By

Associate Professor

Finance, Banking, and Law Department

College of Business Administration

University of Nebraska at Omaha

Omaha NE 68182

(402) 554 – 2823 = voice

(402) 554 – 2680 = fax

mohara@unomaha.edu

http://unicron.unomaha.edu/faculty/mohara/web/mohara/htm

Presented to

69^th Annual meeting

San Diego, California

August 19, 1997 through August 22, 1998

ABSTRACT: Distance education is the newest buzzword in higher education. However, scant thought is being given to who owns the content created for the unique --and repeatable-- web-based classroom. University administrators tend to plunge ahead blindly assuming they rightfully have full control. Meanwhile, faculty tend to either be blinded by the allure of this new technology, or to retreat into their intensely personal sanctuary so as to avoid the evil intruder. This paper will explore the relative claims to ownership and control by university faculty and their employers. Particular emphasis will be placed on copyright law.

Please, do not cite this preliminary work without the prior, written consent of the author.

If you are here to hear this paper, then let us play out a bit of your dreams and see where they lead us in the law.

Let's assume you develop some aspects of your course on the web, nothing fancy, just course syllabi and handouts, with a link to reach you by email. You get a scattering of student email inquiries over the course of the semester, and reply to each with a mass emailing to everyone in the class who volunteered their email address. At the end of the year your Dean notes particularly the increased student evaluations from non-traditional students. These non-traditional students are your college's target market for expansion during these tough times. Not only do you earn merit pay, but your Dean also directs the technical support staff to put you at the top of the queue as well as fill your equipment requests first.

To test your Dean's commitment, you order a web camera setup (in color and with audio, you are testing commitment) for your office computer and a digital camera. Both are on your desk in less than a week. Playing with your new toys, you slave away on improving your courses, putting in 60+ hours per week for several months. Your university's technology transfer office, at your request, obtains hundreds of copyright licenses (albeit all for free or at miniscule fees) for your class exhibits. You tell yourself it's "Better safe than sorry." when you are an attorney, even though you personally believe it is all "fair use."

Your efforts do not go unnoticed. Students are singing your praises in the halls. The non-traditional students are most impressed with the ability to catch a missed lecture by going the archive at your web site. You win your university's teaching award and earn a big press release from university relations.

Life has its ups and downs. To meet the increased demand for "your" course, and still stay within budget, your Dean has scheduled two distance education sections of "your" course. The Registrar and the rest of the administration have already approved everything and are ready to go. Your first clue was the TV ads. One course will be offered to those that cannot come to campus, either due to rural location or due to corporate time demands. This section will be on the web from the archive of your last semester's lectures. You won't have any contact with these students except to answer email and to grade papers; but, you will get full workload credit for this section. The other section will be taught "live" by you from the campus TV studio, but also with taped delayed delivery across the state. Except for the technicians, there will be no one else in the studio with you when you teach. You will get a graduate student to help you with grading. The grader will be very helpful, if not absolutely necessary. The university wants to be "flexible and responsive to customer demands." Therefore, those who take the course on the web will be allowed to enroll and start the class every Monday, rather than the old, inflexible rule of just at the start of the semester.

Welcome to the big time. Got any problems with it?

Universities are becoming commercialized: first, research, now instruction. With limited faculty input --so as to avoid unnecessary delays for objections from faculty who do not own the product anyway-- university administrators are redefining the university employment relationship. Administrators are being prodded by the opportunities offered by new technologies and by the pressures of new financial realities. As all good employees should, faculty are becoming mere means to the ends of making the employer money.

Commercialization is optimized by proprietary resources that are shrouded protected by secrecy. Both of which are the antithesis of the foundations of "the university."

Universities are body surfing into distance education by riding the waves of new technology. As is always the case with new technology, the law is quite far behind and we are forced improvise as the waves rapidly churn under us. Additionally, universities are moving out of one contractual milieu into a radically different milieu. They are moving out of a milieu which is cooperative, open, and focused on the social good; and they are moving into a shark invested milieu which is competitive, closed, and focused on the bottom line. Both of these changes will carry many unwitting participants onto the rocky shoals where their remains will be consumed by the sharks.

