212 F.3d 477 (9th Cir. 2000)

THREE BOYS MUSIC CORPORATION, Plaintiff-Appellee,
v.
MICHAEL BOLTON, individually and d/b/a MR. BOLTON'S MUSIC, INC.; ANDREW GOLDMARK; NON-PAREIL MUSIC, INC.; WARNER-CHAPPELL MUSIC LIMITED; WARNER TAMERLANE PUBLISHING CORP.; WB MUSIC CORP.; and SONY MUSIC ENTERTAINMENT, INC., Defendants-Appellants.

Nos. 97-55150, 97-55154

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted October 5, 1999
Filed May 9, 2000

[480] COUNSEL: Robert G. Sugarman, Weil, Gotshal & Manges, New York, New York, for the defendants-appellants.

Russell J. Frackman, Mitchell, Silberberg & Knupp, Los Angeles, California, for the defendant-appellant.

Pierce O'Donnell, O'Donnell & Shaeffer, Los Angeles, California, for the plaintiff-appellee.

John P. McNicholas, McNicholas & McNicholas, Los Angeles, California, for the plaintiff-appellee.

Louis Petrich, Leopold, Petrich, & Smith, Los Angeles, California, for amici, Recording Industry Association of America, Inc. and Motion Picture Association of America, Inc.

Appeals from the United States District Court for the Central District of California; Lourdes G. Baird, District Judge, Presiding. D.C. No. CV-92-01177 LGB

Before: Betty B. Fletcher, Dorothy W. Nelson, and Melvin Brunetti, Circuit

Judges.

OPINION

D.W. NELSON, Circuit Judge:

In 1994, a jury found that Michael Bolton's 1991 pop hit, "Love Is a Wonderful Thing," infringed on the copyright of a 1964 Isley Brothers' song of the same name. The district court denied Bolton's motion for a new trial and affirmed the jury's award of $5.4 million.

Bolton, his co-author, Andrew Goldmark, and their record companies ("Sony Music") appeal, arguing that the district court erred in finding that: (1) sufficient evidence supported the jury's finding that the appellants had access to the Isley Brothers' song; (2) sufficient evidence supported the jury's finding that the songs were substantially similar; (3) subject matter jurisdiction existed based on the Isley Brothers registering a complete copy of the song; (4) sufficient evidence supported the jury's attribution of profits to the infringing elements of the song; (5) Sony Music could not deduct its tax liability; and (6) the appellants' motion for a new trial based on newly discovered evidence was unwarranted.

We affirm.

I. BACKGROUND

The Isley Brothers, one of this country's most well-known rhythm and blues groups, have been inducted into the Rock and Roll Hall of Fame. They helped define the soul sound of the 1960s with songs such as "Shout," "Twist and Shout," and "This Old Heart of Mine," and they mastered the funky beats of the 1970s with songs such as "Who's That Lady, " "Fight the Power," and "It's Your Thing." In 1964, the Isley Brothers wrote and recorded "Love is a Wonderful Thing " for United Artists. The Isley Brothers received a copyright for "Love is a Wonderful Thing" from the Register of Copyrights on February 6, 1964. The following year, they switched to the famous Motown label and had three top-100 hits including "This Old Heart of Mine."

Hoping to benefit from the Isley Brothers' Motown success, United Artists released "Love is a Wonderful Thing" in 1966. The song was not released on an album, only on a 45record as a single. Several industry publications predicted that "Love is a Wonderful Thing" would be a hit -"Cash Box" on August 27, 1966, "Gavin Report" on August 26, 1966, and "Billboard" on September 10, 1966. On September 17, 1966, Billboard listed "Love is a Wonderful Thing" at number 110 in a chart titled "Bubbling Under the Hot 100. " The song was never listed on any other Top 100 charts. In 1991, the Isley Brothers' "Love is a Wonderful Thing" was released [481] on compact disc. See Isley Brothers, The Isley Brothers -The Complete UA Sessions, (EMI 1991).

Michael Bolton is a singer/songwriter who gained popularity in the late 1980s and early 1990s by reviving the soul sound of the 1960s. Bolton has orchestrated this soul-music revival in part by covering old songs such as Percy Sledge's "When a Man Love a Woman" and Otis Redding's"(Sittin' on the) Dock of the Bay." Bolton also has written his own hit songs. In early 1990, Bolton and Goldmark wrote a song called "Love Is a Wonderful Thing." Bolton released it as a single in April 1991, and as part of Bolton's album,"Time, Love and Tenderness." Bolton's "Love Is a Wonderful Thing" finished 1991 at number 49 on Billboard's year-end pop chart.

On February 24, 1992, Three Boys Music Corporation filed a copyright infringement action for damages against the appellants under 17 U.S.C. SS 101 et seq. (1988). The parties agreed to a trifurcated trial. On April 25, 1994, in the first phase, the jury determined that the appellants had infringed the Isley Brothers' copyright. At the end of second phase five days later, the jury decided that Bolton's "Love Is a Wonderful Thing" accounted for 28 percent of the profits from "Time, Love and Tenderness." The jury also found that 66 percent of the profits from commercial uses of the song could be attributed to the inclusion of infringing elements. On May 9, 1994, the district court entered judgment in favor of the Isley Brothers based on the first two phases.

The deadline for post-trial motions was May 25, 1994. On that day, the appellants filed a motion for judgment as a matter of law and a motion for new trial. The district court denied the motions on August 11, 1994. On June 8, 1994, the appellants filed a second motion for new trial based on newly discovered evidence on the issue of copyright ownership. The district court dismissed this motion as untimely.

On December 5, 1996, the district court adopted the findings of the Special Master's Amended Report about the allocation of damages (third phase). In the final judgment entered against the appellants, the district court ordered Sony Music to pay $4,218,838; Bolton to pay $932,924; Goldmark to pay $220,785; and their music publishing companies to pay $75,900. They timely appealed.

II. DISCUSSION

Proof of copyright infringement is often highly circumstantial, particularly in cases involving music. A copyright plaintiff must prove (1) ownership of the copyright; and (2) infringement -that the defendant copied protected elements of the plaintiff's work. See Smith v. Jackson , 84 F.3d 1213, 1218 (9th Cir. 1996) (citation omitted). Absent direct evidence of copying, proof of infringement involves fact-based showings that the defendant had "access" to the plaintiff's work and that the two works are "substantially similar." Id.

Given the difficulty of proving access and substantial similarity, appellate courts have been reluctant to reverse jury verdicts in music cases. See, e.g., id. at 1221 (affirming a jury's verdict for the defendants in a copyright infringement case involving Michael Jackson and other musicians); Gaste v. Kaiserman, 863 F.2d 1061, 1071 (2d Cir. 1988) (affirming a jury's damages award against a defendant in a music copyright infringement case). Judge Newman's opinion in Gaste nicely articulated the proper role for an appeals court in reviewing a jury verdict:

The guiding principle in deciding whether to overturn a jury verdict for insufficiency of the evidence is whether the evidence is such that, without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, there can be but one conclusion as to the verdict that reasonable men could have reached.

Id. at 1066 (internal quotations omitted). In Arnstein v. Porter, the seminal case [482] about musical copyright infringement, Judge Jerome Frank wrote:

Each of these two issues - copying and improper appropriation - is an issue of fact. If there is a trial, the conclusions on those issues of the trier of the facts - of the judge if he sat without a jury, or of the jury if there was a jury trial - bind this court on appeal, provided the evidence supports those findings, regardless of whether we would ourselves have reached the same conclusions.

Arnstein v. Porter, 154 F.2d 464, 469 (2d Cir. 1946).

As a general matter, the standard for reviewing jury verdicts is whether they are supported by "substantial evidence" -that is, such relevant evidence as reasonable minds might accept as adequate to support a conclusion. See Poppell v. City of San Diego, 149 F.3d 951, 962 (9th Cir. 1998). The credibility of witnesses is an issue for the jury and is generally not subject to appellate review. See Gilbrook v. City of Westminster, 177 F.3d 839, 856 (9th Cir.), cert. denied, 120 S. Ct. 614 (1999).

We affirm the jury's verdict in this case in light of the standard of review and copyright law's "guiding principles." Although we will address each of the appellant's arguments in turn, we focus on access because it is the most difficult issue in this case. Our decision is predicated on judicial deference -finding that the law has been properly applied in this case, viewing the facts most favorably to the appellees, and not substituting our judgment for that of the jury.

A. Access

Proof of access requires "an opportunity to view or to copy plaintiff's work." Sid and Marty Krofft Television Prods., Inc. v. McDonald's Corp., 562 F.2d 1157, 1172 (9th Cir. 1977). This is often described as providing a "reasonable opportunity" or "reasonable possibility" of viewing the plaintiff's work. 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright, S 13.02[A], at 13-19 (1999); Jason v. Fonda, 526 F. Supp. 774, 775 (C.D. Cal. 1981), aff'd , 698 F.2d 966 (9th Cir. 1983). We have defined reasonable access as "more than a `bare possibility.' " Jason, 698 F.2d at 967. Nimmer has elaborated on our definition: "Of course, reasonable opportunity as here used, does not encompass any bare possibility in the sense that anything is possible. Access may not be inferred through mere speculation or conjecture. There must be a reasonable possibility of viewing the plaintiff's work -not a bare possibility." 4 Nimmer,S 13.02[A], at 1319. "At times, distinguishing a `bare' possibility from a `reasonable' possibility will present a close question. " Id. at 1320.

Circumstantial evidence of reasonable access is proven in one of two ways: (1) a particular chain of events is established between the plaintiff's work and the defendant's access to that work (such as through dealings with a publisher or record company), or (2) the plaintiff's work has been widely disseminated. See 4 Nimmer, S 13.02[A], at 13-20-13-21; 2 Paul Goldstein, Copyright: Principles, Law, and Practice S 8.3.1.1., at 90-91 (1989). Goldstein remarks that in music cases the "typically more successful route to proving access requires the plaintiff to show that its work was widely disseminated through sales of sheet music, records, and radio performances." 2 Goldstein, S 8.3.1.1, at 91. Nimmer, however, cautioned that "[c]oncrete cases will pose difficult judgments as to where along the access spectrum a given exploitation falls." 4 Nimmer, S 13.02[A], at 13-22.

Proof of widespread dissemination is sometimes accompanied by a theory that copyright infringement of a popular song was subconscious. Subconscious copying has been accepted since Learned Hand embraced it in a 1924 music infringement case: "Everything registers somewhere in our memories, and no one can tell what [483] may evoke it . . . . Once it appears that another has in fact used the copyright as the source of this production, he has invaded the author's rights. It is no excuse that in so doing his memory has played him a trick." Fred Fisher, Inc. v. Dillingham, 298 F. 145, 147-48 (S.D.N.Y. 1924). In Fred Fisher, Judge Hand found that the similarities between the songs "amount[ed] to identity" and that the infringement had occurred "probably unconsciously, what he had certainly often heard only a short time before." Id. at 147.

In modern cases, however, the theory of subconscious copying has been applied to songs that are more remote in time. ABKCO Music, Inc v. Harrisongs Music, Ltd., 722 F.2d 988 (2d Cir. 1983) is the most prominent example. In ABKCO, the Second Circuit affirmed a jury's verdict that former Beatle George Harrison, in writing the song "My Sweet Lord," subconsciously copied The Chiffons' "He's So Fine," which was released six years earlier. See id. at 997, 999. Harrison admitted hearing "He's So Fine" in 1963, when it was number one on the Billboard charts in the United States for five weeks and one of the top 30 hits in England for seven weeks. See id. at 998. The court found:"the evidence, standing alone, `by no means compels the conclusion that there was access . . . it does not compel the conclusion that there was not.' " Id. (quoting Heim v. Universal Pictures Co., 154 F.2d 480, 487 (2d Cir. 1946)). In ABKCO, however, the court found that "the similarity was so striking and where access was found, the remoteness of that access provides no basis for reversal." Id. Furthermore, "the mere lapse of a considerable period of time between the moment of access and the creation of defendant's work does not preclude a finding of copying." 4 Nimmer, S 13.02[A], at 13-20 (citing ABKCO, 722 F.2d at 997-98).

The Isley Brothers' access argument was based on a theory of widespread dissemination and subconscious copying. They presented evidence supporting four principal ways that Bolton and Goldmark could have had access to the Isley Brothers' "Love is a Wonderful Thing":

(1) Bolton grew up listening to groups such as the Isley Brothers and singing their songs. In 1966, Bolton and Goldmark were 13 and 15, respectively, growing up in Connecticut. Bolton testified that he had been listening to rhythm and blues music by black singers since he was 10 or 11,"appreciated a lot of Black singers," and as a youth was the lead singer in a band that performed "covers" of popular songs by black singers. Bolton also testified that his brother had a "pretty good record collection."

(2) Three disk jockeys testified that the Isley Brothers' song was widely disseminated on radio and television stations where Bolton and Goldmark grew up. First, Jerry Blavitt testified that the Isley Brothers' "Love is a Wonderful Thing" was played five or six times during a 13-week period on the television show, "The Discophonic Scene," which he said aired in Philadelphia, New York, and Hartford-New Haven. Blavitt also testified that he played the song two to three times a week as a disk jockey in Philadelphia and that the station is still playing the song today. Second, Earl Rodney Jones testified that he played the song a minimum of four times a day during an eight to 14 to 24 week period on WVON radio in Chicago, and that the station is still playing the song today. Finally, Jerry Bledsoe testified that he played the song on WUFO radio in Buffalo, and WWRL radio in New York was playing the song in New York in 1967 when he went there. Bledsoe also testified that he played the song twice on a television show, "Soul," which aired in New York and probably in New Haven, Connecticut, where Bolton lived.

(3) Bolton confessed to being a huge fan of the Isley Brothers and a collector of their music. Ronald Isley testified that when Bolton saw Isley at the Lou Rawls United Negro College Fund Benefit concert in 1988, Bolton said,"I know this guy.[484] I go back with him. I have all his stuff. " Angela Winbush, Isley's wife, testified about that meeting that Bolton said, "This man needs no introduction. I know everything he's done."

(4) Bolton wondered if he and Goldmark were copying a song by another famous soul singer. Bolton produced a work tape attempting to show that he and Goldmark independently created their version of "Love Is a Wonderful Thing." On that tape of their recording session, Bolton asked Goldmark if the song they were composing was Marvin Gaye's "Some Kind of Wonderful."[1] The district court, in affirming the jury's verdict, wrote about Bolton's Marvin Gaye remark:

This statement suggests that Bolton was contemplating the possibility that the work he and Goldmark were creating, or at least a portion of it, belonged to someone else, but that Bolton wasn't sure who it belonged to. A reasonable jury can infer that Bolton mistakenly attributed the work to Marvin Gaye, when in reality Bolton was subconsciously drawing on Plaintiff's song.

The appellants contend that the Isley Brothers' theory of access amounts to a "twenty-five-years-after-the-factsubconscious copying claim." Indeed, this is a more attenuated case of reasonable access and subconscious copying than ABKCO. In this case, the appellants never admitted hearing the Isley Brothers' "Love is a Wonderful Thing. " That song never topped the Billboard charts or even made the top 100 for a single week. The song was not released on an album or compact disc until 1991, a year after Bolton and Goldmark wrote their song. Nor did the Isley Brothers ever claim that Bolton's and Goldmark's song is so "strikingly similar" to the Isley Brothers' that proof of access is presumed and need not be proven.

Despite the weaknesses of the Isley Brothers' theory of reasonable access, the appellants had a full opportunity to present their case to the jury. Three rhythm and blues experts (including legendary Motown songwriter Lamont Dozier of Holland-Dozier-Holland fame) testified that they never heard of the Isley Brothers' "Love is a Wonderful Thing." Furthermore, Bolton produced copies of "TV Guide" from 1966 suggesting that the television shows playing the song never aired in Connecticut. Bolton also pointed out that 129 songs called "Love is a Wonderful Thing" are registered with the Copyright Office, 85 of them before 1964.

The Isley Brothers' reasonable access arguments are not without merit. Teenagers are generally avid music listeners. It is entirely plausible that two Connecticut teenagers obsessed with rhythm and blues music could remember an Isley Brothers' song that was played on the radio and television for a few weeks, and subconsciously copy it twenty years later. Furthermore, Ronald Isley testified that when they met, Bolton said, "I have all his stuff." Finally, as the district court pointed out, Bolton's remark about Marvin Gaye and "Some Kind of Wonderful" indicates that Bolton believed he may have been copying someone else's song.

Finally, with regard to access, we are mindful of Judge Frank's words of caution in Arnstein v. Porter: "The judge characterized plaintiff's story as `fantastic'; and in the light of the references in his opinion to defendant's deposition, the judge obviously accepted the defendant's denial of access and copying . . . . [Y]et plaintiff's credibility, even as to those improbabilities, should be left to the jury." Arnstein, 154 F.2d at 469. In this case, Judge Baird heeded Judge Frank's admonition:

[T]his Court is not in a position to find that the only conclusion that a reasonable jury could have reached is that [485] Defendants did not have access to Plaintiff's song. One must remember that the issue this Court must address is not whether Plaintiff has proven access by a preponderance of evidence, but whether reasonable minds could find that Defendants had a reasonable opportunity to have heard Plaintiff's song before they created their own song.

Although we might not reach the same conclusion as the jury regarding access, we find that the jury's conclusion about access is supported by substantial evidence. We are not establishing a new standard for access in copyright cases; we are merely saying that we will not disturb the jury's factual and credibility determinations on this issue.

B. Substantial Similarity

Under our case law, substantial similarity is inextricably linked to the issue of access. In what is known as the "inverse ratio rule," we "require a lower standard of proof of substantial similarity when a high degree of access is shown." Smith, 84 F.3d at 1218 (citing Shaw v. Lindheim, 919 F.2d 1353, 1361-62 (9th Cir. 1990); Krofft, 562 F.2d at 1172). Furthermore, in the absence of any proof of access, a copyright plaintiff can still make out a case of infringement by showing that the songs were "strikingly similar." See Smith, 84 F.3d at 1220; Baxter v. MCA, Inc., 812 F.2d 421, 423, 424 n.2 (9th Cir. 1987).

Proof of the substantial similarity is satisfied by a twopart test of extrinsic similarity and intrinsic similarity. See Krofft, 562 F.2d at 1164. Initially, the extrinsic test requires that the plaintiff identify concrete elements based on objective criteria. See Smith, 84 F.3d at 1218; Shaw, 919 F.2d at 1356. The extrinsic test often requires analytical dissection of a work and expert testimony. See Apple Computer, Inc v. Microsoft Corp., 35 F.3d 1435, 1442 (9th Cir. 1994). Once the extrinsic test is satisfied, the factfinder applies the intrinsic test. The intrinsic test is subjective and asks "whether the ordinary, reasonable person would find the total concept and feel of the works to be substantially similar." Pasillas v. McDonald's Corp., 927 F.2d 440, 442 (9th Cir. 1991) (internal quotations omitted).

We will not second-guess the jury's application of the intrinsic test. See Krofft 562 F.3d at 1166 ("Since the intrinsic test for expression is uniquely suited for determination by the trier of fact, this court must be reluctant to reverse it.") (citations omitted). Furthermore, we will not reverse factual determinations regarding the extrinsic test absent a clearly erroneous application of the law. See id. It is well settled that a jury may find a combination of unprotectible elements to be protectible under the extrinsic test because " `the over-all impact and effect indicate substantial appropriation.' " Id. at 1169 (quoting Malkin v. Dubinsky, 146 F. Supp. 111, 114 (S.D.N.Y. 1956)).

1. Evidence of Substantial Similarity

Bolton and Goldmark argue that there was insufficient evidence of substantial similarity because the Isley Brothers' expert musicologist, Dr. Gerald Eskelin, failed to show that there was copying of a combination of unprotectible elements. On the contrary, Eskelin testified that the two songs shared a combination of five unprotectible elements: (1) the title hook phrase (including the lyric, rhythm, and pitch); (2) the shifted cadence; (3) the instrumental figures; (4) the verse/chorus relationship; and (5) the fade ending. Although the appellants presented testimony from their own expert musicologist, Anthony Ricigliano, he conceded that there were similarities between the two songs and that he had not found the combination of unprotectible elements in the Isley Brothers' song "anywhere in the prior art." The jury heard testimony from both of these experts and "found infringement based on a unique compilation of those elements." We refuse to interfere with the jury's credibility determination, nor do we find [486] that the jury's finding of substantial similarity was clearly erroneous.

2. Independent Creation

Bolton and Goldmark also contend that their witnesses rebutted the Isley Brothers' prima facie case of copyright infringement with evidence of independent creation. By establishing reasonable access and substantial similarity, a copyright plaintiff creates a presumption of copying. The burden shifts to the defendant to rebut that presumption through proof of independent creation. See Granite Music Corp. v. United Artists Corp., 532 F.2d 718, 721 (9th Cir. 1976).

The appellants' case of independent creation hinges on three factors: the work tape demonstrating how Bolton and Goldmark created their song, Bolton and Goldmark's history of songwriting, and testimony that their arranger, Walter Afanasieff, contributed two of five unprotectible elements that they allegedly copied. The jury, however, heard the testimony of Bolton, Goldmark, Afanasieff, and Ricigliano about independent creation. The work tape revealed evidence that Bolton may have subconsciously copied a song that he believed to be written by Marvin Gaye. Bolton and Goldmark's history of songwriting presents no direct evidence about this case. And Afanasieff's contributions to Bolton and Goldmark's song were described by the appellants' own expert as "very common." Once again, we refuse to disturb the jury's determination about independent creation. The substantial evidence of copying based on access and substantial similarity was such that a reasonable juror could reject this defense.

3. Inverse-Ratio Rule

Although this may be a weak case of access and a circumstantial case of substantial similarity, neither issue warrants reversal of the jury's verdict. An amicus brief on behalf of the recording and motion picture industries warns against watering down the requirements for musical copyright infringement. This case presents no such danger. The Ninth Circuit's inverse-ratio rule requires a lesser showing of substantial similarity if there is a strong showing of access. See Smith, 84 F.3d at 1218. In this case, there was a weak showing of access. We have never held, however, that the inverse ratio rule says a weak showing of access requires a stronger showing of substantial similarity. Nor are we redefining the test of substantial similarity here; we merely find that there was substantial evidence from which the jury could find access and substantial similarity in this case.

C. Sufficiency of the Deposit Copy

The appellants argue that the district court did not have jurisdiction over this case because the Isley Brothers failed to register a complete copy of the song upon which the lawsuit was based. Although the 1909 Copyright Act requires the owner to deposit a "complete copy" of the work with the copyright office, our definition of a "complete copy" is broad and deferential: "Absent intent to defraud and prejudice, inaccuracies in copyright registrations do not bar actions for infringement." Harris v. Emus Records Corp. , 734 F.2d 1329, 1335 (9th Cir. 1984) (citations omitted).

Bolton and Goldmark argue that in 1964 the Isley Brothers deposited sheet music ("deposit copy") of "Love is a Wonderful Thing" that differed from the recorded version of the song. Furthermore, they claimed that the deposit copy does not include the majority of the musical elements that were part of the infringement claim. At trial, the Isley Brothers' expert, Dr. Eskelin, testified that the deposit copy included all of the song's essential elements such as the title hook, chorus, and pitches. Dr. Eskelin even played the deposit copy for the jury on the keyboard. We refuse to disturb the jury's finding that the Isley Brothers deposited a "complete copy " because (1) there was no intent to defraud and prejudice and (2) any inaccuracies [487] in the deposit copy were minor and do not bar the infringement action.

D. Attribution of Profits

Sony Music claims that the district court improperly applied an assumption that all profits from Bolton and Goldmark's song go to the Isley Brothers, and that no evidence supported the jury's apportionment of profits. A successful copyright plaintiff is allowed to recover only those profits that are "attributable to infringement." 17 U.S.C.S 504(b) (1994). "In establishing the infringer's profits, the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work." Id. See also Cream Records, Inc. v. Jos. Schlitz Brewing Co., 754 F.2d 826, 828 (9th Cir. 1985) (holding that when all profits do not clearly derive from the infringing material, the copyright owner is not entitled to recover all of the profits); Gaste , 863 F.2d at 1070 (finding that where there is "imprecision in the computation of expenses, a court should err on the side of guaranteeing the plaintiff a full recovery"). Thus, the statutory burden of proof lies with Sony Music to prove what percentage of their profits were not attributable to copying the Isley Brothers'"Love is a Wonderful Thing."

Sony Music presented evidence that Bolton's "Love Is a Wonderful Thing" produced only 5-10% of the profits from his album, "Time, Love and Tenderness," and that the song's infringing elements resulted in only 10-15% of the profits from the song. The Isley Brothers, however, attacked the credibility of one of Sony Music's experts. Furthermore, they presented evidence that Bolton's infringing song was the album's lead single, that it was released 19 days before the album, and that Bolton engaged in telephone promotion of the song. The jury found that 28% of the album's profits derived from the song, and that 66% of the song's profits resulted from infringing elements.

We affirm the jury's apportionment of the profits for several reasons. First, the jury instructions adequately conveyed the burden of proof. Second, the burden of proof was on Sony Music, and the jury chose not to believe Sony Music's experts. Finally, a jury verdict apportioning less than 100% of the profits but more than the percentage estimates of Sony Music's experts does not represent clear error.

E. Deduction of Tax Liability

Sony Music also argues that the district court erred in allowing Bolton and Goldmark, but not Sony Music, to deduct income taxes due to profits from the album. Whether income taxes are considered "deductible expenses " under S 504(b) is an issue of first impression in this circuit. The Supreme Court held that willful infringers could not deduct income taxes, but it left open the possibility that non-willful infringers could deduct their income taxes from the infringing profits. See L.P. Larson, Jr., Co. v. Wm. Wrigley, Jr., Co., 277 U.S. 97, 99-100 (1928). The circuits are split over whether non-willful infringers such as Bolton, Goldmark, and Sony Music can deduct income taxes from their infringing profits. Compare In Design v. K-Mart Apparel Corp., 13 F.3d 559, 567 (2d Cir. 1994) (allowing the deduction of income taxes) with Schnadig Corp. v. Gaines Mfg. Co., Inc., 620 F.2d 1166, 1169-70 (6th Cir. 1980) (not allowing the deduction of income taxes).

The Second Circuit allowed the deduction of income taxes because if infringers are liable for pre-tax profits, they may end up paying more money than they ever received. See In Design, 13 F.3d at 567. Under the Second Circuit's rule, the infringer receives a windfall by (1) paying a smaller damages award and (2) deducting the entire, pre-tax award from gross income on a subsequent tax return. The Sixth Circuit rejected the deduction of income taxes because the increased pre-tax [488] profits paid to the copyright holder will be balanced out by an eventual tax refund based on the pre-tax award. See Schnadig, 620 F.2d at 1169-70. Under the Sixth Circuit's rule, the copyright holder receives a windfall by receiving a larger, pre-tax award.

During the third phase of this trial, the district court adopted the findings of the special master's report regarding the deduction of income taxes. The district court followed the Second Circuit rule and allowed Bolton and Goldmark, as non-willful infringers, to deduct the income taxes and management fees that they paid relating to the infringing song. The district court, however, refused to allow Sony Music to deduct its Net Operating Loss Carry-forward (NOL) because the NOL did not have a "concrete financial impact."

We uphold the district court's decision to allow non-willful infringers to deduct income taxes, but not NOL. In this case, Bolton and Goldmark actually paid income taxes and management fees on the infringing profits. Sony Music, however, never actually paid income taxes on its infringing profits. Rather, Sony Music claimed it offset nearly $1.7 million in taxes on the infringing profits against its parent company's NOL. No court has ever found that NOL is a deductible expense under S 504(b). Furthermore, we find that the district court's distinctions between taxes actually paid and taxes not actually paid was a fair one. Thus, we affirm the district court's calculation of a $4,218,838 damages award against Sony Music.

F. Second New Trial Motion

Finally, Bolton and Goldmark claim that the district court erred in rejecting their second motion for new trial. The district court's denial of a motion for a new trial pursuant to Federal Rule of Civil Procedure 60(b) is reviewed for an abuse of discretion. See Browning-Ferris Indus. v. Kelco Disposal, Inc., 492 U.S. 257, 278 (1989); Scott v. Ross, 140 F.3d 1275, 1281 (9th Cir. 1998). The abuse of discretion standard applies particularly when the district court's denial is based on the motion's untimeliness. See E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1294-96 (9th Cir. 1992).

Bolton and Goldmark's second motion for a new trial was based on the discovery of new evidence that disputed the Isley Brothers' claim of authorship. A day before the deadline for post-trial motions, the appellees discovered evidence alleging that the Turkcords, a group that played with the Isley Brothers in the mid-1960s, claimed to have written the 1964 song, "Love is a Wonderful Thing." Bolton and Goldmark did not immediately notify the district court of this new evidence. Instead, fourteen days after the deadline for post-trial motions had passed, they filed an additional motion for new trial. The district court rejected the second motion for new trial as untimely filed.

We affirm the district court's denial of the second motion for new trial because the evidence, if true, goes at most to the weight and credibility of the evidence before the jury. At trial, Ronald Isley claimed to have written the song with the deceased guitar legend, Jimi Hendrix. (As a young man, Hendrix played in the Isley Brothers' band.) The Turkcords' claims of authorship are dubious for several reasons. The Turkcords knew about the re-release of "Love is a Wonderful Thing" by United Artists in 1991, yet they claimed that the Isley Brothers had agreed to share the song's royalties with them only after hearing about the damages award in this case on "Inside Edition." Furthermore, Bolton and Goldmark knew about this new evidence before the deadline for the post-trial motions, yet they did not immediately notify the district court.

Even if the Turkcords' claims of authorship are true, a new trial is not warranted in the interests of justice because the Isley Brothers' copyright ownership is not jeopardized. Registration is [489] prima facie evidence of the validity of a copyright. See 17 U.S.C. S 410(c) (1994). This presumption can be rebutted by the defendant's showing that the plaintiff's work is not original. See North Coast Indus. v. Jason Maxwell, Inc., 972 F.2d 1031, 1033 (9th Cir. 1992). North Coast 's definition of originality is broad: " `All that is needed to satisfy both the Constitution and the statute is that the "author " contributed something more than a "merely trivial" variation, something recognizably "his own." Originality in this context means "little more than a prohibition of actual copying." ' " Id. (quoting Krofft, 562 F.2d at 1163 n.5 (quoting Alfred Bell & Co. v. Catalda Fine Arts, 191 F.2d 99, 102-03 (2d Cir. 1951))). See also Kamar Int'l Inc. v. Russ Berrie and Co., 657 F.2d 1059, 1061 (9th Cir. 1981) (employing a broad definition of originality relating to toy stuffed animals).

In this case, the Isley Brothers undoubtedly contributed something original to "Love is a Wonderful Thing. " Their proteges, the Turkcords, purportedly wrote the song, then gave the Isley Brothers' permission to record it after the voice of the Turkcords' lead singer allegedly "cracked. " Members of the Turkcords allegedly sang back-up on the record. Yet the Turkcords never copyrighted their song. They relied on the Isley Brothers' alleged promise to share the royalties with them.

The district court did not abuse its discretion in rejecting Bolton and Goldmark's second motion for a new trial based on this evidence. The Turkcords' claims of authorship would not have affected the outcome of the case and at most go to the weight and credibility of the evidence. Bolton and Goldmark's second motion was a last-ditch attempt to discredit the jury's verdict. The district court heard all of the evidence in this case, instructed the jury on the applicable law, yet refused to reverse the jury's verdict pursuant to motion for a judgment as a matter of law. Having found that the law was properly applied in this case, we leave the district court's decisions and the jury's credibility determinations undisturbed.

AFFIRMED.

[1] Marvin Gaye also referred to the song's chorus, "She's some kind of wonderful," in his song, "Too Busy Thinking About My Baby." See Marvin Gaye, Too Busy Thinking About My Baby, on MPG, (Motown 1969). 

[1190] Alan Korn, Law Offices of Alan Korn, Berkeley, CA, for the plaintiff-appellant.

Adam F. Streisand and David C. Nelson, Loeb & Loeb, LLP, and Barry E. Mallen, Manatt, Phelps & Phillips, LLP, Los Angeles, CA, for the defendants-appellees.

Todd M. Gascon, Law Offices of Todd M. Gascon, and Sarah Sevier Farnbach, Phillips & Erlewin, LLP, San Francisco, CA, for the amici curiae.

Appeal from the United States District Court for the Central District of California; Nora M. Manella, District Judge, Presiding. D.C. No. CV-00-04909-NM.

Before SCHROEDER, Chief Judge, THOMPSON and GRABER, Circuit Judges.

Opinion by Chief Judge SCHROEDER; Dissent by Judge GRABER.

ORDER AMENDING OPINION AND DENYING REHEARING AND AMENDED OPINION AND AMENDED DISSENT

The Opinion filed on November 4, 2003, is hereby amended. The clerk shall file the attached Amended Opinion.

With this Amended Opinion, the panel has voted unanimously to deny the petition for panel rehearing and petition for rehearing en banc.

The full court has been advised of the petition for rehearing en banc and no active judge has requested a vote on whether to hear the matter en banc. Fed.R.App. P.35.

The petition for panel rehearing and the petition for rehearing en banc are DENIED. No further petitions for rehearing will be entertained.

SCHROEDER, Chief Judge.

This appeal raises the difficult and important issue of whether the incorporation of a short segment of a musical recording into a new musical recording, i.e., the practice of "sampling," requires a license to use both the performance and the composition of the original recording. The particular sample in this case consists of a six-second, three-note segment of a performance of one of his own compositions by plaintiff, and accomplished jazz flutist, James W. Newton. The defendants, the performers who did the sampling, are the members of the musical group Beastie Boys. They obtained a license to sample the sound recording of Newton's copyrighted performance, but they did not obtain a license to use Newton's underlying composition, which is also copyrighted.

The district court granted summary judgment to the defendants. In a scholarly opinion, it held that no license to the underlying composition was required because, as a matter of law, the notes in question—C—D flat—C, over a held C note—lacked sufficient originality to merit copyright protection. Newton v. Diamond, 204 F.Supp.2d 1244, 1256 (C.D.Cal. 2002). The district court also held that even if the sampled segment of the composition were original, Beastie Boys' use of a brief segment of the sound recording of "Choir" was a de minimis use of the "Choir" composition and therefore was not actionable. Id. at 1259. We affirm on the ground that the use was de minimis. [1191]

Background and Procedural History

The plaintiff and appellant in this case, James W. Newton, is an accomplished avant-garde jazz flutist and composer. In 1978, he composed the song "Choir," a piece for flute and voice intended to incorporate elements of African-American gospel music, Japanese ceremonial court music, traditional African music, and classical music, among others. According to Newton, the song was inspired by his earliest memory of music, watching four women singing in a church in rural Arkansas. In 1981, Newton performed and recorded "Choir" and licensed all rights in the sound recording to ECM Records for $5000.^[1] The license covered only the sound recording, and it is undisputed that Newton retained all rights to the composition of "Choir." Sound recordings and their underlying compositions are separate works with their own distinct copyrights. 17 U.S.C. § 102(a)(2), (7).

The defendants and appellees include the members of the rap and hip-hop group Beastie Boys, and their business associates. In 1992, Beastie Boys obtained a license from ECM Records to use portions of the sound recording of "Choir" in various renditions of their song "Pass the Mic" in exchange for a one-time fee of $1000.^[2] Beastie Boys did not obtain a license from Newton to use the underlying composition.

The portion of the composition at issue consists of three notes, C—D flat—C, sung over a background C note played on the flute. The score to "Choir" also indicates that the entire song should be played in a "largo/senza-misura" tempo, meaning "slowly/without-measure." The parties disagree about whether two additional elements appear in the score. First, Newton argues that the score contains an instruction that requires overblowing the background C note that is played on the flute. Second, Newton argues that multiphonics are part of the composition because they are necessarily created when a performer follows the instructions on the score to simultaneously play the flute note and sing the vocal notes. Because we review the district court's grant of summary judgment to the Beastie Boys, we must construe the evidence in Newton's favor. We therefore assume that these two elements are part of the "Choir" composition. As we will discuss more fully below, there are other elements that are part of Newton's performance that was captured in the [1192] sound recording, but that do not appear in the score.

The dispute between Newton and Beastie Boys centers around the copyright implications of the practice of sampling, a practice now common to many types of popular music. Sampling entails the incorporation of short segments of prior sound recordings into new recordings. The practice originated in Jamaica in the 1960s, when disc jockeys (DJs) used portable sound systems to mix segments of prior recordings into new mixes, which they would overlay with chanted or "scatted" vocals. See Robert M. Szymanski, Audio Pasitiche: Digital Sampling, Intermediate Copying, Fair Use, 3 U.C.L.A. Ent. L. Rev. 271, 277 (Spring 1996). Sampling migrated to the United States and developed throughout the 1970s, using the analog technologies of the time. Id. The digital sampling involved here developed in the early 1980s with the advent of digital synthesizers having MIDI (Musical Instrument Digital Interface) keyboard controls. These digital instruments allowed artists digitally to manipulate and combine sampled sounds, expanding the range of possibilities for the use of pre-recorded music. Whereas analog devices limited artists to "scratching" vinyl records and "cutting" back and forth between different sound recordings, digital technology allowed artists to slow down, speed up, combine, and otherwise alter the samples. See id.

Pursuant to their license from ECM Records, Beastie Boys digitally sampled the opening six seconds of Newton's sound recording of "Choir." Beastie Boys repeated or "looped" this six-second sample as a background element throughout "Pass the Mic," so that it appears over forty times in various renditions of the song. In addition to the version of "Pass the Mic" released on their 1992 album, "Check Your Head," Beastie Boys included the "Choir" sample in two remixes, "Dub the Mic" and "Pass the Mic (Pt. 2, Skills to Pay the Bills)." It is unclear whether the sample was altered or manipulated, though Beastie Boys' sound engineer stated that alterations of tone, pitch, and rhythm are commonplace, and Newton maintains that the pitch was lowered slightly.

Newton filed the instant action in federal court on May 9, 2000, alleging violations of his copyright in the underlying composition, as well as Lanham Act violations for misappropriation and reverse passing off. The district court dismissed Newton's Lanham Act claims on September 12, 2000, and granted summary judgment in favor of Beastie Boys on the copyright claims on May 21, 2002. Newton v. Diamond, 204 F.Supp.2d 1244 (C.D.Cal.2002). The district court held that the three-note segment of the "Choir" composition could not be copyrighted because, as a matter of law, it lacked the requisite originality. 204 F.Supp.2d at 1256. The court also concluded that even if the segment were copyrightable, Beastie Boys' use of the work was de minimis and therefore not actionable. Id. at 1259. Newton appealed.

Whether Defendants' Use was De Minimis

We may affirm the grant of summary judgment on any basis supported by the record and need not reach each ground relied upon by the district court. See Venetian Casino Resort L.L.C. v. Local Joint Executive Bd. of Las Vegas, 257 F.3d 937, 941 (9th Cir.2001), cert. denied, 535 U.S. 905, 122 S.Ct. 1204, 152 L.Ed.2d 142 (2002). Assuming that the sampled segment of the composition was sufficiently original to merit copyright protection, we nevertheless affirm on the ground that Beastie Boys' use was de minimis and therefore not actionable.

For an unauthorized use of a copyrighted work to be actionable, the use must be significant enough to constitute [1193] infringement. See Ringgold v. Black Entm't Television, Inc., 126 F.3d 70, 74-75 (2d Cir.1997). This means that even where the fact of copying is conceded, no legal consequences will follow from that fact unless the copying is substantial. See Laureyssens v. Idea Group, Inc., 964 F.2d 131, 140 (2d Cir.1992); 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.03[A], at 13-30.2. The principle that trivial copying does not constitute actionable infringement has long been a part of copyright law. Indeed, as Judge Learned Hand observed over 80 years ago: "Even where there is some copying, that fact is not conclusive of infringement. Some copying is permitted. In addition to copying, it must be shown that this has been done to an unfair extent." West Publ'g Co. v. Edward Thompson Co., 169 F. 833, 861 (E.D.N.Y.1909). This principle reflects the legal maxim, de minimis non curatlex (often rendered as, "the law does not concern itself with trifles"). See Ringgold, 126 F.3d at 74-75.

A leading case on de minimis infringement in our circuit is Fisher v. Dees, 794 F.2d 432 (9th Cir.1986), where we observed that a use is de minimis only if the average audience would not recognize the appropriation. See id. at 434 n. 2 ("[A] taking is considered de minimis only if it is so meager and fragmentary that the average audience would not recognize the appropriation."). This observation reflects the relationship between the de minimis maxim and the general test for substantial similarity, which also looks to the response of the average audience, or ordinary observer, to determine whether a use is infringing. See, e.g., Cavalier v. Random House, Inc., 297 F.3d 815, 822 (9th Cir. 2002); Castle Rock Entm't, Inc. v. Carol Publ'g Group, Inc., 150 F.3d 132 (2d Cir. 1998) ("Two works are substantially similar where `the ordinary observer, unless he set out to detect the disparities, would be disposed to overlook them, and regard [the] aesthetic appeal [of the two works] as the same.'" (quoting Arica Inst., Inc. v. Palmer, 970 F.2d 1067, 1072 (2d Cir.1992) (quoting Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir. 1960) (L. Hand, J.)))). To say that a use is de minimis because no audience would recognize the appropriation is thus to say that the use is not sufficiently significant.

On the facts of Fisher, this court rejected the de minimis defense because the copying was substantial: the defendant had appropriated the main theme and lyrics of the plaintiff's song, both of which were easily recognizable in the defendant's parody. 794 F.2d at 434 & n. 2. Specifically, the defendant copied six of the thirty-eight bars to the 1950s standard, "When Sunny Gets Blue," to make the parody, "When Sonny Sniffs Glue," and paralleled the original lyrics with only minor variations. Id. However, despite the works' substantial similarities, we held that the use was nevertheless non-infringing because, as a parody, it was "fair use" under 17 U.S.C. § 107. Id. at 440. We explained that the defendant's successful fair use defense precluded a finding that the use was insubstantial or unrecognizable because "the parodist must appropriate a substantial enough portion of[the original] to evoke recognition." Id. at 435 n. 2.

This case involves not only use of a composition, as was the case in Fisher, but also use of a sound recording of a particular performance of that composition. Because the defendants were authorized to use the sound recording, our inquiry is confined to whether the unauthorized use of the composition itself was substantial enough to sustain an infringement claim. Therefore, we may consider only Beastie Boys' appropriation of the song's compositional elements and must remove from consideration all the elements unique to Newton's performance. Stated another [1194] way, we must "filter out" the licensed elements of the sound recording to get down to the unlicensed elements of the composition, as the composition is the sole basis for Newton's infringement claim. See Cavalier, 297 F.3d at 822; Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435, 1446 (9th Cir.1994).

In filtering out the unique performance elements from consideration, and separating them from those found in the composition, we find substantial assistance in the testimony of Newton's own experts. Because we are reviewing a grant of summary judgment in favor of the Beastie Boys, we must view the evidence in the light most favorable to Newton and affirm only if there is no genuine issue of material fact. Newton's experts, however, reveal the extent to which the sound recording of "Choir" is the product of Newton's highly developed performance techniques, rather than the result of a generic rendition of the composition. As a general matter, according to Newton's expert Dr. Christopher Dobrian, "[t]he contribution of the performer is often so great that s/he in fact provides as much musical content as the composer." This is particularly true with works like "Choir," given the improvisational nature of jazz performance and the minimal scoring of the composition. Indeed, as Newton's expert Dr. Oliver Wilson explained:

[T]he copyrighted score of "Choir", as is the custom in scores written in the jazz tradition, does not contain indications for all of the musical subtleties that it is assumed the performer-composer of the work will make in the work's performance. The function of the score is more mnemonic in intention than prescriptive.

And it is clear that Newton goes beyond the score in his performance. For example, Dr. Dobrian declared that "Mr. Newton blows and sings in such a way as to emphasize the upper partials of the flute's complex harmonic tone, [although] such a modification of tone color is not explicitly requested in the score." Dr. Dobrian also concludes that Newton "uses breath control to modify the timbre of the sustained flute note rather extremely" and "uses portamento to glide expressively from one pitch to another in the vocal part." Dr. Dobrian concedes that these elements do not appear in the score, and that they are part of Newton's performance of the piece.

A crucial problem with the testimony of Newton's experts is that they continually refer to the "sound" produced by the "Newton technique." A sound is protected by copyright law only when it is "fixed in a tangible medium." 17 U.S.C. § 102(a). Here, the only time any sound was fixed in a tangible medium was when a particular performance was recorded.

Newton licensed the recording at issue to ECM Records over twenty years ago, and ECM Records in turn licensed the interest in the recording to the Beastie Boys. Newton's copyright extends only to the elements that he fixed in a tangible medium—those that he wrote on the score. Thus, regardless of whether the average audience might recognize the "Newton technique" at work in the sampled sound recording, those performance elements are beyond consideration in Newton's claim for infringement of his copyright in the underlying composition.

Once we have isolated the basis of Newton's infringement action—the "Choir" composition, devoid of the unique performance elements found only in the sound recording—we turn to the nub of our inquiry: whether Beastie Boys' unauthorized use of the composition, as opposed to their authorized use of the sound recording, was substantial enough to sustain an infringement action. In answering that question, we must distinguish between whether there is a high enough degree of similarity [1195] between the works to establish copying, and whether that copying is substantial enough to constitute infringement. Cf. Ringgold, 126 F.3d at 74-75; 4 Nimmer § 13.03[A][2], at 13-45. The practice of music sampling will often present cases where the degree of similarity is high. Indeed, unless the sample has been altered or digitally manipulated, it will be identical to the sampled portion of the original recording. Yet as Nimmer explains, "[if] the similarity is only as to nonessential matters, then a finding of no substantial similarity should result." 4 Nimmer § 13.03[A][2], at 13-48; cf. Warner Bros. v. Am. Broad. Cos., 720 F.2d 231, 242 (2d Cir.1983). This reflects the principle that the substantiality requirement applies throughout the law of copyright, including cases of music sampling, even where there is a high degree of similarity.

The high degree of similarity between the works here (i.e., "Pass the Mic" and "Choir"), but the limited scope of the copying, place Newton's claim for infringement into the class of cases that allege what Nimmer refers to as "fragmented literal similarity." 4 Nimmer § 13.03[A][2], at 13-45. Fragmented literal similarity exists where the defendant copies a portion of the plaintiff's work exactly or nearly exactly, without appropriating the work's overall essence or structure. Id. Because the degree of similarity is high in such cases, the dispositive question is whether the copying goes to trivial or substantial elements. Substantiality is measured by considering the qualitative and quantitative significance of the copied portion in relation to the plaintiff's work as a whole. See, e.g., Worth v. Selchow & Righter Co., 827 F.2d 569, 570 n. 1 (9th Cir.1987) ("[T]he relevant inquiry is whether a substantial portion of the protectable material in the plaintiff's work was appropriated— not whether a substantial portion of defendant's work was derived from plaintiff's work."); Jarvis v. A & M Records, 827 F.Supp. 282, 289-90 (D.N.J.1993); 4 Nimmer § 13.03[A][2], at 13-47 to 48 & n. 97. This focus on the sample's relation to the plaintiff's work as a whole embodies the fundamental question in any infringement action, as expressed more than 150 years ago by Justice Story: whether "so much is taken[] that the value of the original is sensibly diminished, or the labors of the original author are substantially to an injurious extent appropriated by another." Folsom v. Marsh, 9 F.Cas. 342, 348 (C.C.D.Mass.1841) (No. 4901). Courts also focus on the relationship to the plaintiff's work because a contrary rule that measured the significance of the copied segment in the defendant's work would allow an unscrupulous defendant to copy large or qualitatively significant portions of another's work and escape liability by burying them beneath non-infringing material in the defendant's own work, even where the average audience might recognize the appropriation. Cf. Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 56 (2d Cir.1936) ("[I]t is enough that substantial parts were lifted; no plagiarist can excuse the wrong by showing how much of his work he did not pirate."). Thus, as the district court properly concluded, the fact that Beastie Boys "looped" the sample throughout "Pass the Mic" is irrelevant in weighing the sample's qualitative and quantitative significance. See Newton, 204 F.Supp.2d at 1257.

