The Copyright Doctrine of Fair Use and the Internet: Caselaw

The Copyright Doctrine of Fair Use and the Internet: Caselaw

Order Code RL30495
CRS Report for Congress
Received through the CRS Web
The Copyright Doctrine of Fair Use and the
Internet: Caselaw
March 30, 2000
Douglas Reid Weimer
Legislative Attorney
American Law Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
This report examines the evolving copyright doctrine of fair use within the context of
copyrighted works published or placed on the Internet. American courts have been examining
the various property rights of copyright owners concurrently with the unauthorized use of
these copyrighted materials by Web site operators, Internet consumers, access providers, and
other interested parties. This report analyzes the early fair use copyright cases concerning
Internet use, as well as the most recent judicial interpretations.

The Copyright Doctrine of Fair Use and the Internet:
Caselaw
Summary
Copyright owners possess certain exclusive rights of ownership in their creative
works. However, the fair use doctrine in copyright law allows, under certain
circumstances, the unauthorized use of copyrighted works. Originating under
common law, the fair use doctrine was codified in the Copyright Act of 1976. Under
the fair use doctrine, four criteria are considered in the determination of whether the
unauthorized use of a work is a “fair” use, or whether it is an infringing use: 1) the
amount and character of the use; 2) the nature of the copyrighted work; 3) the amount
copied in relation to the whole copyrighted work; and 4) the effect of the copying on
the potential market for the copyrighted work. The courts have scrutinized the
factual circumstances and applied these criteria on a case-by-case basis.
The Internet is a cooperative network of networks. Millions of users are linked
nationally and internationally, including: individuals, schools, libraries, governments,
and corporations. No single individual or organization owns or controls the Internet.
As a result of the use of copyrighted materials placed on the Internet, various
questions concerning the control, ownership, and fair use of copyrighted materials on
the Internet have arisen. Copyright owners have pursued their ownership rights
against the unauthorized use of their works by service providers, corporate users,
individual users, and others. Generally speaking, the American courts have treated
the publication or posting on the Internet as another form of communication or
publication. Hence, American courts have applied the four fair use factors to
individual situations involving the unauthorized use of copyrighted materials on the
Internet. This report examines the case law development from the earliest cases to
the most recent.

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Case Law and the Internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

The Copyright Doctrine of Fair Use and the
Internet: Caselaw
Domestic case law has been developing which examines the copyright doctrine
of fair use within the context of copyrighted works placed on the Internet without the
permission of the copyright owner. Various efforts are being undertaken by the
courts, Congress, and the industry to divide enforcement responsibilities and
protection rights among the various interested parties: the copyright owners, the
access providers, Web site operators, and Internet consumers.1
Generally speaking, American courts have considered the placement or
publication of copyrighted materials on the Internet to be another form of expression
or communication. Hence, the courts have applied a fair use legal analysis in Internet
cases similar to that applied with respect to more traditional forms of communication.
The report examines the statutory background and development of the fair use
doctrine in copyright law and its application to works placed on the Internet.
Background
The copyright owner possesses various exclusive ownership rights in the work.2
However, the fair use doctrine permits, under certain circumstances, the unauthorized
use of copyrighted works. The doctrine, which has its origins in common law, was
first codified in the Copyright Act of 1976.3 The statute provides four criteria for the
determination of whether the unauthorized use of a work is a “fair” use, or whether
it is an infringing use.4 These are: 1) the amount and character of the use; 2) the
nature of the copryighted work; 3) the amount copied in relation to the whole
copyrighted work; and 4) the effect of the copying on the potential market for the
1 This report is limited to an examination of the domestic issues concerning the copyright
doctrine of fair use within the context of the Internet. International copyright law and the
Internet may present various currently unresolved concerns and legal issues.
2 17 U.S.C. § 106. These ownership rights include the rights to do and to authorize: 1)
reproduction of the work; 2) preparation of derivative works; 3) distribution of copies of the
work to the public by sale or other transfer; 4) with literary, musical, dramatic, and
choreographic works and other works, performance of the work publicly; 5) with literary,
musical, dramatic, and other works, the display of the copyrighted work publicly; and 6) in
the case of sound recordings, public performance of digital audio transmissions.
3 17 U.S.C. § 107.
4 If a use is infringing, the copyright owner may bring an action for infringement against the
unauthorized user of the copyrighted work. 17 U.S.C. § 411.

