The opinion of the court was delivered by: Denise Cote, District Judge:
This Opinion addresses cross-motions for summary judgment filed by The Associated Press ("AP"), a news cooperative, and Meltwater US Holdings Inc., Meltwater News US Inc., and Meltwater News US1 Inc. (collectively "Meltwater"), an Internet media monitoring service. In this action, AP principally contends that Meltwater is infringing AP's copyright in its published news stories. Meltwater uses a computer program to scrape news articles on the web and, among other things, provides excerpts of those stories, including many AP stories, in reports it sends each weekday to its subscribers. Meltwater does not dispute that it has taken expressive content from AP stories that is protected by the Copyright Act, but has interposed five defenses to AP's copyright infringement claim.
Meltwater's principal defense against the infringement claim is that its excerpting of AP news stories is a fair use.
Even though Meltwater's service is a closed system for subscribers only, Meltwater equates itself with Internet search engines. It argues that search engines transform the work they take from Internet news sites by using that content for a new purpose, that is, as an integral part of an information-location tool. According to Meltwater, this transformative purpose qualifies as a fair use of the copyright-protected material. It will be assumed for purposes of this Opinion that Internet search engines are a transformative use of copyrighted work. Nonetheless, based on undisputed facts, AP has shown that it is entitled to summary judgment on its claim that Meltwater has engaged in copyright infringement and that Meltwater's copying is not protected by the fair use doctrine.
This Opinion begins with a description of the facts taken from the parties' submissions on these cross-motions for summary judgment. The facts are largely undisputed; where there are factual disputes, those will be noted. Following a description of AP's business as it relates to these claims, and then Meltwater's, there will be a brief description of the procedural history of this lawsuit. The next sections of the Opinion will analyze the legal issues. They will include a discussion of Meltwater's five affirmative defenses to the claim of copyright infringement: fair use, implied license, equitable estoppel, laches, and copyright misuse. Finally, this Opinion will address Meltwater's motion for summary judgment on AP's secondary infringement claims and some of Meltwater's evidentiary objections.
AP was established in 1846; it is owned by over 1,400 newspapers across the United States and employs a staff of approximately 3,700 people. On any given day it produces between 1,000 and 2,000 news articles.
Each article is the result of a process that involves a number of creative decisions by AP reporters and editors. First, AP must select the topic to be covered in the article. The selection process can involve sifting through numerous press releases, comments made by politicians, and news tips received by AP in order to decide which topics are worthy of coverage. The actual writing of the story is often an iterative process, involving consultations between the reporter and editor about how to handle the assignment. During this process, the articles are reviewed for "completeness, clarity, balance and accuracy." The structure of a news article is itself the product of strategic and stylistic choices. For instance, breaking news stories are traditionally organized in the form of an "inverted triangle." The purpose of the "inverted triangle" structure is to include "as much key information as possible in the 'lede,' or first portion of the story." As AP's Standards Editor has explained, an AP story lede "is meant to convey the heart of the story, rather than serving as a teaser for the remainder of the story." In connection with this action, the AP obtained copyright registrations for thirty-three of its articles ("Registered Articles").*fn1
The news products that AP offers take many forms. For instance, subscribers can choose to subscribe to a regional news product, like AP's Latin American News, or Asia-Pacific News. Alternatively, a subscriber can select an AP product that is focused on a particular industry, like AP's Business Alert, Defense Alert, or Technology Alert.
Each of the thirty-three Registered Articles at issue in this lawsuit was written by an AP reporter. Most of articles authored by AP reporters are published by its members or licensees and not by AP itself. Thus, a principal component of AP's revenue comes from licensing fees it earns by licensing uses of its news products to its roughly 8,000 licensees. AP earns hundreds of millions of dollars in licensing fees annually.
In the digital age, AP's license agreements have expanded to permit the publication of its articles on the Internet. AP's license agreements with its digital and commercial clients account for more than $75 million of AP's annual gross revenue. Many of the websites on which AP content appears permit readers to access the articles without paying any fee.
