Sorry, but I think the professor likely wins this one.
"Fair use" refers to a provision of copyright law that enables a student to photocopy parts of books or journals for own use purposes. This generally is interpreted as a chapter of a book not exceeding 10% and one article per issue of a journal.
International copyright law prescribes how one can use copyrighted materials, even if one attributes the source of material. Because governments worldwide are interested in furthering education, international copyright law allows the "fair use" of materials in the limited way noted above. The law protects even the organization of material. To use an example, a local public speaker who is well known, attended a Tony Robbins (i.e., Personal Power guru) lecture in California and then returned to his home country and used the headers from the lecture notes to organize and write a book. The book contained original text throughout but Robbins argued that it constituted plagiarism and a copyright violation because it used his headers and was closely patterned after the lecture. After a one-hour meeting with their lawyers, the publisher immediately yanked the books off-shelf and destroyed them.
The professor's lawyer is arguing that the content of a lecture is provided as part of what a student pays to receive. In consideration for payment of tuition fees, students are enabled to attend lectures, receive all class materials, and to make notes in the classroom. These days, it is not uncommon for some professors to make additional coursepacks available that the professor has put considerable work into, so that students can concentrate better on class discussion and avoid note-taking. In universities where this is above and beyond expectations, professors often are told that they may only do this if they sell the notes at their own risk. So, a good teacher who wants to help students can find herself in exactly the place this professor seems to be.
Students pay their fees and buy books to receive content and are licensed to take notes in class to help them master the materials. Fair use use of copyrighted materials does not allow students to then pass notes on to a third party who has not purchased paid tuition fees, purchased the prescribed text, or met the other conditions of the offer.
The professor's argument is that a third party is paying students to take notes and share course materials so that these can be repackaged and sold at a lower price to students than the original notes. This robs the professor of an income stream that she is due in respect of having developed notes.
Now, if the university has a policy that notes are free to students, then another issue is at play here. Perhaps this professor is inflating the price of notes above the cost of reproduction and the prescribed text, which violates university policy, I don't know.
But as someone who's written a university text or two, let me say that I have seen diagrams and figures stolen from my books being used by others locally and in foreign countries without my permission. More likely than not, I have seen my work being passed off as if it were the original work of others. Let me also say that I have taken action immediately to stop this every time, beginning with the person's University President or Dean.
It isn't only students who try to steal your intellectual property for unlicensed use or to pass off as their own.
I have caught students and executive education program attendees trying to access my hard drive to download its contents during coffee breaks and lunch breaks. I have found electronically generated figures and tables from my books being used by executives as if they had developed the intellectual content on their own.
I even had the occasion to be in the audience once when one of these thieves was trying (badly) to pass off one of my concepts as his own. So, during question and answer time, I took him back to the slide and said that I understood that the content was developed by Professor Steve19. He had the stupidity to say that he and Steve19 were close friends who worked together on the idea; then he apologized for forgetting to note that Professor Steve19 also had something to do with the work. His life changed forever when I identified myself and placed on record we had never met and that he had nothing to do with the idea he had just presented as his own before all of his colleagues at the conference.
So, I am not so sure we should jump on the professor on this one. It sounds like a sleazy business that whispers to students that they can avoid lectures, buying the book, and buying the course pack "and still get an A in the course if you buy our notes." I might add that for this reason, I never use the same cases to illustrate the same concepts and never ask the same questions twice.