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@elfwreck: No, I do not have a specific ruling. There may be one (or several), but... I am not a lawyer so take what follows with the appropriate wheelbarrow-load of salt.
I've been given that rule of thumb in many venues, starting in grade-school (in Utah). Same r-o-t later on in high-school in California. Then as an undergrad at CMU. Then again, 15 years later as a grad-student at CMU (in that IP seminar I've mentioned many a time). Please note, by the way, that the rule-of-thumb applies to written works only so your movie or song example wouldn't fit. I seem to recall that song lyrics and poetry may have different rules (but I can't remember whether that's because of differences in their nature or because their rule of thumb came from a different court case).
The issue of "college students & professors, some of whom are being told that they cannot use any direct quotes at all in their papers, to avoid lawsuits" is different, however. The rule-of-thumb I gave addresses the question "am I likely to prevail in court if someone were to sue me over this quotation?" If the question that concerns you is "Am I likely to be sued over using this quotation?", all I can do is to observe that any fool can bring suit for any d*mn thing they like. So if avoiding suits in the first place is the primary concern it may indeed be best to skip the direct quotes. On the other hand I would expect that any sane college or university has an explicit written policy on the subject, and will defend faculty, staff, or students who have obeyed that policy but are nevertheless sued for copyright violations. That seems like basic academic freedoms to me. And it's certainly what my University does.
Xenophon
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