Chicago Bd. of Educ. v. Substance, Inc.

• Decision Date: 31 December 2003
• Docket Number: No. 03-1479.,03-1479.
• Citation: 354 F.3d 624
• Parties: CHICAGO BOARD OF EDUCATION, Plaintiff-Appellee, v. SUBSTANCE, INC. and George N. Schmidt, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

354 F.3d 624

CHICAGO BOARD OF EDUCATION, Plaintiff-Appellee, v. SUBSTANCE, INC. and George N. Schmidt, Defendants-Appellants.

No. 03-1479.

United States Court of Appeals, Seventh Circuit.

Argued December 1, 2003.

Decided December 31, 2003.

Nancy K. Laureto (argued), Chicago, IL, for Plaintiff-Appellee.

Mark H. Barinholtz (argued), Elaine K.B. Siegel (argued), Hager & Siegel, Chicago, IL, for Defendant-Appellant.

Patricia J. Whitten, Kristi L. Bowman (argued), Franczek Sullivan, Chicago, IL, for Illinois Ass'n of School Boards.

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 interlocutory 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]nterlocutory 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 for 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 copyright 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, 105 S.Ct. 2218, 85 L.Ed.2d 588 (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...