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copyrighted work.5 Courts have examined the factual circumstances surrounding each
case and have applied these criteria on a case-by-case basis.6
The Internet is a cooperative network of networks.7 It links millions of users
nationally and internationally, including individuals, schools, libraries, and
corporations. There is no single individual or organization that owns, oversees, or
controls the Internet. For many users, the costs of accessing the Internet are paid by
their organizations, such as universities, national laboratories, corporations, and
governments.8 Other individuals pay subscription fees to Internet service providers,
like American Online or CompuServe, which provide links to the Internet.9 The
World Wide Web is the Internet’s most popular application. The growing number of
Web sites and bulletin boards10 provides great distribution capabilities for all types of
material. Since computers can reproduce virtually perfect copies of copyrighted
works, including text, audio, and video, the Internet provides the potential for
distributing and redistributing replicas of copyrighted material to large numbers of
Internet users. The technological achievements of the Internet have greatly increased
the possibilities for copyright infringement.11
Internet users who view information and download that information are copying.
If the material that is being copied is copyrighted, the possibility of infringement may
rest upon an application of the fair use doctrine to the circumstances surrounding the
unauthorized use of the material.12 By viewing materials on the Internet, there is a
fixation of materials on a computer’s Random Access Memory (RAM). This fixation
in the RAM may support an infringement claim based upon the copyright owner’s
5 17 U.S.C. § 107.
6 See, CRS Rept. No. 95-888, Copyright and Fair Use After Acuff-Rose and Texaco; CRS
Rept. No. 93-396, Copyright Law: Recent Case law Developments in The “Single
Receiving” Exemption; CRS Rept. No. 93-515, Photocopying of ScientificJournal Articles:
American Geophysical Union v. Texaco, Inc.
7 See CRS Rept. No. 98-649, Spinning the Web: The History and Infrastructure of the
Internet.
8 Id. at 13-14.
9 Id. at 14. The extensive usage of the Web has generated various legal issues other than the
fair use of copyrighted works. Among these issues are: trademarks, privacy, fraud, security,
copyright first sale doctrine, trade secrets, and First Amendment issues.
10 An electronic bulletin board is a means of exchanging information with distant areas
through a computer and modem. The electronic bulletin board is comprised of an electronic
storage medium (computer memories or hard disks), which is attached to telephone lines
through modem devices which are controlled by a computer.
11 Christopher Wolf, ‘Net Users Could Face IP Liability, NAT’L Law J. C34, C35 (May 20,
1996)(cited to afterward as “Wolf”).
12 Circumstances may exist where a user pays a subscription fee for the use of particular
information on the Internet. The service provider may specifically address the issues of
copying/downloading in the access agreements with the users. However, many Internet sites
do not impose a user fee or contain copyright information concerning the material on the site.

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exclusive rights of reproduction.13 However, if the copyright owner places his/her
work on the Internet, it could be inferred that the owner would expect other Internet
users to read and download the copyrighted work. Legal complications arise when
persons other than the copyright owner publish the copyrighted works on the Internet.
Case Law and the Internet
American courts have been seeking equitable resolutions to copyright
infringement actions over the unauthorized use of copyrighted works on the Internet.
Court decisions applying the fair use principles to Internet use provide some legal
guidance; however, case law precedent is still developing and certain issues remain
unresolved. Still, the most recent cases have continued the traditional application of
the fair use principles to Internet use of copyrighted materials.
An early case that dealt with the fair use principles and online services involved
an electronic bulletin board which was open to the public.14 The scheme involved the
electronic exchange of copyrighted Sega video games through the bulletin board. The
bulletin board operators asserted a fair use defense which was based upon the
argument that the operators themselves did not download or retain copies of any Sega
video games. The court applied the four fair use factors to this situation and rejected
the defendants’ fair use defense. The court determined that the use was for a
commercial purpose–to download the copyrighted games, so as to avoid their
purchase from the copyright owner. Considering the nature of the copyrighted work,
the court observed that the work involved creativity, fiction, and fantasy. Since the
entire work was copied, the third factor–the amount of the work used, favored the
plaintiff’s claim. In considering the fourth factor, the effect of copying on the
potential market, the court concluded that the unauthorized copying of the
copyrighted works would adversely impact the potential market, as few persons
would purchase the copyrighted works if they were available through the bulletin
board. Hence, the court concluded that all four factors favored the plaintiff and that
the defendants’ unauthorized use of the copyrighted works was an infringing use.
Another subsequent decision which dealt with the fair use doctrine and Internet use
involved the same parties and a similar factual situation.15 The court applied the four
fair use factors to the facts at hand.16 After balancing all of the factors, the court
reached the same conclusion as in the earlier decision, finding that the fair use
doctrine did not apply.17
Several online cases have involved the unauthorized use of certain written works
of L. Ron Hubbard, founder of Scientology. The simplified factual situation
concerning these cases follows. In unrelated litigation, the Religious Technology
Center (RTC) attempted to seal an affidavit concerning church ideology. Lerma–a
13 See Wolfe, supra, note 11.
14 Sega Enterprises, Ltd. v. MAPHIA, 857 F.Supp. 679 (N.D.Cal. 1994).
15 Sega Enterprises, Ltd. v. MAPHIA, 948 F.Supp. 923 (N.D.Cal. 1996).
16 Id. at 934-935.
17 Id. at 936.

