Significant Second Circuit Fair Use Decision Clarifies Transformative Use Analysis

On March 26, 2021, the Second Circuit Court of Appeals in The Andy Warhol Foundation v Goldsmith held that Warhol’s mid-1980s silkscreen portraits of the artist Prince, which were based on an iconic photograph by Lynn Goldsmith, do not qualify as fair use. Reversing and remanding the district court’s finding, the opinion acknowledges that courts have misapplied the standard the Second Circuit set forth in Cariou v. Prince and by doing so have greatly diminished the derivate work right. The decision is a significant one in that the court seeks to mitigate an overreliance on broad notions of transformativeness in fair use jurisprudence by proposing a more rational dividing line when evaluating whether a work is sufficiently transformative or simply derivative. Confirming that to be transformative enough to qualify as fair use a secondary work must be “fundamentally different and new” and embody an “entirely different artistic purpose” so that it “stands apart from the raw material,” the decision is a welcome response to misguided interpretations that in recent years have expanded the boundaries of fair use beyond reason.

Background

The works in question are a series of 15 silkscreen prints and pencil illustrations that Warhol based on a photographic portrait of Prince taken by Goldsmith in 1981. While Goldsmith initially licensed the photograph to Vanity Fair in 1984 for use as an artist reference for a work it commissioned Warhol to create, Warhol created the additional series without authorization. Goldsmith did not become aware of the series until Prince’s death in 2016. She then contacted the Andy Warhol Foundation (AWF) about the infringement, and AWF sought and won a declaratory judgement in which the U.S. District Court for the Southern District of New York found that Warhol’s works qualified as fair use. Goldsmith then appealed the Second Circuit, arguing that the district court erred in its application of the four fair use factors, specifically that the district court’s conclusion that the Prince Series works are transformative under factor one was based on “a subjective evaluation of the underlying artistic message of the works rather than an objective assessment of their purpose and character.”

Purpose and Character, Cariou, and Derivative Works

The opinion’s approach to transformative fair use is remarkable for two key reasons.

• First, it provides needed guidance on how to analyze what constitutes transformative use as opposed to derivative use (falling under the derivate work right). This is a crucial clarification that corrects case law and commentary that have increasingly blurred the line between transformative use and derivative works in recent years as to nearly eliminate a copyright owner’s exclusive right to prepare derivative works.
• Second, it rejects a transformative use test based on one person’s subjective opinion in favor of an objective test that asks how a work “may reasonably be perceived.” This shift is a meaningful development, as it replaces the point of view of one judge or critic with a more impartial standard based on how the public perceives a work. As the opinion explains, “whether a work is transformative cannot turn merely on the stated or perceived intent of the artist or the meaning or impression that a critic – or for that matter, a judge – draws from the work.” Going on to quote Nimmer, the opinion warns that if the transformative determination was dependent on such an objective analysis, “the law may well ‘recogniz[e] any alteration as transformative.’”

The first fair use factor requires consideration of the purpose and character of the alleged infringing work, and it essentially asks how the party claiming fair use is using the underlying work. Courts ask whether the use is of a commercial nature or is for nonprofit educational purposes, with the latter being more likely to qualify as a fair use. Whether a work is transformative, meaning that it adds something new, with a further purpose or different character than the underlying work, is also an important consideration in deciding factor one. To truly qualify as transformative, the Supreme Court has made clear that rather than merely superseding the objects of the original creation, the secondary work must alter the original “with new expression, meaning, or message.”

After reiterating these principles, the court moves into a discussion of its often-cited 2013 decision in Cariou v. Prince, which found certain works by appropriation artist Richard Prince that incorporated a number of black-and-white photographic portraits taken by Patrick Cariou to be fair use. The court’s fair use finding was based on its conclusion that 25 of the 30 works at issue distorted the human forms and settings of the underlying photographs, added color, and significantly resized the images, resulting in “crude and jarring” works that transformed Cariou’s serene and composed portraits. While some disagreed with the court’s transformative analysis and argued it expanded the boundaries of fair use in a way that harmed copyright owners, the Second Circuit explains that the district court and others have mistakenly interpreted Cariou as creating a bright-line rule that a secondary work that adds a new aesthetic or new expression to its source material always weighs in favor of fair use under factor one. The court acknowledges the criticisms surrounding Cariou, going out of its way to remind the parties that the decision represents the “high-water mark of our court’s recognition of transformative works.”