On the undisputed facts of this record, no reasonable juror could find the sampled portion of the composition to be a quantitatively or qualitatively significant portion of the composition as a whole. Quantitatively, the three-note sequence appears only once in Newton's composition. It is difficult to measure the precise relationship between this segment and the composition as a whole, because the score calls for between 180 and 270 seconds of improvisation. When played, however, the segment [1196] lasts six seconds and is roughly two percent of the four-and-a-half-minute "Choir" sound recording licensed by Beastie Boys. Qualitatively, this section of the composition is no more significant than any other section. Indeed, with the exception of two notes, the entirety of the scored portions of "Choir" consist of notes separated by whole and half-steps from their neighbors and is played with the same technique of singing and playing the flute simultaneously; the remainder of the composition calls for sections of improvisation that range between 90 and 180 seconds in length.

The Beastie Boys' expert, Dr. Lawrence Ferrara, concludes that the compositional elements of the sampled section do not represent the heart or the hook of the "Choir" composition, but rather are "simple, minimal and insignificant." The sampled section may be representative of the scored portions of the composition as Newton's expert's contend. Newton has failed to offer any evidence, however, to rebut Dr. Ferrara's testimony and to create a triable issue of fact on the key question, which is whether the sampled section is a qualitatively significant portion of the "Choir" composition as a whole. Instead, Newton's experts emphasize the uniqueness of the "Newton technique," which is found throughout the "Choir" composition and in Newton's other work.

Newton nevertheless maintains that the testimony of his experts creates a genuine issue of material fact on the substantiality of the copying. To the extent the expert testimony is relevant, it is not helpful to Newton. On the key question of whether the sample is quantitatively or qualitatively significant in relation to the composition as a whole, his experts are either silent or fail to distinguish between the sound recording, which was licensed, and the composition, which was not. Moreover, their testimony on the composition does not contain anything from which a reasonable jury could infer the segment's significance in relation to the composition as a whole. In contrast, Dr. Ferrara stated that the sampled excerpt from the "Choir" composition "is merely a common, trite, and generic three-note sequence, which lacks any distinct melodic, harmonic, rhythmic or structural elements." He described the sequence as "a common building block tool" that "has been used over and over again by major composers in the 20th century, particularly in the '60s and '70s, just prior to James Newton's usage."

Because Newton conceded that "Choir" and "Pass the Mic" "are substantially dissimilar in concept and feel, that is, in [their] overall thrust and meaning" and failed to offer any evidence to rebut Dr. Ferrara's testimony that the sampled section is not a quantitatively or qualitatively significant portion of the "Choir" composition, the Beastie Boys are entitled to prevail on summary judgment. On the undisputed facts of this case, we conclude that an average audience would not discern Newton's hand as a composer, apart from his talent as a performer, from Beastie Boys' use of the sample. The copying was not significant enough to constitute infringement. Beastie Boys' use of the "Choir" composition was de minimis. There is no genuine issue of material fact, and the grant of summary judgment was appropriate.

Conclusion

Because Beastie Boys' use of the sound recording was authorized, the sole basis of Newton's infringement action is his remaining copyright interest in the "Choir" composition. We hold that Beastie Boys' use of a brief segment of that composition, consisting of three notes separated by a half-step over a background C note, is not sufficient to sustain a claim for infringement of Newton's copyright in the composition "Choir". We affirm the district [1197] court's grant of summary judgment on the ground that Beastie Boys' use of the composition was de minimis and therefore not actionable.

AFFIRMED.

[1] In relevant part, the license reads as follows:

1) [Newton] herewith grants, transfers and assigns to ECM without limitations and restrictions whatsoever the exclusive rights to record his performances and to exploit these recordings in perpetuity throughout the world in any manner whatsoever.

....

3) The grant of rights according to section 1) especially, includes the rights to manufacture in quantity [sic], to distribute, to license to others, as well as to perform the recordings in public and to utilize it in radio, TV, or in other ways without any restrictions.

[2] In relevant part, the license reads as follows:

[ECM Records], as owner of the applicable sound recording rights, including but not limited to recording, reproduction, synchronization and performing rights, grants to Beastie Boys, its licensees, assigns, employees and agents (the "Licensed Parties"), the irrevocable non-exclusive license and right to copy portions (if any) of the sound recording entitled "Choir" performed by James Newton (the "Sample"); to embody the sample in some or all versions of the selection entitled "Pass the Mic" by the Beastie Boys (all versions of "Pass the Mic" which contain the Sample are referred to as the "Selection"); to reproduce, distribute and otherwise exploit the Sample as part of the Selection in all media, whether now known or hereinafter developed, including, without limitation, all record formats throughout the world in perpetuity.

__________

GRABER, Circuit Judge, dissenting:

I respectfully dissent. The majority has laid out correctly the legal principles that apply in this case, and I agree with the majority's assumption that the sampled portion of "Choir" qualifies as "original" and therefore is copyrightable. Maj. op. at 1192. However, on the record before us, a finder of fact reasonably could find that Beastie Boys' use of the sampled material was not de minimis. Therefore, summary judgment is inappropriate.

As the majority observes, a use is de minimis only if an average audience would not recognize the appropriation. Fisher v. Dees, 794 F.2d 432, 434 n. 2 (9th Cir.1986). The majority is correct that James Newton's considerable skill adds many recognizable features to the performance sampled by Beastie Boys. Even after those features are "filtered out," however, the composition, standing alone, is distinctive enough for a fact-finder reasonably to conclude that an average audience would recognize the appropriation of the sampled segment and that Beastie Boys' use was therefore not de minimis.

Newton has presented evidence that the compositional elements of "Choir" are so compositionally distinct that a reasonable listener would recognize the sampled segment even if it were performed by the featured flautist of a middle school orchestra. It is useful to begin by observing that the majority's references to the sampled segment of "Choir" as a "3 note-sequence"^[1] are overly simplified. The sampled segment is actually a three-note sequence sung above a fingered held C note, for a total of four separate tones.^[2] Even passages with relatively few notes may be qualitatively significant. The opening melody of Beethoven's Fifth Symphony is relatively simple and features only four notes, but it certainly is compositionally distinctive and recognizable.

The majority, while citing the correct standard of review, fails fully to apply it. First, the majority usurps the function of the fact-finder by weighing the opinions of the various experts and emphasizing some parts of their testimony over others. Maj. op. at 1194-95, 1196. The majority also fails to interpret the evidence in Newton's favor when, for example, it asserts that Newton's experts failed to distinguish between the sound recording and the composition. Id. at 1196. To the contrary, Newton presented expert evidence that the composition alone is distinctive and recognizable.

First, Newton offered a letter from Professor Olly Wilson of the University of California at Berkeley. Professor Wilson acknowledges that much of the distinctiveness of the sampled material is due to Newton's performance and that the copyrighted score does not fully convey the quality of the piece as performed. Nevertheless, Professor Wilson concludes that the score

clearly indicates that the performer will simultaneously sing and finger specific pitches, gives a sense of the rhythm of the piece, and also provides the general structure of this section of the piece. Hence, in my opinion, the digital sample of the performance ... is clearly a realization of the musical score filed with the copyright office.

Second, Newton presented a letter from Professor Christopher Dobrian of the University [1198] of California, Irvine, which concludes:

Applying traditional analysis to this brief excerpt from Newton's "Choir"— i.e., focusing solely on the notated pitches—a theorist could conclude (erroneously, in my opinion) that the excerpt contains an insignificant amount of information because it contains a simple "neighboring-tone" figure: C to D-flat and back to C.... If, on the other hand, one considers the special playing technique described in the score (holding one fingered note constant while singing the other pitches) and the resultant complex, expressive effect that results, it is clear that the "unique expression" of this excerpt is not solely in the pitch choices, but is actually in those particular pitches performed in that particular way on that instrument. These components in this particular combination are not found anywhere else in the notated music literature, and they are unique and distinctive in their sonic/musical result.

(Emphasis added.)

Professor Dobrian is not talking about Newton's performance of the sampled portion. Rather, he is speaking of the distinctiveness of the underlying composition. The "playing technique" is not a matter of personal performance, but is a built-in feature of the score itself. In essence, Dobrian is stating that any flautist's performance of the sampled segment would be distinctive and recognizable, because the score itself is distinctive and recognizable.

The majority, then, reads the record selectively when it states that Newton failed to offer sufficient evidence that the sampled material is qualitatively significant. In fact, Newton presented evidence, as described above, to show that an average and reasonable listener would recognize Beastie Boys' appropriation of the composition of the sampled material.^[3]

The majority also asserts that Newton failed to offer evidence to rebut Beastie Boys' expert on the question whether the sampled section of "Choir" is qualitatively significant. Maj. op. at 1196. Again, the majority improperly discounts, or improperly interprets, Dr. Dobrian's unequivocal description of the sampled passage: "These components in this particular combination are not found anywhere else in the notated music literature, and they are unique and distinctive in their sonic/musical result." A fact-finder would be entitled to find either that the sampled passage is trivial and trite (Beastie Boys' expert) or, instead, that it is "unique and distinctive" in the musical literature (Newton's expert).

Because Newton has presented evidence establishing that reasonable ears differ over the qualitative significance of the composition of the sampled material, summary judgment is inappropriate in this case. Newton should be allowed to present his claims of infringement to a factfinder. I therefore dissent from the majority's conclusion to the contrary.

[1199] APPENDIX

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

[1] Maj. op. at 1190, 1195.

[2] The sampled segment of the composition is scored as shown in the Appendix.

[3] Because Newton has established that a fact-finder reasonably could find that the sampled portion of "Choir" is qualitatively significant, we need not address the question of the portion's quantitative significance. See Worth v. Selchow & Righter Co., 827 F.2d 569, 570 n. 1 (9th Cir.1987) (noting that "a determination of the qualitative importance of the material to the plaintiff's work is more significant than a quantitative calculation of the portion allegedly appropriated by the defendant").

[794] ARGUED: Richard S. Busch, King & Ballow, Nashville, Tennessee, for Appellants. Robert L. Sullivan, Loeb & Loeb, Nashville, Tennessee, for Appellee. ON BRIEF: Richard S. Busch, D'Lesli M. Davis, King & Ballow, Nashville, Tennessee, for Appellants. Robert L. Sullivan, John C. Beiter, Loeb & Loeb, Nashville, Tennessee, for Appellee. Marjorie Heins, Brennan Center for Justice at Nyu School of Law, New York, New York, Paul M. Smith, Jenner & Block, Washington, D.C., Fred von Lohmann, Electronic Frontier Foundation, San Francisco, California, Todd M. Gascon, Law Office of Todd Gascon, San Francisco, California, for Amici Curiae.

Before: GUY and GILMAN, Circuit Judges; BARZILAY, Judge.^[1][795]

RALPH B. GUY, JR., Circuit Judge.

The court issued an initial opinion in these consolidated cases on September 7, 2004. Bridgeport Music, Inc. v. Dimension Films, 383 F.3d 390 (6th Cir.2004). Through an Order entered December 20, 2004, the full court denied the petition for rehearing en banc filed by No Limit Films and a panel rehearing was granted only with respect to the issues discussed in Section II of the opinion as amended. Bridgeport Music, Inc. v. Dimension Films, 401 F.3d 647 (6th Cir.2004). After additional briefing and argument on rehearing, we adhere to our conclusions and amend the opinion to further clarify our reasoning.

Plaintiffs, Bridgeport Music, Inc., Westbound Records, Inc., Southfield Music, Inc., and Nine Records, Inc., appeal from several of the district court's findings with respect to the copyright infringement claims asserted against No Limit Films.^[2] This action arises out of the use of a sample from the composition and sound recording "Get Off Your Ass and Jam" ("Get Off") in the rap song "100 Miles and Runnin" ("100 Miles"), which was included in the sound track of the movie I Got the Hook Up (Hook Up). Specifically, Westbound appeals from the district court's decision to grant summary judgment to defendant on the grounds that the alleged infringement was de minimis and therefore not actionable. Bridgeport, while not appealing from the summary judgment order, challenges instead the denial of its motion to amend the complaint to assert new claims of infringement based on a different song included in the sound track of Hook Up. Finally, Bridgeport, Southfield, and Nine Records appeal from the decision to award attorney fees and costs totaling $41,813.30 to No Limit Films under 17 U.S.C. § 505. For the reasons that follow, we reverse the district court's grant of summary judgment to No Limit on Westbound's claim of infringement of its sound recording copyright, but affirm the decision of the district court as to the award of attorney fees and the denial of Bridgeport's motion to amend.

The claims at issue in this appeal were originally asserted in an action filed on May 4, 2001, by the related entities Bridgeport Music, Southfield Music, Westbound Records, and Nine Records, alleging nearly 500 counts against approximately 800 defendants for copyright infringement and various state law claims relating to the use of samples without permission in new rap recordings. In August 2001, the district court severed that original complaint into 476 separate actions, this being one of them, based on the allegedly infringing work and ordered that amended complaints be filed.^[3]

The claims in this case were brought by all four plaintiffs: Bridgeport and Southfield, which are in the business of music publishing and exploiting musical composition copyrights, and Westbound Records and Nine Records, which are in the business of recording and distributing sound recordings. It was conceded at the time of summary judgment, however, that neither [796] Southfield Music nor Nine Records had any ownership interest in the copyrights at issue in this case. As a result, the district court ordered that they be jointly and severally liable for 10% of the attorney fees and costs awarded to No Limit Films.

Bridgeport and Westbound claim to own the musical composition and sound recording copyrights in "Get Off Your Ass and Jam" by George Clinton, Jr. and the Funkadelics. We assume, as did the district court, that plaintiffs would be able to establish ownership in the copyrights they claim. There seems to be no dispute either that "Get Off" was digitally sampled or that the recording "100 Miles" was included on the sound track of I Got the Hook Up. Defendant No Limit Films, in conjunction with Priority Records, released the movie to theaters on May 27, 1998. The movie was apparently also released on VHS, DVD, and cable television. Fatal to Bridgeport's claims of infringement was the Release and Agreement it entered into with two of the original owners of the composition "100 Miles," Ruthless Attack Muzick (RAM) and Dollarz N Sense Music (DNSM), in December 1998, granting a sample use license to RAM, DNSM, and their licensees. Finding that No Limit Films had previously been granted an oral synchronization license to use the composition "100 Miles" in the sound track of Hook Up, the district court concluded Bridgeport's claims against No Limit Films were barred by the unambiguous terms of the Release and Agreement. Bridgeport Music, Inc. v. Dimension Films, 230 F.Supp.2d 830, 833-38 (M.D.Tenn.2002). Although Bridgeport does not appeal from this determination, it is relevant to the district court's later decision to award attorney fees to No Limit Films.

Westbound's claims are for infringement of the sound recording "Get Off."^[4] Because defendant does not deny it, we assume that the sound track of Hook Up used portions of "100 Miles" that included the allegedly infringing sample from "Get Off." The recording "Get Off" opens with a three-note combination solo guitar "riff" that lasts four seconds. According to one of plaintiffs' experts, Randy Kling, the recording "100 Miles" contains a sample from that guitar solo. Specifically, a two-second sample from the guitar solo was copied, the pitch was lowered, and the copied piece was "looped" and extended to 16 beats. Kling states that this sample appears in the sound recording "100 Miles" in five places; specifically, at 0:49, 1:52, 2:29, 3:20 and 3:46. By the district court's estimation, each looped segment lasted approximately 7 seconds. As for the segment copied from "Get Off," the district court described it as follows:

The portion of the song at issue here is an arpeggiated chord—that is, three notes that, if struck together, comprise a chord but instead are played one at a time in very quick succession—that is repeated several times at the opening of "Get Off." The arpeggiated chord is played on an unaccompanied electric guitar. The rapidity of the notes and the way they are played produce a high-pitched, whirling sound that captures the listener's attention and creates anticipation of what is to follow.

Bridgeport, 230 F.Supp.2d at 839. No Limit Films moved for summary judgment, [797] arguing (1) that the sample was not protected by copyright law because it was not "original"; and (2) that the sample was legally insubstantial and therefore does not amount to actionable copying under copyright law.

Mindful of the limited number of notes and chords available to composers, the district court explained that the question turned not on the originality of the chord but, rather, on "the use of and the aural effect produced by the way the notes and the chord are played, especially here where copying of the sound recording is at issue." Id. (citations omitted). The district court found, after carefully listening to the recording of "Get Off," "that a jury could reasonably conclude that the way the arpeggiated chord is used and memorialized in the `Get Off' sound recording is original and creative and therefore entitled to copyright protection." Id. (citing Newton v. Diamond, 204 F.Supp.2d 1244, 1249-59 (C.D.Cal.2002)) (later affirmed on other grounds at 349 F.3d 591 (9th Cir.2003)). No Limit Films does not appeal from this determination.

Turning then to the question of de minimis copying in the context of digital sampling, the district court concluded that, whether the sampling is examined under a qualitative/quantitative de minimis analysis or under the so-called "fragmented literal similarity" test, the sampling in this case did not "rise to the level of a legally cognizable appropriation." 230 F.Supp.2d at 841. Westbound argues that the district court erred both in its articulation of the applicable standards and its determination that there was no genuine issue of fact precluding summary judgment on this issue.

On October 11, 2002, the district court granted summary judgment to No Limit Films on the claims of Bridgeport and Westbound; dismissed with prejudice the claims of Southfield and Nine Records; denied as moot the motion of Bridgeport and Westbound for partial summary judgment on the issue of copyright ownership; and entered final judgment accordingly. Bridgeport and Westbound appealed. The facts relevant to the earlier denial of Bridgeport's motion to amend the complaint will be discussed below. No Limit Films filed a post-judgment motion for attorney fees and costs, which the district court granted for the reasons set forth in its memorandum opinion and order of April 24, 2003. Bridgeport, Southfield Music, and Nine Records appealed from that award.

The district court's decision granting summary judgment is reviewed de novo. Smith v. Ameritech, 129 F.3d 857, 863 (6th Cir.1997). In deciding a motion for summary judgment, the court must view the evidence and reasonable inferences in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Summary judgment is appropriate when there are no genuine issues of material fact in dispute and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c).

In granting summary judgment to defendant, the district court looked to general de minimis principles and emphasized the paucity of case law on the issue of whether digital sampling amounts to copyright infringement. Drawing on both the quantitative/qualitative and "fragmented literal similarity" approaches, the district court found the de minimis analysis was a derivation of the substantial similarity element when a defendant claims that the literal copying of a small and insignificant portion of the copyrighted work should be [798] allowed. After listening to the copied segment, the sample, and both songs, the district court found that no reasonable juror, even one familiar with the works of George Clinton, would recognize the source of the sample without having been told of its source. This finding, coupled with findings concerning the quantitatively small amount of copying involved and the lack of qualitative similarity between the works, led the district court to conclude that Westbound could not prevail on its claims for copyright infringement of the sound recording.^[5]

Westbound does not challenge the district court's characterization of either the segment copied from "Get Off" or the sample that appears in "100 Miles." Nor does Westbound argue that there is some genuine dispute as to any material fact concerning the nature of the protected material in the two works. The heart of Westbound's arguments is the claim that no substantial similarity or de minimis inquiry should be undertaken at all when the defendant has not disputed that it digitally sampled a copyrighted sound recording. We agree and accordingly must reverse the grant of summary judgment.

A. Digital Sampling of Copyrighted Sound Recordings

At the outset it is important to make clear the precise nature of our decision. Our conclusions are as follows:

1. The analysis that is appropriate for determining infringement of a musical composition copyright, is not the analysis that is to be applied to determine infringement of a sound recording. We address this issue only as it pertains to sound recording copyrights.^[6]

2. Since the district court decision essentially tracked the analysis that is made if a musical composition copyright were at issue, we depart from that analysis.^[7]

3. We agree with the district court's analysis on the question of originality. On remand, we assume that Westbound will be able to establish it has a copyright in the sound recording and that a digital sample from the copyrighted sound recording was used in this case.

4. This case involves "digital sampling" which is a term of art well understood by the parties to this litigation and the music industry in general. Accordingly, we adopt the definition commonly accepted within the industry.

5. Because of the court's limited technological knowledge in this specialized field, our opinion is limited to an instance of digital sampling of a sound recording protected by a valid copyright. If by analogy it is possible to extend our analysis to other forms of sampling, we leave it to others to do so.

6. Advances in technology^[8] coupled with the advent of the popularity of hip [799] hop or rap music have made instances of digital sampling extremely common and have spawned a plethora of copyright disputes and litigation.

7. The music industry, as well as the courts, are best served if something approximating a bright-line test can be established. Not necessarily a "one size fits all" test, but one that, at least, adds clarity to what constitutes actionable infringement with regard to the digital sampling of copyrighted sound recordings.

B. Analysis

We do not set forth the arguments made by Westbound since our analysis differs somewhat from that offered by the plaintiff. Our analysis begins and largely ends with the applicable statute. Section 114(a) of Title 17 of the United States Code provides:

The exclusive rights of the owner of copyright in a sound recording are limited to the rights specified by clauses (1), (2), (3) and (6) of section 106, and do not include any right of performance under section 106(4).

Section 106 provides:

Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords;

(2) to prepare derivative works based upon the copyrighted work;

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;

(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works to perform the copyrighted work publicly;

(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and

(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

Section 114(b) states:

(b) The exclusive right of the owner of copyright in a sound recording under clause (1) of section 106 is limited to the right to duplicate the sound recording in the form of phonorecords or copies that directly or indirectly recapture the actual sounds fixed in the recording. The exclusive right of the owner of copyright in a sound recording under clause (2) of section 106 is limited to the right to prepare a derivative work in which the actual sounds fixed in the sound recording are rearranged, remixed, or otherwise altered in sequence or quality. The exclusive rights of the owner of copyright in a sound recording under clauses [800] (1) and (2) of section 106 do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording. The exclusive rights of the owner of copyright in a sound recording under clauses (1), (2), and (3) of section 106 do not apply to sound recordings included in educational television and radio programs (as defined in section 397 of title 47) distributed or transmitted by or through public broadcasting entities (as defined by section 118(g)): Provided, That copies or phonorecords of said programs are not commercially distributed by or through public broadcasting entities to the general public.

Before discussing what we believe to be the import of the above quoted provisions of the statute, a little history is necessary. The copyright laws attempt to strike a balance between protecting original works and stifling further creativity. The provisions, for example, for compulsory licensing make it possible for "creators" to enjoy the fruits of their creations, but not to fence them off from the world at large. 17 U.S.C. § 115. Although musical compositions have always enjoyed copyright protection, it was not until 1971 that sound recordings were subject to a separate copyright. If one were to analogize to a book, it is not the book, i.e., the paper and binding, that is copyrightable, but its contents. There are probably any number of reasons why the decision was made by Congress to treat a sound recording differently from a book even though both are the medium in which an original work is fixed rather than the creation itself. None the least of them certainly were advances in technology which made the "pirating" of sound recordings an easy task. The balance that was struck was to give sound recording copyright holders the exclusive right "to duplicate the sound recording in the form of phonorecords or copies that directly or indirectly recapture the actual sounds fixed in the recording." 17 U.S.C. § 114(b). This means that the world at large is free to imitate or simulate the creative work fixed in the recording so long as an actual copy of the sound recording itself is not made.^[9] That leads us directly to the issue in this case. If you cannot pirate the whole sound recording, can you "lift" or "sample" something less than the whole. Our answer to that question is in the negative.^[10]

Section 114(b) provides that "[t]he exclusive right of the owner of copyright in a sound recording under clause (2) of section 106 is limited to the right to prepare a derivative work in which the actual sounds fixed in the sound recording are rearranged, remixed, or otherwise altered in sequence or quality." Further, the rights of sound recording copyright holders under clauses (1) and (2) of section 106 "do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording." 17 U.S.C. § 114(b) (emphasis added). The significance of this provision is amplified by the fact that the Copyright [801] Act of 1976 added the word "entirely" to this language. Compare Sound Recording Act of 1971, Pub.L. 92-140, 85 Stat. 391 (Oct. 15, 1971) (adding subsection (f) to former 17 U.S.C. § 1) ("does not extend to the making or duplication of another sound recording that is an independent fixation of other sounds"). In other words, a sound recording owner has the exclusive right to "sample" his own recording. We find much to recommend this interpretation.^[11]

To begin with, there is ease of enforcement. Get a license or do not sample. We do not see this as stifling creativity in any significant way. It must be remembered that if an artist wants to incorporate a "riff" from another work in his or her recording, he is free to duplicate the sound of that "riff" in the studio. Second, the market will control the license price and keep it within bounds.^[12] The sound recording copyright holder cannot exact a license fee greater than what it would cost the person seeking the license to just duplicate the sample in the course of making the new recording. Third, sampling is never accidental. It is not like the case of a composer who has a melody in his head, perhaps not even realizing that the reason he hears this melody is that it is the work of another which he had heard before. When you sample a sound recording you know you are taking another's work product.^[13]

This analysis admittedly raises the question of why one should, without infringing, be able to take three notes from a musical composition, for example, but not three notes by way of sampling from a sound recording. Why is there no de minimis taking or why should substantial similarity not enter the equation.^[14] Our first answer to this question is what we have earlier indicated. We think this result is dictated by the applicable statute. Second, even [802] when a small part of a sound recording is sampled, the part taken is something of value.^[15] No further proof of that is necessary than the fact that the producer of the record or the artist on the record intentionally sampled because it would (1) save costs, or (2) add something to the new recording, or (3) both. For the sound recording copyright holder, it is not the "song" but the sounds that are fixed in the medium of his choice. When those sounds are sampled they are taken directly from that fixed medium. It is a physical taking rather than an intellectual one.

This case also illustrates the kind of mental, musicological, and technological gymnastics that would have to be employed if one were to adopt a de minimis or substantial similarity analysis. The district judge did an excellent job of navigating these troubled waters, but not without dint of great effort. When one considers that he has hundreds of other cases all involving different samples from different songs, the value of a principled bright-line rule becomes apparent. We would want to emphasize, however, that considerations of judicial economy are not what drives this opinion. If any consideration of economy is involved it is that of the music industry. As this case and other companion cases make clear, it would appear to be cheaper to license than to litigate.^[16]

Since our holding arguably sets forth a new rule, several other observations are in order. First, although there were no existing sound recording judicial precedents to follow,^[17] we did not pull this interpretation [803] out of thin air.^[18] Several law review and text writers, some of whom have been referenced in this opinion, have suggested that this is the proper interpretation of the copyright statute as it pertains to sound recordings.^[19] Since digital sampling has [804] become so commonplace and rap music has become such a significant part of the record industry, it is not surprising that there are probably a hundred articles dealing with sampling and its ramifications. It is also not surprising that the viewpoint expressed in a number of these articles appears driven by whose ox is being gored. As is so often the case, where one stands depends on where one sits. For example, the sound recording copyright holders favor this interpretation as do the studio musicians and their labor organization. On the other hand, many of the hip hop artists may view this rule as stifling creativity. The record companies and performing artists are not all of one mind, however, since in many instances, today's sampler is tomorrow's samplee. The incidence of "live and let live" has been relatively high, which explains why so many instances of sampling go unprotested and why so many sampling controversies have been settled.

Second, to pursue further the subject of stifling creativity, many artists and record companies have sought licenses as a matter of course.^[20] Since there is no record of those instances of sampling that either go unnoticed or are ignored, one cannot come up with precise figures, but it is clear that a significant number of persons and companies have elected to go the licensing route. Also there is a large body of pre-1972 sound recordings that is not subject to federal copyright protection.^[21]> Additionally, just as many artists and companies choose to sample and take their chances, it is likely that will continue to be the case.

Third, the record industry, including the recording artists, has the ability and know-how to work out guidelines, including a fixed schedule of license fees, if they so choose.

Fourth, we realize we are announcing a new rule and because it is new, it should not play any role in the assessment of concepts such as "willful" or "intentional" [805] in cases that are currently before the courts or had their genesis before this decision was announced.

Finally, and unfortunately, there is no Rosetta stone for the interpretation of the copyright statute. We have taken a "literal reading" approach. The legislative history is of little help because digital sampling wasn't being done in 1971. If this is not what Congress intended or is not what they would intend now, it is easy enough for the record industry, as they have done in the past, to go back to Congress for a clarification or change in the law. This is the best place for the change to be made, rather than in the courts, because as this case demonstrates, the court is never aware of much more than the tip of the iceberg. To properly sort out this type of problem with its complex technical and business overtones, one needs the type of investigative resources as well as the ability to hold hearings that is possessed by Congress.

These conclusions require us to reverse the entry of summary judgment entered in favor of No Limit Films on Westbound's claims of copyright infringement. Since the district judge found no infringement, there was no necessity to consider the affirmative defense of "fair use." On remand, the trial judge is free to consider this defense and we express no opinion on its applicability to these facts.

Bridgeport's substantive appeal is from the denial of leave to file a second amended complaint that would have asserted new claims of infringement based on the inclusion of a different song, called "How Ya Do Dat," in the sound track of Hook Up.^[22] We review the denial of a motion to amend for abuse of discretion, except to the extent that it is based on a legal determination that the amendment would not withstand a motion to dismiss. Wade v. Knoxville Utils. Bd., 259 F.3d 452, 459 (6th Cir.2001). Leave to amend a pleading shall be freely given "when justice so requires." FED. R. CIV. P. 15(a).

Undue delay in filing, lack of notice to the opposing party, bad faith by the moving party, repeated failure to cure deficiencies by previous amendments, undue prejudice to the opposing party, and futility of amendment are all factors which may affect the decision. Delay by itself is not sufficient reason to deny a motion to amend. Notice and substantial prejudice to the opposing party are critical factors in determining whether an amendment should be granted.

Head v. Jellico Hous. Auth., 870 F.2d 1117, 1123 (6th Cir.1989) (quoting Hageman v. Signal L.P. Gas, Inc., 486 F.2d 479, 484 (6th Cir.1973)). "When amendment is sought at a late stage in the litigation, there is an increased burden to show justification for failing to move earlier." Wade, 259 F.3d at 459 (citing Duggins v. Steak `N Shake, Inc., 195 F.3d 828, 834 (6th Cir.1999)).

A. Facts

Plaintiffs commenced this action in May 2001, and filed an amended complaint in September 2001. In November 2001, the district court entered a scheduling order which required that any motion to amend pleadings be filed far enough in advance of April 1, 2002, to allow briefing to be completed by that date. Discovery was to be completed by May 21, 2002. On March 18, 2002, the district court extended the time [806] for amending pleadings with the proviso that it would have to be done in time to avoid extending discovery beyond May 21, 2002.

On April 15, 2002, plaintiffs' counsel received a "cue sheet" for Hook Up that apparently alerted Bridgeport to the presence of another song in which it held a copyright interest. Specifically, Bridgeport claims 37% interest in the composition "How Ya Do Dat" ("How Ya") under a Release and Agreement dated October 21, 1998, that granted permission to use a sample from the composition "One of Those Funky Things" in "How Ya." While there was disagreement about whether discovery made available as early as October 2001 should have alerted Bridgeport of this claim, there is no dispute that the presence of "How Ya" was readily observable from watching the movie. In fact, the magistrate judge noted that the "cue sheet" appears to be a list of credits from the end of the film.

Plaintiffs moved to amend on April 19, 2002, and No Limit Films opposed the motion in a response filed on April 26, 2002. On May 6, 2002, the magistrate judge recommended that the motion be denied. Plaintiffs filed objections on May 16, 2002, and defendant responded on May 30, 2002. The discovery cutoff date, May 21, had passed, but the deadline for completing depositions had been extended to June 14, 2002. But, the deadline for filing dispositive motions continued to be June 21, 2002. No Limit Films filed its motion for summary judgment on that date. On August 14, 2002, the district court entered its order overruling plaintiffs' objections, denying plaintiffs' motion to amend, and denying plaintiffs' further motion to certify the issue for appeal.

B. Analysis

Bridgeport maintains the district court abused its discretion by denying leave to amend on the grounds of unjustified delay and in the absence of a finding of prejudice to the defendant. It is true that, ordinarily, delay alone will not justify the denial of leave to amend the complaint. Morse v. McWhorter, 290 F.3d 795, 800 (6th Cir.2002). Delay, however, will become "undue" at some point, "placing an unwarranted burden on the court," or "'prejudicial,' placing an unfair burden on the opposing party." Morse, 290 F.3d at 800 (citing Adams v. Gould Inc., 739 F.2d 858, 863 (3d Cir.1984)).

Had the district court made an explicit finding of prejudice, very little would need to be said in affirming the denial of leave in this case. The district court's order, although brief, touched on undue delay and prejudice, explaining:

The plaintiffs object to the Magistrate Judge's conclusion that plaintiffs had not offered a sufficient reason for failing to amend their complaint to add claims and parties by the deadline set by the Court. Plaintiffs argue that this deadline was modified by subsequent order, and that the Magistrate Judge erred under Sixth Circuit law by not allowing the amendments in the interests of justice. The defendants respond that [the] Magistrate Judge correctly concluded that, under the circumstances of this case, amendment on the eve of the close of discovery would be prejudicial to defendants and unduly delay trial.

After careful consideration of the entire record, the Court adopts and approves the Magistrate Judge's Report and Recommendation. The plaintiffs' objections are overruled. The interest of justice in this case requires that plaintiffs show good cause why the Court should allow amendment of their complaint to add a claim and parties after the Court's deadline for such amendments, [807] which the plaintiffs have failed to do.

To the extent that this brief discussion leaves doubt that a finding of prejudice was made, we may sustain a denial of leave to amend on grounds that are apparent from the record. Morse, 290 F.3d at 801.

Defendant clearly argued that it would be unfairly prejudiced if required to respond to a distinct new claim of infringement with only a few weeks of discovery remaining. Plaintiffs focus on the magistrate judge's mistaken reliance on the April 1 deadline for seeking leave to amend. Nonetheless, as defendant argues, plaintiffs' motion was not timely because the district court required that any amendments be sought in sufficient time that discovery could be completed before May 21. Also, the record reflects that although there were extensions of discovery beyond that date, extensions were only granted to allow the completion of certain depositions and did not affect the deadline for filing dispositive motions. We find no abuse of discretion in the district court's denial of leave to raise new claims based on a different song, by a different artist, in the movie.

Bridgeport, Southfield Music, and Nine Records appeal from the decision to award $41,813.30 in attorney fees and costs to No Limit Films as a prevailing party under 17 U.S.C. § 505. Apportioning the award between these plaintiffs, the district court ordered that Southfield and Nine Records be held liable, jointly and severally, for 10% of the total. The district court also found that no award was warranted against Westbound Records because its claims were objectively reasonable and based on a developing area of copyright law. As a result, the amount of fees reasonably incurred in defense of this action were reduced by 50%. Plaintiffs do not challenge the calculation of the fees or the inclusion of any particular item.

A court may, in its discretion, award costs, including reasonable attorney fees, to the prevailing party in a civil suit under the Copyright Act. 17 U.S.C. § 505.^[23] Our review is for abuse of discretion. Coles v. Wonder, 283 F.3d 798, 804 (6th Cir.2002) (affirming award to prevailing defendant); Murray Hill Publ'ns, Inc. v. ABC Communications, Inc., 264 F.3d 622, 639 (6th Cir.2001) (reversing award to prevailing defendant). A district court abuses its discretion when it relies on clearly erroneous factual findings, improperly applies the law, or uses an erroneous legal standard. Adcock-Ladd v. Sec'y of Treasury, 227 F.3d 343, 349 (6th Cir.2000).

The discretion to award attorney fees under § 505 is to be exercised in an evenhanded manner with respect to prevailing plaintiffs and prevailing defendants, and in a manner consistent with the primary purposes of the Copyright Act. Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994). "'There is no precise rule or formula for making these determinations,' but instead equitable discretion should be exercised 'in light of the considerations we have identified.'" Id. at 534, 114 S.Ct. 1023 (quoting Hensley v. Eckerhart, 461 U.S. 424, 436-37, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983)).^[24]

[808] Several nonexclusive factors may be considered as long as they are "faithful to the purposes of the Copyright Act and are applied to prevailing plaintiffs and defendants in an evenhanded manner." Id. at 534 n. 19, 114 S.Ct. 1023. Those nonexclusive factors include: "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Id. (quoting Lieb v. Topstone Indus., Inc., 788 F.2d 151, 156 (3d Cir.1986)).

Southfield and Nine Records, neither of which had an interest in "Get Off" or "100 Miles," argue that defendant did not truly prevail against them because they were "inadvertently" left in the amended complaint and they did not oppose dismissal in this case. They did not voluntarily dismiss their claims, however, as it was only in response to defendant's dispositive motions that they acquiesced in dismissal. Moreover, the inclusion of Southfield and Nine Records in the amended complaint in this case was less "inadvertent" than a reflection of the plaintiffs' failure to discriminate between defendants and claims. No Limit Films is a prevailing defendant as judgment was entered in its favor on all claims.^[25]

Concluding that Bridgeport's claim was objectively unreasonable, the district court indicated that the factor weighed heavily in favor of awarding fees. The district court, relying on its decision granting summary judgment to defendant, specifically found Bridgeport's claims were objectively unreasonable because Bridgeport had no ownership interest in "100 Miles" when the oral synchronization license was granted and offered no evidence to undermine the existence of a valid license. Bridgeport argues that its claim, although unsuccessful, was not objectively unreasonable because it was not aware No Limit would claim it had an oral license that preceded the Release and Agreement. As defendant responds, nothing in this record suggests Bridgeport would not have sued No Limit Films if it had been aware of the oral license.

This brings us to what the district court called the deciding factor—the manner in which the plaintiffs litigated this action. This consideration, plaintiffs maintain, represents nothing more than an attempt to punish Bridgeport and deter the plaintiffs from pursuing reasonable, nonfrivolous claims in other cases under threat of an award of attorney fees. The district court reasoned as follows:

The initial complaint in this action is so voluminous that, with exhibits, it is almost 1,000 pages long and takes days to read in its entirety. It is replete with diatribes against the music industry, but lacks concrete facts directed at specific defendants. Almost all of the 800 or so [809] defendants in the initial complaint (representing what appeared to be almost the entirety of entities involved in making urban music) were lumped together in broad categories and descriptions of activities. The individual counts described the infringing conduct of the defendants by references to these broad generalizations, without any specific information as to what any individual defendant did to violate the Copyright Act.

From that inauspicious beginning, this action proceeded in a like manner, with heavy emphasis on discovery disputes and motion practice and little attention paid to narrowing the issues and refining the claims. The plaintiffs repeatedly taxed the patience of the Court, from narrowing the margins on their memoranda to circumvent page limits, to filing voluminous pleadings that were long on argument but short on concrete facts or applicable legal authority. The plaintiffs took every opportunity to inundate the Court with paperwork, yet many of these motions were hastily prepared and often lacked sufficient legal or factual support. Most notably, the plaintiffs filed a motion for summary judgment on ownership yet failed to submit certified copies of the registration certificates for the copyrights they claimed to own. When this oversight was pointed out by the Magistrate Judge as being fatal to their summary judgment motion, the plaintiffs, instead of providing the documentation (which could be easily obtained from the U.S. Copyright Office), expended enormous effort in subsequent motion papers trying to convince the Court that the certified copies were unnecessary [until ordered to produce them].

The plaintiffs' tactics have contributed to the multiplication of fees by all parties, including the defendant here. This, combined with the determination that Bridgeport's claim was objectively unreasonable, merits an award for fees and costs against Bridgeport.

To award fees simply because of the length of and lack of specificity in the original complaint or because of the number of claims brought by the plaintiffs would strike us as punitive and inconsistent with the purposes of the Copyright Act. See Murray Hill, 264 F.3d at 639-40 (reversing award of attorney fees, despite district court's criticism of the "voluminous burden" the case imposed, noting only that the law was unsettled and the plaintiff presented one or more colorable claims). The district court's criticisms go beyond just that, however, and are tied to conduct that complicated rather than streamlined the issues and contributed to the multiplication of fees for the defendant.

While the district court did not articulate this consideration in terms of the Fogerty factors, and was not required to since they are nonexclusive, we see it as related to the recognized factor of deterrence and compensation. The unique posture of this case as one of hundreds brought in the same manner and asserting parallel claims, makes deterrence a particularly relevant and appropriate consideration. It is not the deterrence of objectively reasonable good faith claims, but the interest in motivating plaintiffs to sort through the objectively unreasonable ones and prosecute this at best cumbersome litigation in a way that discriminates between parties and claims.

Plaintiffs charge that the defendant was equally responsible for multiplying fees, particularly by failing to designate a representative for deposition who had knowledge of the facts concerning the use of "Get Off" in Hook Up. While there is some suggestion that defendant contributed to increased discovery costs because multiple [810] depositions were required, our review is deferential and the record does not demonstrate clear error in the district court's assessment of plaintiffs' litigation conduct. Ultimately, we cannot say the district court abused its discretion in this case, particularly given the 50% reduction in attorney fees to account for Westbound's claims. Nor should Southfield and Nine Records be relieved of the nominal award of fees in this case, as defendant was required to investigate whether they had any claim and affirmatively move for dismissal of their claims before it was conceded that they had no interest in the copyrighted works.

AFFIRMED in part, REVERSED in part, and REMANDED for further proceedings consistent with this opinion.

---------------

Notes:

[1] The Honorable Judith M. Barzilay, Judge, United States Court of International Trade, sitting by designation.

[2] All of plaintiffs' claims against Miramax Film Corp. and Dimension Films were dismissed with prejudice, pursuant to a settlement, on June 27, 2002.

[3] These are two of eleven appeals arising out of six related lawsuits that have been assigned to this panel for hearing and decision (Nos.02-6521, 03-5002, 03-5003, 03-5004, 03-5005, 03-5738, 03-5739, 03-5741, 03-5742, 03-5744, 03-5656).

[4] Sound recordings and their underlying musical compositions are separate works with their own distinct copyrights. See 17 U.S.C. § 102(a)(2), (7). Bridgeport Music, Inc. v. Still N The Water Publ'g, 327 F.3d 472, 475 n. 3 (6th Cir.), cert. denied, 540 U.S. 948, 124 S.Ct. 399, 157 L.Ed.2d 279 (2003) (consolidated appeals from the dismissal of 19 of the 476 actions for lack of personal jurisdiction).

[5] Were we to follow the analysis used by the district judge, we would agree with the result he reached.

[6] Defendants initially claimed that this argument was made for the first time on appeal. Since a panel rehearing was granted, defendants have had a full opportunity to brief and argue these issues.

[7] In most copyright actions, the issue is whether the infringing work is substantially similar to the original work. . . . The scope of inquiry is much narrower when the work in question is a sound recording. The only issue is whether the actual sound recording has been used without authorization. Substantial similarity is not an issue . . . . Bradley C. Rosen, Esq., 22 CAUSES OF ACTION § 12 (2d ed.2003).

[8] E.g., Terry Fryer, Sampling Jargon Illustrated, KEYBOARD, June 1988, at 66-73.

First, the cost barrier to enter into the audio production arena is low due to the influx of affordable digital recording equipment. The combination of a microphone, digital audio equipment, consumer audio equipment and an album or compact disc collection are the only tools needed to produce commercial rap music. Second, utilizing samples as the musical element of the song enables the producer to create commercial rap music without any original musical accompaniment prior to recording the vocals. Third, using music samples saves a considerable amount of time when compared to the traditional recording methods because another artist already recorded the underlying music. . . .

Stephen R. Wilson, Music Sampling Lawsuits: Does Looping Music Samples Defeat the De Minimis Defense?, 1 Journal of High Technology Law (JHTL) 179 n. 9 (2002) (citations omitted).

[9] Needless to say, in the case of a recording of a musical composition the imitator would have to clear with the holder of the composition copyright.

[10] A question arises as to whether the copying of a single note would be actionable. Since that is not the fact situation in this case, we need not provide a definitive answer. We note, however, that under the Copyright Act, the sound recording must "result from the fixation of a series of musical, spoken, or other sounds. . . ." 17 U.S.C. § 101 (definition of "sound recording").

[11] 

[B] by clarifying the rights of a sound recording copyright owner in regard to derivative works, Section 114(b) makes it clear that the digital sampling of a copyrighted sound recording must typically be licensed to avoid an infringement.... The import of this language is that it does not matter how much a digital sampler alters the actual sounds or whether the ordinary lay observer can or cannot recognize the song or the artist's performance of it. Since the exclusive right encompasses rearranging, remixing, or otherwise altering the actual sounds, the statute by its own terms precludes the use of a substantial similarity test.

Susan J. Latham, Newton v. Diamond: Measuring the Legitimacy of Unauthorized Compositional Sampling-A Clue Illuminated and Obscured, 26 Hastings Comm. & Ent. L.J. 119, 125 (2003) (footnotes omitted).

[21]

Samplers should apply for the appropriate licenses, respect the rights of copyright holders, and be respected in turn as equal creators, Responsibility for obtaining clearance should fall to either the artist, the label, or both. Samplers realize that in the litigious environment of the United States, there is nothing to be gained and much money potentially to be lost by being a renegade. Surely some obscure materials will be sampled and overlooked, but the process should proceed devoid of recrimination and with the opportunity for money to be made by both the sampler and those whom he samples.

David Sanjek, "Don't Have to DJ No More": Sampling and the "Autonomous" Creator, 10 Cardozo Arts & Ent. L.J. 607, 621 (1992).

[13] The opinion in Grand Upright Music Ltd. v. Warner Bros. Records, Inc., 780 F.Supp. 182 (S.D.N.Y.1991), one of the first cases to deal with digital sampling, begins with the phrase, "`Thou shalt not steal.'" Id. at 183 (quoting Exodus 20:15).

[14]

Thus, it seems like the only way to infringe on a sound recording is to re-record sounds from the original work, which is exactly the nature of digital sound sampling. Then the only issue becomes whether the defendant re-recorded sound from the original. This suggests that the substantial similarity test is inapplicable to sound recordings.

Jeffrey R. Houle, Digital Audio Sampling, Copyright Law and the American Music Industry: Piracy or Just a Bad "RAP"?, 37 Loy. L.Rev. 879, 896 (1992).

[15]

(A)ll samples from a record appropriate the work of the musicians who performed on that record. This enables the sampler to use a musical performance without hiring either the musician who originally played it or a different musician to play the music again. Thus sampling of records ... allows a producer of music to save money (by not hiring a musician) without sacrificing the sound and phrasing of a live musician in the song. This practice poses the greatest danger to the musical profession because the musician is being replaced with himself.

Christopher D. Abramson, Digital Sampling and the Recording Musician: A Proposal for Legislative Protection, 74 N.Y.U. L. REV. 1660, 1668 (1999) (footnote omitted).

[16]

The current lack of bright-line rules leads to unpredictability, which may be one reason that so few sampling cases are brought to trial .... A cost-benefit analysis generally indicates that is is less expensive for a sampler to purchase a license before sampling (or settle a post-sampling lawsuit) rather than take his chances in an expensive trial, the outcome of which ... is nearly impossible to predict with any degree of certainty.

Stephen R. Wilson, Music Sampling Lawsuits: Does Looping Music Samples Defeat the De Minimis Defense, 1 Journal of High Technology Law (JHTL) 179, 187 n. 97 (2002).

[17] Two prior cases are worthy of mention, however, as they are often cited in discussions of digital sampling. These cases are Grand Upright Music Ltd. v. Warner Bros. Records, Inc., 780 F.Supp. 182 (S.D.N.Y.1991), and United States v. Taxe, 540 F.2d 961 (9th Cir.1976).

