Why Second Circuit Found No Fair Use in 'TVEyes' Case

The district court actually issued two decisions ruling on the parties' cross motions for summary judgment. In the first decision, Fox News Network LLC v. TVEyes Inc., 43 F. Supp. 3d 379 (S.D.N.Y. 2014), the district court held that TVEyes's use of Fox News's content was fair use. In setting the stage for its decision, the court discussed the many advantages of the TVEyes service and its use by many governmental agencies. The court offered the example that once a police station has issued a public safety message, “the only way for the police department to know how every station is constantly reporting the situation would be to have an individual watch every station that broadcast news for twenty-four hours a day taking notes on each station's simultaneous coverage.”

The court then walked through the functionality and features of the TVEyes service, noting users could perform keyword searches, as well as searches based on the date, time and channel of an airing, and then could view, edit, download and email the 10-minute clips. The court was careful to point out that the TVEyes service was available only to businesses and not the general public and that the subscriber agreement limited use of the use of clips for internal research, review and analysis purposes. The court also noted that the TVEyes service had generated $8 million in revenue in 2013, charging subscribers a $500 monthly fee.

The district court similarly provided an overview of Fox News's interest in the dispute. Fox News, which makes only 16% of its television broadcast content available online, was concerned that the broader dissemination of its programming could both weaken its viewer base and its ability to license its content to third parties, from which it had generated around $3 million.

Against this factual backdrop, the district court proceeded to consider the four fair use factors of 17 U.S.C, §107: 1) the purpose and character of the use, including whether such use is of a 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; and 4) effect of the use upon the potential market for or value of the copyrighted work.

Central to the court's consideration of the transformative nature of the work under the first factor were Author's Guild Inc. v. HathiTrust, 755 F.3d 87 (2d Cir. 2017), and Authors Guild v. Google Inc., 954 F. Supp. 2d 282 (S.D.N.Y. 2013), both of which held that electronic libraries of books created for the purpose of allowing users to pinpoint which books use certain keywords or terms are transformative and therefore constitute fair use. Looking to the undisputed evidence that the TVEyes subscribers used the TVEyes service for research, criticism and comment, the court held that TVEyes had converted copyrighted works into a research tool. Citing the Second Circuit's decision in HathiTrust, the court explained that the TVEyes service “serves a new and different function from the original work and is not a substitute for it.” Acknowledging that TVEyes was a for-profit entity, the court nevertheless found that the first factor weighed in TVEyes's favor, citing the U.S. Supreme Court's holding in Campbell v. Acuff-Rose Music Inc., 510 U.S. 569 (1994), that if “commerciality carried presumptive force against a finding of fairness, the presumption would swallow nearly all of the illustrative uses listed in the preamble paragraph of §107, including news reporting, comment, criticism, teaching, scholarship, and research, since these activities are generally conducted for profit in this country.”

The district court engaged in a much shorter analysis for factors two and three. The court found the second factor — the nature of the copyrighted work — to be neutral, holding that news was factual or informational and that the second factor had limited value given the transformative nature of TVEyes's use. The district court similarly found the third factor neutral, explaining that although TVEyes had copied all of Fox News's content, doing so was essential to the transformative purpose of the TVEyes service.

Finally, the district court found that the fourth factor — the effect of the use on the market for the copyrighted work — did not weigh against a finding of fair use. Pointing to the fact that users typically played the Fox News clips at issue for less than a minute and that no user had accessed any of the works to watch clips sequentially, the court held that no reasonable juror could find that people were watching TVEyes as a substitute for FoxNews. The district court also found an overwhelming public benefit in the service provided by TVEyes: government bodies use it to monitor the accuracy of facts reported by the media so they can make corrections when necessary; the Army uses it to track media coverage of military operations in remote locations and to ensure national security and the safety of America troops; the White House uses TVEyes to evaluate news stories and give feedback to the press corps.

On balance, the factors clearly favored TVEyes and its use of Fox News's broadcast content was fair use. The district court withheld judgment, however, on whether other features of the TVEyes service, such as saving, archiving, downloading, emailing and sharing of clips also constituted fair use. Because the parties had not presented sufficient evidence on these issues, the court ordered further development of the factual record.