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former follower of Hubbard–obtained the affidavit and published it on the Internet
through his Internet access provider–Digital Gateway Systems (DGS). The RTC
brought an infringement action against Lerma, DGS, The Washington Post, and
others. Another series of cases involved the RTC bringing an action for copyright
infringement against a former minister–Erlich–for posting on an Internet bulletin
board certain materials containing Hubbard’s published and unpublished works. The
RTC also named as defendants the bulletin board operator–Klemesrud and the
Internet access provider–Netcom. These cases are summarized below.
In Religious Technology Center v. Lerma,18 the court dealt primarily with RTC’s
infringement action against the Post, certain reporters, and Lerma. This case did not
deal chiefly with the Internet or online aspects of fair use. The action was based
primarily upon the unauthorized dissemination of information owned by the RTC and
did not address the substantive copyright issues.19
In another case involving the RTC’s infringement action, the same defendants
moved for summary judgment and the district court concluded that the fair use
doctrine was applicable to the Post and its reporters.20 In reaching this conclusion,
the court examined the four fair use factors and applied them in a traditional copyright
analysis. The court concluded that the purpose and character of the use of the
material was for news gathering and this favored the defendants. In evaluating the
nature of the work, the court deemed it to be informational rather than creative, and
that a broader fair use approach was appropriate. The court determined that the
amount of the work used in relation to its entirety was not significant. Finally, the
court found that the unauthorized use did not adversely impact the market value of
the material. The court concluded that the unauthorized use of the copyrighted
material by the Post and by its reporters was a fair use.
In an unpublished opinion, the court subsequently examined the copyright
infringement claim against Lerma.21 Lerma first argued that the disputed works were
not copyrightable. The court rejected this argument. He next raised the fair use
defense for his unauthorized use of the copyrighted works. After examining each of
the four fair use factors, the court concluded that Lerma’s use could not be construed
as a fair use. Finally, Lerma argued that the RTC misused the copyright. The court
concluded that the RTC had not misused its copyright and that Lerma’s unauthorized
use of the material was an infringing use. The RTC was awarded $2,500 in statutory
damages.
In another series of cases, the RTC brought actions against Erlich (the former
minister), the bulletin board operator, and the Internet access provider. In two
separate opinions, the district court for the Northern District of California addressed
18 908 F.Supp. 1353 (E.D.Va. 1995).
19 Id. at 1355-1358
20 Religious Technology Center v. Lerma, 908 F.Supp. 1361 (E.D.Va. 1995).
21 Religious Technology Center v. Arnaldo Pagliarina Lerma, 1996 U.S. Dist. LEXIS 15454
(E.D.Va. Oct. 4, 1996).

