Chicago Bd Educ v. Substance Inc

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-1479
CHICAGO BOARD OF EDUCATION,
Plaintiff-Appellee,
v.
SUBSTANCE, INC. and GEORGE N. SCHMIDT,
Defendants-Appellants.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 440—Edward A. Bobrick, Magistrate Judge.
____________
ARGUED DECEMBER 1, 2003—DECIDED DECEMBER 31, 2003
____________
Before POSNER, EASTERBROOK, and ROVNER, Circuit Judges.
POSNER, Circuit Judge. In 1999 the Chicago Board
of Education brought this suit for copyright infringement
against a Chicago public school teacher named Schmidt
and a corporation that owns a local newspaper called
Substance, aimed at such teachers, which Schmidt edits.
(To simplify the opinion, we’ll ignore the corporation.) In
August 2002 the magistrate judge issued an injunction
mysteriously captioned “Permanent Restraining Order,”
from which no appeal was taken. He issued a “Final Judg-
2 No. 03-1479
ment Order” in January of the following year, awarding the
school board $500 in damages but not referring to the
injunction. Schmidt filed a timely notice of appeal from that
order. But was that too late to challenge the “Permanent
Restraining Order”? One possibility is that the order was
a temporary injunction that became permanent when the
“Final Judgment Order” was issued. If so, then since an
appeal from a final judgment brings up for review any inter-
locutory order that has not become moot, Schmidt could
defer his appellate challenge until the final judgment was
entered. And if, as other orders in the case suggest, including
the clerk’s minute order recording the issuance of the
“Permanent Restraining Order,” the magistrate judge meant
by that term “Permanent Injunction,” the failure to appeal
from it when it was entered was still not fatal. “[I]nter-
locutory appeal of a permanent injunction is not mandatory,
as the order remains part of the case and merges with the
final judgment, from which an appeal can then be taken.”
Prudential Securities, Inc. v. Yingling, 226 F.3d 668, 671 (6th
Cir. 2000); see also Victor Talking Machine Co. v. George, 105
F.2d 697 (3d Cir. 1939). To speak of “merger” in this context
is to state a conclusion rather than give a reason. But it is the
right conclusion because judicial economy is served by the
consolidation of as many issues in a litigation as possible in
a single appeal. That is why it is almost never mandatory to
file an interlocutory appeal in order to preserve an issue
for appellate review. 16 Charles Alan Wright et al., Federal
Practice and Procedure § 3921, pp. 19-20 (2d ed. 1996); see, e.g.,
Clark v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 924 F.2d
550, 553 (4th Cir. 1991).
The following facts are either undisputed or indisputable.
At some considerable expense (more than $1 million, ac-
cording to Schmidt, though the actual figure is not in the
record), the school board created and copyrighted a series
No. 03-1479 3
of standardized tests that it called the “Chicago Academic
Standards Exams” (CASE). These were, in copyright lingo,
“secure tests.” “A secure test is a nonmarketed test admin-
istered under supervision at specified centers on specific
dates, all copies of which are accounted for and either
destroyed or returned to restricted locked storage following
each administration. For these purposes a test is not mar-
keted if copies are not sold but it is distributed and used in
such a manner that ownership and control of copies remain
with the test sponsor or publisher.” 37 C.F.R. § 202.20(b)(4).
To maintain secrecy, the Library of Congress does not retain
a copy of such a test. § 202.20(c)(2)(vi).
The first step in making the CASE tests was to create a
pool of questions—the record does not indicate how many—
that would be drawn on to create the individual exams, each
consisting of between three and 30 questions. The teachers
who administered the exams were instructed not to make
copies of them and to collect the test papers at the end of
each exam so that the tests could be reused. Reuse of ques-
tions in standardized testing is not a sign of laziness but a
way of validating a test, since if performance on the same
questions is inconsistent from year to year this may indicate
that the questions are not well designed and are therefore
eliciting random answers. Educational Testing Service v.
