Seventh Circuit Decision in Substance case

[Csubstance@aol.com]

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 Judgment 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 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, according to Schmidt, though the actual 
figure is not in the record), the school board created and copyrighted a series 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 administered 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 marketed 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 questions 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 particular 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 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 diminished 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 analytical difference between destroying 
the market for a copyrighted 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 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 submitted 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. International 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.

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 publishing 
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 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-sculpture 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 order 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 copyrighted 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 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 answered 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 constitute 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 effectiv
ely. 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 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 accessible to the judges, rather than ask them 
to play archaeologist 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, 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 establish 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 memorandum 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 confidentiality.

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 apparent 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 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 institutions, 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), including 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 discussion. Despite 
the Supreme Court ‘s recent statement that "copyright law contains built-in 
First Amendment accommodations" 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 attempting to 
persuade us that the First Amendment authorizes he did. (He fails to cite 
either case.) The First Amendment adds nothing to the fair use defense. The 
defense, so far as relates to this case, is the point of balance between the right to 
criticize, which is one aspect of freedom 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 frivolous. Although a copyright no longer 
need be registered with the Copyright Office to be valid, an application for 
registration 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 Whimsicality, 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 questions, though this is unclear and in any event would probably 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. 

All that remains to consider is the injunction. Remarkably, Schmidt does not 
question its scope or application. But because an injunction frequently 
affects third parties and consumes 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 injunctions 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 inclusion 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.

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 authorization.

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