Court: Court of Appeals for the Ninth Circuit; September 18, 2000; Federal Appellate Court
Appellant Worldwide Church of God (WCG) is a nonprofit religious organization that holds the copyright to Herbert W. Armstrong's book, *Mystery of the Ages* (MOA). Following Armstrong's death in 1986, WCG ceased distribution of MOA due to changes in church doctrine and concerns about outdated and racially insensitive views expressed in the book. WCG had previously distributed over nine million free copies of MOA.
In 1989, former WCG ministers Gerald Flurry and John Amos founded the Philadelphia Church of God (PCG), which claims to adhere strictly to Armstrong's teachings. PCG considers MOA essential to its religious practice and began copying and distributing it without WCG's permission in 1997. PCG's version of MOA included verbatim text but altered copyright information and omitted a reproduction warning. To date, PCG has distributed around thirty thousand copies in English and additional foreign-language versions.
The legal issue at hand is whether PCG’s actions constitute fair use under the Copyright Statute, 17 U.S.C. § 107.
WCG has accused PCG of copyright infringement by reproducing and distributing its copyrighted material, the MOA, despite WCG's demands to cease such actions. In response, PCG denied WCG's copyright ownership, claiming protections under the Free Exercise Clause, the Religious Freedom Restoration Act (RFRA), and the fair use doctrine. WCG sought partial summary judgment and a preliminary injunction, but the district court denied these motions and granted PCG's motion for summary adjudication, ruling that Armstrong, not WCG, was the author of the MOA and that it was not a work for hire, thus WCG lacked copyright ownership. WCG appealed the district court's decisions, which were consolidated for review.
The court noted that even though PCG disputed WCG's copyright ownership, it was established that Armstrong bequeathed his estate, including copyright, to WCG, which was upheld in probate. PCG claimed an implied license from Armstrong for MOA's dissemination but failed to properly plead this defense, rendering it not before the court. The argument for an implied license lacked merit as PCG did not assert a specific license granted by Armstrong, only that he intended for MOA to reach a broad audience.
Armstrong's copyright for the book "MOA" passed to WCG through his Will, establishing WCG as the copyright owner. The district court found that PCG's use of MOA qualified as fair use, primarily because it was for non-profit religious and educational purposes, the complete text was reasonable for that use, no evidence showed WCG lost members due to PCG’s distribution, and MOA being out of print supported PCG's actions. WCG argues this fair use finding was erroneous, asserting that fair use involves both legal and factual assessments. Courts may determine fair use as a matter of law if there are no genuine factual disputes. WCG, as copyright owner under § 106 of the Copyright Act, retains exclusive rights to reproduce and distribute MOA, regardless of its non-profit status or the religious nature of its activities. PCG's unauthorized copying is not protected under the limited religious use exemptions in § 110(3), and legal precedent confirms that religious or non-profit use does not exempt entities from copyright laws. Additionally, First Amendment free speech rights do not support PCG’s claim, as the law does not recognize valid copyrights in facts, ensuring public access to information.
The fair use doctrine does not authorize unauthorized use of copyrighted material, particularly not for corporate gain, as clarified by the Supreme Court in Harper & Row. It emphasizes the importance of protecting an author's rights to their unpublished works and the balance between an artist's control over their work and public access. The Copyright Act defines fair use under § 107, highlighting four factors for consideration: 1) the purpose and character of the use (commercial vs. nonprofit), 2) the nature of the copyrighted work, 3) the amount and substantiality of the portion used, and 4) the effect on the market value of the original work. The common-law origins of fair use emphasize the necessity for reasonable use, and historical cases illustrate that while extensive copying for criticism may be permissible, using critical excerpts to replace the original work constitutes infringement.
The analysis begins with the examination of the four statutory fair use factors, specifically focusing on the first factor that evaluates the purpose and character of the use, distinguishing between commercial and nonprofit educational purposes as per 17 U.S.C. § 107(1). The inquiry seeks to determine if the new work merely replaces the original or adds something transformative, which involves substantial intellectual effort rather than simple copying. In this case, PCG's complete reproduction of WCG’s MOA lacks transformative qualities and instead serves the same religious and educational objectives as the original.
While PCG claims its use is not for profit, the Supreme Court clarified that the commercial or nonprofit nature of a work is just one aspect of the first factor. Noncommercial use does not inherently equate to fair use, as it can still impair the copyright holder's financial interests. The distinction between profit and nonprofit is nuanced, emphasizing that any perceived advantage or benefit from the copyrighted material can constitute profit, even in non-monetary terms.
PCG's use of the MOA is deemed to provide it with significant benefits, such as facilitating religious practices, attracting new members who contribute financially, and supporting its growth. With a membership increase to approximately seven thousand during the period of copying and distribution, it is evident that PCG derived advantages from the MOA, leading to the conclusion that the first factor weighs against a finding of fair use.
