I would agree with you. This is getting absolutely ridiculous. Though, on the flipside, if Fair Use doesn't have any affect on anything anymore, I can't really write any more research papers because I would have to call all of my sources to get the explicit permission required just to use a quote. Profs can't really expect that.
Honestly though, we know that the right to fair use is protected in the Constitution. I don't see how they can make this claim with any legal backing whatsoever.