The opinion of the court was delivered by: CURTIN
This is a copyright infringement action which poses the question of whether an educational cooperative's large-scale videotape reproduction of copyrighted works originally broadcast and taken from the television airways constitutes fair use under the copyright laws.
Plaintiffs are three profit motivated corporations engaged in the business of producing, acquiring, and licensing educational audiovisual materials. In this case, they are all primarily involved in the production and distribution of educational works which are marketed to educational institutions, related organizations, and television networks. These works are sold or licensed in several different formats, but in general terms, they may be marketed as 16 millimeter motion pictures (print films) or on various sizes of videotape.
The plaintiffs' primary allegations are that defendants videotaped their copyrighted works from the television airways, principally from the local educational and instructional television station, WNED-Channel 17, maintained a library of these videotaped works, and made copies of these tapes for classroom use. They have selected 19 films which were broadcast over the television airways and videotaped by the defendants as the basis for this action. Each of the plaintiffs owns copyrights to some of these 19 works, and they seek permanent injunctive relief, statutory damages, costs, and attorneys' fees for the defendants' alleged unauthorized use of these works.
Defendants are the Board of Educational Services, First Supervisory District, Erie County, New York [BOCES], and its individual officers and directors. BOCES was created under section 1950 of the New York Education Law for the purpose of providing educational services and specialized instruction on a cooperative basis to the 19 school districts within its geographic region.
It is a non-profit organization funded by the 19 school districts, and there are over 100 affiliated schools served by BOCES programs. The purpose of the BOCES cooperative is to provide a variety of educational services in a more economical and efficient form than could be accomplished by an individual school or school district. At the same time, a school district's membership in BOCES does not necessarily mean subscription to or participation in all BOCES educational services.
Two services provided by BOCES are a videotape library and duplication program and a film print library which circulates motion pictures on request to the member schools. When this suit was commenced, 15 of the 21 school districts subscribed to the BOCES Videotape Service, and 20 of the 21 school districts participated in the BOCES Film Service. It should be noted that none of the individual schools or school districts is a party to this action.
The complaint was filed in October of 1977. At that time, plaintiffs were granted a temporary restraining order to prevent destruction of existing videotapes and relevant written records pending a final decision in this case. They were also given leave to conduct accelerated discovery. Subsequently, plaintiffs moved for a preliminary injunction. A hearing was held on December 27, 1977, and a decision was issued granting a preliminary injunction on February 27, 1978. Encyclopaedia Britannica v. Crooks, 447 F. Supp. 243 (W.D.N.Y. 1978). The primary basis for that injunction was that BOCES operated a highly organized and systematic program for reproducing videotapes on a massive scale, apparently in blatant violation of the then-existing Copyrights Act. The court subsequently issued an order enjoining BOCES from videotaping plaintiffs' programs off the public airwaves. For the existing videotape library, however, the court declined to enjoin further distribution of these tapes. Rather, it was concluded that plaintiffs would be adequately protected if BOCES monitored the use of the tapes and required their return and erasure within a specified time.
A two-week non-jury trial on the merits was held in the fall of 1980, at which some 17 witnesses testified and 87 exhibits were entered into evidence.
Although the trial concerned only the use of 19 works copyrighted by the plaintiffs, limited evidence concerning 126 other copyrighted works owned by the plaintiffs and videotaped by the defendants was permitted to show the defendants' general plan or scheme. Additionally, evidence concerning alternative methods of licensing videotape reproductions was permitted for the limited purpose of demonstrating some harm to the plaintiffs' potential market for or value of the 19 copyrighted works.
Corporate representatives of the plaintiffs, Rolf Rasmussen, Encyclopaedia Britannica Educational Cooperation's [EBEC] marketing manager for television sales; Ralph-Wagner, president of EBEC; David Davidsen, former executive vice president of the Learning Corporation of America [LCA]; William Deneen, president of LCA; and and William Ambrose, vice president of Time-Life, Inc., for marketing in the areas of business and education, testified about the production, distribution, and marketing of their educational films and the effect of unauthorized videotape reproduction on the sales of their companies.
