Reflections on the Second Circuit’s Decision in Authors Guild v. HathiTrust

This morning, the Second Circuit Court of Appeals released its long awaited opinion in Authors Guild, Inc. v. HathiTrust. The Second Circuit toned down the rhetoric of Judge Baer’s opinion for the district court while affirming its ultimate holding: that creating a full-text searchable database of copyrighted works and providing those works in accessible formats to the print disabled is fair use. The opinion fully embraces contextual transformations (transformations that do not physically alter a work, but instead serve a new and different purpose) as clearly eligible for fair use. Additionally, it makes clear that the heart of the fourth factor analysis, the effect of the use upon the potential market for or value of the copyrighted work, is whether the use serves as a market substitution for the original. However, there are a few points that are worth exploring in more detail, excerpted and discussed below.

Contrary to what the district court implied, a use does not become transformative by making an “invaluable contribution to the progress of science and cultivation of the arts.” HathiTrust, 902 F. Supp. 2d at 464. Added value or utility is not the test: a transformative work is one that serves a new and different function from the original work and is not a substitute for it.

On its face, this reads like it narrows the definition of what constitutes a transformative use from that which adds value or utility to that which serves a new and different function from the original and is not a substitute. However, upon re-reading the quoted section of the opinion below, it appears as though the Second Circuit merely took Judge Baer’s words out of context. Baer, in balancing the fair use factors in this case, was simply characterizing the HathiTrust Digital Library (HDL) as an “invaluable contribution,” not suggesting that this was the test for transformativeness. Indeed, the test the Second Circuit articulates is in no tension with Judge Baer’s analysis. However, the Second Circuit’s seeming misquotation may be used by litigants in the future to argue for a narrower application of fair use. Hopefully judges in future cases will see through this seeming discrepancy and decline to narrow the scope of what constitutes a transformative use.

[T]he fourth factor requires us to assess the impact of the use on the traditional market for copyrighted work. This is the “single most important element of fair use.” Harper & Row, 471 U.S. at 566. To defeat a claim of fair use, the copyright holder must point to market harm that results because the secondary use serves as a substitute for the original work.

While the fourth factor used to be the most important element of fair use, it has become less relevant since the Supreme Court’s decision in Campbell v. Acuff-Rose Music, Inc., particularly where the use is transformative. It is odd that the Second Circuit elevated the fourth factor here, especially given the transformative nature of the use at issue. While the role of the fourth factor may be more significant in cases where the use is not transformative (as compared to where it is transformative), it seems strange to say the fourth factor is ever more important than the first.

Importantly, as we have seen, the HDL does not allow users to view any portion of the books they are searching. Consequently, in providing this service, the HDL does not add into circulation any new, human-readable copies of any books.

While it is certainly true that the HDL does not allow users to view any portion of the books they are searching, relying heavily (or perhaps exclusively) on that fact spells trouble for future cases (notably the Guild’s case against Google for its Google Books project, where users are shown small snippets of the works). However, the second sentence may provide some safety for future users: if the test is whether the use puts new copies into circulation, presumably it would be permissible to show snippets since there are no human-readable full (or nearly full) copies put into circulation. This is still a dangerous test and risks the creation of a bright-line rule, which runs contrary to the purposes underlying fair use.

[I]t is irrelevant that the Libraries might be willing to purchase licenses in order to engage in this transformative use (if the use were deemed unfair). Lost licensing revenue counts under Factor Four only when the use serves as a substitute for the original and the full-text search use does not.

This strong, clear statement that lost potential licensing revenue is insufficient for a finding of market harm is both highly needed and critically important. The Second Circuit here acknowledges that the fact that you may be able to get a license doesn’t mean you should have to. Hopefully this will help counter the notion that if a use is proper “you can just get a license,” a popular sentiment expressed numerous times by the content industry, and slow the spread of the permission culture that appears to be taking hold.