Simon, 95 F. Supp. 2d 1081, 1084 (C.D. Cal. 1999); Association
of American Medical Colleges v. Mikaelian, 571 F. Supp. 144,
147 (E.D. Pa. 1983), aff’d by unpublished order, 734 F.2d 3
(3d Cir. 1984); Association of American Medical Colleges v.
Carey, 482 F. Supp. 1358, 1367 (N.D.N.Y. 1980); Robert A.
Kreiss, “Copyright Fair Use of Standardized Tests,” 48
Rutgers L. Rev. 1043, 1049 (1996). Such validation is of par-
ticular importance for a new battery of standardized tests,
such as CASE, the subject of a three-year pilot program. And
publication of standardized tests would not only prevent
4 No. 03-1479
validation by precluding reuse of any of the questions in
them, but also require the school board to create many new
questions, at additional expense; and they might not be as
good as the original questions, in which event there would
be diminished quality as well as added cost. Hence the
copyright category “secure tests.”
It may seem paradoxical to allow copyright to be obtained
in secret documents, but it is not. See National Conference of
Bar Examiners v. Multistate Legal Studies, Inc., 692 F.2d 478,
483-87 (7th Cir. 1982). For one thing, the tests are not secret
from the students taking them. For another, federal copy-
right is now available for unpublished works that the author
intends never to see the light of day. Salinger v. Random
House, Inc., 811 F.2d 90, 94-97 (2d Cir. 1987); see 17 U.S.C.
§§ 104(a), 301(a); Harper & Row, Publishers, Inc. v. Nation
Enterprises, 471 U.S. 539, 548 (1985). Most important, tests
are expressive works that are not costlessly created, and the
costs are greater and so the incentive to create the tests dim-
inished if the tests cannot be reused. Educational Testing
Services v. Katzman, 793 F.2d 533, 544 (3d Cir. 1986); Emily
Campbell, Comment, “ ‘Testing’ the Copyright Clause:
Copyright Protection for Educational and Psychological
Tests,” 69 Neb. L. Rev. 791, 796-805 (1990). There is no analyt-
ical difference between destroying the market for a copy-
righted work by producing and selling cheap copies and
destroying the subsequent years’ market for a standardized
test by blowing its cover.
In the newspaper that he edits, Schmidt published six of
the tests given in January 1999. He did this because he
thought them bad tests and that he could best demonstrate
this by publishing them in full. His answer to the school
board’s complaint asserted that the unauthorized copying
and publication of the tests were a fair use and therefore not
a copyright infringement. The district court dismissed the
No. 03-1479 5
fair use defense on the pleadings. This was irregular, since
no evidence had yet been presented and the defense was not
meritless on its face. The judge said that Schmidt had offered
“no indication that [the defendants] plan to present facts,
arguments, or analyses in support of a fair use.” The judge
was mistaken. He had overlooked a memorandum submit-
ted by Schmidt that attempted to do just that.
To convert the school board’s motion to dismiss into a
motion for summary judgment, the judge would have had to
notify Schmidt of his intention and give him an opportunity
to present evidence that would create a triable issue. Fed. R.
Civ. P. 12(b); R.J. Corman Derailment Services, LLC v. Interna-
tional Union of Operating Engineers, Local Union 150, 335 F.3d
643, 649 (7th Cir. 2003); Edward Gray Corp. v. National Union
Fire Ins. Co., 94 F.3d 363, 366-67 (7th Cir. 1996); 5A Wright et
al., supra, § 1366, pp. 501-06 (1990). The judge didn’t do that.