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various copyright issues, including fair use.22 Erlich did not dispute that he copied the
works. He advanced a fair use defense.23 The court granted in part the plaintiff’s
motion for a preliminary injunction against Erlich and concluded that his use of the
RTC’s materials was unlikely to qualify as fair use. In evaluating Erlich’s purpose and
character of the use, the court determined that it was for criticism or comment and
was thus for noncommercial use. Therefore, the fair use factor was held to be
slightly in Erlich’s favor.24 In looking at the nature of the copyrighted work, the court
considered that some of the works were published while others were unpublished.
The court determined that the unauthorized use of the unpublished works favored the
plaintiffs. In assessing the third factor, the court favored the plaintiffs. As for the
potential market for the work, the court concluded that Erlich’s use would not have
an adverse effect on the market. The court engaged in an “equitable balancing” of the
factors and found that Erlich could not assert a fair use defense for his copying.25
In Religious Technology Center v. Netcom On-Line Commu.,26 another action
involving the RTC and Erlich’s access provider and the bulletin board, the court
granted in part and denied in part the defendants’ motion for summary judgment and
judgment on the pleadings, and denied the plaintiffs’ motion for a preliminary
injunction. The district court applied the fair use analysis to the action of the Internet
access provider, Netcom. The court determined that the access provider was not
liable for direct infringement; rather, the court examined it as a case of contributory
infringement on the part of Netcom and determined that the plaintiffs raised a genuine
issue of fact concerning Netcom’s contributory infringement.27 Although Netcom was
a commercial enterprise, the court found that its use of copyrighted work was of a
different nature than the plaintiffs’ use. In looking at the nature of the copyrighted
works, the court determined that Netcom’s use of the works was merely to facilitate
their posting to the bulletin board--an entirely different use from the use of plaintiffs--
and therefore favored Netcom. Regarding the amount of the copyrighted work
copied, the court determined that Netcom copied no more of the plaintiffs’ work than
was necessary to function; thus, this factor did not favor the plaintiffs. The court
concluded that the postings on the Internet by Netcom raised a genuine factual issue
as to whether the market for plaintiff’s works was diminished. Because the court was
not able to make a determination concerning the fourth fair use factor–the market
harm–the court decided that the fair use defense was not available to Netcom on
motion for summary judgment.28 In conclusion, the court determined that there were
issues of fact to be determined in the case and that a fair use defense was not available
for Netcom on summary judgment.
22 The court examined other issues, such as trade secret and tort claims, which are not
discussed in this report.
23 Id. at 1242-1250.
24 Id. at 1244.
25 Id. at 1249-1250.
26 907 F.Supp. 1361 (N.D.Ca. 1995).
27 Id. at 1373-1375.
28 Id. at 1381. Apparently, the bulletin board provider did not assert a fair use defense;
therefore, the court did not utilize the fair use analysis.

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In late 1997, the U.S. District Court for the Northern District of Illinois ruled
that an Internet service provider was not liable for direct copyright infringement,
despite the fact that materials were directly copied on a web site that the service
provider maintained for a subscriber.29 However, the Internet subscriber was found
to have infringed certain copyrighted “clip art” images by using them on the Internet.
The court concluded that the subscriber’s use of the clip art was primarily for
commercial uses, for promoting his organization, and for generating revenue. Hence,
the fair use defense was not available for the defendant and the unauthorized use of
the “clip art” on the Internet was found to be an infringing use. In 1998, the same
court–the U.S. District Court for the Northern District of Illinois--reached a finding
of infringement in a similar case involving the use of “shareware,” copyrighted
software which is loaned to potential purchasers under certain conditions.30 The court
went through an extensive fair use analysis within the context of shareware.31
In another case concerning fair use and the Internet, still images taken from a
copyrighted videotape of a celebrity couple engaging in sexual activity were placed
on the Internet without the couple’s permission. Applying the fair use doctrine to a
rather complex factual situation, the U.S. District Court for the Central District of
California held that the unauthorized placement on the Internet of still images from
a copyrighted videotape was not a fair use.32 The court considered each fair use
factor within the context of the factual situation.33
The U.S. District Court for the Eastern District of Texas examined a unique case
where the plaintiff’s copyrighted works–model legal codes--had been adopted as
municipal laws by various communities.34 The defendant then posted these
copyrighted works on the Internet and was sued for infringement. The court applied
the fair use analysis to the factual situation at hand and determined that the fair use
defense was not applicable in this situation.35 Hence, the posting of certain
copyrighted model codes, even when they had been adopted as municipal laws or
ordinances, did not lose their copyright protection, and could not be posted on the
Internet without the permission of the copyright owner.
In Kelly v. Arriba Soft Corp.,36 the court examined the fair use doctrine within
the context of a “visual search engine” on the Internet. The defendant’s visual search
engine allows a user to obtain a list of related Web content following a search inquiry.
The visual search engine produces a list of reduced “thumbnail” pictures related to the
29 Marobie-FL v. National Assn of Fire Equip. Dist., 983 F.Supp. 1167 (N.D. Ill. 1997).
30 Storm Impact v. Software of the Month Club, 13 F.Supp. 2d 782 (N.D. Ill. 1998).
31 Id. at 787-790.
32 Michaels v. Internet Entertainment Group, Inc., 5 F.Supp. 2d 823 (D.C. Cal. 1998).
33 Id. at 834-836. The final disposition of this case was reached at Michaels v. Internet
Entertainment Group, 1998 U.S. Dist. LEXIS 20786 (1998).
34 Veeck v. Southern Bldg. Code Congress Intern., 49 F.Supp. 885 (E.D. Tex. 1999).
35 Id. at 891.
36 77 F.Supp. 1116 (C.D. Cal. 1999).

