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Fox News Network, LLC v. TVEyes, Inc.

United States Court of Appeals, Second Circuit

February 27, 2018

FOX NEWS NETWORK, LLC, Plaintiff-Appellee-Cross-Appellant,
v.
TVEYES, INC., Defendant-Appellant-Cross-Appellee.

          Argued: March 7, 2017

         Defendant TVEyes, Inc. ("TVEyes") is a media company that continuously records the audiovisual content of more than 1, 400 television and radio channels, imports that content into a database, and enables its clients, for $500 per month, to view, archive, download, and email to others ten-minute clips. TVEyes also copies the closed-captioned text of the content it imports, allowing its clients to search for the clips that they want by keyword, as well as by date and time.

         Plaintiff Fox News Network, LLC ("Fox") sued TVEyes for copyright infringement in the United States District Court for the Southern District of New York. The principal question on appeal is whether TVEyes's enabling of its clients to watch Fox's programming is protected by the fair use doctrine.

         TVEyes's re-distribution of Fox's content serves a transformative purpose insofar as it enables TVEyes's clients to isolate from the vast corpus of Fox's content the material that is responsive to their interests, and to access that material in a convenient manner. But because that re-distribution makes available to TVEyes's clients virtually all of Fox's copyrighted content that the clients wish to see and hear, and because it deprives Fox of revenue that properly belongs to the copyright holder, TVEyes has failed to show that the product it offers to its clients can be justified as a fair use.

         Accordingly, we reverse the order of the district court to the extent that it found fair use. Our holding does not encompass the copying of Fox's closed-captioned text into a text-searchable database, which Fox does not challenge on appeal. We affirm the district court's order to the extent that it denied TVEyes's request for additional relief. We also remand for entry of a revised injunction.

          KATHLEEN M. SULLIVAN (Thomas C. Rubin, Todd Anten, and Jessica A. Rose on the brief), Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, for Defendant-Appellant-Cross-Appellee TVEyes, Inc.

          DALE M. CENDALI (Joshua L. Simmons on the brief), Kirkland & Ellis LLP, New York, NY, for Plaintiff-Appellee-Cross-Appellant Fox News Network, LLC.

          Brian M. Willen (Lauren Gallo White and Stephen N. Gikow on the brief), Wilson Sonsini Goodrich & Rosati, P.C., New York, NY, for amicus curiae Google, Inc.

          Brianna L. Schofield (Law Students Tomasz Barczyk and J. William Binkley on the brief), Samuelson Law, Technology & Public Policy Clinic, UC Berkeley School of Law, Berkeley, CA; [**] Lila Bailey, Law Office of Lila Bailey, San Francisco, CA, for amici curiae Internet Archive; American Library Association; Association of College and Research Libraries; Association of Research Libraries; Society of American Archivists, in support of TVEyes, Inc.

          Corynne McSherry (Kit Walsh on the brief), Electronic Frontier Foundation, San Francisco, CA; Aaron Williamson, Technology Law & Policy Clinic, N.Y. U.School of Law, New York, NY, for amici curiae Electronic Frontier Foundation; Public Knowledge, in support of TVEyes, Inc.

          Matt Schruers (Ali Sternburg on the brief), Computer & Communications Industry Association, Washington, DC; Jonathan Band, Jonathan Band PLLC, Washington, DC, for amicus curiae Computer & Communications Industry Association, in support of TVEyes, Inc.

          Phillip R. Malone (Jeffrey T. Pearlman and Law Student Brian P. Quinn on the brief), Juelsgaard Intellectual Property and Innovation Clinic, Mills Legal Clinic at Stanford Law School, Stanford, CA, for amici curiae Media Critics, in support of TVEyes, Inc.

          Rebecca Tushnet, Washington, DC; Michael Scott Leavy, Maplewood, NJ; Christopher Jon Sprigman, New York, NY, for amici curiae Professors of Intellectual Property Law, in support of TVEyes, Inc.

          Rick Kaplan (Benjamin F.P. Ivins on the brief), National Association of Broadcasters, Washington, DC; Joseph R. Palmore (Paul Goldstein and James R. Sigel on the brief), Morrison & Foerster LLP, Washington, DC, for amicus curiae National Association of Broadcasters, in support of Fox News Network, LLC.

          Barry I. Slotnick (Jonathan N. Strauss on the brief), Loeb & Loeb LLP, New York, NY, for amicus curiae Copyright Alliance, in support of Fox News Network, LLC.

