`
`Filed August 26, 2003
`
`UNITED STATES COURT OF APPEALS
`FOR THE THIRD CIRCUIT
`
`No. 02-2497
`
`VIDEO PIPELINE, INC.
`v.
`BUENA VISTA HOME ENTERTAINMENT, INC.
`BUENA VISTA HOME ENTERTAINMENT, INC.;
`MIRAMAX FILM CORP.,
`Counterclaim-Plaintiffs
`
`v.
`VIDEO PIPELINE, INC.,
`Counterclaim-Defendant
`Video Pipeline, Inc.,
`Appellant
`
`Appeal from the United States District Court
`for the District of New Jersey
`(D.C. Civil Action No. 00-cv-05236)
`District Judge: Honorable Jerome B. Simandle
`
`Argued January 21, 2003
`Before: BECKER,* NYGAARD, and AMBRO, Circuit Judges
`
`(Opinion filed August 26, 2003)
`
`* Judge Becker concluded his term as Chief Judge on May 4, 2003.
`
`
`
`
`
`2
`
`Paul R. Fitzmaurice, Esquire
` (Argued)
`Lisa A. Sabatino, Esquire
`Pelino & Lentz
`1650 Market Street
`One Liberty Place, 32nd Floor
`Philadelphia, PA 19103
` Attorneys for Appellant
`Gary A. Rosen, Esquire (Argued)
`Akin, Gump, Strauss, Hauer & Feld
`2005 Market Street
`One Commerce Square, Suite 2200
`Philadelphia, PA 19103
` Attorney for Appellee
`Jon A. Baumgarten, Esquire
`William M. Hart, Esquire
`Proskauer Rose LLP
`1585 Broadway
`New York, NY 10036
` Attorneys for Amicus Curiae
`Motion Picture Association of
`America, Inc.
`
`OPINION OF THE COURT
`
`AMBRO, Circuit Judge:
`In this copyright case we review the District Court’s entry
`of a preliminary injunction against Video Pipeline, Inc.’s
`online display of “clip previews.” A “clip preview,” as we use
`the term, is an approximately two-minute segment of a
`movie, copied without authorization
`from
`the
`film’s
`copyright holder, and used in the same way as an
`authorized movie “trailer.” We reserve the term “trailer” for
`previews created by the copyright holder of a particular
`movie (or under the copyright holder’s authority).
`Video Pipeline challenges the injunction on the ground
`that its internet use of the clip previews is protected by the
`fair use doctrine and, alternatively, that appellees Buena
`
`
`
`3
`
`Vista Home Entertainment, Inc. and Miramax Film Corp.1
`may not receive the benefits of copyright protection because
`they have engaged in copyright misuse. We reject both
`arguments, and affirm.
`
`BACKGROUND
`Video Pipeline compiles movie trailers onto videotape for
`home video retailers to display in their stores. To obtain the
`right to distribute the trailers used in the compilations,
`Video Pipeline enters
`into agreements with various
`entertainment companies.
`It entered
`into such an
`agreement, the Master Clip License Agreement (“License
`Agreement”), with Disney in 1988, and Disney thereafter
`provided Video Pipeline with over 500 trailers for its movies.
`In 1997, Video Pipeline took its business to the web,
`where it operates VideoPipeline.net and VideoDetective.com.
`The company maintains a database accessible
`from
`VideoPipeline.net, which contains movie trailers Video
`Pipeline has received throughout the years. Video Pipeline’s
`internet clients — retail web sites selling home videos —
`use VideoPipeline.net to display trailers to site visitors. The
`site visitors access trailers by clicking on a button labeled
`“preview” for a particular motion picture. The requested
`trailer is then “streamed” for the visitor to view (because it
`is streamed the trailer cannot be downloaded to or stored
`on the visitor’s computer). The operators of the web sites
`from which the trailers are accessed — Video Pipeline’s
`internet clients — pay a fee to have the trailers streamed
`based on the number of megabytes shown to site visitors.
`Video Pipeline has agreements to stream trailers with
`approximately 25 online retailers,
`including Yahoo!,
`Amazon, and Best Buy.
`operates
`also
`Pipeline
`As
`noted,
`Video
`VideoDetective.com. On this web site, visitors can search
`
`1. Buena Vista holds an exclusive license to distribute Miramax and Walt
`Disney Pictures and Television home videos. Buena Vista, Miramax, and
`Walt Disney Pictures and Television are subsidiaries of The Walt Disney
`Co. Because of this connection and for simplicity’s sake, we refer to the
`appellees collectively and individually as “Disney.”