AP's licensing agreements are crafted around the kind of redistribution rights the licensee wishes to have. For instance, AP's licensing agreements with LexisNexis and Factiva permit those services to give their customers access to full AP articles and to search through AP's archives. AP also has licensing agreements that permit the distribution of excerpts from or snippets of its articles. The license agreements between AP and three news clipping services that are competitors of Meltwater are examples of this kind of license. One such license granted the Internet news clipping service a license to distribute "AP text scraped from third party AP licensee websites ("AP Articles") . . . as well as links to AP Articles and excerpts of AP Articles." In a second such license, AP permits the Internet news clipping service to redistribute "Snippets" of AP articles "as a part of an aggregated feed of licensed content," to a primary market of Media Monitoring & Evaluation companies who cater to "Internal corporate communications and PR professionals and their external agents." This license defines "Snippets" to mean "headlines and leading 140 characters from AP content." In a final example, the licensing agreement allows the news clipping service to make available directly or via its affiliate "snippets of [certain AP content] in response to search requests."
AP also offers a web-based platform known as AP Exchange to its licensees, which permits the licensees to search AP articles by keywords. Each AP article contains metadata tags. These tags attach to certain information appearing in AP articles including people, companies, geographic locations, and organizations. Through AP Exchange, customers can run either simple or advanced searches to locate AP news stories. This platform also allows AP's customers to save their searches and to receive search results on an ongoing basis. AP's customers can receive email alerts when an article that is responsive to one of their custom searches has been published. In addition, AP has licensed its content to customers that, in turn, permit their users to search for AP articles using keyword search terms.
Meltwater is an international "software as a service" ("SaaS") company that operates in twenty-seven countries. It was founded in 2001 in Norway. Its United States subsidiaries currently have four hundred employees, nine U.S. offices, and an annual income of [REDACTED] of dollars.
In 2005, Meltwater began offering a news monitoring service to subscribers in the United States called Meltwater News. Meltwater News now has more than [REDACTED] customers in the United States. Its U.S. customers are businesses, non-profit organizations, and government agencies. An annual subscription fee costs thousands of dollars.
Meltwater News subscribers have access to Meltwater's "Global Media
Monitoring" product, which offers a suite of online services. The
Global Media Monitoring product enables users to monitor the news
based on the presence of certain words
or phrases in news articles appearing on the Internet and to receive
excerpts of those news articles. Meltwater uses automated computer
programs or algorithms to copy or "scrape" an article from an online
news source, index the article, and deliver verbatim excerpts of the
article to its customers in response to search queries.*fn2
Through this automated mechanism, Meltwater copied each of
the thirty-three Registered Articles at issue in this litigation and
delivered excerpts from them to subscribers.
Meltwater markets its services to communications and public relations professionals as a tool that will assist them in locating "mentions" of their businesses in the media, in tracking their company's press releases, and in conducting comparative research. Some of Meltwater's marketing materials and sales representatives also advertise Meltwater News as a useful tool for staying informed of general news developments. One Meltwater sales representative described Meltwater News as "provid[ing] the most news in the most efficient manner" and referred to the Meltwater News Reports as "customized news digest[s]." Another Meltwater employee has recommended telling customers that a Meltwater News excerpt "saves you time so you don't have to read the full article."
Meltwater competes with AP and its licensees for business. Meltwater identifies companies and services like LexisNexis, Cision, Google News, and BurrellesLuce as its competitors. Each of these companies has held an AP license. Meltwater has succeeded in winning what it described as a "mega-contract" away from an AP licensee, and both AP and Meltwater have submitted bids to the same potential customers. In 2010, for instance, both AP and Meltwater submitted proposals to the House of Representatives in response to an "official solicitation for proposals to provide web based delivery of local, national and international news."
Like Internet search engines, Meltwater News employs automated computer programs known as "crawlers" to scan the Internet for news. Meltwater's crawlers scan approximately 162,000 online news websites from over 190 countries each day to create an index of the websites' content. The program usually crawls a news website at roughly [REDACTED] intervals. Most of these websites make their articles available to readers without charge.
