American Geophysical Union v. Texaco, 60 F.3d 913 (2d Cir. 1995), was a U.S. copyright case holding that a private, for-profit corporate library could not rely on fair use in systematically making copies of articles for its employees.
Case background
Texaco is a for-profit corporation, that maintained an internal library and employed a number of scientists. Texaco subscribed to journals by the American Geophysical Union, a scholarly society that publishes a number of journals. Texaco also purchased a photocopy license from the Copyright Clearance Center (CCC), an entity that licenses academic content to research organizations. Texaco, like many entities with institutional libraries, was in the practice of photocopying articles from its journals to send to employees.
The AGU and five other publishers, eventually joined by several dozen other publishers, sued Texaco. Texaco defended, citing the fair use doctrine, which holds that uses found to be "fair," "for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research," are not infringements of copyright.
The court ultimately deemed Texaco's use to not be fair use, and Texaco was fined and agreed to retroactively purchase a license from the Copyright Clearance Center.
The Second Circuit's fair use analysis weighted heavily the "fourth factor," which considers "the effect of the use upon the potential market for ... the copyrighted work." Because CCC made licenses available for the photocopying, the court held that Texaco's failure to use those licenses for all its photocopying deprived the rightsholders of lost licensing revenue. This portion of the opinion has been criticized for its circularity of reasoning: Since any use could in theory be licensed, any non-licensed use would weigh against fair use on the market harm factor.