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Helping B-Schools Navigate Copyright Law, a CEO Finds His Way to an MBA

Bassim Hamadeh showed foresight in 1992 by starting a business that handled copyright permissions. The arcana of copyright law used to be the bastion of lawyers, publishers, and law school professors who teach the subject, but no more.

Intellectual property issues are pertinent to people in many fields, including—and perhaps especially—people who work at business schools.

This is the story of the increasing risks of copyright infringement and a young man whose business is helping keep business schools and other educational institutions on the good side of the law.

University Readers: A Timely Idea, Humble Beginnings

When most of his classmates were idly waiting in endless bookstore lines to get their course materials, 18-year-old Hamadeh, then a freshman at the University of California, San Diego, was hatching a plan for a business.

“The bookstore sold coursepacks [course reading packets] with high prices and low quality. Students also got frustrated with the ridiculously long lines at the beginning of each term,” recalls Hamadeh.

“I figured I’d be on to something if I could develop a student-direct delivery model that would circumvent the standard 25% bookstore mark-up and pass the savings on to the students.”

In addition to assembling cheaper, better coursepacks, the business would also handle the matter of securing copyright permissions. Failure to do so had triggered the landmark judgment against Kinko’s copy shops a few years earlier, so Hamadeh knew his coursepacks had to be produced “by the book,” as it were.

Hamadeh started his coursepack reproduction company, University Readers, that year. The company handled every aspect of compiling coursepacks and complying with copyright laws, including gathering the necessary permissions, making camera-ready reproductions of materials, producing the packets, and delivering them directly to professors and students—all without the bookstore lines and fees. The business was off to a good start.

Hamadeh did most of the selling, aided by business cards, campus circulars distributed to professors, and lots of phone calls. Friends from his dorm and fraternity helped him with deliveries.

“My friends liked the extra cash and the attention they got distributing coursepacks to students on and off campus,” says Hamadeh.

Hamadeh devoted 30 to 40 hours a week to his new venture in the busy seasons and 5 to 10 hours a week in the off seasons, but at all times, he was consumed with growing the business.

“It’s not the same as working in a part-time student job,” explains Hamadeh. “You’re constantly thinking about your strategy, problems that might arise, or customers you might target.

“The business is constantly nagging at you—in a good way, of course!”

Hamadeh continued to run University Readers part time after he graduated with a degree in structural engineering. He took a job in that field at a large San Diego architectural firm. He was successful, but not content. The business was still nagging at him.

Meanwhile, Intellectual Property Litigation Heats Up

In the last few years, electronic publishing and file sharing have pushed the legal debate over intellectual property into the public forum, putting businesses such as University Readers in the spotlight.

The most publicized and emblematic copyright and intellectual property cases involve the Recording Industry Association of America (RIAA) crackdown on the sharing of music files over the Internet. Internet music services that facilitate the sharing of copyrighted material, such as Napster and Kazaa, have been the subject of lawsuits, as have individuals who download and share large numbers of music files, in violation of copyright law. Musicians in the Recording Artists Coalition recently launched a public education campaign urging fans to adhere to copyright laws.

This year, the Motion Picture Academy of Arts and Sciences got serious about copyright infringement, as well, first banning the use of “screener” videotapes by members of the Academy, and then allowing use of the tapes but admonishing members not to lose or distribute them, under threat of penalties.

Hamadeh believes it is only a matter of time before lawsuits over copyright infringement come to roost with professors and universities.

Could B-Schools Be the Next Targets?

“Professors who are ignorant about copyright law or who willfully ignore copyright law are making themselves and their universities vulnerable to lawsuits,” Hamadeh says. He foresees trouble not only for professors and institutions using illegally reproduced course materials but also for those posting course materials online. He believes class websites and library electronic reserves, a relatively new way of cutting students’ costs, may be the next target of litigation. These websites, also called e-reserves, are electronic libraries that allow students enrolled in a class to access, view, and print out required course reading materials or other information for the class, effectively giving them copyrighted works free of charge.

“Professors who use class websites or e-reserves to post copyrighted materials and believe they are covered under the ‘fair use’ clause [of the U.S. Copyright Law of 1976] don’t realize the potential for liability,” he says.