Although Grand Upright applied a bright-line test in a sampling case, we have not cited it as precedent for several reasons. First, it is a district court opinion and as such has no binding precedential value. Second, although it appears to have involved claims for both sound recording and musical composition copyright infringement, the trial judge does not distinguish which he is talking about in his ruling, and appears to be addressing primarily the musical composition copyright. Third, and perhaps most important, there is no analysis set forth to indicate how the judge arrived at his ruling, which has resulted in the case being criticized by commentators. Although often cited in later cases, there appears to be no case involving only the digital sampling of sound recordings that has relied on that decision. Nonetheless, it did precipitate a significant increase in licensing requests and changes in the way some artists and recording companies approached the issue of digital sampling.

Taxe involved a criminal prosecution of sound recording "pirates." The defendants were convicted in the district court and on appeal the court held that a jury instruction that characterized "any and all re-recordings as infringements" went too far, but nonetheless found the instructions as a whole to be free of any error requiring reversal. Like Grand Upright, there was no analysis to support this conclusion. This is understandable because the court was upholding the instructions given and had no need to dwell on that portion of the instruction the court "believed" "went beyond the law." Taxe, 540 F.2d at 965. Although Taxe has been cited frequently, it has not been cited for the pronouncement relative to the nature of the copyright protection afforded to sound recordings. It has been cited, however, for the proposition that infringement occurs even though the unauthorized recording makes changes in the sounds duplicated. Id. at n. 2.

[18] We have not addressed several of the cases frequently cited in music copyright cases because in the main they involve infringement of the composition copyright and not the sound recording copyright or were decided on other grounds. Baxter v. MCA, Inc., 812 F.2d 421 (9th Cir.1987); Jarvis v. A & M Records, 827 F.Supp. 282 (D.N.J.1993); Tuff `N' Rumble Mgmt., Inc. v. Profile Records, Inc., 1997 WL 158364, 42 U.S.P.Q.2d 1398 (S.D.N.Y.1997) (plaintiff did not prove ownership of valid copyright or actual copying); Williams v. Broadus, 60 U.S.P.Q.2d 1051 (S.D.N.Y.2001); Newton v. Diamond, 349 F.3d 591 (9th Cir.2003), amended 388 F.3d 1189 (9th Cir.2004), cert. denied, ___ U.S. ___, 125 S.Ct. 2905, ___ L.Ed.2d ___, 2005 WL 585458, 73 U.S.L.W. 3557 (U.S. Jun. 13, 2005) (No. 04-1219). We note that in Newton, the matter at issue was infringement of the composition copyright. The alleged infringer had secured a license for use of the sound recording.

[19]

Certain provisions of the copyright law, however, do suggest that broader protection against unauthorized sampling may be available for owners of sound recordings than for the owners of musical compositions that may be embodied in those sound recordings.

For example, the copyright act states that, `The exclusive rights of the owner of copyright in a sound recording ... do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording' [17 U.S.C. § 114(b)] (emphasis added). By using the words `entirely of an independent fixation' in referring to sound recordings which may imitate or simulate the sounds of another, Congress may have intended that a recording containing any sounds of another recording would constitute infringement. Thus, it would appear that any unauthorized use of a digital sample taken from another's copyrighted recording would be an infringement of the copyrighted recording.

In fact, the copyright law specifically provides that the owner of copyright in a sound recording has the exclusive right to prepare a derivative work `in which the actual sounds fixed in the sound recording are rearranged, remixed, or otherwise altered in sequence or quality.' A recording that embodies samples taken from the sound recording of another is by definition a `rearranged, remixed, or otherwise altered in sequence or quality.'

It has been suggested that the strong protection implied by the foregoing provisions could be mitigated by a judicially applied standard which permits some degree of de minimis copying or copying where the sampled portion of the resulting work is not substantially similar to the copied work. For example, a court could determine that the taking of a millisecond of sound from another's copyrighted recording, or the taking of a more extensive portion that has been modified to the point of being completely unrecognizable or impossible to associate with the copied recording, does not constitute infringement. It is believed, however, that the courts should take what appears to be a rare opportunity to follow a `bright line' rule specifically mandated by Congress. This would result in a substantial reduction of litigation costs and uncertainty attending disputes over sampling infringement of sound recordings and would promote a faster resolution of these disputes.

While the question whether an unauthorized use of a digital sample infringes a musical composition may require a full substantial similarity analysis, the question whether the use of a sample constitutes infringement of a sound recording could end upon a determination that the sampler physically copied the copyrighted sound recording of another. If the sampler physically copied any portion of another's copyrighted sound recording, then infringement should be found. If the sampler did not physically copy, then there could be no infringement (even if the resulting recording substantially simulates or imitates the original recording).

AL KOHN & BOB KOHN, KOHN ON MUSICLICENSING 1486-87 (Aspen Law & Business 3d ed.2002) (footnotes omitted).

[20] "As a result of actual, as well as threatened, litigation in the area of digital sampling infringement, several developments have occurred. Sampling clearinghouses serve as one recent outgrowth. These companies are similar to publisher clearinghouses in that they are authorized by member copyright owners to clear samples for use on albums according to an agreed upon fee structure. In addition, record companies and most music publishers have instituted certain licensing policies as more and more artists routinely seek clearance for their samples with the hope of avoiding litigation." A. Dean Johnson, Music Copyrights: The Need for an Appropriate Fair Use Analysis in Digital Sampling Infringement Suits, 21 FLA. ST. U.L. REV. 135, 163 (1993) (footnote omitted).

[21] We speak as to federal copyright protection only, and recognize that the Copyright Act provides that: "With respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067. The preemptive provisions of subsection (a) shall apply to any such rights and remedies pertaining to any cause of action arising from undertakings commenced on and after February 15, 2067. Notwithstanding the provisions of section 303, no sound recording fixed before February 15, 1972, shall be subject to copyright under this title before, on, or after February 15, 2067." 17 U.S.C. § 301(c) (1998).

[22] The district court also denied plaintiffs leave to amend to add claims against new parties arising from the inclusion of "100 Miles" in I Got the Hook Up. Plaintiffs have abandoned any appeal with respect to the denial of that request.

[23] Section 505 provides that:

In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs.

[24] Those considerations include: the primary objective of the Copyright Act to "encourage the production of original literary, artistic, and musical expression for the good of the public"; the fact that defendants as well as plaintiffs may hold copyrights and run the "gamut" from large corporations to "starving artists"; the need to encourage "defendants who seek to advance a variety of meritorious copyright defenses ... to litigate them to the same extent that plaintiffs are encouraged to litigate meritorious claims of infringement"; and the fact that "a successful defense of a copyright infringement action may further the policies of the Copyright Act every bit as much as a successful prosecution of an infringement claim by the holder of a copyright." Id. at 524 and 527.

[25] Plaintiffs argue that Southfield had a significant interest in "How Ya Do Dat" and joined Bridgeport in seeking leave to file the second amended complaint to assert infringement claims. That assertion does not affect the prevailing party status of defendant or undermine the finding that the claims which were asserted were objectively unreasonable.

[708] Rembar & Curtis, New York City, for plaintiff; Charles Rembar, Frank R. Curtis, Mark W. Budwig, of counsel.

Pryor, Cashman, Sherman & Flynn, New York City, for defendants; Stephen F. Huff, Philip R. Hoffman, Tom J. Ferber, of counsel.

OPINION AND ORDER

STANTON, District Judge.

In these actions for copyright infringement, plaintiff Saul Steinberg is suing the producers, promoters, distributors and advertisers of the movie "Moscow on the Hudson" ("Moscow"). Steinberg is an artist whose fame derives in part from cartoons and illustrations he has drawn for The New Yorker magazine. Defendant Columbia Pictures Industries, Inc. (Columbia) is in the business of producing, promoting and distributing motion pictures, including "Moscow." Defendant RCA Corporation (RCA) was involved with Columbia in promoting and distributing the home video version of "Moscow," and defendant Diener Hauser Bates Co. (DHB) acted as an advertising agent for "Moscow." The other defendants were added to the complaint pursuant to a memorandum decision of this court dated November 17, 1986. These defendants fall into two categories: (1) affiliates of Columbia and RCA that were involved in the distribution of "Moscow" here and/or abroad, and (2) owners of major newspapers that published the allegedly infringing advertisement.

The defendants in the second-captioned action either are joint ventures affiliated with Columbia or are newspapers that published the allegedly infringing advertisement for "Moscow." This action was consolidated with the first by stipulation dated April 3, 1987.

Plaintiff alleges that defendants' promotional poster for "Moscow" infringes his copyright on an illustration that he drew [709] for The New Yorker and that appeared on the cover of the March 29, 1976 issue of the magazine, in violation of 17 U.S.C. §§ 101-810. Defendants deny this allegation and assert the affirmative defenses of fair use as a parody, estoppel and laches.

Defendants have moved, and plaintiff has cross-moved, for summary judgment. For the reasons set forth below, this court rejects defendants' asserted defenses and grants summary judgment on the issue of copying to plaintiff.

I

To grant summary judgment, Fed.R. Civ.P. 56 requires a court to find that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." In reaching its decision, the court must "assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986), citing Anderson v. Liberty Lobby, 477 U.S. 242, 106 S.Ct. 2505, 2509-11, 91 L.Ed.2d 202 (1986).

Summary judgment is often disfavored in copyright cases, for courts are generally reluctant to make subjective comparisons and determinations. Hoehling v. Universal City Studios, Inc., 618 F.2d 972, 977 (2d Cir.1980), citing Arnstein v. Porter, 154 F.2d 464, 474 (2d Cir.1946). Recently, however, this circuit has "recognized that a court may determine non-infringement as a matter of law on a motion for summary judgment." Warner Brothers v. American Broadcasting Cos., 720 F.2d 231, 240 (2d Cir.1983), quoting Durham Industries, Inc. v. Tomy Corp., 630 F.2d 905, 918 (2d Cir.1980). See also Hoehling, 618 F.2d at 977; Walker v. Time-Life Films, Inc., 615 F.Supp. 430, 434 (S.D.N.Y. 1985), aff'd, 784 F.2d 44 (2d Cir.1986), cert. denied, ___ U.S. ___, 106 S.Ct. 2278, 90 L.Ed.2d 721 (1986). "When the evidence is so overwhelming that a court would be justified in ordering a directed verdict at trial, it is proper to grant summary judgment." Silverman v. CBS Inc., 632 F.Supp. 1344, 1352 (S.D.N.Y.1986) (awarding summary judgment to defendant on counterclaim of copyright infringement).

The voluminous submissions that accompanied these cross-motions leave no factual issues concerning which further evidence is likely to be presented at a trial. Moreover, the factual determinations necessary to this decision do not involve conflicts in testimony that would depend for their resolution on an assessment of witness credibility. In addition, this case is different from most copyright infringement actions, in which it is preferable to leave the determination of the issue to a jury: each party has implied that its case is complete by moving for summary judgment, and as neither side has requested a jury, the court would be the trier of fact at trial. Finally, the interests of judicial economy are also served by deciding the case at its present stage. Summary judgment is therefore appropriate.

II

The essential facts are not disputed by the parties despite their disagreements on nonessential matters. On March 29, 1976, The New Yorker published as a cover illustration the work at issue in this suit, widely known as a parochial New Yorker's view of the world. The magazine registered this illustration with the United States Copyright Office and subsequently assigned the copyright to Steinberg. Approximately three months later, plaintiff and The New Yorker entered into an agreement to print and sell a certain number of posters of the cover illustration.

It is undisputed that unauthorized duplications of the poster were made and distributed by unknown persons, although the parties disagree on the extent to which plaintiff attempted to prevent the distribution of those counterfeits. Plaintiff has also conceded that numerous posters have been created and published depicting other localities in the same manner that he depicted New York in his illustration. These facts, however, are irrelevant to the merits of this case, which concerns only the relationship [710] between plaintiff's and defendants' illustrations.

Defendants' illustration was created to advertise the movie "Moscow on the Hudson," which recounts the adventures of a Muscovite who defects in New York. In designing this illustration, Columbia's executive art director, Kevin Nolan, has admitted that he specifically referred to Steinberg's poster, and indeed, that he purchased it and hung it, among others, in his office. Furthermore, Nolan explicitly directed the outside artist whom he retained to execute his design, Craig Nelson, to use Steinberg's poster to achieve a more recognizably New York look. Indeed, Nelson acknowledged having used the facade of one particular edifice, at Nolan's suggestion that it would render his drawing more "New York-ish." Curtis Affidavit ¶ 28(c). While the two buildings are not identical, they are so similar that it is impossible, especially in view of the artist's testimony, not to find that defendants' impermissibly copied plaintiff's.^[1]

To decide the issue of infringement, it is necessary to consider the posters themselves. Steinberg's illustration presents a bird's eye view across a portion of the western edge of Manhattan, past the Hudson River and a telescoped version of the rest of the United States and the Pacific Ocean, to a red strip of horizon, beneath which are three flat land masses labeled China, Japan and Russia. The name of the magazine, in The New Yorker's usual typeface, occupies the top fifth of the poster, beneath a thin band of blue wash representing a stylized sky.

The parts of the poster beyond New York are minimalized, to symbolize a New Yorker's myopic view of the centrality of his city to the world. The entire United States west of the Hudson River, for example, is reduced to a brown strip labeled "Jersey," together with a light green trapezoid with a few rudimentary rock outcroppings and the names of only seven cities and two states scattered across it. The few blocks of Manhattan, by contrast, are depicted and colored in detail. The four square blocks of the city, which occupy the whole lower half of the poster, include numerous buildings, pedestrians and cars, as well as parking lots and lamp posts, with water towers atop a few of the buildings. The whimsical, sketchy style and spiky lettering are recognizable as Steinberg's.

The "Moscow" illustration depicts the three main characters of the film on the lower third of their poster, superimposed on a bird's eye view of New York City, and continues eastward across Manhattan and the Atlantic Ocean, past a rudimentary evocation of Europe, to a clump of recognizably Russian-styled buildings on the horizon, labeled "Moscow." The movie credits appear over the lower portion of the characters. The central part of the poster depicts approximately four New York city blocks, with fairly detailed buildings, pedestrians and vehicles, a parking lot, and some water towers and lamp posts. Columbia's artist added a few New York landmarks at apparently random places in his illustration, apparently to render the locale more easily recognizable. Beyond the blue strip labeled "Atlantic Ocean," Europe is represented by London, Paris and Rome, each anchored by a single landmark (although the landmark used for Rome is the Leaning Tower of Pisa).

The horizon behind Moscow is delineated by a red crayoned strip, above which are the title of the movie and a brief textual introduction to the plot. The poster is crowned by a thin strip of blue wash, apparently a stylization of the sky. This poster is executed in a blend of styles: the three characters, whose likenesses were copied from a photograph, have realistic faces and somewhat sketchy clothing, and the city blocks are drawn in a fairly detailed but sketchy style. The lettering on the drawing is spiky, in block-printed handwritten capital letters substantially identical to plaintiff's, while the printed texts at the top and bottom of the poster are in the [711] typeface commonly associated with The New Yorker magazine.^[2]

III

To succeed in a copyright infringement action, a plaintiff must prove ownership of the copyright and copying by the defendant. Reyher v. Children's Television Workshop, 533 F.2d 87, 90 (2d Cir.1976); Durham Industries, 630 F.2d at 911; Novelty Textile Mills, Inc. v. Joan Fabrics Corp., 558 F.2d 1090, 1092 (2d Cir.1977). There is no substantial dispute concerning plaintiff's ownership of a valid copyright in his illustration. Therefore, in order to prevail on liability, plaintiff need establish only the second element of the cause of action.

"Because of the inherent difficulty in obtaining direct evidence of copying, it is usually proved by circumstantial evidence of access to the copyrighted work and substantial similarities as to protectible material in the two works." Reyher, 533 F.2d at 90, citing Arnstein v. Porter, 154 F.2d 464, 468 (2d Cir.1946). See also Novelty Textile Mills, 558 F.2d at 1092. "Of course, if there are no similarities, no amount of evidence of access will suffice to prove copying." Arnstein v. Porter, 154 F.2d at 468. See also Novelty Textile Mills, 558 F.2d at 1092 n. 2.

Defendants' access to plaintiff's illustration is established beyond peradventure. Therefore, the sole issue remaining with respect to liability is whether there is such substantial similarity between the copyrighted and accused works as to establish a violation of plaintiff's copyright. The central issue of "substantial similarity," which can be considered a close question of fact, may also validly be decided as a question of law. Berkic v. Crichton, 761 F.2d 1289, 1292 (9th Cir.1985), citing Sid & Marty Krofft Television Productions, Inc. v. McDonald's Corp., 562 F.2d 1157 (9th Cir.1977).

"Substantial similarity" is an elusive concept. This circuit has recently recognized that

[t]he "substantial similarity" that supports an inference of copying sufficient to establish infringement of a copyright is not a concept familiar to the public at large. It is a term to be used in a courtroom to strike a delicate balance between the protection to which authors are entitled under an act of Congress and the freedom that exists for all others to create their works outside the area protected by infringement.

Warner Bros., 720 F.2d at 245.

The definition of "substantial similarity" in this circuit is "whether an average lay observer would recognize the alleged copy as having been appropriated from the copyrighted work." Ideal Toy Corp. v. Fab-Lu Ltd., 360 F.2d 1021, 1022 (2d Cir.1966); Silverman v. CBS, Inc., 632 F.Supp. at 1351-52. A plaintiff need no longer meet the severe "ordinary observer" test established by Judge Learned Hand in Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487 (2d Cir.1960). Uneeda Doll Co., Inc. v. Regent Baby Products Corp., 355 F.Supp. 438, 450 (E.D.N.Y.1972). Under Judge Hand's formulation, there would be substantial similarity only where "the ordinary observer, unless he set out to detect the disparities, would be disposed to overlook them, and regard their aesthetic appeal as the same." 274 F.2d at 489.

Moreover, it is now recognized that "[t]he copying need not be of every detail so long as the copy is substantially similar to the copyrighted work." Comptone Co. v. Rayex Corp., 251 F.2d 487, 488 (2d Cir. 1958). See also Durham Industries, 630 F.2d at 911-12; Novelty Textile Mills, 558 F.2d at 1092-93.

In determining whether there is substantial similarity between two works, it is crucial to distinguish between an idea and its expression. It is an axiom of copyright law, established in the case law and since codified at 17 U.S.C. § 102(b), that only the [712] particular expression of an idea is protectible, while the idea itself is not. See, e.g., Durham Industries, 630 F.2d at 912; Reyher, 533 F.2d at 90, citing Mazer v. Stein, 347 U.S. 201, 217, 74 S.Ct. 460, 470, 98 L.Ed. 630 (1954); Baker v. Selden, 101 U.S. (11 Otto) 99, 25 L.Ed. 841 (1879). See also Warner Bros., 720 F.2d at 239.

"The idea/expression distinction, although an imprecise tool, has not been abandoned because we have as yet discovered no better way to reconcile the two competing societal interests that provide the rationale for the granting of and restrictions on copyright protection," namely, both rewarding individual ingenuity, and nevertheless allowing progress and improvements based on the same subject matter by others than the original author. Durham Industries, 630 F.2d at 912, quoting Reyher, 533 F.2d at 90.

There is no dispute that defendants cannot be held liable for using the idea of a map of the world from an egocentrically myopic perspective. No rigid principle has been developed, however, to ascertain when one has gone beyond the idea to the expression, and "[d]ecisions must therefore inevitably be ad hoc." Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir.1960) (L. Hand, J.). As Judge Frankel once observed, "Good eyes and common sense may be as useful as deep study of reported and unreported cases, which themselves are tied to highly particularized facts." Couleur International Ltd. v. Opulent Fabrics, Inc., 330 F.Supp. 152, 153 (S.D.N.Y.1971).

Even at first glance, one can see the striking stylistic relationship between the posters, and since style is one ingredient of "expression," this relationship is significant. Defendants' illustration was executed in the sketchy, whimsical style that has become one of Steinberg's hallmarks. Both illustrations represent a bird's eye view across the edge of Manhattan and a river bordering New York City to the world beyond. Both depict approximately four city blocks in detail and become increasingly minimalist as the design recedes into the background. Both use the device of a narrow band of blue wash across the top of the poster to represent the sky, and both delineate the horizon with a band of primary red.^[3]

The strongest similarity is evident in the rendering of the New York City blocks. Both artists chose a vantage point that looks directly down a wide two-way cross street that intersects two avenues before reaching a river. Despite defendants' protestations, this is not an inevitable way of depicting blocks in a city with a grid-like street system, particularly since most New York City cross streets are one-way. Since even a photograph may be copyrighted because "no photograph, however simple, can be unaffected by the personal influence of the author," Time Inc. v. Bernard Geis Assoc., 293 F.Supp. 130, 141 (S.D.N.Y. 1968), quoting Bleistein, supra, one can hardly gainsay the right of an artist to protect his choice of perspective and layout in a drawing, especially in conjunction with the overall concept and individual details. Indeed, the fact that defendants changed the names of the streets while retaining the same graphic depiction weakens their case: had they intended their illustration realistically to depict the streets labeled on the poster, their four city blocks would not so closely resemble plaintiff's four city blocks. Moreover, their argument that they intended the jumble of streets and landmarks and buildings to symbolize their Muscovite protagonist's confusion in a new city does not detract from the strong similarity between their poster and Steinberg's.

[713] While not all of the details are identical, many of them could be mistaken for one another; for example, the depiction of the water towers, and the cars, and the red sign above a parking lot, and even many of the individual buildings. The shapes, windows, and configurations of various edifices are substantially similar. The ornaments, facades and details of Steinberg's buildings appear in defendants', although occasionally at other locations. In this context, it is significant that Steinberg did not depict any buildings actually erected in New York; rather, he was inspired by the general appearance of the structures on the West Side of Manhattan to create his own New York-ish structures. Thus, the similarity between the buildings depicted in the "Moscow" and Steinberg posters cannot be explained by an assertion that the artists happened to choose the same buildings to draw. The close similarity can be explained only by the defendants' artist having copied the plaintiff's work. Similarly, the locations and size, the errors and anomalies of Steinberg's shadows and streetlight, are meticulously imitated.

In addition, the Columbia artist's use of the childlike, spiky block print that has become one of Steinberg's hallmarks to letter the names of the streets in the "Moscow" poster can be explained only as copying. There is no inherent justification for using this style of lettering to label New York City streets as it is associated with New York only through Steinberg's poster.

While defendants' poster shows the city of Moscow on the horizon in far greater detail than anything is depicted in the background of plaintiff's illustration, this fact alone cannot alter the conclusion. "Substantial similarity" does not require identity, and "duplication or near identity is not necessary to establish infringement." Krofft, 562 F.2d at 1167. Neither the depiction of Moscow, nor the eastward perspective, nor the presence of randomly scattered New York City landmarks in defendants' poster suffices to eliminate the substantial similarity between the posters. As Judge Learned Hand wrote, "no plagiarist can excuse the wrong by showing how much of his work he did not pirate." Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 56 (2d Cir.), cert. denied, 298 U.S. 669, 56 S.Ct. 835, 80 L.Ed. 1392 (1936).

Defendants argue that their poster could not infringe plaintiff's copyright because only a small proportion of its design could possibly be considered similar. This argument is both factually and legally without merit. "[A] copyright infringement may occur by reason of a substantial similarity that involves only a small portion of each work." Burroughs v. Metro-Goldwyn-Mayer, Inc., 683 F.2d 610, 624 n. 14 (2d Cir.1982). Moreover, this case involves the entire protected work and an iconographically, as well as proportionately, significant portion of the allegedly infringing work. Cf. Mattel, Inc. v. Azrak-Hamway Intern., Inc., 724 F.2d 357, 360 (2d Cir.1983); Elsmere Music, Inc. v. National Broadcasting Co., 482 F.Supp. 741, 744 (S.D.N.Y.), aff'd, 623 F.2d 252 (2d Cir. 1980) (taking small part of protected work can violate copyright).

The process by which defendants' poster was created also undermines this argument. The "map," that is, the portion about which plaintiff is complaining, was designed separately from the rest of the poster. The likenesses of the three main characters, which were copied from a photograph, and the blocks of text were superimposed on the completed map. Nelson Deposition at 21-22; Nolan Deposition at 28.

I also reject defendants' argument that any similarities between the works are unprotectible scenes a faire, or "incidents, characters or settings which, as a practical matter, are indispensable or standard in the treatment of a given topic." Walker, 615 F.Supp. at 436. See also Reyher, 533 F.2d at 92. It is undeniable that a drawing of New York City blocks could be expected to include buildings, pedestrians, vehicles, lampposts and water towers. Plaintiff, however, does not complain of defendants' mere use of these elements in their poster; rather, his complaint is that defendants [714] copied his expression of those elements of a street scene.

While evidence of independent creation by the defendants would rebut plaintiff's prima facie case, "the absence of any countervailing evidence of creation independent of the copyrighted source may well render clearly erroneous a finding that there was not copying." Roth Greeting Cards v. United Card Co., 429 F.2d 1106, 1110 (9th Cir.1970). See also Novelty Textile Mills, 558 F.2d at 1092 n. 2.

Moreover, it is generally recognized that "... since a very high degree of similarity is required in order to dispense with proof of access, it must logically follow that where proof of access is offered, the required degree of similarity may be somewhat less than would be necessary in the absence of such proof." 2 Nimmer § 143.4 at 634, quoted in Krofft, 562 F.2d at 1172. As defendants have conceded access to plaintiff's copyrighted illustration, a somewhat lesser degree of similarity suffices to establish a copyright infringement than might otherwise be required. Here, however, the demonstrable similarities are such that proof of access, although in fact conceded, is almost unnecessary.

IV

I find meritless defendants' assertion that, to the extent that the "Moscow" poster evokes Steinberg's, that evocation is justified under the parody branch of the "fair use" doctrine, codified at 17 U.S.C. § 107. As this circuit has held, the copyrighted work must be "at least in part an object of the parody," MCA, Inc. v. Wilson, 677 F.2d 180, 185 (2d Cir.1981). The record does not support a claim that defendants intended to satirize plaintiff's illustration; indeed, the deposition testimony of Columbia's executive art director tends to contradict such a claim. Moreover, an assertion that defendants consciously parodied the idea of a parochial view of the world is immaterial: ideas are not protected by copyright, and the infringement alleged is of Steinberg's particular expression of that idea. Defendants' variation on the visual joke of plaintiff's illustration does not, without an element of humor aimed at some aspect of the illustration itself, render it a parody and therefore a fair use of plaintiff's work.

In codifying the case law on determining whether one work constitutes a fair use of another, Congress instructed the courts to consider certain factors, the first of which is whether the intended use of the allegedly infringing work is "of a commercial nature or is for nonprofit educational purposes." 17 U.S.C. § 107(1). As the Second Circuit said in a different artistic context, "We are not prepared to hold that a commercial [artist] can plagiarize a ... copyrighted [work], substitute [certain elements] of his own, [produce] it for commercial gain, and then escape liability by calling the end result a parody or satire on the mores of society." MCA, Inc., 677 F.2d at 185.

In analyzing the commercial or noncommercial nature of the "Moscow" poster, it is useful to distinguish between two conceptually different situations: advertising material that promotes a parody of a copyrighted work, and advertising material that itself infringes a copyright. In the first case, the fact that the advertisement uses elements of the copyrighted work does not necessarily mean that it infringes the copyright, if the product that it advertises constitutes a fair use of the copyrighted work. See, e.g., Warner Bros., 720 F.2d at 242-44 (promotional broadcasts for television series legally parodying the Superman comic strip character did not infringe copyright in Superman character).

In the second case, the work being advertised bears no relationship to the copyrighted work, but the advertisement itself infringes the copyright. In such a case, the owners of the copyright can prevent the advertisement from being used. As the Second Circuit has said, "[n]o matter how well known a copyrighted phrase becomes, its author is entitled to guard against its appropriation to promote the sale of commercial products." Warner Bros., 720 F.2d at 242. See, e.g., D.C. Comics, Inc. v. Crazy Eddie, Inc., 205 [715] U.S.P.Q. 1177 (S.D.N.Y.1979) (discount electronics chain not permitted to advertise its stores using parody of well-known lines associated with copyrighted Superman character).

This situation fits the second case. Neither the "Moscow" movie nor the poster was designed to be a parody of the Steinberg illustration. The poster merely borrowed numerous elements from Steinberg to create an appealing advertisement to promote an unrelated commercial product, the movie. No parody of the illustration is involved, and defendants are not entitled to the protection of the parody branch of the fair use doctrine.

The other factors mandated by 17 U.S.C. § 107 do nothing to mitigate this determination. The copyrighted work at issue is an artistic creation, 17 U.S.C. § 107(2), a very substantial portion of which was appropriated in the defendants' work, 17 U.S.C. § 107(3). As for the value of the copyrighted work, 17 U.S.C. § 107(4), plaintiff submitted testimony to the court to show that his reputation was injured by having the public believe that he voluntarily lent his work to a profit-making enterprise.

V

In their motion, defendants raised the affirmative defenses of estoppel and laches. Although Fed.R.Civ.P. 8(c) generally requires affirmative defenses to be pleaded, courts have been more lenient in the context of motions for summary judgment. "[A]bsent prejudice to the plaintiff, a defendant may raise an affirmative defense in a motion for summary judgment for the first time." Rivera v. Anaya, 726 F.2d 564, 566 (9th Cir.1984). See 2A, 6 J. Moore, Moore's Federal Practice ¶¶ 8.28, 56.02[2], 56.17[4] (2d ed. 1986). It is therefore appropriate for this court to consider these defenses on the merits.

Defendants base their assertions of these equitable defenses on the following factual claims: (1) plaintiff's alleged "deliberate inaction" for eight years in the face of numerous counterfeits of his poster and adaptations of his idea to various other localities; (2) plaintiff's alleged failure to act in response to the newspaper advertisements that appeared to promote "Moscow"; and (3) defendants' assertion that Steinberg waited six months before even complaining to Columbia about their alleged infringement of his copyright on the poster, which defendants claim in their brief was a tactic on plaintiff's part to maximize the damages he hoped to receive.

The record, however, does not support defendants' claims. First, Steinberg specifically requested that The New Yorker magazine attempt to identify the sources of the counterfeit posters and prevent their continued distribution. As for the so-called adaptations of Steinberg's idea, there is no evidence that they infringed his copyright or that anyone ever believed that they did. As plaintiff freely and necessarily admits, the law does not protect an idea, but only the specific expression of that idea. The examples that defendants use to support their defense can at most be considered derivative of Steinberg's idea; none is a close copy of the poster itself, as defendants' is. Finally, defendants' last two assertions are rebutted by evidence that The New Yorker protested to The New York Times on plaintiff's behalf and at his request when "Moscow" opened, and that Columbia learned of this protest only a few weeks later.

Moreover, even were defendants' factual assertions borne out by the record, their equitable defenses would have to be rejected because they have failed to establish the elements of either estoppel or laches.

"A party seeking to invoke the doctrine of estoppel must plead and prove each of the essential elements: (1) a representation of fact ...; (2) rightful reliance thereon; and (3) injury or damage ... resulting from denial by the party making the representation." Galvez v. Local 804 Welfare Trust Fund, 543 F.Supp. 316, 317 (E.D.N. Y.1982), citing Haeberle v. Board of Trustees, 624 F.2d 1132 (2d Cir.1980).

Defendants have not established even the first of these elements. They argue that plaintiff's alleged silence [716] during the course of their advertisement campaign constitutes a sufficient representation of his acquiescence to meet the first requirement of the doctrine. As noted above, however, plaintiff did not remain silent, and the record shows that defendants, despite their awareness of his objections, continued to promote the film with the same advertisements and subsequently released a videocassette version of "Moscow" using the same promotional design. See Lottie Joplin Thomas Trust v. Crown Publishers, 592 F.2d 651, 655 (2d Cir.1978) (defense of estoppel falls where defendants fail to produce any evidence of detrimental reliance on plaintiff's alleged representations). Defendants overlook, moreover, that silence or inaction, in the absence of any duty or relationship between the parties, cannot give rise to an estoppel. Whiting Corp. v. Home Ins. Co., 516 F.Supp. 643, 656 (S.D.N.Y.1981). Cf. Columbia Broadcasting System, Inc. v. Stokely-Van Camp, Inc., 522 F.2d 369, 378 (2d Cir.1975). No such duty existed here.

Defendants have likewise failed to establish the defense of laches. The party asserting laches must show that the opposing party "did not assert her or their rights diligently, and that such asserted lack of diligence ... resulted in prejudice to them." Lottie Joplin, 592 F.2d at 655, citing, inter alia, Costello v. United States, 365 U.S. 265, 282, 81 S.Ct. 534, 543, 5 L.Ed.2d 551 (1961). In Lottie Joplin, the Second Circuit held that a gap of approximately half a year between the publication of the allegedly infringing work and the institution of the lawsuit did not constitute a delay sufficient to establish a claim of laches. In this case, defendants were informed within weeks of plaintiff's disapproval of their poster; moreover, they have presented no evidence that, even if they had acknowledged any awareness of plaintiff's reaction, they would in any way have modified their subsequent actions. Consequently, they have failed to prove prejudice to themselves.

VI

For the reasons set out above, summary judgment is granted to plaintiffs as to copying.

A pretrial conference will be held on September 11, 1987, at 2 o'clock P.M., in Courtroom 35, to determine the proper measure and allocation of damages, other appropriate matters, and the parties' proposed schedule of further proceedings. The parties are to confer in advance of this conference, with the goal of reaching agreement on these matters, if possible.

[1] Nolan claimed also to have been inspired by some of the posters that were inspired by Steinberg's; such secondary inspiration, however, is irrelevant to whether or not the "Moscow" poster infringes plaintiff's copyright by having impermissibly copied it.

[2] The typeface is not a subject of copyright, but the similarity reinforces the impression that defendants copied plaintiff's illustration.

[3] Defendants claim that since this use of thin bands of primary colors is a traditional Japanese technique, their adoption of it cannot infringe Steinberg's copyright. This argument ignores the principle that while "[o]thers are free to copy the original ... [t]hey are not free to copy the copy." Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 250, 23 S.Ct. 298, 300, 47 L.Ed. 460 (1903) (Holmes, J.). Cf. Dave Grossman Designs, Inc. v. Bortin, 347 F.Supp. 1150, 1156-57 (N.D.Ill.1972) (an artist may use the same subject and style as another "so long as the second artist does not substantially copy [the first artist's] specific expression of his idea.")

[695] Stephen D. Kahn, New York City (Stuart D. Levi, Beth K. Neelman, Carol A. Motyka, Weil, Gotshal & Manges, Michael A. [696] McElroy, Computer Associates Intern., Inc., of counsel), for plaintiff-appellant, cross-appellee.

Susan G. Braden, Washington, DC (Christ M. Kacoyannakis, Anderson Kill Olick & Oshinshy, Washington, DC, Stephen D. Susman, Susman Godfrey, Houston, TX, of counsel), for defendant-appellee, cross-appellant.

Bruce A. Lehman, Swidler & Berlin, Washington, DC, filed a brief amicus curiae, on behalf of The Software Publishers Ass'n.

Peter M.C. Choy, Mountain View, CA, filed a brief amicus curiae, on behalf of the American Committee for Interoperable Systems.

J. David Cabello, Houston, TX, David R. Bradford, Provo, UT, Robert H. Kohn, Scotts Valley, CA, filed a brief amici curiae, on behalf of Compaq Computer Corp., Novell, Inc., and Borland Intern., Inc.

Before ALTIMARI, MAHONEY and WALKER, Circuit Judges.

WALKER, Circuit Judge:

In recent years, the growth of computer science has spawned a number of challenging legal questions, particularly in the field of copyright law. As scientific knowledge advances, courts endeavor to keep pace, and sometimes--as in the area of computer technology--they are required to venture into less than familiar waters. This is not a new development, though. "From its beginning, the law of copyright has developed in response to significant changes in technology." Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 430, 104 S.Ct. 774, 782, 78 L.Ed.2d 574 (1984).

Article I, section 8 of the Constitution authorizes Congress "[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." The Supreme Court has stated that "[t]he economic philosophy behind the clause ... is the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare...." Mazer v. Stein, 347 U.S. 201, 219, 74 S.Ct. 460, 471, 98 L.Ed. 630 (1954). The author's benefit, however, is clearly a "secondary" consideration. See United States v. Paramount Pictures, Inc., 334 U.S. 131, 158, 68 S.Ct. 915, 929, 92 L.Ed. 1260 (1948). "[T]he ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good." Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2044, 45 L.Ed.2d 84 (1975).

Thus, the copyright law seeks to establish a delicate equilibrium. On the one hand, it affords protection to authors as an incentive to create, and, on the other, it must appropriately limit the extent of that protection so as to avoid the effects of monopolistic stagnation. In applying the federal act to new types of cases, courts must always keep this symmetry in mind. Id.

Among other things, this case deals with the challenging question of whether and to what extent the "non-literal" aspects of a computer program, that is, those aspects that are not reduced to written code, are protected by copyright. While a few other courts have already grappled with this issue, this case is one of first impression in this circuit. As we shall discuss, we find the results reached by other courts to be less than satisfactory. Drawing upon long-standing doctrines of copyright law, we take an approach that we think better addresses the practical difficulties embedded in these types of cases. In so doing, we have kept in mind the necessary balance between creative incentive and industrial competition.

This appeal comes to us from the United States District Court for the Eastern District of New York, the Honorable George C. Pratt, Circuit Judge, sitting by designation. By Memorandum and Order entered August 12, 1991, Judge Pratt found that defendant Altai, Inc.'s ("Altai"), OSCAR 3.4 computer program had infringed plaintiff Computer Associates' ("CA"), copyrighted computer program entitled CA-SCHEDULER. Accordingly, the district court awarded CA $364,444 in actual damages and apportioned profits. Altai has [697] abandoned its appeal from this award. With respect to CA's second claim for copyright infringement, Judge Pratt found that Altai's OSCAR 3.5 program was not substantially similar to a portion of CA-SCHEDULER called ADAPTER, and thus denied relief. Finally, the district court concluded that CA's state law trade secret misappropriation claim against Altai had been preempted by the federal Copyright Act. CA appealed from these findings.

Because we are in full agreement with Judge Pratt's decision and in substantial agreement with his careful reasoning regarding CA's copyright infringement claim, we affirm the district court's judgment on that issue. However, we vacate the district court's preemption ruling with respect to CA's trade secret claim, and remand the case to the district court for further proceedings.

BACKGROUND

We assume familiarity with the facts set forth in the district court's comprehensive and scholarly opinion. See Computer Assocs. Int'l., Inc. v. Altai, Inc., 775 F.Supp. 544, 549-55 (E.D.N.Y.1991). Thus, we summarize only those facts necessary to resolve this appeal.

I. COMPUTER PROGRAM DESIGN

Certain elementary facts concerning the nature of computer programs are vital to the following discussion. The Copyright Act defines a computer program as "a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result." 17 U.S.C. § 101. In writing these directions, the programmer works "from the general to the specific." Whelan Assocs., Inc. v. Jaslow Dental Lab., Inc., 797 F.2d 1222, 1229 (3d Cir.1986), cert. denied, 479 U.S. 1031, 107 S.Ct. 877, 93 L.Ed.2d 831 (1987). See generally Steven R. Englund, Note, Idea, Process, or Protected Expression?: Determining the Scope of Copyright Protection of the Structure of Computer Programs, 88 MICH.L.REV. 866, 867-73 (1990) (hereinafter "Englund"); Peter S. Menell, An Analysis of the Scope of Copyright Protection for Application Programs, 41 STAN.L.REV. 1045, 1051-57 (1989) (hereinafter "Menell"); Mark T. Kretschmer, Note, Copyright Protection For Software Architecture: Just Say No!, 1988 COLUM.BUS.L.REV. 823, 824-27 (1988) (hereinafter "Kretschmer"); Peter G. Spivack, Comment, Does Form Follow Function? The Idea/Expression Dichotomy In Copyright Protection of Computer Software, 35 U.C.L.A.L.REV. 723, 729-31 (1988) (hereinafter "Spivack").

The first step in this procedure is to identify a program's ultimate function or purpose. An example of such an ultimate purpose might be the creation and maintenance of a business ledger. Once this goal has been achieved, a programmer breaks down or "decomposes" the program's ultimate function into "simpler constituent problems or 'subtasks,' " Englund, at 870, which are also known as subroutines or modules. See Spivack, at 729. In the context of a business ledger program, a module or subroutine might be responsible for the task of updating a list of outstanding accounts receivable. Sometimes, depending upon the complexity of its task, a subroutine may be broken down further into sub-subroutines.

Having sufficiently decomposed the program's ultimate function into its component elements, a programmer will then arrange the subroutines or modules into what are known as organizational or flow charts. Flow charts map the interactions between modules that achieve the program's end goal. See Kretschmer, at 826.

In order to accomplish these intra-program interactions, a programmer must carefully design each module's parameter list. A parameter list, according to the expert appointed and fully credited by the district court, Dr. Randall Davis, is "the information sent to and received from a subroutine." See Report of Dr. Randall Davis, at 12. The term "parameter list" refers to the form in which information is passed between modules (e.g. for accounts receivable, the designated time frame and particular customer identifying number) and the information's actual content (e.g. [698] 8/91-7/92; customer No. 3). Id. With respect to form, interacting modules must share similar parameter lists so that they are capable of exchanging information.

"The functions of the modules in a program together with each module's relationships to other modules constitute the 'structure' of the program." Englund, at 871. Additionally, the term structure may include the category of modules referred to as "macros." A macro is a single instruction that initiates a sequence of operations or module interactions within the program. Very often the user will accompany a macro with an instruction from the parameter list to refine the instruction (e.g. current total of accounts receivable (macro), but limited to those for 8/91 to 7/92 from customer No. 3 (parameters)).

In fashioning the structure, a programmer will normally attempt to maximize the program's speed, efficiency, as well as simplicity for user operation, while taking into consideration certain externalities such as the memory constraints of the computer upon which the program will be run. See id.; Kretschmer, at 826; Menell, at 1052. "This stage of program design often requires the most time and investment." Kretschmer, at 826.

Once each necessary module has been identified, designed, and its relationship to the other modules has been laid out conceptually, the resulting program structure must be embodied in a written language that the computer can read. This process is called "coding," and requires two steps. Whelan, 797 F.2d at 1230. First, the programmer must transpose the program's structural blue-print into a source code. This step has been described as "comparable to the novelist fleshing out the broad outline of his plot by crafting from words and sentences the paragraphs that convey the ideas." Kretschmer, at 826. The source code may be written in any one of several computer languages, such as COBAL, FORTRAN, BASIC, EDL, etc., depending upon the type of computer for which the program is intended. Whelan, 797 F.2d at 1230. Once the source code has been completed, the second step is to translate or "compile" it into object code. Object code is the binary language comprised of zeros and ones through which the computer directly receives its instructions. Id. at 1230-31; Englund, at 868 & n. 13.

After the coding is finished, the programmer will run the program on the computer in order to find and correct any logical and syntactical errors. This is known as "debugging" and, once done, the program is complete. See Kretschmer, at 826-27.

II. FACTS

CA is a Delaware corporation, with its principal place of business in Garden City, New York. Altai is a Texas corporation, doing business primarily in Arlington, Texas. Both companies are in the computer software industry--designing, developing and marketing various types of computer programs.

The subject of this litigation originates with one of CA's marketed programs entitled CA-SCHEDULER. CA-SCHEDULER is a job scheduling program designed for IBM mainframe computers. Its primary functions are straightforward: to create a schedule specifying when the computer should run various tasks, and then to control the computer as it executes the schedule. CA-SCHEDULER contains a sub-program entitled ADAPTER, also developed by CA. ADAPTER is not an independently marketed product of CA; it is a wholly integrated component of CA-SCHEDULER and has no capacity for independent use.

Nevertheless, ADAPTER plays an extremely important role. It is an "operating system compatibility component," which means, roughly speaking, it serves as a translator. An "operating system" is itself a program that manages the resources of the computer, allocating those resources to other programs as needed. The IBM System 370 family of computers, for which CA-SCHEDULER was created, is, depending upon the computer's size, designed to contain one of three operating systems: DOS/VSE, MVS, or CMS. As the district court noted, the general rule is that "a [699] program written for one operating system, e.g., DOS/VSE, will not, without modification, run under another operating system such as MVS." Computer Assocs., 775 F.Supp. at 550. ADAPTER's function is to translate the language of a given program into the particular language that the computer's own operating system can understand.

The district court succinctly outlined the manner in which ADAPTER works within the context of the larger program. In order to enable CA-SCHEDULER to function on different operating systems, CA divided the CA-SCHEDULER into two components:

--a first component that contains only the task-specific portions of the program, independent of all operating system issues, and

--a second component that contains all the interconnections between the first component and the operating system.

In a program constructed in this way, whenever the first, task-specific, component needs to ask the operating system for some resource through a "system call", it calls the second component instead of calling the operating system directly.

The second component serves as an "interface" or "compatibility component" between the task-specific portion of the program and the operating system. It receives the request from the first component and translates it into the appropriate system call that will be recognized by whatever operating system is installed on the computer, e.g., DOS/VSE, MVS, or CMS. Since the first, task-specific component calls the adapter component rather than the operating system, the first component need not be customized to use any specific operating system. The second, interface, component insures that all the system calls are performed properly for the particular operating system in use.

Id. at 551.

ADAPTER serves as the second, "common system interface" component referred to above.

A program like ADAPTER, which allows a computer user to change or use multiple operating systems while maintaining the same software, is highly desirable. It saves the user the costs, both in time and money, that otherwise would be expended in purchasing new programs, modifying existing systems to run them, and gaining familiarity with their operation. The benefits run both ways. The increased compatibility afforded by an ADAPTER-like component, and its resulting popularity among consumers, makes whatever software in which it is incorporated significantly more marketable.

Starting in 1982, Altai began marketing its own job scheduling program entitled ZEKE. The original version of ZEKE was designed for use in conjunction with a VSE operating system. By late 1983, in response to customer demand, Altai decided to rewrite ZEKE so that it could be run in conjunction with an MVS operating system.

At that time, James P. Williams ("Williams"), then an employee of Altai and now its President, approached Claude F. Arney, III ("Arney"), a computer programmer who worked for CA. Williams and Arney were longstanding friends, and had in fact been co-workers at CA for some time before Williams left CA to work for Altai's predecessor. Williams wanted to recruit Arney to assist Altai in designing an MVS version of ZEKE.

At the time he first spoke with Arney, Williams was aware of both the CA-SCHEDULER and ADAPTER programs. However, Williams was not involved in their development and had never seen the codes of either program. When he asked Arney to come work for Altai, Williams did not know that ADAPTER was a component of CA-SCHEDULER.

Arney, on the other hand, was intimately familiar with various aspects of ADAPTER. While working for CA, he helped improve the VSE version of ADAPTER, and was permitted to take home a copy of ADAPTER'S source code. This apparently developed into an irresistible habit, for when Arney left CA to work for Altai in January, 1984, he took with him copies of [700] the source code for both the VSE and MVS versions of ADAPTER. He did this in knowing violation of the CA employee agreements that he had signed.

Once at Altai, Arney and Williams discussed design possibilities for adapting ZEKE to run on MVS operating systems. Williams, who had created the VSE version of ZEKE, thought that approximately 30% of his original program would have to be modified in order to accommodate MVS. Arney persuaded Williams that the best way to make the needed modifications was to introduce a "common system interface" component into ZEKE. He did not tell Williams that his idea stemmed from his familiarity with ADAPTER. They decided to name this new component-program OSCAR.

Arney went to work creating OSCAR at Altai's offices using the ADAPTER source code. The district court accepted Williams' testimony that no one at Altai, with the exception of Arney, affirmatively knew that Arney had the ADAPTER code, or that he was using it to create OSCAR/VSE. However, during this time period, Williams' office was adjacent to Arney's. Williams testified that he and Arney "conversed quite frequently" while Arney was "investigating the source code of ZEKE" and that Arney was in his office "a number of times daily, asking questions." In three months, Arney successfully completed the OSCAR/VSE project. In an additional month he developed an OSCAR/MVS version. When the dust finally settled, Arney had copied approximately 30% of OSCAR's code from CA's ADAPTER program.