After the parties completed the additional discovery, they again filed cross motions for summary judgment, this time focusing on the archiving, editing, sharing, downloading and date-time search features of the TVEyes service. This time around, Fox News Network LLC v. TVEyes Inc., 124 F. Supp. 3d 325 (S.D.N.Y. 2015), the Southern District of New York court engaged in a much shorter analysis of the fair use factors. First, the archiving feature was fair use because it was an integral part of the TVEyes service; only through archiving past clips could a user determine trends in media coverage and create comparisons. Second, TVEyes's emailing feature was an important feature, but without sufficient protections against abuse, it could not be fair use. As explained by the court, although a staffer emailing a clip to a Congressman would undoubtedly further the transformative purpose of the TVEyes service, there was nothing to stop a business from emailing a clip as a part of a client pitch. As to the downloading and date-time search features, those were not integral to the TVEyes core services and thus were not transformative use.

On appeal, the U.S. Court of Appeals for the Second Circuit disagreed that any feature of the TVEyes service constituted fair use, and thus reversed in part and affirmed in part. Fox News Network LLC v. TVEyes Inc., 883 F.3d 169 (2018). Rather than extolling the public benefits of the TVEyes service in its fact recitation as the lower court had done, the Second Circuit's opening sentence was: “TVEyes is a for-profit media company.” The appeals court did mention that TVEyes's clients “include journalists, government and political organizations, law enforcement, the military, for-profit companies, and non-profits,” but was undoubtedly less moved by this fact than was the lower court.

Turning to the first fair-use factor, the Second Circuit started its analysis with the Google books decision. The appeals court held that TVEyes's copying of Fox's content was transformative to the extent that it enabled users to isolate responsive material from a sea of programming — material that would otherwise be “irretrievable, or else retrievable only through prohibitively inconvenient or inefficient means.” Nevertheless, the appeals court held that the first factor only favored TVEyes “slightly” given the commercial nature of TVEyes's use and the “modest character” of the transformative use, which added no new expression, meaning or message to the republished broadcasts.

Similar to the lower court, the Second Circuit found the second factor to have little role in the analysis.

For the third and fourth factors, however, the Second Circuit's holding deviated substantially from the district court's determinations. As to the amount and substantiality of the work used, the Second Circuit held this factor “clearly favor[ed] Fox.” The appeals court pointed out that contrary to the use in the Google books case, which included only snippets of text, the TVEyes clips were 10 minutes, which would likely be the entirety of the relevant news segment. The appeals court also agreed with Fox News that TVEyes's service “undercuts Fox's ability to profit from licensing searchable access to its copyrighted content to third parties.” According to the appeals court, the TVEyes business model made clear that “deep-pocketed consumers” were willing to pay for the service of being able to search and view selected clips — a service that was worth millions of dollars in the aggregate. “Since the ability to redistribute Fox's content in the manner that TVEyes does is clearly of value to TVEyes, it (or a similar service) should be willing to pay Fox for the right to offer the content.” Because TVEyes did not pay Fox, it was depriving Fox of licensing revenues.

Balancing the four factors, the court held no fair use, explaining: “At bottom, TVEyes is unlawfully profiting off the work of others by commercially re-distributing all of that work that a viewer wishes to use, without payment or license.”

The Second Circuit's decision in TVEyes is significant because it made clear that for it, the fourth factor — the effect of the use on the potential market for or value of the copyrighted work — is the most important factor in the fair use analysis. Indeed, even where a use is transformative and the defendant can demonstrate that the use benefits the public, there can nevertheless be no fair use if there is a substantial market for the defendant's service. Relatedly, the Second Circuit's opinion reinforces the highly factual nature of the fair use inquiry and the importance of working closely with counsel on services that, similar to TVEyes's services, incorporate another's copyrightable work. *****

Crystal Genteman is an associate with Kilpatrick Townsend & Stockton. She focuses her practice on trademark and copyright law and regularly practices before the Trademark Trial and Appeal Board. She can be reached at [email protected]. Chris Bussert is Senior Counsel at Kilpatrick Townsend. He has more than 30 years of experience in representing clients in trademark, franchise, copyright and unfair competition litigation, including proceedings before the Trademark Trial and Appeal Board. He can be reached at [email protected].