January 21, 2016 | By Corynne McSherry

Fair Use Economics: How Fair Use Makes Innovation Possible and Profitable

Just over 30 years ago, the Supreme Court issued its landmark ruling in Sony v. Universal City Studios (usually referred to as the Sony/Betamax case), clearing the way for a technology company to sells its products (Betamaxes, and by extension, VCRs) even though they could potentially be used for infringing purposes. After all, the court reasoned, customers also deployed their VCRs to engage in non-infringing fair uses, such as recording soap operas to watch after work. If a product was capable of “substantial noninfringing uses,” the fact that it could also be used for unlawful purposes shouldn’t be enough to force it off the market (and/or require its maker to pay millions in damages).

That decision is emblematic of the role fair use plays in providing breathing space in copyright law, making sure that control of the right to copy and distribute doesn’t become control of the right to create and innovate. New technologies and services often create multiple “copies” as a matter of course during their operation. At the same time, copyright terms cover works many decades old and copyrighted software appears in more and more devices. Taken together, these developments mean the potential reach of copyright may extend ever further. Fair use makes sure that the rights of the public expand at the same time, so add-on creativity and innovation can continue to thrive.

Take last year’s ruling in the Google Books case. For years, Google cooperated with libraries to digitize books and create a massive, publicly available and searchable books database. It has become an extraordinarily valuable tool for librarians, scholars, and amateur researchers of all kinds. It also generates revenue for authors by helping them reach new audiences. Nonetheless, for almost a decade the Authors Guild has argued that its members are owed compensation in exchange for their books being copied, digitized, and included in the database. The Second Circuit disagreed, finding that Google was making a fair use of the works because the reason Google had to make the copies was in order to allow others to engage in fair use. Along the way, it rejected the notion that fair use doesn’t protect “technological” fair uses like digitization (as opposed to “creative” repurposing, such as a remix video).

The Google Books decision is fair use doing its job: making sure that copyright law serves, rather than impedes, the public interest. Thanks to copyright rules governing the right to copy, distribute, and perform, the folks who held copyrights in the works at issue in the above cases has (and have) a chance to seek compensation. And thanks to copyright rules protecting fair uses, other creative people, their users and the public had (and have) an opportunity to engage with those works in new and unexpected ways. Of course innovators have to take a chance that a court will find their uses to be fair—but absent fair use the copyright risk would make that innovation impossible. That’s fair use as innovation policy and according to one study it’s helped generate trillions for the U.S. economy.

For every decision like that in the Google Books case, however, we still see fair use tested. For example, in the Fox News v. TVEyes case, a great decision on the fair use of radio and TV excerpts was followed up by a troubling one that walks back some of the protections for new and innovative uses of media. Two years ago, Fox News sued a company called TVEyes, which creates a text-searchable database of broadcast content from thousands of television and radio stations in the United States and worldwide. It’s used by journalists, scholars, and political campaigns to study and monitor the national media. In September 2014 the court ruled that the service was for the most part engaging in fair uses, but wanted to know more about certain features. In August 2015, it issued a perplexing ruling that TV Eyes was liable for infringement because some aspects of the service might be used for infringing purposes—even though it admitted those features could also be used for non-infringing purposes. That ruling can’t be squared with Sony/Betamax, and misses the mark on how fair use is flexible enough to include uses never before seen; we look forward to seeing it overturned on appeal.

We're taking part in Copyright Week, a series of actions and discussions supporting key principles that should guide copyright policy. Every day this week, various groups are taking on different elements of the law, and addressing what's at stake, and what we need to do to make sure that copyright promotes creativity and innovation.


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