But the requirement of notice has a purpose, which is to give
the opponent a chance to show that he can present evidence
that will defeat summary judgment. If Schmidt cannot point
to any pertinent evidence that he might be able to obtain and
present in opposition to summary judgment, the judge’s
pratfall was harmless and a remand to enable the formal
conversion of the school board’s motion to dismiss to a
motion for summary judgment would be pointless. Loeb
Industries, Inc. v. Sumitomo Corp., 306 F.3d 469, 479-80 (7th
Cir. 2002); see also Ribando v. United Airlines, Inc., 200 F.3d
507, 509-10 (7th Cir. 1999); cf. Walker v. National Recovery, Inc.,
200 F.3d 500, 504 (7th Cir. 1999); Kingman Park Civic Ass’n v.
Williams, 348 F.3d 1033, 1036, 1041-43 (D.C. Cir. 2003); Taylor
v. FDIC, 132 F.3d 753, 762-63, 765-66 (D.C. Cir. 1997). What
is pertinent evidence depends on the applicable substantive
law, here the scope of the privilege of fair use in relation to
secure tests.
6 No. 03-1479
Each side of this case has a one-sided view of the law. The
school board contends that the case is governed by Harper &
Row Publishers, Inc. v. Nation Enterprises, supra, a case in
which a magazine published unauthorized excerpts from
Gerald Ford’s copyrighted memoirs before the memoirs
were published, thus jumping the gun and by doing so
reducing the value of the copyright. The school board points
out that Schmidt impaired the value of the exams by pub-
lishing them prematurely. (Presumably the school board will
not complain if they are published in Substance a century
from now.) But the board overlooks the fact that the Nation
was not publishing the excerpts from Ford’s memoirs in
order to be able to criticize Ford, or anyone or anything else,
and the further fact that Schmidt was not trying to steal the
school board’s market, because unlike Harper & Row the
school board did not intend ever to publish the copyrighted
work that the alleged infringer published first. The second
point has little force, as we’ll see; but the first is important.
As Schmidt points out, one office of the fair use defense
is to facilitate criticism of copyrighted works by enabling
the critic to quote enough of the criticized work to make
his criticisms intelligible. Copyright should not be a means
by which criticism is stifled with the backing of the courts.
And since doubts that fair use could ever be a defense to
infringement of a copyright on an unpublished work (see,
e.g., Salinger v. Random House, Inc., supra, 811 F.2d at 97) have
now been stilled (see 17 U.S.C. § 107; Sundeman v. Seajay
Society, Inc., 142 F.3d 194, 204-05 (4th Cir. 1998); Wright v.
Warner Books, Inc., 953 F.2d 731, 740 (2d Cir. 1991)), the fact
that the CASE tests were quasi-secret does not exclude the
possibility of a fair use defense.
But Schmidt overreads our decision in Ty, Inc. v.
Publications Int’l Ltd., 292 F.2d 512 (7th Cir. 2002), to hold that
a purpose of criticizing creates a privilege of unlimited
No. 03-1479 7
copying regardless of the harm to the copyright owner’s
legitimate interests. Ty was trying to enjoin the publication
of Beanie Babies collectors’ guides that contained criticisms
of some of the Beanie Babies, with accompanying photo-
graphs that constituted derivative works of the soft-sculp-
ture Beanie Babies and hence prima facie infringements of
Ty’s copyrights. There was no danger that if Ty failed to
enjoin the publication of the collectors’ guides the value of its
copyrights would be impaired, because collectors’ guides are
not substitutes for the Beanie Babies themselves. More
precisely, the only harm that could come to Ty from the
unauthorized publication of the guides would be caused by
the criticisms of particular Beanie Babies, whereas a harm to
the school board from Schmidt’s copying and publication
that is independent of any criticisms is the cost of creating
substitutes for the questions that Schmidt published and of
extending the period of the pilot program because his
publishing the six tests prevented the board from asking
any of the questions in those tests in subsequent years.
The board thus is correct that Schmidt did it harm going
beyond the force of his criticisms. Yet he was entitled to
criticize the tests and to do that effectively he had to be able
to quote from them, just as a parodist has to be able to quote,
sometimes very extensively, from the parodied work in or-
der to make the criticism of it that is implicit in parodying
it comprehensible. Campbell v. Acuff-Rose Music, Inc., 510
U.S. 569, 588 (1994); Ty, Inc. v. Publications Int’l Ltd., supra,
292 F.3d at 518; SunTrust Bank v. Houghton Mifflin Co., 268
F.3d 1257, 1271-74 (11th Cir. 2001). Indeed, there is no per se
rule against copying in the name of fair use an entire copy-
righted work if necessary. Sony Corp. of America v. Universal
City Studios, Inc., 464 U.S. 417, 449-50 (1984); Ty, Inc. v.