          Eleanor M. Lackman (Nancy E. Wolff, Scott J. Sholder, and Brittany L. Kaplan on the brief), Cowan DeBaets Abrahams & Sheppard LLP, New York, NY, for amici curiae American Photographic Artists; American Society of Media Photographers, Digital Media Licensing Association, National Press Photographers Association; Professional Photographers of America, in support of Fox News Network, LLC.

          David L. Leichtman (Sherli Furst on the brief), Robins Kaplan LLP, New York, NY, for amici curiae American Society of Journalists and Authors, Inc.; Jonathan Taplin; Mary T. Rogus; Joe Bergantino; David C. Hazinski; Mitchell T. Bard; Patrick Meirick, in support of Fox News Network, LLC.

          Michael S. Schooler, National Cable & Telecommunications Association, Washington, DC, for amicus curiae National Cable & Telecommunications Association, in support of Fox News Network, LLC.

          Linda Steinman (Elizabeth A. McNamara and Alison Schary on the brief), Davis Wright Tremaine LLP, New York, NY, for amici curiae Cable News Network, Inc.; Gray Television Group, Inc.; Hearst Television, Inc.; ITV America, in support of Fox News Network, LLC.

          Sandra Aistars, Arts and Entertainment Advocacy Clinic, George Mason University School of Law, Arlington, VA; Jennifer Allen Sands Atkins, Cloudigy Law PLLC, McLean, VA, for amici curiae Intellectual Property Scholars, in support of Fox News Network, LLC.

          Before: NEWMAN, JACOBS, Circuit Judges, and KAPLAN, District Judge. [*]

          JACOBS, CIRCUIT JUDGE.

         In this copyright infringement suit, defendant TVEyes, Inc. ("TVEyes") offers a service that enables its clients to easily locate and view segments of televised video programming that are responsive to the clients' interests. It does so by continuously recording vast quantities of television programming, compiling the recorded broadcasts into a database that is text-searchable (based primarily on the closed-captioned text copied from the broadcasts), and allowing its clients to search for and watch (up to) ten-minute video clips that mention terms of interest to the clients.[1] Plaintiff Fox News Network, LLC ("Fox"), which has sued TVEyes in the United States District Court for the Southern District of New York, does not challenge the creation of the text-searchable database but alleges that TVEyes infringed Fox's copyrights by re-distributing Fox's copied audiovisual content, thereby enabling TVEyes's clients to access that content without Fox's permission. The principal question on appeal is whether TVEyes's enabling of its clients to watch Fox's programming is protected by the doctrine of fair use. See 17 U.S.C. § 107.

         The district court held that fewer than all of the functions of TVEyes's service constitute a fair use. Specifically, the district court deemed a fair use the functions enabling clients of TVEyes to search for videos by term, to watch the resulting videos, and to archive the videos on the TVEyes servers; but the court held that certain other functions were not a fair use, such as those enabling TVEyes's clients to download videos to their computers, to freely e-mail videos to others, or to watch videos after searching for them by date, time, and channel (rather than by keyword). The district court therefore dismissed Fox's challenge to important functions of TVEyes's service, but also held that TVEyes was liable to Fox for copyright infringement on account of other functions of that service. A permanent injunction limited various aspects of TVEyes's service.[2]

         This appeal shares features with our decision in Authors Guild v. Google, Inc., 804 F.3d 202 (2d Cir. 2015) ("Google Books"). That case held that Google's creation of a text-searchable database of millions of books (including books under copyright) was a fair use because Google's service was "transformative" and because integral features protected the rights of copyright holders. However, we cautioned that the case "test[ed] the boundaries of fair use." Google Books, 804 F.3d at 206. We conclude that defendant TVEyes has exceeded those bounds.

         TVEyes's re-distribution of Fox's audiovisual content serves a transformative purpose in that it enables TVEyes's clients to isolate from the vast corpus of Fox's content the material that is responsive to their interests, and to access that material in a convenient manner. But because that re-distribution makes available virtually all of Fox's copyrighted audiovisual content--including all of the Fox content that TVEyes's clients wish to see and hear--and because it deprives Fox of revenue that properly belongs to the copyright holder, TVEyes has failed to show that the product it offers to its clients can be justified as a fair use.

         Accordingly, we reverse the order of the district court to the extent it held that some of the challenged TVEyes functions constituted a fair use. We affirm the order to the extent that it denied TVEyes's request for additional relief. Furthermore, because the district court's issuance of an injunction was premised on the incorrect conclusion that much of what TVEyes offered was a fair use, we remand for the district court to revise the injunction in light of this opinion.