BOCES employees and defendants Dr. Clifford Crooks, the district supervisor of BOCES; Joseph Plesur, formerly the BOCES coordinator of planning and instructional services from 1966 to 1978; Theodore Ertel, BOCES senior educational television equipment specialist; and Alvin Kraebel, supervisor supervisor of instructional television operations, testified about the BOCES videotape operations and the duplication and distribution of videotape copies to the schools for classroom use.
John Johnston and Charles Teague, two teachers at schools subscribing to the Videotape Service, explained the attributes and mechanics of educational videotape use in classroom instruction.
Raymond Graf, Chief of the New York State Bureau of Educational Communications, testified concerning the history, growth, and development of videotape as a teaching tool, the support of this technological development given by the State, and the value of educational videotapes in classroom instruction. Anthony Buttino, director of educational services at WNED-Channel 17, explained the relationship between BOCES and the station's broadcast of instructional television programs. Additionally, he testified about the various videotape duplication rights granted by copyright holders of educational films. Norman Johnson, a BOCES employee who is the supervisor of the BOCES print-film library and Service and who now holds Mr. Plesur's position, explained the operation of this program and the division and distinctions between Print Film Service and Videotape Service. Kenneth Wasmund, chairperson of the Appalachian BOCES consortium, testified about the opration of their videotape reproduction and film distribution services. Finally, Dr. Jacky Knopp, a professor of marketing and the defendants' expert witness, testified on the issue of harm and potential harm to the plaintiffs' copyrighted works caused by the defendants' videotape reproduction efforts.
This action was initiated before January 1, 1978, and therefore, the Copyrights Act of 1909 [the Old Act], 17 U.S.C. § 1 et seq., is applicable to all the defendants' activities prior to this date. Concerning any activities of the defendants which occurred after January 1, 1978, or any future activities of the defendants, this case is governed by the Copyrights Act of 1976 [the New Act], 17 U.S.C. § 101 et seq.
The facts are not substantially in dispute. In accordance with Rule 52 of the Federal Rules of Civil Procedure, they are set forth below. At the outset, however, it is helpful to define some of the terms and functions involved in television broadcasting, film production, videotape reproduction, and audiovisual technology.
Traditionally, the most common format for an educational audiovisual work has been the 16 millimeter print film format. The primary advantage of using the print film format is general familiarity with the technology and the availability in the schools of projection equipment.
Videotape is a more recent development, and there are three types of videotape: one-hlaf-inch Sony Betamax, one-half-inch VHS, and three-quarter-inch videotape. These three types of videotape are not interchangeable, and the price of equipment utilizing a specific type of tape varies as well. For example, the court was given to understand that a one-half-inch videotape recorder-player costs approximately $600, while a recorder-player for three-quarter-inch tape costs approximately $1,500.
Off-the-air recording or videotaping, sometimes called off-air recording, has now almost become a term of art. It refers to the use of videotape in a recorder to record television signals using the videotape in a playback machine or a recorder equipped with the requisite playback equipment. In this manner, television programs originally broadcast over the airways may be transcribed on videotape and then used and replayed much like the more customary audio/tape recorder. Although the means to videotape off-the-air has existed for many years, prior to the marketing of recorder-players such as the Sony Betamax, off-the-air videotaping was a complicated procedure and not as widely used. Recent technological developments have both simplified the use of videotape in cassette or disc form and have added complex electronic capabilities to videotape recorders.
One of the advantages of videotape is that it can be erased and reused extensively. Additionally, unlike print films which may chemically deteriorate over time, videotape has an unlimited shelf life and is less likely to be damaged in use. Further, television programs can now be videotaped with relative ease, and videotape copies made from the original tape can be reproduced with the proper equipment.
A third format by which audiovisual programs are made available to the schools is through the medium of educational television itself.
There are two varieties. Most familiar is the daytime instructional broadcast of public television. Less widespread is closed circuit cable and/or microwave transmission within a given broadcast system. The advantage of the latter format in a school setting is that the timing of a program's showing can be at the convenience of the classroom audience. On the other hand, public television has the advantage of reaching a much wider audience without the need for any special transmission and receiving equipment and without the additional equipment operating costs.