`
`
`
`4
`
`for movies by title, actor, scene, genre, etc. When a search
`is entered, the site returns a list of movies and information
`about them, and allows the user to stream trailers from
`VideoPipeline.net.
`In addition
`to displaying
`trailers,
`VideoDetective.com includes a “Shop Now” button to link
`the user to a web site selling the requested video. Visitors
`to VideoDetective.com can also win prizes by playing “Can
`You Name that Movie?” after viewing a trailer on the site.
`
`Video Pipeline included in its online database trailers it
`received under the License Agreement
`from Disney.
`Because the License Agreement did not permit this use,
`Disney requested that Video Pipeline remove the trailers
`from the database. It complied with that request.
`On October 24, 2000, however, Video Pipeline filed a
`complaint in the District Court for the District of New
`Jersey seeking a declaratory judgment that its online use of
`the trailers did not violate federal copyright law. Disney
`shortly thereafter terminated the License Agreement.
`Video Pipeline decided to replace some of the trailers it
`had removed at Disney’s request from its database. In order
`to do so, it copied approximately two minutes from each of
`at least 62 Disney movies to create its own clip previews of
`the movies. (Again, to distinguish between the previews
`created under the copyright holder’s authority and those
`created by Video Pipeline, we call the former “trailers” and
`the latter “clip previews” or “clips.” We use the term
`“previews” generically.)
`Video Pipeline stores the clip previews in its database and
`displays them on the internet in the same way it had
`displayed the Disney trailers. In content, however, the clip
`previews differ from the trailers. Each clip preview opens
`with a display of the Miramax or Disney trademark and the
`title of the movie, then shows one or two scenes from the
`first half of the movie, and closes with the title again.
`Disney’s trailers, in contrast, are designed to entice sales
`from a target market by using techniques such as voice-
`over, narration, editing, and additional music. Video
`
`
`
`5
`
`Pipeline’s clip previews use none of these marketing
`techniques.2
`Disney also makes its trailers available online. It displays
`them on its own web sites in order to attract and to keep
`users there (a concept called “stickiness”) and then takes
`advantage of the users’ presence to advertise and sell other
`products. Disney has also entered into agreements to link
`its trailers with other businesses, and, for example, has
`such a link with the Apple Computer home page.
`Video Pipeline amended
`its complaint
`to seek a
`declaratory judgment allowing it to use the clip previews.
`Disney filed a counterclaim alleging copyright infringement.
`The District Court entered a preliminary injunction, later
`revised, prohibiting Video Pipeline from displaying clip
`previews of Disney films on the internet. See Video Pipeline,
`Inc. v. Buena Vista Home Entertainment, Inc., 192 F. Supp.
`2d 321 (D.N.J. 2002). Video Pipeline appeals.3
`
`2. We have reviewed as part of the record several of the clip previews and
`trailers.
`3. The District Court’s jurisdiction arose under 28 U.S.C. § 1331 and 28
`U.S.C. § 1338. We have jurisdiction over this interlocutory appeal
`pursuant to 28 U.S.C. § 1292(a)(1).
`
`On August 7, 2003, the District Court entered summary judgment in
`Disney’s favor as to various claims and counterclaims, some of which
`overlap with what is before us. See Video Pipeline, Inc. v. Buena Vista
`Home Entertainment, Inc., 2003 WL 21811891 (D.N.J. Aug. 7, 2003). The
`obvious question is whether this appeal is moot. We have concluded,
`however, that a live controversy remains because the District Court has
`not entered a final judgment or a permanent injunction in place of the
`preliminary one and has not otherwise revoked or altered the injunction
`on appeal. See generally Grupo Mexicano de Desarrollo, S.A. v. Alliance
`Bond Fund, Inc., 527 U.S. 308, 313-18 (1999).
`
`We are troubled that the attorneys for neither side (the same counsel
`that came before us) appear to have alerted the District Court to this
`appeal and instead went forward with motions for summary judgment.
