Copyright Fair Use
Limitation on Exclusive Rights
Fair use began as a judicially created defense and was later codified in the Copyright Act of 1976. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 576 (1994).
17 U.S.C. § 107 defines fair use as a limitation on the exclusive rights of copyright.
Section 107 states:
- Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.
The fair use doctrine “creates a limited privilege in those other than the owner of a copyright to use the copyrighted material in a reasonable manner without the owner’s consent,” Fisher v. Dees, 794 F.2d 432, 435 (9th Cir. 1986), and “permits and requires courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.” Campbell, 510 U.S. at 577 (internal quotation marks omitted).
A fair use is not an infringement of copyright. Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417, 433 (1984). Lenz v. Universal Music Corp., 572 F. Supp. 2d 1150, 1154 (N.D. Cal. 2008) discusses this issue, noting that "Section 107 of the Copyright Act of 1976 provides that '[n]otwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work . . . is not an infringement of copyright.' 17 U.S.C. § 107." Id. The court concluded that "fair use is a lawful use of a copyright." See also Association of American Medical Colleges v. Cuomo, 928 F.2d 519, 523 (2d Cir. 1991) ("It has long been recognized that certain unauthorized but 'fair' uses of copyrighted material do not constitute copyright infringement."). Online Policy Group v. Diebold, Inc., 337 F. Supp. 2d 1195, 1200 (N.D. Cal. 2004) ("fair use is not infringement of a copyright") (citing Campbell, 510 U.S. 569; Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539 (1985)); Penelope v. Brown, 792 F. Supp. 132, 136 (D. Mass. 1992).
Burden of Proof
Despite the lack of such language in the statute, the Supreme Court and Congress have characterized fair use as an affirmative defense, and has placed the burden of proving fair use on the defendant. Campbell, 510 U.S. at 591, citing Harper & Row, 471 U.S. at 562. See American Geophysical Union v. Texaco Inc., 60 F.3d 913, 918 (2d Cir. 1995); Perfect 10 v. Amazon.com, 508 F.3d 1146, 1158 (9th Cir. 2007) (In a motion for preliminary injunction, once the moving party has shown a likelihood of success for a copyright infringement claim, the burden shifts to the nonmoving party to show a likelihood that the affirmative defense of fair use will succeed.); Columbia Pictures v. Miramax Films Corp., 11 F. Supp. 2d 1179, 1187 (C.D. Cal. 1998) ("because fair use is an affirmative defense, Defendants bear the burden of proof on all of its factors").
Nevertheless, the Supreme Court has suggested that, at least where noncommercial uses are concerned, the defendant may enjoy a presumption that the use does not harm the market for the original work. "A challenge to a noncommercial use of a copyrighted work requires proof either that the particular use is harmful, or that if it should become widespread, it would adversely affect the potential market for the copyrighted work." Sony, 464 U.S. 417, 451; but see Sony BMG Music Entertainment v. Tenenbaum, No. 07cv11446-NG at 14 (D. Mass. Dec. 7, 2009) (arguing that subsequent Supreme Court ruling in "Campbell" dispelled this presumption).
Balancing Test
To determine whether a work constitutes fair use, courts engage in a case-by-case analysis and a flexible balancing of relevant factors. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577-78 (1994). The Supreme Court recognized that science and art generally rely on works that came before them and rarely spring forth in a vacuum, and instructs courts to use the doctrine to limit the rights of a copyright owner regarding works that build upon, reinterpret, and reconceive existing works. See id. at 575-577.
The Copyright Act sets out four nonexclusive factors for courts to examine (17 U.S.C. § 107):
- In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include--
- the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
- the nature of the copyrighted work;
- the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
- the effect of the use upon the potential market for or value of the copyrighted work.
Rather than simply counting up these factors, a court is to evaluate them together, as well as any others it finds relevant, in arriving at a holistic conclusion. The analysis is not a simple arithmetic "3 in favor, 1 against" affair. In Perfect 10 v. Amazon.com, the court ruled that the four factors should be considered "in light of the purposes of copyright," which are "[t]o promote the Progress of Science and useful Arts and to serve the welfare of the public." 508 F.3d at 1163 (internal citations omitted).
Because the four factors are nonexclusive, courts may also consider other factors. See, e.g., Field v. Google Inc., 412 F. Supp. 2d 1106, 1122 (D. Nev. 2006) (listing extra fifth factor comparing defendant's good faith with plaintiff's conduct). For a discussion of courts' use of other factors, including good faith, see William F. Patry, Patry on Copyright § 10:156 (2009).