Although the BOCES Print Film Service and the Television and Videotape Service are located in the same building in Lancaster, New York, they are administered separately. They are operated by two different staffs in different parts of the building and under different policies. The Print Film Service is supervised by Norman Johnson and consists primarily of a print film library which has extensive holdings totaling over 10,000 print films. In fact, of the 19 works in suit, 16 were purchased by BOCES from the plaintiffs in the form of print films prior to the initiation of this action. At least one of these films was obtained after there were videotapes made of the same work by off-the-air recording. Since the print film staff operated so autonomously from the Videotape Service, the Film Service was unaware that this same work had been copied by the Videotape Service.
The Film Service has two basic methods for determining which films should be acquired for the library. New print films are selected for acquisition by a User Committee. Additional copies of films are purchased when it becomes difficult to fulfill requests for a particular film with a single print. As a general rule, every time there are 30 requests from teachers for a given film, an additional copy is purchased. These purchases are regularly made by BOCES directly from the plaintiffs and other film manufacturers and distributors, and the 1975-1976 budget of the Film Service was approximately $238,000.
BOCES also has the capability to transfer the images on print film to videotape, using two types of "film chain" machinery. Nevertheless, BOCES insists that at no time have the print films involved in this action ever been converted to videotape.
BOCES Videotape and Instructional Television Service
The Videotape and Instructional Television Service has extensive facilities for off-the-air recording of television programs, equipment for the simultaneous reproduction of multiple videotape copies of programs, cable television, and microwave transmitting and receiving equipment licensed by the Federal Communications Commission, as well as a videotape library. The value of the electronic equipment used by BOCES ranges from $500,000 to $1,000,000, and the library contained 4,500 videotaped programs during the 1976-1977 school year. Most of these library holdings were obtained by the off-the-air recording of programs broadcast by television stations. The sophisticated electronic equipment used by the BOCES staff can produce 60 videotape copies of any given program in a 24-hour period. Additionally, BOCES has a 100-foot antenna tower for receiving television signals and two microwave antennas for broadcasting its own signals to member schools.
The BOCES Videotape and Television Service has approximately nine employees and a budget of some $297,000 per school year, as reported in 1976-1977. These funds were primarily derived from the 15 participating school districts, based upon a perpupil assessment for each school district.
BOCES originally began videotaping television programs in 1966 when defendant Joseph Plesur was hired by BOCES to establish an instructional television service for the schools in the BOCES district. Since that time, the Videotape Service has grown at a rapid rate, and the videotape library has become the largest in the State.According to the BOCES 1976-1977 budget, some 14,000 programs were either transmitted to schools via cable television or were reproduced on school-owned videotape during the prior year.
Since 1967, the BOCES supervisor of instructional television has been defendant Alvin Kraebel, who was hired by Plesur. It was under Kraebel's supervision, but at Plesur's direction, that BOCES generally videotaped all programs broadcast by WNED during the instructional daytime television period. This period of time, between 9 a.m. and 3 p.m., is traditionally reserved for school-related instructional programs broadcast by instructional television stations. During this six-hour period, BOCES usually videotaped all programs broadcast by WNED and 17 of the 19 works in issue here.
Defendants concede that BOCES videotaped off-the-air all programs of educational value. They presumed that if a program was broadcast by WNED as part of the station's daytime instructional television broadcasts, the program had inherent educational value. Additionally, BOCES videotaped television programs of educational value broadcast by three of the local Buffalo commercial television stations, evening programs broadcast by WNED, and programs from a not too distant Canadian educational television station. In this case, 2 of the 19 films in suit were originally broadcast as part of the evening television programming.
Defendants videotaped entire programs, including plaintiffs' copyrighted notices from the various television stations' broadcasts. They have conceded that there was no prior permission secured from the plaintiffs or any fees paid to the plaintiffs for BOCES' videotape copying. Further, BOCES had no contractual relationship with the plaintiffs or with WNED for the purchase or licensing of the off-the-air videotapes derived from the television broadcasts.
Videotape Service Operations
The production and distribution operations of the Videotape Service are significant to many of the legal issues in this litigation and will be described in some detail. The holdings in the videotape library were made known to teachers in the BOCES district by means of a catalog which was periodically supplemented or revised. Approximately 4,000 copies of the 1975-1976 catalog were distributed, and this edition listed some 5,000 "master" videotapes
in a 345-page directory, divided into 26 separate subject areas. Each of the plaintiffs' 19 copyrighted works involved in this lawsuit has been listed in one of the BOCES catalogs as available to schools; however, none of these catalogs was ever sent to the plaintiffs.
