Fair Use

I recommend you take a look at James Frankel's text The Teacher's Guide to Music, Media, and Copyright Law, Chapter 4.
 
What is Fair Use? Find out at www.copyright.gov
"The fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright."
http://www.copyright.gov/title17/92chap1.html#107
 
How do courts determine Fair Use?

Fair Use is not a "Get out of Jail Free Card". There is no predetermined formula for indentifying infringement. Every case is ruled upon based on the uses of the copyrighted material. However, courts will evaluate each suit based on the following critea.

  1. the purpose and character of the use, is it for commercial use or for nonprofit educational purposes
  2. the nature of the copyrighted work.
  3. the amount or the work used in relation to the entire copyrighted work
  4. the effect of the use on the potential market of the copyrighted work.
    Here is a helpful chart of how much material you can use under the Fair Use law (section 107)
How can I teach my students about Fair Use? Look at the student presentation prepared by the U.S. Copyright Office
 
What is Public Domain? Public Domain is the term used to identify a work that is no longer protected by copyright and can be used free of compensation to create new materials which can be copyrighted by the new creator.
When does a work become Public Domain?