For an empirical overview of judicial applications of the four factor test, see Barton Beebe, An Empirical Study of U.S. Copyright Fair Use Opinions, 1978-2005, 156 Penn. L. Rev. 549 (2008).
Purpose
Courts typically focus on whether there is a commercial purpose and whether the work is transformative. When relevant, the purposes listed in Section 107, criticism, commentary, and news-reporting, are also helpful to a finding of fair use. Defendants often have multiple purposes motivating their copying, and no one purpose or lack of purpose definitively decides this factor.
Commercial versus non-commercial
In determining the “purpose and character of the use,” courts consider whether the use is commercial or nonprofit. See Campbell, 510 U.S. at 578. In doing so, courts ask “whether the original was copied in good faith to benefit the public or primarily for the commercial interests of the infringer.” American Geophysical Union v. Texaco Inc., 60 F.3d 913, 922 (2nd Cir. 1994) (quoting Rogers v. Koons, 960 F.2d 301, 309 (1992)). Non-commercial uses tend to weigh in favor of fair use, though non-commercial use is not required for a finding of fair use. National Rifle Ass'n of America v. Handgun Control Federation of Ohio, 15 F.3d 559 (6th Cir. 1994). “The crux of the profit/non-profit distinction is...whether the user stands to profit from exploitation of the copyrighted material without paying the customary price.” Los Angeles News Serv. v. Reuters Television Int’l, Ltd., 149 F.3d 987, 994 (9th Cir. 1998) (quoting Harper & Row v. Nation Enters., 471 U.S. 539, 562 (1985)).
Time Shifting/Space Shifting
In Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), the Supreme Court held time-shifting of television shows by consumers for personal use to be fair use. In RIAA v. Diamond Multimedia, 180 F.3d 1072 (9th Cir. 1999), the Ninth Circuit expanded the Supreme Court’s holding in Sony to include noncommercial space-shifting (e.g., from a CD to an MP3 file on a computer or MP3 player) as “paradigmatic fair use.” Diamond Multimedia’s Rio device allows computer users to transfer audio recordings from an audio CD placed in the computer’s CD-ROM drive onto the Rio in the MP3 format. However, the RIAA decision was not based on fair use analysis, and the Ninth Circuit refused to expand the space-shifting theory in A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001). The Ninth Circuit upheld the district court’s refusal to apply RIAA and Sony’s shifting analysis, since Napster made the material available to millions of other users and was not solely for the personal use of the individual doing the shifting. Id. at 1019. The court in UMG Recordings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349 (S.D.N.Y. 2000) refused to expand fair use to 'virtual' space-shifting. UMG sued for copyright violations based on defendant’s service that allowed customers to store, customize and listen to the recordings contained on their CDs via the Internet. Id. at 350. MP3.com purchased tens of thousands of CDs in which plaintiffs held copyrights and copied them onto its computers in order to replay the recordings for its subscribers. Id. Before accessing a song from MP3.com’s servers, a subscriber first had to “prove” that he already owned the CD by placing his copy of the commercial CD into his computer’s CD-ROM drive for several seconds or by purchasing the CD from one of defendant’s cooperating online retailers. Id. However, it was MP3.com doing the copying from the CDs onto their servers, and the court found this copying not a fair use. Id.
Transformativeness
A transformative work “is the very type of activity that the fair use doctrine intends to protect for the enrichment of society.” Castle Rock Ent. v. Carol Pub. Group, Inc., 150 F.3d 132, 141 (2d Cir. 1998) (quoting Leval, Toward A Fair Use Standard, 103 Harv. L. Rev. 1105 (1990), a law review article cited in Campbell). A transformative work must add something new, with a further purpose or different character, altering the first with new expression, meaning, or message. Campbell, 510 U.S. at 579 (“[Transformative] works thus lie at the heart of the fair use doctrine’s guarantee of breathing space within the confines of copyright.”). A work's commercial qualities are less significant when the work is extremely transformative and parodic. Mattel Inc. v. Walking Mountain Productions, et al., 353 F.3d 792, 803 (9th Cir. 2003). The more transformative the use, the less other factors such as commercialism will weigh against a finding of fair use. Campbell, 510 U.S. at 578. A work can be transformative if used for a new purpose, even if the work is unchanged. Nuñez v. Caribbean International News Corp., 235 F.3d 18 (1st Cir. 2000) (modeling photo taken for portfolio purpose was transformed into news when published in newspaper).