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inquiry.37 The plaintiff argued that the use of the “thumbnail” copyrighted pictures
obtained through the visual search was an infringement of his copyright interest. The
court undertook an extensive fair use evaluation of the circumstances surrounding the
visual search engine and the unauthorized use of the copyrighted photographs.38 The
court weighed all of the fair use factors together and determined that the defendant’s
use of the copyrighted photographs as part of their visual search engine was a fair use
of the plaintiff’s images.39
The posting of copyrighted news articles on the Internet has been the subject of
recent litigation.40 The defendant posted copyrighted articles from newspapers on an
Internet “bulletin board” website so that visitors to the site could comment and
criticize the articles. Applying the fair use factors to the instant case, the court
determined that the defendant’s posting of full length, copyrighted articles on the
Internet was not a fair use of the copyrighted material. The court noted that the
website operator could have avoided infringement if summaries of the articles had
been posted or if hyperlinks to the articles on the newspapers’ own websites had been
provided.
The practice of “streaming”–the visual transmission of copyrighted television
programming–on the Internet was the subject of a recent action. The defendant was
transmitting portions of the plaintiffs’ copyrighted programming on the Internet. The
plaintiff sought and received a temporary restraining order.41 The U.S. District Court
for the Western District of Pennsylvania did not examine the fair use doctrine or any
other copyright defenses in its opinion.
In recent litigation, several motion picture studios brought an action to prevent
the defendants from providing a computer program on their Web sites that allowed
users to decrypt and copy the plaintiffs’ copyrighted motion pictures from digital
versatile disks.42 Although the defendants argued that their activities were within the
fair use exception, the court rejected this defense and granted the plaintiffs’ motion
for a preliminary injunction.
Conclusion
These cases have illustrated the judicial process–the “equitable balancing”–that
courts undertake in their evaluation of fair use claims. It appears that the courts are
using the same analysis and criteria for Internet litigation as they have with other
intellectual property determinations. The courts have examined in detail the factual
situation surrounding the litigation and they have applied each of the fair use criteria
37 Id. at 1117.
38 Id. at 1118-1121.
39 Id. at 1121.
40 Los Angeles Times v. Free Republic, (C.D. Cal., No. CV 98-7840-MMM-AJWX,
11/8/99).
41 Twentieth Century Fox Film Corporation v. ICRAVETV, (2000 U.S. Dist. Lexis 1013).
42 Universal City Studios, Inc. v. Shawn C. Reimerdes, 82 F.Supp. 2d 211 (S.D.N.Y. 2000).

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to the case-by-case circumstances. The courts then evaluate or weigh the statutory
criteria and determine whether, on balance, the evidence favors a finding of fair use
of the copyrighted material or not.
While these cases provide judicial precedent, the use of copyrighted materials on
the Internet is not entirely resolved. Factual circumstances may change the judicial
outcome in various situations. In addition, various areas of fair use litigation and the
Internet may still be developing. Among these subject areas are: possible liability for
Internet server and bulletin board providers; whether online use is legally
distinguishable from the use of the printed form; unintended or unintentional use of
copyrighted materials; use of materials by schools and libraries; and other issues.