Fair use may be one of the most difficult issues copyright lawyers face due to decades of different court rulings applying the multifactorial balancing test, especially in the face of new technologies that use, modify and aggregate data in ways not intended under copyright law. The February 2018 Second Circuit fair use decision in the dispute between Fox News Network, LLC (“Fox”) and TVEyes, Inc. (“TVEyes”) added another wrinkle to fair use jurisprudence when the court emphasized the market effect on transformative use, apparently a departure from recent trends in the application of the comparative test. (See Fox News Network, LLC v TVEyes, Inc., 883 F.3d 169 (2d Cir. 2018)). In recent weeks, the Supreme Court rejected TVEyes’ motion for certiorari, leaving the decision of the appeal court unchanged; and Fox and TVEyes settled the case, ruling that TVEyes can no longer make available, distribute or publicly perform or display Fox’s copyrighted video content.

TV Eyes it is likely to be an important decision for future fair use cases within the Second Circuit.

TVEyes in court

Like most fair use cases, the underlying analysis and holding of TV Eyes it depends on the technology and uses of the copyrighted material in question. TVEyes is a media monitoring service that allows paid subscribers to track when, where and how certain chosen keywords are being used in radio and television broadcasts and obtain text-searchable transcripts and video clips of the portions of television programs they use such keywords. In addition to setting up term “watchlists” and receiving real-time alerts, subscribers can also search for past broadcasts from the TVEyes database, for which video is saved for 32 days. When a matching segment is found, the user can view relevant video clips of up to ten minutes in length (the “Watch” feature).

THE TV Eyes Litigation began in July 2013 when Fox sued TVEyes alleging, among other claims, that TVEyes’ service functions infringed Fox’s copyrights in their broadcasts. The argument quickly evolved into a dispute over whether TVEyes’ use of Fox’s material was defensible under fair use. While the lower court held that most of TVEyes’ core functions were protected by fair use, the Second Circuit disagreed. Many people expected the Second Circuit to rule that the “transformative” nature of TVEyes’ service fell within the bounds of fair use established by the Second Circuit in its 2015 google books decision on proper usebut the Court noted several distinctions in denying TVEyes’ fair use defense.

Fair Use after TV Eyes

THE TV Eyes The case was particularly notable because of the Second Circuit’s position on the fourth fair use factor regarding the effect on the potential market or value of the copyrighted work. In recent years, many courts have focused on the first factor, including the “transformative” nature of a use, and have perhaps de-emphasized the fourth factor of fair use, but not the Second Circuit in this case, which has emphasized the factor of the market effect as “arguably the most important element of fair use”. The court mentioned the effect of the TVEyes service on a “plausibly exploitable market”, whereas previous decisions probably had a more limited view or definition of the market effect. The Second Circuit rejected TVEyes’ argument that its service posed little risk of being a “competing substitute” for Fox’s offerings, concluding rather that its service “threatens” Fox’s ability to profit from the searchable access to its copyrighted content to third parties:

“The success of TVEyes’ business model demonstrates that affluent consumers are willing to pay well for a service that allows them to search and view select TV clips, and that this market is worth millions of dollars in total. As a result, there is a plausibly exploitable market for such access to television content, and it is worth considering whether TVEyes substitutes potential revenues from Fox when TVEyes allows its customers to watch Fox’s copyrighted content without Fox’s permission.

With this discussion of market effect, the Second Circuit Opinion has raised the question of whether the talisman of “transformative use” has lost its lustre, at least for commercial services that aggregate large portions of copyrighted content. As part of its examination of the first fair use factor regarding the nature and character of the use, the Second Circuit said that TVEyes’ Watch feature was “at least somewhat transformative,” but that because the service was commercial in nature and its Watch function “does little or nothing to change the content itself or the purpose for which the content is used”, such a transformative character was “modest at best”. According to the Second Circuit, it was not sufficient for commercial efficiency-enhancing technologies to obtain fair use protection without adding something new or displaying an additional purpose beyond the repackaging of copyrighted works (although the court offered no indication about what similar services might do in the future). Judge Kaplan, in his concurring opinion, noted that if the matter were conclusive, he would have ruled that TVEyes’ “efficiency-enhancing delivery technology” was hardly transformative. TVEyes’ characterization of the court as only “somewhat” transformative and an entity that “usurped a market that properly belongs to the copyright holder” was likely influenced by the fact that TVEyes offered large exceptions of Fox content (e.g. , ten-minute clips), an amount “radically dissimilar” from google booksas the latter service offers users only snippets of text in response to keyword searches and places some other limitations on viewing.