Parodies and Satire
The Supreme Court has extended greater fair use protection to parodies than satires, reasoning that "[p]arody needs to mimic an original to make its point...whereas satire can stand on its own two feet and so requires justification for the very act of borrowing. Campbell, 510 U.S. at 580-81. This does not leave satire unprotected. In Blanch v. Koons, 467 F.3d 244, 255 (2d Cir. 2006), an artist explained that the use of an existing image advanced his artistic purposes better than taking similar photos himself. The court accepted this statement and found the defendant to have established a justification for his borrowing. Id. However, in Dr. Seuss v. Penguin Books, the court dismissed the defendants' explanation for using elements of Dr. Seuss's book to criticize the O.J. Simpson trial as "pure shtick" and "completely unconvincing." 109 F.3d at 1402-03. It ruled the defendants' work did not target the plaintiff's work but rather used elements of it "to get attention." Id. at 1401.
Some legal scholars have argued that the distinction between parody and satire is unsupported by literary theory and at odds with the protections of the First Amendment. See Eugene Volokh, Freedom of Speech and Intellectual Property: Some Thoughts After Eldred, 44 Liquormart, and Bartnicki, 40 Hous. L. Rev. 697, 708-10 (2003) (arguing that the distinction between parody and satire allows the courts to grant protection on the basis of what the content targets, in violation of the First Amendment's content-neutral and subject-matter neutral principles); Bruce P. Keller & Rebecca Tushnet, Even More Parodic than the Real Thing: Parody Lawsuits Revisited, 94 Trademark Rep. 979, 979 (2004) ("[T]he parody/satire distinction simply is not responsive to the considerations that underline copyright law's fair use doctrine, including First Amendment values served by satires as well as parodies."); Zahr Said Stauffer, 'Po-mo Karaoke' or Postcolonial Pastiche? What Fair Use Analysis Could Draw From Literary Criticism, 31 Colum. J.L. & Arts 43, 76 (2007) ("[T]he rigidity of having to choose between satire and parody belies the flexible way that creators move between genres in creating works of art: works may be satires, parodies, and other forms of art all at once.").
Search tools/Thumbnails
Courts have ruled that thumbnail pictures in search engines are fair use. In Kelly v. Arriba Soft Corp., 336 F.3d 811, 815 (9th Cir. 2003), Arriba Soft operated a visual search engine that allowed users to search for photographs. The search engine displayed thumbnail copies of each photo. Id. The Ninth Circuit held that the copying and display of the thumbnail images was transformative and less exploitative than more traditional types of commercial uses. Id. at 818-19. The court concluded that both "[t]he creation of and use of thumbnails in the search engine is a fair use." Id. at 815.
The Ninth Circuit expanded upon this analysis in Perfect 10 v. Amazon.com, 508 F.3d 1146 (9th Cir. 2007). Defendant search engine Google automatically created low-resolution thumbnails of all the images it indexes. The 9th Circuit held that Google was not directly infringing by displaying the thumbnail images because Google's use was highly transformative and provided a social benefit by being an electronic reference tool, which outweighed the commercial and possibly superseding nature of Google's use. Id. at 1165. Similarly, in Field v. Google Inc., 412 F. Supp. 2d 1106 (D. Nev. 2006) the court held that the automatically cached images on Google’s commercial server were fair uses.
In A.V. v. iParadigms, LLC, 562 F.3d 630 (4th Cir. 2009), the court found digital archival of student papers to be a fair use. Schools paid iParadigms to check student papers for plagarism, and iParadigms archived the assignments submitted through its system to compare against future submissions. Id. at 634. The court determined that iParadigms's digital fingerprinting of student papers to detect future plagerism was a transformative use of the papers, and that iParadigms's for-profit commercial nature was not significant in light of the transformative use. Id. at 639.
Public Policy
“The greater the private economic rewards reaped by the secondary user (to the exclusion of broader public benefits), the more likely the first factor will favor the copyright holder and the less likely the use will be considered fair.” American Geophysical, 60 F.3d at 922. “Courts are more willing to find a secondary use fair when it produces a value that benefits the broader public interest.” Id. "The immediate effect of our copyright law is to secure a fair return for an 'author's' creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good." Sony Corp., 464 U.S. at 432 (quoting Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975)).
