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U.S. Supreme Court Agrees with Authors Guild in Fair Use Case

Court's decision safeguards writers' rights, stating that transformative use should not “swallow up” the derivative work right.

Closeup of a judge's gavel resting on a sound block

The Supreme Court’s May 18th ruling in Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith et al., written for the Court by Justice Sotomayor, brings welcome, well-reasoned limitations to the increasingly expansive fair use exception in copyright law. The decision clarifies the role of “transformative use”—a subfactor of the first of four factors weighed by courts in deciding fair use. In recent years, it’s become the principal and deciding factor in fair use cases. Transformative use looks at whether an allegedly infringing use has “a further purpose or different character” from the original by adding “new meaning, message, or expression” to it. 

The Court’s decision preserves the right to make derivate works by clarifying that courts should look to the degree of transformativeness under that subfactor—not simply at whether there is any transformation—and should do so in light of the commerciality of the use. This decision is important for authors because it affirms and protects their ability to create new versions of their own work. If these rights are not properly safeguarded, authors might have fewer chances to earn money from adaptations, translations, audio variations, and other related works, which are vital sources of revenue. This situation could make it harder for authors to continue writing professionally and, as a result, limit the variety and availability of new books for readers.

After the Supreme Court’s 1994 decision in Campbell v. Acuff-Rose Music, Inc.—which first introduced the concept into the case law as part of the analysis under the first fair use factor[1])—lower courts increasingly found that any new purpose, meaning, or expression added to a work by the alleged infringer was “transformative.” The courts then followed a systematic analysis of the other three factors whereby those factors naturally fell into line favoring fair use. This expansion of fair use crept up against the right to create derivative works—one among the bundle of rights that an author possesses when creating a new work. “Derivative works” are works “based upon one or more preexisting works [in a] form in which a work may be recast, transformed, or adapted” (Copyright Act, section 101). Lower courts sometimes applied the transformative use doctrine so broadly that it threatened to completely swallow the derivate use right. The underlying issue before the court in Warhol was whether and where to draw the line between transformative use and the derivative work right. 

The case involved the Warhol Foundation’s licensing to Conde Nast of a Warhol silkscreen print of Prince based on a photograph taken by celebrity photographer Lynn Goldsmith. The photograph was originally taken in 1981 to accompany an article in Newsweek magazine about the musician. A few years later, Goldsmith granted a one-time license of the same photograph to Vanity Fair for $400 to serve as an “artist reference for an illustration,” which Warhol used to create a purple shaded image that appeared in the magazine in 1984. Warhol also created fifteen other images in different shades based on the same photo. After Prince died, Conde Nast obtained a license from the Warhol Foundation to use one of these images, “Orange Prince,” for $10,000. The Foundation never reached out to Goldsmith to license the underling image from her.  

Goldsmith sued for copyright infringement and the Foundation raised a fair use defense. After losing on summary judgment in district court, Goldsmith appealed to the Second Circuit Court of Appeals, which reversed the lower court’s judgment, finding that each of the four fair use factors weighed against the Foundation’s license to Conde Nast. The Warhol Foundation asked the Supreme Court to review only the Second Circuit’s finding under the first factor that the use was not transformative. 

Derivative Work Right: A “Critical Incentive”

The Authors Guild submitted a neutral amicus brief (in support of neither party) in the case to advise the court of the crucial importance of protecting the derivative work right in analyzing transformative use, describing it as a “critical incentive for the production and dissemination” of works. The derivative work right—one of six exclusive rights in the copyright bundle—incentivizes the creation of new books by giving authors a limited exclusive right to exploit and sell, and thereby profit from, their writings. Our brief explains how essential derivative work markets are for an author’s sufficient income earnings. They play a key role in ensuring that the writing profession remains financially viable. As we noted in our brief, citing our author earnings surveys: “Without the potential to exploit the derivative-work rights in their books—via audiobooks, enhanced eBooks, abridged versions, translations, speeches, excerpts of and articles based on the book (referred to as serial rights), motion pictures, television shows, sequels, web series, video games or other medium—authors would earn far less money, and many would have to stop writing professionally. Ultimately, readers would lose out.”[2]

The founders of this nation enshrined copyright in the U.S. Constitution because of the utmost importance of creating an economy for creative works to flourish in a democracy as “the engine of free speech.” But Congress and courts realized that the exclusive rights had to be reasonably limited to further the underlying purpose of copyright law, which is “to promote the progress of science and the arts, without diminishing the incentive to create.”[3] Fair use, originally a court-made doctrine and now embodied in Section 107 of the Copyright Act, is one of the means of doing so. 