To satisfy the needs of commerce, universities must (purport to?) transfer clear title to the instruction "product." Since possession is nine tenths of the law (i.e., all of "your" course material is on their LAN server and not "your" desktop machine!), clear title can be had by giving short shift to the claims of others: most notably, the ownership claims of the faculty, but so too the claims of students. One justification for such contemptuous treatment is the contractual nature of the university's relationships. The university asserts it may alter these relationships at will. If only there were no tenured faculty with property rights. If only all students were sufficiently informed and had the capacity to contract.

Cost recovery is the source of the need for repetition of distance education courses. We can ignore any purported bloated ego drive of administrator's, and ignore the American organizational proclivity to expand. We need merely focus after the decision to enter the distance education market. That market creates unique pressures to repeat the courses in order to recover imbedded costs.

Distance education comes in several forms; some of which are the age-old correspondence course, the videotaped correspondence course (not necessarily on broadcast TV), the two-way live video and audio, and the web. Today, the focus is on the last two. Both of which require significant up front investments.

Economists view total costs as divided between fixed and variable costs. Fixed costs do not vary with the level of output, which the variable costs do rise and fall with the level of output. With the current technology of higher education the classroom is a fixed cost and the faculty are, of necessity, a variable cost. If a Dean wants more sections of a class, then a Dean needs more warm bodies in the front of the room.

Distance education changes that equation by making it possible to store and reuse "faculty." Faculty can be made a into a fixed cost by making "faculty" into an asset that is reused again and again, regardless of the level of demand.

Let's look at just two major costs in distance education that are in addition to the regular costs of university education: equipment and preparation time.

A distance education studio for the point of origin will cost at least $150,000, but can soar up to the neighborhood of $500,000. Each classroom that will receive the transmission from the point of origin costs in the neighborhood of $50,000. These numbers assume the point of origin and reception buildings already are wired as needed. (In the short run, it may be possible to substitute expensive satellite time in place of fiber.)

Preparing for a one-hour chalkboard lecture typically costs two hours of faculty time. The same clock hour of face time with computerized slide presentation will cost ten hours of preparation. In contrast, one hour of a broadcast quality TV class will cost one hundred hours of preparation time (now spilt between the faculty member and multiple support staff members).

These equipment costs and preparation costs are in addition to regular costs. Therefore, if distance education is to pay for itself then the revenue collected from distance education also must be in addition to regular revenues.

Cost recovery is unlikely if each lecture is only used one-time. Recall the two main target markets: rural and corporate students.

The rural market is a thin market. If the rural students/customers are only asked to bear the expense of the receiving classroom, then distance education to rural markets will be profitable. However, the number of rural students is insufficient to economically support creation of these costly delivery systems. Social, political, or other economic realities may compel distance education delivery to rural students, but in terms of break even or profit, rural students only can be icing on an already baked cake.

That leaves the corporate customers to justify the new investments. However, these customers will be net additions. Some existing customers of traditional university delivery systems will switch over to distance education delivery systems. Only the net addition of students can be used for cost recovery.

Allocating over the useful life of the origination and receipt equipment investments, the net addition of corporate students likely will be sufficient to cover these costs. What of the creation of content costs? If the creation of content costs are treated as variable costs by the university, where these costs need to be recovered every semester, then the net addition of corporate students very likely will be grossly insufficient to support the additional costs. Hence the need for repetition.

Only if the "stored" lectures can be used repeatedly do the economics of distance education make sense. The university needs to be able to bear and spread these new costs. Bearing these new investments, that is, fitting them into existing budgets is a feasible challenge for any competent manager who chooses to prioritize distance education. Spreading these costs, that is, having enough new customers to produce a revenue stream greater than the costs is the heart of the problem.

The thinner the rural market and the smaller the net addition from the corporate market the greater will be pressure to increase the frequency and extend the duration of repetition. Increasing this pressure for repetition will be the time value of money: a dollar tomorrow is worth less than a dollar today. Since the expenses are incurred up front, but the revenues lag by at least a semester (and repetitions lag by years), the discounted present value of future revenue streams will be markedly reduced.

