it sets a huge legal and cultural precedent AGAINST copyright reform, since he is the figurehead of the copyright reform movementUm, do you not understand how the legal system works? Or are you far more breathtakingly cynical than Larry Lessig will ever be?
The US legal system is not a battle of personalities. It's not a popularity contest. It's not a political game, where lawyers campaign for votes. The judicial system is not "stacked against Larry Lessig" -- though some of his legal arguments have had more success than others, they are each judged on their merits. And beating Larry Lessig in some minor copyright suit won't magically discredit him, just as it wouldn't discredit him if he had some unpaid parking tickets.
His status as a "figurehead" won't really affect the outcome either (except to the extent that his fame is correlated with his ability to write really good legal arguments on exactly this topic -- and the fact that judges will probably tend to look with favor on a video that was used as part of an educational lecture about copyright law). Judges will not be star-struck by Lessig. They have seen famous law professors before. Even if this case went before a jury, surely both sides are bright enough to select jurors who have never heard of Lessig, thus rendering his fame relatively moot.
There have been times, of course, when these abstractions have broken down. But not very often. And if a corrupt judge or jury does decide to throw the case one way or the other, it's likely to get fixed (or, depending on your perspective, screwed up again) on appeal.
If he loses the case he might pay some damages, that's all. Those damages are likely to be insignificant, since if this isn't found to be fair use it will surely be found to be within a hair of fair use -- it's not for profit, it's for educational and critical purposes, it was done in good faith with the very reasonable expectation that it would be fair use, etc. Nothing will happen to Lessig.
And even if it did, it shouldn't hurt the cause. If Lessig is found to have violated fair use the case is boring, from a DMCA standpoint: Everyone knows that you're not allowed to copy stuff outside of fair use, so Lessig is guilty, he owes damages, the end. The possibility of an interesting precedent will only arise if the video is found to be fair use -- in which case Warner is guilty of using the DMCA to exercise prior restraint over legal content, and Lessig will go to town with his brief-writing skills.
In other words, the likely explanation is the simple one. Warner is handing out DMCA notices by the bushel, and they sent this one out without looking too carefully. Oops.