see Campbell, 510
U.S. at 590; Peter Letterese & Assoc., Inc. v. World Inst. of Scientology Enter.,
Int’l, 533 F.3d 1287, 1315 (11th Cir. 2008)—to explain that the earlier “analysis
under the fourth factor was correct.” Cambridge II, 769 F.3d at 1279.
In short, we held in Cambridge II that the district court’s original fourth-
factor analysis was correct. That holding precluded the district court from
revisiting the fourth factor in Cambridge III. On remand, the district court must
reinstate its original findings that the fourth factor strongly disfavors fair use for
the 31 excerpts for which the publishers proved the availability of digital licenses.
2. The District Court Erred when It Weighed and Balanced the Factors in Its
Overall Calculus of Fair Use for Each Excerpt.
The publishers argue that the district court erred by again “appl[ying] a
mathematical formula” in its overall analysis of fair use for each excerpt. The
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University contends that, “[a]lthough the district court provided approximate initial
weights of the four factors at the outset of its remand decision,” it adjusted that
formula in its overall analysis for each excerpt. We again agree with the publishers.
In Cambridge II, we identified two distinct ways in which, in its original
analysis, the district court failed to recognize that “a given factor may be more or
less important . . . under the specific circumstances of [a particular] case.”
Cambridge II, 769 F.3d at 1260. First, we explained that “the District Court erred
in giving each of the four factors equal weight.” Id. Second, we explained that the
district court erred “in treating the four factors as a simple mathematical formula,”
which we also described as an “arithmetic approach.” Id.
On remand, the district court corrected the first of these errors but again
committed the second. The district court assigned “initial, approximate respective
weights of the four factors as follows: 25% for factor one, 5% for factor two, 30%
for factor three, and 40% for factor four.” Cambridge III, slip op. at 14. Although
the district court heeded our instructions in Cambridge II when it recognized that
some factors are more important than others, it failed to break free of its erroneous
“arithmetic approach” and to give each excerpt the holistic review the Act
demands.
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As the Supreme Court has explained and as we reiterated in Cambridge II,
“the four statutory factors may not be treated in isolation, one from another. All are
to be explored, and the results weighed together, in light of the purposes of
copyright.” Cambridge II, 769 F.3d at 1260 (alteration adopted) (quoting
Campbell, 510 U.S. at 578). We emphasized that “fair use is not a mechanical
determination,” id. (alteration adopted) (quoting Wright v. Warner Books, Inc., 953
F.2d 731, 740 (2d Cir. 1991)), and that a court must “weigh[] . . . the four factors in
light of the facts of a given case,” id. at 1259.
To be sure, the district court described its arithmetic weights as “initial” and
“approximate,” and it stated that it would “adjust[]” them when it found
a “noteworthy strength or weakness” among the factors. Id. at 13. But the district
court made such adjustments only four times, each time to bolster the importance
of the third factor’s weighing against fair use. See id. at 38, 68, 140, & 201. And,
on those four occasions, the district court did nothing to adjust the other factors in
the overall fair-use calculus. We conclude that the district court’s quantitative
rubric was an improper substitute for a qualitative consideration of each instance of
copying in the light of its particular facts.
The district court failed to give each excerpt the holistic review that the Act
demands. On this remand, the district court must not apply a mathematical formula
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at any step of its analysis. We reiterate our holding in Cambridge II that “the fourth
factor looms large in the overall fair use analysis” for each excerpt in this appeal,
769 F.3d at 1275, but we instruct the district court to evaluate the four factors
qualitatively, not quantitatively, and to take care to consider them holistically “in
light of the purposes of copyright.” Campbell, 510 U.S. at 578.
3. The District Court Erred when It Considered the Cost of Purchasing
Licenses in Finding that the Third Factor Favored Fair Use.
The district court twice erred in applying the third factor of the statutory test
of fair use when it considered whether the cost of licensing was “excessive” in the
light of the publishers’ “marginal cost for authorizing digital copies . . . , [which]
would not vary no matter how many digital copies were authorized.” Cambridge
III, slip op. at 116, 176. The district court reasoned that high prices “allow[ed] [it]
to look more favorably on the quantity of [the University’s] use than it otherwise
would.” Id. at 116, 176 (emphases omitted). In these two instances, the district
court deviated from the language of the Act.
The third factor of the statutory fair-use test is “the amount and
substantiality of the portion used in relation to the copyrighted work as a whole.”
17 U.S.C. § 107(3). This provision of the Act does not direct courts to consider the
price of the unpaid use. If it did, then the district court’s reasoning could tilt the
third factor in favor of fair use even in cases of extensive verbatim copying. After
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all, it is always the case that a publisher’s “marginal cost for authorizing digital
copies would be virtually nil, and would not vary no matter how many digital
copies were authorized.” Cambridge III, slip op. at 116, 176. When we instructed
the district court to correct its analysis under the third factor on remand, we did not
include this consideration. See Cambridge II, 769 F.3d at 1275. The district court
erred when it twice considered the price of the unpaid use as relevant to the third
factor.
B. The District Court Did Not Abuse Its Discretion when It Declined To
Reopen the Record.
The publishers argue that they should have been permitted to supplement the
record on remand with evidence that digital permissions were available for the 17
works for which it did not previously provide this evidence. They argue that this
evidence “was offered to fill a purported evidentiary gap that existed through no
fault of [the publishers]” because “[t]he district court failed to put [them] on
notice” of the need to prove license availability at trial. They stress that the
availability of digital licenses took on greater importance after our decision in
Cambridge II clarified the importance of factor four.
These arguments are unpersuasive. The question whether to reopen the
record on remand is “left to the sound discretion of the trial court.” Jones &
Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523, 551 (1983). And the district court
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was entitled to conclude that it would be inappropriate to admit new evidence of
license availability that was “offered years after the close of the trial and entry of
the judgment and after review by the Court of Appeals.” Cambridge III, slip op. at
18. Nor can the publishers excuse their delay by asserting that they were ignorant
of the importance of this evidence. Indeed, they similarly “complain[ed]” in the
earlier appeal “that they were not notified at trial that they were required to show
license availability for 2009 in particular.” Cambridge II, 769 F.3d at 1278 n.33.
And we responded that the publishers “were—or should have been—aware that the
relevant evidentiary question was whether a market existed at the time of the
purported infringements.” Id. The district court was not required to reopen the
record to allow the publishers to introduce new evidence on this topic.
IV. CONCLUSION
We AFFIRM in part, VACATE in part, and REMAND for proceedings
consistent with this opinion. We affirm the order denying the publishers’ request to
reopen the record, but we vacate the judgment entered on remand. The district
court must reinstate its earlier findings that factor four strongly disfavors fair use
for 31 of the 48 excerpts. The district court must eschew a quantitative approach to
the weighing and balancing of the fair-use factors and give each excerpt the
holistic, qualitative, and individual analysis that the Act demands. And the district
court must omit any consideration of price from its analysis of the third factor.
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Because the district court’s award of attorney’s fees and costs was based on its
erroneous fair-use analysis, we also VACATE that award and the underlying
determination that the University is the prevailing party.
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