The crawlers extract and download content from the websites. The downloaded content is organized into a structured internal format that has seven fields, including a time-stamp reflecting when the document was first seen by the crawler. The extracted content is then placed in a queue for indexing. Using an Application Programming Interface or API, an index is created that links or "maps" most of the words in the document to the document.
Meltwater's creation of the index permits its subscribers to search for and request delivery of information that is responsive to their search queries. Its subscribers can conduct two types of searches of the index.
First, a customer can use the Meltwater News platform to set up standing search queries known as "agents." An agent is a single string of words or phrases that will be used in searching Meltwater's index of online news content. For example, a customer interested in obtaining information on education policy might create an agent that reads: "("teachers" or "students") and education* and policies." The creation of an agent query allows the particular search to be conducted automatically on a recurring basis. A basic subscription offers a customer the ability to create five standing agent queries.
Customers receive agent search results in two ways. Most customers receive emails every weekday that contain the excerpts responsive to their standing search requests. These are labeled "News Reports." Customers can also view those same search results by logging onto their Meltwater News online account, where they can see all of their News Reports from the last seven months.
A typical News Report takes the following form. At the top of the News Report a banner appears that reads "News Report from Meltwater News." Directly beneath the banner appears a table entitled "Report Overview." The Table ordinarily consists of two columns; the first column contains the name of the "agent" query that retrieved hits; the second displays the raw number of hits in a given period of time (such as 3 in 1 day, or 635 in 23 hours).
The actual search results follow the Report Overview. They are organized in subcategories based on the agent query to which they respond. Within each agent category, the results appear in reverse chronological order, with the excerpt of the most recently published article appearing first.*fn3 Three icons appear next to each search result; they read, "Translate," "Share," and "Archive." AP articles account for over a third of the search results in some News Reports.
Each search result in the News Report generally includes the following text: (1) the headline or title of the article and a hyperlink to the URL for the website from which the article was indexed; (2) information identifying the article's source, such as the publisher and the country of origin; and (3) usually two excerpts from the article. The first excerpt consists of up to 300 characters (including white space) from the opening text of the article or lede. The second excerpt is shorter and is known as the "Hit Sentence." It is approximately 140 characters (not including white spaces) "surrounding a single, algorithmically chosen appearance of one of the customer's matched search keywords." If the keyword appears in the lede, then the lede is repeated twice.
On occasion, the hyperlink to the article no longer leads to the article because the article has been removed from the web. Meltwater contends that when that occurs, the hyperlink will lead the Meltwater subscriber to the website where the article originally appeared, and the reader will see whatever content the operator of the webpage has chosen to display in place of the original article.
A Meltwater News subscriber can choose to have certain charts and graphs included in their News Reports. These charts and graphs -- known as "Dashboard Analytics" or "Mail Analytics" -- provide additional information about the search results. For instance, customers who opt to have Mail Analytics included in their daily News Report will see a pie chart showing the three or four countries that have had the highest coverage of a particular agent. They also have a choice of seeing an "up-and-down coverage" chart that indicates whether the volume of coverage has gone up or down during a certain period of time, or a "word cloud" illustrating certain buzz words appearing in the search results.
A subscriber can also view additional analysis of its agent searches by logging on to the Meltwater News platform. When it logs on, it encounters a "dashboard" page containing five tools; some of these tools overlap with the tools that can be delivered in the News Reports. Using the dashboard, the customer can view (1) a "tone analysis" tool, which analyzes whether the tone of the news coverage is negative, positive, or neutral; (2) a "word cloud" graphic, which illustrates the frequency with which a keyword appears in the search results; (3) a list of the "top publications" providing the most coverage of a given agent query; (4) an "up-and-down trend analysis" chart, which indicates "whether the volume of media coverage related to a given search query has increased or decreased over a given period;" and (5) a map that illustrates the "geographical distribution of relevant news coverage."
The second way in which customers can conduct searches of the Meltwater News index is through an "ad hoc" search. To perform an ad hoc search, a Meltwater News subscriber logs on to its Meltwater account, clicks on a "Search" tab, and types in keywords of its choice.