Reverse Engineering
In Sony Computer, Inc. v. Connectix Corp., 203 F.3d 596 (9th Cir. 2000), Sony sued Connectix for copyright infringement arising from the intermediate copying necessary to create Connectix’s Virtual Game Station, which allowed people to use PlayStation games on Macintosh computers (without purchasing Sony’s console). The Ninth Circuit held that Connectix’s intermediate copying of the copyrighted Sony BIOS during the course of its reverse engineering of the PlayStation was a fair use as a matter of law. See also Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992) (holding that disassembly of object code is fair use).
In Ticketmaster v. Tickets.com, 2000 U.S. Dist. LEXIS 12987 (C.D. Cal. 2000), aff’d, 2001 U.S. App. LEXIS 1454 (9th Cir. 2001), Ticketmaster sought a preliminary injunction against its rival online ticket vendor, Tickets.com, to prevent Tickets.com from deep linking to and copying from the Ticketmaster site. Analogizing the situation to reverse engineering, the court held that even though the copying was intentional and for commercial gain, it fell under the fair use exception. Specifically, the court stated that the ten to fifteen second copy was not used competitively, was destroyed after it served its limited purpose, was used only to facilitate the gathering of non-protected material, and was the most efficient way of doing so. The court later made identical findings in granting Tickets.com's motion for summary judgment. 2003 U.S. Dist. LEXIS 6483, CV99-7654-HLH(VBKx) (C.D. Cal. Mar. 6, 2003).
Comparative Advertising
In Sony Computer Entm’t Am. v. Bleem, 214 F.3d 1022 (9th Cir. 2000), the court vacated a preliminary injunction against defendant for reproducing screen shots from Sony’s copyrighted video game for purposes of comparative advertising. The court held that the reproduction constituted fair use and did not impair Sony’s copyright.
Criticism and Commentary
In Michael Savage v. Council on American-Islamic Relations, Inc., No. C-07-6076-SI, 2008 U.S. Dist. LEXIS 60545 (N.D. Cal. July 25, 2008), conservative radio host Michael Savage sued claiming copyright infringement after CAIR posted a four-minute clip of excerpts from Savage's show and criticized Savage for his inflammatory anti-Islam rhetoric. The court found CAIR's post to be fair use. Savage attempted to argue CAIR's used the clip to mislead and raise funds in bad faith. However, citing Hustler Magazine, Inc. v. Moral Majority Inc., 796 F.2d 1148, 1151 (9th Cir. 1986), the court concluded the presence of a 'donate' button near the clip was irrelevant, and CAIR's purpose was to criticize and comment on Savage’s statements and views.
Similarly, in Sedgwich Claims Management Services, Inc. v. Delsman, No. C 09-1468 SBA, 2009 WL 2157573 (July 17, 2009 N.D. Cal.), the court found the defendant's use of the plaintiff's photographs for criticism to be fair use. The defendant had mailed out postcards with pictures of two Sedgwich executives in 'wanted' style posters, accussing them of a variety of unsavory business practices. Id. at *2. Delsman also morphed the two into pictures of Adolph Hitler and Heinrich Himler. Id. The court found both uses to be fair use because the purpose was clearly to criticize on Sedgwich's business practices. Id. at *7. The court noted that transformativeness does not depend only on alterations to the image but also the context the copier uses it in, which in this case was amongst criticism. Id. at *5.
Connection to the fourth factor
This factor is often linked with the market harm factor. The Sony court noted "although every commercial use of copyrighted material is presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright, noncommercial uses are a different matter. A challenge to a noncommercial use of a copyrighted work requires proof either that the particular use is harmful, or that if it should become widespread, it would adversely affect the potential market for the copyrighted work." Sony, 464 U.S. 417, 451. The Supreme Court later cabined this presumption, stating that it only applied to wholesale verbatim copying, which presents a common sense danger of market replacement, and not "transformative" uses. Campbell, 510 U.S. 569, 591.
In Los Angeles Times v. Free Republic, No. CV 98-7840 MMM (AJWx), 2000 U.S. Dist. LEXIS 5669, at *45 (C.D. Cal. Mar. 31, 2000), the court expressed concern that copying by website with non-profit characteristics allowed the defendants and other website users to view the plaintiff's news articles without "paying the customary price" (internal quotations omitted). The website did not sell copies or access, and the defendants maintained they did not earn advertising revenue. Though the parties disputed the import of donation solicitations, the court focused on the lack of payment to the plaintiffs rather than any financial gain by the plaintiff. The court may have conflated the first and fourth factors in its analysis.