The first generation of OSCAR programs was known as OSCAR 3.4. From 1985 to August 1988, Altai used OSCAR 3.4 in its ZEKE product, as well as in programs entitled ZACK and ZEBB. In late July 1988, CA first learned that Altai may have appropriated parts of ADAPTER. After confirming its suspicions, CA secured copyrights on its 2.1 and 7.0 versions of CA-SCHEDULER. CA then brought this copyright and trade secret misappropriation action against Altai.

Apparently, it was upon receipt of the summons and complaint that Altai first learned that Arney had copied much of the OSCAR code from ADAPTER. After Arney confirmed to Williams that CA's accusations of copying were true, Williams immediately set out to survey the damage. Without ever looking at the ADAPTER code himself, Williams learned from Arney exactly which sections of code Arney had taken from ADAPTER.

Upon advice of counsel, Williams initiated OSCAR's rewrite. The project's goal was to save as much of OSCAR 3.4 as legitimately could be used, and to excise those portions which had been copied from ADAPTER. Arney was entirely excluded from the process, and his copy of the ADAPTER code was locked away. Williams put eight other programmers on the project, none of whom had been involved in any way in the development of OSCAR 3.4. Williams provided the programmers with a description of the ZEKE operating system services so that they could rewrite the appropriate code. The rewrite project took about six months to complete and was finished in mid-November 1989. The resulting program was entitled OSCAR 3.5.

From that point on, Altai shipped only OSCAR 3.5 to its new customers. Altai also shipped OSCAR 3.5 as a "free upgrade" to all customers that had previously purchased OSCAR 3.4. While Altai and Williams acted responsibly to correct Arney's literal copying of the ADAPTER program, copyright infringement had occurred.

After CA originally instituted this action in the United States District Court for the District of New Jersey, the parties stipulated its transfer in March, 1989, to the Eastern District of New York where it was assigned to Judge Jacob Mishler. On October 26, 1989, Judge Mishler transferred the case to Judge Pratt who was sitting in the district court by designation. Judge Pratt conducted a six day trial from March 28 through April 6, 1990. He entered judgment on August 12, 1991, and this appeal followed.

[701] DISCUSSION

While both parties originally appealed from different aspects of the district court's judgment, Altai has now abandoned its appellate claims. In particular, Altai has conceded liability for the copying of ADAPTER into OSCAR 3.4 and raises no challenge to the award of $364,444 in damages on that score. Thus, we address only CA's appeal from the district court's rulings that: (1) Altai was not liable for copyright infringement in developing OSCAR 3.5; and (2) in developing both OSCAR 3.4 and 3.5, Altai was not liable for misappropriating CA's trade secrets.

CA makes two arguments. First, CA contends that the district court applied an erroneous method for determining whether there exists substantial similarity between computer programs, and thus, erred in determining that OSCAR 3.5 did not infringe the copyrights held on the different versions of its CA-SCHEDULER program. CA asserts that the test applied by the district court failed to account sufficiently for a computer program's non-literal elements. Second, CA maintains that the district court erroneously concluded that its state law trade secret claims had been preempted by the federal Copyright Act. See 17 U.S.C. § 301(a). We shall address each argument in turn.

I. COPYRIGHT INFRINGEMENT

In any suit for copyright infringement, the plaintiff must establish its ownership of a valid copyright, and that the defendant copied the copyrighted work. See Novelty Textile Mills, Inc. v. Joan Fabrics Corp., 558 F.2d 1090, 1092 (2d Cir.1977); see also 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.01, at 13-4 (1991) (hereinafter "Nimmer"). The plaintiff may prove defendant's copying either by direct evidence or, as is most often the case, by showing that (1) the defendant had access to the plaintiff's copyrighted work and (2) that defendant's work is substantially similar to the plaintiff's copyrightable material. See Walker v. Time Life Films, Inc., 784 F.2d 44, 48 (2d Cir.), cert. denied, 476 U.S. 1159, 106 S.Ct. 2278, 90 L.Ed.2d 721 (1986).

For the purpose of analysis, the district court assumed that Altai had access to the ADAPTER code when creating OSCAR 3.5. See Computer Assocs., 775 F.Supp. at 558. Thus, in determining whether Altai had unlawfully copied protected aspects of CA's ADAPTER, the district court narrowed its focus of inquiry to ascertaining whether Altai's OSCAR 3.5 was substantially similar to ADAPTER. Because we approve Judge Pratt's conclusions regarding substantial similarity, our analysis will proceed along the same assumption.

As a general matter, and to varying degrees, copyright protection extends beyond a literary work's strictly textual form to its non-literal components. As we have said, "[i]t is of course essential to any protection of literary property ... that the right cannot be limited literally to the text, else a plagiarist would escape by immaterial variations." Nichols v. Universal Pictures Co., 45 F.2d 119, 121 (2d Cir.1930) (L. Hand, J.), cert. denied, 282 U.S. 902, 51 S.Ct. 216, 75 L.Ed. 795 (1931). Thus, where "the fundamental essence or structure of one work is duplicated in another," 3 Nimmer, § 13.03[A], at 13-24, courts have found copyright infringement. See, e.g., Horgan v. Macmillan, 789 F.2d 157, 162 (2d Cir.1986) (recognizing that a book of photographs might infringe ballet choreography); Twentieth Century-Fox Film Corp. v. MCA, Inc., 715 F.2d 1327, 1329 (9th Cir.1983) (motion picture and television series); Sid & Marty Krofft Television Prods., Inc. v. McDonald's Corp., 562 F.2d 1157, 1167 (9th Cir.1977) (television commercial and television series); Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 55 (2d Cir.), cert. denied, 298 U.S. 669, 56 S.Ct. 835, 80 L.Ed. 1392 (1936) (play and motion picture); accord Stewart v. Abend, 495 U.S. 207, 238, 110 S.Ct. 1750, 1769, 109 L.Ed.2d 184 (1990) (recognizing that motion picture may infringe copyright in book by using its "unique setting, characters, plot, and sequence of events"). This black letter proposition is the springboard for our discussion.

[702] A. Copyright Protection for the Non-literal Elements of Computer Programs

It is now well settled that the literal elements of computer programs, i.e., their source and object codes, are the subject of copyright protection. See Whelan, 797 F.2d at 1233 (source and object code); CMS Software Design Sys., Inc. v. Info Designs, Inc., 785 F.2d 1246, 1247 (5th Cir.1986) (source code); Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1249 (3d Cir.1983), cert. dismissed, 464 U.S. 1033, 104 S.Ct. 690, 79 L.Ed.2d 158 (1984) (source and object code); Williams Elecs., Inc. v. Artic Int'l, Inc., 685 F.2d 870, 876-77 (3d Cir.1982) (object code). Here, as noted earlier, Altai admits having copied approximately 30% of the OSCAR 3.4 program from CA's ADAPTER source code, and does not challenge the district court's related finding of infringement.

In this case, the hotly contested issues surround OSCAR 3.5. As recounted above, OSCAR 3.5 is the product of Altai's carefully orchestrated rewrite of OSCAR 3.4. After the purge, none of the ADAPTER source code remained in the 3.5 version; thus, Altai made sure that the literal elements of its revamped OSCAR program were no longer substantially similar to the literal elements of CA's ADAPTER.

According to CA, the district court erroneously concluded that Altai's OSCAR 3.5 was not substantially similar to its own ADAPTER program. CA argues that this occurred because the district court "committed legal error in analyzing [its] claims of copyright infringement by failing to find that copyright protects expression contained in the non-literal elements of computer software." We disagree.

CA argues that, despite Altai's rewrite of the OSCAR code, the resulting program remained substantially similar to the structure of its ADAPTER program. As discussed above, a program's structure includes its non-literal components such as general flow charts as well as the more specific organization of inter-modular relationships, parameter lists, and macros. In addition to these aspects, CA contends that OSCAR 3.5 is also substantially similar to ADAPTER with respect to the list of services that both ADAPTER and OSCAR obtain from their respective operating systems. We must decide whether and to what extent these elements of computer programs are protected by copyright law.

The statutory terrain in this area has been well explored. See Lotus Dev. Corp. v. Paperback Software Int'l, 740 F.Supp. 37, 47-51 (D.Mass.1990); see also Whelan, 797 F.2d at 1240-42; Englund, at 885-90; Spivack, at 731-37. The Copyright Act affords protection to "original works of authorship fixed in any tangible medium of expression...." 17 U.S.C. § 102(a). This broad category of protected "works" includes "literary works," id. at § 102(a)(1), which are defined by the Act as

works, other than audiovisual works, expressed in words, numbers, or other verbal or numerical symbols or indicia, regardless of the nature of the material objects, such as books, periodicals, manuscripts, phonorecords, film tapes, disks, or cards, in which they are embodied.

17 U.S.C. § 101. While computer programs are not specifically listed as part of the above statutory definition, the legislative history leaves no doubt that Congress intended them to be considered literary works. See H.R.Rep. No. 1476, 94th Cong., 2d Sess. 54, reprinted in 1976 U.S.C.C.A.N. 5659, 5667 (hereinafter "House Report" ); Whelan, 797 F.2d at 1234; Apple Computer, 714 F.2d at 1247.

The syllogism that follows from the foregoing premises is a powerful one: if the non-literal structures of literary works are protected by copyright; and if computer programs are literary works, as we are told by the legislature; then the non-literal structures of computer programs are protected by copyright. See Whelan, 797 F.2d at 1234 ("By analogy to other literary works, it would thus appear that the copyrights of computer programs can be infringed even absent copying of the literal elements of the program."). We have no reservation in joining the company of those courts that have already ascribed to this logic. See, e.g., Johnson Controls, Inc. v. [703] Phoenix Control Sys., Inc., 886 F.2d 1173, 1175 (9th Cir.1989); Lotus Dev. Corp., 740 F.Supp. at 54; Digital Communications Assocs., Inc. v. Softklone Distrib. Corp., 659 F.Supp. 449, 455-56 (N.D.Ga.1987); Q-Co Industries, Inc. v. Hoffman, 625 F.Supp. 608, 615 (S.D.N.Y.1985); SAS Inst., Inc. v. S & H Computer Sys., Inc., 605 F.Supp. 816, 829-30 (M.D.Tenn.1985). However, that conclusion does not end our analysis. We must determine the scope of copyright protection that extends to a computer program's non-literal structure.

As a caveat, we note that our decision here does not control infringement actions regarding categorically distinct works, such as certain types of screen displays. These items represent products of computer programs, rather than the programs themselves, and fall under the copyright rubric of audiovisual works. If a computer audiovisual display is copyrighted separately as an audiovisual work, apart from the literary work that generates it (i.e., the program), the display may be protectable regardless of the underlying program's copyright status. See Stern Elecs., Inc. v. Kaufman, 669 F.2d 852, 855 (2d Cir.1982) (explaining that an audiovisual works copyright, rather than a copyright on the underlying program, extended greater protection to the sights and sounds generated by a computer video game because the same audiovisual display could be generated by different programs). Of course, the copyright protection that these displays enjoy extends only so far as their expression is protectable. See Data East USA, Inc. v. Epyx, Inc., 862 F.2d 204, 209 (9th Cir.1988). In this case, however, we are concerned not with a program's display, but the program itself, and then with only its non-literal components. In considering the copyrightability of these components, we must refer to venerable doctrines of copyright law.

1) Idea vs. Expression Dichotomy

It is a fundamental principle of copyright law that a copyright does not protect an idea, but only the expression of the idea. See Baker v. Selden, 101 U.S. 99, 25 L.Ed. 841 (1879); Mazer v. Stein, 347 U.S. 201, 217, 74 S.Ct. 460, 470, 98 L.Ed. 630 (1954). This axiom of common law has been incorporated into the governing statute. Section 102(b) of the Act provides:

In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.

17 U.S.C. § 102(b). See also House Report, at 5670 ("Copyright does not preclude others from using ideas or information revealed by the author's work.").

Congress made no special exception for computer programs. To the contrary, the legislative history explicitly states that copyright protects computer programs only "to the extent that they incorporate authorship in programmer's expression of original ideas, as distinguished from the ideas themselves." Id. at 5667; see also id. at 5670 ("Section 102(b) is intended ... to make clear that the expression adopted by the programmer is the copyrightable element in a computer program, and that the actual processes or methods embodied in the program are not within the scope of copyright law.").

Similarly, the National Commission on New Technological Uses of Copyrighted Works ("CONTU") established by Congress to survey the issues generated by the interrelationship of advancing technology and copyright law, see Pub.L. No. 93-573, § 201, 88 Stat. 1873 (1974), recommended, inter alia, that the 1976 Copyright Act "be amended ... to make it explicit that computer programs, to the extent that they embody the author's original creation, are proper subject matter for copyright." See National Commission on New Technological Uses of Copyrighted Works, Final Report 1 (1979) (hereinafter "CONTU Report" ). To that end, Congress adopted CONTU's suggestions and amended the Copyright Act by adding, among other things, a provision to 17 U.S.C. § 101 which defined the term "computer program." See Pub.L. No. 96-517, § 10(a), 94 Stat. [704] 3028 (1980). CONTU also "concluded that the idea-expression distinction should be used to determine which aspects of computer programs are copyrightable." Lotus Dev. Corp., 740 F.Supp. at 54 (citing CONTU Report, at 44).

Drawing the line between idea and expression is a tricky business. Judge Learned Hand noted that "[n]obody has ever been able to fix that boundary, and nobody ever can." Nichols, 45 F.2d at 121. Thirty years later his convictions remained firm. "Obviously, no principle can be stated as to when an imitator has gone beyond copying the 'idea,' and has borrowed its 'expression,' " Judge Hand concluded. "Decisions must therefore inevitably be ad hoc." Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir.1960).

The essentially utilitarian nature of a computer program further complicates the task of distilling its idea from its expression. See SAS Inst., 605 F.Supp. at 829; cf. Englund, at 893. In order to describe both computational processes and abstract ideas, its content "combines creative and technical expression." See Spivack, at 755. The variations of expression found in purely creative compositions, as opposed to those contained in utilitarian works, are not directed towards practical application. For example, a narration of Humpty Dumpty's demise, which would clearly be a creative composition, does not serve the same ends as, say, a recipe for scrambled eggs--which is a more process oriented text. Thus, compared to aesthetic works, computer programs hover even more closely to the elusive boundary line described in § 102(b).

The doctrinal starting point in analyses of utilitarian works, is the seminal case of Baker v. Selden, 101 U.S. 99, 25 L.Ed. 841 (1879). In Baker, the Supreme Court faced the question of "whether the exclusive property in a system of bookkeeping can be claimed, under the law of copyright, by means of a book in which that system is explained?" Id. at 101. Selden had copyrighted a book that expounded a particular method of bookkeeping. The book contained lined pages with headings intended to illustrate the manner in which the system operated. Baker's accounting publication included ledger sheets that employed "substantially the same ruled lines and headings...." Id. Selden's testator sued Baker for copyright infringement on the theory that the ledger sheets were protected by Selden's copyright.

The Supreme Court found nothing copyrightable in Selden's bookkeeping system, and rejected his infringement claim regarding the ledger sheets. The Court held that:

The fact that the art described in the book by illustrations of lines and figures which are reproduced in practice in the application of the art, makes no difference. Those illustrations are the mere language employed by the author to convey his ideas more clearly. Had he used words of description instead of diagrams (which merely stand in the place of words), there could not be the slightest doubt that others, applying the art to practical use, might lawfully draw the lines and diagrams which were in the author's mind, and which he thus described by words in his book.

The copyright of a work on mathematical science cannot give to the author an exclusive right to the methods of operation which he propounds, or to the diagrams which he employs to explain them, so as to prevent an engineer from using them whenever occasion requires.

Id. at 103.

To the extent that an accounting text and a computer program are both "a set of statements or instructions ... to bring about a certain result," 17 U.S.C. § 101, they are roughly analogous. In the former case, the processes are ultimately conducted by human agency; in the latter, by electronic means. In either case, as already stated, the processes themselves are not protectable. But the holding in Baker goes farther. The Court concluded that those aspects of a work, which "must necessarily be used as incident to" the idea, system or process that the work describes, are also not copyrightable. 101 U.S. at 104. Selden's ledger sheets, therefore, enjoyed [705] no copyright protection because they were "necessary incidents to" the system of accounting that he described. Id. at 103. From this reasoning, we conclude that those elements of a computer program that are necessarily incidental to its function are similarly unprotectable.

While Baker v. Selden provides a sound analytical foundation, it offers scant guidance on how to separate idea or process from expression, and moreover, on how to further distinguish protectable expression from that expression which "must necessarily be used as incident to" the work's underlying concept. In the context of computer programs, the Third Circuit's noted decision in Whelan has, thus far, been the most thoughtful attempt to accomplish these ends.

The court in Whelan faced substantially the same problem as is presented by this case. There, the defendant was accused of making off with the non-literal structure of the plaintiff's copyrighted dental lab management program, and employing it to create its own competitive version. In assessing whether there had been an infringement, the court had to determine which aspects of the programs involved were ideas, and which were expression. In separating the two, the court settled upon the following conceptual approach:

[T]he line between idea and expression may be drawn with reference to the end sought to be achieved by the work in question. In other words, the purpose or function of a utilitarian work would be the work's idea, and everything that is not necessary to that purpose or function would be part of the expression of the idea.... Where there are various means of achieving the desired purpose, then the particular means chosen is not necessary to the purpose; hence, there is expression, not idea.

797 F.2d at 1236 (citations omitted). The "idea" of the program at issue in Whelan was identified by the court as simply "the efficient management of a dental laboratory." Id. at n. 28.

So far, in the courts, the Whelan rule has received a mixed reception. While some decisions have adopted its reasoning, see, e.g., Bull HN Info. Sys., Inc. v. American Express Bank, Ltd., 1990 Copyright Law Dec. (CCH) p 26,555 at 23,278, 1990 WL 48098 (S.D.N.Y.1990); Dynamic Solutions, Inc. v. Planning & Control, Inc., 1987 Copyright Law Dec. (CCH) p 26,062 at 20,912, 1987 WL 6419 (S.D.N.Y.1987); Broderbund Software Inc. v. Unison World, Inc., 648 F.Supp. 1127, 1133 (N.D.Cal.1986), others have rejected it, see Plains Cotton Co-op v. Goodpasture Computer Serv., Inc., 807 F.2d 1256, 1262 (5th Cir.), cert. denied, 484 U.S. 821, 108 S.Ct. 80, 98 L.Ed.2d 42 (1987); cf. Synercom Technology, Inc. v. University Computing Co., 462 F.Supp. 1003, 1014 (N.D.Tex.1978) (concluding that order and sequence of data on computer input formats was idea not expression).

Whelan has fared even more poorly in the academic community, where its standard for distinguishing idea from expression has been widely criticized for being conceptually overbroad. See, e.g., Englund, at 881; Menell, at 1074, 1082; Kretschmer, at 837-39; Spivack, at 747-55; Thomas M. Gage, Note, Whelan Associates v. Jaslow Dental Laboratories: Copyright Protection for Computer Software Structure--What's the Purpose?, 1987 WIS.L.REV. 859, 860-61 (1987). The leading commentator in the field has stated that "[t]he crucial flaw in [Whelan 's] reasoning is that it assumes that only one 'idea,' in copyright law terms, underlies any computer program, and that once a separable idea can be identified, everything else must be expression." 3 Nimmer § 13.03(F), at 13-62.34. This criticism focuses not upon the program's ultimate purpose but upon the reality of its structural design. As we have already noted, a computer program's ultimate function or purpose is the composite result of interacting subroutines. Since each subroutine is itself a program, and thus, may be said to have its own "idea," Whelan 's general formulation that a program's overall purpose equates with the program's idea is descriptively inadequate.

Accordingly, we think that Judge Pratt wisely declined to follow Whelan. See [706] Computer Assocs., 775 F.Supp. at 558-60. In addition to noting the weakness in the Whelan definition of "program-idea," mentioned above, Judge Pratt found that Whelan 's synonymous use of the terms "structure, sequence, and organization," see Whelan, 797 F.2d at 1224 n. 1, demonstrated a flawed understanding of a computer program's method of operation. See Computer Assocs., 775 F.Supp. at 559-60 (discussing the distinction between a program's "static structure" and "dynamic structure"). Rightly, the district court found Whelan 's rationale suspect because it is so closely tied to what can now be seen--with the passage of time--as the opinion's somewhat outdated appreciation of computer science.

2) Substantial Similarity Test for Computer Program Structure: Abstraction-Filtration-Comparison

We think that Whelan 's approach to separating idea from expression in computer programs relies too heavily on metaphysical distinctions and does not place enough emphasis on practical considerations. Cf. Apple Computer, 714 F.2d at 1253 (rejecting certain commercial constraints on programming as a helpful means of distinguishing idea from expression because they did "not enter into the somewhat metaphysical issue of whether particular ideas and expressions have merged"). As the cases that we shall discuss demonstrate, a satisfactory answer to this problem cannot be reached by resorting, a priori, to philosophical first principals.

As discussed herein, we think that district courts would be well-advised to undertake a three-step procedure, based on the abstractions test utilized by the district court, in order to determine whether the non-literal elements of two or more computer programs are substantially similar. This approach breaks no new ground; rather, it draws on such familiar copyright doctrines as merger, scenes a faire, and public domain. In taking this approach, however, we are cognizant that computer technology is a dynamic field which can quickly outpace judicial decisionmaking. Thus, in cases where the technology in question does not allow for a literal application of the procedure we outline below, our opinion should not be read to foreclose the district courts of our circuit from utilizing a modified version.

In ascertaining substantial similarity under this approach, a court would first break down the allegedly infringed program into its constituent structural parts. Then, by examining each of these parts for such things as incorporated ideas, expression that is necessarily incidental to those ideas, and elements that are taken from the public domain, a court would then be able to sift out all non-protectable material. Left with a kernel, or possible kernels, of creative expression after following this process of elimination, the court's last step would be to compare this material with the structure of an allegedly infringing program. The result of this comparison will determine whether the protectable elements of the programs at issue are substantially similar so as to warrant a finding of infringement. It will be helpful to elaborate a bit further.

Step One: Abstraction

As the district court appreciated, see Computer Assocs., 775 F.Supp. at 560, the theoretic framework for analyzing substantial similarity expounded by Learned Hand in the Nichols case is helpful in the present context. In Nichols, we enunciated what has now become known as the "abstractions" test for separating idea from expression:

Upon any work ... a great number of patterns of increasing generality will fit equally well, as more and more of the incident is left out. The last may perhaps be no more than the most general statement of what the [work] is about, and at times might consist only of its title; but there is a point in this series of abstractions where they are no longer protected, since otherwise the [author] could prevent the use of his "ideas," to which, apart from their expression, his property is never extended.

Nichols, 45 F.2d at 121.

While the abstractions test was originally applied in relation to literary works such [707] as novels and plays, it is adaptable to computer programs. In contrast to the Whelan approach, the abstractions test "implicitly recognizes that any given work may consist of a mixture of numerous ideas and expressions." 3 Nimmer § 13.03[F], at 13-62.34-63.

As applied to computer programs, the abstractions test will comprise the first step in the examination for substantial similarity. Initially, in a manner that resembles reverse engineering on a theoretical plane, a court should dissect the allegedly copied program's structure and isolate each level of abstraction contained within it. This process begins with the code and ends with an articulation of the program's ultimate function. Along the way, it is necessary essentially to retrace and map each of the designer's steps--in the opposite order in which they were taken during the program's creation. See Background: Computer Program Design, supra.

As an anatomical guide to this procedure, the following description is helpful:

At the lowest level of abstraction, a computer program may be thought of in its entirety as a set of individual instructions organized into a hierarchy of modules. At a higher level of abstraction, the instructions in the lowest-level modules may be replaced conceptually by the functions of those modules. At progressively higher levels of abstraction, the functions of higher-level modules conceptually replace the implementations of those modules in terms of lower-level modules and instructions, until finally, one is left with nothing but the ultimate function of the program.... A program has structure at every level of abstraction at which it is viewed. At low levels of abstraction, a program's structure may be quite complex; at the highest level it is trivial.

Englund, at 897-98; cf. Spivack, at 774.

Step Two: Filtration

Once the program's abstraction levels have been discovered, the substantial similarity inquiry moves from the conceptual to the concrete. Professor Nimmer suggests, and we endorse, a "successive filtering method" for separating protectable expression from non-protectable material. See generally 3 Nimmer § 13.03[F]. This process entails examining the structural components at each level of abstraction to determine whether their particular inclusion at that level was "idea" or was dictated by considerations of efficiency, so as to be necessarily incidental to that idea; required by factors external to the program itself; or taken from the public domain and hence is nonprotectable expression. See also Kretschmer, at 844-45 (arguing that program features dictated by market externalities or efficiency concerns are unprotectable). The structure of any given program may reflect some, all, or none of these considerations. Each case requires its own fact specific investigation.

Strictly speaking, this filtration serves "the purpose of defining the scope of plaintiff's copyright." Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1475 (9th Cir.) (endorsing "analytic dissection" of computer programs in order to isolate protectable expression), cert. denied, --- U.S. ----, 113 S.Ct. 198, 121 L.Ed.2d 141 (1992). By applying well developed doctrines of copyright law, it may ultimately leave behind a "core of protectable material." 3 Nimmer § 13.03[F], at 13-72. Further explication of this second step may be helpful.

(a) Elements Dictated by Efficiency

The portion of Baker v. Selden, discussed earlier, which denies copyright protection to expression necessarily incidental to the idea being expressed, appears to be the cornerstone for what has developed into the doctrine of merger. See Morrissey v. Proctor & Gamble Co., 379 F.2d 675, 678-79 (1st Cir.1967) (relying on Baker for the proposition that expression embodying the rules of a sweepstakes contest was inseparable from the idea of the contest itself, and therefore were not protectable by copyright); see also Digital Communications, 659 F.Supp. at 457. The doctrine's underlying principle is that "[w]hen there is essentially only one way to express an idea, the idea and its expression are inseparable [708] and copyright is no bar to copying that expression." Concrete Machinery Co. v. Classic Lawn Ornaments, Inc., 843 F.2d 600, 606 (1st Cir.1988). Under these circumstances, the expression is said to have "merged" with the idea itself. In order not to confer a monopoly of the idea upon the copyright owner, such expression should not be protected. See Herbert Rosenthal Jewelry Corp. v. Kalpakian, 446 F.2d 738, 742 (9th Cir.1971).

CONTU recognized the applicability of the merger doctrine to computer programs. In its report to Congress it stated that:

[C]opyrighted language may be copied without infringing when there is but a limited number of ways to express a given idea.... In the computer context, this means that when specific instructions, even though previously copyrighted, are the only and essential means of accomplishing a given task, their later use by another will not amount to infringement.

CONTU Report, at 20. While this statement directly concerns only the application of merger to program code, that is, the textual aspect of the program, it reasonably suggests that the doctrine fits comfortably within the general context of computer programs.

Furthermore, when one considers the fact that programmers generally strive to create programs "that meet the user's needs in the most efficient manner," Menell, at 1052, the applicability of the merger doctrine to computer programs becomes compelling. In the context of computer program design, the concept of efficiency is akin to deriving the most concise logical proof or formulating the most succinct mathematical computation. Thus, the more efficient a set of modules are, the more closely they approximate the idea or process embodied in that particular aspect of the program's structure.

While, hypothetically, there might be a myriad of ways in which a programmer may effectuate certain functions within a program,--i.e., express the idea embodied in a given subroutine--efficiency concerns may so narrow the practical range of choice as to make only one or two forms of expression workable options. See 3 Nimmer § 13.03[F], at 13-63; see also Whelan, 797 F.2d at 1243 n. 43 ("It is true that for certain tasks there are only a very limited number of file structures available, and in such cases the structures might not be copyrightable...."). Of course, not all program structure is informed by efficiency concerns. See Menell, at 1052 (besides efficiency, simplicity related to user accommodation has become a programming priority). It follows that in order to determine whether the merger doctrine precludes copyright protection to an aspect of a program's structure that is so oriented, a court must inquire "whether the use of this particular set of modules is necessary efficiently to implement that part of the program's process" being implemented. Englund, at 902. If the answer is yes, then the expression represented by the programmer's choice of a specific module or group of modules has merged with their underlying idea and is unprotected. Id. at 902-03.

Another justification for linking structural economy with the application of the merger doctrine stems from a program's essentially utilitarian nature and the competitive forces that exist in the software marketplace. See Kretschmer, at 842. Working in tandem, these factors give rise to a problem of proof which merger helps to eliminate.

Efficiency is an industry-wide goal. Since, as we have already noted, there may be only a limited number of efficient implementations for any given program task, it is quite possible that multiple programmers, working independently, will design the identical method employed in the allegedly infringed work. Of course, if this is the case, there is no copyright infringement. See Roth Greeting Cards v. United Card Co., 429 F.2d 1106, 1110 (9th Cir.1970); Sheldon, 81 F.2d at 54.

Under these circumstances, the fact that two programs contain the same efficient structure may as likely lead to an inference of independent creation as it does to one of copying. See 3 Nimmer § 13.03[F], at 13-65; cf. Herbert Rosenthal [709] Jewelry Corp., 446 F.2d at 741 (evidence of independent creation may stem from defendant's standing as a designer of previous similar works). Thus, since evidence of similarly efficient structure is not particularly probative of copying, it should be disregarded in the overall substantial similarity analysis. See 3 Nimmer § 13.03[F], at 13-65.

We find support for applying the merger doctrine in cases that have already addressed the question of substantial similarity in the context of computer program structure. Most recently, in Lotus Dev. Corp., 740 F.Supp. at 66, the district court had before it a claim of copyright infringement relating to the structure of a computer spreadsheet program. The court observed that "the basic spreadsheet screen display that resembles a rotated 'L' ..., if not present in every expression of such a program, is present in most expressions." Id. Similarly, the court found that "an essential detail present in most if not all expressions of an electronic spreadsheet--is the designation of a particular key that, when pressed, will invoke the menu command system." Id. Applying the merger doctrine, the court denied copyright protection to both program elements.

In Manufacturers Technologies, Inc. v. Cams, Inc., 706 F.Supp. 984, 995-99 (D.Conn.1989), the infringement claims stemmed from various alleged program similarities "as indicated in their screen displays." Id. at 990. Stressing efficiency concerns in the context of a merger analysis, the court determined that the program's method of allowing the user to navigate within the screen displays was not protectable because, in part, "the process or manner of navigating internally on any specific screen displays ... is limited in the number of ways it may be simply achieved to facilitate user comfort." Id. at 995.

The court also found that expression contained in various screen displays (in the form of alphabetical and numerical columns) was not the proper subject of copyright protection because it was "necessarily incident to the idea[s]" embodied in the displays. Id. at 996-97. Cf. Digital Communications, 659 F.Supp. at 460 (finding no merger and affording copyright protection to program's status screen display because "modes of expression chosen ... are clearly not necessary to the idea of the status screen").

We agree with the approach taken in these decisions, and conclude that application of the merger doctrine in this setting is an effective way to eliminate non-protectable expression contained in computer programs.

(b) Elements Dictated By External Factors

We have stated that where "it is virtually impossible to write about a particular historical era or fictional theme without employing certain 'stock' or standard literary devices," such expression is not copyrightable. Hoehling v. Universal City Studios, Inc., 618 F.2d 972, 979 (2d Cir.), cert. denied, 449 U.S. 841, 101 S.Ct. 121, 66 L.Ed.2d 49 (1980). For example, the Hoehling case was an infringement suit stemming from several works on the Hindenberg disaster. There we concluded that similarities in representations of German beer halls, scenes depicting German greetings such as "Heil Hitler," or the singing of certain German songs would not lead to a finding of infringement because they were " 'indispensable, or at least standard, in the treatment of' " life in Nazi Germany. Id. (quoting Alexander v. Haley, 460 F.Supp. 40, 45 (S.D.N.Y.1978)). This is known as the scenes a faire doctrine, and like "merger," it has its analogous application to computer programs. Cf. Data East USA, 862 F.2d at 208 (applying scenes a faire to a home computer video game).

Professor Nimmer points out that "in many instances it is virtually impossible to write a program to perform particular functions in a specific computing environment without employing standard techniques." 3 Nimmer § 13.03[F], at 13-65. This is a result of the fact that a programmer's freedom of design choice is often circumscribed by extrinsic considerations such as (1) the mechanical specifications of the computer on which a particular program [710] is intended to run; (2) compatibility requirements of other programs with which a program is designed to operate in conjunction; (3) computer manufacturers' design standards; (4) demands of the industry being serviced; and (5) widely accepted programming practices within the computer industry. Id. at 13-66-71.

Courts have already considered some of these factors in denying copyright protection to various elements of computer programs. In the Plains Cotton case, the Fifth Circuit refused to reverse the district court's denial of a preliminary injunction against an alleged program infringer because, in part, "many of the similarities between the ... programs [were] dictated by the externalities of the cotton market." 807 F.2d at 1262.

In Manufacturers Technologies, the district court noted that the program's method of screen navigation "is influenced by the type of hardware that the software is designed to be used on." 706 F.Supp. at 995. Because, in part, "the functioning of the hardware package impact[ed] and constrain[ed] the type of navigational tools used in plaintiff's screen displays," the court denied copyright protection to that aspect of the program. Id.; cf. Data East USA, 862 F.2d at 209 (reversing a district court's finding of audiovisual work infringement because, inter alia, "the use of the Commodore computer for a karate game intended for home consumption is subject to various constraints inherent in the use of that computer").

Finally, the district court in Q-Co Industries rested its holding on what, perhaps, most closely approximates a traditional scenes a faire rationale. There, the court denied copyright protection to four program modules employed in a teleprompter program. This decision was ultimately based upon the court's finding that "the same modules would be an inherent part of any prompting program." 625 F.Supp. at 616.

Building upon this existing case law, we conclude that a court must also examine the structural content of an allegedly infringed program for elements that might have been dictated by external factors.

(c) Elements taken From the Public Domain

Closely related to the non-protectability of scenes a faire, is material found in the public domain. Such material is free for the taking and cannot be appropriated by a single author even though it is included in a copyrighted work. See E.F. Johnson Co. v. Uniden Corp. of America, 623 F.Supp. 1485, 1499 (D.Minn.1985); see also Sheldon, 81 F.2d at 54. We see no reason to make an exception to this rule for elements of a computer program that have entered the public domain by virtue of freely accessible program exchanges and the like. See 3 Nimmer § 13.03[F]; see also Brown Bag Software, 960 F.2d at 1473 (affirming the district court's finding that " '[p]laintiffs may not claim copyright protection of an ... expression that is, if not standard, then commonplace in the computer software industry.' "). Thus, a court must also filter out this material from the allegedly infringed program before it makes the final inquiry in its substantial similarity analysis.

Step Three: Comparison

The third and final step of the test for substantial similarity that we believe appropriate for non-literal program components entails a comparison. Once a court has sifted out all elements of the allegedly infringed program which are "ideas" or are dictated by efficiency or external factors, or taken from the public domain, there may remain a core of protectable expression. In terms of a work's copyright value, this is the golden nugget. See Brown Bag Software, 960 F.2d at 1475. At this point, the court's substantial similarity inquiry focuses on whether the defendant copied any aspect of this protected expression, as well as an assessment of the copied portion's relative importance with respect to the plaintiff's overall program. See 3 Nimmer § 13.03[F]; Data East USA, 862 F.2d at 208 ("To determine whether similarities result from unprotectable expression, analytic dissection of similarities may be [711] performed. If ... all similarities in expression arise from use of common ideas, then no substantial similarity can be found.").

3) Policy Considerations

We are satisfied that the three step approach we have just outlined not only comports with, but advances the constitutional policies underlying the Copyright Act. Since any method that tries to distinguish idea from expression ultimately impacts on the scope of copyright protection afforded to a particular type of work, "the line [it draws] must be a pragmatic one, which also keeps in consideration 'the preservation of the balance between competition and protection....' " Apple Computer, 714 F.2d at 1253 (citation omitted).

CA and some amici argue against the type of approach that we have set forth on the grounds that it will be a disincentive for future computer program research and development. At bottom, they claim that if programmers are not guaranteed broad copyright protection for their work, they will not invest the extensive time, energy and funds required to design and improve program structures. While they have a point, their argument cannot carry the day. The interest of the copyright law is not in simply conferring a monopoly on industrious persons, but in advancing the public welfare through rewarding artistic creativity, in a manner that permits the free use and development of non-protectable ideas and processes.

In this respect, our conclusion is informed by Justice Stewart's concise discussion of the principles that correctly govern the adaptation of the copyright law to new circumstances. In Twentieth Century Music Corp. v. Aiken, he wrote:

The limited scope of the copyright holder's statutory monopoly, like the limited copyright duration required by the Constitution, reflects a balance of competing claims upon the public interest: Creative work is to be encouraged and rewarded, but private motivation must ultimately serve the cause of promoting broad public availability of literature, music, and the other arts.

The immediate effect of our copyright law is to secure a fair return for an "author's" creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good.... When technological change has rendered its literal terms ambiguous, the Copyright Act must be construed in light of this basic purpose.

422 U.S. 151, 156, 95 S.Ct. 2040, 2043-44, 45 L.Ed.2d 84 (1975) (citations and footnotes omitted).

Recently, the Supreme Court has emphatically reiterated that "[t]he primary objective of copyright is not to reward the labor of authors...." Feist Publications, Inc. v. Rural Tel. Serv. Co., --- U.S. ----, ----, 111 S.Ct. 1282, 1290, 113 L.Ed.2d 358 (1991) (emphasis added). While the Feist decision deals primarily with the copyrightability of purely factual compilations, its underlying tenets apply to much of the work involved in computer programming. Feist put to rest the "sweat of the brow" doctrine in copyright law. Id. at ----, 111 S.Ct. at 1295. The rationale of that doctrine "was that copyright was a reward for the hard work that went into compiling facts." Id. at ----, 111 S.Ct. at 1291. The Court flatly rejected this justification for extending copyright protection, noting that it "eschewed the most fundamental axiom of copyright law--that no one may copyright facts or ideas." Id.

Feist teaches that substantial effort alone cannot confer copyright status on an otherwise uncopyrightable work. As we have discussed, despite the fact that significant labor and expense often goes into computer program flow-charting and debugging, that process does not always result in inherently protectable expression. Thus, Feist implicitly undercuts the Whelan rationale, "which allow[ed] copyright protection beyond the literal computer code ... [in order to] provide the proper incentive for programmers by protecting their most valuable efforts...." Whelan, 797 F.2d at 1237 (footnote omitted). We note that Whelan was decided prior to Feist when the "sweat of the brow" doctrine still had vitality. In view of the Supreme [712] Court's recent holding, however, we must reject the legal basis of CA's disincentive argument.

Furthermore, we are unpersuaded that the test we approve today will lead to the dire consequences for the computer program industry that plaintiff and some amici predict. To the contrary, serious students of the industry have been highly critical of the sweeping scope of copyright protection engendered by the Whelan rule, in that it "enables first comers to 'lock up' basic programming techniques as implemented in programs to perform particular tasks." Menell, at 1087; see also Spivack, at 765 (Whelan "results in an inhibition of creation by virtue of the copyright owner's quasi-monopoly power").

To be frank, the exact contours of copyright protection for non-literal program structure are not completely clear. We trust that as future cases are decided, those limits will become better defined. Indeed, it may well be that the Copyright Act serves as a relatively weak barrier against public access to the theoretical interstices behind a program's source and object codes. This results from the hybrid nature of a computer program, which, while it is literary expression, is also a highly functional, utilitarian component in the larger process of computing.

Generally, we think that copyright registration--with its indiscriminating availability--is not ideally suited to deal with the highly dynamic technology of computer science. Thus far, many of the decisions in this area reflect the courts' attempt to fit the proverbial square peg in a round hole. The district court, see Computer Assocs., 775 F.Supp. at 560, and at least one commentator have suggested that patent registration, with its exacting up-front novelty and non-obviousness requirements, might be the more appropriate rubric of protection for intellectual property of this kind. See Randell M. Whitmeyer, Comment, A Plea for Due Processes: Defining the Proper Scope of Patent Protection for Computer Software, 85 Nw.U.L.REV. 1103, 1123-25 (1991); see also Lotus Dev. Corp. v. Borland Int'l, Inc., 788 F.Supp. 78, 91 (D.Mass.1992) (discussing the potentially supplemental relationship between patent and copyright protection in the context of computer programs). In any event, now that more than 12 years have passed since CONTU issued its final report, the resolution of this specific issue could benefit from further legislative investigation--perhaps a CONTU II.

In the meantime, Congress has made clear that computer programs are literary works entitled to copyright protection. Of course, we shall abide by these instructions, but in so doing we must not impair the overall integrity of copyright law. While incentive based arguments in favor of broad copyright protection are perhaps attractive from a pure policy perspective, see Lotus Dev. Corp., 740 F.Supp. at 58, ultimately, they have a corrosive effect on certain fundamental tenets of copyright doctrine. If the test we have outlined results in narrowing the scope of protection, as we expect it will, that result flows from applying, in accordance with Congressional intent, long-standing principles of copyright law to computer programs. Of course, our decision is also informed by our concern that these fundamental principles remain undistorted.

B. The District Court Decision

We turn now to our review of the district court's decision in this particular case. At the outset, we must address CA's claim that the district court erred by relying too heavily on the court appointed expert's "personal opinions on the factual and legal issues before the court."

1) Use of Expert Evidence in Determining Substantial Similarity Between Computer Programs

Pursuant to Fed.R.Evid. 706, and with the consent of both Altai and CA, Judge Pratt appointed and relied upon Dr. Randall Davis of the Massachusetts Institute of Technology as the court's own expert witness on the issue of substantial similarity. Dr. Davis submitted a comprehensive written report that analyzed the various aspects of the computer programs [713] at issue and evaluated the parties' expert evidence. At trial, Dr. Davis was extensively cross-examined by both CA and Altai.

The well-established general rule in this circuit has been to limit the use of expert opinion in determining whether works at issue are substantially similar. As a threshold matter, expert testimony may be used to assist the fact finder in ascertaining whether the defendant had copied any part of the plaintiff's work. See Arnstein v. Porter, 154 F.2d 464, 468 (2d Cir.1946). To this end, "the two works are to be compared in their entirety ... [and] in making such comparison resort may properly be made to expert analysis...." 3 Nimmer § 13.03[E], at 13-62.16.

However, once some amount of copying has been established, it remains solely for the trier of fact to determine whether the copying was "illicit," that is to say, whether the "defendant took from plaintiff's works so much of what is pleasing to [lay observers] who comprise the audience for whom such [works are] composed, that defendant wrongfully appropriated something which belongs to the plaintiff." Arnstein, 154 F.2d at 473. Since the test for illicit copying is based upon the response of ordinary lay observers, expert testimony is thus "irrelevant" and not permitted. Id. at 468, 473. We have subsequently described this method of inquiry as "merely an alternative way of formulating the issue of substantial similarity." Ideal Toy Corp. v. Fab-Lu Ltd. (Inc.), 360 F.2d 1021, 1023 n. 2 (2d Cir.1966).

Historically, Arnstein 's ordinary observer standard had its roots in "an attempt to apply the 'reasonable person' doctrine as found in other areas of the law to copyright." 3 Nimmer § 13.03[E], at 13-62.10-11. That approach may well have served its purpose when the material under scrutiny was limited to art forms readily comprehensible and generally familiar to the average lay person. However, in considering the extension of the rule to the present case, we are reminded of Holmes' admonition that, "[t]he life of the law has not been logic: it has been experience." O.W. Holmes, Jr., THE COMMON LAW 1 (1881).

Thus, in deciding the limits to which expert opinion may be employed in ascertaining the substantial similarity of computer programs, we cannot disregard the highly complicated and technical subject matter at the heart of these claims. Rather, we recognize the reality that computer programs are likely to be somewhat impenetrable by lay observers--whether they be judges or juries--and, thus, seem to fall outside the category of works contemplated by those who engineered the Arnstein test. Cf. Dawson v. Hinshaw Music Inc., 905 F.2d 731, 737 (4th Cir.) ("departure from the lay characterization is warranted only where the intended audience possesses 'specialized expertise' "), cert. denied, 498 U.S. 981, 111 S.Ct. 511, 112 L.Ed.2d 523 (1990). As Judge Pratt correctly observed:

In the context of computer programs, many of the familiar tests of similarity prove to be inadequate, for they were developed historically in the context of artistic and literary, rather than utilitarian, works.

Computer Assocs., 775 F.Supp. at 558.

In making its finding on substantial similarity with respect to computer programs, we believe that the trier of fact need not be limited by the strictures of its own lay perspective. See Dawson, 905 F.2d at 735; Whelan, 797 F.2d at 1233; Broderbund, 648 F.Supp. at 1136 (stating in dictum: "an integrated test involving expert testimony and analytic dissection may well be the wave of the future in this area...."); Brown Bag Software, 960 F.2d at 1478-79 (Sneed, J., concurring); see also 3 Nimmer § 13.03[E]; but see Brown Bag Software, 960 F.2d at 1475 (applying the "ordinary reasonable person" standard in substantial similarity test for computer programs). Rather, we leave it to the discretion of the district court to decide to what extent, if any, expert opinion, regarding the highly technical nature of computer programs, is warranted in a given case.

In so holding, we do not intend to disturb the traditional role of lay observers in judging [714] substantial similarity in copyright cases that involve the aesthetic arts, such as music, visual works or literature.

In this case, Dr. Davis' opinion was instrumental in dismantling the intricacies of computer science so that the court could formulate and apply an appropriate rule of law. While Dr. Davis' report and testimony undoubtedly shed valuable light on the subject matter of the litigation, Judge Pratt remained, in the final analysis, the trier of fact. The district court's use of the expert's assistance, in the context of this case, was entirely appropriate.

2) Evidentiary Analysis

The district court had to determine whether Altai's OSCAR 3.5 program was substantially similar to CA's ADAPTER. We note that Judge Pratt's method of analysis effectively served as a road map for our own, with one exception--Judge Pratt filtered out the non-copyrightable aspects of OSCAR 3.5 rather than those found in ADAPTER, the allegedly infringed program. We think that our approach--i.e., filtering out the unprotected aspects of an allegedly infringed program and then comparing the end product to the structure of the suspect program--is preferable, and therefore believe that district courts should proceed in this manner in future cases.

We opt for this strategy because, in some cases, the defendant's program structure might contain protectable expression and/or other elements that are not found in the plaintiff's program. Since it is extraneous to the allegedly copied work, this material would have no bearing on any potential substantial similarity between the two programs. Thus, its filtration would be wasteful and unnecessarily time consuming. Furthermore, by focusing the analysis on the infringing rather than on the infringed material, a court may mistakenly place too little emphasis on a quantitatively small misappropriation which is, in reality, a qualitatively vital aspect of the plaintiff's protectable expression.

The fact that the district court's analysis proceeded in the reverse order, however, had no material impact on the outcome of this case. Since Judge Pratt determined that OSCAR effectively contained no protectable expression whatsoever, the most serious charge that can be levelled against him is that he was overly thorough in his examination.

The district court took the first step in the analysis set forth in this opinion when it separated the program by levels of abstraction. The district court stated:

As applied to computer software programs, this abstractions test would progress in order of "increasing generality" from object code, to source code, to parameter lists, to services required, to general outline. In discussing the particular similarities, therefore, we shall focus on these levels.

Computer Assocs., 775 F.Supp. at 560. While the facts of a different case might require that a district court draw a more particularized blueprint of a program's overall structure, this description is a workable one for the case at hand.

Moving to the district court's evaluation of OSCAR 3.5's structural components, we agree with Judge Pratt's systematic exclusion of non-protectable expression. With respect to code, the district court observed that after the rewrite of OSCAR 3.4 to OSCAR 3.5, "there remained virtually no lines of code that were identical to ADAPTER." Id. at 561. Accordingly, the court found that the code "present[ed] no similarity at all." Id. at 562.

