Balkinization: Is the Pendulum Swinging on Fair Use?

Is the Pendulum Swinging on Fair Use?

Neil Netanel

Several months ago, Israel became the only [well, second, following the Philippines - I stand corrected] country in the world aside from the U.S. to incorporate the fair use doctrine in its copyright statute. (Here's an unofficial translation.) In fact, Section 19 of Israel’s new copyright law translates Section 107, the fair use provision of the U.S. Copyright Act, virtually verbatim. The parallel provisions set forth four nonexclusive factors that courts are to use as guidelines on a case-by-case basis in determining whether the defendant’s otherwise infringing use of the plaintiff’s copyrighted work should be excused as a fair use.

Commentators often lament the unpredictable, ad hoc character of fair use analysis. But is fair use doctrine truly without any consistent direction? As I write a chapter entitled “Israeli Fair Use from an American Perspective,” for an anthology on Israel’s new copyright law, I see two internally consistent, but competing trends in fair use case law.

The first views fair use as a narrow, disfavored exception to the copyright holders’ exclusive rights, an exception to be granted only when the defendant demonstrates that (1) the copyright holder would have licensed the use but for an insurmountable market failure AND (2) a ruling of fair use setting a precedent for other similar uses would not lead to a significant erosion of the copyright incentive. The market failure view of fair use gained ascendancy in the early 1980’s, particularly when adopted by the U.S. Supreme Court in Harper & Row v. The Nation in 1985, with specific reference to Wendy Gordon’s seminal 1982 Columbia Law Review article, Fair Use as Market Failure. In the market failure view, the fourth fair use factor, the effect of the use on the potential market for the copyrighted work (including the market for derivative works) is, as the Harper & Row majority proclaimed, “undoubtedly the single most important element of fair use.”

The second views fair use as a central component, not an anomalous exception, to the copyright regime. It places great weight on whether the defendant’s use is “transformative,” in other words whether the use serves a fundamentally different purpose than that for which the plaintiff’s copyrighted work was created and whether that purpose serves copyright law’s overall goal of promoting the dissemination of knowledge and a diversity of expression. The transformative use understanding of fair use was set out by Judge Pierre Leval in 1990 in his seminal Harvard Law Review article, Toward a Fair Use Standard, and received support, with repeated citation to Leval’s article, in the Supreme Court’s 1994 decision in Campbell v. Acuff-Rose. As the Campbell Court opined, “the more transformative the new work, the less will be the significance of other factors … that may weigh against a finding of fair use.” And Campbell holds that all four factors are to be weighed together.

Some recent cases suggest that the transformative use understanding is overtaking the market failure view. In a case involving small scale copies of rock concert posters in an illustrated biography of the Grateful Dead, the Second Circuit held that the unlicensed reproduction of rock concert posters for inclusion in an illustrated biography of the Grateful Dead was a fair use despite the copyright holder’s active licensing of such uses. Biography, the court held, is a transformative use and “[i]n a case such as this, a copyright holder cannot prevent others from entering fair use markets merely ‘by developing or licensing a market for parody, news reporting, educational or other transformative uses of its own creative work.” Bill Graham Archives v. Dorling Kindersley Ltd., 448 F.3d 605 (2nd Cir. 2006).

Similarly, the Ninth Circuit recently held that the thumbnail copies of copyrighted images displayed on Google’s Image Search is a highly transformative use, providing “great value to the public.” Citing Campbell, the court noted that in determining fair use, “The Supreme Court … has directed us to be mindful of the extent to which a use promotes the purposes of copyright and serves the interests of the public.” In finding fair use, the court discounted evidence that Google’s thumbnails might harm the plaintiff copyright holder’s market for licensing thumbnails of its images for display on cell phones, although there was almost certainly sufficient evidence of harm to a potential, even if not actual, market. Perfect 10, Inc., v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007).

Professor Paul Goldstein, a leading advocate of the market failure view of fair use, has attacked these two courts’ overriding preference for transformative uses as “a triumph of mindless sound bite over principled analysis.” Paul Goldstein, Fair Use in Context, 31 Colum. J. L. & Arts 433, 442 (2008). But to my mind, those rulings thoughtfully convey an understanding that fair use is central to serving copyright’s goal of promoting the dissemination of knowledge and expressive diversity. They also comport with other recent cases (including suggestions in the Supreme Court’s ruling in Eldred v. Ashcroft) that fair use must be viewed and interpreted in line with First Amendment protections of free speech.

Do these cases represent a change in direction, a judicial push-back against the overly constrained market failure view of fair use? Or are they idiosyncratic, fact specific anomalies? I suspect that the Google Book Search cases, pending in the Southern District of New York, will yield an answer. If the Book Search courts rule consistently with the recent transformative use view of fair use, they should hold that Google’s scanning of copyrighted books to display short snippets in response to a user search query is a fair use.