`We are also concerned by the failure of counsel to notify this Court of
`the District Court’s decision (they still have not done so). The attorneys
`should have known that the August 7 decision raised a question whether
`this appeal had become moot — a question for us, not counsel, to
`decide. By continuing to litigate the case in the District Court after the
`appeal was taken and by failing to inform either Court of the ongoing
`actions of the other, counsel risked a needless waste of judicial
`resources as well as the resources of their clients.
`
`
`
`6
`
`DISCUSSION
`We review for an abuse of discretion the District Court’s
`decision to grant Disney’s request
`for a preliminary
`injunction. Adams v. Freedom Forge Corp., 204 F.3d 475,
`484 (3d Cir. 2000). Under this standard, questions of law
`receive de novo review, and questions of fact are reviewed
`for clear error. Id.
`To obtain a preliminary injunction, a party must show (1)
`that it is “reasonably likely to succeed on the merits” of its
`copyright infringement claim and (2) a likelihood that it will
`suffer irreparable harm if the injunction is denied. Id. Other
`issues to consider if relevant are (3) the likelihood of
`irreparable harm to the non-moving party and (4) the
`public interest. Id. Video Pipeline presents no arguments
`for issues (3) and (4), so we shall not discuss them,
`assuming instead that the District Court correctly held that
`these factors favored issuing the injunction. We therefore
`address the first two issues.
`I. Likelihood of Success on the Merits
`Subject to the fair use exception discussed below (and
`other exceptions not relevant here), copyright owners have
`the exclusive right (1) to reproduce the copyrighted work,
`(2) to prepare derivative works, (3) to distribute copies, (4)
`to perform publicly a copyrighted motion picture, and (5) to
`display publicly the individual images of a copyrighted
`motion picture. 17 U.S.C. §106. To make out a prima facie
`case of copyright infringement for preliminary injunction
`purposes, Disney needed to show that the display of the
`clip previews likely violates any provision of § 106. See 17
`U.S.C. §§ 501(a), (b).4 The District Court held that Video
`Pipeline’s clip previews likely infringe Disney’s exclusive
`rights under three of § 106’s provisions: subsection (2),
`concerning derivative works; subsection (4), dealing with
`public performance of motion pictures; and subsection (5),
`relating to public display of individual images of a motion
`picture.
`
`4. There is no dispute as to Disney’s copyright ownership in the full-
`length motion pictures at issue.
`
`
`
`7
`
`On appeal, Video Pipeline challenges the District Court’s
`holding that the clip previews likely violate § 106(2),
`asserting that the clips cannot properly be classified as
`derivative works.
`It does not contest
`the Court’s
`determination as to subsections (4) and (5). Because proof
`of a violation of any one subsection of § 106 states a case
`of illegal infringement, the District Court’s decision that
`Disney made a prima facie showing of infringement on the
`basis of subsections (4) and (5) would not be affected by
`any conclusion we might make as to whether the clip
`previews are derivative in nature. As Video Pipeline’s
`display of excerpts taken from the copyrighted movies
`clearly comes within the prohibition on public display of
`motion pictures, and images from a motion picture, we turn
`to whether Video Pipeline’s use should nonetheless be
`countenanced on the ground that it falls within the “fair
`use” doctrine.
`A. Fair Use
`Congress’s constitutional power to provide for copyright
`protection “is intended to motivate the creative activity of
`authors . . . by the provision of a special reward, and to
`allow the public access to the products of their genius after
`the limited period of exclusive control has expired.” Sony
`Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417,
`429 (1984). At times, however, “rigid application of the
`copyright statute . . . would stifle the very creativity which
`that law is designed to foster.” Campbell v. Acuff-Rose
`Music, Inc., 510 U.S. 569, 577 (1994). When that is the
`case, the fair use doctrine may be implicated.
`Congress codified the judicially created “fair use” defense
`at §107 of the 1976 Copyright Act, which permits a “fair
`use of a copyrighted work.” 17 U.S.C. § 107. A fair use,
`although not specifically defined by the statute, is one
`made “for purposes such as criticism, comment, news
`reporting, teaching . . . , scholarship, or research.” Id. It is
`an affirmative defense for which the alleged infringer bears
`the burden of proof.
`In judging the fairness of a particular use, courts must
`take into account the following non-exhaustive list of
`factors:
`
`
`
`8
`
`(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.
`Id. The four statutory factors “do not represent a score card
`that promises victory to the winner of the majority.” Pierre
`N. Leval, Toward a Fair Use Standard, 103 Harv. L. Rev.
