The Copyright Act encourages creativity by granting an author or owner of an original work certain exclusive rights.¹ These include the right to reproduce the copyrighted work, the right to prepare derivative works, and the right to display the copyrighted work publicly.² The doctrines of fair use and derivative works balance rights of the copyright owner with public interest in promoting creativity. Recent case law provides new guidance on the fair use analysis by focusing on a degree of transformation relative to the purpose of an adapted work as compared to the original. Now, the degree of transformation required for the fair use defense must go beyond what is required to qualify as a derivative work.

WHAT IS FAIR USE?

Fair use under 17 U.S.C. §107 is an affirmative defense to copyright infringement.³ The doctrine of fair use purports to balance creativity with the rights conferred to a copyright owner by providing some flexibility to an otherwise rigid prohibition on copying an original work.⁴ The fair use defense may apply, for example, when a work is reproduced for purposes such as:

• Criticism and commentary: quoting portions of an original work in a review, comment, or critique;
• News reporting: summarizing or quoting a portion of an article, book, speech, etc. in a news article or report;
• Teaching, scholarship, and nonprofit education: using portions of an original work for purposes of research or teaching; and
• Parody: comically imitating an original work.⁵

In evaluating a fair use defense, courts consider the following factors:

1. the purpose and character of the use, including whether such use is of a commercial nature or 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.⁶

While none of the above factors are dispositive in a given case, courts have found that more transformative works tip the scale in favor of fair use, effectively decreasing the significance of the other factors.⁷

With respect to the first factor — the purpose and character of the use — courts consider the reason for the new use, such as if it has a further purpose or is of different character than the original work.⁸ Put another way, courts consider if the use of a portion of an original work is different from, or transformative relative to, that of the original work.

WHAT IS TRANSFORMATIVE USE?

In copyright law, transformation is not unique to the fair use defense. The concept is also rooted in the principles of derivative works. A “derivative work” is a work based upon one or more preexisting works and is afforded copyright protection separate from that of the preexisting work.⁹ Under 17 U.S.C. § 103(a), copyright protection of a derivative work extends only to the material contributed by its author and is distinguished from the preexisting material it employs.¹⁰

Derivative works include new original material “recast, transformed, or adapted” from the original work.¹¹ While transformative use in fair use is “a use that has a further purpose or different character,”¹² transformation for a derivative work must be “more than a minimum contribution” of original work.¹³ For example, derivative works can include translations, musical arrangements, dramatizations, fictionalizations, motion picture versions, sound recordings, art reproductions, abridgements, and condensations.¹⁴

TRANSFORMATIVE USE MUST GO BEYOND THAT OF A DERIVATIVE WORK

As mentioned above, courts have generally analyzed the first factor of fair use by examining the transformative use of a work.¹⁵ For example, in the landmark case Google v. Oracle, a court found fair use where the defendant copied a portion of code (e.g., the user interface) and its organizational structure. Even though both works were used commercially, the defendant’s use was transformative because it added code that altered the original copyrighted work enough to make it “something new and important.”¹⁶ Until recently, however, the practical differences between transformative use for the purposes of the fair use defense versus the protections afforded to derivative works has been ambiguous, leading copyright owners and practitioners alike to ask: How much transformation is really required to be considered fair use?

In 2023, the Supreme Court clarified the distinction with its decision in Andy Warhol Foundation for the Visual Arts v. Goldsmith. In this case, celebrity photographer Lynn Goldsmith took a photograph of the musician Prince that was licensed to Vanity Fair for one-time use.¹⁷ Artist Andy Warhol created a silkscreen rendition of the photograph, which was published in the magazine.

Warhol later derived 15 additional works, one of which was licensed to another publisher.¹⁸ Goldsmith challenged the subsequent pieces and commercial license, alleging copyright infringement of her photograph.¹⁹ Here, the commercial use of the subsequently licensed image shared “substantially the same purpose” as Goldsmith’s photographs, thus weighing against a finding that the use was fair.²⁰

In analyzing the fair use defense, the Court looked at the specific use of the original work and compared it to the use in which the work at issue appeared.²¹ Ultimately, the Court found that transformativeness is a matter of degree.²² To constitute fair use, “the degree of transformation required to be transformative must go beyond that required to qualify as a derivative.”²³ The Court reasoned that because an owner of a derivative work owns a copyright in its original transformations of a preexisting work, fair use transformation cannot be so broad that it encroaches on this right.²⁴ The relevant inquiry now is whether and to what extent the specific use at issue has a purpose or character different from the original.²⁵

While Warhol reaffirmed landmark fair use cases Campbell v. Acuff-Rose²⁶ and Google v. Oracle,²⁷ it does not provide explicit guidance in how to measure what is beyond the transformation of a derivative work. But it is clear that the fair use inquiry centers on the purpose and character of use such that the degree of transformativeness is balanced against the commercial nature of the use.²⁸ Future application of Warhol by lower courts will likely provide additional direction.

As generative AI and content creation on social media continue to gain popularity, the Warhol case could be considered a win for artists and creators, protecting works that are altered and used on similar platforms and for commercial purposes.²⁹ On the other hand, critics are concerned about stifling creativity and freedom of expression by limiting the adaptation of copyrighted materials.³⁰ Warhol acknowledges this careful balance between promoting the arts and upholding rights of copyright owners in further defining the scope the fair use defense.