Ad hoc searches do not generate News Reports, but the format for presenting the results generated by an ad hoc search is identical to that in News Reports. The results of ad hoc searches are not saved on the Meltwater system unless the subscriber saves them to the subscriber's own archive folder. There is no limit on the number of ad hoc searches that a subscriber can perform.
A subscriber with a basic subscription has the ability to archive material in two ways. First, subscribers can archive any of their search results in a personal archive stored on Meltwater's database. For instance, as described above, an "Archive" button appears next to each excerpt contained in a Meltwater News Report. Clicking this button archives the search result. When a search result is archived in this way, the information stored in the archive includes (1) the headline or title of the article and the URL link; (2) a description of the source of the article; (3) an excerpt of the article, consisting only of the opening text; and (4) any text the user has typed or pasted into a comment box. In other words, the Hit Sentence is not automatically archived.
Second, Meltwater offers a tool called "Article Editor" that is accessible from the Meltwater News online platform. Clicking on the Article Editor tool causes a pop-up window to appear. The window contains boxes with the labels "Date, Title, Opening Text, Body Text, URL, Name of Publisher, and Country." The subscriber can type text into these boxes or can copy and paste text from other websites. For instance, if a customer clicks on a hyperlink provided as part of a search result, the customer can proceed to copy the article from the publishing website and paste the text into the Article Editor. The text can be saved in an "external archive folder" on Meltwater's system for as long as the subscriber remains a customer.
E. Newsletter and Newsfeed
For an additional fee, Meltwater News assists its subscribers in creating their own newsletters. Material that has been saved in a subscriber's archive folder -- search results or material entered into the Article Editor -- can be incorporated into a "Newsletter" and sent to third-party recipients.
Alternatively, subscribers can elect to have their search results incorporated into a Newsfeed on their internal or external website. Meltwater describes the Newsfeed as a "dynamic list of search results, including links to full articles."
III. The Thirty-Three Registered Articles
Meltwater delivered excerpts of each of the thirty-three
Registered Articles to its customers in News Reports as a result of agent searches.*fn4 Meltwater scraped the Registered Articles from roughly 1,200 websites -- including the websites of AP's licensees and AP Hosted, which is a private label website where AP hosts content for its members. Twenty-four of the thirty- three articles were published within six months of the date Meltwater responded to a discovery request in this action. As a result, Meltwater was able to calculate from its records that it made at least 22,297 excerpts from the twenty-four Registered Articles available to its customers in the United States in response to agent queries.
The parties have not calculated the percentage of each original AP news story that was excerpted and delivered in each of the News Reports, but it probably ranged from as low as 4.5% to slightly over 60%. There are several factors that affect the calculation of the percentage. One is the length of the Registered Article. The average length of the full text of the thirty-three Registered Articles is 2,571 characters (not including spaces), or 504 words. But, some of the articles are short and some are long; they vary in length from 75 words to 1,321 words. Moreover, if the keyword that is searched appears in the lede, then the lede and Hit Sentence will overlap. AP has shown that with respect to some of the Registered Articles, a single Meltwater excerpt consisted of more than 30% of the text of the article and in at least one instance it constituted 61% of the article's text.
For example, from the shortest Registered Article -- entitled "Modern pentathlon tightens anti-doping policy"
Meltwater delivered the following excerpt:
MONACO (AP) -- Modern pentathlon has joined other sports in adopting a "no needles" policy as part of its anti-doping rules ahead of the 2012 London Olympics. . . . says athletes can receive injections only from a "certified medical professional" after an appropriate diagnosis and only if there is no alternative.
The full text of the Registered Article reads as follows:
MONACO (AP) -- Modern pentathlon has joined other sports in adopting a "no needles" policy as part of its anti-doping rules ahead of the 2012 London Olympics.
Governing body UIPM says athletes can receive injections only from a "certified medical professional" after an appropriate diagnosis and only if there is no alternative.
The UIPM says all injections must be reported to competition doctors.
Governing bodies in cycling, gymnastics and rowing have also introduced "no needles" rules this year.
Some of Meltwater's customers have received multiple excerpts from the same AP article, apparently in a single News Report. In such instances, the percentage of the article that is provided to the Meltwater customer may increase since the Hit Sentence in the various excerpts can change.