`1105, 1110 (1990). Rather, each factor is “to be explored,
`and the results weighed together, in light of the purposes of
`copyright.” Campbell, 510 U.S. at 578 (citations omitted).
`Thus, as we apply copyright law, and the fair use doctrine
`in particular, we bear in mind its purpose to encourage
`“creative activity” for the public good. Sony Corp., 464 U.S.
`at 429.
`This focus on copyright’s purpose makes relevant a
`comparison of the copy with the original: where the copier
`uses none of his own creative activity to transform the
`original work, holding the fair use doctrine inapplicable will
`not likely interfere with copyright’s goal of encouraging
`creativity. Thus, in the typical fair use case, the analysis
`under each statutory factor concentrates on the copy and
`the original work from which it derives. In this case,
`however, our analysis of the four statutory factors will take
`into account where relevant Disney’s original full-length
`films and its trailers. We examine in this way the fairness
`of the online display of the clip previews because, among
`other things, the statute directs our attention under factor
`four to the effect of the allegedly infringing uses on both the
`potential market for any derivative works (the parties do not
`dispute that Disney’s trailers qualify as derivative works)
`and the potential market for the originals. See Campbell,
`510 U.S. at 590.
`1. Purpose and Character of the Use
`Once again, the first factor requires that we consider “the
`purpose and character of the use, including whether such
`
`
`
`9
`
`for nonprofit
`is
`is of a commercial nature or
`use
`educational purposes.” § 107(1). The District Court
`concluded that the purpose and character of Video
`Pipeline’s clip previews weigh against finding fair use. We
`agree.
`If a new work is used commercially rather than for a
`nonprofit purpose, its use will less likely qualify as fair.
`Campbell, 510 U.S. at 585. As Video Pipeline charges a fee
`to stream the clip previews, its use of the copies is
`commercial (as the District Court found).
`The commercial nature of the use does not by itself,
`however, determine whether the purpose and character of
`the use weigh for or against finding fair use. Id. at 583-84.
`We look as well to any differences in character and purpose
`between the new use and the original. We consider whether
`the copy is “transformative” of the work it copied because
`it “alter[ed] the first with new expression, meaning, or
`message,” or instead “whether the new work merely
`supersedes the objects of the original creation.” Id. at 579
`(citations and alteration in original omitted).
`Video Pipeline asserts that its use of the clip previews
`substantially transforms the full-length films from which
`they derive because the clips and the movies have different
`purposes. According to Video Pipeline, the original works
`have an aesthetic and entertainment purpose while the clip
`previews serve only to provide information about the movies
`to internet users or as advertisements for the company’s
`retail web site clients.5 To the extent that the character and
`
`5. We note that the clip previews do not constitute mere “information”
`about the movies, as would, for example, a list of the names of the
`actors starring in a film, or a statement of the rating it received. Were
`Video Pipeline dealing only in this type of information, the fair use
`doctrine might not be implicated at all because copyright protection does
`not include facts and ideas, but only their expression. See Harper & Row
`Publishers, Inc. v. Nation Enters., 471 U.S. 539, 547 (1985); 17 U.S.C.
`§ 102(b). Regardless, the clips are part of — not information about —
`Disney’s expressive creations. See id. at 569 (“Any copyright infringer
`may claim to benefit the public by increasing public access to the
`copyrighted work.”).
`
`
`
`10
`
`purpose of the clip previews and the original full-length
`films diverge, however, the clips share the same character
`and purpose as Disney’s derivative trailers. Whatever
`informational or promotional character and purpose the
`trailers possess, so do the clip previews. Consequently, the
`clips are likely to “supersede the objects of” Disney’s
`derivatives. Campbell, 510 U.S. at 579 (citations omitted).6
`Although the clips are copied from Disney’s original rather
`than its derivative works, it is highly relevant to our inquiry
`here that the clips will likely serve as substitutes for those
`derivatives.