Every videotape in the BOCES library and catalog was assigned an accession number, and each catalog contained written request forms. When a teacher from a subscribing district wanted to use a videotaped program from the BOCES library, the teacher would complete the form and have it sent to the Videotape service. In response to the request, the Service would copy the requested program onto videotape from the master videotape kept in the BOCES library. The videotape used for making the copy was usually supplied by the school, although occasionally, the copy tape was supplied by the Service.
The videotape copy was then returned to the school, usually within seven days of the request, where it was often screened by the requesting teachers to determine whether the program was suitable for students and the curriculum. If the videotape copy was used by the teacher, testimony by teachers at trial revealed that the copy was generally shown five or six times so that several class sections would view the program. These repeated showings of off-the-air videotaped programs, which had earlier appeared on television, permitted the defendants to engage in what they call "time-shifting."
In home videotape recording and playback systems, time-shifting refers to the ability of some videotape machines to record television programs while the viewer is watching another station or program, or even when the viewer is not watching television at all. The videotape machine can be programmed in advance to receive and record television broadcast signals at a particular time and then played back at the viewer's convenience. See Universal City Studios, Inc. v. Sony Corporation of America, 480 F. Supp. 429, 435, 203 USPQ 656, 666-667 (C.D. Cal. 1979). In this case, time-shifting refers to the ability of teachers and students to view instructional television programs by BOCES' off-the-air recording, irrespective of when the program was broadcast by WNED.In essence, timeshifting provides for a more flexible television viewing schedule through videotape transcription and later playback for the convenience of the teachers and students.
The Videotape Service kept no records concerning the use of videotape copies after they were delivered to the schools. There were no restrictions or requirements imposed by BOCES on the use of these copies; they could be kept by the school, or the copies could be returned to the Videotape Service for erasure and used again for duplication. Some schools kept the copies and created their own libraries of videotape programs, with collections of up to 100 tapes, but the more common practice was to use the same tape repeatedly for copying different programs.
The Videotape Service occasionally made videotape copies for institutions not affiliated with BOCES. These copies were made either free of charge or at nominal cost -- such as $25 per hour of duplicating, with the organization supplying the videotape for the copy. Organizations whose requests were filled in this manner included the State University College at Buffalo, other BOCES, the Buffalo public schools, as well as at least one profit-making, non-educational corporation. The extent of this practice was only a small part of the Videotape Service's overall work. Of the 16,730 "usages" of the Videotape Service in a two-year period, only 198 were of this sort. In addition, no evidence was adduced at trial that any of the 19 works in suit were copied at the request of these non-BOCES organizations.
WNED and Instrumental Television Programming
WNED is the local Western New York public television station which also functions as an instructional television station. As an instructional television station, it is considered a regional education agency and is chartered by the New York State Board of Regents. Since 1960, the station has been broadcasting instructional daytime television programming, and since 1972 when State law was changed, the cost of this broadcasting has been almost totally funded by the State. Under this arrangement, WNED receives approximately $180,000 annually from the State for instructional television broadcasting purposes. Prior to this time, a large portion of WNED's instructional television budget was derived from schools, school districts, and BOCES.
A substantial number of programs broadcast by WNED are supplied to the station by the Eastern Education Network. Each year, member stations of this network, including WNED, designate representatives to attend meetings where network-wide programming decisions and selections are made. These program selections are in turn broadcast by WNED during "preview week" and evaluated by teachers and BOCES representatives who serve on the Western New York Public Television Council. Based upon these evaluations, the final program selections are made for broadcast by the television station. In the past, these selections have included copyrighted works of the plaintiffs.
The fees for licensing these broadcasts vary with the copyright holder and individual work as well as the number of times a program may be rebroadcast by the station. Generally, plaintiffs Encyclopaedia Britannica and LCA received between $55 and $75 from the Eastern Educational Network for every instructional television station which would broadcast their individual films. Time-Life's broadcast license fee for each work ranged between $250 and $400 per television station. Individual stations may also contract directly with audiovisual producers and distributors for the television rights to broadcast their media works.
