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SDNY Rejects Online Clipping Service's Fair Use Defense
Practical Law Legal Update 2-525-3915 (Approx. 4 pages)
SDNY Rejects Online Clipping Service's Fair Use Defense
by PLC Intellectual Property & Technology
| Published on 25 Mar 2013 • USA (National/Federal) |
In Associated Press v. Meltwater US Holdings, Inc., the US District Court for the Southern District of New York granted summary judgment in favor of The Associated Press, holding that the defendant online news clipping company's reports featuring AP news story excerpts sold to subscribers constituted copyright infringement and not permissible fair use.
Key Litigated Issue
The key issue in this opinion granting the plaintiff Associated Press Inc.'s (AP) motion for summary judgment was whether the defendant online news clipping service's activity of sending its subscribers reports featuring AP news story excerpts was copyright infringement or a protectable fair use.
Background
Meltwater US Holdings Inc., Meltwater News US Inc., and Meltwater News US1 Inc. (Meltwater), is an internet media monitoring service that uses automated computer programs (web crawlers) to locate and copy ("scrape") news articles from the web. Meltwater provides verbatim excerpts of these articles for its subscribers' search engine retrieval and e-mail reports. Meltwater's e-mails typically include:
- The article's headline.
- The article's publisher or other source.
- Two excerpts from the article:
- the first usually showing the article's opening text ("lede"); and
- the second reflecting one of the key search terms earlier input by the subscriber.
- A hyperlink to the URL for the website from which the article was indexed.
In 2012, AP filed this action against Meltwater claiming various causes of action, but focusing on copyright infringement. The parties cross-moved for summary judgment, including, in the case of AP, for summary judgment on Meltwater's fair use affirmative defense.
Outcome
In its March 20, 2013 order and opinion, the Southern District of New York held that AP had shown that it was entitled to summary judgment on its claim that Meltwater had engaged in copyright infringement and awarding AP summary judgment on, among other Meltwater defenses, Meltwater’s fair use defense.
In support of its fair use defense, Meltwater argued that its use of AP's articles was fair because Meltwater News functions as an internet search engine, providing limited amounts of copyrighted material to subscribers in response to their search requests and pointing the subscribers to a source of online information. Meltwater contended that this service is transformative of the original works and, as such, a fair use.
To determine whether Meltwater's use of AP's copyrighted works was protected fair use, the Southern District l weighed each of the four non-exclusive statutory factors set out in Section 107 of the Copyright Act.
The Purpose and Character of the Use
The first fair use factor focuses on whether, and to what extent, the new work is transformative of the underlying copyrighted work. On this issue, the Southern District ruled that neither the purpose nor use of the Meltwater reports, nor its excerpts from AP's articles, were transformative. In support of this ruling, the Southern District noted that Meltwater merely used its computer programs to automatically capture and republish designated segments of AP's news articles without adding any commentary or insight. Further, Meltwater copied AP content to make money directly from its literal copying of this copyrighted material, which was the central feature of its business model.
The Southern District also explained that Meltwater could not define itself as an internet search engine, which it defined as a publicly-available tool that improves general access to content across the internet. Instead, the court stated that Meltwater was an expensive, subscriber-only service that marketed itself as an online news clipping service. Further, the Southern District explained that the purpose of search engines is to allow users to sift through internet data and direct them to its original source, but Meltwater's news aggregation and clipping service did not function in this manner.
The Nature of the Copyrighted Work
The second fair use factor calls for consideration of whether the underlying copyrighted work:
- Is expressive or creative, such as a work of fiction, or is more factual or informational in nature.
- Is published or unpublished.
The Southern District found that this factor was at most neutral because AP’s articles were published news stories and therefore more vulnerable to a fair use defense than unpublished works or fictional works.
The Amount of the Work Used
The third fair use factor examines the amount and substantiality of the copying of the original made by the infringing work. The court noted that this factor has both quantitative and qualitative dimensions, and is to be reviewed with reference to the copyrighted work, not the infringing work.
The Southern District found that this factor weighed strongly against a finding of fair use because Meltwater failed to show that its use of AP's articles was defensible from either a quantitative or qualitative perspective. Meltwater commonly took between 4.5% and 61% of AP's articles and automatically took the summary lede of every AP story. Further, the court observed that Meltwater failed to show that it took only the amount of material from AP’s articles that was necessary for it to function as a search engine, noting that search engines routinely offer briefer segments.
The Effect on the Work's Potential Market
The final fair use factor examines the extent of market harm caused by the particular actions of the alleged infringer. This factor also assesses whether unrestricted and widespread conduct of the sort the defendant engaged in would result in a substantially adverse impact on the potential market for the original work the defendant copied. This factor's main concern is whether the accused infringer's secondary use usurps the original work's market.
The Southern District held that this fourth factor weighed strongly against Meltwater because AP had expended considerable effort to develop an online presence. The court further noted that when Meltwater reproduced and distributed AP's articles without paying a licensing fee it:
- Diverted subscriber licensing fees from AP to Meltwater.
- Lessened the value of AP’s work by letting Meltwater compete with companies that pay a licensing fee to AP to use its content.
- Allowed Meltwater to act as an AP competitor, offering AP content to customers for fees that are less than AP's.
Practical Implications
This opinion is notable because it shows that even at the relatively early procedural stage of summary judgment, the district court was willing to reject Meltwater's fair use defense. The Southern District simply did not permit Meltwater to avoid in-depth analysis of the fair use factors by advancing an unsupported argument that its commercial news clipping service was a transformative internet search engine. Online service providers seeking to use other business's copyrightable content and defend on the grounds of fair use should note that the Southern District and other courts following its reasoning would be unlikely to accept their self-designation as a search engine unless their services are limited to the common purposes and functions typically associated with search engines.