In recent years, the fair use doctrine has been drastically expanded by courts from its original purposes of protecting such uses as quotation in criticism, comment, and news reporting, and limited copying for teaching, scholarship, and research to include many other types of uses, including wholesale copying for search engine use and even for new expressive uses. This expansion was based on Campbell v. Acuff-Rose, which held that 2 Live Crew’s parody of the Roy Orbison song “Oh, Pretty Women” was fair use despite the fact it was commercial. Although parody, a form of criticism, is a widely accepted fair use, lower courts prior to Campbell tended to reject fair use arguments if the secondary use was of a commercial nature, strictly interpreting an earlier Supreme Court case—Harper & Row, Publishers, Inc. v. Nation Enterprise—which held commercial use “tends to weigh against a finding of fair use.”[4]

Since Campbell, however, many courts have swung too far the other way, finding any use that changed the purpose of the original or added new meaning, messages, or expression to be “transformative.” Then, once a work was deemed “transformative,” courts applied the other fair use factors in an overly strict interpretation of Campbell (ignoring the Supreme Court’s instructions that its analysis was limited to the facts of the case), so that they all skewed in favor of fair use.

“Transformativeness” Is Not An ON/OFF Switch

The Supreme Court in Warhol clarifies that transformative use is not the end all and be all under the first factor, and that it must be “balanced against the commercial nature of the use” in analyzing the first fair use factor. Rather than redefining “transformative” as some had suggested, the Court sensibly reminds us that the transformativeness of the secondary use is a matter of degree—it should not be regarded as an on-off switch. It reviews the history of the transformative use doctrine, rooted in Judge Leval’s 1992 article “Toward a Fair Use Standard,” and the Campbell case, and reasons that fair use cannot weigh in favor of any and every use that adds a new meaning or message, as the doctrine was not meant to usurp the derivate work right. The decision states that courts should instead look at the extent to which the secondary use inhabits a purpose or character that is different from the original work, taking into account its effects on the commercial market for the original, and that the degree of transformation required to be a “transformative use” must exceed that required to qualify as derivative work, stating that “If an original work and secondary use share the same or highly similar purposes, and the secondary use is commercial, the first fair use factor is likely to weigh against fair use, absent some other justification for copying.” 

The Court’s decision points out that almost any new use, especially where the new use is an expressive work based on the prior work—i.e., a derivative work—will add some new meaning or message. But, the court notes, Congress specifically gave copyright owners the exclusive right to create derivative works and, in line with the arguments the Authors Guild made in our brief, the ability to exercise that right is central to the copyright incentives. While Warhol’s print added some new expression to Goldsmith’s photo, the court holds that it was not enough to justify its unauthorized use, especially when both the photograph and Warhol’s print were used for the same purpose—to illustrate magazine stories about Prince—and competing in the same market. 

Click here to read the entire opinion

Click here to read the amicus brief (PDF).

[1] Section 107 of the Copyright Act set out the test for determining if a use is fair, instructing courts to balance four factors: 1) “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit education purposes; 2) the nature of the copyrighted work; 3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and 4) the effect of the use upon the potential market for or value of the copyrighted work.” 

[2] AG, et al. Amicus Brief at 11. 

[3] Warhol at 18 

[4] In correcting that imbalance, the court in Campbell adopted a concept under the first fact originally described by Judge Leval in his paper “Toward a Fair Use Standard” that looks at how transformative the secondary use is of the original, asking whether the new use supplants the original work, or instead adds something new with a “further purpose or different character.”