In contrast, the court in Religious Tech. Ctr. v. Netcom On-Line Communications Servs., Inc., 923 F. Supp. 1231, 1244 (N.D. Cal. 1995) found similar postings to be decidedly noncommercial. A Scientology critic posted writings by Scientology's founder L. Ron Hubbard on the Internet for discussion. The court also doubted the ability of the posts to supplant the market for Scientology works, but found Erlich copied too much and commented too little to qualify as transformative.
Nature
Fiction versus non-fiction
Creative works are "closer to the core of intended copyright protection" than factual works, and thus fair use is more difficult to establish when the underlying work is fiction rather than non-fiction. Campbell, 510 U.S. at 586. See Los Angeles News Serv. v. KCAL-TV Channel 9, 108 F.3d 1119, 1122 (9th Cir. Cal. 1997) (videotape of Reginald Denny beating was "informational and factual and news," all characteristics strongly favoring fair use).
Published versus unpublished
Unpublished works receive more protection than published works. Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 551 (1985). The Supreme Court recognized the author's interest in controlling the first public distribution of a work for both creative and market reasons. Id. at 555. However, "[t]he fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the [] factors" listed in Section 107. 17 U.S.C. § 107.
Relation to the first factor
When the use is transformative, the nature of the work is “not...terribly significant in the overall fair use balancing" Mattel Inc. v. Walking Mountain Productions, et al., 353 F.3d 792, 803 (9th Cir. 2003). See Campbell, 510 U.S. at 586 (the creative nature of an borrowed work is not much help "in separating the fair use sheep from the infringing goats in a parody case, since parodies almost invariably copy publicly known, expressive works").
Amount
Courts consider both the quantitative and qualitative amount copied as well as the amount added to the secondary work. Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 565 (1985). Copying nearly all of a work is less likely to be fair.
"Heart of the work"
In Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539 (1985), the use of less than 400 words from President Ford's memoir by a news magazine was interpreted as infringement because those few words represented "the heart of the book" and were, as such, substantial. Whether quantitatively minor copying constitutes taking the qualitative "heart" of a work can be a contentious issue.
In Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., 192 F. Supp. 2d 321 (D.N.J. 2002), aff'd 342 F.3d 191 (3d Cir. 2003), Video Pipeline, a website operator, created streaming trailers using actual movie clips and sold the trailers to online video sales clients who lacked access to official trailers. The district court found that Video Pipeline’s use of clips from Buena Vista’s copyrighted movies was not fair use. On appeal, the Third Circuit affirmed the preminary injuction issued by the district court, but overruled its finding as to the third factor. The Third Circuit found the trailers, while offering a glimpse as to the plot, tone, and leading characters, to be advertisements meant to entice viewers to watch the entire movie, not a substitute that could appropriate the "heart" of a movie. 342 F.3d 191, 201.
Connection with the first factor
The extent of permissible copying varies with the purpose and character of the use, Campbell, 510 U.S. at 586-8, and “[i]f the secondary user only copies as much as is necessary for his or her intended use, then this factor will not weigh against him or her.” See Kelly, 336 F.3d at 820-21. see also Mattel, 353 F.3d at 803 n.8 (holding that “entire verbatim reproductions are justifiable where the purpose of the work differs from the original”).
Similarly, in Online Policy Group v. Diebold, 337 F. Supp. 2d 1195, 1203 (N.D. Cal. 2004), the court found the complete posting of thousands of Diebold employee emails discussing problems associated with Diebold's electronic voting machines to be fair use because of the obvious public interest in ensuring fair and accurate elections. In Savage v. CAIR, 2008 U.S. Dist. LEXIS 60545, where the defendant's purpose was criticism and commentary of the plaintiff, the court found the "amount used in reference to plaintiff’s statements was reasonably necessary to convey the extent of plaintiff’s comments." Id. at *20
However, in Los Angeles Times v. Free Republic, No. CV 98-7840 MMM (AJWx), 2000 U.S. Dist. LEXIS 5669 (C.D. Cal. Mar. 31, 2000), the court found that while commenters on the Free Republic website did post commentary and criticism concerning copies of the plaintiff's news articles, the first posting of an article usually contained little or no commentary and thus was insufficiently transformative.
Market Harm
This factor examines how the new use affects the exploitable markets of the copyright owner. If one uses the copied work in a way that substitutes for the original or a derivative of the original in the market, the use is unlikely to be fair; uses that serve a different audience or purpose are more likely fair. Perfect 10, 508 F.3d at 1168. “[A] use that has no demonstrable effect upon the potential market for, or the value of, the copyrighted work need not be prohibited in order to protect the author’s incentive to create.” Sony, 464 U.S. at 450. This factor balances the benefit the public will derive if the use is permitted and the personal gain the copyright owner will receive if the use is denied. MCA, Inc. v. Wilson, 677 F.2d 180, 183 (2d Cir. 1981).
