District Court Issues Opinion on “Fair Use” of Viral Videos

In Equals Three, LLC v. Jukin Media, Inc., the United States District Court for the Central District of California presented an informative “fair use” analysis in a dispute between two media companies over viral videos. The Court’s decision highlights the fact-sensitive nature of the doctrine of fair use. It also clarifies the extent to which a use must be transformative in order to be deemed fair use.

According to the lawsuit, Jukin Media, Inc. (“Jukin”) scours the internet for potential viral videos for use inter alia on its YouTube network or proprietary websites. Subsequently, Jukin enters into licensing agreements with the videos’ creators. Order at 2. Equals Three, LLC (“Equals Three”), the Plaintiff in the lawsuit, also engages in content publishing, which sometimes includes portions of Jukin’s videos. However, Equals Three’s episodes are introduced by a host who provides sarcastic, derisive commentary and facial expressions towards the subjects shown in the videos. Id. at 3. After Equals Three refused to pay Jukin a licensing fee for the use of Jukin’s videos, Jukin filed with YouTube a complaint against Equals Three’s videos, effectively preventing Equals Three from receiving advertising revenue. Id. at 5-6. Equals Three sued, seeking a declaratory judgment and relief under § 512(f) of the Digital Millenium Copyright Act (“DCMA”) for fraudulent takedown notices. Jukin counterclaimed for copyright infringement. Id. at 1-2.

The primary issue in the case was whether the disputed clips were protected by the fair use doctrine based on the fact that the jokes about the underlying content were transformative.

The Court began by explaining that “[t]he Copyright Act provides that the fair use of a copyrighted work, ‘for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.’” Id. at 8 (quoting 17 U.S.C. § 107). To determine if a use is fair, courts look to:

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.

Order at 9 (quoting Monge v. Maya Magazines, Inc., 688 F.3d 1164, 1170 (9th Cir. 2012).

The Court explained that the first factor typically weighs more heavily than the others if the purpose and character of the use is highly transformative – that is if it “adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message.” Order at 9 (quoting Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1164 (9th Cir. 2007)). The Court noted that criticism, comment, and parody are all transformative uses. The Court evaluated whether Equal Three’s episodes constituted parodies, that is, whether those clips used some elements of the prior author’s work to create a new work, which, at least in part, commented or criticized the prior author’s works. Fortunately for Equals Three, the Court found that the hosts “jokes, narration, costumes, and graphics” sufficiently commented and criticized the events shown in Jukin’s clips to make the use highly transformative, despite its commercial nature.

This determination essentially dictated the ultimate result. Under the second factor, although the Court found that Jukin’s clips were creative, “the copied work’s creative nature is not particularly important where the new work is highly transformative.” Order at 13-14. Similarly, as to the third factor, the Court was not concerned that Equals Three’s episodes took “the heart” of Jukin’s clips, because Equals Three “does not show more than is reasonably necessary to convey enough of the events to allow the host’s jokes, comments, and criticisms to make sense to the viewer and resonate.” Id. at 14. Finally, the Court found that the fourth factor as neutral, as the market harm was hypothetical. Id. at 17.

Balancing all factors, the Court concluded that several, but not all, of the disputed clips were protected by the fair use doctrine. However, the Court concluded, when a clip is not sufficiently transformative, it is likely to cause market harm by usurping demand for a cognizable derivative market.

On a separate note, the ruling also shed some light on the uncharacteristic commercial nature of many viral videos. It is often challenging to determine the ownership of such clips and whether all rights have been obtained. A consequential lesson is that content producers should not only secure permission from the videographer, but also from active contributors and performers who might have claims beyond copyright, such as right of publicity and other personality rights.