Next, Judge Pratt addressed the issue of similarity between the two programs' parameter lists and macros. He concluded that, viewing the conflicting evidence most favorably to CA, it demonstrated that "only a few of the lists and macros were similar to protected elements in ADAPTER; the others were either in the public domain or dictated by the functional demands of the program." Id. As discussed above, functional elements and elements taken from the public domain do not qualify for copyright protection. With respect to the few remaining parameter lists and macros, the district court could reasonably conclude that they did not warrant a [715] finding of infringement given their relative contribution to the overall program. See Warner Bros., Inc. v. American Broadcasting Cos., Inc., 720 F.2d 231, 242 (2d Cir.1983) (discussing de minimis exception which allows for literal copying of a small and usually insignificant portion of the plaintiff's work); 3 Nimmer § 13.03[F], at 13-74. In any event, the district court reasonably found that, for lack of persuasive evidence, CA failed to meet its burden of proof on whether the macros and parameter lists at issue were substantially similar. See Computer Assocs., 775 F.Supp. at 562.

The district court also found that the overlap exhibited between the list of services required for both ADAPTER and OSCAR 3.5 was "determined by the demands of the operating system and of the applications program to which it [was] to be linked through ADAPTER or OSCAR...." Id. In other words, this aspect of the program's structure was dictated by the nature of other programs with which it was designed to interact and, thus, is not protected by copyright.

Finally, in his infringement analysis, Judge Pratt accorded no weight to the similarities between the two programs' organizational charts, "because [the charts were] so simple and obvious to anyone exposed to the operation of the program[s]." Id. CA argues that the district court's action in this regard "is not consistent with copyright law"--that "obvious" expression is protected, and that the district court erroneously failed to realize this. However, to say that elements of a work are "obvious," in the manner in which the district court used the word, is to say that they "follow naturally from the work's theme rather than from the author's creativity." 3 Nimmer § 13.03[F], at 13-65. This is but one formulation of the scenes a faire doctrine, which we have already endorsed as a means of weeding out unprotectable expression.

CA argues, at some length, that many of the district court's factual conclusions regarding the creative nature of its program's components are simply wrong. Of course, we are limited in our review of factual findings to setting aside only those that we determine are clearly erroneous. See Fed.R.Civ.P. 52. Upon a thorough review of the voluminous record in this case, which is comprised of conflicting testimony and other highly technical evidence, we discern no error on the part of Judge Pratt, let alone clear error.

Since we accept Judge Pratt's factual conclusions and the results of his legal analysis, we affirm his denial of CA's copyright infringement claim based upon OSCAR 3.5. We emphasize that, like all copyright infringement cases, those that involve computer programs are highly fact specific. The amount of protection due structural elements, in any given case, will vary according to the protectable expression found to exist within the program at issue.

II. TRADE SECRET PREEMPTION

In its complaint, CA alleged that Altai misappropriated the trade secrets contained in the ADAPTER program. Prior to trial, while the proceedings were still before Judge Mishler, Altai moved to dismiss and for summary judgment on CA's trade secret misappropriation claim. Altai argued that section 301 of the Copyright Act preempted CA's state law cause of action. Judge Mishler denied Altai's motion, reasoning that " '[t]he elements of the tort of appropriation of trade secrets through the breach of contract or confidence by an employee are not the same as the elements of a claim of copyright infringement.' " Computer Assocs., 775 F.Supp. at 563.

The parties addressed the preemption issue again, both in pre- and post-trial briefs. Judge Pratt then reconsidered and reversed Judge Mishler's earlier ruling. The district court concluded that CA's trade secret claims were preempted because "CA--which is the master of its own case--has pleaded and proven facts which establish that one act constituted both copyright infringement and misappropriation of trade secrets [namely, the] copying [716] of ADAPTER into OSCAR 3.4...." Id. at 565.

In our original opinion, Computer Assocs. Int'l, Inc. v. Altai, Inc., Nos. 91-7893, 91-7935, slip op. 4715, 4762-69, 1992 WL 139364 (2d Cir. June 22, 1992), we affirmed Judge Pratt's decision. CA petitioned for rehearing on this issue. In its petition for rehearing, CA brought to our attention portions of the record below that were not included in the appendix on appeal. CA argued that these documents, along with Judge Mishler's disposition of Altai's motion to dismiss and for summary judgment, established that CA advanced non-preempted trade secret misappropriation claims before both Judge Mishler and Judge Pratt. CA further contended that Judge Pratt failed to consider its theory that Altai was liable for wrongful acquisition of CA's trade secrets through Arney. Upon reconsideration, we have granted the petition for rehearing, withdrawn our initial opinion, and conclude in this amended opinion that the district court's preemption ruling on CA's trade secret claims should be vacated. We accordingly vacate the judgment of the district court on this point and remand CA's trade secret claims for a determination on the merits.

A. General Law of Copyright Preemption Regarding Trade Secrets and Computer Programs

Congress carefully designed the statutory framework of federal copyright preemption. In order to insure that the enforcement of these rights remains solely within the federal domain, section 301(a) of the Copyright Act expressly preempts

all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103....

17 U.S.C. § 301(a). This sweeping displacement of state law is, however, limited by section 301(b), which provides, in relevant part, that

[n]othing in this title annuls or limits any rights or remedies under the common law or statutes of any State with respect to ... activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106....

17 U.S.C. § 301(b)(3). Section 106, in turn, affords a copyright owner the exclusive right to: (1) reproduce the copyrighted work; (2) prepare derivative works; (3) distribute copies of the work by sale or otherwise; and, with respect to certain artistic works, (4) perform the work publicly; and (5) display the work publicly. See 17 U.S.C. § 106(1)-(5).

Section 301 thus preempts only those state law rights that "may be abridged by an act which, in and of itself, would infringe one of the exclusive rights" provided by federal copyright law. See Harper & Row, Publishers, Inc. v. Nation Enters., 723 F.2d 195, 200 (2d Cir.1983), rev'd on other grounds, 471 U.S. 539, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985). But if an "extra element" is "required instead of or in addition to the acts of reproduction, performance, distribution or display, in order to constitute a state-created cause of action, then the right does not lie 'within the general scope of copyright,' and there is no preemption." 1 Nimmer § 1.01[B], at 1-14-15; see also Harper & Row, Publishers, Inc., 723 F.2d at 200 (where state law right "is predicated upon an act incorporating elements beyond mere reproduction or the like, the [federal and state] rights are not equivalent" and there is no preemption).

A state law claim is not preempted if the "extra element" changes the "nature of the action so that it is qualitatively different from a copyright infringement claim." Mayer v. Josiah Wedgwood & Sons, Ltd., 601 F.Supp. 1523, 1535 (S.D.N.Y.1985); see Harper & Row, Publishers, Inc., 723 F.2d at 201. To determine whether a claim meets this standard, we must determine "what plaintiff seeks to protect, the theories in which the matter is thought to be protected and the rights sought to be enforced." 1 Roger M. Milgrim, Milgrim on Trade Secrets [717] § 2.06A, at 2-150 (1992) (hereinafter "Milgrim"). An action will not be saved from preemption by elements such as awareness or intent, which alter "the action's scope but not its nature...." Mayer, 601 F.Supp. at 1535.

Following this "extra element" test, we have held that unfair competition and misappropriation claims grounded solely in the copying of a plaintiff's protected expression are preempted by section 301. See, e.g., Walker v. Time Life Films, Inc., 784 F.2d 44, 53 (2d Cir.), cert. denied, 476 U.S. 1159, 106 S.Ct. 2278, 90 L.Ed.2d 721 (1986); Warner Bros., Inc. v. American Broadcasting Cos., 720 F.2d 231, 247 (2d Cir.1983); Durham Indus., Inc. v. Tomy Corp., 630 F.2d 905, 919 & n. 15 (2d Cir.1980). We also have held to be preempted a tortious interference with contract claim grounded in the impairment of a plaintiff's right under the Copyright Act to publish derivative works. See Harper & Row, Publishers, Inc., 723 F.2d at 201.

However, many state law rights that can arise in connection with instances of copyright infringement satisfy the extra element test, and thus are not preempted by section 301. These include unfair competition claims based upon breaches of confidential relationships, breaches of fiduciary duties and trade secrets. Balboa Ins. Co. v. Trans Global Equities, 218 Cal.App.3d 1327, 1339-53, 267 Cal.Rptr. 787, 793-803 (Ct.App. 3rd Dist.), cert. denied, --- U.S. ----, 111 S.Ct. 347, 112 L.Ed.2d 311 (1990).

Trade secret protection, the branch of unfair competition law at issue in this case, remains a "uniquely valuable" weapon in the defensive arsenal of computer programmers. See 1 Milgrim § 2.06A[c], at 2-172.4. Precisely because trade secret doctrine protects the discovery of ideas, processes, and systems which are explicitly precluded from coverage under copyright law, courts and commentators alike consider it a necessary and integral part of the intellectual property protection extended to computer programs. See id.; see also Integrated Cash Management Servs., Inc. v. Digital Transactions, Inc., 920 F.2d 171, 173 (2d Cir.1990) (while plaintiff withdrew copyright infringement claim for misappropriation of computer program, relief for theft of trade secret sustained); Healthcare Affiliated Servs., Inc. v. Lippany, 701 F.Supp. 1142, 1152-55 (W.D.Pa.1988) (finding likelihood of success on trade secret claim, but not copyright claim); Q-Co Indus., Inc., 625 F.Supp. at 616-18 (finding likelihood of success on trade secret claim, but no merit to copyright claim); Kretschmer, at 847-49.

The legislative history of section 301 states that "[t]he evolving common law rights of ... trade secrets ... would remain unaffected as long as the causes of action contain elements, such as ... a breach of trust or confidentiality, that are different in kind from copyright infringement." House Report, at 5748. Congress did not consider the term "misappropriation" to be "necessarily synonymous with copyright infringement," or to serve as the talisman of preemption. Id.

Trade secret claims often are grounded upon a defendant's breach of a duty of trust or confidence to the plaintiff through improper disclosure of confidential material. See, e.g., Mercer v. C.A. Roberts Co., 570 F.2d 1232, 1238 (5th Cir.1978); Brignoli v. Balch Hardy and Scheinman, Inc., 645 F.Supp. 1201, 1205 (S.D.N.Y.1986). The defendant's breach of duty is the gravamen of such trade secret claims, and supplies the "extra element" that qualitatively distinguishes such trade secret causes of action from claims for copyright infringement that are based solely upon copying. See, e.g., Warrington Assoc., Inc. v. Real-Time Eng'g Sys., Inc., 522 F.Supp. 367, 369 (N.D.Ill.1981); Brignoli, 645 F.Supp. at 1205; see also generally Balboa Ins. Co., 218 Cal.App.3d at 1346-50, 267 Cal.Rptr. at 798-802 (reviewing cases).

B. Preemption in this Case

The district court stated that:

Were CA's [trade secret] allegations premised on a theory of illegal acquisition of a trade secret, a charge that might have been alleged against Arney, who is not a defendant in this case, the [718] preemption analysis might be different, for there seems to be no corresponding right guaranteed to copyright owners by § 106 of the copyright act.

Computer Assocs., 775 F.Supp. at 565.

However, the court concluded that CA's trade secret claims were not grounded in a theory that Altai violated a duty of confidentiality to CA. Rather, Judge Pratt stated that CA proceeded against Altai solely "on a theory that the misappropriation took place by Altai's use of ADAPTER--the same theory as the copyright infringement count." Id. The district court reasoned that "the right to be free from trade secret misappropriation through 'use', and the right to exclusive reproduction and distribution of a copyrighted work are not distinguishable." Id. Because he concluded that there was no qualitative difference between the elements of CA's state law trade secret claims and a claim for federal copyright infringement, Judge Pratt ruled that CA's trade secret claims were preempted by section 301.

We agree with CA that the district court failed to address fully the factual and theoretical bases of CA's trade secret claims. The district court relied upon the fact that Arney--not Altai--allegedly breached a duty to CA of confidentiality by stealing secrets from CA and incorporating those secrets into OSCAR 3.4. However, under a wrongful acquisition theory based on Restatement (First) of Torts § 757 (1939), Williams and Altai may be liable for violating CA's right of confidentiality. Section 757 states in relevant part:

One who discloses or uses another's trade secret, without a privilege to do so, is liable to another if.... (c) he learned the secret from a third person with notice of the fact that it was a secret and that the third person discovered it by improper means or that the third person's disclosure of it was otherwise a breach of his duty to the other....

Actual notice is not required for such a third party acquisition claim; constructive notice is sufficient. A defendant is on constructive notice when, "from the information which he has, a reasonable man would infer [a breach of confidence], or if, under the circumstances, a reasonable man would be put on inquiry and an inquiry pursued with reasonable intelligence and diligence would disclose the [breach]." Id., comment 1; Metallurgical Indus., Inc. v. Fourtek, Inc., 790 F.2d 1195, 1204 (5th Cir.1986); Vantage Point, Inc. v. Parker Bros., Inc., 529 F.Supp. 1204, 1210 n. 2 (E.D.N.Y.1981), aff'd, 697 F.2d 301 (2d Cir.1982); see also Rohm and Haas Co. v. Adco Chem. Co., 689 F.2d 424, 431 (3rd Cir.1982) ("Defendants never asked where the 'Harvey process' had come from. Defendants therefore were charged 'with whatever knowledge such inquiry would have led to.' ") (citation omitted); Colgate-Palmolive Co. v. Carter Prods., Inc., 230 F.2d 855, 864 (4th Cir.) (per curiam) (defendant " 'must have known by the exercise of fair business principles' " that its employee's work was covered by an agreement not to disclose) (citation omitted), cert. denied, 352 U.S. 843, 77 S.Ct. 43, 1 L.Ed.2d 59 (1956); 1 Milgrim § 5.04[c].

We agree with the district court that New Jersey's governing governmental interest choice of law analysis directs the application of Texas law to CA's trade secret misappropriation claim. See Computer Assocs., 775 F.Supp. at 566. Texas law recognizes trade secret misappropriation claims grounded in the reasoning of Restatement section 757(c), see, e.g., Fourtek, 790 F.2d at 1204, and the facts alleged by CA may well support such a claim.

It is undisputed that, when Arney stole the ADAPTER code and incorporated it into his design of OSCAR 3.4, he breached his confidentiality agreement with CA. The district court noted that while such action might constitute a valid claim against Arney, CA is the named defendant in this lawsuit. Additionally, the district court found, as a matter of fact, that "[n]o one at Altai, other than Arney, knew that Arney had the ADAPTER code...." Computer Assocs., 775 F.Supp. at 554. However, the district court did not consider fully Altai's potential liability for improper trade secret acquisition. It did not consider the question of Altai's trade secret liability [719] in connection with OSCAR 3.4 under a constructive notice theory, or Altai's potential liability under an actual notice theory in connection with OSCAR 3.5.

The district court found that, prior to CA's bringing suit, Altai was not on actual notice of Arney's theft of trade secrets, and incorporation of those secrets into OSCAR 3.4. However, by virtue of Williams' close relationship with Arney, Williams' general familiarity with CA's programs (having once been employed by CA himself), and the fact that Arney used the ADAPTER program in an office at Altai adjacent to Williams during a period in which he had frequent contact with Williams regarding the OSCAR/VSE project, Williams (and through him Altai) may well have been on constructive notice of Arney's breach of his duty of confidentiality toward CA. The district court did not address whether Altai was on constructive notice, thereby placing it under a duty of inquiry; rather the court's finding that only Arney affirmatively knew of the theft of CA's trade secrets and incorporation of those secrets into OSCAR 3.4 simply disposed of the issue of actual notice in connection with the creation of OSCAR 3.4. CA's claim of liability based on constructive notice, never considered in the district court's opinion, must be determined on remand.

With respect to actual notice, it is undisputed that CA's first complaint, filed in August 1988, informed Altai of Arney's trade secret violations in connection with the creation of OSCAR 3.4. The first complaint alleged that Arney assisted in the development of ADAPTER, thereby obtaining knowledge of CA's related trade secrets. It also alleged that Altai misappropriated CA's trade secrets by incorporating them into ZEKE.

In response to CA's complaint, Altai rewrote OSCAR 3.4, creating OSCAR 3.5. While we agree with the district court that OSCAR 3.5 did not contain any expression protected by copyright, it may nevertheless still have embodied many of CA's trade secrets that Arney brought with him to Altai. Since Altai's rewrite was conducted with full knowledge of Arney's prior misappropriation, in breach of his duty of confidentiality, it follows that OSCAR 3.5 was created with actual knowledge of trade secret violations. Thus, with regard to OSCAR 3.5, CA has a viable trade secret claim against Altai that must be considered by the district court on remand. This claim is grounded in Altai's alleged use of CA's trade secrets in the creation of OSCAR 3.5, while on actual notice of Arney's theft of trade secrets and incorporation of those secrets into OSCAR 3.4. The district court correctly stated that a state law claim based solely upon Altai's "use", by copying, of ADAPTER's non-literal elements could not satisfy the governing "extra element" test, and would be preempted by section 301. However, where the use of copyrighted expression is simultaneously the violation of a duty of confidentiality established by state law, that extra element renders the state right qualitatively distinct from the federal right, thereby foreclosing preemption under section 301.

We are also convinced that CA adequately pled a wrongful acquisition claim before Judge Mishler and Judge Pratt. In ruling that CA failed to properly plead a non-preempted claim, Judge Pratt relied heavily upon two allegations in CA's amended complaint. Id. at 563-64. They read as follows:

p 57. By reason of the facts stated in paragraph 39 and by copying from CA-SCHEDULER into ZEKE, ZACK and ZEBB the various elements stated in paragraphs 39-51, 54 and 55, defendant Altai has infringed [CA's] copyright in CA-SCHEDULER.

* * * * * *

p 73. Defendant's incorporation into its ZEKE, ZACK and ZEBB programs of the various elements contained in the ADAPTER component of [CA's] CA-SCHEDULER program as set out in paragraphs 39-51, 54 and 55 constitutes the willful misappropriation of the proprietary property and trade secrets of plaintiff [CA].

[720] From these pleadings, Judge Pratt concluded that the very same act, i.e., Altai's copying of various elements of CA's program, was the basis for both CA's copyright infringement and trade secret claims. See id. at 564. We agree with Judge Pratt that CA's allegations are somewhat inartfully stated. However, when taken together, the terms "incorporation" and "misappropriation" in paragraph 73 above suggest to us an act of a qualitatively different nature than the infringement pled in paragraph 57. House Report, at 5748 (" '[m]isappropriation' is not necessarily synonymous with copyright infringement").

In support of our reading, we note that paragraphs 65-75 of CA's amended complaint alleged facts that reasonably comprise the elements of a wrongful acquisition of trade secrets claim. CA averred that, while he was employed at CA, Arney learned CA's trade secrets regarding the ADAPTER program. CA further alleged that, after Arney went to work for Altai, Altai misappropriated those trade secrets by incorporating CA's ADAPTER program into its own product. Finally, CA claimed that the trade secret misappropriation was carried out "in a willful, wanton and reckless manner in disregard of [CA's] rights." In other words, Altai could have reasonably inferred from CA's allegations that CA's claim, in part, rested on Williams' "wanton and reckless" behavior in the face of constructive notice.

In addition, while responding to Altai's preemption argument in its motion to dismiss and for summary judgment, CA specifically argued in its brief to Judge Mishler that "it can easily be inferred that Mr. Arney was hired by Altai to misappropriate [CA's] confidential source code for Altai's benefit." At oral argument, CA further contended that:

The circumstances of Mr. Arney's hiring suggested that Mr. Williams wanted more than Mr. Arney's ability and in fact got exactly what he wanted. And that is Computer Associates' confidential Adapter technology.

* * * * * *

[Arney testified that he] surreptitiously took that code home from Computer Associates after giving notice he was going to go to work for Altai, and after being hired by Mr. Williams to come to Altai and reconstruct Zeke, to work on the MVS operating system.

In the aftermath of Judge Mishler's ruling in its favor on Altai's motion to dismiss and for summary judgment, CA reasonably believed that it had sufficiently alleged a non-preempted claim. And, in light of CA's arguments and Judge Mishler's ruling, Altai clearly was on notice that the amended complaint placed non-preempted trade secret claims in play. See 5 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1215, at 136-38 (2d ed. 1990) (federal pleading standards require plaintiff to provide defendant with fair notice of claim and grounds it rests on).

Accordingly, we vacate the judgment of the district court and remand for reconsideration of those aspects of CA's trade secret claims related to Altai's alleged constructive notice of Arney's theft of CA's trade secrets and incorporation of those secrets into OSCAR 3.4. We note, however, that CA may be unable to recover damages for its trade secrets which are embodied in OSCAR 3.4 since Altai has conceded copyright liability and damages for its incorporation of ADAPTER into OSCAR 3.4. CA may not obtain a double recovery where the damages for copyright infringement and trade secret misappropriation are coextensive.

However, additional trade secret damages may well flow from CA's creation of OSCAR 3.5. Judge Pratt correctly acknowledged that "[i]f CA's claim of misappropriation of trade secrets did not fail on preemption grounds, it would be necessary to examine in some detail the conflicting claims and evidence relating to the process by which Altai rewrote OSCAR and ultimately produced version 3.5." Computer Assocs., 775 F.Supp. at 554-55; see also 1 Milgrim § 5.04[d], at 5-148 ("after notice, the [innocent] second user should cease the use, and if he does not he can be enjoined and held liable for damages arising from such use subsequent to notice"). Since we hold that CA's trade secret claims [721] are not preempted, and that, in writing OSCAR 3.5, Altai had actual notice of Arney's earlier trade secret violations, we vacate and remand for such further inquiry anticipated by the district court. If the district court finds that CA was injured by Altai's unlawful use of CA's trade secrets in creating OSCAR 3.5, CA is entitled to an award of damages for trade secret misappropriation, as well as consideration by the district court of CA's request for injunctive relief on its trade secret claim.

CONCLUSION

In adopting the above three step analysis for substantial similarity between the non-literal elements of computer programs, we seek to insure two things: (1) that programmers may receive appropriate copyright protection for innovative utilitarian works containing expression; and (2) that non-protectable technical expression remains in the public domain for others to use freely as building blocks in their own work. At first blush, it may seem counter-intuitive that someone who has benefitted to some degree from illicitly obtained material can emerge from an infringement suit relatively unscathed. However, so long as the appropriated material consists of non-protectable expression, "[t]his result is neither unfair nor unfortunate. It is the means by which copyright advances the progress of science and art." Feist, --- U.S. at ----, 111 S.Ct. at 1290.

Furthermore, we underscore that so long as trade secret law is employed in a manner that does not encroach upon the exclusive domain of the Copyright Act, it is an appropriate means by which to secure compensation for software espionage.

Accordingly, we affirm the judgment of the district court in part; vacate in part; and remand for further proceedings. The parties shall bear their own costs of appeal, including the petition for rehearing.

ALTIMARI, Circuit Judge, concurring in part and dissenting in part:

Because I believe that our original opinion, see Computer Assoc. Int'l v. Altai, Nos. 91-7893(L), 1992 WL 139364 (2d Cir. June 22, 1992), is a reasoned analysis of the issues presented, I adhere to the original determination and therefore concur in Part 1 and respectfully dissent from Part 2 of the amended opinion.

Melvin L. Wulf, Beldock, Levine & Hoffman, LLP, New York City, for Defendants-Appellants.

David Dunn, Davis, Weber & Edwards, P.C., New York City, for Plaintiff-Appellee.

Before: VAN GRAAFEILAND and WALKER, Circuit Judges, and RAKOFF, District Judge.^[*]

JOHN M. WALKER, Jr., Circuit Judge:

This case presents two interesting and somewhat novel issues of copyright law. The first is whether The Seinfeld Aptitude Test, a trivia quiz book devoted exclusively to testing its readers' recollection of scenes and events from the fictional television series Seinfeld, takes sufficient protected expression from the original, as evidenced by the book's substantial similarity to the television series, such that, in the absence of any defenses, the book would infringe the copyright in Seinfeld. The second is whether The Seinfeld Aptitude Test (also referred to as The SAT) constitutes fair use of the Seinfeld television series.

Defendants-appellants Carol Publishing Group, Inc. and Beth B. Golub appeal from the July 23, 1997 judgment of the United States District Court for the Southern District of New York (Sonia Sotomayor, District Judge) granting, pursuant to Fed.R.Civ.P. 56, plaintiff-appellee Castle Rock Entertainment, Inc.'s ("Castle Rock") motion for summary judgment; denying defendants' cross-motion for summary judgment; awarding Castle Rock $403,000 for defendants' copyright infringement; and permanently enjoining defendants from publishing The Seinfeld Aptitude Test.

We conclude that The SAT unlawfully copies from Seinfeld and that its copying does not constitute fair use and thus is an actionable infringement. Accordingly, we affirm the judgment in favor of Castle Rock.

Background

The material facts in this case are undisputed. Plaintiff Castle Rock is the producer and copyright owner of each episode of the Seinfeld television series. The series revolves around the petty tribulations in the lives of four single, adult friends in New York: Jerry Seinfeld, George Costanza, Elaine Benes, and Cosmo Kramer. Defendants are Beth Golub, the author, and Carol Publishing Group, Inc., the publisher, of The SAT, a 132-page book containing 643 trivia questions and answers about the events and characters depicted in Seinfeld. These include 211 multiple choice questions, in which only one out of three to five answers is correct; 93 matching questions; and a number of short-answer questions. The questions are divided into five levels of difficulty, labeled (in increasing order of difficulty) "Wuss Questions," "This, That, and the Other Questions," "Tough Monkey Questions," "Atomic Wedgie Questions," and "Master of Your Domain Questions." Selected examples from level 1 are indicative of the questions throughout The SAT:

1. To impress a woman, George passes himself off as

a) a gynecologist

b) a geologist

c) a marine biologist

d) a meteorologist

11. What candy does Kramer snack on while observing a surgical procedure from an operating-room balcony?

12. Who said, "I don't go for those nonrefundable deals ... I can't commit to a woman ... I'm not committing to an airline."?

a) Jerry

b) George

c) Kramer^[2]

The book draws from 84 of the 86 Seinfeld episodes that had been broadcast as of the time The SAT was published. Although Golub created the incorrect answers to the multiple choice questions, every question and correct answer has as its source a fictional moment in a Seinfeld episode. Forty-one questions and/or answers contain dialogue from Seinfeld. The single episode most drawn upon by The SAT, "The Cigar Store Indian," is the source of 20 questions that directly quote between 3.6% and 5.6% of that episode (defendants' and plaintiff's calculations, respectively).

The name "Seinfeld" appears prominently on the front and back covers of The SAT, and pictures of the principal actors in Seinfeld appear on the cover and on several pages of the book. On the back cover, a disclaimer states that "This book has not been approved or licensed by any entity involved in creating or producing Seinfeld."^[3] The front cover bears the title "The Seinfeld Aptitude Test" and describes the book as containing "[h]undreds of spectacular questions of minute details from TV's greatest show about absolutely nothing." The back cover asks:

Just how well do you command the buzzwords, peccadilloes, petty annoyances, and triflingly complex escapades of Jerry Seinfeld, Elaine Benes, George Costanza, and Kramer—the fabulously neurotic foursome that makes the offbeat hit TV series Seinfeld tick?

....

If you think you know the answers—and really keep track of Seinfeld minutiae—challenge yourself and your friends with these 550 trivia questions and 10 extra matching quizzes. No, The Seinfeld Aptitude Test can't tell you whether you're Master of Your Domain, but it will certify your status as King or Queen of Seinfeld trivia. So twist open a Snapple, double-dip a chip, and open this book to satisfy your between-episode cravings.

Golub has described The SAT as a "natural outgrowth" of Seinfeld which, "like the Seinfeld show, is devoted to the trifling, picayune and petty annoyances encountered by the show's characters on a daily basis." According to Golub, she created The SAT by taking notes from Seinfeld programs at the time they were aired on television and subsequently reviewing videotapes of several of the episodes, as recorded by her or various friends.

The SAT's publication did not immediately provoke a challenge. The National Broadcasting Corporation, which broadcasted Seinfeld, requested free copies of The SAT from defendants and distributed them together with promotions for the program. Seinfeld's executive producer characterized The SAT as "a fun little book." There is no evidence that The SAT's publication diminished Seinfeld's profitability, and in fact Seinfeld's audience grew after The SAT was first published.

Castle Rock has nevertheless been highly selective in marketing products associated with Seinfeld, rejecting numerous proposals from publishers seeking approval for a variety of projects related to the show. Castle Rock licensed one Seinfeld book, The Entertainment Weekly Seinfeld Companion, and has licensed the production of a CD-ROM product that includes discussions of Seinfeld episodes; the CD-ROM allegedly might ultimately include a trivia bank. Castle Rock claims in this litigation that it plans to pursue a more aggressive marketing strategy for Seinfeld-related products, including "publication of books relating to Seinfeld."

In November 1994, Castle Rock notified defendants of its copyright and trademark infringement claims. In February 1995, after defendants continued to distribute The SAT, Castle Rock filed this action alleging federal copyright and trademark infringement and state law unfair competition. Subsequently, both parties moved, pursuant to Fed.R.Civ.P. 56, for summary judgment on both the copyright and unfair competition claims.

The district court granted summary judgment to Castle Rock on the copyright claim. It held that defendants had violated plaintiff's copyrights in Seinfeld and that such copying did not constitute fair use. See Castle Rock Entertainment v. Carol Publ'g Group, Inc., 955 F.Supp. 260, 274 (S.D.N.Y. 1997). The district court did not grant summary judgment to either party on the unfair competition claim. See id. The parties then stipulated to damages and attorneys' fees on the copyright infringement claim and, presumably to facilitate the appeal, to the dismissal without prejudice of all remaining claims. Carol Publishing's cross-claims against Golub were dismissed with prejudice. The district court entered final judgment on the copyright infringement claim, awarded Castle Rock $403,000 with interest, permanently enjoined defendants from publishing or distributing The SAT, and ordered defendants to destroy all copies of The SAT in their custody or control. Defendants now appeal.

Discussion

Standard of Review

Summary judgment is appropriate only if the moving party can show that there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The court "must draw all reasonable inferences and resolve all ambiguities in favor of the non-moving party." Garza v. Marine Transp. Lines, Inc., 861 F.2d 23, 26 (2d Cir.1988). Although "[f]air use is a mixed question of law and fact," Harper & Row, Publishers, Inc. v. Nation Enter., 471 U.S. 539, 560, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985), this court has on a number of occasions "resolved fair use determinations at the summary judgment stage" where, as here, there are no genuine issues of material fact. Wright v. Warner Books, Inc., 953 F.2d 731, 735 (2d Cir.1991); Leibovitz v. Paramount Pictures Corp., 137 F.3d 109 (2d Cir.1998) (affirming summary judgment awarded to defendants on basis of fair use defense); Harper & Row, 471 U.S. at 560, 105 S.Ct. 2218. We review the district court's legal conclusions de novo and its findings of fact for clear error. See American Geophysical Union v. Texaco Inc., 60 F.3d 913, 918 (2d Cir.1994).

Copyright Infringement

The Copyright Act of 1976 ("Copyright Act"), 17 U.S.C. §§ 101-803, grants copyright owners a bundle of exclusive rights, including the rights to "reproduce the copyrighted work in copies" and "to prepare derivative works based upon the copyrighted work." Id. § 106. "Copyright infringement is established when the owner of a valid copyright demonstrates unauthorized copying." Repp v. Webber, 132 F.3d 882, 889 (2d Cir.1997); see Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991). There are two main components of this prima facie case of infringement: "a plaintiff must first show that his work was actually copied .... [and] then must show that the copying amounts to an improper or unlawful appropriation." Laureyssens v. Idea Group, Inc., 964 F.2d 131, 139-40 (2d Cir.1992) (quotation marks and citations omitted). Actual copying may be established "either by direct evidence of copying or by indirect evidence, including access to the copyrighted work, similarities that are probative of copying between the works, and expert testimony." Id. at 140. As we have noted before, "probative," rather than "substantial" similarity is the correct term in referring to the plaintiff's initial burden of proving actual copying by indirect evidence. See Webber, 132 F.3d at 889 n. 1; Laureyssens, 964 F.2d at 140. "It is only after actual copying is established that one claiming infringement" then proceeds to demonstrate that the copying was improper or unlawful by showing that the second work bears "substantial similarity" to protected expression in the earlier work. Webber, 132 F.3d at 889; Laureyssens, 964 F.2d at 140.

In the instant case, no one disputes that Castle Rock owns valid copyrights in the Seinfeld television programs and that defendants actually copied from those programs in creating The SAT. Golub freely admitted that she created The SAT by taking notes from Seinfeld programs at the time they were aired on television and subsequently reviewing videotapes of several of the episodes that she or her friends recorded. Since the fact of copying is acknowledged and undisputed, the critical question for decision is whether the copying was unlawful or improper in that it took a sufficient amount of protected expression from Seinfeld as evidenced by its substantial similarity to such expression.

Substantial Similarity

We have stated that "substantial similarity"

requires that the copying [be] quantitatively and qualitatively sufficient to support the legal conclusion that infringement (actionable copying) has occurred. The qualitative component concerns the copying of expression, rather than ideas [, facts, works in the public domain, or any other non-protectable elements].... The quantitative component generally concerns the amount of the copyrighted work that is copied,

which must be more than "de minimis." Ringgold v. Black Entertainment Television, Inc., 126 F.3d 70, 75 (2d Cir.1997) (emphasis added).

As to the quantitative element, we conclude that The SAT has crossed the de minimis threshold. At the outset, we observe that the fact that the copying appears in question and answer form is by itself without particular consequence: the trivia quiz copies fragments of Seinfeld in the same way that a collection of Seinfeld jokes or trivia would copy fragments of the series. In order to determine the quantitative extent of the defendants' copying, we must then decide whether to analyze separately the amount of expression copied from each individually copyrighted Seinfeld episode, or to analyze in the aggregate the amount copied from the eighty-four Seinfeld episodes. As defendants observe, 17 U.S.C. § 106 speaks throughout in the singular, referring to the allegedly infringed "work," thus bolstering an individual-episode analysis. Our precedents, however, tend to support the aggregate analysis. See Twin Peaks Prods., Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1372-73, 1381 (2d Cir.1993) (finding substantial similarity between infringing book and 8 episodes of Twin Peaks weekly television series seen as a whole, but awarding statutory damages on per-episode basis); Wainwright Secs. Inc. v. Wall St. Transcript Corp., 558 F.2d 91, 94 (2d Cir.1977) (abstracts of a number of research reports treated cumulatively in fair use analysis); see also Craft v. Kobler, 667 F.Supp. 120, 124-25 (S.D.N.Y.1987) (passages taken from 15 separate books of copyright holder treated cumulatively in finding infringement); cf. New Era Publications Int'l, ApS v. Carol Publ'g Group, 904 F.2d 152, 158 (2d Cir.1990) (in analyzing whether critical biography was fair use of 48 original writings, court noted that biography "uses overall a small percentage of [plaintiff's] works" but also noted that percentage of copying taken from each individual work was not "unfair") (emphasis added); but see Salinger v. Random House, Inc., 811 F.2d 90, 98 (2d Cir.1987) (copying of Salinger letters not fair use because, among other factors, secondary work copied one-third of 17 letters and 10 percent of 42 letters).

As in Twin Peaks, for the purposes of the quantitative copying analysis we shall treat Seinfeld—a discrete, continuous television series—as a single work.^[4] Where the secondary work focuses on an entire continuous television series such as Seinfeld, there is no basis for looking in isolation at the amount copied from each separately copyrighted episode. Although 17 U.S.C. § 106 speaks in terms of a singular copyrighted "work," it would elevate form over substance to conclude that The SAT's copying of 643 fragments from 84 individually copyrighted Seinfeld episodes is indistinguishable from a case in which a 634-question trivia quiz book poses a few questions from each of 84 unrelated television programs, books, movies, or any combination of creative works that do not constitute a discrete series of works. Had The SAT copied a few fragments from each of 84 unrelated television programs (perhaps comprising the entire line-up on broadcast television), defendants would have a stronger case under the de minimis doctrine. By copying not a few but 643 fragments from the Seinfeld television series, however, The SAT has plainly crossed the quantitative copying threshold under Ringgold.

As to Ringgold's qualitative component, each SAT trivia question is based directly upon original, protectable expression in Seinfeld. As noted by the district court, The SAT did not copy from Seinfeld unprotected facts, but, rather, creative expression. Cf. Feist, 499 U.S. at 364, 111 S.Ct. 1282 (finding no infringement where defendant produced a multi-county phone directory, in part, by obtaining names and phone numbers from plaintiffs' single-county directory). Unlike the facts in a phone book, which "do not owe their origin to an act of authorship," id. at 347, 111 S.Ct. 1282, each "fact" tested by The SAT is in reality fictitious expression created by Seinfeld's authors. The SAT does not quiz such true facts as the identity of the actors in Seinfeld, the number of days it takes to shoot an episode, the biographies of the actors, the location of the Seinfeld set, etc. Rather, The SAT tests whether the reader knows that the character Jerry places a Pez dispenser on Elaine's leg during a piano recital, that Kramer enjoys going to the airport because he's hypnotized by the baggage carousels, and that Jerry, opining on how to identify a virgin, said "It's not like spotting a toupee." Because these characters and events spring from the imagination of Seinfeld's authors, The SAT plainly copies copyrightable, creative expression.^[5]See Feist, 499 U.S. at 347, 111 S.Ct. 1282 (discussing distinction between discovered facts, which do not "owe their origin to an act of authorship" and therefore are not protected by copyright, and created facts, which constitute original, protected expression).

We find support for this conclusion in a previous case in which we held that a series of still photographs of a ballet may in some cases infringe the copyright in an original choreographic work. See Horgan v. Macmillan, Inc., 789 F.2d 157, 163 (2d Cir.1986). The defendants in Horgan claimed that still photographs could not "capture the flow of movement, which is the essence of dance," that "the staged performance could not be recreated from the photographs," and thus, that the photographs were not substantially similar to the choreographic work. Id. at 161-62 (quotation marks omitted). Although noting that the issue "was not a simple one," this court rejected that argument, holding that "the standard for determining copyright infringement is not whether the original could be recreated from the allegedly infringing copy, but whether the latter is substantially similar to the former." Id. at 162 (quotation marks omitted). That observation applies with equal force to the trivia quiz fragments in this case. Although Seinfeld could not be "recreated" from The SAT, Castle Rock has nevertheless established both the quantitative and qualitative components of the substantial similarity test, establishing a prima facie case of copyright infringement.

Other Tests

As defendants note, substantial similarity usually "arises out of a claim of infringement as between comparable works .... [where] because of the equivalent nature of the competing works, the question of similarity can be tested conventionally by comparing comparable elements of the two works." Because in the instant case the original and secondary works are of different genres and to a lesser extent because they are in different media, tests for substantial similarity other than the quantitative/qualitative approach are not particularly helpful to our analysis.

Under the "ordinary observer" test, for example, "[t]wo works are substantially similar where 'the ordinary observer, unless he set out to detect the disparities, would be disposed to overlook them, and regard [the] aesthetic appeal [of the two works] as the same.'" Arica Inst., Inc. v. Palmer, 970 F.2d 1067, 1072 (2d Cir.1992) (quoting Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir.1960) (L.Hand, J.) (comparing dress designs)) (alterations in original). Undoubtedly, Judge Hand did not have in mind a comparison of aesthetic appeal as between a television series and a trivia quiz and, in the usual case, we might question whether any "ordinary observer" would "regard [the] aesthetic appeal" in a situation-comedy television program as being identical to that of any book, let alone a trivia quiz book, about that program. Cf. Laureyssens, 964 F.2d at 132, 141 (applying "ordinary observer" test to compare two sets of foam rubber puzzles). We note here, however, that plaintiff has a plausible claim that there is a common aesthetic appeal between the two works based on The SAT's plain copying of Seinfeld and Golub's statement on the back cover that the book was designed to complement the aesthetic appeal of the television series. See The SAT ("So twist open a Snapple, double-dip a chip, and open this book to satisfy your between episode cravings.").

Under the "total concept and feel" test, urged by defendants, we analyze "the similarities in such aspects as the total concept and feel, theme, characters, plot, sequence, pace, and setting" of the original and the allegedly infringing works. Williams v. Crichton, 84 F.3d 581, 588 (2d Cir.1996) (comparing children's books with novel and movie); Reyher v. Children's Television Workshop, 533 F.2d 87, 91 (2d Cir.1976) (comparing children's book with story in Sesame Street Magazine). Defendants contend that The SAT and the Seinfeld programs are incomparable in conventional terms such as plot, sequence, themes, pace, and setting. For example, The SAT has no plot; "[t]he notion of pace ... cannot be said even to exist in the book"; The SAT's "sequence has no relationship to the sequences of any of the Seinfeld episodes, since it is a totally random and scattered collection of questions relating to events that occurred in the shows"; and The SAT's only theme "is how much a Seinfeld fan can remember of 84 different programs." The total concept and feel test, however, is simply not helpful in analyzing works that, because of their different genres and media, must necessarily have a different concept and feel. Indeed, many "derivative" works of different genres, in which copyright owners have exclusive rights, see 17 U.S.C. § 106, may have a different total concept and feel from the original work.

Finally, we do not apply the "fragmented literal similarity" test,^[6] which focuses upon copying of direct quotations or close paraphrasing, or the "comprehensive nonliteral similarity" test, which examines whether "the fundamental essence or structure of one work is duplicated in another." 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.03[A][1], at 13-29, § 13.03[A][2], at 13-45 (1997) (hereafter "Nimmer"); Twin Peaks, 996 F.2d at 1372-73 (applying Nimmer test); Warner Bros. Inc. v. American Broad. Cos., 720 F.2d 231, 240, 242 (2d Cir.1983) (applying Nimmer test to compare Superman and The Greatest American Hero). In the instant case, because the direct quotations or close paraphrases that The SAT copied from the Seinfeld series are few and almost irrelevant to The SAT, undue focus upon these isolated quotations could improperly distract us from inquiring as to whether substantial similarity exists between Seinfeld and The SAT.

Castle Rock's comprehensive nonliteral similarity argument—that the defendants "literally constructed the SAT with 643 fragments of Seinfeld's creative whole"—is also unhelpful to our analysis and unnecessary to our determination that The SAT is substantially similar to Seinfeld. Without having viewed Seinfeld itself, no SAT reader could plausibly "construct" in his or her mind the plot of any Seinfeld episode, nor any of Seinfeld's settings (the Seinfeld and Kramer apartments, the foursome's restaurant hangout, George Steinbrenner's office, etc.), nor even the four principal Seinfeld characters. Nor does The SAT "[duplicate] the fundamental essence or structure" of Seinfeld. 4 Nimmer § 13.03[A][1], at 13-29; cf. Twin Peaks, 996 F.2d 1372-73 (finding "substantial similarity through comprehensive nonliteral similarity" where chapter of infringing book "is essentially a detailed recounting of the first eight episodes of the [television] series" and "[e]very intricate plot twist and element of character development appear in the Book in the same sequence as in the teleplays"). However, "[t]he standard for determining copyright infringement is not whether the original could be recreated from the allegedly infringing copy, but whether the latter is 'substantially similar' to the former," Horgan, 789 F.2d at 162, and in copying a sufficient amount of protected expression from the Seinfeld television series, The SAT easily passes the threshold of substantial similarity between the contents of the secondary work and the protected expression in the original.

Fair Use

Defendants claim that, even if The SAT's copying of Seinfeld constitutes prima facie infringement, The SAT is nevertheless a fair use of Seinfeld. "From the infancy of copyright protection," the fair use doctrine "has been thought necessary to fulfill copyright's very purpose, '[t]o promote the Progress of Science and useful Arts.'" Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 575, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994) (quoting U.S. Const., art. I, § 8, cl. 8). As noted in Campbell, "in truth, in literature, in science and in art, there are, and can be, few, if any, things, which in an abstract sense, are strictly new and original throughout. Every book in literature, science and art, borrows, and must necessarily borrow, and use much which was well known and used before." Id. (quotation marks omitted). Until the 1976 Copyright Act, the doctrine of fair use grew exclusively out of the common law. See id. at 576, 114 S.Ct. 1164; Folsom v. Marsh, 9 F.Cas. 342, 348 (C.D.Mass.1900) (CCD Mass. 1841) (Story, J.) (stating fair use test); Pierre N. Leval, Toward a Fair Use Standard, 103 Harv. L.Rev. 1105, 1105 (1990) ("Leval").

In the Copyright Act, Congress restated the common law tradition of fair use:

[T]he fair use of a copyrighted work ... for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(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.

17 U.S.C. § 107. This section "intended that courts continue the common law tradition of fair use adjudication" and "permits and requires courts to avoid rigid application of the copyright statute, when, on occasion, it would stifle the very creativity which that law is designed to foster." Campbell, 510 U.S. at 577, 114 S.Ct. 1164 (quotation marks omitted). Fair use analysis, therefore, always "calls for case-by-case analysis." Id. The fair use examples provided in § 107 are "illustrative and not limitative" and "provide only general guidance about the sorts of copying that courts and Congress most commonly had found to be fair uses." Id. at 577-78, 114 S.Ct. 1164. Similarly, the four listed statutory factors in § 107 guide but do not control our fair use analysis and "are to be explored, and the results weighed together, in light of the purposes of copyright." Id.; see 4 Nimmer § 13.05[A], at 13-153 ("[T]he factors contained in Section 107 are merely by way of example, and are not an exhaustive enumeration."). The ultimate test of fair use, therefore, is whether the copyright law's goal of "promot[ing] the Progress of Science and useful Arts," U.S. Const., art. I, § 8, cl. 8, "would be better served by allowing the use than by preventing it." Arica, 970 F.2d at 1077.

Purpose/Character of Use

The first fair use factor to consider is "the purpose and character of the [allegedly infringing] use, including whether such use is of a commercial nature or is for nonprofit educational purposes." 17 U.S.C. § 107(1). That The SAT's use is commercial, at most, "tends to weigh against a finding of fair use." Campbell, 510 U.S. at 585, 114 S.Ct. 1164 (quotation marks omitted); Texaco, 60 F.3d at 921. But we do not make too much of this point. As noted in Campbell, "nearly all of the illustrative uses listed in the preamble paragraph of § 107, including news reporting, comment, criticism, teaching, scholarship, and research ... are generally conducted for profit in this country," 510 U.S. at 584, 114 S.Ct. 1164 (quotation marks omitted), and "no man but a blockhead ever wrote, except for money," id. (quoting 3 Boswell's Life of Johnson 19 (G. Hill ed.1934)). We therefore do not give much weight to the fact that the secondary use was for commercial gain.

The more critical inquiry under the first factor and in fair use analysis generally is whether the allegedly infringing work "merely supersedes" the original work "or instead adds something new, with a further purpose or different character, altering the first with new ... meaning [ ] or message," in other words "whether and to what extent the new work is 'transformative.'" Id. at 579, 114 S.Ct. 1164 (quoting Leval at 1111). If "the secondary use adds value to the original—if [copyrightable expression in the original work] is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings—this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society." Leval at 1111. In short, "the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works." Campbell, 510 U.S. at 579, 114 S.Ct. 1164.

Defendants claim two primary "transformative" qualities of The SAT. First, as noted by the district court, "a text testing one's knowledge of Joyce's Ulysses, or Shakespeare's Hamlet, would qualify as 'criticism, comment, scholarship, or research,' or such. The same must be said, then, of a text testing one's knowledge of Castle Rock's Seinfeld." Castle Rock, 955 F.Supp. at 268 (citing Twin Peaks, 996 F.2d at 1374 ("A comment is as eligible for fair use protection when it concerns 'Masterpiece Theater' and appears in the New York Review of Books as when it concerns 'As the World Turns' and appears in Soap Opera Digest.")). In other words, the fact that the subject matter of the quiz is plebeian, banal, or ordinary stuff does not alter the fair use analysis. Criticism, comment, scholarship, research, and other potential fair uses are no less protectable because their subject is the ordinary.

