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Fair Use of Copyrighted Works

Factor 4: The Effect of the New Use on the Market for the Original

The fourth factor is the effect that the new use has on the value of, or the potential market for, the original work. While courts have sometimes described this factor as the most important factor, the Supreme Court has affirmed that all four factors must be "weighed together". (Campbell v. Acuff-Rose Music.)

Deciding whether a new work undermines the value of, or market for, the original, of course depends on the first fair use factor — what is the purpose and character of the new work? Is it "transformative", or in some other way not a substitute for the original? It also depends on the third fair use factor — whether the original work is wholly appropriated, or less of it is taken. For instance, one court held that downloading and keeping songs from peer-to-peer file sharing networks was not a fair use, largely because the songs were substitutes for purchases. (BMG Music v. Gonzalez.)

Parodies, on the other hand, are unlikely to substitute for the original work. People who want a love ballad are less likely to be happy with a song that mocks the love ballad. In addition, the fact that parodies and other critical works may discourage consumers from buying the original doesn't count against fair use. Otherwise, a major purpose of fair use — to advance free expression, including critique — would be subverted. It is only replacing or supplanting demand that counts against fair use.

Courts examine both potential and actual market harms. An actual harm was shown in the Nation case, in which the magazine's publication of a portion of Gerald Ford's memoirs caused Time magazine to cancel a contract for "first serial rights". (Harper & Row v. Nation Enterprises.) A potential market harm was found where large-scale photocopying of journal articles would undermine a potential market in selling nreprints. (American Geophysical Union v. Texaco.)

Some courts, though, have considered the absence of a current, existing market to favor fair use. Out-of-print books would be a good example; uses of a book, such as educational copies, are given more latitude if the book is out of print.