Beginning in 1975, WNED began circulating information to schools about the off-the-air copying rights granted by some of the copyright holders of instructional television programs broadcast by the station. These rerecord rights, as they are called, vary greatly; some copyright holders permit broad reproduction of their works, while others place restrictions to prohibit rerecording altogether.
Anthony Buttino, director of Educational Services at WNED and supervisor of the day-time instructional broadcasting for the station, explained at trial that the Advisory Council now attempts to select only programs which offer rerecord rights. Prior to the introduction of State funding, WNED's contract with schools for instructional television broadcasts would also list some of the off-the-air rerecording rights for the works televised by the station. None of the films in this case was listed in the contract as available for off-the-air recording.
Additionally, WNED publishes an annual program guide of its instructional television programs which is distributed to teachers. This guide explains how to use the program in classroom learning, the purpose of the work, and suggested follow-up activities to be undertaken by students based upon their viewing of the program. It should also be noted that WNED is not a party to this action Production and Distribution of Educational Films and Videotape
Plaintiff Encyclopaedia Britannica Corporation began producing and distributing films in 1929. The Corporation both produces and contracts with others to produce non-theatrical print films, and it has approximately 1,500 active titles available for classroom use. These works may be purchased outright or over a period of time, rented for a short duration, or leased for 12 months or longer. Encyclopaedia Britannica produces approximately 70 new films a year, at an estimated average cost of $66,000 per 30-minute film. The market price for each work varies, but they are generally sold for several hundred dollars in film format. About 5 percent of Encyclopaedia's revenue is derived from the television broadcast of their works, and in this case, Encyclopaedia Britannica holds the copyrights of 7 of the 19 works in issue.
In response to the development in late 1973 of the simplified videotape recorder-player such as the Sony Betamax, Encyclopaedia Britannica began offering its film works in video cassette and video disc formats. EBEC also offers a licensing agreement which permits the videotape reproduction of their copyrighted films by those already owning the work in film format. This license is based upon a rate of $5 for the first 10 minutes of film running time and $3 per minute for the remaining length of the film. Thus, the license fee for those owning their own videotape equipment and transferring film images to videotape is $110 for a 30-minute Encyclopaedia Britannica film. This license provides for only one videotape copy at any one time, although the single copy may be erased and later reproduced again at the owner's convenience.If more than one copy is desired, additional licenses must be purchased from Encyclopaedia Britannica for each copy.
Another agreement developed by Encyclopaedia Britannica allows an educational institution to make unlimited videotape copies of any Encyclopaedia Britannica film already owned by the institution. The fee for this license is based upon the number of playback machines used to show the videotape copies, and the license fee per machine decreases in proportion to the additional number of playback machines authorized to show the copies. Under this scheme, one Encyclopaedia Britannica playback machine license costs $125. If 250 playback machines are licensed, the individual machine license fee decreases to $48 per machine. This licensing agreement between Encyclopaedia Britannica and the educational entity also requires that the videotape copies produced under the contract be erased or destroyed at the expiration of the agreement if it is not renewed by the parties.
Appalachian BOCES, which geographically adjoins the defendant BOCES, has entered into this type of licensing agreement with Encyclopaedia Britannica. It has also entered into a similar arrangement with plaintiff LCA for the videotape reproduction of their film works. Appalachian BOCES' total cost for both these licensing agreements is $75,000 for a five-year period of time, and since 1974, Encyclopaedia Britannica has derived approximately $685,000 from this type of agreement with educational institutions.
Encyclopaedia Britannica has also entered into licensing agreements with television stations and schools, which permit the schools to make off-the-air recordings and videotape copies of Encyclopaedia Britannica works broadcast by an educational television station. Such an agreement exists between EBEC, the schools, and Channel 19 in Kansas City.
Finally, Encyclopaedia Britannica allows schools to make off-the-air recordings from instructional television broadcasts of their works, and these videotape copies may be used for seven days. This off-the-air copying does not require the payment of any fees, although Encyclopaedia Britannica requests that the educational institutions limit their videotaping to one copy per school and that they notify EBEC of their videotape copying. After this seven-day period, the copies are to be erased.