Second, defendants style The SAT as a work "decod[ing] the obsession with ... and mystique that surround[s] 'Seinfeld,'" by "critically restructur[ing] [Seinfeld's mystique] into a system complete with varying levels of 'mastery' that relate the reader's control of the show's trivia to knowledge of and identification with their hero, Jerry Seinfeld." Citing one of their own experts for the proposition that "[t]he television environment cannot speak for itself but must be spoken for and about," defendants argue that "The SAT is a quintessential example of critical text of the TV environment .... expos[ing] all of the show's nothingness to articulate its true motive forces and its social and moral dimensions." (Quotation marks omitted). Castle Rock dismisses these arguments as post hoc rationalizations, claiming that had defendants been half as creative in creating The SAT as were their lawyers in crafting these arguments about transformation, defendants might have a colorable fair use claim.

Any transformative purpose possessed by The SAT is slight to non-existent. We reject the argument that The SAT was created to educate Seinfeld viewers or to criticize, "expose," or otherwise comment upon Seinfeld. The SAT's purpose, as evidenced definitively by the statements of the book's creators and by the book itself, is to repackage Seinfeld to entertain Seinfeld viewers. The SAT's back cover makes no mention of exposing Seinfeld to its readers, for example, as a pitiably vacuous reflection of a puerile and pervasive television culture, but rather urges SAT readers to "open this book to satisfy [their] between-episode [Seinfeld] cravings." Golub, The SAT's author, described the trivia quiz book not as a commentary or a Seinfeld research tool, but as an effort to "capture Seinfeld's flavor in quiz book fashion." Finally, even viewing The SAT in the light most favorable to defendants, we find scant reason to conclude that this trivia quiz book seeks to educate, criticize, parody, comment, report upon, or research Seinfeld, or otherwise serve a transformative purpose.^[7] The book does not contain commentary or analysis about Seinfeld, nor does it suggest how The SAT can be used to research Seinfeld; rather, the book simply poses trivia questions. The SAT's plain purpose, therefore, is not to expose Seinfeld's "nothingness," but to satiate Seinfeld fans' passion for the "nothingness" that Seinfeld has elevated into the realm of protectable creative expression.

Although a secondary work need not necessarily transform the original work's expression to have a transformative purpose, see, e.g., 4 Nimmer § 13.05[D][2], at 13-227-13-228 (discussing reproduction of entire works in judicial proceedings), the fact that The SAT so minimally alters Seinfeld's original expression in this case is further evidence of The SAT's lack of transformative purpose. To be sure, the act of testing trivia about a creative work, in question and answer form, involves some creative expression. While still minimal, it does require posing the questions and hiding the correct answer among three or four incorrect ones.^[8] Also, dividing the trivia questions into increasing levels of difficulty is somewhat more original than arranging names in a telephone book in alphabetical order. See Feist, 499 U.S. at 362-63, 111 S.Ct. 1282. The SAT's incorrect multiple choice answers are also original. However, the work as a whole, drawn directly from the Seinfeld episodes without substantial alteration, is far less transformative than other works we have held not to constitute fair use. See, e.g., Twin Peaks, 996 F.2d at 1378 (book about Twin Peaks television series that discusses show's popularity, characters, actors, plots, creator, music, and poses trivia questions about show held not to be fair use).

Finally, we note a potential source of confusion in our copyright jurisprudence over the use of the term "transformative." A "derivative work," over which a copyright owner has exclusive control, is defined as

a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted.

17 U.S.C. §§ 101, 106(2) (emphasis added). Although derivative works that are subject to the author's copyright transform an original work into a new mode of presentation, such works—unlike works of fair use—take expression for purposes that are not "transformative."^[9] In the instant case, since The SAT has transformed Seinfeld's expression into trivia quiz book form with little, if any, transformative purpose, the first fair use factor weighs against defendants.

Nature of the Copyrighted Work

The second statutory factor, "the nature of the copyrighted work," 17 U.S.C. § 107(2), "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, 114 S.Ct. 1164. Defendants concede that the scope of fair use is somewhat narrower with respect to fictional works, such as Seinfeld, than to factual works. See Stewart v. Abend, 495 U.S. 207, 237, 110 S.Ct. 1750, 109 L.Ed.2d 184 (1990) ("In general, fair use is more likely to be found in factual works than in fictional works"); Twin Peaks, 996 F.2d at 1376 (second factor "favor[s] ... creative and fictional work"). Although this factor may be of less (or even of no) importance when assessed in the context of certain transformative uses, see, e.g., Campbell, 510 U.S. at 586, 114 S.Ct. 1164 (creative nature of original "Pretty Woman" song "not much help" to fair use analysis "since parodies almost invariably copy ... expressive works"), the fictional nature of the copyrighted work remains significant in the instant case, where the secondary use is at best minimally transformative. Thus, the second statutory factor favors the plaintiff.

Amount and Substantiality of the Portion Used in Relation to the Copyrighted Work as a Whole

As a preliminary matter, the district court held that its determination that The SAT is substantially similar to Seinfeld "'should suffice for a determination that the third fair use factor favors the plaintiff.'" Castle Rock, 955 F.Supp. at 269-70 (quoting Twin Peaks, 996 F.2d at 1377). However, because secondary users need invoke the fair use defense only where there is substantial similarity between the original and allegedly infringing works, and thus actionable copying, the district court's analysis is of little if any assistance. Under the district court's analysis, the third fair use factor would always and unfairly favor the original copyright owner claiming no fair use. See 4 Nimmer § 13.05[A], at 13-152 ("[F]air use is a defense not because of the absence of substantial similarity but rather despite the fact that the similarity is substantial.").

In Campbell, a decision post-dating Twin Peaks, the Supreme Court clarified that the third factor—the amount and substantiality of the portion of the copyrighted work used—must be examined in context. The inquiry must focus upon whether "[t]he extent of ... copying" is consistent with or more than necessary to further "the purpose and character of the use." 510 U.S. at 586-87, 114 S.Ct. 1164; see Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 449-50, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984) (reproduction of entire work "does not have its ordinary effect of militating against a finding of fair use" as to home videotaping of television programs); Harper & Row, 471 U.S. at 564, 105 S.Ct. 2218 ("[E]ven substantial quotations might qualify as fair use in a review of a published work or a news account of a speech" but not in a scoop of a soon-to-be-published memoir.). "[B]y focussing [sic] on the amount and substantiality of the original work used by the secondary user, we gain insight into the purpose and character of the use as we consider whether the quantity of the material used was reasonable in relation to the purpose of the copying." Texaco, 60 F.3d at 926 (quotation marks omitted). In Campbell, for example, the Supreme Court determined that a "parody must be able to 'conjure up' at least enough of [the] original [work] to make the object of its critical wit recognizable" and then determined whether the amount used of the original work was "no more than necessary" to satisfy the purpose of parody. 510 U.S. at 588-89, 114 S.Ct. 1164.

In the instant case, it could be argued that The SAT could not expose Seinfeld's "nothingness" without repeated, indeed exhaustive examples deconstructing Seinfeld's humor, thereby emphasizing Seinfeld's meaninglessness to The SAT's readers. That The SAT posed as many as 643 trivia questions to make this rather straightforward point, however, suggests that The SAT's purpose was entertainment, not commentary. Such an argument has not been advanced on appeal, but if it had been, it would not disturb our conclusion that, under any fair reading, The SAT does not serve a critical or otherwise transformative purpose. Accordingly, the third factor weighs against fair use.

Effect of Use Upon Potential Market for or Value of Copyrighted Work

Defendants claim that the fourth factor favors their case for fair use because Castle Rock has offered no proof of actual market harm to Seinfeld caused by The SAT. To the contrary, Seinfeld's audience grew after publication of The SAT, and Castle Rock has evidenced no interest in publishing Seinfeld trivia quiz books and only minimal interest in publishing Seinfeld-related books.

The Supreme Court has recently retreated from its earlier cases suggesting that the fourth statutory factor is the most important element of fair use, see Harper & Row, 471 U.S. at 566, 105 S.Ct. 2218, recognizing instead that "[a]ll [factors] are to be explored, and the results weighed together, in light of the purposes of copyright," Campbell, 510 U.S. at 578, 114 S.Ct. 1164; see Texaco, 60 F.3d at 926 (applying Campbell approach). Under this factor, we "consider not only the extent of market harm caused by the particular actions of the alleged infringer, but also whether unrestricted and widespread conduct of the sort engaged in by the defendant ... would result in a substantially adverse impact on the potential market for the original." Campbell, 510 U.S. at 590, 114 S.Ct. 1164 (quotation marks and citation omitted). The fourth factor must also "take account ... of harm to the market for derivative works," id., defined as those markets "that creators of original works would in general develop or license others to develop," id. at 592, 114 S.Ct. 1164.

In considering the fourth factor, our concern is not whether the secondary use suppresses or even destroys the market for the original work or its potential derivatives, but whether the secondary use usurps or substitutes for the market of the original work. Id. at 593, 114 S.Ct. 1164. The more transformative the secondary use, the less likelihood that the secondary use substitutes for the original. Id. at 591, 114 S.Ct. 1164. As noted by the district court, "[b]y the very nature of [transformative] endeavors, persons other than the copyright holder are undoubtedly better equipped, and more likely, to fill these particular market and intellectual niches." Castle Rock, 955 F.Supp. at 271. And yet the fair use, being transformative, might well harm, or even destroy, the market for the original. See Campbell, 510 U.S. at 591-92, 114 S.Ct. 1164 ("[A] lethal parody, like a scathing theater review, kills demand for the original, [but] does not produce a harm cognizable under the Copyright Act."); New Era Publications, 904 F.2d at 160 ("a critical biography serves a different function than does an authorized, favorable biography, and thus injury to the potential market for the favorable biography by the publication of the unfavorable biography does not affect application of factor four").^[10]

Unlike parody, criticism, scholarship, news reporting, or other transformative uses, The SAT substitutes for a derivative market that a television program copyright owner such as Castle Rock "would in general develop or license others to develop." Campbell, 510 U.S. at 592, 114 S.Ct. 1164.^[11] Because The SAT borrows exclusively from Seinfeld and not from any other television or entertainment programs, The SAT is likely to fill a market niche that Castle Rock would in general develop. Moreover, as noted by the district court, this "Seinfeld trivia game is not critical of the program, nor does it parody the program; if anything, SAT pays homage to Seinfeld." Castle Rock, 955 F.Supp. at 271-72. Although Castle Rock has evidenced little if any interest in exploiting this market for derivative works based on Seinfeld, such as by creating and publishing Seinfeld trivia books (or at least trivia books that endeavor to "satisfy" the "between-episode cravings" of Seinfeld lovers), the copyright law must respect that creative and economic choice. "It would ... not serve the ends of the Copyright Act—i.e., to advance the arts—if artists were denied their monopoly over derivative versions of their creative works merely because they made the artistic decision not to saturate those markets with variations of their original." Castle Rock, 955 F.Supp. at 272; see Salinger, 811 F.2d at 99 ("The need to assess the effect on the market for Salinger's letters is not lessened by the fact that their author has disavowed any intention to publish them during his lifetime."). The fourth statutory factor therefore favors Castle Rock.

Other Factors

As we have noted, the four statutory fair use factors are non-exclusive and serve only as a guide to promote the purposes underlying the copyright law. One factor that is of no relevance to the fair use equation, however, is defendants' continued distribution of The SAT after Castle Rock notified defendants of its copyright infringement claim, because "[i]f the use is otherwise fair, then no permission need be sought or granted.... [B]eing denied permission to use a work does not weigh against a finding of fair use." Campbell, 510 U.S. at 585 n. 18, 114 S.Ct. 1164; see Wright, 953 F.2d at 737 (rejecting as irrelevant to fair use analysis argument that defendant failed to get plaintiff's permission to create work).

We also note that free speech and public interest considerations are of little relevance in this case, which concerns garden-variety infringement of creative fictional works. See 4 Nimmer § 13.05[B][4], at 13-205 ("The public interest is also a factor that continually informs the fair use analysis."); cf. Time Inc. v. Bernard Geis Assocs., 293 F.Supp. 130, 146 (S.D.N.Y.1968) (discussing importance of access to information about President Kennedy assassination in fair use analysis of home video of assassination).

Aggregate Assessment

Considering all of the factors discussed above, we conclude that the copyright law's objective "[t]o promote the Progress of Science and useful Arts" would be undermined by permitting The SAT's copying of Seinfeld, see Arica, 970 F.2d at 1077, and we therefore reject defendants' fair use defense. Finally, we note that defendants do not assert that Castle Rock abandoned, forfeited, or misused copyrights in Seinfeld, and that defendants have asserted no defense on appeal other than that of fair use.

Conclusion

Undoubtedly, innumerable books could "expose" the "nothingness" or otherwise comment upon, criticize, educate the public about, or research Seinfeld and contemporary television culture. The SAT, however, is not such a book. For the reasons set forth above, the judgment of the district court is affirmed.^[12]

[*] The Honorable Jed S. Rakoff, of the United States District Court for the Southern District of New York, sitting by designation.

[2] An example of the trivia quiz book's matching questions (entitled "Family Trees") is as follows:

1. Cousin Jeffrey 2. Uncle Leo 3. Manya 4. Isaac 5. Mr. Seinfeld 6. Mrs. Seinfeld 7. Mr. Benes 8. Mr. Costanza 9. Mrs. Costanza 10. Mrs. Kramer.

(a) Former condo association president

(b) Drinks Colt 45 in the nude

(c) Arm-grabbing, loquacious garbage can picker

(d) Leaves a rent-controlled New York City apartment for the Phoenix sunshine

(e) Gruff-talking, well-known novelist

(f) New York City employee who watches the Nature Channel

(g) Wears sneakers in the swimming pool and has to "get the good spot in front of the good building in the good neighborhood"

(h) Enjoys the heat and never uses air conditioning

(i) Elderly immigrant whose beloved pony was "the pride of Krakow"

(j) Nagging, shrill-voiced Glamour magazine reader who was hospitalized for a back injury

[3] As noted later, this opinion does not address issues of trademark or unfair competition.

[4] Because the parties have stipulated to damages, we need not address, as did Twin Peaks, whether damages should be assessed on a per episode basis.

[5] We appreciate that the line between unprotected fact and protected creative expression may in some instances be less clear. Where a "fictional" single mother in a popular television series engages in real political discourse with a real Vice-President of the United States, for example, it is less clear whether the television "script" is fiction—in the sense that it is only a television script, or fact—in the sense that it is a real dialogue with a real political figure about contemporary issues. Whatever the line between historical fact and creative expression, however, Seinfeld is securely on the side of creative expression.

[6] We do not understand Ringgold's quantitative analysis to be the same as a fragmented similarity analysis. The former considers the amount of copying not only of direct quotations and close paraphrasing, but also of all other protectable expression in the original work.

[7] Had The SAT's incorrect answer choices attempted to parody Seinfeld, for example, defendants would have a stronger case for fair use. See Campbell, 510 U.S. at 588, 114 S.Ct. 1164.

[8] In the time it took to write this last sentence, for example, one could have easily created the following trivia question about the film trilogy Star Wars: "Luke Skywalker was aghast to learn that Darth Vader was Luke's (a) father (b) father-in-law (c) best friend (d) Jerry Seinfeld," and innumerable other such trivia questions about original creative works.

[9] Indeed, if the secondary work sufficiently transforms the expression of the original work such that the two works cease to be substantially similar, then the secondary work is not a derivative work and, for that matter, does not infringe the copyright of the original work. See 1 Nimmer § 3.01, at 3-3 (stating that "a work will be considered a derivative work only if it would be considered an infringing work" if it were unauthorized).

[10] By the same token, because a "film producer's appropriation of a composer's previously unknown song that turns the song into a commercial success" is a market substitute, that use is not made fair because it increases the market for the original work. Campbell, 510 U.S. at 591 n. 21, 114 S.Ct. 1164.

[11] Just as secondary users may not exploit markets that original copyright owners would "in general develop or license others to develop" even if those owners had not actually done so, copyright owners may not preempt exploitation of transformative markets, which they would not "in general develop or license others to develop," by actually developing or licensing others to develop those markets. Thus, by developing or licensing a market for parody, news reporting, educational or other transformative uses of its own creative work, a copyright owner plainly cannot prevent others from entering those fair use markets. See 4 Nimmer § 13.05[A][4], at 13-181-13-182 (recognizing "danger of circularity" where original copyright owner redefines "potential market" by developing or licensing others to develop that market); Texaco, 60 F.3d at 930 ("Only an impact on potential licensing revenues for traditional, reasonable, or likely to be developed markets" is relevant to fourth factor.).

[12] For any reader of this opinion still possessed by post-Seinfeld "cravings," the answers to the trivia questions posed supra, at 3-4 & n. 2, are: 1-c, 11-"Junior Mints," 12-a; matching: 1-f, 2-c, 3-i, 4-d, 5-a, 6-h, 7-e, 8-g, 9-j, 10-b.

154 F.3d 1107

1998 Copr.L.Dec. P 27,820, 48 U.S.P.Q.2d 1026,
98 Cal. Daily Op. Serv. 7130,
98 Daily Journal D.A.R. 9859

MICRO STAR, Plaintiff-Appellant,
v.
FORMGEN INC., a corporation; GT Interactive Software Corp.;
3D Realms Entertainment, aka 3D Realms
Entertainment; DOES, 1 through 100,
inclusive., Defendants-Appellees.
MICRO STAR, Plaintiff-Appellant/Cross-Appellee,
v.
FORMGEN INC., a corporation; GT Interactive Software Corp.;
3D Realms Entertainment, aka 3D Realms
Entertainment; Does, 1 through 100,
inclusive., Defendants-Appellees/Cross-Appellants.

Nos. 96-56426, 96-56433.

United States Court of Appeals,
Ninth Circuit.

Argued and Submitted Nov. 4, 1997.
Decided Sept. 11, 1998.

[1109] Philip H. Stillman, Flynn, Sheridan, Tabb & Stillman, San Diego, CA, for plaintiff-appellant/cross-appellee.

Michael S. Oberman, Kramer, Levin, Naftalis & Frankel, New York City, for defendants-appellees/cross-appellants.

Mark E. Nebergall, Mark Traphagen, Software Publishers Association, Washington, DC, for defendants-appellees/cross-appellants.

Gail E. Markels, Interactive Digital Software Association, New York City, for defendants-appellees/cross-appellants.

Appeal from the United States District Court for the Southern District of California Marilyn L. Huff, District Judge, Presiding. D.C. No. CV-96-03435-MLH.

Before: KOZINSKI, THOMPSON^[*] and TROTT, Circuit Judges.

KOZINSKI, Circuit Judge.

Duke Nukem routinely vanquishes Octabrain and the Protozoid Slimer. But what about the dreaded Micro Star?

I

FormGen Inc., GT Interactive Software Corp. and Apogee Software, Ltd. (collectively FormGen) made, distributed and own the rights to Duke Nukem 3D (D/N-3D), an immensely popular (and very cool) computer game. D/N-3D is played from the first-person perspective; the player assumes the personality and point of view of the title character, who is seen on the screen only as a pair of hands and an occasional boot, much as one might see oneself in real life without the aid of a mirror.^[1] Players explore a futuristic city infested with evil aliens and other hazards. The goal is to zap them before they zap you, while searching for the hidden passage to the next level. The basic game comes with twenty-nine levels, each with a different combination of scenery, aliens, and other challenges. The game also includes a "Build Editor," a utility that enables players to create their own levels. With FormGen's encouragement, players frequently post levels they have created on the Internet where others can download them. Micro Star, a computer software distributor, did just that: It downloaded 300 user-created levels and stamped them onto a CD, which it then sold commercially as Nuke It (N/I). N/I is packaged in a box decorated with numerous "screen shots," pictures of what the new levels look like when played.

Micro Star filed suit in district court, seeking a declaratory judgment that N/I did not infringe on any of FormGen's copyrights. FormGen counterclaimed, seeking a preliminary injunction barring further production and distribution of N/I. Relying on Lewis Galoob Toys, Inc. v. Nintendo of Am., Inc., 964 F.2d 965 (9th Cir.1992), the district court held that N/I was not a derivative work and therefore did not infringe FormGen's copyright. The district court did, however, grant a preliminary injunction as to the screen shots, finding that N/I's packaging violated FormGen's copyright by reproducing pictures of D/N-3D characters without a license. The court rejected Micro Star's fair use claims. Both sides appeal their losses.

II

A party seeking a preliminary injunction must show "either a likelihood of success on the merits and the possibility of irreparable injury, or that serious questions going to the merits were raised and the balance of hardships tips sharply in its favor." Johnson Controls, Inc. v. Phoenix Control Systems, Inc., 886 F.2d 1173, 1174 (9th Cir.1989). Because "in a copyright infringement claim, a showing of a reasonable likelihood of success on the merits raises a presumption of irreparable harm," id., FormGen need only show a likelihood of success on the merits to get the preliminary injunction it seeks (barring the manufacture and distribution of N/I) and to preserve the preliminary injunction it already won (barring the screen shots on N/I's packaging).

III

To succeed on the merits of its claim that N/I infringes FormGen's copyright, FormGen must show (1) ownership of the copyright to D/N-3D, and (2) copying of protected expression by Micro Star. See Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330, 1335 (9th Cir.1995). FormGen's [1110] copyright registration creates a presumption of ownership, see id., and we are satisfied that FormGen has established its ownership of the copyright. We therefore focus on the latter issue.

FormGen alleges that its copyright is infringed by Micro Star's unauthorized commercial exploitation of user-created game levels. In order to understand FormGen's claims, one must first understand the way D/N-3D works. The game consists of three separate components: the game engine, the source art library and the MAP files.^[2] The game engine is the heart of the computer program; in some sense, it is the program. It tells the computer when to read data, save and load games, play sounds and project images onto the screen. In order to create the audiovisual display for a particular level, the game engine invokes the MAP file that corresponds to that level. Each MAP file contains a series of instructions that tell the game engine (and, through it, the computer) what to put where. For instance, the MAP file might say scuba gear goes at the bottom of the screen. The game engine then goes to the source art library, finds the image of the scuba gear, and puts it in just the right place on the screen.^[3] The MAP file describes the level in painstaking detail, but it does not actually contain any of the copyrighted art itself; everything that appears on the screen actually comes from the art library. Think of the game's audiovisual display as a paint-by-numbers kit. The MAP file might tell you to put blue paint in section number 565, but it doesn't contain any blue paint itself; the blue paint comes from your palette, which is the low-tech analog of the art library, while you play the role of the game engine. When the player selects one of the N/I levels, the game engine references the N/I MAP files, but still uses the D/N-3D art library to generate the images that make up that level.

FormGen points out that a copyright holder enjoys the exclusive right to prepare derivative works based on D/N-3D. See 17 U.S.C. § 106(2) (1994). According to FormGen, the audiovisual displays generated when D/N-3D is run in conjunction with the N/I CD MAP files are derivative works that infringe this exclusivity. Is FormGen right? The answer is not obvious.

The Copyright Act defines a derivative work as

a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a "derivative work."

Id. § 101. The statutory language is hopelessly overbroad, however, for "[e]very book in literature, science and art, borrows and must necessarily borrow, and use much which was well known and used before." Emerson v. Davies, 8 F. Cas. 615, 619 (C.C.D.Mass.1845) (No. 4436), quoted in 1 Nimmer on Copyright, § 3.01, at 3-2 (1997). To narrow the statute to a manageable level, we have developed certain criteria a work must satisfy in order to qualify as a derivative work. One of these is that a derivative work must exist in a "concrete or permanent form," Galoob, 964 F.2d at 967 (internal quotation marks omitted), and must substantially incorporate protected material from the preexisting work, see Litchfield v. Spielberg, 736 F.2d 1352, 1357 (9th Cir.1984). Micro Star argues that N/I is not a derivative work because the audiovisual displays generated when D/N-3D is run with N/I's MAP files are [1111] not incorporated in any concrete or permanent form, and the MAP files do not copy any of D/N-3D's protected expression. It is mistaken on both counts.

The requirement that a derivative work must assume a concrete or permanent form was recognized without much discussion in Galoob. There, we noted that all the Copyright Act's examples of derivative works took some definite, physical form and concluded that this was a requirement of the Act. See Galoob, 964 F.2d at 967-68; see also Edward G. Black & Michael H. Page, Add-On Infringements, 15 Hastings Comm/Ent. L.J. 615, 625 (1993) (noting that in Galoob the Ninth Circuit "re-examined the statutory definition of derivative works offered in section 101 and found an independent fixation requirement of sorts built into the statutory definition of derivative works"). Obviously, N/I's MAP files themselves exist in a concrete or permanent form; they are burned onto a CD-ROM. See ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1453 (7th Cir.1996) (computer files on a CD are fixed in a tangible medium of expression). But what about the audiovisual displays generated when D/N-3D runs the N/I MAP files--i.e., the actual game level as displayed on the screen? Micro Star argues that, because the audiovisual displays in Galoob didn't meet the "concrete or permanent form" requirement, neither do N/I's.

In Galoob, we considered audiovisual displays created using a device called the Game Genie, which was sold for use with the Nintendo Entertainment System. The Game Genie allowed players to alter individual features of a game, such as a character's strength or speed, by selectively "blocking the value for a single data byte sent by the game cartridge to the [Nintendo console] and replacing it with a new value." Galoob, 964 F.2d at 967. Players chose which data value to replace by entering a code; over a billion different codes were possible. The Game Genie was dumb; it functioned only as a window into the computer program, allowing players to temporarily modify individual aspects of the game. See Lewis Galoob Toys, Inc. v. Nintendo of Am., Inc., 780 F.Supp. 1283, 1289 (N.D.Cal.1991).

Nintendo sued, claiming that when the Game Genie modified the game system's audiovisual display, it created an infringing derivative work. We rejected this claim because "[a] derivative work must incorporate a protected work in some concrete or permanent form." Galoob, 964 F.2d at 967 (internal quotation marks omitted). The audiovisual displays generated by combining the Nintendo System with the Game Genie were not incorporated in any permanent form; when the game was over, they were gone. Of course, they could be reconstructed, but only if the next player chose to reenter the same codes.^[4]

Micro Star argues that the MAP files on N/I are a more advanced version of the Game Genie, replacing old values (the MAP files in the original game) with new values (N/I's MAP files). But, whereas the audiovisual displays created by Game Genie were never recorded in any permanent form, the audiovisual displays generated by D/N-3D from the N/I MAP files are in the MAP files themselves. In Galoob, the audiovisual display was defined by the original game cartridge, not by the Game Genie; no one could possibly say that the data values inserted by the Game Genie described the audiovisual display. In the present case the audiovisual display that appears on the computer monitor when a N/I level is played is described--in exact detail--by a N/I MAP file.

This raises the interesting question whether an exact, down to the last detail, description of an audiovisual display (and--by definition--we know that MAP files do describe audiovisual displays down to the last detail) [1112] counts as a permanent or concrete form for purposes of Galoob. We see no reason it shouldn't. What, after all, does sheet music do but describe in precise detail the way a copyrighted melody sounds? See 1 William F. Patry, Copyright Law and Practice 168 (1994) ("[A] musical composition may be embodied in sheet music...."). To be copyrighted, pantomimes and dances may be "described in sufficient detail to enable the work to be performed from that description." Id. at 243 (citing Compendium II of Copyright Office Practices § 463); see also Horgan v. Macmillan, Inc., 789 F.2d 157, 160 (2d Cir.1986). Similarly, the N/I MAP files describe the audiovisual display that is to be generated when the player chooses to play D/N-3D using the N/I levels. Because the audiovisual displays assume a concrete or permanent form in the MAP files, Galoob stands as no bar to finding that they are derivative works.

In addition, "[a] work will be considered a derivative work only if it would be considered an infringing work if the material which it has derived from a preexisting work had been taken without the consent of a copyright proprietor of such preexisting work." Mirage Editions v. Albuquerque A.R.T. Co., 856 F.2d 1341, 1343 (quoting 1 Nimmer on Copyright § 3.01 (1986)) (internal quotation marks omitted). "To prove infringement, [FormGen] must show that [D/N-3D's and N/I's audiovisual displays] are substantially similar in both ideas and expression." Litchfield v. Spielberg, 736 F.2d 1352, 1356 (9th Cir.1984) (emphasis omitted). Similarity of ideas may be shown by comparing the objective details of the works: plot, theme, dialogue, mood, setting, characters, etc. See id. Similarity of expression focuses on the response of the ordinary reasonable person, and considers the total concept and feel of the works. See id. at 1356-57. FormGen will doubtless succeed in making these showings since the audiovisual displays generated when the player chooses the N/I levels come entirely out of D/N-3D's source art library. Cf. Atari, Inc. v. North Am. Philips Consumer Elec. Corp., 672 F.2d 607, 620 (7th Cir.1982) (finding two video games substantially similar because they shared the same "total concept and feel").

Micro Star further argues that the MAP files are not derivative works because they do not, in fact, incorporate any of D/N-3D's protected expression. In particular, Micro Star makes much of the fact that the N/I MAP files reference the source art library, but do not actually contain any art files themselves. Therefore, it claims, nothing of D/N-3D's is reproduced in the MAP files. In making this argument, Micro Star misconstrues the protected work. The work that Micro Star infringes is the D/N-3D story itself--a beefy commando type named Duke who wanders around post-Apocalypse Los Angeles, shooting Pig Cops with a gun, lobbing hand grenades, searching for medkits and steroids, using a jetpack to leap over obstacles, blowing up gas tanks, avoiding radioactive slime. A copyright owner holds the right to create sequels, see Trust Co. Bank v. MGM/UA Entertainment Co., 772 F.2d 740 (11th Cir.1985), and the stories told in the N/I MAP files are surely sequels, telling new (though somewhat repetitive) tales of Duke's fabulous adventures. A book about Duke Nukem would infringe for the same reason, even if it contained no pictures.^[5]

Micro Star nonetheless claims that its use of D/N-3D's protected expression falls within the doctrine of fair use, which permits unauthorized use of copyrighted works "for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research." 17 U.S.C. § 107; see Narell v. Freeman, 872 F.2d 907, 913 (9th Cir.1989). Section 107 instructs courts "determining whether the use made of a work in any particular case is a fair use" to consider four factors: (1) the purpose and character of the use, including whether it is commercial in nature; (2) the nature of the copyrighted work; (3) the amount and substantiality of the copied material in relation to the copyrighted work as a whole; and (4) the effect of the use on the potential market for the copyrighted work. 17 U.S.C. § 107.

[1113] As a preliminary matter, Micro Star asks us to focus on the player's use of the N/I CD in evaluating the fair use claim, because-according to Micro Star-the player actually creates the derivative work. In Galoob, after we assumed for purposes of argument that the Game Genie did create derivative works, we went on to consider the fair use defense from the player's point of view. See Galoob, 964 F.2d at 970. But the fair use analysis in Galoob was not necessary and therefore is clearly dicta. More significantly, Nintendo alleged only contributory infringement--that Galoob was helping consumers create derivative works; FormGen here alleges direct infringement by Micro Star, because the MAP files encompass new Duke stories, which are themselves derivative works.

Our examination of the section 107 factors yields straightforward results. Micro Star's use of FormGen's protected expression was made purely for financial gain. While that does not end our inquiry, see Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 584, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994), "every commercial use of copyrighted material is presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright." Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 451, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984).^[6] The Supreme Court has explained that the second factor, the nature of the copyrighted work, is particularly significant because "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, 114 S.Ct. 1164. The fair use defense will be much less likely to succeed when it is applied to fiction or fantasy creations, as opposed to factual works such as telephone listings. See United Tel. Co. v. Johnson Publ'g Co., 855 F.2d 604, 609 (8th Cir.1988); see also Stewart v. Abend, 495 U.S. 207, 237, 110 S.Ct. 1750, 109 L.Ed.2d 184 (1990). Duke Nukem's world is made up of aliens, radioactive slime and freezer weapons-clearly fantasies, even by Los Angeles standards. N/I MAP files "expressly use[ ] the [D/N-3D] story's unique setting, characters, [and] plot," Stewart, 495 U.S. at 238, 110 S.Ct. 1750; both the quantity and importance of the material Micro Star used are substantial. Finally, by selling N/I, Micro Star "impinged on [FormGen's] ability to market new versions of the [D/N-3D] story." Stewart, 495 U.S. at 238, 110 S.Ct. 1750; see also Twin Peaks Productions, Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1377 (2d Cir.1993). Only FormGen has the right to enter that market; whether it chooses to do so is entirely its business. "[N/I] neither falls into any of the categories enumerated in section 107 nor meets the four criteria set forth in section 107." Stewart, 495 U.S. at 237, 110 S.Ct. 1750. It is not protected by fair use.

Micro Star also argues that it is the beneficiary of the implicit license FormGen gave to its customers by authorizing them to create new levels. Section 204 of the Copyright Act requires the transfer of the exclusive rights granted to copyright owners (including the right to prepare derivative works) to be in writing. See 17 U.S.C. § 204(a); Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 556 (9th Cir.1990). A nonexclusive license may, however, be granted orally or implied by conduct. See Effects, 908 F.2d at 558. Nothing indicates that FormGen granted Micro Star any written license at all; nor is there evidence of a nonexclusive oral license. The only written license FormGen conceivably granted was to players who designed their own new levels, but that license contains a significant limitation: Any new levels the players create "must be offered [to others] solely for free." The parties dispute whether the license is binding, but it doesn't matter. If the license is valid, it clearly prohibits commercial distribution of levels; if it doesn't, FormGen hasn't granted any written licenses at all.^[7]

[1114] In case FormGen didn't license away its rights, Micro Star argues that, by providing the Build Editor and encouraging players to create their own levels, FormGen abandoned all rights to its protected expression. It is well settled that rights gained under the Copyright Act may be abandoned. But abandonment of a right must be manifested by some overt act indicating an intention to abandon that right. See Hampton v. Paramount Pictures Corp., 279 F.2d 100, 104 (9th Cir.1960). Given that it overtly encouraged players to make and freely distribute new levels, FormGen may indeed have abandoned its exclusive right to do the same. But abandoning some rights is not the same as abandoning all rights, and FormGen never overtly abandoned its rights to profit commercially from new levels. Indeed, FormGen warned players not to distribute the levels commercially and has actively enforced that limitation by bringing suits such as this one.

IV

Because FormGen will likely succeed at trial in proving that Micro Star has infringed its copyright, we reverse the district court's order denying a preliminary injunction and remand for entry of such an injunction. Of course, we affirm the grant of the preliminary injunction barring Micro Star from selling N/I in boxes covered with screen shots of the game. ^[8]

AFFIRMED in part, REVERSED in part, and REMANDED. Micro Star to bear costs of both appeals.

---------------

[*] Judge Thompson was drawn to replace Judge Floyd Gibson who became unavailable after the case was submitted.

[1] This form of play was pioneered by a company called id Software with its classic Wolfenstein 3D character.

[2] So-called because the files all end with the extension ".MAP". Also, no doubt, because they contain the layout for the various levels.

[3] Actually, this is all a bit metaphorical. Computer programs don't actually go anywhere or fetch anything. Rather, the game engine receives the player's instruction as to which game level to select and instructs the processor to access the MAP file corresponding to that level. The MAP file, in turn, consists of a series of instructions indicating which art images go where. When the MAP file calls for a particular art image, the game engine tells the processor to access the art library for instructions on how each pixel on the screen must be colored in order to paint that image.

[4] A low-tech example might aid understanding. Imagine a product called the Pink Screener, which consists of a big piece of pink cellophane stretched over a frame. When put in front of a television, it makes everything on the screen look pinker. Someone who manages to record the programs with this pink cast (maybe by filming the screen) would have created an infringing derivative work. But the audiovisual display observed by a person watching television through the Pink Screener is not a derivative work because it does not incorporate the modified image in any permanent or concrete form. The Game Genie might be described as a fancy Pink Screener for video games, changing a value of the game as perceived by the current player, but never incorporating the new audiovisual display into a permanent or concrete form.

[5] We note that the N/I MAP files can only be used with D/N-3D. If another game could use the MAP files to tell the story of a mousy fellow who travels through a beige maze, killing vicious saltshakers with paper-clips, then the MAP files would not incorporate the protected expression of D/N-3D because they would not be telling a D/N-3D story.

[6] Of course, transformative works have greater recourse to the fair use defense as they "lie at the heart of the fair use doctrine's guarantee of breathing space within the confines of copyright ... and the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use." Campbell, 510 U.S. at 579, 114 S.Ct. 1164 (citations omitted). N/I can hardly be described as transformative; anything but.

[7] We would have no reason to sever the limitation from the license; the limitation is plainly stated in the User License, unambiguous, and not the least bit unreasonable. Indeed, it is precisely the sort of term we would expect to see in such a license.

[8] Micro Star raises various other claims alleging copyright misuse and abuse of the discovery process. However, nothing indicates that FormGen abused its copyright. See Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330, 1337 (9th Cir.1995). And we are at a loss to understand why Micro Star complains about the discovery process; certainly the district court did not abuse its discretion. See Sopcak v. Northern Mountain Helicopter Serv., 52 F.3d 817, 819 (9th Cir.1995).

[609] Appeals from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 96 C 330--Sarah Evans Barker, Chief Judge.

[610] Before Harlington Wood, Jr., Ripple and MANION, Circuit Judges.

Harlington Wood, Jr., Circuit Judge.

We are not art critics, do not pretend to be and do not need to be to decide this case. A large outdoor stainless steel sculpture by plaintiff Jan Martin, an artist, was demolished by the defendant as part of an urban renewal project. Plaintiff brought a one-count suit against the City of Indianapolis (the "City") under the Visual Artists Rights Act of 1990 ("VARA"), 17 U.S.C. sec. 101 et seq. The parties filed cross-motions for summary judgment. The district court granted plaintiff's motion and awarded plaintiff statutory damages in the maximum amount allowed for a non-wilful statutory violation. Martin v. City of Indianapolis, 982 F.Supp. 625 (S.D. Ind. 1997), and Martin v. City of Indianapolis, 4 F.Supp.2d 808 (S.D. Ind. 1998). Neither party is satisfied. It is necessary to see how this unique controversy came to be.

I. BACKGROUND

Plaintiff is an artist, but in this instance more with a welding torch than with a brush. He offered evidence to show, not all of it admitted, that his works have been displayed in museums, and other works created for private commissions, including a time capsule for the Indianapolis Museum of Art Centennial. He has also done sculptured jewelry for the Indiana Arts Commission. In 1979, at the Annual Hoosier Salem Art Show, plaintiff was awarded the prize for best of show in any medium. He holds various arts degrees from Purdue University, the Art Institute of Chicago and Bowling Green State University in Ohio. Plaintiff had been employed as production coordinator for Tarpenning-LaFollette Co. (the "Company"), a metal contracting firm in Indianapolis. It was in this position that he turned his artistic talents to metal sculpture fabrication.

In 1984, plaintiff received permission from the Indianapolis Metropolitan Development Commission to erect a twenty-by-forty-foot metal sculpture on land owned by John LaFollette, chairman of the Company. The Company also agreed to furnish the materials. The resulting Project Agreement between the City and the Company granted a zoning variance to permit the erection of plaintiff's proposed sculpture. An attachment to that agreement and the center of this controversy provided as follows:

Should a determination be made by the Department of Metropolitan Development that the subject sculpture is no longer compatible with the existing land use or that the acquisition of the property is necessary, the owner of the land and the owner of the sculpture will receive written notice signed by the Director of the Department of Metropolitan Development giving the owners of the land and sculpture ninety (90) days to remove said sculpture. Subject to weather and ground conditions.

[611] Plaintiff went to work on the project and in a little over two years it was completed.^[1] He named it "Symphony #1," but as it turns out in view of this controversy, a more suitable musical name might have been "1812 Overture." Because of the possibility that the sculpture might someday have to be removed, as provided for in the Project Agreement, Symphony #1 was engineered and built by plaintiff so that it could be disassembled for removal and later reassembled. The sculpture did not go unnoticed by the press, public or art community. Favorable comments admitted into evidence and objected to by the City are now an issue on appeal and their admissibility will be considered hereinafter.

The trouble began in April 1992 when the City notified LaFollette that there would be public hearings on the City's proposed acquisition of various properties as part of an urban renewal plan. One of the properties to be acquired was home to Symphony #1. Kim Martin, president of the Company and plaintiff's brother, responded to the City. He reminded the City that the Company had paid for Symphony #1, and had signed the agreement with the Metropolitan Development Corporation pertaining to the eventuality of removal. Martin stated that if the sculpture was to be removed, the Company would be willing to donate it to the City provided the City would bear the costs of removal to a new site, but that plaintiff would like some input as to where his sculpture might be placed. Plaintiff also personally appeared before the Metropolitan Development Commission and made the same proposal. This was followed by a letter from plaintiff to the Mayor reiterating the removal proposal. The Mayor responded that he was referring plaintiff's proposal to his staff to see what could be done.

The City thereafter purchased the land. At the closing, plaintiff again repeated his proposal and agreed to assist so Symphony #1 could be saved and, if necessary, moved without damage. The City's response was that plaintiff would be contacted in the event the sculpture was to be removed. Shortly thereafter, the City awarded a contract to demolish the sculpture, and demolition followed, all without prior notice to plaintiff or the Company. This lawsuit resulted in which summary judgment was allowed for plaintiff. However, his victory was not entirely satisfactory to him, nor was the City satisfied. The City appealed, and plaintiff cross-appealed.

II. ANALYSIS

Although recognized under the Berne Convention, the legal protection of an artist's so-called "moral rights"^[2] was controversial in this country. The United States did not join the Berne Convention until 1988 when it did so in a very limited way.^[3] Then Congress followed up by enacting VARA in 1990, with this explanation found in the House Reports:

An artist's professional and personal identity is embodied in each work created by that artist. Each work is a part of his or her reputation. Each work is a form of personal expression (oftentimes painstakingly and earnestly recorded). It is a rebuke to the dignity of the visual artist that our copyright law allows distortion, modification and even outright permanent destruction of such efforts.

H.R. Rep. No. 101-514, at 15 (1990), reprinted in 1990 U.S.C.C.A.N. 6915, 6925.

VARA seems to be a stepchild of our copyright laws, but does not require copyright registration. Some remedies [612] under the Copyright Act, however, including attorney's fees, are recoverable. 17 U.S.C. sec.sec. 504-05. VARA provides: "[T]he author of a work of visual art . . . shall have the right . . . to prevent any destruction of a work of recognized stature, and any intentional or grossly negligent destruction of that work is a violation of that right." 17 U.S.C. sec. 106A(a)(3)(B) (emphasis added). The district court considered Symphony #1 to be of "recognized stature" under the evidence presented and thus concluded that the City had violated plaintiff's rights under VARA. That finding is contested by the City.

"Recognized stature" is a necessary finding under VARA in order to protect a work of visual art from destruction. In spite of its significance, that phrase is not defined in VARA, leaving its intended meaning and application open to argument and judicial resolution. The only case found undertaking to define and apply "recognized stature" is Carter v. Helmsley-Spear, Inc., 801 F.Supp. 303 (S.D.N.Y. 1994), aff'd in part, vacated in part, rev'd in part, 71 F.3d 77 (2nd Cir. 1995).^[4] Involved was an unusual work of art consisting of interrelated sculptural elements constructed from recycled materials, mostly metal, to decorate the lobby of a commercial building in a borough of New York City. Carter II, 71 F.3d at 80. Part of the work was "a giant hand fashioned from an old school bus, [and] a face made of automobile parts . . . ." Id. Although the Second Circuit reversed the district court and held that the work was not a work of visual art protected by VARA, id. at 88, the district court presented an informative discussion in determining whether a work of visual art may qualify as one of "recognized stature." See Carter I, 861 F.Supp. at 324-26. That determination is based greatly on the testimony of experts on both sides of the issue, as would ordinarily be expected. See id.

The stature test formulated by the New York district court required:

(1) that the visual art in question has "stature," i.e. is viewed as meritorious, and (2) that this stature is "recognized" by art experts, other members of the artistic community, or by some cross-section of society. In making this showing, plaintiffs generally, but not inevitably, will need to call expert witnesses to testify before the trier of fact.

Carter I, 861 F.Supp. at 325.

Even though the district court in this present case found that test was satisfied by the plaintiff's evidence, plaintiff argues that the Carter v. Helmsley-Spear test may be more rigorous than Congress intended. That may be, but we see no need for the purposes of this case to endeavor to refine that rule. Plaintiff's evidence, however, is not as complete as in Carter v. Helmsley-Spear, possibly because Symphony #1 was destroyed by the City without the opportunity for experts to appraise the sculpture in place.

The City objects to the "stature" testimony that was offered by plaintiff as inadmissible hearsay. If not admitted, it would result in plaintiff's failure to sustain his burden of proof. It is true that plaintiff offered no evidence of experts or others by deposition, affidavit or interrogatories. Plaintiff's evidence of "stature" consisted of certain newspaper and magazine articles, and various letters, including a letter from an art gallery director and a letter to the editor of The Indianapolis News, all in support of the sculpture, as well as a program from the show at which a model of the sculpture won "Best of Show." After reviewing the City's objection, the district court excluded plaintiff's "programs and awards" evidence as lacking adequate foundation, Martin I, 982 F.Supp. at 631 n.1, but nevertheless found Martin had met his "stature" burden of proof with his other evidence. Id. at 630-31.

[613] Included in the admitted evidence, for example, was a letter dated October 25, 1982 from the Director of the Herron School of Art, Indiana University, Indianapolis. It was written to the Company and says in part, "The proposed sculpture is, in my opinion, an interesting and aesthetically stimulating configuration of forms and structures." The Indianapolis Star, in a four-column article by its visual arts editor, discussed public sculpture in Indianapolis. This article included a photograph of Symphony #1. The article lamented that the City had "been graced by only five pieces of note," but that two more had been added that particular year, one being plaintiff's sculpture. It noted, among other things, that Symphony #1 had been erected without the aid of "federal grants" and without the help of any committee of concerned citizens. Other public sculptures came in for some criticism in the article. However, in discussing Symphony #1, the author wrote: "Gleaming clean and abstract, yet domestic in scale and reference, irregularly but securely cabled together, the sculpture shows the site what it might be. It unites the area, providing a nexus, a marker, a designation, an identity and, presumably, a point of pride."

The district judge commented on the City's hearsay objection to plaintiff's admitted evidence as follows:

The statements contained within the proffered newspaper and magazine articles and letters are offered by Martin to show that respected members of the art community and members of the public at large consider Martin's work to be socially valuable and to have artistic merit, and to show the newsworthiness of Symphony #1 and Martin's work. These statements are offered by Martin to show that the declarants said them, not that the statements are, in fact, true . . . . The statements contained within the exhibits show how art critics and the public viewed Martin's work, particularly Symphony #1, and show that the sculpture was a matter worth reporting to the public. Therefore, the statements contained within these challenged exhibits are not hearsay because they are not being offered for the truth of the matters asserted therein.

Martin I, 982 F.Supp. at 630 (emphasis added).

We agree with the assessment made by the district court. The City urges the application of the usual hearsay cases such as Eisenstadt v. Central Corp., 113 F.3d 738 (7th Cir. 1997). In Eisenstadt, this court held it was an abuse of discretion in a securities fraud action for the district court to admit a newspaper article which attributed pertinent comments to the corporation and its agents. Id. at 744-45. That was clearly inadmissible hearsay, offered for the truth of the hearsay. Id. at 745. That may be distinguished from the very limited use of the evidence in this case, admitted only to show Symphony #1 had not gone unnoticed.

A closer case offered by the City is Grossman v. Waste Management, Inc., 589 F.Supp. 395 (N.D. Ill. 1984). There the district court admitted news articles to show that information about a proposed waste site was available to the market, but those articles were not to be used to show public opposition to the waste site. Id. at 414 n.8. In the present case, the author of the letter and the newspaper writer were not reporting as the truth what others reportedly said about the sculpture, but only expressing their own opinions. We find the article and the letter, as examples, admissible for this unique and limited purpose as the district court permitted.

