These scenarios illustrate some uses of computer programs and multimedia works by nonprofit libraries, including those at nonprofit educational institutions, for administrative purposes and for on-site and off-site circulation, in light of the following provisions of the Copyright Act of 1976:

Section 107: Fair use privilege for certain unauthorized reproduction, distribution, adaptation, and public performance and display.

Section 109(b): Exemption from the software rental right for lending by nonprofit educational institu-

tions, and exemption from the software rental right for lending by nonprofit libraries for nonprofit purposes.

Section 117: Exemption for archival "back-up" copies and adaptations essential for using computer program with machine.

Please note that the Guidelines for Classroom Copying in Not-for-Profit Educational Institutions are explicitly limited to books and periodicals, and do not encompass other types of copyrighted works, including computer programs.

1. Library Administration

General Rule: Unauthorized reproduction, distribution, or adaptation of computer programs for library administration is governed by the same rules as other end-uses, and will be considered infringement unless it constitutes fair use under Section 107 or it is exempted under Section 117.

a. A nonprofit university library purchases a spread sheet program for managing accounts payable, and the MIS director adapts the program so it can be used on the library's computers.

This use qualifies for the Section 117 exemption. The owner of a lawfully acquired copy of a computer program is permitted to make an adaptation of a computer program "as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner." If the library licenses, rather than purchases, the program, then it should refer to the license agreement or contact the copyright owner before making an adaptation.

b. The administrator of a nonprofit university library licenses a spread sheet program for managing accounts payable, but the university business office uses a different program. The library administrator prepares monthly reports with the program, which are sent to the university's business office on diskette or via e-mail with a copy of the library's spread sheet program.

No fair use defense or statutory exemption is available. Because the copy sent to the university business office was not lawfully made, this does not qualify for the nonprofit library lending exemption, or the nonprofit educational lending exemption permitting transfer of possession of computer programs to "faculty, staff, and students."

c. Assume the same facts as in (b) above, except that the library administrator does not send the monthly report with a copy of the library's spread sheet program, but rather reformats the monthly report in text for transmission to the university business office.

Fair use defense or statutory exemptions are not necessary. Because the library administrator has not made an unauthorized reproduction or distribution of the spread sheet program, it has not infringed the copyright.

d. A nonprofit library purchases a single-machine license for a spreadsheet program to be used in calculating employee payroll. A library employee opens the sealed envelope containing the CD-ROM or diskette and installs the computer program on a computer without reading the license agreement. Later, he makes a copy of the program and gives it to a colleague on the library staff, who loads it on her computer.

No fair use defense exists under Section 107. The library has infringed the copyright by making an unauthorized reproduction of the computer program, and there are no other statutory exemptions available.

e. A librarian busy archiving the papers of a noted alumna decides to work at home. To keep track of his hours, he makes a copy of the spread sheet program installed on his office computer and takes it home to installs on his home computer.

No fair use defense or statutory exemption is available. Because many end-users now want to work at home as well as the office, many business application publishers now offer "single user licenses," which permit the licensee to install and use the computer program on both an office and a home computer provided the two copies are not in use simultaneously.

f. A librarian licenses and installs a spread sheet program to manage her budget. Two years later, the librarian licenses a functional upgrade for the program, installs it on her office computer, and installs the older version alone on her home computer.

No statutory exemption or fair use defense exists if a valid license for the functional upgrade prohibits transfer of the older version to another machine or another user. Software license agreements distinguish between functional upgrades of licensed software and the current version licensed by new customers. Because functional upgrades are licensed on the assumption that the customer has already licensed a previous version of the software, their prices are usually about two-thirds lower than the price of the current title for new customers. Therefore, most functional upgrade licenses restrict or prohibit the transfer of the previous version to another user or machine.

There is disagreement about whether the same result would be reached if the functional upgrade and the older version are part of the library collection.

g. Assume the same facts as in (f), except that the librarian obtains a full price license to the new version of the program, rather than the less expensive functional upgrade, for her office computer, and installs the older version alone on her home computer.

It is unnecessary to consider fair use or statutory exemptions. Because the librarian has licensed two complete and independent programs, the copyright in the programs has not been infringed.

2. Lending Copies of Computer Programs to Library Patrons

General Rule: Provided that the required warning is placed on lawfully acquired copies of computer programs, they may be lent by nonprofit libraries to patrons for nonprofit purposes under Section 109(b) of the Copyright Act. In looking at these scenarios, keep in mind that the library patron may be liable for copyright infringement even if the library is not.

a. A nonprofit library possesses one copy of a popular word processing program pursuant to a valid license, affixes to the package the required copyright warning, and makes it available at the circulation desk for patrons to borrow.

This is permissible under Section 109(b)(2), provided that the lending library is unaware or has no substantial reason to believe that the computer software is lent for a for-profit purpose.

b. Assuming the same facts as in (a). A student working on an English

literature research paper borrows the word processing program and installs it on her personal computer. Later, when the word processing program is overdue, she returns the packaged copy to the library, but keeps the copy installed on her computer to complete the research paper.

Statutory exemptions are available to the library, but not to the student. The Section 109(b)(2) lending exemptions permit "transfer of possession" and "lending" of computer programs by schools and libraries for users, but not unauthorized reproduction by patrons. The library would not face liability unless contributory infringement or vicarious liability is proved, such as demonstrating that the library encouraged patrons to copy.

c. A nonprofit library loans its copy of applications software that was purchased, not licensed. The required warning is affixed to the package.

This is permissible under 109(b)(2) provided that the borrowing library is unaware or has no sub-

stantial reason to believe that the software is to be used for for-profit purposes. Lending the applica-

tions software is impermissible if the library acquired it under a license which did not permit loans.

d. A library purchases a book with supplemental software on a disk in the book pocket. The library lends the book with the accompanying software in response to an interlibrary loan request.

This is permissible under Section 109(b)(2), provided that the book and software is lent for a nonprofit purpose, and the library affixes to the book or disk the required copyright warning.

3. Patron Use from Remote Servers

a. A library at a nonprofit educational institution obtains a single-machine license for a popular word processing program, but makes it available via a campus wide computer system that any number

of students, faculty, and staff may access simultaneously from either on or off campus. The required

copyright warning is displayed whenever an end-user signs onto the computer system.

The fair use defense and statutory exemptions are unavailable. The lending exemptions for nonprofit libraries and nonprofit educational institutions apply to lawfully made copies, but not to the unauthor-

ized reproduction and public display that occurs with network distribution. The fair use defense also should not apply to this reproduction, despite its non-commercial purpose, because the entire compu-

ter program is reproduced, the computer program may be unpublished, and the serious commercial effect caused by lost license fees and pirated copies.

b. Assume the same facts as in (a), except that the library obtains a network version of the word processing program and a site license permitting simultaneous access for faculty, staff, and students.

There is no infringement by library or faculty, staff, or students.

c. A nonprofit library has installed a computer program on its network and made it available to patrons, pursuant to a license agreement, via on-site terminals. Despite warnings to the contrary, a patron copies the computer program onto a diskette for his personal use.

There is copyright infringement by the library patron, and neither the fair use defense nor a statutory exemption is available.

d. A student at a nonprofit educational institution licenses a computer program for her personal computer, and uploads the computer program to the school library's network, where it can be accessed and copied by several hundred students, faculty and staff without permission of the copyright owner.

There is copyright infringement by the student. Her unauthorized reproduction of the computer program is not covered by Section 109(b) exemptions for nonprofit library lending for nonprofit purposes or nonprofit educational institutional lending.

September 6, 1996