The opinion draws attention to Richard Prince’s 5 works that were not found to be fair use despite adding to Cariou’s works a “new aesthetic.” Discussing these examples of works that add new expression but are not sufficiently transformative, the court explains that they are simply derivative works. The opinion states that “there exists an entire class of secondary works that add ‘new expression, meaning, or message’ to their source material but are nonetheless specifically excluded from the scope of fair use: derivative works.” While it’s unclear whether the court means to say a derivative works can never qualify as fair use, there’s no question that it believes that “an overly liberal standard of transformativeness, such as that embraced by the district court in this case, risks crowding out statutory protections for derivative works.” Using the example of a book being adapted for a screenplay, the court stresses that while these adaptations often add quite a bit to the source material, they are unequivocal instances of works that implicate a copyright owners exclusive right to make derivative works.

In the instant case, the court explains that because the overarching purpose of the underlying and unauthorized works are the same—to serve as works of visual art—it must focus its inquiry on the transformative nature of the Warhol prints. Contrasting Warhol’s works with those at issue in a case involving another appropriation artist, Jeff Koons, the court pointed to Koons’s reproduction of a photograph alongside several other photographs with changes in color, size, and background elements that obstructed the underlying work. This transformation resulted in an “entirely different type of art,” which drew from numerous sources rather than merely recasting the original with a different aesthetic.

Considering the transformative nature of Warhol’s prints, the district court found that they qualified as fair use because they “can reasonably be perceived to have transformed Prince from a vulnerable, uncomfortable person to an iconic, larger-than-life figure.” According to the Second Circuit, this is an entirely subjective determination that is based on the opinion of one critic or judge. To rely on such determinations of the perceived intent of an artist could result in nearly any alteration, no matter how insignificant, being deemed transformative, and therefor the court rejected it as an unworkable standard. The court makes clear that it intends to employ a more objective standard based on how the work “may reasonably be perceived.”

In addition to adopting the objective “reasonably perceived” standard, the opinion stresses that a judge must consider whether the secondary work is “fundamentally different and new” in purpose and character when compared to the source material. At the very least, a secondary work must comprise something more than simply imposing another artist’s style on the underlying work “such that the secondary work remains both recognizably deriving from, and retaining the essential elements of, its source material.” Applying these concepts to the Warhol works, it’s clear that while they incorporate Warhol’s recognizable artistic style, the court concluded that those changes were not substantial enough to constitute transformative fair use. Considering the non-transformative purpose of the visual art portraits alongside the lack of transformation in nature and character of the underlying work, the court found first fair use factor weighs clearly in favor of Goldsmith.

The Nature of the Underlying Work and Amount Used

Moving to the second fair use factor, which asks whether the underlying work is more creative or factual and whether it is published or unpublished, the decision explains that the district court erred in finding that it did not weigh in favor of either party. While the district court found that Goldsmith had licensed the photograph for use by Vanity Fair and that Warhol’s use was transformative, the Second Circuit says that neither should result in factor two neutrality. The opinion clarifies that Goldsmith only made the photograph available for a single use on limited terms, which does not change its status as unpublished. Importantly, the court notes that such activity does not diminish the law’s protection of her choice of “when to make a work public and whether to withhold a work to shore up demand.” Because the district court erred in its transformative and unpublished analysis, the Second Circuit found the second factor should be afforded more weight and favor Goldsmith.

The third fair use factor considers the amount and substantially of the underlying work that was used in the secondary work, and the district court found the factor favored AWF because Warhol had “removed nearly all of [the underlying works] protectable elements.” And while the Second Circuit acknowledges that Goldsmith cannot be granted copyright in Prince’s face, the court asserts that AWF’s argument misses the mark. The opinion explains that what copyright protects is the “cumulative manifestation” that results from choices involving lighting, posing of the subject, and selection of film and camera—all things that create a “particular expression” of the idea in the underlying photograph. To hold otherwise would rob creators of copyright protection for any number of works that incorporate creative expression simply because the underlying subject could be considered “an idea.” Think of a nature photograph that an artist goes to great lengths to capture. While the artist will never be granted copyright in the idea of a flower or animal featured in the photo, the resulting photograph that combines expressive elements with those underlying subjects is protectable. 

