Real news, fake news, old news, breaking news—in today’s world, news and media pervades every corner of our lives. Nonprofit organizations, for-profit companies, and governments all closely watch and monitor television news and other programming to conduct a wide variety of activities including researching, marketing, and maintaining public relations.
One way to monitor and access the universe of television programming is through a media monitoring service, such as the one provided by TVEyes. For $500 a month, businesses, governments, and professionals (the service was not available for personal use), TVEyes recorded programming 24/7 from over 1,400 television and radio stations and compiled the recorded programs into text-searchable databases. Subscribers could search the database by keyword or date and time and could then watch, archive, download, and email the ten-minute-long clips contained in the search results.
As you might imagine, the service was quite valuable to those who were interested in monitoring television programming for one reason or another. However, there was one significant problem with TVEyes’ business model. TVEyes decided not to license the most important component of its services – the programming it recorded from the broadcasters, which included Fox News Network (“Fox”) – and instead chose to rely on the copyright law’s fair use exception as the foundation for its entire business. That proved to be a tremendous miscalculation.
In 2013, Fox sued TVEyes for copyright infringement in the Southern District of New York. Two years later, the District Court held that the function in TVEyes’ service that enabled subscribers to search for videos and clips using keywords (“Search Function”) and the functions that allowed subscribers to watch, archive, and share relevant clips with others (“Watch Function”) were both allowed under the fair use exception. The District Court held that the functions that allowed TVEyes subscribers to download and freely email clips or to watch clips obtained by using search functions other than by keywords were not fair use.
Fox appealed part of the District Court ruling to the Second Circuit Court of Appeals. Specifically, Fox appealed the Watch Function, arguing that it was not fair use. Fox did not appeal the Search Function part of the ruling.
In a decision handed down on Tuesday (just in time for fair use week), the Second Circuit agreed with Fox, and reversed the District Court’s finding of fair use on the Watch Functions and remanded the case to the District Court to revise the injunction in light of its fair use ruling.
Judge Jacobs, writing for the Court, addressed at the beginning the superficial similarity between this case and the Authors Guild v. Google case (“Google Books”), where the Second Circuit found fair use when Google Books users searched databases of books to view short passages or “snippets” containing the user’s desired keywords. In that holding, the Court cautioned that the Google Books presented a unique set of facts that “test[ed] the boundaries of fair use” and concluded that in this case TVEyes “exceeded those bounds.”
Here is why the Court concluded that TVEyes overstepped the boundaries of fair use.
- Potential Market Harm and Displacement of a Copyright Owner’s Market is the Single Most Important Fair Use Factor
Though the Court thoroughly analyzed and balanced all four factors in its fair use analysis, it undeniably regarded the fourth factor concerning potential market harm as the “single most important element of fair use” and weighed it in favor of Fox. The Court recognized the value of the clip viewing, clipping, and sharing functions in TVEyes’ service as analyzed and stated under the transformative prong of the first factor, but it also realized that this should not undermine the basic tenet of copyright law that copyright owners are entitled to a meaningful ability to exploit their work in the market.
The Court first noted that when evaluating this factor, it looks at how the secondary use will “’impact on potential licensing revenues for traditional, reasonable, or likely to be developed’” for the original copyrighted work. It was clear that Fox had a potential licensing market in licensing clips of its programming, since “TVEyes business model demonstrates that deep-pocketed consumers are willing to pay well” for a clip-viewing service, a market that “is worth millions of dollars in the aggregate.” Because the potential market existed, and Fox was not being paid, the Court found that TVEyes displaced Fox’s revenues it should have earned on its work.
Instead of properly licensing from Fox, TVEyes decided to distribute and provide access to Fox’s content without licensing, depriving Fox of the opportunity to get properly paid for its works—again, undermining the basic rule of copyright law that a copyright owner is entitled to control how to license, if at all, to those who want to use the work. The Court stated that since “the ability to re-distribute Fox’s content in the manner that TVEyes does is clearly of value to TVEyes, it (or a similar service) should be willing to pay Fox for the right to offer the content.” The Court concluded by noting that “TVEyes ha[d] usurped a function for which Fox is entitled to demand compensation under a licensing agreement” and weighed this factor in favor of Fox.