Some courts have held this factor to be the most important in the analysis. Harper, 471 U.S. at 566 ("This last factor is undoubtedly the single most important element of fair use."); A.V. v. iParadigms, LLC, 562 F.3d 630, 642 (4th Cir. 2009); Sony v. Bleem, 214 F.3d at 1029; Savage v. CAIR, 2008 U.S. Dist. LEXIS 60545 at *22. Others found that the Supreme Court backed away from the Harper view in Campbell and that "all factors are to be explored, and the results weighed together." Castle Rock, 150 F.3d at 145, citing Campbell, 510 U.S. at 578; American Geophysical Union, 60 F.3d at 926 ("Apparently abandoning the idea that any factor enjoys primacy, Campbell instructs that all four factors are to be explored, and the results weighed together, in light of the purposes of copyright.") (interal quotation marks omitted). See also Field v. Google, 412 F. Supp. 2d at 1118 ("While no one factor is dispositive, courts traditionally have given the most weight to the first and fourth factors.").
Market Substitution
In Perfect 10, 508 F.3d at 1168, Perfect 10 claimed the thumbnails on Google's search engine directly interfered with its secondary market for small cell phone version images because consumers who found such thumbnails on Google would not bother to buy similar-sized cell phone versions from Perfect 10. The court found this potential harm to be too hypothetical and Google's use to be fair. See also Princeton Univ. Press v. Mich. Document Servs., 99 F.3d 1381, 1387 (6th Cir. 1996) (“Only ‘traditional, reasonable, or likely to be developed markets’ are to be considered in this connection, and even the availability of an existing system for collecting licensing fees will not be conclusive.”) But see American Geophysical Union, 60 F.3d at 937 (The majority found market harm because of the availability of Copyright Clearinghouse Center licenses for individual articles, despite the lack of availability of CCC licenses for most articles and the dissent's complaint that CCC licenses are "neither traditional nor reasonable" and serve a market that will only develop if the courts create it by finding individual photocopying of articles to be nonfair use.) (Jacobs, J., dissenting).
Value of the original
In Video Pipeline, 342 F.3d 191, 202, the Third Circuit found that although previews are no substitute for full movies and consumers may not be willing to pay to watch movie previews, the market harm factor encompasses a broader definition of harm. The court found that widespread use of unofficial trailers would diminish the value of official trailers and decrease their value for luring consumers to official websites of the purposes of advertising, cross-marketing and cross-selling other products.
Relation to commercial/noncommercial purpose factor
The Sony court noted "although every commercial use of copyrighted material is presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright, noncommercial uses are a different matter. A challenge to a noncommercial use of a copyrighted work requires proof either that the particular use is harmful, or that if it should become widespread, it would adversely affect the potential market for the copyrighted work." Sony, 464 U.S. 417, 451. The Supreme Court later cabined this presumption, stating that it only applied to wholesale verbatim copying, which presents a common sense danger of market replacement, and not "transformative" uses. Campbell, 510 U.S. 569, 591.
Market harm caused by criticism
In assessing the fourth factor, courts sometimes contrast a use that "suppresses" or "destroys" the market for the original or derivative works with one that "usurps" or "substitutes" for those markets. Los Angeles Times v. Free Republic, No. CV 98-7840 MMM (AJWx), 2000 U.S. Dist. LEXIS 5669, at *61 (C.D. Cal. Mar. 31, 2000). Note that criticism or parody that has the side effect of reducing a market is fair because it is not acting as a market substitute. Savage v. CAIR, 2008 U.S. Dist. LEXIS 60545 at *22. If criticism of a product is so powerful that people stop buying the product, that effect of the criticism does not count as having an "effect on the market for the work" under copyright law. See Campbell, 510 U.S. 569, 592.
However, in Video Pipeline, 192 F. Supp. 2d 321, 340, the District Court accepted the argument that Video Pipeline's previews did not always match the genre of the movie and were of low quality, which may discourage potential consumers. On appeal, the Third Circuit declined to address the trademark-esque nature of this argument. The District Court also found this effect countered by the potential for the unofficial trailers to increase sales of the original movie by exposing more consumers to the work, which the Third Circuit also failed to discuss.
Other Resources
Stanford Copyright and Fair Use Center
Center for Social Media at American University
Columbia University Libraries/Information Services Copyright Advisory Office