`Video Pipeline also urges us to take into account the
`functional character and purpose of the database in which
`it stores trailers and clip previews, apparently hoping we
`will discern no significant difference between its database
`and the internet search engine used in Kelly v. Arriba Soft
`Corp., 336 F.3d 811 (9th Cir. 2003).7 In Kelly, Arriba Soft
`Corp.’s search engine located images on other web sites in
`response to a user’s request and displayed the results in
`
`Additionally, it is not clear to us that the use of a copy — not
`accompanied by any creative expression on the part of the copier — as
`an advertisement for the original would qualify as a type of use intended
`to be recognized by the fair use doctrine. See Campbell, 510 U.S. at 578-
`79 (“The enquiry [under the first factor] may be guided by the examples
`given in the preamble to § 107, looking to whether the use is for
`criticism, or comment, or news reporting, and the like . . . .”); id. at 585
`(“The use, for example, of a copyrighted work to advertise a product,
`even in a parody, will be entitled to less indulgence under the first factor
`of the fair use enquiry than the sale of a parody for its own sake, let
`alone one performed a single time by students in school.”).
`
`We need not resolve these issues, however, because (as we conclude in
`the text) the purpose and character of the use of the clip previews and
`that of Disney’s derivative works — its trailers — are the same.
`6. We see little significance in whether the trailers use marketing
`techniques that the clip previews do not.
`7. A database is a discrete collection of data (here, previews) set up for
`efficient retrieval. By comparison, a search engine refers to a system that
`locates data (or images, etc.) from other web sites; thus, a search engine
`will retrieve data that
`is not
`in the engine operator’s control.
`VideoPipeline.net is a database, not a search engine.
`
`
`
`11
`
`thumbnail-size pictures, with a link that would take the
`user to the web site on which the image was found. Id. at
`815. The Court held that the display of the thumbnail
`images was a fair use. Id.
`Video Pipeline’s database does not, however, serve the
`same function as did Arriba Soft’s search engine. As used
`with retailers’ web sites, VideoPipeline.net does not improve
`access to authorized previews located on other web sites.
`Rather, it indexes and displays unauthorized copies of
`copyrighted works. VideoDetective.com does permit viewers
`to link to legitimate retailers’ web sites, but a link to a
`legitimate seller of authorized copies does not here, if it ever
`would, make prima facie infringement a fair use.
`Finally, we note that Video Pipeline’s clip previews — to
`reiterate, approximately two-minute excerpts of full-length
`films with movie title and company trademark shown — do
`not add significantly to Disney’s original expression. Video
`Pipeline itself asserts, and the District Court found, 192 F.
`Supp. at 337, that the clip previews “involved no new
`creative ingenuity.” The Court did recognize that deciding
`which scene or scenes to include in a clip preview requires
`some creative choice. Id. But as Video Pipeline disclaims
`the use of any creative ingenuity, we have no difficulty
`viewing those decisions as involving creativity only in a
`theoretical, and most narrow, sense. Hence, it is dubious
`what “new expression, meaning, or message” Video Pipeline
`has brought to its copies. Campbell, 510 U.S. at 579.
`It is useful to compare the clip previews with a movie
`review, which might also display two-minute segments
`copied from a film. The movie reviewer does not simply
`display a scene from the movie under review but as well
`provides his or her own commentary and criticism. In so
`doing, the critic may add to the copy sufficient “new
`expression, message, or meaning” to render the use fair. Id.
`Here, in contrast, the fact that “a substantial portion,”
`indeed almost all, “of the infringing work was copied
`verbatim from the copyrighted work” with no additional
`creative activity “reveal[s] a dearth of transformative
`character or purpose.” Id. at 587. Consequently, rejecting
`the fair use defense in this case will not likely “stifle the
`
`
`
`12
`
`very creativity” that the Copyright Clause “is designed to
`foster.” Id. at 577.
`With this context, the District Court correctly concluded
`that Video Pipeline’s clip previews lack any significant
`transformative quality. Thus, the commercial nature of the
`clip previews weighs more strongly against Video Pipeline’s
`use. Campbell, 510 U.S. at 580 (If “the alleged infringer
`merely uses [the original work] to get attention or to avoid
`the drudgery in working up something fresh, the claim to
`fairness in borrowing from another’s work diminishes
`accordingly (if it does not vanish), and other factors, like
`the extent of its commerciality, loom larger.”). Given the
`shared character and purpose of the clip previews and the
`trailers (so that the clips will likely serve as a substitute for
`the trailers) and the absence of creative ingenuity in the
`creation of the clips, the first factor strongly weighs against
`fair use in this case.
`2. Nature of the Copyrighted Work
`The second statutory fair use factor directs courts to
`consider “the nature of the copyrighted work.” § 107(2).