Publications Int’l Ltd., supra, 292 F.3d at 521; Sega Enterprises
Ltd. v. Accolade, Inc., 977 F.2d 1510, 1526 (9th Cir. 1992). This
8 No. 03-1479
would be obvious if the school board had copyrighted each
question separately, as it might well have done, since it
wants to reuse questions without necessarily reusing an en-
tire test.
So where to draw the line? The question cannot be an-
swered precisely. The fair use defense defies codification.
As we said in Ty, the four factors that Congress listed when
it wrote a fair use defense (a judicial creation) into the
Copyright Act in 1976 are not exhaustive and do not con-
stitute an algorithm that enables decisions to be ground out
mechanically. Ty, Inc. v. Publications Int’l Ltd., supra, 292
F.3d at 522; see also Campbell v. Acuff-Rose Music, Inc., supra,
510 U.S. at 577-78; Harper & Row, Publishers, Inc. v. Nation
Enterprises, supra, 471 U.S. at 560. The general standard,
however, is clear enough: the fair use copier must copy no
more than is reasonably necessary (not strictly necessary—
room must be allowed for judgment, and judges must not
police criticism with a heavy hand) to enable him to pursue
an aim that the law recognizes as proper, in this case the aim
of criticizing the copyrighted work effectively. Ty, Inc. v.
Publications Int‘l Ltd., supra, 292 F.3d at 521; Kelly v. Arriba
Soft Corp., 336 F.3d 811, 820-21 (9th Cir. 2003); Sundeman v.
Seajay Society, Inc., supra, 142 F.3d at 206.
The burden of proof is on the copier because fair use is an
affirmative defense, Campbell v. Acuff-Rose Music, Inc., supra,
510 U.S. at 590; Harper & Row Publishers, Inc. v. Nation
Enterprises, supra, 471 U.S. at 561; Video Pipeline, Inc. v.
Buena Vista Home Entertainment, Inc., 342 F.3d 191, 197
(3d Cir. 2003), and Schmidt has presented no evidence
sufficient to withstand summary judgment. But because of
the bizarre circumstance that the district court decided the
issue of fair use and then permitted discovery, we would be
forgiving had Schmidt indicated in his appeal briefs or at
oral argument what evidence he would like to obtain or
No. 03-1479 9
present, though he didn‘t obtain any in the district court
proceedings, to prove that he copied no more of the tests
than he had to do in order to make his criticisms of them
intelligible. He insists that he had to copy six tests out of the
22 to 44 tests given in January 1999 (it is unclear from the
record which number is correct, so we will give Schmidt the
benefit of the doubt and assume that it is the higher number)
in order to drive his criticisms home. But he does not explain
why, or indicate witnesses or documents that might support
such an argument. Granted that he had to quote some of the
test questions in order to substantiate his criticisms, why
entire tests? Does he think all the questions in all six tests
bad? He does not say. What purpose is served by quoting the
good questions? Again, no answer.
Schmidt‘s opening brief cites the memorandum that
he had filed in the district court—the memorandum the
judge had overlooked in rejecting the fair use defense on the
pleadings. In the memorandum, Schmidt did offer answers
to these questions. Only the answers are no good, so that
even if incorporation by reference were a valid method of
bringing facts and arguments to the attention of an appellate
court—which it is not, DeSilva v. DiLeonardi, 181 F.3d 865,
867 (7th Cir. 1999) (“a brief must make all arguments ac-
cessible to the judges, rather than ask them to play archae-
ologist with the record”); Hunter v. Allis-Chalmers Corp.,
797 F.2d 1417, 1430 (7th Cir. 1986) (“our rules do not permit
issues to be preserved by references to documents filed in the
district court”); Northland Ins. Co. v. Stewart Title Guaranty
Co., 327 F.3d 448, 452-53 (6th Cir. 2003)—treating the
memorandum as if it were a brief in this court would merely
confirm that Schmidt has no fair use defense.
