I admire their cleverness, but I think they get an F for "Fair Use"
According to this Washington Post Article, some Arizona High School students are suing an anti-cheating company. They argue that the method used, which creates a permanent copy of every student paper submitted to compare with future papers so they can detect copying, violates the copyright of the students to control their own intellectual property. http://www.washingtonpost.com/wp-dyn/content/article/2007/03/28/AR2007032802038.html
The interesting question for me is whether catching student plagarists constitutes an educational fair use. I think it does. Still, despite my flippant title above, it is not an obvious call and I look forward to seeing how the case evolves.