Copycats

This story appears in the January 1998 issue of Entrepreneur. Subscribe »

Suppose a certain industry newsletter is indispensable to your business. Many of your employees need ready access to it, but subscriptions cost $400 each. How about buying one subscription and encouraging employees to check for articles they think they might need and then make copies for their files?

That's what Texaco Inc. did with various scientific journals that its huge research and development staff needed--until the publisher of one of the journals found out and took Texaco to court. The U.S. Court of Appeals for the Second Circuit ruled that Texaco's practice was not "fair use" of the journals. After much negotiation, Texaco agreed to settle the case with a seven-figure retroactive licensing fee.

Stephen Gillen, an attorney who specializes in copyright, trademark and publishing issues with Cincinnati law firm Frost & Jacobs LLP, draws a parallel to computer software. "Most executives are well aware that buying one copy of a software program does not entitle their company to make multiple copies for internal use," Gillen says. "Many, though, would be surprised to learn that subscribing to a scientific or business periodical does not entitle the company to photocopy its articles, even for strictly internal use by its staff."

While most small businesses aren't likely to use scientific journals, many depend on industry newsletters. Because they're targeted specifically to a given industry and provide the latest news and analysis, these newsletters charge a price far greater than their size would seem to warrant. A single annual subscription might cost hundreds of dollars because newsletter publishers rely on subscription and licensing fees rather than advertising. "They can't afford to sell one copy and have it copied many times," Gillen says. Accordingly, newsletter publishers are even more aggressive than research and development publishers about going after people making unauthorized photocopies.

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Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.

Court Orders

But what about the concept of "fair use"? Most of us learned in school that it was okay to copy a magazine article for research purposes, as long as we weren't going to make money from it. But that was an academic setting, not business. When a newsletter or journal article actually or potentially helps your business prosper, that's commercial use.

For centuries, courts have recognized the right of authors to protect their work from being appropriated by others. The federal Copyright Act of 1976 codified both copyright law and the long-standing doctrine of "fair use," which moderates the copyright holder's rights by allowing a limited amount of material to be copyrighted under certain circumstances. These include criticism, comment, news reporting, teaching, scholarship and research. The law states that determining whether a given instance of copying is fair use involves four factors:

1. The purpose and character of the use, including whether it's for commercial or nonprofit, educational purposes

2. The nature of the copyrighted work

3. What proportion of the entire copyrighted work is duplicated

4. The effect of the use upon the potential market for or value of the copyrighted work

In the Texaco case, the company and the publisher agreed to limit the issues in the case to whether the researchers' photocopying practice was fair use. And because Texaco had nearly 500 scientists, all encouraged to copy journal articles for their files, the company and the publisher agreed to ask the court for a ruling based on the photocopying practices of one Texaco researcher, chosen at random. (This approach saved both sides from years of discovery and legal expenses.) Texaco argued that the researcher's copies were made in pursuit of scientific and scholarly research, so the practice counted as fair use.

Measuring the use of eight articles found in the researcher's files against each of the four factors, the court disagreed. The court noted the purpose of the use was not to contribute to the researcher's knowledge but to help the company develop profitable products. While the nature of the copyrighted work--fact-based scientific articles--makes it more likely to be subject to fair use than a highly creative piece, the publisher was able to show that the lost subscription and licensing revenue had significantly harmed the value of its copyright.

Who Would Know?

So how would a publisher ever find out if your business photocopies its articles? They're already a step ahead of you. Many publishers and software developers offer hefty rewards for information about illegal photocopying. For instance, Washington Business Information Inc., which publishes the industry newsletters Product Safety Letter, Regulatory Watchdog Report, The Food and Drug Letter and more, includes a reward statement with its copyright notice, offering a $2,000 reward for information about illegal photocopying. SIMBA Information Inc., publisher of Educational Marketer, Book Publishing Report and other industry newsletters, offers a reward of "up to $1,000 for actionable evidence of illegal copying or faxing" and assures informants of confidentiality.

"Nobody thinks someone is going to come inside and find out," Gillen says. But suppose you need to discipline an employee who happens to know about your photocopying practices. Tattling on the boss could be a satisfying way for a disgruntled employee to get even--and collect a nice reward in the bargain.

What To Do

Your options depend on how many publications your business uses and how many employees need them.

• Route it. If only a few employees need the publication, route it around the office for employees to read but not copy--but be aware that this method often results in slow delivery or lost newsletters.

• Circulate tables of contents. It's legal to copy the table of contents, so do that and then keep the publications in a central location so anyone who wants to read a given article can do so.

• Buy multiple subscriptions. It may be worth the money to make sure certain employees receive every issue.

• License photocopy rights. If you need only one or two publications, contact the publisher directly about buying a license to copy as many articles as you need. For broader rights, a rights clearing service such as the Copyright Clearance Center in Danvers, Massachusetts (508-750-8400) can sell you the right to copy from thousands of publications. The cost depends on the nature and size of your business. For example, a retail business with fewer than 80 employees can obtain a license to copy from more than 9,000 publications, for internal use only, for about $550 per year--plus a first-year start-up fee.

It may seem picky for newsletter publishers to file lawsuits over the photocopies in someone's file, but just like you, they're trying to earn a reasonable profit for their efforts.

Contact Source

Frost & Jacobs LLP, 2500 PNC Ctr., 201 E. 5th St., Cincinnati, OH 45202, (513) 651-6159