         I

         TVEyes is a for-profit media company. It offers a service that allows its clients to efficiently sort through vast quantities of television content in order to find clips that discuss items of interest to them. For example, a client in marketing or public relations interested in how a particular product is faring in the media can use the TVEyes service to find, watch, and share clips of recent television broadcasts that mention that product.

         The service works this way. TVEyes records essentially all television broadcasts as they happen, drawing from more than 1, 400 channels, recording 24 hours a day, every day. By copying the closed-captioned text that accompanies the content it records (and utilizing speech-to-text software when necessary), TVEyes creates a text-searchable transcript of the words spoken in each video. The videos and transcripts are consolidated into a database. A client inputs a search term and gets a list of video clips that mention the term. A click on a thumbnail image of a clip plays the video, beginning fourteen seconds before the search term was spoken, and displays a segment of the transcript with the search term highlighted. The parties dispute the quality of the clips. Fox contends that the clips are high definition; TVEyes contends that the clips are grainier than the original broadcasts. The clips can be played for no more than ten minutes, but a user can play an unlimited number of clips. To prevent clients from watching entire programs, TVEyes (during the course of this litigation) implemented a device that is claimed to prevent clients from viewing consecutive segments. The parties dispute whether this measure is effective.

         TVEyes's service has ancillary functions. A TVEyes client may "archive" videos permanently on the TVEyes servers and may download videos directly to the client's computer. These services are useful because TVEyes otherwise deletes captured content after thirty-two days. Clients can also email the clips for viewing by others, including those who are not TVEyes clients. And clients can search for videos by date, time, and channel (rather than by keyword). The parties dispute whether clients can watch live broadcasts on TVEyes.

         A TVEyes subscription costs approximately $500 per month, is available for business and professional use, and is not offered to private consumers for personal use. Clients include journalists, government and political organizations, law enforcement, the military, for-profit companies, and non-profits.

         TVEyes asserts that it restricts its clients' use of its content in various ways. For example, clients are required to sign a contract that limits their use of clips to "internal purposes only" and are warned upon downloading a clip that it is to be used for only "internal review, analysis or research." Fox contends that these safeguards are ineffective and disputes the assertion by TVEyes that its service is primarily used for "internal" research and analysis.

         Fox claims that at some point TVEyes unsuccessfully approached it to procure a license to use Fox programming. Fox demanded that TVEyes stop using its programming; when TVEyes refused, litigation ensued. The lawsuit focuses on nineteen copyrighted Fox broadcasts. The legal question is whether TVEyes has a "fair use" defense to Fox's copyright infringement claims. 17 U.S.C. § 107.

         II

         The Copyright Act provides:

[T]he fair use of a copyrighted work . . . for purposes such as criticism, comment, news reporting, teaching . . ., scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include--
(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) the effect of the use upon the potential market for or value of the copyrighted work.

Id.

         In fair use litigation, courts undertake a "case-by-case analysis" in which each factor is considered, "and the results [are] weighed together, in light of the purposes of copyright." Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577-78 (1994). The factors are non-exclusive, but consideration of each is mandatory.[3]Swatch Grp. Mgmt. Servs. Ltd. v. Bloomberg L.P., 756 F.3d 73, 81 (2d Cir. 2014). Some of the factors are more important than others, with the fourth (market impact) being "the single most important element." Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566 (1985). Fair use is an affirmative defense, so TVEyes bears the burden of proving it. Am. Geophysical Union v. Texaco, Inc., 60 F.3d 913, 918 (2d Cir. 1994).

         It is useful to analyze separately distinct functions of the secondary use (i.e., the use by TVEyes of Fox's copyrighted material), considering whether each independent function is a fair use. See Google Books, 804 F.3d at 216-18. TVEyes has two core offerings: the "Search function" and the "Watch function." The Search function allows clients to identify videos that contain keywords of interest. The Watch function allows TVEyes clients to view up to ten-minute, unaltered video clips of copyrighted content. Fox does not challenge the Search function on appeal. Fox's challenge is to the Watch function, and we determine that its inclusion renders TVEyes's package of services unprotected by the fair use doctrine. That conclusion subsumes and obviates consideration of certain functions that are subsidiary to the Watch function, such as archiving, downloading, and emailing the video clips.

         Turning to the Watch function, we next consider each of the four factors listed in § 107.