Once the process of repetition starts, the net economic incentives strongly encourage continuous repetition. The first repetition reduces the variable costs to grading papers and buying bandwidth for the broadcast. Together, these two costs are far less than the predictable revenues even from thin markets.

True, there will be some economic breaks applied to endless repetition. If the course is distributed over an open system, for example TV, then the potential customer base will see the repetition and view the product as dated, in over supply, and less valuable. Also, repetition in an open system is more visible than an equal amount of repetition in a classroom, which is a largely closed system. The customers' perception of quality diminution due to repetition, however, will be but a proxy for the true quality diminution stemming from a failure to update those portions that have changed. This latter source of quality diminution is what is usually meant when one says that an instructor's notes are "yellow."

Clearly then there is a need for repetition if this new technology is to be used. Let me beg the question of whether this new technology should be used, as well as beg the question whether an administrator has the authority to order a faculty member to use this new technology. Instead, let's focusing solely on the question of control the content. Should the faculty or the administrators control content? That is, who should control the degree of repetition? Whose reputation is truly on the line: faculty member or university? For purely economic reasons may the university enforce differing standards of "current" for the instruction by its faculty members?

The university faces genuine political pressures by the major funders of universities --the State legislatures and corporate America-- to role out distance education "product." The university will need to providing funding in fundamentally new dimensions --in terms of total dollars, types of support, and scope of organizational effort-- to develop distance education content. Do these new realities empower universities, both in terms of the law and the social good, to sweep aside centuries of tradition that the true "author" of course content is the human instructor?

The question of social good will be measured differently by every interested party, and the question of serving the social good will be answered in widely differing tones. However, with respect to the law, copyright law will play the largest role.

Storage of the "lecture" is one advantage of the more technology intensive delivery systems. The question here is who will reap the benefit of this storage? Legally, the question is "Who is the author?" Legally, the "author" gets to reap the benefit of storage since the author is the owner of the copyright. Since faculty are employees, the question, then, is whether the lecture is a "work made for hire."

An employee who creates a copyrightable work and is acting within the scope of employment is not the "author," the employer is. To the "author" and owner of the copyright an employee must be acting outside the scope of employment. With respect to independent contractors, the contractor is the "author" unless there is a written, signed agreement prior to creation of the work. These rules are easy enough to state. But, they can be difficult to apply to faculty members creating content for courses.

"Employee" and "within the scope" of employment have the meanings they have in the general common law of agency. The crucial element is whether the work was created at the employer's insistence and expense; another factor is whether the employer had the right to direct and supervises the manner in which the work was created, and lastly, whether the employee was specifically compensated for the effort. An employer who attempts with a blanket statement to claim all of an employee's efforts will fail to bring the creation within the scope of employment if the employee is motivated beyond the employer's needs, the employee uses non-employer resources, and the employee works on his own time.

In the unique employment relationship between faculty and their university there is a division of authority with respect to the content of courses. The university decides which courses will be offered and who will staff the course. However, the individual faculty member has substantial if not total control over what content is delivered. Most importantly, the faculty member controls how the content is delivered. The university lacks the authority to control this aspect of their employee's performance. Also, faculty have very few fixed hours of engagement. This alone would not prove that most of the faculty member's efforts were not "on company time." However, most studies of faculty behavior indicate that most faculty members routinely put in 50+ hours per week. The hours beyond a normal workweek demonstrate substantial independent faculty initiative.

There is an additional item beyond foregoing unique aspects of the employment relationship of faculty. Both by tradition (which becomes an implied portion of the contract and the scope of employment) and/or express policy provisions, the vast majority of universities surrender all claims to copyrights for works created by their faculty. Stanford University, a leader in commercialization of software created in a university environment, has expressly altered its policy statement to reclaim copyrights on software, but not all copyrightable works.

The typical faculty member is acting on his own initiative and is (clearly?) the "author" of course content for the purposes of copyright law. Some universities, which are moving aggressively into distance education, have signed agreements which purport otherwise.

It is possible for the university to transform this unique relationship. It is possible to bring the creation of distance education course content "within the scope of employment." However, to do so will require more than contracts with third parties.

A Dean has the right to appoint instructors. If a faculty member is qualified (which is a faculty decision) to teach a given course, then the Dean may compel an instructor to teach that course at a given time and place. Usually, the relationship is sufficiently collegial that such resort to raw legal power is avoided. But, that power is there and can be used.