Additionally, the opinion finds that Warhol borrowed significantly from Goldsmith’s photograph, both in quality and quantity. While Warhol cropped and flattened the photograph, the resulting image is still readily identifiable as being derived from the Goldsmith work. Rather than using the photograph as a reference point for a work that added something new, the court explains that the similarities between the two works are undeniable, and in fact Warhol’s works amplify, rather than minimize, certain recognizable aspects of Goldsmith’s photograph. Because the court concluded that Warhol’s work did not merely reproduce unprotected elements to create a transformative work, the third factor was found to also favor Goldsmith.

The Effect of the Use on the Market for the Original

The fourth factor asks whether the unauthorized use will adversely affect the potential market for or value of the copyrighted work, and once again the Second Circuit found that the district court failed to apply the standard correctly. The district court erred by shifting the burden to Goldsmith to prove actual market harm caused by Warhol’s use, and the Second Circuit makes clear that it has never held that the copyright owner bears this burden:

“Fair use is an affirmative defense; as such, the ultimate burden of proving that the secondary use does not compete in the relevant market is appropriately borne by the party asserting the defense: the secondary user.”

The district court also found, and the Second Circuit agreed, that the primary market for sales of the Goldsmith photograph and the Warhol works are distinct and do not meaningfully overlap. But the district court then fell into a common trap that has unfortunately tripped up other courts when conducting fair use analysis: it gave little consideration to potential derivative use licensing markets. Simply because Goldsmith had not entered into a market does not mean that unauthorized uses like Warhol’s couldn’t have adversely affected a potential market. Indeed, the fact that AWF licensed the unauthorized prints to Conde Nast after Prince’s death shows the existence of a market for derivative uses. The Second Circuit goes on to point out that if the sort of copying that Warhol engaged in became widespread, it would have a devastating impact on a proven existing market to license works for stylized derivative uses. This would devalue existing works and disincentivize artists from creating new ones, which the opinion describes as “the precise evil against which copyright law is designed to guard.”

The court goes on to explain that there is no material dispute that both Goldsmith and AWF have sought to license (and successfully licensed) both works to print magazines to accompany articles about Prince. Because Goldsmith identified a relevant market, and AWF failed to present evidence that the Warhol series poses no harm to actual or potential markets, the court found the fourth factor weighs heavily against fair use.  

Substantial Similarity

AWF asked the Second Circuit to affirm the district court’s determination on the alternate grounds that Warhol’s works cannot be infringing because they are not substantially similar to Goldsmith’s photograph. In support of this argument, AWF contends that rather than using an “average lay observer” test that asks whether such a person would recognize the alleged copy as having been appropriated from the copyrighted work, the Second Circuit should apply a “more discerning observer” standard because the works contain both protectable and unprotectable elements.

Rejecting this proposal, the Second Circuit explains that almost any copyright protected work (including “quintessentially expressive” works like paintings or books) contain unprotectable ideas or concepts. The opinion makes clear that the “more discerning observer” test is reserved for works of “thinner” copyright protection—those that are more likely to include higher portions of non-copyrightable elements. Because photographs are not generally classified as works subject to “thin” protection, the court found the alternate test is improper.

After acknowledging that substantial similarity is often for a jury to decided, the court explains that it may be decided as a matter of law when access to the underlying work is conceded and a when works are so similar that a reasonable jury could not find otherwise. Here, it’s undisputed that Goldsmith’s photograph was the “raw material” on which the Warhol series was based. Warhol created the series by copying Goldsmith’s photograph, and in the court’s opinion, copying “Goldsmith’s particular expression of that idea.” Ultimately, the court concluded that because of the degree to which Goldsmith’s work remains recognizable in Warhol’s, there can be no reasonable claim that the works are not substantially similar.

Conclusion

While the Second Circuit explicitly recognizes that it is bound by its decision in Cariou, it dedicates significant time to clarifying its reasoning, addressing the misguided ideas that Cariou may have inadvertently spawned, and laying out a new approach to transformative use that reinforces the derivative use right. As the concurring Judges note, transformative use has become the dominant focus in fair use analyses, and when something is found to be transformative, a finding a fair use is a near certainty. Rather than surrendering to a system in which first factor transformative use swallows all other factors, the court here returns to a more balanced fair use analysis in which factor four plays an equal role—specifically with regard to potential derivative markets. It’s a welcome development not only for photographers who so often encounter infringement in the digital age, but for all copyright owners who rely on a sensible application of the fair use doctrine.