`“This factor calls for recognition that some works are closer
`to the core of intended copyright protection than others,
`with the consequence that fair use is more difficult to
`establish when the former works are copied.” Campbell, 510
`U.S. at 586. Fictional, creative works come closer to this
`core than do primarily factual works. Harper & Row
`Publishers, Inc. v. Nation Enters., 471 U.S. 539, 563 (1985).
`The Disney movies at issue — including, for example,
`Beauty and the Beast, Fantasia, Pretty Woman, and Dead
`Poet’s Society — are paradigms of creative, non-factual
`expression. And Disney’s trailers share imaginative aspects
`with the originals.
`Video Pipeline argues that this factor nonetheless weighs
`in its favor because Disney released to the public its
`movies, if not all of its trailers, prior to Video Pipeline’s
`display of the clip previews.8 It is true that Disney would
`have a stronger case against fair use had it not yet made its
`
`8. The record does suggest that Video Pipeline streamed over the internet
`clip previews of some Disney movies not yet released to the public.
`
`
`
`13
`
`movies available for the public’s viewing pleasure. See id. at
`554 (“[T]he unpublished nature of a work is a key . . . factor
`tending to negate a defense of fair use.”) (quoting S. Rep.
`No. 94-473 at 64 (1975)) (alteration and quotation marks in
`original omitted).
`But the second statutory factor does not necessarily
`weigh in favor of finding fair use simply because the public
`already has access to the original work. Rather, that
`Disney’s movies and trailers contain mainly creative
`expression, not factual material, suggests that the use is
`not fair regardless of the published or unpublished status
`of the original. See e.g., Campbell, 510 U.S. at 586 (holding
`that the song Pretty Woman fit “within the core of the
`copyright’s protective purposes” because of its creative
`expression, without considering that the original had
`already been made available to the public). The District
`Court therefore properly relied on the creative, non-factual
`expression involved in Disney’s movies and trailers to hold
`that this factor weighs against the fair use defense.
`3. Amount and Substantiality of the Work Copied
`The third factor requires an analysis of “the amount and
`substantiality of the portion used in relation to the
`copyrighted work as a whole.” § 107(3). The District Court
`determined that this factor also weighed in Disney’s favor.
`192 F. Supp. 2d at 340.
`As Video Pipeline points out, its previews excerpt only
`about two minutes from movies that last one and a half to
`two hours. Quantitatively then, the portion taken is quite
`small.
`But the third factor “calls for thought not only about the
`quantity of the materials used, but about their quality and
`importance, too.” Campbell, 510 U.S. at 587. The District
`Court found that the clip previews, “for the most part, were
`used to provide the potential customer with some idea of
`the plot of each motion picture, its overall tone, and a
`glimpse of its leading characters.” 192 F. Supp. 2d at 339.
`Although the plot, tone, and leading characters are, of
`course, significant aspects of the films, the two-minute
`“glimpse” provided by the clips is made up only of scenes
`taken from the first half of the Disney films. Disney has not
`
`
`
`14
`
`claimed, for instance, that any of the clips “give away” the
`ending of a movie, or ruin other intended surprises for
`viewers
`of
`the
`full-length
`films. Moreover,
`as
`advertisements, the clip previews are meant to whet the
`customer’s appetite, not to sate it; accordingly, they are not
`designed to reveal the “heart” of the movies. Simply put, we
`have no reason to believe that the two-minute clips manage
`in so brief a time, or even intend, to appropriate the “heart”
`of the movies. Compare Harper & Row, 471 U.S. at 564-55
`(weighing this factor against finding fair use because the
`alleged infringer “took what was essentially the heart of the
`book”).
`Because the clip previews copy a relatively small amount
`of the original full-length films and do not go to the “heart”
`of the movies, this factor, contrary to the District Court’s
`determination, weighs
`in
`favor of
`finding
`fair Video
`Pipeline’s display of its clips.
`4. Effect on Potential Market or Value
`Finally, courts should evaluate “the effect of the use upon
`the potential market for or value of the copyrighted work.”
`§ 107(4). The District Court considered the question to be
`whether Video Pipeline’s “use of the copyrighted work
`affects or materially impairs the marketability of the
`copyrighted motion pictures,” and, finding the evidence
`equivocal, concluded that the fourth factor weighed neither
`for nor against finding a likelihood of fair use. 192 F. Supp.
`2d at 340, 343.
