he Associated Press scored a significant victory this past week in a case indicating that the scales may be beginning to tip in favor of content owners in the battle over online copyright infringement. In Associated Press v. Meltwater, the United States District Court for the Southern District of New York granted plaintiff The Associated Press’s (“AP”) motion for summary judgment with one exception, while denying defendant Meltwater U.S. Holdings, Inc.’s (“Meltwater”) equivalent motion. Most significantly, the court, in a 90-page opinion, held that Meltwater’s practice of “scraping” the internet and offering excerpts of news stories through its “Global Media Monitoring” service does not constitute fair use.
After ruling that AP had successfully carried its burden of showing both its ownership in the articles in dispute and Meltwater’s copying of those works, the court analyzed Meltwater’s fair use defense using the established four part test from Section 107 of the Copyright Act: (1) the purpose and character of the use; (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. The court found that three of the four factors weighed against a finding of fair use.
On the first factor, the court rejected Meltwater’s argument that the purpose and use of its news reports, and the excerpts contained within those reports, are transformative. The court found that, “Meltwater copies AP content in order to make money directly from the undiluted use of the copyrighted material; this is the central feature of its business model and not an incidental consequence of the use to which it puts the copyrighted material.” While Meltwater’s transformative use argument relied on its characterization of its service as a search engine (which search companies have successfully argued in cases such as Perfect 10 v. Amazon and Kelly v. Arriba Soft makes the use “transformative” because a search engine’s primary function is to direct users to information and provide relevant context), the court rejected that argument outright. It held that Meltwater does not function like a search engine but rather as an “expensive subscription service” that provides subscribers with significant portions of articles directly copied from AP and consciously markets itself as a substitute for news sites operated or licensed by AP.
The court emphatically distinguished Meltwater’s behavior from the transformative use described in the Ninth Circuit’s Perfect 10 and Arriba Soft cases, concluding that “using the mechanics of search engines” to provide copyrighted materials to consumers in response to their search requests does not immunize a defendant from the standards of conduct imposed by law through the Copyright Act. According to the court, there are no bright-line rules that would prevent a defendant from having to independently establish that the fair use defense applies to the case at hand. It also stated that Meltwater’s provision of analysis and analytics tools did not render its copying and redistribution of article excerpts transformative.
On the second fair use factor, “nature of the copyrighted work,” the court stated that AP’s articles, as news stories, are more vulnerable to application of fair use than works of fiction. Accordingly, it held that the second factor weighed in favor of a finding of fair use. With respect to the third fair use factor, “amount and substantiality,” the court remarked that Meltwater took between 4.5% and 61% of the news articles at issue. It also automatically took the opening lede of every AP article, the part of the article described by AP’s Standards Editor as intended to “convey the heart of the story.” Rejecting Meltwater’s arguments, the court held that Meltwater failed to show that it takes only the amount of material from AP’s articles necessary for it to function as a search engine. Thus, this factor weighed against a finding of fair use.
On the fourth and final fair use factor, the effect of the use on the potential market for or value of the copyrighted work, the court’s analysis also weighed heavily against Meltwater. It observed that AP has expended “considerable effort” to develop an online presence and licenses its content to media monitoring services that directly compete with Meltwater. In a fairly critical analysis, the court remarked that “Meltwater’s business model relies on the systematic copying of protected expression and the sale of collections of those copies in reports that compete directly with the copyright owner and that owner’s licensees and that deprive that owner of a stream of income to which it is entitled.”
In addition to rejecting Meltwater’s fair use defense, the court also rejected Meltwater’s implied fair use, equitable estoppel and copyright misuse defenses, while it granted the parties an additional opportunity to address the issue of potential injunctive action.
The Meltwater decision is significant for (at least) three different reasons. First, it represents a significant victory for journalists, news content owners and legitimate content distributors more generally. Throughout the opinion, the court repeatedly stresses the importance of protecting journalistic work from copyright infringement while emphasizing the creative skill and originality necessitated by reporting on the news. On multiple occasions, the court asserts that Meltwater’s business model – which generates millions of dollars per year in revenue – relies almost entirely upon its intentional use of AP’s research and reporting. In addition to remarking upon the creative skill it takes to craft a strong lede to a story (and hence asserting the value of a lede as the “heart” of a journalistic work), the court included one comment that may particularly please content owners accustomed to seeing their expensive intellectual property devalued by aggregation and file sharing:
Investigating and writing about newsworthy events occurring around the globe is an expensive undertaking and enforcement of the copyright laws permits AP to earn the revenue that underwrites that work. Permitting Meltwater to take the fruit of AP’s labor for its own profit, without compensating AP, injures AP’s ability to perform this essential function of democracy.
The second takeaway observation from the decision is that the court is tactful, even-handed and nuanced in its analysis. In particular, it refuses to be pulled into debating the “old media profiteering vs. freedom of information” polemic leveraged so successfully by the tech industry during last year’s SOPA debate; with a footnote, the court confirms, in response to amicus briefs in support of Meltwater, that it has taken into account the effect of the ruling on the operation of “legitimate” online services. Instead, the court points out on several occasions that the ability for content owners to profit from their work and the benefits presented to consumers by new technology are not mutually exclusive. AP has invested significant money and resources in its technology capabilities and, as the court details at some length, is extremely flexible with respect to the options it presents for licensing its content. One of the conventional arguments leveled at content owners is that they do not make it sufficiently easy for consumers to enjoy their content legally online. That accusation, as the court noted in its fair use analysis, cannot be leveled at AP.
The final takeaway observation involves the significance and consequence of the decision. On one hand, this is a district court opinion which Meltwater says it will appeal and is not precedent on a national level. On the other hand, the decision could have significant consequences for other companies that profit by scraping, quoting and repurposing copyrighted content. Business Insider and Buzzfeed, for instance, have generated significant growth upon the model of reacting quickly to publish stories about “trending” topics that often liberally quote material from other sources. If the tone of the Meltwater decision is followed by other courts, we may see a significantly more heated and nuanced discussion of what constitutes transformative fair use online.