Excerpts from the Registered Articles were also included in ten Newsletters created by Meltwater customers in the United States. There is no evidence, however, that any Meltwater subscriber used the Meltwater Newsletter feature to cut and paste a complete copy of any of the thirty-three Registered Articles into its customized newsletter.
Finally, Meltwater subscribers only clicked on the hyperlinks for seven of the thirty-three Registered Articles. The average click-through rate for the thirty-three Registered Articles is roughly 0.08%.*fn5 Meltwater has not provided any information on any other measure of its click-through rates.*fn6
On February 14, 2012, AP filed this action against Meltwater. AP's amended complaint asserts six causes of action with respect to the Registered Articles: (1) copyright infringement; (2) contributory copyright infringement; (3) vicarious copyright infringement; (4) declaratory judgment of copyright infringement; (5) "hot news" misappropriation under New York common law; and (6) removal or alteration of copyright management information. In response, Meltwater has raised four counterclaims: (1) declaratory judgment of non-infringement; (2) declaratory judgment of safe harbor from infringement claims based upon the Digital Millennium Copyright Act ("DMCA"); (3) libel per se; and (4) tortious interference with business relations.
At a pretrial conference held on April 20, 2012, the Court proposed that the parties conduct an initial phase of discovery focused on Meltwater's liability on AP's copyright claims based on the nineteen articles identified in its original complaint. The parties thereafter agreed on a schedule that would permit them to focus on the core discovery needed to allow early briefing of the central legal issues in this case. At a May 11 conference, the Court determined that AP should be permitted to take targeted discovery not only of Meltwater's alleged infringement with respect to the Registered Articles, but also broader discovery of Meltwater's general practices and procedures.
On July 13, AP filed an amended complaint in which it included fourteen additional articles -- bringing the total number of Registered Articles at issue to thirty-three. Discovery proceeded on all thirty-three articles and broader issues to permit the parties to litigate through summary judgment practice the copyright infringement claim and Meltwater's affirmative defenses to that claim.
Both sides filed the instant cross-motions for summary judgment on November 9.*fn7 AP and Meltwater both move for summary judgment on Meltwater's fair use defense. AP has also moved for summary judgment on Meltwater's implied license defense. Each of Meltwater's affirmative defenses is implicated by this motion practice since Meltwater also contends that there are triable issues of fact on its affirmative defenses of implied license, equitable estoppel, laches, and copyright misuse that prevent summary judgment from being entered for AP. Meltwater has also moved for summary judgment on AP's contributory and vicarious copyright infringement claims.
These motions were fully submitted on January 23, 2013. Redacted sets of these motion papers were publicly filed in December 2012 and January 2013. The defendants also filed on December 26, 2012 and January 24, 2013, two motions to strike certain declarations submitted by the plaintiff and the plaintiff's Fed.R.Civ.P. 56.1 Statement.
Three amici curiae briefs were accepted for filing. Computer & Communications Industry Association ("CCIA") represents that it is not filing in support of either AP or Meltwater. Electronic Frontier Foundation and Public Knowledge have filed in support of Meltwater; the New York Times Company, Advance Publications, Inc., Gannett Co., Inc., the McClatchy Company, the Newspaper Association of America, and BurrellesLuce have filed in support of AP ("New York Times, et al.").
The parties have cross-moved for summary judgment. Summary judgment may not be granted unless the submissions of the parties taken together "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c), Fed. R. Civ. P. The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination the court must view all facts in the light most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp v. Catrett, 477 U.S. 317, 323 (1986); Azrielli v. Cohen Law Offices, 21 F.3d 512, 517 (2d Cir. 1994) ("[T]he court must resolve all ambiguities and draw all reasonable inferences in favor of the nonmoving party."). When the moving party has asserted facts showing that the non-movant's claims cannot be sustained, the opposing party must "set forth specific facts showing that there is a genuine issue for trial," and cannot rest on the "mere allegations or denials" of his pleadings. Rule 56(e), Fed. R. Civ. P. See also Goenaga v. March of Dimes Birth Defects ...