Posted 3:31 PM by Neil Netanel [link]

Comments:

I certainly hope that you're right. Not that I have to make this point to you, but as far as I can see, the market failure approach has to be wrong because it is inconsistent with the First Amendment. Clearly copyright owners will never license hostile uses of the work, even if these uses do not in any way interfere with their market. Insofar as the sole purpose of copyright is to encourage publication and it is contrary to the values underlying the First Amendment to allow copyright to be used for the sole purpose of censorship, the market failure approach must be wrong.

Any theory of copyright should have to pass the Cranston test: if it would not have permitted the publication of Cranston's edition of Mein Kampf, its a bad theory.

# posted by

Bill : 8:21 PM

German copyright law has a full section on fair use as well - sections §44 -63 of the German UrhG; it's not just the US or Israel.

# posted by

Alex : 3:29 AM

Thanks to billposer and Alex for your comments. As anyone who has read Copyright's Paradox knows, I agree with billposer that the crabbed, market failure view of fair use runs counter, at the very least, to the First Amendment values that animate copyright law and possibly to First Amendment doctrinal constraints as well. On the other hand, critics of the transformative use approach, like Paul Goldstein, contend that failing to give predominate weight to the fourth fair use factor - harm to the market - runs afoul of US obligations under TRIPS. Article 13 of TRIPS forbids countries from making exceptions to copyright holder rights that fail to meet the "three step test" set forth in that Article. Article 13 provides: "Members shall confine limitations or exceptions to exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder." I am quite skeptical that TRIPS truly limits judicial application and interpretation of US fair use doctrine. But copyright industry lobbyists have sought to use TRIPS to limit fair use from the beginning. In fact, at the behest of industry lobbyists, the United States proposed in TRIPS negotiations that TRIPs allow countries to provide for exceptions to copyright holder exclusive rights only in "clearly and carefully defined special cases which do not impair an actual or potential market for or the value of a protected work" -- in other words that TRIPS require that the fourth fair use factor be the trump. Fortunately, other countries opposed the US and, in so doing, saved US fair use.
Regarding Alex's comment that German copyright law also contains fair use, that's not entirely accurate. Like virtually all other countries, Germany provides a list of specific, narrowly defined exceptions and limitations to copyright. But fair use is an open-ended exception that gives courts significant discretion to exempt uses on a case-by-case basis. In fact, Israel's adoption of US fair use came as a reaction to the constraints of the UK doctrine of "fair dealing," which was the principal copyright exemption in Israel's prior copyright statute and which provides a closed list of the types of uses that can be exempted.

# posted by

Neil Netanel : 11:58 AM

Suppose that the transformative use approach is inconsistent with TRIPS. It seems to me that that would not be the end of the world. TRIPS is after all an international agreement, not a law of nature or even long-standing international law. Many countries objected to TRIPS at the time, and my impression is that criticism has grown. Unilaterally abrogating TRIPS might not be good international citizenship, but if the US were to advocate revision of Article 13, among others, I suspect that revision would be welcomed by a great many countries. (I am aware, of course, that powerful corporate interests in the US would oppose this, so getting the US to do it would not be easy politically.)

# posted by

Bill : 4:39 PM

The Philippines has the US fair use provision as well, almost verbatim even.

# posted by

anna su : 8:44 PM

Thanks for the correction regarding the Philippines' fair use provision, anna su! Any idea of when that provision was enacted?

Regarding billposer's thoughtful comments on amending TRIPS Art. 13, there have been a number of such proposals in the academic literature, but I'm even more skeptical of the practical possibility than you. The Europeans would be steadfastly opposed. A more likely scenario, were a WTO dispute settlement panel to rule that US fair use fails the 3 step test, would be that the US would simply pay the price without amending Section 107, as it is doing in response to a WTO ruling that Copyright Act Section 110(5) fails the 3 step test.

# posted by

Neil Netanel : 1:27 PM

A follow-up and clarification to my question to anna su about when the Philippines' fair use provision was adopted. My quick research shows that the Philippines' current Intellectual Property Code, which contains the fair use provisions (sure enough!!), was enacted in 1997. It's copyright provisions, I gather, replaced the previous copyright regime under Presidential Decree No. 49. I gather that that Decree was also modeled on US copyright law, but don't know whether it contained a fair use provision or when it was issued. My guess is that fair use was new to the Intellectual Property Code enacted in 1997, since it seems that the provision was aimed at enabling Philippine software companies to decompile and reverse engineer software, which has been held to be a fair use in the US.

# posted by

Neil Netanel : 2:01 PM