The memorandum argues that the school board does not
intend to sell the tests, and so Schmidt isn‘t eating into their
market by publishing the tests. This is true, but irrelevant,
10 No. 03-1479
because he is destroying the value of the tests and the fact
that it‘s not a market value has no significance once the right
to copyright unpublished works is conceded, as it must be.
The memorandum argues that expert testimony would es-
tablish that there is no educational value in publishing the
exact same exam year after year. No one supposes there is;
the argument rather is that some questions must be carried
over to future years in order to validate the exam. The mem-
orandum argues that if Schmidt quoted only a few of the
questions, the school board would respond that he was
cherry-picking the worst. But if the board did that without a
solid grounding, it would open the door for him to quote
additional questions; it would be a pro tanto waiver of con-
fidentiality. The memorandum‘s remaining argument is that
expert witnesses can be found to testify that the CASE tests
are “dramatically inadequate.” No doubt. But in so arguing
the memorandum misunderstands the fair use privilege of
criticism. It is not a privilege to criticize just bad works, and
there is no right to copy copyrighted works promiscuously
merely upon a showing that they are bad.
There is more than a suspicion that Schmidt simply does
not like standardized tests. That is his right. But he does
not have the right, as he believes he does (he claims a right
to copy any test that an expert will testify is no good), to
destroy the tests by publishing them indiscriminately, any
more than a person who dislikes Michelangelo‘s statue of
David has a right to take a sledgehammer to it. From the
amicus curiae briefs filed in this case, moreover, it is appar-
ent that many other teachers share Schmidt‘s unfavorable
opinion of standardized tests. (A cynic might say that this
is because such tests can make teachers look bad if their
students don‘t do well on them.) So if Schmidt can publish
six tests, other dissenters can each publish six other tests, and
in no time all 44 will be published. The board will never be
No. 03-1479 11
able to use the same question twice, and after a few years of
Schmidtian tactics there will be such difficulty in inventing
new questions without restructuring the curriculum that the
board will have to abandon standardized testing. Which is
Schmidt‘s goal.
If ever a “floodgates” argument had persuasive force,
therefore, it is in this case. And this suggests another fair use
factor that supports the school board: the aspect of academic
freedom that consists of the autonomy of educational in-
stitutions, see, e.g., Grutter v. Bollinger, 123 S. Ct. 2325,
2339 (2003); Piarowski v. Illinois Community College Dist. 515,
759 F.2d 625, 629 (7th Cir. 1985) (cases involving a university
and a college respectively, but the point is general), includ-
ing their authority here gravely threatened to employ
standardized tests in support of their conception of their
educational mission. If Schmidt wins this case, it is goodbye
to standardized tests in the Chicago public school system;
Schmidt, his allies, and the federal courts will have wrested
control of educational policy from the Chicago public school
authorities.
The appeal raises other issues, but they require little dis-
cussion. Despite the Supreme Court ‘s recent statement that
“copyright law contains built-in First Amendment accommo-
dations” and that in any event the First Amendment “bears
less heavily when speakers assert the right to make other
people‘s speeches,” Eldred v. Ashcroft, 537 U.S. 186, 219, 221
(2003), and our repetition of the point in In re Aimster
Copyright Litigation, 334 F.3d 643, 656 (7th Cir. 2003), Schmidt
devotes most of the argument portion of his briefs to at-
tempting to persuade us that the First Amendment au-
thorizes what he did. (He fails to cite either case.) The First
Amendment adds nothing to the fair use defense. The de-
fense, so far as relates to this case, is the point of balance
between the right to criticize, which is one aspect of freedom
12 No. 03-1479
of expression, and the incentive to create expressive works,
which is another aspect of the same freedom, the aspect that
undergirds the Constitution‘s copyright clause. Wasting time
on the First Amendment, Schmidt failed to show that he may
have a viable fair use defense.
