What Fair Use Is -- And How It Works

The Digital Millenium Copyright Act (DMCA) has provided user-generated content websites with four safe harbors that effectively put the onus on rightsholders to protect their intellectual property.  While 2012 saw the content lobby go nuclear on the DMCA and try to shift the onus of takedown notices from the content owner to the aggregator who serves as the platform to the alleged acts of piracy, as a producer of video content, I have focused more on another aspect of copyright law, namely, fair use. 

More so than with articles, online video content has flourished thanks to fair use, so in this article we’ll outline what it entails and how it both fosters and limits commercial development.

Section 106 and 107 of Copyright Law

Section 106 of the copyright law provides the owner of copyright in a work the exclusive right:

  • To reproduce the work in copies;
  • To prepare derivative works based upon the work;
  • To distribute copies of the work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
  • To perform the work publicly;
  • To display the copyrighted work publicly
  • In the case of sound recordings, to perform the work publicly by means of a digital audio transmission.

If that was “all she wrote,” then copyright would be an open and shut case. However, the doctrine of fair use has developed through a series of court decisions over the years and codified in section 107.

Ironically, the same way that the DMCA has four “safe harbors,” fair use includes four variables, namely:

1.  The purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational 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

4.  The effect of the use upon the potential market for, or value of, the copyrighted work

Since this is ultimately a column about making money from video content, for the purpose of this article, we will focus only on the first variable: whether it’s to be used commercially.  It is important to note that commercial use does not automatically nullify fair use.  For example, if a newspaper publishes excerpts of a book and runs ad for bookstores selling that book alongside the review, that would fall under fair use.  The list goes on and on. 

How does this apply to online content and video in particular?

However, if you’re using something under fair use, you can get away with commercial use -- but you cannot go full-tilt and monetize it to the fullest extent.  I would like to stress that I am not a lawyer, but I have consulted with dozens of lawyers representing all three sides of the debate and I would consider myself well-versed in the matter.

Applying this to the world of online media and video content in specific, you might be able to serve a pre-roll or display advertisement before or alongside a video that employs fair use, but you might have a harder time getting away with it if you have a direct sponsorship or endorsement. 

Nonetheless, fair use is omnipresent: news organizations, portals, and media companies all rely on it even if they are for-profit businesses.

Leaving Billions On the Table

But, in doing so, we -- and the ecosystem in general – are leaving billions on the table. 

Chris Rock once said: “Just because you can drive with your feet doesn’t mean that you should.”  In the same vein, just because we can get away with further commercialization of a fair use project doesn’t mean that we should. 

While fair use has allowed society as a whole to benefit from new projects based on older works, it’s clear that by trying to please both sides of the debate we are foregoing a lot of potential economic activity. 

There’s a business opportunity around this inefficiency, but whether or not the loss of potential revenue is enough to bring the various stakeholders remains to be seen.

2 comments about "What Fair Use Is -- And How It Works".
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  1. Max Mead from TubeMogul, January 2, 2012 at 4:03 p.m.

    Nice article on a dicey topic. Today's NYT has a good piece on how fair use is playing out in the art world; and if you've never seen Epic 2014 by the Museum of Media History, I'd highly recommend it: -- it gives question to point #4 about how the fair use may effect content producers over the longer term. Is Google, for example, a vehicle for enabling discovery of new/great content, or a troll that hoardes the economics to the detriment of the talent who's creating the works?

  2. Pamela Horovitz from Internet Video Archive, January 3, 2012 at 12:48 p.m.

    AK, glad to see you covering the commercial aspect of fair use. I agree with Max that it is a tricky topic.. I'd just like to add that without fair use the market has to assume that the best future exploitation of content always resides with the copyright holder. Crowd sourcing shows that may not always be the case. Second, are you sure we're really leaving billions on the table? The FBI has admitted that they have no basis in fact for the stats they quote on losses from piracy which they get from the RIAA and the MPAA who understandably have a vested interest in using the highest numbers they can. It's a tough debate with legit arguments on both sides, and as you noted, while there may be a business opportunity there, it's sometimes easier to just say no.

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