The Law and Business of Social Media
April 02, 2013 - Copyright, Litigation

Southern District of New York Examines Whether News Clipping Service Qualifies as Fair Use Under Copyright Act

It is well settled that Internet search engines’ reproduction of limited portions of copyrighted materials in order to direct Internet users to locations of original content constitutes “fair use” under the Copyright Act. (See, for example, Perfect 10, Inc. v., Inc. and Kelly v. Arriba Soft.) But where is the line between, on the one hand, a search engine’s fair use of a small amount of material to enable users to locate the original works and, on the other hand, infringing reproduction and display of excerpts that serve as substitutes for the original works? A recent opinion by the Southern District of New York in The Associated Press v. Meltwater U.S. Holdings, Inc. provides insight into that question and a cautionary tale for online service providers that utilize search engine functionality to provide “news clipping” or other aggregation services on the Internet.

Meltwater News is a news aggregator service that bears some similarity to a traditional search engine: it utilizes an automated program, or “web crawler,” to scan the Internet for news articles; extracts, or “scrapes,” content from online news articles and creates a searchable index of the content; and delivers verbatim excerpts of the articles and links in response to search queries. What distinguishes Meltwater News from traditional (and free) Internet search engines is its apparent purpose and the amount of content delivered in its search results, called “News Reports,” which Meltwater generates automatically on a recurring basis using a subscriber’s standing search queries. The News Reports include article titles; a hyperlink to the web address where Meltwater’s web crawler found the article; information about the article’s source; the opening text of the article (the “lede”), consisting of up to 300 characters; and an algorithmically chosen short excerpt (approximately 140 characters) containing one of the search terms.

The Associated Press (AP) sued Meltwater for copyright infringement based on the inclusion of AP’s content in the News Reports. Meltwater asserted fair use (among other defenses that the court disposed of easily) as an affirmative defense (i.e., a defense that Meltwater had to affirmatively prove), contending that its use of AP’s material was fair because Meltwater functions as a search engine. As the court repeatedly noted, however, Meltwater failed to present any evidence directly supporting that argument within the framework of the statutory factors that guide the fair use determination. On summary judgment, therefore, the court held that there was no material question of fact regarding fair use and ruled against Meltwater.

This case puts online news aggregators on notice that, if they wish to invoke the fair use defense, the mere fact that they provide search engine functionality does not substitute for a showing that their use of copyrighted materials meets the statutory fair use factors. More specifically, news aggregators should anticipate a few key fair use questions as set forth below and be able to answer them with evidence.

Is the Copyrighted Material Being Used for a “Transformative” Purpose? 

The “purpose and character” of the use that an alleged infringer makes of copyrighted material is one of the statutory factors for determining fair use. A “transformative” use—i.e., a use that is significantly different from the intended use of the original work—will support a finding of fair use. A traditional search engine may be said to make transformative use of copyrighted materials when it reproduces those materials for the sole purpose of allowing users to find the originals. The court rejected Meltwater’s attempt to liken its expensive subscription service to a traditional search engine, however, because Meltwater presented no evidence that its service “systematically drives its customers to third-party websites.” In particular, Meltwater admitted that its “click-through rate” (the frequency with which users click on links to access the underlying AP articles) was likely around .05%, but it chose not to rely on any evidence comparing its “seemingly small click-through rate” to the rates of other Internet search services. Moreover, Meltwater failed to establish that it did not copy more copyrighted materials than are copied by traditional search engines. In fact, Meltwater had described its News Reports as “customized news digest[s]” that “save[] you time so you don’t have to read the full article.” Thus, Meltwater failed to persuade the court that its use of AP’s material served a transformative purpose.

Are We Copying No More Than Our Purpose Requires? 

The “amount and substantiality of the copying” factor of the fair use analysis looks at how much of the original work has been copied and how important the copied portion is to the original work. If a search engine provides results that include the core expressive elements of the underlying original material, rather than displaying only enough material to direct the user to the original, this factor would weigh against fair use. Apparently this was the case with Meltwater’s search results, which included the lede sentence “meant to convey the heart of the story,” and Meltwater made no attempt to establish that it copied no more than was necessary to function as a search engine. The court therefore found this factor to weigh heavily against a finding of fair use.

Does Our Copying Usurp the Market for Original Materials?

If there is a market for licensing original content and unauthorized use deprives the copyright owner of potential licensing revenue, a finding of fair use is unlikely. The court easily applied this factor against Meltwater, which refused to pay licensing fees to AP while operating in the same commercial space as many AP licensees, including other media monitoring services. Accordingly, the court found that Meltwater “not only deprives AP of a licensing fee . . . but also cheapens the value of AP’s work by competing with companies that do pay a licensing fee to use AP content in the way that Meltwater does.” Meltwater had no effective counter argument to these facts. Instead, Meltwater relied “almost exclusively on its contentions that it is a search engine and that search engines make a transformative use of the copyrighted news stories.” As explained above, the court rejected that argument. The court observed that Meltwater used its service to “obtain an unfair commercial advantage in the marketplace,” and granted AP summary judgment rejecting Meltwater’s fair use defense.

Perhaps not surprisingly, AP praised the ruling as a rejection of the mindset that “if it is free on the Internet, it is free for the taking.” Others agreed that the ruling was a “significant victory for journalists, news content owners and legitimate content distributors more generally.”

Meanwhile, some observers find the ruling troubling in that it distinguishes Meltwater’s services from free search engines and appears to give weight to the fact that Meltwater reproduced the “heart” of AP’s articles, the factual content of which is not protected by copyright. The ruling has fueled the ongoing discussion regarding the balance of rights between news publishers and news reader applications, including specific analysis of how other news aggregators may avoid similar rulings.

Much of the court’s analysis was fact-specific, so it may not have broad application except to those engaged in substantially the same activity as Meltwater’s. As one commentator notes, Meltwater’s service is very different from “typical blogger or social media” activity. Nevertheless, this case sounds a warning to any online service provider that provides content aggregation functionality that goes beyond what is typically provided by traditional search engines. One clear lesson is that, at least in the Southern District of New York, there is no per se rule that a search engine’s provision of links to articles alongside verbatim excerpts of the articles constitutes fair use. If providers of such search or aggregation services wish to avoid summary judgment, they must be ready to show how their use of copyrightable material is transformative.