On February 27, 2018, the United States Court of Appeals for the Second Circuit in Fox News Network, LLC, v. TVEyes, Inc. (No. 15-3885) held that certain aspects of TVEyes’s service—which allows users to watch video clips excerpted from programming on Fox News and other channels—are not protected by the copyright fair use doctrine under 17 U.S.C. § 107.

TVEyes records television broadcasts from several channels 24 hours a day, creates a text-searchable transcript of those broadcasts, and consolidates the broadcasts and transcripts into a text-searchable database. Users who pay for TVEyes’s service can search the database for terms, and can watch video clips up to ten minutes in length which contain those terms. TVEyes’s service also allows users to download videos directly to their computer; to email the clips for others to view; and to search for videos by date, time, and channel rather than by keyword.

The District Court for the Southern District of New York held that some aspects of TVEyes’s service constituted fair use: namely, enabling clients to search for videos by term (“Search function”), to watch those videos (“Watch function”), and to archive those videos on the TVEyes’s servers. But the district court also held that other aspects were not fair use: namely, enabling clients to download videos to their computers, to email videos to others, and to watch videos after searching for them by date, time, and channel. The district court enjoined or restricted those aspects of TVEyes’s service. Fox appealed the district court’s holding that the Watch function of TVEyes’s service constituted fair use—but did not challenge the district court’s holding that the Search function was fair use.

In a decision by Judge Dennis G. Jacobs, the Second Circuit addressed each of the four statutory fair use factors set forth in 17 U.S.C. § 107 to reverse the district court’s determination that TVEyes’s Watch function constituted fair use.

The first factor—the purpose and character of the use—focuses on whether the use in question is “transformative,” i.e., whether the use “communicates something new and different from the original or otherwise expands its utility.” As to this factor, the Court relied on Authors Guild v. Google Inc., 804 F.3d 202, 214 (2nd Cir. 2015) (“Google Books”) and Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417 (1984) (“Sony”) to hold that the Watch function is “at least somewhat transformative.” In Google Books, Google pooled digital copies of books into a text-searchable database which, when searched for a term, would return a list of books with the term and provided three-line “snippets” containing the term. The Second Circuit there found Google’s copying to be fair use, noting that the “snippet view” of copyrighted text “add[ed] important value to the basic transformative search function” because users could verify that the list of books was actually responsive to their search. 804 F.3d at 217. In view of Google Books, the TVEyes Court reasoned that the Watch function was similarly transformative, because 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.” In Sony, the Supreme Court determined that a television customer’s recording of a program to watch at a later, more convenient time was not necessarily an infringement of copyright. In view of Sony, the TVEyes Court reasoned that the Watch function similarly “achieves the transformative purpose of enhancing efficiency” by allowing TVEyes’s clients to watch programming at a time and place convenient to them. But the Court further noted that, due to the commercial nature of TVEyes’s use and the fact that the Watch function “essentially republishes content unaltered from its original form,” the Watch function “has only a modest transformative character” which favors TVEyes only “slightly.”

As to the second fair use factor—the nature of the copyrighted work—the Court, citing Google Books, noted that the nature of the work rarely plays a significant role in the fair use analysis and concluded that it “plays no significant role here.” The Court rejected TVEyes’s argument that, because facts are not copyrightable, “the factual nature of Fox’s content militates in favor of a finding of fair use.”

As to the third fair use factor—the amount and substantiality of the portion used relative to the copyrighted work as a whole—the Court explained that the focus is on the amount of material “made available to the public,” rather than the amount used by the copier. The Court found that the third factor clearly favors Fox, because TVEyes makes available “virtually the entirety of the Fox programming that TVEyes users want to see and hear.” Although TVEyes’s clips are only up to ten minutes, the Court noted that ten minutes, in this context, constituted “extensive” copying, inclusive of all that is important from Fox’s news programming, “given the length of the average news segment on a particular topic.” The TVEyes Court distinguished these facts from those in Google Books, noting that Google there had imposed a number of technological limitations on the “snippets” to prevent their compilation into a coherent block of text, such that it “would be nearly impossible for a user to see a meaningful exposition of what the author intended to convey to readers.”

As to the fourth fair use factor—the effect of the use upon the potential market for or value of the copyrighted work—the Court agreed with Fox that TVEyes “undercut Fox’s ability to profit for licensing searchable access to its copyrighted content from third parties.” The Court explained that the success of TVEyes’s business model showed that consumers are willing to pay for a service that allows them to search for and view television clips, and that TVEyes, by providing Fox’s content to viewers without payment to Fox, deprives Fox of licensing revenues.

In sum, the Second Circuit rejected TVEyes’s fair use defense as to the Watch function, holding that the first fair use factor modestly favored TVEyes, but was outweighed by the third and fourth factors strongly favoring Fox. Accordingly, the Second Circuit remanded to the district court to revise the injunction as to the Watch function, but noted that that the injunction on remand “shall not bar TVEyes from offering a product that includes [the Search function] without making impermissible use of any protected audiovisual content.”

Senior Judge Lewis A. Kaplan of the District Court for the Southern District of New York, sitting by designation, issued a separate opinion concurring in part with the majority’s decision, but criticizing as dicta the majority’s holding that the Watch function was “somewhat transformative.” Judge Kaplan argued that there was no need for the majority to address the transformative nature of the Watch function in this case, and that the majority opinion’s “somewhat transformative” characterization “may contribute to confusion and uncertainty regarding this central concept in the law of fair use.” Judge Kaplan further expressed doubt that the Watch function was transformative, noting that it was his inclination “to conclude that a technological means that delivers copies of copyrighted material to a secondary user more quickly, efficiently or conveniently does not render the distribution of those copies transformative, at least standing alone.”