Opinion ID: 794396
Heading Depth: 2
Heading Rank: 4

Heading: Effect of the Use upon the Market for or Value of the Original

Text: 28 The fourth factor is the effect of the use upon the potential market for or value of the copyrighted work. 17 U.S.C. § 107(4). The court looks to not only the market harm caused by the particular infringement, but also to whether, if the challenged use becomes widespread, it will adversely affect the potential market for the copyrighted work. Harper, 471 U.S. at 568, 105 S.Ct. 2218. This analysis requires a balancing of the benefit the public will derive if the use is permitted and the personal gain the copyright owner will receive if the use is denied. MCA, Inc. v. Wilson, 677 F.2d 180, 183 (2d Cir.1981). 29 In the instant case, the parties agree that DK's use of the images did not impact BGA's primary market for the sale of the poster images. Instead, we look to whether DK's unauthorized use usurps BGA's potential to develop a derivative market. Appellant argues that DK interfered with the market for licensing its images for use in books. Appellant contends that there is an established market for licensing its images and it suffered both the loss of royalty revenue directly from DK and the opportunity to obtain royalties from others. 30 It is indisputable that, as a general matter, a copyright holder is entitled to demand a royalty for licensing others to use its copyrighted work, and that the impact on potential licensing revenues is a proper subject for consideration in assessing the fourth factor. Texaco, 60 F.3d at 929 (citations omitted). We have noted, however, that were a court automatically to conclude in every case that potential licensing revenues were impermissibly impaired simply because the secondary user did not pay a fee for the right to engage in the use, the fourth fair use factor would always favor the copyright holder. Id. at 930 n. 17 (emphasis added); see Princeton Univ. Press v. Mich. Document Servs., 99 F.3d 1381, 1387 (6th Cir.1996) (stating that a copyright holder must have a right to copyright revenues before finding that a failure to pay a license fee equals market harm); Leval, supra, at 1124 (stating that [b]y definition every fair use involves some loss of royalty revenue because the secondary user has not paid royalties); 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.05[A][4] (2005) (stating that it is a given in every fair use case that plaintiff suffers a loss of a potential market if that potential is defined as the theoretical market for licensing the very use at bar). Accordingly, we do not find a harm to BGA's license market merely because DK did not pay a fee for BGA's copyrighted images. 31 Instead, we look at the impact on potential licensing revenues for traditional, reasonable, or likely to be developed markets. Texaco, 60 F.3d at 930. In order to establish a traditional license market, Appellant points to the fees paid to other copyright owners for the reproduction of their images in Illustrated Trip. Moreover, Appellant asserts that it established a market for licensing its images, and in this case expressed a willingness to license images to DK. Neither of these arguments shows impairment to a traditional, as opposed to a transformative market. 5 See Leval, supra, at 1125 (explaining that [t]he fourth factor disfavors a finding of fair use only when the market is impaired because the ... material serves the consumer as a substitute, or, ... supersedes the use of the original) (internal quotation marks omitted). 32 Here, unlike in Texaco, we hold that DK's use of BGA's images is transformatively different from their original expressive purpose. 6 In a case such as this, a copyright holder cannot prevent others from entering fair use markets merely by developing or licensing a market for parody, news reporting, educational or other transformative uses of its own creative work. Castle Rock, 150 F.3d at 146 n. 11. [C]opyright owners may not preempt exploitation of transformative markets .... Id. Moreover, a publisher's willingness to pay license fees for reproduction of images does not establish that the publisher may not, in the alternative, make fair use of those images. Campbell, 510 U.S. at 585 n. 18, 114 S.Ct. 1164 (stating that being denied permission to use [or pay license fees for] a work does not weigh against a finding of fair use). Since DK's use of BGA's images falls within a transformative market, BGA does not suffer market harm due to the loss of license fees.