Next the City claims that the Project Agreement entered into pre-VARA by plaintiff and the City encompassed many of plaintiff's rights under VARA. Therefore, the City argues, that whereas plaintiff failed to remove his work within the time allowed in the contract, plaintiff waived any cause of action he might have [614] had under VARA. That failure was the City's, not plaintiff's, as under the Agreement the City was obligated to give the owners of the land and the sculpture ninety days to remove the sculpture. The City, after discussing with the Company and plaintiff possible other uses for the tract and the removal proposal, failed to give the required notice and went ahead and demolished the sculpture. Nothing had happened between the parties prior to that which could constitute a waiver of any rights by the Company or plaintiff. Plaintiff had no notice of the City letting a contract for Symphony #1's demolition and no notice when that demolition would actually occur. After the preliminary and ongoing discussions plaintiff and the Company had with the City, when there was no immediate threat of imminent demolition, plaintiff had the right to continue to rely on the specific notice provided in the Agreement, unless it had been waived, which it was not.

Plaintiff and the Company had proposed a solution if the sculpture was to be moved. That proposal was still pending when the surprise destruction of Symphony #1 occurred. Prior to the demolition, nothing more had been heard from anyone, including the Mayor. Bureaucratic ineptitude may be the only explanation. Under 17 U.S.C. sec. 106A(e)(1), an artist may waive VARA rights "in a written instrument signed by the author," specifying to what the waiver applies. There is no written waiver instrument in this case which falls within the VARA requirements. We regard this argument to be without merit.

In spite of the City's conduct resulting in the intentional destruction of the sculpture, we do not believe under all the circumstances, particularly given the fact that the issue of VARA rights had not been raised until this suit, that the City's conduct was "wilful," as used in VARA, 17 U.S.C. sec. 504(c)(2), so as to entitle the plaintiff to enhanced damages. This appears to be a case of bureaucratic failure within the City government, not a wilful violation of plaintiff's VARA rights. As far as we can tell from the record, those VARA rights were unknown to the City. The parties proceeded under their pre-VARA agreement which the City breached. However, plaintiff retained his VARA rights. As unfortunate as the City's unannounced demolition of Symphony #1 was, it does not qualify plaintiff for damages under VARA.

The City also claims that the district court abused its discretion in awarding costs and attorney's fees to plaintiff. The City recognizes that a deferential standard of review of the district court's determination is applicable. See Knitwaves, Inc. v. Lollytogs Ltd. (Inc.), 71 F.3d 996, 1012 (7th Cir. 1995) (citation omitted). In view of the preceding discussion of this case we find no abuse of discretion and deem the City's fee arguments to be without merit.

Being fully satisfied with the district court's careful resolution of these unique issues and the resulting judgment, the district court's finding is affirmed in all respects.

MANION, Circuit Judge, concurring in part and dissenting in part.

Like my colleagues, I am not an art critic. So I begin with the well-worn adage that one man's junk is another man's treasure. No doubt Jan Martin treasured what the city's bulldozers treated as junk. At this point in the litigation this court is not in a position to attach either label (or perhaps one falling somewhere in between) to Symphony #1. For the Martin sculpture to receive protection under the Visual Arts Rights Act (VARA), it has to rise to the statutory level of "recognized stature." Because at this summary judgment stage, at least, it has clearly not merited the protection that goes with that description, I respectfully dissent.

Another well-worn adage advises that you should never look a gift horse in the mouth. Of course anyone who has ever accepted a gift horse that turns out to be lame or otherwise infirm quickly understands the error of that advice when the feed and veterinary bills arrive. When the City acquired several tracts of land for urban renewal, Martin's Symphony #1 remained in place on one of the tracts. Martin offered to donate the sculpture to the City if it would remove and relocate it to another site. The City examined this "gift" and determined it would have cost it $8,000 to relocate, so it declined the offer. But it did agree to notify Martin in advance of any renewal project so he could remove Symphony #1 if he so chose. Although it appears that Martin was fully aware that the sculpture's days were numbered, the City did not send him an official notice before the bulldozer moved in. If this were a simple breach of contract claim (albeit not a federal case), damages could well be in order. Instead, this is a federal claim under VARA, and different standards apply.

Of course, VARA was not designed to regulate urban renewal, but to protect great works of art from destruction and mutilation, among other things. 17 U.S.C. sec. 106A(a). In order to restrict VARA's reach, the Act was limited to preventing destruction of works of art that had attained a "recognized stature." 17 U.S.C. sec. 106A(a)(3)(B). The court correctly notes that a natural reading of this term indicates that it has two elements (which [616] correspond to its two words): (1) merit or intrinsic worth; and (2) a public acknowledgment of that merit by society or the art community. As the district court in Carter v. Helmsley-Spear, Inc. stated: "the recognized stature requirement is best viewed as a gate-keeping mechanism--protection is afforded only to those works of art that art experts, the art community, or society in general views as possessing stature." 861 F. Supp. 303, 325 (S.D.N.Y. 1994), rev'd in part and aff'd in part, 71 F.3d 77 (2d Cir. 1995). So I concur with the court on this point.

I dissent, however, because summary judgment is not appropriate here. A plaintiff cannot satisfy his burden of demonstrating recognized stature through old newspaper articles and unverified letters, some of which do not even address the artwork in question. Rather, as the district court stated in Carter, in "making this showing [of recognized stature] plaintiffs generally, but not inevitably, will need to call expert witnesses to testify before the trier of fact." 861 F. Supp. at 325. Instances where expert testimony on this point is not necessary will be rare, and this is not one of those exceptional cases where something of unquestioned recognition and stature was destroyed. Furthermore, where newspaper articles are admitted into evidence only to acknowledge recognition but not for the truth of the matter asserted (that the art in question was good or bad), a plaintiff needs more to overcome a defendant's motion for summary judgment on a VARA claim, much less prevail on his own summary judgment motion. While the very publication of newspaper articles on a work of art may have bearing on the "recognized" element, there has to be some evidence that the art had stature (i.e., that it met a certain high level of quality). The newspaper articles are hearsay and not admitted for the truth of the matter asserted in them. Construed in the light most favorable to the defendant, they cannot demonstrate by a preponderance of the evidence that the plaintiff's art was of a recognized stature, and that no reasonable jury could find otherwise. Experts need to weigh in here, and the trial court and perhaps this court need to come up with a clearer definition of when works of art achieve "recognized stature."

For now, however, those who are purchasers or donees of art had best beware. To avoid being the perpetual curator of a piece of visual art that has lost (or perhaps never had) its luster, the recipient must obtain at the outset a waiver of the artist's rights under VARA. See 17 U.S.C. sec. 106A(e). Before awarding building permits for erection of sculptures, municipalities might be well advised to obtain a written waiver of the artist's rights too. If not, once destroyed, art of questionable value may acquire a minimum worth of $20,000.00 under VARA.

Notes:

[1]. See Appendix for a photographic copy of the sculpture.

[2]. See, Martin A. Roeder, The Doctrine of Moral Right, A Study in the Law of Artists, Authors and Creators, 53 Harv.L.Rev. 554 (1940).

[3]. See S. Rep. No. 100-352 (1988), reprinted in 1988 U.S.C.C.A.N. 3706.

[4]. This Second Circuit case provides a good general review of the development of VARA.

539 U.S. 23

DASTAR CORP.
v.
TWENTIETH CENTURY FOX FILM CORP. ET AL.

No. 02-428.
Supreme Court of United States.
Argued April 2, 2003.
Decided June 2, 2003.

General Dwight D. Eisenhower's World War II book, Crusade in Europe, was published by Doubleday, which registered the work's copyright and granted exclusive television rights to an affiliate of respondent Twentieth Century Fox Film Corporation (Fox). Fox, in turn, arranged for Time, Inc., to produce a Crusade in Europe television series based on the book, and Time assigned its copyright in the series to Fox. The series was first broadcast in 1949. In 1975, Doubleday renewed the book's copyright, but Fox never renewed the copyright on the television series, which expired in 1977, leaving the series in the public domain. In 1988, Fox reacquired the television rights in the book, including the exclusive right to distribute the Crusade television series on video and to sublicense others to do so. Respondents SFM Entertainment and New Line Home Video, Inc., acquired from Fox the exclusive rights to manufacture and distribute Crusade on video. In 1995, petitioner Dastar released a video set, World War II Campaigns in Europe, which it made from tapes of the original version of the Crusade television series and sold as its own product for substantially less than New Line's video set. Fox, SFM, and New Line brought this action alleging, inter alia, that Dastar's sale of Campaigns without proper credit to the Crusade television series constitutes "reverse passing off" in violation of § 43(a) of the Lanham Act. The District Court granted respondents summary judgment. The Ninth Circuit affirmed in relevant part, holding, among other things, that because Dastar copied substantially the entire Crusade series, labeled the resulting product with a different name, and marketed it without attribution to Fox, Dastar had committed a "bodily appropriation" of Fox's series, which was sufficient to establish the reverse passing off.

Held: Section 43(a) of the Lanham Act does not prevent the unaccredited copying of an uncopyrighted work. Pp. 28-38.

(a) Respondents' claim that Dastar has made a "false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which.. . is likely to cause confusion.. . as to the origin ... of [its] goods" in violation of § 43(a) of the Lanham Act, 15 U. S. C. § 1125(a), would undoubtedly be sustained if Dastar had bought [539 U.S. 24] some of New Line's Crusade videotapes and merely repackaged them as its own. However, Dastar has instead taken a creative work in the public domain, copied it, made modifications (arguably minor), and produced its very own series of videotapes. If "origin" refers only to the manufacturer or producer of the physical "good" that is made available to the public (here, the videotapes), Dastar was the origin. If, however, "origin" includes the creator of the underlying work that Dastar copied, then someone else (perhaps Fox) was the origin of Dastar's product. At bottom, the Court must decide what § 43(a) means by the "origin" of "goods." Pp. 28-31.

(b) Because Dastar was the "origin" of the physical products it sold as its own, respondents cannot prevail on their Lanham Act claim. As dictionary definitions affirm, the most natural understanding of the "origin" of "goods"—the source of wares—is the producer of the tangible product sold in the marketplace, here Dastar's Campaigns videotape. The phrase "origin of goods" in the Lanham Act is incapable of connoting the person or entity that originated the ideas that "goods" embody or contain. The consumer typically does not care about such origination, and § 43(a) should not be stretched to cover matters that are of no consequence to purchasers. Although purchasers do care about ideas or communications contained or embodied in a communicative product such as a video, giving the Lanham Act special application to such products would cause it to conflict with copyright law, which is precisely directed to that subject, and which grants the public the right to copy without attribution once a copyright has expired, e. g., Sears, Roebuck & Co. v. Stiffel Co., 376 U. S. 225, 230. Recognizing a § 43(a) cause of action here would render superfluous the provisions of the Visual Artists Rights Act that grant an artistic work's author "the right. .. to claim authorship," 17 U. S. C. § 106A(a)(1)(A), but carefully limit and focus that right, §§ 101, 106A(b), (d)(1), and (e). It would also pose serious practical problems. Finally, reading § 43(a) as creating a cause of action for, in effect, plagiarism would be hard to reconcile with, e. g., Wal-Mart Stores, Inc. v. Samara Brothers, Inc., 529 U. S. 205, 211. Pp. 31-38.

34 Fed. Appx. 312, reversed and remanded.

SCALIA, J., delivered the opinion of the Court, in which all other Members joined, except BREYER, J., who took no part in the consideration or decision of the case.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

David A. Gerber argued the cause for petitioner. With him on the briefs were Stewart A. Baker, Bennett Evan Cooper, and David Nimmer.

[539 U.S. 25] Gregory G. Garre argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Olson, Assistant Attorney General McCallum, Deputy Solicitor General Clement, Anthony J. Steinmeyer, and Mark S. Davies.

Dale M. Cendali argued the cause for respondents. With her on the briefs were Walter E. Dellinger, Pamela A. Harris, Jonathan D. Hacker, Jeremy Maltby, Pammela Quinn, and Gary D. Roberts.^[*]

JUSTICE SCALIA delivered the opinion of the Court.

In this case, we are asked to decide whether § 43(a) of the Lanham Act, 15 U. S. C. § 1125(a), prevents the unaccredited copying of a work, and if so, whether a court may double a profit award under § 1117(a), in order to deter future infringing conduct.

I

In 1948, three and a half years after the German surrender at Reims, General Dwight D. Eisenhower completed Crusade in Europe, his written account of the allied campaign in Europe during World War II. Doubleday published the book, registered it with the Copyright Office in 1948, and granted exclusive television rights to an affiliate of respondent Twentieth Century Fox Film Corporation (Fox). Fox, in turn, arranged for Time, Inc., to produce a television series, also [539 U.S. 26] called Crusade in Europe, based on the book, and Time assigned its copyright in the series to Fox. The television series, consisting of 26 episodes, was first broadcast in 1949. It combined a soundtrack based on a narration of the book with film footage from the United States Army, Navy, and Coast Guard, the British Ministry of Information and War Office, the National Film Board of Canada, and unidentified "Newsreel Pool Cameramen." In 1975, Doubleday renewed the copyright on the book as the "`proprietor of copyright in a work made for hire.'" App. to Pet. for Cert. 9a. Fox, however, did not renew the copyright on the Crusade television series, which expired in 1977, leaving the television series in the public domain.

In 1988, Fox reacquired the television rights in General Eisenhower's book, including the exclusive right to distribute the Crusade television series on video and to sublicense others to do so. Respondents SFM Entertainment and New Line Home Video, Inc., in turn, acquired from Fox the exclusive rights to distribute Crusade on video. SFM obtained the negatives of the original television series, restored them, and repackaged the series on videotape; New Line distributed the videotapes.

Enter petitioner Dastar. In 1995, Dastar decided to expand its product line from music compact discs to videos. Anticipating renewed interest in World War II on the 50th anniversary of the war's end, Dastar released a video set entitled World War II Campaigns in Europe. To make Campaigns, Dastar purchased eight beta cam tapes of the original version of the Crusade television series, which is in the public domain, copied them, and then edited the series. Dastar's Campaigns series is slightly more than half as long as the original Crusade television series. Dastar substituted a new opening sequence, credit page, and final closing for those of the Crusade television series; inserted new chapter-title sequences and narrated chapter introductions; moved the "recap" in the Crusade television series to the [539 U.S. 27] beginning and retitled it as a "preview"; and removed references to and images of the book. Dastar created new packaging for its Campaigns series and (as already noted) a new title.

Dastar manufactured and sold the Campaigns video set as its own product. The advertising states: "Produced and Distributed by: Entertainment Distributing " (which is owned by Dastar), and makes no reference to the Crusade television series. Similarly, the screen credits state "DASTAR CORP presents" and "an ENTERTAINMENT DISTRIBUTING Production," and list as executive producer, producer, and associate producer employees of Dastar. Supp. App. 2-3, 30. The Campaigns videos themselves also make no reference to the Crusade television series, New Line's Crusade videotapes, or the book. Dastar sells its Campaigns videos to Sam's Club, Costco, Best Buy, and other retailers and mail-order companies for $25 per set, substantially less than New Line's video set. In 1998, respondents Fox, SFM, and New Line brought this action alleging that Dastar's sale of its Campaigns video set infringes Doubleday's copyright in General Eisenhower's book and, thus, their exclusive television rights in the book. Respondents later amended their complaint to add claims that Dastar's sale of Campaigns "without proper credit" to the Crusade television series constitutes "reverse passing off"^[1] in violation of § 43(a) of the Lanham Act, 60 Stat. 441, 15 U. S. C. § 1125(a), and in violation of state unfair-competition law. App. to Pet. for Cert. 31a. On cross-motions for summary judgment, the District Court found for respondents on all three counts, id., at 54a-55a, treating its [539 U.S. 28] resolution of the Lanham Act claim as controlling on the state-law unfair-competition claim because "the ultimate test under both is whether the public is likely to be deceived or confused," id., at 54a. The court awarded Dastar's profits to respondents and doubled them pursuant to § 35 of the Lanham Act, 15 U. S. C. § 1117(a), to deter future infringing conduct by petitioner.

The Court of Appeals for the Ninth Circuit affirmed the judgment for respondents on the Lanham Act claim, but reversed as to the copyright claim and remanded. 34 Fed. Appx. 312, 316 (2002). (It said nothing with regard to the state-law claim.) With respect to the Lanham Act claim, the Court of Appeals reasoned that "Dastar copied substantially the entire Crusade in Europe series created by Twentieth Century Fox, labeled the resulting product with a different name and marketed it without attribution to Fox[, and] therefore committed a `bodily appropriation' of Fox's series." Id., at 314. It concluded that "Dastar's `bodily appropriation' of Fox's original [television] series is sufficient to establish the reverse passing off." Ibid.^[2] The court also affirmed the District Court's award under the Lanham Act of twice Dastar's profits. We granted certiorari. 537 U. S. 1099 (2003).

II

The Lanham Act was intended to make "actionable the deceptive and misleading use of marks," and "to protect persons engaged in . . . commerce against unfair competition." 15 U. S. C. § 1127. While much of the Lanham Act addresses [539 U.S. 29] the registration, use, and infringement of trademarks and related marks, § 43(a), 15 U. S. C. § 1125(a) is one of the few provisions that goes beyond trademark protection. As originally enacted, § 43(a) created a federal remedy against a person who used in commerce either "a false designation of origin, or any false description or representation" in connection with "any goods or services." 60 Stat. 441. As the Second Circuit accurately observed with regard to the original enactment, however—and as remains true after the 1988 revision—§ 43(a) "does not have boundless application as a remedy for unfair trade practices," Alfred Dunhill, Ltd. v. Interstate Cigar Co., 499 F. 2d 232, 237 (1974). "[B]ecause of its inherently limited wording, § 43(a) can never be a federal `codification' of the overall law of `unfair competition,'" 4 J. McCarthy, Trademarks and Unfair Competition § 27:7, p. 27-14 (4th ed. 2002) (McCarthy), but can apply only to certain unfair trade practices prohibited by its text.

Although a case can be made that a proper reading of § 43(a), as originally enacted, would treat the word "origin" as referring only "to the geographic location in which the goods originated," Two Pesos, Inc. v. Taco Cabana, Inc., 505 U. S. 763, 777 (1992) (STEVENS, J., concurring in judgment),^[3] the Courts of Appeals considering the issue, beginning [539 U.S. 30] with the Sixth Circuit, unanimously concluded that it "does not merely refer to geographical origin, but also to origin of source or manufacture," Federal-Mogul-Bower Bearings, Inc. v. Azoff, 313 F. 2d 405, 408 (1963), thereby creating a federal cause of action for traditional trademark infringement of unregistered marks. See 4 McCarthy § 27:14; Two Pesos, supra, at 768. Moreover, every Circuit to consider the issue found § 43(a) broad enough to encompass reverse passing off. See, e. g., Williams v. Curtiss-Wright Corp., 691 F. 2d 168, 172 (CA3 1982); Arrow United Indus., Inc. v. Hugh Richards, Inc., 678 F. 2d 410, 415 (CA2 1982); F. E. L. Publications, Ltd. v. Catholic Bishop of Chicago, 214 USPQ 409, 416 (CA7 1982); Smith v. Montoro, 648 F. 2d 602, 603 (CA9 1981); Bangor Punta Operations, Inc. v. Universal Marine Co., 543 F. 2d 1107, 1109 (CA5 1976). The Trademark Law Revision Act of 1988 made clear that § 43(a) covers origin of production as well as geographic origin.^[4] Its language is amply inclusive, moreover, of reverse passing off—if indeed it does not implicitly adopt the unanimous court-of-appeals jurisprudence on that subject. See, e. g., [539 U.S. 31] Alpo Petfoods, Inc. v. Ralston Purina Co., 913 F. 2d 958, 963-964, n. 6 (CADC 1990) (Thomas, J.).

Thus, as it comes to us, the gravamen of respondents' claim is that, in marketing and selling Campaigns as its own product without acknowledging its nearly wholesale reliance on the Crusade television series, Dastar has made a "false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . . is likely to cause confusion . . . as to the origin . . . of his or her goods." § 43(a). See, e. g., Brief for Respondents 8, 11. That claim would undoubtedly be sustained if Dastar had bought some of New Line's Crusade videotapes and merely repackaged them as its own. Dastar's alleged wrongdoing, however, is vastly different: It took a creative work in the public domain —the Crusade television series—copied it, made modifications (arguably minor), and produced its very own series of videotapes. If "origin" refers only to the manufacturer or producer of the physical "goods" that are made available to the public (in this case the videotapes), Dastar was the origin. If, however, "origin" includes the creator of the underlying work that Dastar copied, then someone else (perhaps Fox) was the origin of Dastar's product. At bottom, we must decide what § 43(a)(1)(A) of the Lanham Act means by the "origin" of "goods."

III

The dictionary definition of "origin" is "[t]he fact or process of coming into being from a source," and "[t]hat from which anything primarily proceeds; source." Webster's New International Dictionary 1720-1721 (2d ed. 1949). And the dictionary definition of "goods" (as relevant here) is "[w]ares; merchandise." Id., at 1079. We think the most natural understanding of the "origin" of "goods"—the source of wares—is the producer of the tangible product sold in the marketplace, in this case the physical Campaigns videotape sold by Dastar. The concept might be stretched (as it was [539 U.S. 32] under the original version of § 43(a))^[5] to include not only the actual producer, but also the trademark owner who commissioned or assumed responsibility for ("stood behind") production of the physical product. But as used in the Lanham Act, the phrase "origin of goods" is in our view incapable of connoting the person or entity that originated the ideas or communications that "goods" embody or contain. Such an extension would not only stretch the text, but it would be out of accord with the history and purpose of the Lanham Act and inconsistent with precedent.

Section 43(a) of the Lanham Act prohibits actions like trademark infringement that deceive consumers and impair a producer's goodwill. It forbids, for example, the Coca-Cola Company's passing off its product as Pepsi-Cola or reverse passing off Pepsi-Cola as its product. But the brand-loyal consumer who prefers the drink that the Coca-Cola Company or PepsiCo sells, while he believes that that company produced (or at least stands behind the production of) that product, surely does not necessarily believe that that company was the "origin" of the drink in the sense that it was the very first to devise the formula. The consumer who buys a branded product does not automatically assume that the brand-name company is the same entity that came up with the idea for the product, or designed the product—and typically does not care whether it is. The words of the Lanham [539 U.S. 33] Act should not be stretched to cover matters that are typically of no consequence to purchasers.

It could be argued, perhaps, that the reality of purchaser concern is different for what might be called a communicative product—one that is valued not primarily for its physical qualities, such as a hammer, but for the intellectual content that it conveys, such as a book or, as here, a video. The purchaser of a novel is interested not merely, if at all, in the identity of the producer of the physical tome (the publisher), but also, and indeed primarily, in the identity of the creator of the story it conveys (the author). And the author, of course, has at least as much interest in avoiding passing off (or reverse passing off) of his creation as does the publisher. For such a communicative product (the argument goes) "origin of goods" in § 43(a) must be deemed to include not merely the producer of the physical item (the publishing house Farrar, Straus and Giroux, or the video producer Dastar) but also the creator of the content that the physical item conveys (the author Tom Wolfe, or—assertedly—respondents).

The problem with this argument according special treatment to communicative products is that it causes the Lanham Act to conflict with the law of copyright, which addresses that subject specifically. The right to copy, and to copy without attribution, once a copyright has expired, like "the right to make [an article whose patent has expired]—including the right to make it in precisely the shape it carried when patented—passes to the public." Sears, Roebuck & Co. v. Stiffel Co., 376 U. S. 225, 230 (1964); see also Kellogg Co. v. National Biscuit Co., 305 U. S. 111, 121-122 (1938). "In general, unless an intellectual property right such as a patent or copyright protects an item, it will be subject to copying." TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U. S. 23, 29 (2001). The rights of a patentee or copyright holder are part of a "carefully crafted bargain," Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141, 150-151 (1989), under which, once the patent or copyright [539 U.S. 34] monopoly has expired, the public may use the invention or work at will and without attribution. Thus, in construing the Lanham Act, we have been "careful to caution against misuse or over-extension" of trademark and related protections into areas traditionally occupied by patent or copyright. TrafFix, 532 U. S., at 29. "The Lanham Act," we have said, "does not exist to reward manufacturers for their innovation in creating a particular device; that is the purpose of the patent law and its period of exclusivity." Id., at 34. Federal trademark law "has no necessary relation to invention or discovery," Trade-Mark Cases, 100 U. S. 82, 94 (1879), but rather, by preventing competitors from copying "a source-identifying mark," "reduce[s] the customer's costs of shopping and making purchasing decisions," and "helps assure a producer that it (and not an imitating competitor) will reap the financial, reputation-related rewards associated with a desirable product," Qualitex Co. v. Jacobson Products Co., 514 U. S. 159, 163-164 (1995) (internal quotation marks and citation omitted). Assuming for the sake of argument that Dastar's representation of itself as the "Producer" of its videos amounted to a representation that it originated the creative work conveyed by the videos, allowing a cause of action under § 43(a) for that representation would create a species of mutant copyright law that limits the public's "federal right to `copy and to use' " expired copyrights, Bonito Boats, supra, at 165.

When Congress has wished to create such an addition to the law of copyright, it has done so with much more specificity than the Lanham Act's ambiguous use of "origin." The Visual Artists Rights Act of 1990, § 603(a), 104 Stat. 5128, provides that the author of an artistic work "shall have the right. . . to claim authorship of that work." 17 U. S. C. § 106A(a)(1)(A). That express right of attribution is carefully limited and focused: It attaches only to specified "work[s] of visual art," § 101, is personal to the artist, §§ 106A(b) and (e),and endures only for "the life of the author," [539 U.S. 35] § 106A(d)(1). Recognizing in § 43(a) a cause of action for misrepresentation of authorship of noncopyrighted works (visual or otherwise) would render these limitations superfluous. A statutory interpretation that renders another statute superfluous is of course to be avoided. E. g., Mackey v. Lanier Collection Agency & Service, Inc., 486 U. S. 825, 837, and n. 11 (1988).

Reading "origin" in § 43(a) to require attribution of uncopyrighted materials would pose serious practical problems. Without a copyrighted work as the basepoint, the word "origin" has no discernable limits. A video of the MGM film Carmen Jones, after its copyright has expired, would presumably require attribution not just to MGM, but to Oscar Hammerstein II (who wrote the musical on which the film was based), to Georges Bizet (who wrote the opera on which the musical was based), and to Prosper Mérimée (who wrote the novel on which the opera was based). In many cases, figuring out who is in the line of "origin" would be no simple task. Indeed, in the present case it is far from clear that respondents have that status. Neither SFM nor New Line had anything to do with the production of the Crusade television series—they merely were licensed to distribute the video version. While Fox might have a claim to being in the line of origin, its involvement with the creation of the television series was limited at best. Time, Inc., was the principal, if not the exclusive, creator, albeit under arrangement with Fox. And of course it was neither Fox nor Time, Inc., that shot the film used in the Crusade television series. Rather, that footage came from the United States Army, Navy, and Coast Guard, the British Ministry of Information and War Office, the National Film Board of Canada, and unidentified "Newsreel Pool Cameramen." If anyone has a claim to being the original creator of the material used in both the Crusade television series and the Campaigns videotapes, it would be those groups, rather than Fox. We do not [539 U.S. 36] think the Lanham Act requires this search for the source of the Nile and all its tributaries.

Another practical difficulty of adopting a special definition of "origin" for communicative products is that it places the manufacturers of those products in a difficult position. On the one hand, they would face Lanham Act liability for failing to credit the creator of a work on which their lawful copies are based; and on the other hand they could face Lanham Act liability for crediting the creator if that should be regarded as implying the creator's "sponsorship or approval" of the copy, 15 U. S. C. § 1125(a)(1)(A). In this case, for example, if Dastar had simply "copied [the television series] as Crusade in Europe and sold it as Crusade in Europe," without changing the title or packaging (including the original credits to Fox), it is hard to have confidence in respondents' assurance that they "would not be here on a Lanham Act cause of action," Tr. of Oral Arg. 35.

Finally, reading § 43(a) of the Lanham Act as creating a cause of action for, in effect, plagiarism—the use of otherwise unprotected works and inventions without attribution —would be hard to reconcile with our previous decisions. For example, in Wal-Mart Stores, Inc. v. Samara Brothers, Inc., 529 U. S. 205 (2000), we considered whether product-design trade dress can ever be inherently distinctive. WalMart produced "knockoffs" of children's clothes designed and manufactured by Samara Brothers, containing only "minor modifications" of the original designs. Id., at 208. We concluded that the designs could not be protected under § 43(a) without a showing that they had acquired "secondary meaning," id., at 214, so that they "`identify the source of the product rather than the product itself,'" id., at 211 (quoting Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U. S. 844, 851, n. 11 (1982)). This carefully considered limitation would be entirely pointless if the "original" producer could turn around and pursue a reverse-passing-off claim under exactly the same provision of the Lanham Act. Samara [539 U.S. 37] would merely have had to argue that it was the "origin" of the designs that Wal-Mart was selling as its own line. It was not, because "origin of goods" in the Lanham Act referred to the producer of the clothes, and not the producer of the (potentially) copyrightable or patentable designs that the clothes embodied.

Similarly under respondents' theory, the "origin of goods" provision of § 43(a) would have supported the suit that we rejected in Bonito Boats, 489 U. S. 141, where the defendants had used molds to duplicate the plaintiff's unpatented boat hulls (apparently without crediting the plaintiff). And it would have supported the suit we rejected in TrafFix, 532 U. S. 23: The plaintiff, whose patents on flexible road signs had expired, and who could not prevail on a trade-dress claim under § 43(a) because the features of the signs were functional, would have had a reverse-passing-off claim for unattributed copying of his design.

In sum, reading the phrase "origin of goods" in the Lanham Act in accordance with the Act's common-law foundations (which were not designed to protect originality or creativity), and in light of the copyright and patent laws (which were), we conclude that the phrase refers to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods. Cf. 17 U. S. C. § 202 (distinguishing between a copyrighted work and "any material object in which the work is embodied"). To hold otherwise would be akin to finding that § 43(a) created a species of perpetual patent and copyright, which Congress may not do. See Eldred v. Ashcroft, 537 U. S. 186, 208 (2003).

The creative talent of the sort that lay behind the Campaigns videos is not left without protection. The original film footage used in the Crusade television series could have been copyrighted, see 17 U. S. C. § 102(a)(6), as was copyrighted (as a compilation) the Crusade television series, even though it included material from the public domain, see [539 U.S. 38] § 103(a). Had Fox renewed the copyright in the Crusade television series, it would have had an easy claim of copyright infringement. And respondents' contention that Campaigns infringes Doubleday's copyright in General Eisenhower's book is still a live question on remand. If, moreover, the producer of a video that substantially copied the Crusade series were, in advertising or promotion, to give purchasers the impression that the video was quite different from that series, then one or more of the respondents might have a cause of action—not for reverse passing off under the "confusion . . . as to the origin" provision of § 43(a)(1)(A), but for misrepresentation under the "misrepresents the nature, characteristics [or] qualities" provision of § 43(a)(1)(B). For merely saying it is the producer of the video, however, no Lanham Act liability attaches to Dastar.

* * *

Because we conclude that Dastar was the "origin" of the products it sold as its own, respondents cannot prevail on their Lanham Act claim. We thus have no occasion to consider whether the Lanham Act permitted an award of double petitioner's profits. The judgment of the Court of Appeals for the Ninth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

JUSTICE BREYER took no part in the consideration or decision of this case.

---------------

Notes:

[*] Briefs of amici curiae urging reversal were filed for the International Trademark Association by Bruce R. Ewing; and for Malla Pollack et al. by Ms. Pollack, pro se.

Briefs of amici curiae urging affirmance were filed for the Association for Competitive Technology et al. by Paul Bender and Michael R. Klipper; and for the Directors Guild of America et al. by Richard P. Bress.

Briefs of amici curiae were filed for the American Intellectual Property Law Association by William G. Barber, Louis T. Pirkey, and Ronald E. Myrick; for the American Library Association et al. by Jonathan Band and Peter Jaszi; and for Intellectual Property Law Professors by Tyler T. Ochoa.

[1] Passing off (or palming off, as it is sometimes called)occurs when a producer misrepresents his own goods or services as someone else's. See, e. g., O. & W. Thum Co. v. Dickinson, 245 F. 609, 621 (CA6 1917). "Reverse passing off," as its name implies, is the opposite: The producer misrepresents someone else's goods or services as his own. See, e. g., Williams v. Curtiss-Wright Corp., 691 F. 2d 168, 172 (CA3 1982).

[2] As for the copyright claim, the Ninth Circuit held that the tax treatment General Eisenhower sought for his manuscript of the book created a triable issue as to whether he intended the book to be a work for hire, and thus as to whether Doubleday properly renewed the copyright in 1976. See 34 Fed. Appx., at 314. The copyright issue is still the subject of litigation, but is not before us. We express no opinion as to whether petitioner's product would infringe a valid copyright in General Eisenhower's book.

[3] In the original provision, the cause of action for false designation of origin was arguably "available only to a person doing business in the locality falsely indicated as that of origin," 505 U. S., at 778, n. 3. As adopted in 1946, § 43(a) provided in full:

"Any person who shall affix, apply, or annex, or use in connection with any goods or services, or any container or containers for goods, a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce, and any person who shall with knowledge of the falsity of such designation of origin or description or representation cause or procure the same to be transported or used in commerce or deliver the same to any carrier to be transported or used, shall be liable to a civil action by any person doing business in the locality falsely indicated as that of origin or the region in which said locality is situated, or by any person who believes that he is or is likely to be damaged by the use of any such false description or representation." 60 Stat. 441.

[4] Section 43(a) of the Lanham Act now provides:

"Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

"(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

"(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities,

"shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act." 15 U. S. C. § 1125(a)(1).

[5] Under the 1946 version of the Act, § 43(a) was read as providing a cause of action for trademark infringement even where the trademark owner had not itself produced the goods sold under its mark, but had licensed others to sell under its name goods produced by them—the typical franchise arrangement. See, e. g., My Pie Int'l, Inc. v. Debould, Inc., 687 F. 2d 919 (CA7 1982). This stretching of the concept "origin of goods" is seemingly no longer needed: The 1988 amendments to § 43(a) now expressly prohibit the use of any "word, term, name, symbol, or device," or "false or misleading description of fact" that is likely to cause confusion as to "affiliation, connection, or association . . . with another person," or as to "sponsorship, or approval" of goods. 15 U. S. C. § 1125(a).

118 F.3d 199
1997 Copr.L.Dec. P 27,671, 43 U.S.P.Q.2d 1299

Donna R. HOTALING; William W. Hotaling, Jr.; James P.
Maher; Dorothy C. Sherwood, Plaintiffs-Appellants,
v.
CHURCH OF JESUS CHRIST OF LATTER-DAY SAINTS, Defendant-Appellee.

No. 96-1399.
United States Court of Appeals,
Fourth Circuit.
Argued Jan. 29, 1997.
Decided June 30, 1997.

[201] ARGUED: Hunter Craycroft Harrison, Jr., McLean, VA, for Appellants. Michael Abbott Grow, Vorys, Sater, Seymour & Pease, Washington, DC, for Appellee.

Before HALL and LUTTIG, Circuit Judges, and BUTZNER, Senior Circuit Judge.

Reversed and remanded by published opinion. Senior Judge BUTZNER wrote the majority opinion, in which Judge LUTTIG joined. Judge HALL wrote a dissenting opinion.

OPINION

BUTZNER, Senior Circuit Judge:

In this appeal we hold that a library distributes a published work, within the meaning of the Copyright Act, 17 U.S.C. §§ 101 et seq., when it places an unauthorized copy of the work in its collection, includes the copy in its catalog or index system, and makes the copy available to the public. Because the district court ruled that these actions, by themselves, were insufficient to constitute distribution, we reverse the district court's summary judgment for the library and remand this case for further proceedings.

Summary judgment is appropriate only if the record reveals no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). We review the entry of summary judgment de novo, applying the same standard as the district court. Stone v. Liberty Mutual Ins. Co., 105 F.3d 188, 191 (4th Cir.1997).

I

We present the facts in the light most favorable to the plaintiffs, Donna Hotaling, William Hotaling, Jr., James Maher, and Dorothy Sherwood (collectively the Hotalings). See Yarnevic v. Brink's, Inc., 102 F.3d 753, 756 (4th Cir.1996). The Hotalings compiled and copyrighted a number of genealogical research materials. The validity of the copyrights is not at issue at this stage of the litigation. The Hotaling research materials were published in microfiche form and marketed by All-Ireland Heritage, Inc. At some point, most likely between 1985 and 1989, the defendant, the Church of Jesus Christ of Latter-Day Saints (Church), acquired a single legitimate copy of the microfiche and added it to its main library's collection in Salt Lake City, Utah. Sometime before 1992, the Church made microfiche copies of the works without the Hotalings' permission and sent the copies to several of its branch libraries, located throughout the country. The legitimately acquired copy had a black background, and the copies that were made by the Church had purple backgrounds.

In July, 1991, Donna Hotaling learned that the Church was making copies and placing them in its branch libraries. She contacted the Church and demanded that it stop this activity. After receiving her complaint, the Church recalled and destroyed many of the copies that it had made. According to the [202] affidavits submitted by the Church, it did not make any copies after 1991, and there is no evidence to contradict that assertion.

In 1992, All-Ireland Heritage, Inc., sued the Church for copyright infringement based on the Church's copying and distribution of the Hotaling works. The district court dismissed the action because All-Ireland Heritage, Inc., did not own the copyright. As a result of the lawsuit, the Church became concerned that nine of its branch libraries might still possess copies of the Hotaling works. In October, 1993, the Church sent a memorandum to those branch libraries asking them to search their microfiche inventories for copies of the works. Six libraries found and returned one microfiche copy each. Upon receipt, the main library destroyed these copies.

In 1994, Donna Hotaling visited a branch library in Rhode Island. During her visit, she discovered a paper copy of one of the Hotaling works. According to the Rhode Island library director, a patron made the copy and left it in an infrequently used section of the library. The director had been unaware, and believes the other staff members had been unaware, of the copy's existence. When the copy was discovered, the director destroyed it. Prior to April 1992, the Rhode Island library had returned to the Church's main library the microfiche from which the patron apparently had made the paper copy.

In 1995, Donna Hotaling went to the Church's main library in Salt Lake City. There she observed that the library maintained a microfiche copy of the Hotaling works in its collection. She examined a portion of the microfiche and noticed that it had a purple background. The Church acknowledges that the single copy it keeps in its collection is one that it made. The library retained this copy, the Church explains, because the copy it originally acquired was destroyed inadvertently.

In August, 1995, the Hotalings filed this suit. Following discovery, the Church moved for summary judgment, arguing that the record did not include any evidence of an infringing act within the three year statute of limitations. The district court granted the motion, and the Hotalings appealed.

II

The applicable statute of limitations bars civil copyright actions brought more than three years after the claim accrues. 17 U.S.C. § 507(b). "A cause of action for copyright infringement accrues when one has knowledge of a violation or is chargeable with such knowledge." Roley v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir.1994). A party does not waive the right to sue for infringements that accrue within three years of filing by not asserting related claims that accrued beyond three years. Roley, 19 F.3d at 481 (quoting Hoey v. Dexel Systems Corp., 716 F.Supp. 222, 223 (E.D.Va.1989)). In addition, under the prevailing view, a party cannot reach back, based on acts of infringement that accrued within the limitations period, and recover for claims that accrued outside the limitations period. Id.; see also Stone v. Williams, 970 F.2d 1043, 1049-50 (2d Cir.1992); 3 M. Nimmer & D. Nimmer, Nimmer on Copyright, § 12.05 at p. 12-110 (1996); contra Taylor v. Meirick, 712 F.2d 1112, 1118-19 (7th Cir.1983).

Hotaling filed this lawsuit in August, 1995. As a result, the statute of limitations bars recovery on claims that accrued before August, 1992. It is undisputed that any claim based on the Church's copying of Hotaling's works, which ceased by 1991, or on the original distribution of those copies from the main library to the branch libraries, which took place in or before 1991, is untimely. Those claims accrued in 1991 when Hotaling learned that the Church was copying and distributing her works.

In support of its summary judgment motion, the Church argued that there is no evidence of an infringing act within the limitations period. The district court found that the evidence, construed in Hotaling's favor, showed at most that the branch libraries possessed copies within the limitations period. The court granted the motion because it concluded that, without any evidence of copying or specific instances of distribution to the public within the limitations period, Hotaling could not prevail.[203]

III

A copyright infringement is a violation of "any of the exclusive rights of the copyright owner." 17 U.S.C. § 501(a). One of those exclusive rights is the right "to distribute copies ... of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending[.]" 17 U.S.C. § 106(3). Generally, as permitted by what is known as the first-sale doctrine, the copyright owner's right to distribute a copyrighted work does not prevent the owner of a lawful copy of the work from selling, renting, lending, or otherwise disposing of the lawful copy. 17 U.S.C. § 109(a); see Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 52, 113 S.Ct. 1920, 1923-24, 123 L.Ed.2d 611 (1993). For example, a library may lend an authorized copy of a book that it lawfully owns without violating the copyright laws. See H.R.Rep. No. 94-1476, § 109, at 79 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5693 and excerpted following 17 U.S.C.A. § 109. However, distributing unlawful copies of a copyrighted work does violate the copyright owner's distribution right and, as a result, constitutes copyright infringement. In order to establish "distribution" of a copyrighted work, a party must show that an unlawful copy was disseminated "to the public." 17 U.S.C. § 106(3); see National Car Rental v. Computer Associates, 991 F.2d 426, 434 (8th Cir.1993); 2 Nimmer, § 8.11[A] at 8-137.

The Hotalings assert that the Church's libraries infringed their copyrights by distributing unauthorized copies of their works to the public. The libraries did not record public use of the microfiche. Consequently, the Hotalings concede that the record does not contain any evidence showing specific instances within the limitations period in which the libraries loaned the infringing copies to members of the public. But, they argue that proving the libraries held unauthorized copies in their collections, where they were available to the public, is sufficient to establish distribution within the meaning of the statute.

The Church, on the other hand, argues that holding a work in a library collection that is open to the public constitutes, at most, an offer to distribute the work. In order to establish distribution, the Church argues, the evidence would need to show that a member of the public accepted such an offer.

On this issue, we agree with the Hotalings. When a public library adds a work to its collection, lists the work in its index or catalog system, and makes the work available to the borrowing or browsing public, it has completed all the steps necessary for distribution to the public. At that point, members of the public can visit the library and use the work. Were this not to be considered distribution within the meaning of § 106(3), a copyright holder would be prejudiced by a library that does not keep records of public use, and the library would unjustly profit by its own omission.

IV

The Church argues that, even if holding a copyrighted work in a library's collection does constitute distribution within the meaning of the statute, there is no evidence showing that, within the limitations period, unauthorized copies of the Hotaling works were available to the public at any of its libraries. In response, the Hotalings point to the copy Donna Hotaling examined in Salt Lake City in 1995, the paper copy she found in Rhode Island in 1994, and the six copies that were returned and destroyed in 1993.

The Hotalings presented sufficient evidence to create a genuine issue over whether the copy Donna Hotaling examined in Salt Lake City was being distributed to the public in 1995. According to Donna Hotaling's personal observations, that copy was part of the library's collection, listed in the card file, and available to the public. In addition, she asserts that the copy she inspected had a purple background. Based on this evidence, a reasonable jury could conclude that the library held an unauthorized copy of the Hotaling works in its publicly-accessible collection within the limitations period. Because the evidence is sufficient to show that this potentially infringing copy was being distributed to the public as recently as 1995, it provides a timely basis for Hotaling's suit.

[204] Although the Church acknowledges that its sole remaining copy is not the one it originally acquired from All-Ireland Heritage, Inc., it maintains that the remaining copy does not infringe Hotaling's copyright because it is a replacement copy, authorized by 17 U.S.C. § 108. The Copyright Act does permit libraries to make a replacement copy of a copyrighted work that has been published, but only if the library "has, after a reasonable effort, determined that an unused replacement cannot be obtained at a fair price," § 108(c), and the library has complied with other pertinent provisions of § 108. Because the district court did not reach this issue, we decline to address it for the first time on appeal.

We turn next to the other copies that the Hotalings contend were distributed within the limitations period. Based on the evidence in the record, a reasonable jury could not conclude that the library distributed the Rhode Island copy to the public. According to the unrebutted affidavit of the Rhode Island library director, the paper copy was made and left behind by a library patron. Although the copy was later found in the library, there is no evidence to show that it was made part of the library's collection or listed in the library's catalog file.

Nor is there sufficient evidence to establish that the six copies returned and destroyed in 1993 were held out to the public within the limitations period. The evidence in the record does not reveal where the branch libraries found the six copies or whether those copies had been available for public use.

V

The Church asserts an alternative argument. It contends that, even if the library held an unlawful copy of the Hotaling works in its collection during the limitations period, any claim related to that copy accrued more than three years before this suit was filed in August, 1995. The Church points out that Donna Hotaling knew the libraries were adding the unlawful copies to their collections in 1991. With regard to the copy held in the main library's collection, the Church asserts that Donna Hotaling has known for several years that that copy, which had been made by the Church, was maintained in the library's collection as a replacement for the one it had purchased. In Donna Hotaling's deposition, she states that she was aware of the main library's replacement copy before 1992. Therefore, says the Church, the Hotalings action accrued prior to 1992, and the statute of limitations bars the 1995 suit.

The Church's argument is unpersuasive. "Each act of infringement is a distinct harm giving rise to an independent claim for relief." Stone v. Williams, 970 F.2d at 1049. As we decided in Part III, distribution occurs, within the meaning of § 106, when a library holds a copy in its collection, lists the copy in its card file, and makes the copy available to the public. In this respect, the Church distributed the Hotaling microfiche as late as 1995. As we explained in Part II, a copyright holder may recover for infringements that occurred within three years before suit was filed, even if earlier claims were not pursued. Roley, 19 F.3d at 481. For this reason, the statute of limitations does not present a bar to the Hotalings' remaining claim.

Moreover, even if we were to accept the Church's argument, it would not change the outcome. If, as the Church says, actual use by the public must be shown to establish distribution, no one can expect a copyright holder to prove particular instances of use by the public when the proof is impossible to produce because the infringing library has not kept records of public use. To reiterate, a copyright holder should not be prejudiced in this manner, nor should an infringer benefit from its failure to keep records. In this case, the Church's library did not record instances of public use of the Hotaling microfiche.

VI

The Hotalings presented evidence that suggests the Church distributed at its main library one potentially infringing copy of the Hotaling works to the public within the limitations period. For that reason, dismissal of [205] the suit based on the statute of limitations was inappropriate. Accordingly, we reverse and remand to the district court for adjudication of the Hotalings' surviving claim. If the district court finds that the Church complied with § 108, it should dismiss this action. If the court finds that the Church did not comply with § 108, it should conduct further proceedings on outstanding claims, including the validity of the copyright.

REVERSED AND REMANDED

K.K. HALL, Circuit Judge, dissenting:

I respectfully dissent. The statute specifically identifies the sorts of "distribution" that violate a copyright, and none of them fit this situation.

The owner of a copyright does not possess an exclusive right to "distribute" the work in any conceivable manner; instead, it has the exclusive right "to distribute copies ... of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending [.]" 17 U.S.C. § 106(3). The Church did not sell or give an infringing copy to anyone. The Church did not "rent" or "lease" a copy; indeed, the public may use the Church's libraries and all of their contents for free.

"Lending" is the only remaining candidate. Because they are for research, the libraries do not permit materials to be checked out and used by a member of the public off-premises. Do the libraries nonetheless "lend" a work each time a patron consults it? I think not. The patron might report that he "used" or "looked at" the work, but he would not likely say that it had been "lent" to him.