- Enhanced Efficiency is, at Best, a Modest Transformative Use, Which May Be Outweighed if the Use is of a Commercial Nature
The Court only found the Watch function to be “at least somewhat transformative.” First relying on Google Books, where users viewed isolated snippets of books relating to the user’s input of certain search terms, the Court noted that TVEyes’ service similarly facilitated efficient isolation and instant viewing of relevant clips relating to the subscribers’ desired key terms with “targeted precision”. The Court also relied on the Supreme Court case Sony v. Universal City Studios, to state that a secondary use that utilizes technology to maximize efficiency without “encroaching” on the copyright owner’s rights could be fair use. According to the Court, TVEyes’ service increased the efficiency of clip viewing and access since subscribers could instantly view a few, relevant clips in a time convenient to them, similar to how individuals could use Sony’s Betamax machine to conveniently watch recorded programming at a later time.
However, despite the increased efficiency and convenience of TVEyes’ service, the Court stopped short of holding the use as strongly transformative, pointing out that TVEyes’ services “essentially republishe[d] [the] content unaltered from its original form, with no ‘new expression, meaning, or message’, and further noted that TVEyes subscribers use “Fox’s news broadcasts for the same purpose that authorized Fox viewers use those broadcasts—the purpose of learning the information reported.” It additionally found that because the Watch function was only somewhat transformative, the fact that TVEyes’ service was commercial weighed against a finding of fair use. Weighing the commercial aspect of TVEyes’ service against the weakly transformative nature of the Watch function, the Court concluded that the transformativeness in this case was “modest at best” since TVEyes did “little if anything to change the content itself or the purpose for which the content [was] used.”
Judge Kaplan, in a concurring opinion, disagreed with the majority’s characterization of TVEyes’s service as transformative. He rejected the idea that a finding of transformativeness could rest on arguments of increased efficiency (as well as time shifting). Judge Kaplan stated that even if TVEyes’ service is more efficient, “it does no more than repackage and deliver the original works. It adds no new information, no new aesthetics, and no new insights or understandings.” In addition, he rejected the analysis of using time-shifting as a justification for a finding of transformativeness since, contrary to what the majority said, the Supreme Court in Sony never analyzed whether there was truly a transformation, as the word is used by courts today, because time-shifting allowed “a user to do exactly that which the user could have done with the original: watch the show for whatever entertainment, informational or other purpose it serves. No new purpose had been added.”
- Factor 3 Examines the Amount of Copyrighted Material “Made Available to the Public” Not the Amount “Used by the Copier”
On the third factor regarding the amount and substantiality of the copyrighted work, the Court weighed this factor in favor of Fox News, highlighting that the relevant inquiry under this factor examines “the amount of copyrighted material made available to the public rather than the amount of material used by the copier. Distinguishing TVEyes’ service from Google Books, the court said:
Googleʹs snippet function was designed to ensure that users could see only a very small piece of a book’s contents … While the snippets allowed a user to judge whether a book was responsive to the user’s needs, they were abbreviated to ensure that it would be nearly impossible for a user to see a meaningful exposition of what the author originally intended to convey to readers. …TVEyes redistributes Fox’s news programming in ten‐minute clips, which‐‐given the brevity of the average news segment on a particular topic‐‐likely provide TVEyes’s users with all of the Fox programming that they seek and the entirety of the message conveyed by Fox to authorized viewers of the original.
- The fourth factor – the effect of the use on the actual and potential markets – is the most significant of the four fair use factors.
- If the alleged fair use increases efficiency or involves time-shifting and does not add anything new or provide a truly different purpose for which the work is already used, it is only modestly transformative and will be given less weight in the first factor especially if the use is also commercial.
- “The success of [the user’s] business model demonstrates that  consumers are willing to pay well for a service” and that, “there is a plausibly exploitable market for [the service], and it is proper to consider whether [the user] displaces” the copyright owner’s market.
- When a service is clearly of value to the user, the user should be willing to pay the copyright owner for the right to offer the service.
Update: In September 2018, TVEyes filed a cert petition arguing, first, that the Second Circuit’s fourth factor analysis was presumptive since it was based entirely on TVEyes’ commercial success rather than Fox’s actual market loss, and second, that Fox News was using its copyright to deter criticism and commentary. In December, the Supreme Court denied cert without comment, leaving the lower court’s ruling in place–a significant win for creators.
Photo: Artur Marciniec / Alamy Stock Photo Image ID: F2FCGE
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