His further argument that the school board lacks a valid
copyright registration on which to found this suit is frivo-
lous. Although a copyright no longer need be registered with
the Copyright Office to be valid, an application for registra-
tion must be filed before the copyright can be sued upon. 17
U.S.C. § 411(a); 2 Melville B. Nimmer & David Nimmer,
Nimmer on Copyright § 7.16[B][1][a] (2003). In its application
for registration the school board claimed to have a copyright
in the entire contents of the tests. Had the claim been false,
the registration should not have issued and maybe therefore
the copyright could not have been sued upon. See Whimsical-
ity, Inc. v. Rubie‘s Costume Co., 891 F.2d 452, 453, 456 (2d Cir.
1989). (Or maybe it could have been, because the statute
requires only the application, not the registration, as the
premise for the suit. We need not decide.) Schmidt argues
that the school board did not have a copyright in the entire
contents of the tests. He bases this argument on a squabble
that erupted between the school board and a research center
at UCLA called CRESST that had been hired to review and
evaluate the questions and help the board analyze the results
of the tests. CRESST may have devised a few of the ques-
tions, though this is unclear and in any event would proba-
bly have been work for hire, 17 U.S.C. § 101, so that the
school board would have owned the copyright anyway. §
201(b). Unsurprisingly, CRESST did not claim copyright
in any part of the tests, and to resolve the squabble had
assigned any copyright it might have in its analyses to the
board.
No. 03-1479 13
All that remains to consider is the injunction. Remarkably,
Schmidt does not question its scope or application. But be-
cause an injunction frequently affects third parties and con-
sumes judicial resources, a court has an independent duty
(Marseilles Hydro Power, LLC v. Marseilles Land & Water Co.,
299 F.3d 643, 647 (7th Cir. 2002)) to assure that the injunc-
tions it issues comply with the directive of Fed. R. Civ. P.
65(d) that injunctions “shall be specific in terms” and “shall
describe in reasonable detail . . . the act or acts sought to be
restrained.” See, e.g., Schmidt v. Lessard, 414 U.S. 473, 476-77
(1974) (per curiam); International Longshoremen‘s Ass‘n, Local
1291 v. Philadelphia Marine Trade Ass‘n, 389 U.S. 64, 73-76
(1967).
The injunction flunks this test resoundingly. Cf. Educational
Testing Services v. Katzman, supra, 793 F.2d at 544-45. The
defendants are enjoined from “copying distribution of
copies, making derivative copies, displaying copies an
performing copies of the Board‘s examinations, including
but not limited to the CASE examinations, whenever created
by the Board.” The first phrase—“copying distribution of
copies”—is gibberish; probably there was meant to be an
“or” between “copying” and “distribution.” The reference to
“displaying copies an[d] performing copies” is opaque since
what is at issue is the copying itself and the publication of
the copies, not display or performance. The inclusion in the
injunction of all other examinations that the school board
may someday create (there is no sunset provision), an in-
clusion brought about by the phrase “including but not
limited to the CASE examinations, whenever created by the
Board,” is overbroad. The school board may not own the
copyrights in all its tests, even those it creates (work-for-hire
copyright rights can be waived); not all its test questions
may be intended to be reused; not all its tests may be secure
tests.
14 No. 03-1479
This is an appallingly bad injunction. It must be modified to
enjoin the defendants, and those in privy with them or with
notice of the injunction, just from copying or publishing or
otherwise distributing copies of secure Chicago public school
tests, in whole or substantial part, in which the school board
has valid and subsisting copyright, without the board‘s au-
thorization. No evidentiary basis has been laid for a broader
injunction.
The judgment is affirmed in part, and vacated in part, and
the case is remanded for further proceedings consistent with
this opinion, the parties to bear their own costs in this court.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—12-31-03