         A

         In considering the first statutory factor--the "purpose and character" of the secondary use, 17 U.S.C. § 107(1)--the primary inquiry is whether the use "communicates something new and different from the original or [otherwise] expands its utility, " that is, whether the use is "transformative." Google Books, 804 F.3d at 214. To be transformative, a use must "do[] something more than repackage or republish the original copyrighted work"; it must "'add[] something new, with a further purpose or different character, altering the first with new expression, meaning or message . . . .'" Authors Guild, Inc. v. HathiTrust, 755 F.3d 87, 96 (2d Cir. 2014) (quoting Campbell, 510 U.S. at 579). "Although . . . transformative use is not absolutely necessary for a finding of fair use, . . . [transformative] works . . . lie at the heart of the fair use doctrine, " Campbell, 510 U.S. at 579, and "a use of copyrighted material that 'merely repackages or republishes the original' is unlikely to be deemed a fair use, " Infinity Broad. Corp. v. Kirkwood, 150 F.3d 104, 108 (2d Cir. 1998) (quoting Pierre N. Leval, Toward a Fair Use Standard, 103 Harv. L. Rev. 1105, 1111 (1990)).

         Precedent is helpful. Both parties rely most heavily on Google Books, which provides the starting point for analysis.

         In Google Books, a consortium of libraries collaborated to make digital copies of millions of books, many of them under copyright. Google pooled these digital copies into a text-searchable database. 804 F.3d at 207. Anyone could search the database free. When a user entered a search term, Google returned a list of books that included the term, and, for each responsive book, Google provided a few "snippets" that contained the term. Id.

         We held that Google's copying served a transformative purpose because it created a text-searchable database that "communicate[d] something new and different from the original." Id. at 214. "[T]he result of a word search is different in purpose, character, expression, meaning, and message from the page (and the book) from which it is drawn." Id. at 217 (quoting HathiTrust, 755 F.3d at 97).

         We also held that the "snippet view" of unaltered, copyrighted text "add[ed] important value to the basic transformative search function" by allowing users to verify that the list of books returned by the database was responsive to the user's search. Id. Thus, a user searching for the term "Hindenburg" could infer from snippets whether the book was referencing the Weimar president or the exploded zeppelin. See id. at 217-18.

         TVEyes's copying of Fox's content for use in the Watch function is similarly transformative insofar as it enables users to isolate, from an ocean of programming, material that is responsive to their interests and needs, and to access that material with targeted precision. It enables nearly instant access to a subset of material--and to information about the material--that would otherwise be irretrievable, or else retrievable only through prohibitively inconvenient or inefficient means.

         Sony Corporation of America vs. Universal City Studios, Inc. is instructive. See 464 U.S. 417 (1984). In Sony, a television customer, who (by virtue of owning a television set) had acquired authorization to watch a program when it was broadcast, recorded it in order to watch it instead at a later, more convenient time. That was held to be a fair use. While Sony was decided before "transformative" became a term of art, the apparent reasoning was that a secondary use may be a fair use if it utilizes technology to achieve the transformative purpose of improving the efficiency of delivering content without unreasonably encroaching on the commercial entitlements of the rights holder.

         The Watch function certainly qualifies as technology that achieves the transformative purpose of enhancing efficiency: it enables TVEyes's clients to view all of the Fox programming that (over the prior thirty-two days) discussed a particular topic of interest to them, without having to monitor thirty-two days of programming in order to catch each relevant discussion; and it eliminates the clients' need even to view entire programs, because the ten most relevant minutes are presented to them. Much like the television customer in Sony, TVEyes clients can view the Fox programming they want at a time and place that is convenient to them, rather than at the time and place of broadcast. For these reasons, TVEyes's Watch function is at least somewhat transformative.[4]

         * * *

         The first statutory factor also implicates considerations distinct from whether the secondary use is transformative. In particular, Fox argues that the "commercial nature" of TVEyes's copying (its sale of access to Fox's content) weighs against a finding of fair use. 17 U.S.C. § 107(1).

         The commercial nature of a secondary use weighs against a finding of fair use. See Campbell, 510 U.S. at 585. And it does so especially when, as here, the transformative character of the secondary use is modest. See id. at 579 ("[T]he [less] transformative the new work, the [more] will be the significance of other factors, like commercialism . . . ."). The Watch function has only a modest transformative character because, notwithstanding the transformative manner in which it delivers content, it essentially republishes that content unaltered from its original form, with no "new expression, meaning or message." HathiTrust, 755 F.3d at 96 (quoting Campbell, 510 U.S. at 579); cf. Kirkwood, 150 F.3d at 106 (service that transmits unaltered radio broadcasts in real time over telephone lines is not transformative); Video Pipeline, Inc. v. Buena Vista Home Entm't, Inc., 342 F.3d 191, 199-200 (3d Cir. 2003) (service that streams short ...


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