For those wondering if TV Eyes could represent a recalibration of fair use analysis from a “transformative” use toward a market effect, the December 2018 Second Circuit opinion in Capitol Records LLC v. ReDigi, Inc., No. 16-2321 (2d Cir. 12 December 2018), provides some critical insights. ReDigi it involved a digital service that operated as an online marketplace for the resale of ‘used’ or previously purchased digital music. The trial court concluded that version 1.0 of ReDigi’s service infringed Capitol’s reproduction rights, dismissing ReDigi’s argument that its service merely “migrates” a file instead of creating a forged copy, and it also rejected the feasibility of an initial sales defense against claims that ReDigi infringed on Capitol’s distribution right. The appeals court upheld the claim that an infringing reproduction had occurred and sidestepped the issue of the first sale defense. While the case is particularly notable for its holdings regarding the right of reproduction and the “digital first sale doctrine,” the Second Circuit went to great lengths to cite TV Eyes when addressing the fair use defense offered by ReDigi. The Court stated:

“TV Eyes it is a substantial precedent for our participation here. The scope and transformative nature of using TVEyes, while modest, has been far more transformative than ReDigi has shown here. However, the transformative uses of TVEyes were easily outweighed by the damage to the rights holder market considered in Factor Four… While ReDigi is credited with a weak display of transformative purpose, that purpose is overwhelmed by the substantial damage ReDigi inflicts on the value of the Plaintiffs’ copyrights through its direct competition in the legitimate market for rightholders, offering consumers a substitute for buying from rightholders. We find no justification for fair use.”

By relying so heavily on his TV Eyes decision, the Second Circuit reiterated its recent interpretation of market harm in fair use cases. It remains to be seen how this development plays out in cases with stronger examples of transformative use, but the trend is certainly worth noting going forward. It is also possible that courts simply treat fair use issues relating to aggregation services differently than they do in other more traditional copyright cases, making the TV Eyes ruling another plot point next to the google books dominant.

Cert. Denied

While some in the tech industry may have thought TVEyes’ fair use decision by the Second Circuit was ripe for review, those hopes were dashed when the Supreme Court denied TVEyes’ petition for the certiorari writ in December 2018. In their petition, TVEyes argued that this case provided an “extraordinarily important” issue and an opportunity to resolve conflicts between Second Circuit opinion and previous SCOTUS precedent. Specifically, the petition attacked the Second Circuit’s reasoning by arguing that commercial harm cannot be presumed from the commercial success of a transformative use and that a copyright holder cannot anticipate exploitation of a transformative market if the copyright holder is unlikely to copyright never exploit the market . Consideration of such an argument will have to await future litigation.

Settlement

Following the cert. denial, on 18 January 2019, the District Court issued a Consent Judgment and Stipulated Permanent Injunction in TV Eyes case. The court said the parties had reached a private settlement and that TVEyes would be permanently barred from “making available, distributing, publicly performing or publicly displaying audio-visual clips of copyrighted content” owned by Fox. While the terms of the settlement are private, the permanent injunction is a big win for Fox and copyright holders at large.

AS TV Eyes demonstrates, fair use determinations are notoriously unpredictable, and balancing testing can be fluid, fact-specific, and dependent on the technology and medium involved. While this case is now resolved, we will continue to monitor copyright cases to see how the courts interpret them TV Eyes and how media companies, content providers or aggregators adapt their activities to the current state of the law.

Tags: aggregation, fair use, transformative use, video