Lawsuits aside, Hamadeh questions the kind of example professors—especially business school professors—set by using illegal materials in their classes.

“I can understand why some professors and school administrators feel they should help reduce rising textbook costs for their students, but in dodging intellectual property rights, they give students a mixed message about ethical responsibility,” he says.

“As business school curriculum takes a more hands-on approach to ethics, universities should think twice before belittling Dennis Kozlowski [of Tyco] and Kenneth Lay [of Enron] about their ethical transgressions while condoning the piracy of copyrighted works in their own classrooms.”

Publishers are already fighting back, targeting rogue copy shops first. In 2003, the issue of illegal copying of materials for use in university classrooms came to the forefront as major publishers such as MIT Press, John Wiley & Sons, and Sage Publications repeatedly joined forces as plaintiffs against coursepack producers who failed to obtain proper copyright permissions and pay royalty fees.

“These tactical lawsuits are sending a message,” Hamadeh says.

“Most local off-campus copy shops are either completely ignoring federal copyright laws, or they don’t have the slightest idea how to properly secure timely permissions. That’s a recipe for disaster.”

The Business Grows Its Founder

After three years of working as an engineer, Hamadeh quit his job and devoted himself to University Readers full time.

“My passion was, and still is, business building, so I moved on to fully concentrate on my vision of growing University Readers beyond the local and part-time levels,” he explains.

He hired professional staff to help him change University Readers’ corporate structure from fragmented and local campus operations to a more centralized, nationally focused business model.

“Once I began to push our new growth model, I realized how much I enjoyed the challenges that come with modifying our business plan to meet the demands of the marketplace, setting corporate objectives to keep growing at a faster clip, and pushing the company beyond the status quo.”

The company developed a campus bookstore outsourcing division, formed several distribution partnerships with major educational content providers—including Harvard Business School Publishing for MBA coursework, and began offering e-textbook products to enable students to purchase required reading material in digital formats.

Just over a year ago, the company launched an e-commerce site (www.universityreaders.com) where students can purchase customized coursepacks, immediately download the first few reading assignments, and receive free shipping in only one to three days.

Hamadeh was confident about his management of the company and his ability to modify business operations, but he was having trouble managing the financial side of his business. Within a six-month period, Hamadeh was presented with an investor financing deal, an acquisition offer, and an opportunity to buy out a smaller company. He felt unable to act—he could not evaluate the merits of the deals himself and always had to tap his network for advice. He decided that in order to move his business forward and guide it successfully, he needed an MBA.

The Founder Grows His Company

Hamadeh started his MBA at Stanford last year, and he already sees the benefits of his MBA education.

“As an entrepreneur without a business education, I recognized the importance of learning—in an academic setting—strategic management, entrepreneurship, operations, finance, marketing, and human resources to address critical management issues,” he says.

“My MBA experience is helping me to grow beyond my working grasp of business fundamentals and acquire a more sophisticated framework of general business management skills.”

Hamadeh’s vision and his intelligent guidance of his company have paid off. Today, University Readers boasts more than U.S. $1 million in annual revenues, a compound annual growth rate of more than 35%, exclusive coursepack publishing contracts with major MBA programs, and a 95% customer retention rate, of which Hamadeh is particularly proud.

“That customer-centric culture is still ingrained in our company today, and there practically isn’t anything that our staff wouldn’t do to make a professor or student happy,” he says.

“Most companies have ‘credos’ or ‘missions,’ but corporate values need to be taught by example—leaders need to live them. University Readers employees know that customer service is the crux of our business not because I remind them of it, but because they have seen me in the office taking care of a problem at midnight, personally handling a long-distance delivery because we missed the UPS cut-off time, or taking care of customer service issues that come up behind the scenes.”

What’s next for University Readers? “We are going to continue growing by helping universities and MBA programs in particular,” says Hamadeh.

“As an MBA student, I have gained new insights into the custom publishing needs of MBA professors and the buying needs of MBA students—and knowing your customer is the first lesson we learned in marketing. With that new customer knowledge and our core capabilities, we’re definitely positioned for growth.”

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