A far different question and its answer is far less clear, is whether a Dean can compel the use of a particular technology for a given course. Moving even farther into terra incognito, is the question of whether a Dean has the legal power to compel a faculty member to surrender copyrights as a condition of employment.

The preceding paragraphs address the stick. Now let's look at the carrot.

Without a stick, created works are not within the scope of employment. However, regardless of whether the Dean does or does not have a stick, if the Dean has a carrot, then the work can be moved clearly within the scope of employment. If the Dean enters into a written and signed agreement with the faculty member whereby the faculty member is specifically compensate for the design and teaching (i.e., performance of the copyrightable work), then all questions are neatly resolved. Compensation need not be read narrowly. Preferential treatment for a faculty member's equipment requests, if identified in a written agreement, will be sufficient.

The major problem with the carrot approach is that the Dean must be up front and forthright. A position that all experienced managers will tell can be fraught with danger: especially when managing faculty. Obtaining "agreement" from individual faculty members, let alone from the collective faculty, never is a sure thing. Additionally, this carrot requires the Dean, as agents of the heathen commercial interests of distance education, to approach the faculty while treading upon the sacred ground of academic freedom. This does not allow the Dean to negotiate from a secure position of power. However, it may be that very weakness which elicits cooperation from the faculty.

As I am sure you can easily imagine, distance education raises a whole host of legal issues. This is a book length topic and we only had a paper today. This paper touched some of the major copyright issues; others, such as a faculty member's claim to moral rights under the Visual Artist Rights Act have been ignored. Additionally, let me point out just a few of the non-copyright landmines strewn across this field of battle. Here is a very minor sampling of issues ignored:

All of these topics will have to be left for a different venue.

If a university is to implement pervasive distance education, then it will need expressly confront the implications of this new technology on its mission. These new technologies, as applied to the university endeavor, create opportunities which will challenge the very foundations of the academy. To survive this technological change, the university must restructure itself.

The university community must make explicit its assumptions and expectations, so that it may formulate and implement policies to guide its many members in concerted action. Given the culture of the academy, it may not be feasible for the academy to be as scripted and packaged as commerce would like. The traditions and practices of the academy --as much as its detractors would want us to believe-- are not based solely on the whimsy and arrogance of prima donnas. The excellence of the American university, the very "product" which commerce desires, is a direct consequence of many of those traditions and practices. With as richly diverse community as the university presents, it should be quite easy to boldly expand distance education. However, the "trick" will be to implement distance education without killing the goose that lays the golden egg.

A final caution is in order. If a university community does not deliberately search for solutions in a cooperative venture, but rather allows an ad hoc patchwork of makeshift decisions to become its policy, that university will suffer mightily at the hands of lawyers. These lawyers will only have hard facts, and as we all know, the main product will be bad law.

To see the certainty of this adverse selection contemplate for a moment the "court" within which justice will be sought by an aggrieved plaintiff. Will it be the federal court? This may not be feasible if the defendant is a State University: recall the Eleventh Amendment. Lack of access to the federal courts can prove troublesome in a copyright case since the federal courts have exclusive jurisdiction. If foreclosed from federal court, will a faculty member seek recourse from another branch of the same government, claiming breach of contract or seeking to quite title or seek redress for slander of title? Lastly, should a faculty member seek redress in the university's committee on academic freedom and tenure, objecting to overreaching by a Dean in seeking to compel a choice of technology or a surrender of copyrights? This last option has much to recommend it. There is subject matter jurisdiction and the jury is likely to be intimately familiar with the contract. However, the judge (i.e., Regents/Trustees) is likely to see bias where others see intimate familiarity.

Introducing distance education into the offerings of a university should not be done in haste. It should be done, if at all, after deliberate consideration has been given to the multitude of conflicting interests. Introduction of distance education should only follow genuine attempt to resolve those conflicting interests in a mutually satisfying manner. Failure to seek consensus prior to introduction will doom the effort to protracted and intensely hostile legal wrangling.

Thomas, Nancy L., The Attorney's Role on Campus, CHANGE May/June 1998.