Plaintiff Learning Corporation of America was originally known as the Learning Company of America when it began in 1968 as a division of Columbia Pictures. The company was sold to the W.F. Hall Printing Company in 1974, and its name was changed to reflect this new corporate ownership. All of the 10 LCA films involved in this suit were originally registered under the copyright statutes by the Learning Corporation of America, and the copyright ownership for each of these films has since been assigned to LCA.
LCA produces and distributes some 500 non-theatrical films primarily to educational institutions. The purchase price for these films ranges from $225 to $380 each, and the cost for producing these works is estimated to be between $85,000 and $95,000 per film. William Deneen, the president of LCA, testified that they must sell 500 copies of a given film before any profits are generated for the corporation.
LCA's videotape licensing agreement for videotape reproduction of films already owned by a school is based upon a fee of $3 per minute of running film time. Thus, a 30-minute LCA film may be reproduced onto videotape under license for $90. As with plaintiff EBEC, additional videotape copies require additional licenses from the corporation. LCA also has a more flexible videotape licensing agreement, such as the agreement between LCA and Appalachian BOCES.
Before 1978, LCA had a policy similar to EBEC's which allowed schools to make off-the-air videotape reproductions of their works broadcast by instructional television stations. This policy permitted schools to make copies of the broadcasted works without charge, and the videotape copies could be used for up to seven days, after which they were to be erased. As the use of off-the-air videotape recording expanded in the mid-1970s, schools began to request use beyond the seven-day period, and LCA also noted a decline in their film sales.
In January of 1978, based upon declining film sales which LCA believes were caused by extended and expanded off-the-air videotaping by educational institutions, LCA decided to no longer offer their works for broadcast by educational television networks. This resulted in a loss of some $400,000 in revenue to the corporation for educational television broadcast sales; however, LCA believes that its film and videotape sales will ultimately increase as a result of their withdrawal from the educational television market. Prior to this decisions, educational television broadcasting sales comprised only 1.5 - 2 percent of LCA's total revenues, and they continue to sell their works for broadcast by commercial television networks.
Plaintiff Time-Life produces some films for educational use, but the majority of films which the company distributes are produced by the British Broadcasting Corporation or are jointly produced with the BBC. In this suit, the two works to which Time-Life holds the copyrights were originally broadcast outside of the instructional broadcast period. "The Ultimate Risk" was originally broadcast by WGR-Channel 2, a local commercial station, as part of the station's evening programming, and the other, "The Ultimate Machine," was broadcast during the evening hours by WNED.
Time-Life sells its works in both film and videotape formats to educational institutions. Although the corporation prefers to make videotape copies of its works to ensure the quality of the reproduction, it does license videotape copying if the quality can be maintained by those producing the copies. Time-Life's fees for their videotape copying licenses varies with the number of videotape copies made and the average daily attendance at an educational institution.
Plaintiff's argument is essentially unchanged from that presented at the time of the preliminary injunction decision. As the copy-right owners of the films in question, they claim that they have the exclusive rights under the federal copyright laws to control the copying and use of their works. Plaintiffs claim three separate kinds of copyright infringements for the 19 films in issue here: (1) the making of five original master videotapes
and videotape copies derived from all the master tapes in violation of 17 U.S.C. § 1(a); (2) the vending of these copyrighted works by BOCES in violation of 17 U.S.C. § 1(a), based upon contributions from school districts to BOCES for participation in the Videotape Service; and (3) the public performance of these works in the classrooms caused by BOCES' videotape duplication and closed circuit cable television transmission in violation of 17 U.S.C. § 1(d). Thus, each time a videotape was copied and sent out to a school and played in a classroom, plaintiffs claim that at least three infringements of their copyrights occurred under the Old Act.
The defendants' position is in essence that if technological change has rendered the Copyrights Act ambiguous, the Act must be construed in light of its basic purpose, Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 186 USPQ 65, 67 (1975), and that the equitable doctrine of fair use is applicable to the videotaping practices of BOCES brought about by these technological changes. Second, they maintain BOCES was a "transmitting organization" under the Old Act and is a "broadcasting entity" under the New Act, and therefore, its videotaping does not constitute an infringement as a matter of law. Further, the defendants also claim the protection of the First Amendment of the United States Constitution because they are in the business of promoting education, a matter "of paramount interest." Defendants also rely on the doctrine of estoppel. Finally, even if the ...