The second statutory factor evaluates whether the copyrighted work is informational or creative, with the law favoring the dissemination of factual works over creative ones. Copying a news broadcast could be more defensible under fair use than copying a film. Although PCG describes the work "MOA" as a historical account of religious views, its creative elements weigh against fair use. The third factor examines the amount copied relative to the whole work; PCG copied the entire MOA, excluding only minor references. While wholesale copying does not automatically negate fair use, it does heavily influence the assessment against fair use. PCG justifies its verbatim copying by claiming its religious purpose aligns with the original intent of WCG. However, past rulings indicate that copying for the same purpose as the copyright owner weakens the fair use argument. The unique circumstances of the Sony case, where copying for personal use was allowed, do not apply here, as PCG is using the work as a core aspect of its religious practices. The expectation is that PCG should compensate WCG for the use of MOA, with this factor leaning against fair use. The fourth factor considers the impact on the market value of the copyrighted work, emphasizing that fair use should not materially impair the work's marketability. This case presents a unique situation since WCG is a not-for-profit entity, diverging from typical profit-driven copyright cases.
The absence of a conventional market for a work held by a nonprofit does not negate copyright protection. Requiring proof of actual or potential monetary loss would render nonprofit copyrights virtually worthless, jeopardizing religious, educational, and public interest institutions that rely on their reputation. Copyright law encompasses the effect of use on the value of the work, not just market impact. Even noncommercial copying can impair a copyright holder's ability to receive intended rewards, which can take various forms beyond monetary compensation. Courts do not dictate how copyright holders should exploit their rights.
WCG asserts that PCG’s unauthorized distribution of its version of "MOA" harms WCG's goodwill by diverting potential members and contributions, despite the district court's finding that the two versions do not compete in the same market. Evidence shows that recipients of PCG's copies could be potential WCG adherents, indicating that "MOA" serves as a marketing tool for both organizations. PCG argues that WCG's ten-year inaction on publication indicates "MOA" lacks economic value, but this is countered by the principle that potential market considerations and the author's right to change their mind are relevant.
WCG ceased distribution due to changing church doctrines and social sensitivities but plans to publish an annotated edition. PCG's claim that an annotated version would not be competitive is speculative and overlooks that PCG has appropriated "MOA" for the same purposes for which WCG created it. There is no precedent supporting fair use for verbatim copying of an entire work without criticism. The market factor should be evaluated alongside other fair use criteria, and significant interference with the market strongly opposes a fair use finding, as noted in the 1967 House Report and by Judge Pierre N. Leval.
The argument presented establishes that the absence of market harm from a secondary use does not inherently justify that use under the fair use doctrine. The fair use defense concerning the secondary use of the Material of Association (MOA) fails as the first three factors favor WCG, while the fourth is neutral.
PCG claims that the judgment should be upheld based on the Religious Freedom Restoration Act (RFRA), which prohibits substantial burdens on religious exercise without government justification. RFRA imposes strict scrutiny on regulations that significantly affect religious practices. PCG argues that WCG's requested relief would substantially burden its religious practice regarding the distribution of MOA. However, the district court dismissed PCG's RFRA claim.
The Supreme Court's ruling in *City of Boerne v. Flores* limits RFRA's applicability, invalidating it against state and local laws but leaving its constitutionality in federal law an open question. Courts have generally interpreted RFRA as a valid exercise of Congressional authority regarding federal statutes.
PCG has not demonstrated that copyright laws impose a substantial burden on its religious exercise. Notably, PCG admitted it did not seek permission from WCG to copy MOA, as confirmed by documentation from the Church's Advisory Council, which states that no attempts were made to purchase copyright or license rights prior to January 1997.
A substantial burden on religious practice must exceed mere inconvenience, as established in relevant case law. The burden is considered substantial only if it pressures a religious adherent to violate their beliefs or obstructs essential religious activities. In this context, requiring permission and potential payment for using copyrighted material, while inconvenient, does not constitute a substantial burden on religious exercise. Without evidence that the copyright laws cannot accommodate the needs of the plaintiff, the enforcement of these laws is not deemed an unreasonable burden.
The court concludes that the undisputed facts indicate the plaintiff (WCG) is not entitled to a fair use defense against its copyright infringement claim. Consequently, WCG is entitled to a permanent injunction against the defendant (PCG) concerning the reproduction and distribution of its work, MOA. The court reverses the judgment in favor of PCG and remands the case for the entry of a preliminary injunction pending the resolution of damages.
The district court previously struck down the RFRA defense and counterclaim before addressing PCG's motion for summary judgment, leaving the RFRA issue as part of the appeal. WCG's intention to publish an annotated version of MOA reinforces its copyright protection. The notion of market failure presented by PCG is rejected, as WCG's refusal to license is aligned with the interests of both the copyright owner and the public. Finally, since PCG did not meet the RFRA's substantial burden test, the court does not need to explore whether the Copyright Act serves a compelling governmental interest in the least restrictive manner.