`As mentioned above, this final factor “must take [into]
`account not only . . . harm to the original but also . . .
`harm to the market for derivative works.” Campbell, 510
`U.S. at 590. Because the issues pertaining to the potential
`harm to the market for Disney’s derivative trailers are more
`straightforward, we focus our analysis on this area and do
`not review the District Court’s conclusion as to harm to the
`market for the original full-length films.9 It is in this context
`
`9. The District Court declined to consider the potential harm to the
`market for derivatives on the ground that Disney had not argued the
`issue. Disney did, however, so argue in both its briefs in support of its
`motion for a preliminary injunction, and it submitted evidence to
`support those arguments. Video Pipeline also responded in the District
`Court to the merits of Disney’s arguments concerning potential harm to
`the market for its derivative works. Consequently, Video Pipeline suffers
`no harm by our addressing this issue.
`
`
`
`15
`
`that we conclude that the fourth factor weighs in Disney’s
`favor.
`Video Pipeline argued in the District Court that no
`market exists, or could exist, for movie previews because no
`one “ever paid or will ever pay any money merely to see
`trailers.” But in fact retail websites are paying Video
`Pipeline to display both trailers and clip previews.
`Moreover, Video Pipeline takes too narrow a view of the
`harm contemplated by this fourth factor. The statute
`directs us to consider “the effect of the use upon the . . .
`value of the copyrighted work,” not only the effect upon the
`“market,” however narrowly that term is defined. § 107(4);
`see also Worldwide Church of God v. Philadelphia Church of
`God, Inc., 227 F.3d 1110, 1119 (9th Cir. 2000) (drawing
`such a distinction). And the value “need not be limited to
`monetary rewards; compensation may take a variety of
`forms.” Id.; see also Sony Corp., 464 U.S. at 447 n.28
`(stating in a different context that the “copyright law does
`not require a copyright owner to charge a fee for the use of
`his works, and . . . the owner of a copyright may well have
`economic or noneconomic reasons for permitting certain
`kinds of copying
`to occur without receiving direct
`compensation from the copier”).
`Disney introduced evidence that it has entered an
`agreement
`to cross-link
`its
`trailers with
`the Apple
`Computer home page and that it uses on its own websites
`“the draw of the availability of authentic trailers to
`advertise, cross-market and cross-sell other products, and
`to obtain valuable marketing information from visitors who
`chose [sic] to register at the site or make a purchase there.”
`App. 945; see also Kelly, 336 F.3d at 821 (“Kelly’s images
`are related to several potential markets. One purpose of the
`photographs is to attract internet users to his web site,
`where he sells advertising space as well as books and travel
`packages. In addition, Kelly could sell or license his
`photographs to other web sites or to a stock photo
`database, which then could offer the
`images to
`its
`customers.”). In light of Video Pipeline’s commercial use of
`the clip previews and Disney’s use of its trailers as
`described by the record evidence, we easily conclude that
`there is a sufficient market for, or other value in, movie
`
`
`
`16
`
`previews such that the use of an infringing work could have
`a harmful effect cognizable under the fourth factor.
`We have already determined that the clip previews lack
`transformative quality and that, though the clips are copies
`taken directly from the original full-length films rather than
`from the trailers, display of the clip previews would
`substitute for the derivative works. As a result, the clips, if
`Video Pipeline continues to stream them over the internet,
`will “serve[ ] as a market replacement” for the trailers,
`“making it likely that cognizable market harm to the
`[derivatives] will occur.” Campbell, 510 U.S. at 591. For
`instance, web sites wishing to show previews of Disney
`movies may choose to enter licensing agreements with
`Video Pipeline rather than Disney, as at least 25 have
`already done. And internet users searching for previews of
`Disney films may be drawn by the clip previews to web sites
`other than Disney’s, depriving Disney of the opportunity to
`advertise and sell other products to those users.10
`Consequently, “ ‘unrestricted and widespread conduct of
`the sort engaged in by [Video Pipeline] . . . would result in
`a substantially adverse impact on the potential market’ for
`the [derivative works].” Id. at 590 (quoting 3 M. Nimmer &
`D. Nimmer, Nimmer on Copyright § 13.05(A)(4) (1993)). We
`therefore hold that the District Court should have weighed
`this factor against recognizing the fair use defense in this
`case.
`
`* * * * *
`Three of the four statutory facto