Moreover, in this case, the plaintiffs do not even have any evidence that anyone used or looked at an infringing copy during the limitations period. The majority suggests that such evidence might have existed had the libraries--unlike all or nearly all others--recorded each and every use of its millions of volumes. It might have, but it does not.

In closing, I should say that I have some sympathy for the result reached by the majority. A library's allowing on-premises public use of an unauthorized copy should probably infringe a copyright. Nonetheless, I believe that current law does not deem this sort of use an infringing "distribution," and that, in any event, there is no evidence of such use in this case.

I would affirm the judgment of the district court.

[1103] Jerome B. Falk (argued), Clara J. Shin, and Blake J. Lawit of Howard Rice Nemerovski Canady Falk & Rabkin P.C., and Michael A. Jacobs and George C. Harris of Morrison & Foerster LLP, for defendant-appellant Autodesk, Inc.

Gregory A. Beck (argued) and Deepak Gupta of the Public Citizen Litigation Group, for plaintiff-appellee Timothy S. Vernor.

Randi W. Singer, Mark J. Fiore, and Lisa R. Eskow of Weil, Gotshal & Manges LLP, for amicus curiae eBay Inc.

Fred von Lohmann of the Electronic Frontier Foundation and Sherwin Siy and John Bergmayer of Public Knowledge, for amicus curiae American Library Association, Association of College and Research Libraries, Association of Research Libraries, Consumer Federation of America, Electronic Frontier Foundation, Public Knowledge, and U.S. PIRG.

Scott E. Bain, Keith Kupferschmid, and Mark Bohannon, for amicus curiae Software & Information Industry Association.

Robert H. Rotstein, Patricia H. Benson, and J. Matthew Williams of Mitchell Silberberg & Knupp LLP, for amicus curiae Motion Picture Association of America, Inc.

Appeal from the United States District Court for the Western District of Washington, Richard A. Jones, District Judge, Presiding. D.C. No. 2:07-cv-01189-RAJ.

Before WILLIAM C. CANBY, JR., CONSUELO M. CALLAHAN and SANDRA S. IKUTA, Circuit Judges.

CALLAHAN, Circuit Judge:

Timothy Vernor purchased several used copies of Autodesk, Inc.'s AutoCAD Release 14 software (“Release 14”) from one of Autodesk's direct customers, and he resold the Release 14 copies on eBay. Vernor brought this declaratory judgment action against Autodesk to establish that these resales did not infringe Autodesk's copyright. The district court issued the requested declaratory judgment, holding that Vernor's sales were lawful because of two of the Copyright Act's affirmative defenses that apply to owners of copies of copyrighted works, the first sale doctrine and the essential step defense.

Autodesk distributes Release 14 pursuant to a limited license agreement in which it reserves title to the software copies and imposes significant use and transfer restrictions on its customers. We determine that Autodesk's direct customers are licensees of their copies of the software rather [1104] than owners, which has two ramifications. Because Vernor did not purchase the Release 14 copies from an owner, he may not invoke the first sale doctrine, and he also may not assert an essential step defense on behalf of his customers. For these reasons, we vacate the district court's grant of summary judgment to Vernor and remand for further proceedings.

A. Autodesk's Release 14 software and licensing practices

The material facts are not in dispute. Autodesk makes computer-aided design software used by architects, engineers, and manufacturers. It has more than nine million customers. It first released its AutoCAD software in 1982. It holds registered copyrights in all versions of the software including the discontinued Release 14 version, which is at issue in this case. It provided Release 14 to customers on CD-ROMs.

Since at least 1986, Autodesk has offered AutoCAD to customers pursuant to an accompanying software license agreement (“SLA”), which customers must accept before installing the software. A customer who does not accept the SLA can return the software for a full refund. Autodesk offers SLAs with different terms for commercial, educational institution, and student users. The commercial license, which is the most expensive, imposes the fewest restrictions on users and allows them software upgrades at discounted prices.

The SLA for Release 14 first recites that Autodesk retains title to all copies. Second, it states that the customer has a nonexclusive and nontransferable license to use Release 14. Third, it imposes transfer restrictions, prohibiting customers from renting, leasing, or transferring the software without Autodesk's prior consent and from electronically or physically transferring the software out of the Western Hemisphere. Fourth, it imposes significant use restrictions:

YOU MAY NOT: (1) modify, translate, reverse-engineer, decompile, or disassemble the Software ... (3) remove any proprietary notices, labels, or marks from the Software or Documentation; (4) use ... the Software outside of the Western Hemisphere; (5) utilize any computer software or hardware designed to defeat any hardware copy-protection device, should the software you have licensed be equipped with such protection; or (6) use the Software for commercial or other revenue-generating purposes if the Software has been licensed or labeled for educational use only.

Fifth, the SLA provides for license termination if the user copies the software without authorization or does not comply with the SLA's restrictions. Finally, the SLA provides that if the software is an upgrade of a previous version:

[Y]ou must destroy the software previously licensed to you, including any copies resident on your hard disk drive ... within sixty (60) days of the purchase of the license to use the upgrade or update.... Autodesk reserves the right to require you to show satisfactory proof that previous copies of the software have been destroyed.

Autodesk takes measures to enforce these license requirements. It assigns a serial number to each copy of AutoCAD and tracks registered licensees. It requires customers to input “activation codes” within one month after installation to continue using the software.^[1] The customer obtains [1105] the code by providing the product's serial number to Autodesk. Autodesk issues the activation code after confirming that the serial number is authentic, the copy is not registered to a different customer, and the product has not been upgraded. Once a customer has an activation code, he or she may use it to activate the software on additional computers without notifying Autodesk.

B. Autodesk's provision of Release 14 software to CTA

In March 1999, Autodesk reached a settlement agreement with its customer Cardwell/Thomas & Associates, Inc. (“CTA”), which Autodesk had accused of unauthorized use of its software. As part of the settlement, Autodesk licensed ten copies of Release 14 to CTA. CTA agreed to the SLA, which appeared (1) on each Release 14 package that Autodesk provided to CTA; (2) in the settlement agreement; and (3) on-screen, while the software is being installed.

CTA later upgraded to the newer, fifteenth version of the AutoCAD program, AutoCAD 2000. It paid $495 per upgrade license, compared to $3,750 for each new license. The SLA for AutoCAD 2000, like the SLA for Release 14, required destruction of copies of previous versions of the software, with proof to be furnished to Autodesk on request. However, rather than destroying its Release 14 copies, CTA sold them to Vernor at an office sale with the handwritten activation codes necessary to use the software.^[2]

C. Vernor's eBay business and sales of Release 14

Vernor has sold more than 10,000 items on eBay. In May 2005, he purchased an authentic used copy of Release 14 at a garage sale from an unspecified seller. He never agreed to the SLA's terms, opened a sealed software packet, or installed the Release 14 software. Though he was aware of the SLA's existence, he believed that he was not bound by its terms. He posted the software copy for sale on eBay.

Autodesk filed a Digital Millennium Copyright Act (“DMCA”) take-down notice with eBay claiming that Vernor's sale infringed its copyright, and eBay terminated Vernor's auction.^[3] Autodesk advised Vernor that it conveyed its software copies pursuant to non-transferable licenses, and resale of its software was copyright infringement. Vernor filed a DMCA counter-notice with eBay contesting the validity of Autodesk's copyright claim.^[4] Autodesk [1106] did not respond to the counter-notice. eBay reinstated the auction, and Vernor sold the software to another eBay user.

In April 2007, Vernor purchased four authentic used copies of Release 14 at CTA's office sale. The authorization codes were handwritten on the outside of the box. He listed the four copies on eBay sequentially, representing, “This software is not currently installed on any computer.”^[5] On each of the first three occasions, the same DMCA process ensued. Autodesk filed a DMCA take-down notice with eBay, and eBay removed Vernor's auction. Vernor submitted a counter-notice to which Autodesk did not respond, and eBay reinstated the auction.

When Vernor listed his fourth, final copy of Release 14, Autodesk again filed a DMCA take-down notice with eBay. This time, eBay suspended Vernor's account because of Autodesk's repeated charges of infringement. Vernor also wrote to Autodesk, claiming that he was entitled to sell his Release 14 copies pursuant to the first sale doctrine, because he never installed the software or agreed to the SLA. In response, Autodesk's counsel directed Vernor to stop selling the software. Vernor filed a final counter-notice with eBay. When Autodesk again did not respond to Vernor's counter-notice, eBay reinstated Vernor's account. At that point, Vernor's eBay account had been suspended for one month, during which he was unable to earn income on eBay.

Vernor currently has two additional copies of Release 14 that he wishes to sell on eBay. Although the record is not clear, it appears that Vernor sold two of the software packages that he purchased from CTA, for roughly $600 each, but did not sell the final two to avoid risking further suspension of his eBay account.

In August 2007, Vernor brought a declaratory action against Autodesk to establish that his resales of used Release 14 software are protected by the first sale doctrine and do not infringe Autodesk's copyright. He also sought damages and injunctive relief. On January 15, 2008, Autodesk moved to dismiss Vernor's complaint, or in the alternative, for summary judgment. The district court denied the motion, holding that Vernor's sales were non-infringing under the first sale doctrine and the essential step defense. See Vernor v. Autodesk, Inc., 555 F.Supp.2d 1164, 1170-71, 1175 (W.D.Wash.2008).

Following discovery, the parties filed cross-motions for summary judgment. The district court granted summary judgment to Vernor as to copyright infringement in an unpublished decision. However, the district court declined to resolve Vernor's affirmative defense that Autodesk had misused its copyright, reasoning that a misuse defense would not benefit Vernor since he had prevailed on copyright infringement. In October 2009, the district court entered judgment for Vernor, and Autodesk timely appealed.

Copyright is a federal law protection provided to the authors of “original works of authorship,” including software programs. 17 U.S.C. §§ 101-103. The Copyright Act confers several exclusive rights on copyright owners, including the exclusive rights to reproduce their works and to [1107] distribute their works by sale or rental. Id. § 106(1), (3). The exclusive distribution right is limited by the first sale doctrine, an affirmative defense to copyright infringement that allows owners of copies of copyrighted works to resell those copies. The exclusive reproduction right is limited within the software context by the essential step defense, another affirmative defense to copyright infringement that is discussed further infra. Both of these affirmative defenses are unavailable to those who are only licensed to use their copies of copyrighted works.

This case requires us to decide whether Autodesk sold Release 14 copies to its customers or licensed the copies to its customers. If CTA owned its copies of Release 14, then both its sales to Vernor and Vernor's subsequent sales were non-infringing under the first sale doctrine.^[6] However, if Autodesk only licensed CTA to use copies of Release 14, then CTA's and Vernor's sales of those copies are not protected by the first sale doctrine and would therefore infringe Autodesk's exclusive distribution right.

A. The first sale doctrine

The Supreme Court articulated the first sale doctrine in 1908, holding that a copyright owner's exclusive distribution right is exhausted after the owner's first sale of a particular copy of the copyrighted work. See Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 350-51, 28 S.Ct. 722, 52 L.Ed. 1086 (1908). In Bobbs-Merrill, the plaintiff-copyright owner sold its book with a printed notice announcing that any retailer who sold the book for less than one dollar was responsible for copyright infringement. Id. at 341, 28 S.Ct. 722. Plaintiff sought injunctive relief against defendants-booksellers who failed to comply with the price restriction. Id. at 341-42, 28 S.Ct. 722. The Supreme Court rejected the plaintiff's claim, holding that its exclusive distribution right applied only to first sales of copies of the work. Id. at 350-51, 28 S.Ct. 722. The distribution right did not permit plaintiff to dictate that subsequent sales of the work below a particular price were infringing. Id. The Court noted that its decision solely applied to the rights of a copyright owner that distributed its work without a license agreement. Id. at 350, 28 S.Ct. 722 (“There is no claim in this case of contract limitation, nor license agreement controlling the subsequent sales of the book.”).

Congress codified the first sale doctrine the following year. See 17 U.S.C. § 41 (1909). In its current form, it allows the “owner of a particular copy” of a copyrighted work to sell or dispose of his copy without the copyright owner's authorization.^[7] Id. § 109(a) (enacted 1976). The first sale doctrine does not apply to a person who possesses a copy of the copyrighted work without owning it, such as a licensee. See id. § 109(d); cf. Quality King Distribs., Inc. v. L'anza Research Int'l Inc., 523 U.S. 135, 146-47, 118 S.Ct. 1125, 140 L.Ed.2d 254 (1998) (“[T]he first sale doctrine would not provide a defense [1108] to ... any non-owner such as a bailee, a licensee, a consignee, or one whose possession of the copy was unlawful.”).

B. Owners vs. licensees

We turn to our precedents governing whether a transferee of a copy of a copyrighted work is an owner or licensee of that copy. We then apply those precedents to CTA's and Vernor's possession of Release 14 copies.

1. United States v. Wise, 550 F.2d 1180 (9th Cir.1977)

In Wise, a criminal copyright infringement case, we considered whether copyright owners who transferred copies of their motion pictures pursuant to written distribution agreements had executed first sales. Id. at 1187. The defendant was found guilty of copyright infringement based on his for-profit sales of motion picture prints. See id. at 1183. The copyright owners distributed their films to third parties pursuant to written agreements that restricted their use and transfer. Id. at 1183-84. On appeal, the defendant argued that the government failed to prove the absence of a first sale for each film.^[8] If the copyright owners' initial transfers of the films were first sales, then the defendant's resales were protected by the first sale doctrine and thus were not copyright infringement.

To determine whether a first sale occurred, we considered multiple factors pertaining to each film distribution agreement. Specifically, we considered whether the agreement (a) was labeled a license, (b) provided that the copyright owner retained title to the prints, (c) required the return or destruction of the prints, (d) forbade duplication of prints, or (e) required the transferee to maintain possession of the prints for the agreement's duration. Id. at 1190-92. Our use of these several considerations, none dispositive, may be seen in our treatment of each film print.

For example, we reversed the defendant's conviction with respect to Camelot. Id. at 1194. It was unclear whether the Camelot print sold by the defendant had been subject to a first sale. Copyright owner Warner Brothers distributed Camelot prints pursuant to multiple agreements, and the government did not prove the absence of a first sale with respect to each agreement. Id. at 1191-92, 1194. We noted that, in one agreement, Warner Brothers had retained title to the prints, required possessor National Broadcasting Company (“NBC”) to return the prints if the parties could select a mutual agreeable price,^[9] and if not, required NBC's certification that the prints were destroyed. Id. at 1191. We held that these factors created a license rather than a first sale. Id.

We further noted, however, that Warner Brothers had also furnished another Camelot print to actress Vanessa Redgrave. Id. at 1192. The print was provided to Redgrave at cost, and her use of the print was subject to several restrictions. She had to retain possession of the print and was not allowed to sell, license, reproduce, or publicly exhibit the print. Id. She had no obligation to return the print to Warner Brothers. Id. We concluded, “While the provision for payment for the cost of the film, standing alone, does not establish a sale, when taken with the rest of the language [1109] of the agreement, it reveals a transaction strongly resembling a sale with restrictions on the use of the print.” Id. There was no evidence of the print's whereabouts, and we held that “[i]n the absence of such proof,” the government failed to prove the absence of a first sale with respect to this Redgrave print. Id. at 1191-92. Since it was unclear which copy the defendant had obtained and resold, his conviction for sale of Camelot had to be reversed. Id.

Thus, under Wise, where a transferee receives a particular copy of a copyrighted work pursuant to a written agreement, we consider all of the provisions of the agreement to determine whether the transferee became an owner of the copy or received a license. We may consider (1) whether the agreement was labeled a license and (2) whether the copyright owner retained title to the copy, required its return or destruction, forbade its duplication, or required the transferee to maintain possession of the copy for the agreement's duration. Id. at 1190-92. We did not find any one factor dispositive in Wise: we did not hold that the copyright owner's retention of title itself established the absence of a first sale or that a transferee's right to indefinite possession itself established a first sale.^[10]

2. The “MAI trio” of cases

Over fifteen years after Wise, we again considered the distinction between owners and licensees of copies of copyrighted works in three software copyright cases, the “ MAI trio”. See MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir.1993); Triad Sys. Corp. v. Se. Express Co., 64 F.3d 1330 (9th Cir.1995); Wall Data, Inc. v. Los Angeles County Sheriff's Dep't, 447 F.3d 769 (9th Cir.2006). In the MAI trio, we considered which software purchasers were owners of copies of copyrighted works for purposes of a second affirmative defense to infringement, the essential step defense.

The enforcement of copyright owners' exclusive right to reproduce their work under the Copyright Act, 17 U.S.C. § 106(1), has posed special challenges in the software context. In order to use a software program, a user's computer will automatically copy the software into the computer's random access memory (“RAM”), which is a form of computer data storage. See MAI, 991 F.2d at 513. Congress enacted the essential step defense to codify that a software user who is the “owner of a copy” of a copyrighted software program does not infringe by making a copy of the computer program, if the new copy is “created as an essential step in the utilization of the computer program in conjunction with a machine and ... is used in no other manner.” 17 U.S.C. § 117(a)(1).

The Copyright Act provides that an “owner of a copy” of copyrighted software may claim the essential step defense, and the “owner of a particular copy” of copyrighted software may claim the first sale doctrine. 17 U.S.C. §§ 109(a), 117(a)(1). The MAI trio construed the phrase “owner of a copy” for essential step defense purposes. Neither Vernor nor Autodesk contends that the first sale doctrine's inclusion of the word “particular” alters the phrase's meaning, and we “presume that words used more than once in the same statute [1110] have the same meaning throughout.” Moldo v. Matsco, Inc. (In re Cybernetic Servs., Inc.), 252 F.3d 1039, 1051 (9th Cir.2001). Accordingly, we consider the MAI trio's construction of “owner of a copy” controlling in our analysis of whether CTA and Vernor became “owner[s] of a particular copy” of Release 14 software.

In MAI and Triad, the defendants maintained computers that ran the plaintiffs' operating system software. MAI, 991 F.2d at 513; Triad, 64 F.3d at 1333. When the defendants ran the computers, the computers automatically loaded plaintiffs' software into RAM. MAI, 991 F.2d at 517-18; Triad, 64 F.3d at 1333, 1335-36. The plaintiffs in both cases sold their software pursuant to restrictive license agreements, and we held that their customers were licensees who were therefore not entitled to claim the essential step defense. We found that the defendants infringed plaintiffs' software copyrights by their unauthorized loading of copyrighted software into RAM. MAI, 991 F.2d at 517-18 & n. 5; Triad, 64 F.3d at 1333, 1335-36. In Triad, the plaintiff had earlier sold software outright to some customers. 64 F.3d at 1333 n. 2. We noted that these customers were owners who were entitled to the essential step defense, and the defendant did not infringe by making RAM copies in servicing their computers. Id.

In Wall Data, plaintiff sold 3,663 software licenses to the defendant. Wall Data, 447 F.3d at 773. The licenses (1) were non-exclusive; (2) permitted use of the software on a single computer; and (3) permitted transfer of the software once per month, if the software was removed from the original computer. Id. at 775 n. 5, 781. The defendant installed the software onto 6,007 computers via hard drive imaging, which saved it from installing the software manually on each computer. It made an unverified claim that only 3,663 users could simultaneously access the software. Id. at 776.

The plaintiff sued for copyright infringement, contending that the defendant violated the license by “over-installing” the software. Id. at 775. The defendant raised an essential step defense, contending that its hard drive imaging was a necessary step of installation. Id. at 776. On appeal, we held that the district court did not abuse its discretion in denying the defendant's request for a jury instruction on the essential step defense. Id. at 784. Citing MAI, we held that the essential step defense does not apply where the copyright owner grants the user a license and significantly restricts the user's ability to transfer the software. Id. at 784-85. Since the plaintiff's license imposed “significant restrictions” on the defendant's software rights, the defendant was a licensee and was not entitled to the essential step defense. Id. at 785.

In Wall Data, we acknowledged that MAI had been criticized in a Federal Circuit decision, but declined to revisit its holding, noting that the facts of Wall Data led to the conclusion that any error in the district court's failure to instruct was harmless. Even if the defendant owned its copies of the software, its installation of the software on a number of computers in excess of its license was not an essential step in the software's use. Id. at 786 n. 9 (citing Nimmer on Copyright § 8.08[B][1][c] at 8-136; DSC Commc'ns Corp. v. Pulse Commc'ns, Inc., 170 F.3d 1354, 1360 (Fed.Cir.1999) (criticizing MAI)).

We read Wise and the MAI trio to prescribe three considerations that we may use to determine whether a software user is a licensee, rather than an owner of a copy. First, we consider whether the copyright owner specifies that a user is granted a license. Second, we consider [1111] whether the copyright owner significantly restricts the user's ability to transfer the software. Finally, we consider whether the copyright owner imposes notable use restrictions.^[11] Our holding reconciles the MAI trio and Wise, even though the MAI trio did not cite Wise. See Cisneros-Perez v. Gonzales, 451 F.3d 1053, 1058 (9th Cir.2006) (“[W]e are required to reconcile prior precedents if we can do so.”)

In response to MAI, Congress amended § 117 to permit a computer owner to copy software for maintenance or repair purposes. See 17 U.S.C. § 117(c); see also H.R.Rep. No. 105-551, pt. 1, at 27 (1998). However, Congress did not disturb MAI's holding that licensees are not entitled to the essential step defense.

A. The district court's decision

The district court interpreted Wise to hold that a first sale occurs whenever the transferee is entitled to keep the copy of the work. Since Autodesk does not require its customers to return their copies of Release 14, the district court found that Autodesk had sold Release 14 to CTA. It reasoned that thus, CTA and Vernor were successive “owner[s] of a copy” of the software and were entitled to resell it under the first sale doctrine. The district court also found that Vernor's customers' copying of software during installation was protected by the essential step defense.

The district court acknowledged that were it to follow the MAI trio, it would conclude that Autodesk had licensed Release 14 copies to CTA, rather than sold them. However, it viewed Wise and the MAI trio as irreconcilable, and it followed Wise as the first-decided case. See United States v. Rodriguez-Lara, 421 F.3d 932, 943 (9th Cir.2005).

B. Analysis

We hold today that a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions.^[12] Applying our holding to Autodesk's SLA, we conclude that CTA was a licensee rather than an owner of copies of Release 14 and thus was not entitled to invoke the first sale doctrine or the essential step defense.

Autodesk retained title to the software and imposed significant transfer restrictions: it stated that the license is nontransferable, the software could not be transferred or leased without Autodesk's written consent, and the software could not be transferred outside the Western Hemisphere. The SLA also imposed use restrictions against the use of the software outside the Western Hemisphere and against modifying, translating, or reverse-engineering the software, removing any proprietary marks from the software or documentation, or defeating any copy protection [1112] device. Furthermore, the SLA provided for termination of the license upon the licensee's unauthorized copying or failure to comply with other license restrictions. Thus, because Autodesk reserved title to Release 14 copies and imposed significant transfer and use restrictions, we conclude that its customers are licensees of their copies of Release 14 rather than owners.

CTA was a licensee rather than an “owner of a particular copy” of Release 14, and it was not entitled to resell its Release 14 copies to Vernor under the first sale doctrine. 17 U.S.C. § 109(a). Therefore, Vernor did not receive title to the copies from CTA and accordingly could not pass ownership on to others. Both CTA's and Vernor's sales infringed Autodesk's exclusive right to distribute copies of its work. Id. § 106(3).

Because Vernor was not an owner, his customers are also not owners of Release 14 copies. Therefore, when they install Release 14 on their computers, the copies of the software that they make during installation infringe Autodesk's exclusive reproduction right because they too are not entitled to the benefit of the essential step defense.^[13] 17 U.S.C. §§ 106(1), 117(a)(1).

Although unnecessary to our resolution of the case, we address the legislative history in order to address the arguments raised by the parties and amici. That legislative history supports our conclusion that licensees such as CTA are not entitled to claim the first sale doctrine. The House Report for § 109 underscores Congress' view that the first sale doctrine is available only to a person who has acquired a copy via an “outright sale”. H.R.Rep. No. 94-1476, at 79 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5693. The report also asserts that the first sale doctrine does not “apply to someone who merely possesses a copy or phonorecord without having acquired ownership of it.” Id.

Our conclusion that those who rightfully possess, but do not own, a copy of copyrighted software are not entitled to claim the essential step defense is also supported by the legislative history. Congress enacted § 117 following a report from the National Commission on New Technological Uses of Copyrighted Works (“CONTU”) proposing Copyright Act amendments. DSC Commc'ns Corp. v. Pulse Commc'ns, Inc., 170 F.3d 1354, 1360 (Fed.Cir.1999) (citing Final Report of the National Commission on New Technological Uses of Copyrighted Works, U.S. Dept. of Commerce, PB-282141, at 30 (July 31, 1978)). CONTU's proposed version of § 117 was identical to the version that Congress enacted with one exception. Id. CONTU's version provided, “[I]t is not an infringement for the rightful possessor of a copy of a computer program to make or authorize the making of another copy or adaptation of that program....” Id. Without explanation, Congress substituted “owner” for “rightful possessor.” Id. This modification suggests that more than rightful possession is required for § 117 to apply-i.e., that Congress did not intend licensees subject to significant transfer and use restrictions to receive the benefit of the essential step defense.

[1113] C. Vernor's four counterarguments are not persuasive

1. The district court's decision concerning indefinite possession

Vernor contends that the district court correctly concluded that (1) Wise is the controlling precedent and (2) under Wise, the key factor is whether transferees are entitled to indefinite possession of their copy of a copyrighted work. As explained supra, we disagree. In Wise, we utilized a multi-factor balancing test to distinguish between a first sale and a license of a copyrighted film print. United States v. Wise, 550 F.2d 1180, 1190-92 (9th Cir.1977). We considered a transferee's ability to possess a print indefinitely as one factor in our analysis, but we did not treat it as dispositive. If we had, we would not have needed to consider other contractual provisions, such as retention of title, copying prohibitions, and lending restrictions. Id. Moreover, we held in Wise that two agreements were licenses rather than first sales, even though those agreements did not describe any provision requiring the transferee to return the prints to the copyright owners. Id. at 1192 (analyzing VIP agreements for The Sting and Funny Girl ).^[14]

2. Circuit split with the Federal and Second Circuits

Vernor contends that reversing the district court will create a circuit split with the Federal and Second Circuits. See DSC Commc'ns Corp. v. Pulse Commc'ns, Inc., 170 F.3d 1354 (Fed.Cir.1999); Krause v. Titleserv, Inc., 402 F.3d 119 (2nd Cir.2005). We disagree.

In DSC, the Federal Circuit considered the essential step defense in a case in which the plaintiff and defendant sold competing telephone systems hardware cards. 170 F.3d at 1358. Rather than develop its own software, the defendant used its hardware to download plaintiff's software into RAM upon installation. Id. The plaintiff argued that this constituted copyright infringement, and the defendant countered that the relevant customers owned plaintiff's software, entitling them to an essential step defense. Id. at 1359-60. The court rejected the defendant's essential step defense, holding that plaintiff licensed its customers' use of their copies of the software in the relevant license agreement's transfer and use restrictions. Id. at 1360-61. Although the Federal Circuit rejected MAI's “characterization of all licensees as non-owners,” it deemed MAI “instructive” and determined that the agreements there in issue were licenses. Id. at 1360. Although DSC is thus narrower than MAI, it does not conflict with our holding today that a software customer bound by a restrictive license agreement may be a licensee of a copy not entitled to the first sale doctrine or the essential step defense.

[1114] The Second Circuit's decision in Krause is distinguishable. In Krause, the plaintiff-copyright owner was a software developer who sued his former employer for making allegedly infringing modifications to his software program. Krause, 402 F.3d at 120-21. The Second Circuit considered the totality of the parties' agreement to determine that the defendant was entitled to an essential step defense. Id. at 124. In Krause, unlike here, the parties did not have a written license agreement, the defendant-employer had paid the plaintiff-employee significant consideration to develop the programs for its sole benefit, and the plaintiff had agreed to allow the defendant to use the programs “forever,” regardless of whether the parties' relationship terminated. Id. at 124-25. Thus, the Second Circuit found that the defendant-employer owned its copies of the work. Id. The facts and the analysis in Krause are not contrary to our determination that CTA is a licensee rather than an owner.

3. The Supreme Court's holding in Bobbs-Merrill

Vernor contends that Bobbs-Merrill establishes his entitlement to a first sale defense. See Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 28 S.Ct. 722, 52 L.Ed. 1086 (1908). However, Bobbs-Merrill stands only for the proposition that a copyright owner's exclusive distribution right does not allow it to control sales of copies of its work after the first sale. Id. at 350, 28 S.Ct. 722. Decided in 1908, Bobbs-Merrill did not and could not address the question of whether the right to use software is distinct from the ownership of copies of software. Moreover, the Supreme Court in Bobbs-Merrill made explicit that its decision did not address the use of restrictions to create a license. Id. (“There is no claim in this case of contract limitation, nor license agreement controlling the subsequent sales of the book.”)

4. Economic realities of the transaction

Finally, Vernor contends that “economic realities” demonstrate that Autodesk makes “first sales” to its customers, because Autodesk allows its customers to possess their copies of the software indefinitely and does not require recurring license payments. We held supra that neither of these factors is dispositive. Vernor cites no first sale doctrine case in support of this proposition. Rather, he cites In re DAK Indus., 66 F.3d 1091, 1095 (9th Cir.1995), a case in which we interpreted the Bankruptcy Code to decide whether a particular transaction should be considered a pre-petition sale. We commented that “[w]hen applying the bankruptcy code to this transaction, we must look through its form to the‘economic realities of the particular arrangement.’ ” Id. Nothing in DAK is contrary to our reconciliation of Wise and the MAI trio.

Although our holding today is controlled by our precedent, we recognize the significant policy considerations raised by the parties and amici on both sides of this appeal.

Autodesk, the Software & Information Industry Association (“SIIA”), and the Motion Picture Association of America (“MPAA”) have presented policy arguments that favor our result. For instance, Autodesk argues in favor of judicial enforcement of software license agreements that restrict transfers of copies of the work. Autodesk contends that this (1) allows for tiered pricing for different software markets, such as reduced pricing for students or educational institutions; (2) increases software companies' sales; (3) lowers prices for all consumers by spreading [1115] costs among a large number of purchasers; and (4) reduces the incidence of piracy by allowing copyright owners to bring infringement actions against unauthorized resellers. SIIA argues that a license can exist even where a customer (1) receives his copy of the work after making a single payment and (2) can indefinitely possess a software copy, because it is the software code and associated rights that are valuable rather than the inexpensive discs on which the code may be stored. Also, the MPAA argues that a customer's ability to possess a copyrighted work indefinitely should not compel a finding of a first sale, because there is often no practically feasible way for a consumer to return a copy to the copyright owner.

Vernor, eBay, and the American Library Association (“ALA”) have presented policy arguments against our decision. Vernor contends that our decision (1) does not vindicate the law's aversion to restraints on alienation of personal property; (2) may force everyone purchasing copyrighted property to trace the chain of title to ensure that a first sale occurred; and (3) ignores the economic realities of the relevant transactions, in which the copyright owner permanently released software copies into the stream of commerce without expectation of return in exchange for upfront payment of the full software price. eBay contends that a broad view of the first sale doctrine is necessary to facilitate the creation of secondary markets for copyrighted works, which contributes to the public good by (1) giving consumers additional opportunities to purchase and sell copyrighted works, often at below-retail prices; (2) allowing consumers to obtain copies of works after a copyright owner has ceased distribution; and (3) allowing the proliferation of businesses.

The ALA contends that the first sale doctrine facilitates the availability of copyrighted works after their commercial lifespan, by inter alia enabling the existence of libraries, used bookstores, and hand-to-hand exchanges of copyrighted materials. The ALA further contends that judicial enforcement of software license agreements, which are often contracts of adhesion, could eliminate the software resale market, require used computer sellers to delete legitimate software prior to sale, and increase prices for consumers by reducing price competition for software vendors. It contends that Autodesk's position (1) undermines 17 U.S.C. § 109(b)(2), which permits non-profit libraries to lend software for non-commercial purposes, and (2) would hamper efforts by non-profits to collect and preserve out-of-print software. The ALA fears that the software industry's licensing practices could be adopted by other copyright owners, including book publishers, record labels, and movie studios.

These are serious contentions on both sides, but they do not alter our conclusion that our precedent from Wise through the MAI trio requires the result we reach. Congress is free, of course, to modify the first sale doctrine and the essential step defense if it deems these or other policy considerations to require a different approach.

The district court did not consider Vernor's claim that Autodesk misused its copyright. Copyright misuse is an equitable defense to copyright infringement which precludes the copyright holder's enforcement of its copyright during the misuse period. See Practice Mgmt. Info. Corp. v. Am. Med. Ass'n, 121 F.3d 516, 520 n. 9 (9th Cir.1997). The district court reasoned that a misuse defense would not benefit Vernor since he prevailed on copyright infringement below. Since we reverse [1116] the district court's grant of summary judgment in Vernor's favor on copyright infringement, we remand for the district court to consider Vernor's copyright misuse defense in the first instance.

We vacate the district court's grant of summary judgment in Vernor's favor and remand. We hold that because CTA is a licensee, not an owner, the “sale” of its Release 14 copies to Vernor did not convey ownership. Vernor is accordingly not entitled to invoke the first sale doctrine or the essential step defense, on behalf of his customers. We remand for further proceedings consistent with this opinion, including consideration of Vernor's copyright misuse defense.

VACATED AND REMANDED.

[1] Prior to using activation codes, Autodesk required users to return one disc of an earlier version of the software to upgrade to a later version. Autodesk has abandoned this return policy, deeming it slow and unworkable.

[2] Autodesk brought suit in federal district court against CTA for these sales. The parties stipulated to entry of a permanent injunction against CTA from directly or contributorily infringing Autodesk's copyrights.

[3] The DMCA provides that a service provider is not liable for infringing user-posted material on its service if, inter alia, it responds expeditiously to remove or disable access to the material upon receipt of a take-down notice claiming infringement. 17 U.S.C. § 512(c)(1)(C).

[4] The DMCA also provides that a user whose material has been removed or disabled may provide a “counter-notification” to the service provider, including a sworn statement that the user has a good-faith belief that the material was mistakenly removed or disabled. 17 U.S.C. § 512(g)(3)(C). After receiving a counter-notification, the service provider must do the following to retain its liability exemption. It must promptly (1) provide the person who filed the original take-down notice with a copy of the counter-notification and (2) advise that it will replace the removed material or cease disabling access to it in ten business days. 17 U.S.C. § 512(g)(2)(B). It must also timely replace the removed material or cease disabling access to it, unless the person who provided the take-down notice gives notice that he or she has filed a court action to restrain the user's infringement. 17 U.S.C. § 512(g)(2)(C).

[5] Vernor acknowledged at his deposition that he did not know whether this was true.

[6] If Autodesk's transfer of Release 14 copies to CTA was a first sale, then CTA's resale of the software in violation of the SLA's terms would be a breach of contract, but would not result in copyright liability. See United States v. Wise, 550 F.2d 1180, 1187 (9th Cir.1977) (“[T]he exclusive right to vend the transferred copy rests with the vendee, who is not restricted by statute from further transfers of that copy, even though in breach of an agreement restricting its sale.”).

[7] The parties dispute who bears the burden to prove the first sale or the absence thereof in a civil case, a question we have not yet resolved. Since the facts in this case are undisputed, including the chain of software transfers, we need not decide the issue.

[8] In Wise, we construed former 17 U.S.C. § 27, since replaced by 17 U.S.C. § 109(a), the current codification of the first sale doctrine. The provisions are materially similar.

[9] Although the Wise defendant contended that this repurchase provision created a first sale, we held that it merely allowed Warner Brothers to compensate NBC for its out-of-pocket cost in producing additional prints. Id.

[10] Cf. Hampton v. Paramount Pictures Corp., 279 F.2d 100, 103 (9th Cir.1960) (holding in non-first sale doctrine case that the transferee of a movie print was a licensee because the parties designated their agreement as a perpetual license, even though their agreement provided for a one-time lump sum payment and imposed no requirement that the transferee would return the outstanding prints and negatives).

[11] Although use restrictions were not dispositive in the MAI trio, we considered them in each case. See MAI, 991 F.2d at 517 n. 3 (license limited user to making one working and one backup copy of the software, and forbade examination, disclosure, copying, modification, adaptation, and visual display of the software); Triad, 64 F.3d at 1333 (license prohibited software duplication and third-party use); Wall Data, 447 F.3d at 775 n. 5 (license permitted software use on single computer, prohibited multicomputer and multi-user arrangements, and permitted transfer to another computer no more than once every thirty days).

[12] We review the district court's grant of summary judgment to Vernor de novo. Padfield v. AIG Life Ins. Co., 290 F.3d 1121, 1124 (9th Cir.2002).

[13] It may seem intuitive that every lawful user of a copyrighted software program, whether they own their copies or are merely licensed to use them, should be entitled to an “essential step defense” that provides that they do not infringe simply by using a computer program that they lawfully acquired. However, the Copyright Act confers this defense only on owners of software copies. See 17 U.S.C. § 117. In contrast, a licensee's right to use the software, including the right to copy the software into RAM, is conferred by the terms of its license agreement.

[14] We also note that for some of the Wise films, there was a lack of evidence whether transferees who had the option to purchase copies of the prints had done so. Without evidence concerning these options, the government could not sustain its criminal burden of proof to demonstrate the absence of a first sale. See, e.g., 550 F.2d at 1191-92 (“No evidence was adduced at trial as to whether [transferee] exercised its election [to purchase a copy of the print], or, if it did, whether it resold that print. In the absence of such proof, the Government has failed in its burden of proving the absence of first sale of the photoplay Funny Girl.”) Here, in contrast, the undisputed evidence includes the SLA between Autodesk and CTA, which reflects the absence of a first sale. The SLA evidences both the parties' intent to create a license and CTA's acquiescence to substantive restrictions that distinguish the transfer from an outright first sale.

749 F.2d 154
224 U.S.P.Q. 641, 1985 Copr.L.Dec. P 25,733

COLUMBIA PICTURES INDUSTRIES, INC., Embassy Pictures,
Paramount Pictures Corporation, Twentieth Century-Fox Film
Corporation, Universal City Studios, Inc., Walt Disney
Productions and Warner Bros., Inc., Appellees,
v.
REDD HORNE, INC., Maxwell's Video Showcase, Ltd., Glenn W.
Zeny and Robert Zeny, Appellants.

No. 83-5786.
United States Court of Appeals, Third Circuit.
Argued Aug. 14, 1984.
Decided Nov. 23, 1984.

[156] Howard A. Hain (Argued), Galbo, Dailey, Resetifo, Held & Dailey, Erie, Pa., for appellants.

Robert L. Byer, Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., Bancroft D. Haviland (Argued), Carole E. Handler, Nancy L. Schultz, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for appellees; Burton H. Hanft, Harvey L. Shapiro, Sargoy, Stein & Hanft, New York City, of counsel.

Before ALDISERT, Chief Judge, WEIS, Circuit Judge, and RE, Judge.^[*]

OPINION OF THE COURT

RE, Chief Judge.

In this copyright infringement case, defendants appeal from an order of the United States District Court for the Western District of Pennsylvania which granted the plaintiffs' motion for summary judgment, and enjoined defendants from exhibiting plaintiffs' copyrighted motion pictures. Columbia Pictures Indus., Inc. v. Redd Horne Inc., 568 F.Supp. 494 (W.D.Pa.1983). The defendants, Redd Horne, Inc., Maxwell's Video Showcase, Ltd., Glenn W. Zeny and Robert Zeny, also appeal from the dismissal of their antitrust counterclaims, and from an award of damages against them in the amount of $44,750.00.

Defendant-appellants raise three questions on this appeal: (1) whether the activities of the defendant Maxwell's Video Showcase, Ltd., (Maxwell's) constitute an infringement of plaintiffs' copyright protections which would entitle the plaintiffs to injunctive relief and damages; (2) if so, whether the activities of the other defendants, Robert Zeny, the president and sole shareholder of Maxwell's, Redd Horne, Inc., Maxwell's advertising and public relations firm, and Glenn W. Zeny, the president of Redd Horne, Inc., and Robert Zeny's brother, are sufficient to hold each of them liable as co-infringers with Maxwell's; and (3) whether the antitrust counterclaims of the defendants were properly dismissed by the district court. Since we agree with the district court, we affirm.

The Facts

Maxwell's Video Showcase, Ltd., operates two stores in Erie, Pennsylvania. At these two facilities, Maxwell's sells and rents video cassette recorders and prerecorded video cassettes, and sells blank video cassette cartridges. These activities are not the subject of the plaintiffs' complaint. The copyright infringement issue in this case arises from defendants' exhibition of video cassettes of the plaintiffs' films, or what defendants euphemistically refer to as their "showcasing" or "in-store rental" concept.

Each store contains a small showroom area in the front of the store, and a "showcase" or exhibition area in the rear. The front showroom contains video equipment [157] and materials for sale or rent, as well as dispensing machines for popcorn and carbonated beverages. Movie posters are also displayed in this front area. In the rear "showcase" area, patrons may view any of an assortment of video cassettes in small, private booths with space for two to four people. There are a total of eighty-five booths in the two stores. Each booth or room is approximately four feet by six feet and is carpeted on the floor and walls. In the front there is a nineteen inch color television and an upholstered bench in the back.

The procedure followed by a patron wishing to utilize one of the viewing booths or rooms is the same at both facilities. The customer selects a film from a catalogue which contains the titles of available films. The fee charged by Maxwell's depends on the number of people in the viewing room, and the time of day. The price is $5.00 for one or two people before 6 p.m., and $6.00 for two people after 6 p.m. There is at all times a $1.00 surcharge for the third and fourth person. The fee also entitles patrons to help themselves to popcorn and soft drinks before entering their assigned rooms. Closing the door of the viewing room activates a signal in the counter area at the front of the store. An employee of Maxwell's then places the cassette of the motion picture chosen by the viewer into one of the video cassette machines in the front of the store and the picture is transmitted to the patron's viewing room. The viewer may adjust the light in the room, as well as the volume, brightness, and color levels on the television set.

Access to each room is limited to the individuals who rent it as a group. Although no restriction is placed on the composition of a group, strangers are not grouped in order to fill a particular room to capacity. Maxwell's is open to any member of the public who wishes to utilize its facilities or services.

Maxwell's advertises on Erie radio stations and on the theatre pages of the local newspapers. Typically, each advertisement features one or more motion pictures, and emphasizes Maxwell's selection of films, low prices, and free refreshments. The advertisements do not state that these motion pictures are video cassette copies. At the entrance to the two Maxwell's facilities, there are also advertisements for individual films, which resemble movie posters.

Infringement of Plaintiffs' Copyright

It may be stated at the outset that this is not a case of unauthorized taping or video cassette piracy. The defendants obtained the video cassette copies of plaintiffs' copyrighted motion pictures by purchasing them from either the plaintiffs or their authorized distributors. The sale or rental of these cassettes to individuals for home viewing is also not an issue. Plaintiffs do not contend that in-home use infringes their copyright.

The plaintiffs' complaint is based on their contention that the exhibition or showing of the video cassettes in the private booths on defendants' premises constitutes an unauthorized public performance in violation of plaintiffs' exclusive rights under the federal copyright laws.

It is acknowledged that it is the role of the Congress, not the courts, to formulate new principles of copyright law when the legislature has determined that technological innovations have made them necessary. See, e.g., Sony Corp. v. Universal City Studios, Inc., — U.S. —, 104 S.Ct. 774, 783, 78 L.Ed.2d 574 (1984); Teleprompter Corp. v. CBS, 415 U.S. 394, 414, 94 S.Ct. 1129, 1141, 39 L.Ed.2d 415 (1974). In the words of Justice Stevens, "Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology." Sony Corp., supra, 104 S.Ct. at 783. A defendant, however, is not immune from liability for copyright infringement simply because the technologies are of recent origin or are being applied to innovative uses. Although this case involves a novel application of relatively recent technological developments, it can nonetheless be readily analyzed and resolved [158] within the existing statutory framework.

Section 106 of the Copyright Act confers upon the copyright holder certain exclusive rights. This section provides:

Subject to sections 107 through 118, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords;

(2) to prepare derivative works based upon the copyrighted work;

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.

(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; and

(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly.

17 U.S.C. Sec. 106 (1982) (emphasis supplied).

It is undisputed that the defendants were licensed to exercise the right of distribution. Id. Sec. 106(3). A copyright owner, however, may dispose of a copy of his work while retaining all underlying copyrights which are not expressly or impliedly disposed of with that copy. Id. Sec. 202. Thus, it is clear that the plaintiffs have retained their interest in the other four enumerated rights. See M. Nimmer, 2 Nimmer on Copyright Sec. 8.01[A], at 8-11 to 8-12 (1983) (citing Interstate Hotel Co. v. Remick Music Corp., 157 F.2d 744 (8th Cir.1946)). Since the rights granted by section 106 are separate and distinct, and are severable from one another, the grant of one does not waive any of the other exclusive rights. Thus, plaintiffs' sales of video cassette copies of their copyrighted motion pictures did not result in a waiver of any of the other exclusive rights enumerated in section 106, such as the exclusive right to perform their motion pictures publicly. In essence, therefore, the fundamental question is whether the defendants' activities constitute a public performance of the plaintiffs' motion pictures. We agree with the conclusion of the district court that these activities constitute a public performance, and are an infringement.

"To perform a work means . . . in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible." 17 U.S.C. Sec. 101 (1982). Clearly, playing a video cassette results in a sequential showing of a motion picture's images and in making the sounds accompanying it audible. Thus, Maxwell's activities constitute a performance under section 101.

The remaining question is whether these performances are public. Section 101 also states that to perform a work "publicly" means "[t]o perform . . . it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered." Id. The statute is written in the disjunctive, and thus two categories of places can satisfy the definition of "to perform a work publicly." The first category is self-evident; it is "a place open to the public." The second category, commonly referred to as a semi-public place, is determined by the size and composition of the audience.

The legislative history indicates that this second category was added to expand the concept of public performance by including those places that, although not open to the public at large, are accessible to a significant number of people. See H.R.Rep. No. 1476, 94th Cong., 2d Sess. 64, reprinted in, 1976 U.S.Code Cong. & Ad.News 5659, 5677-78 (hereinafter cited as House Report). Clearly, if a place is public, the size and composition of the audience are irrelevant. However, if the place is not public, the size and composition of the audience will be determinative.

[159] We find it unnecessary to examine the second part of the statutory definition because we agree with the district court's conclusion that Maxwell's was open to the public. On the composition of the audience, the district court noted that "the showcasing operation is not distinguishable in any significant manner from the exhibition of films at a conventional movie theater." 568 F.Supp. at 500. Any member of the public can view a motion picture by paying the appropriate fee. The services provided by Maxwell's are essentially the same as a movie theatre, with the additional feature of privacy. The relevant "place" within the meaning of section 101 is each of Maxwell's two stores, not each individual booth within each store. Simply because the cassettes can be viewed in private does not mitigate the essential fact that Maxwell's is unquestionably open to the public.

The conclusion that Maxwell's activities constitute public performances is fully supported by subsection (2) of the statutory definition of public performance:

(2) to transmit or otherwise communicate a performance . . . of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance . . . receive it in the same place or in separate places and at the same time or at different times.

17 U.S.C. Sec. 101 (1982). As explained in the House Report which accompanies the Copyright Revision Act of 1976, "a performance made available by transmission to the public at large is 'public' even though the recipients are not gathered in a single place. . . . The same principles apply whenever the potential recipients of the transmission represent a limited segment of the public, such as the occupants of hotel rooms. . . ." House Report, supra, at 64-65, U.S.Code Cong. & Admin.News, p. 5678. Thus, the transmission of a performance to members of the public, even in private settings such as hotel rooms or Maxwell's viewing rooms, constitutes a public performance. As the statutory language and legislative history clearly indicate, the fact that members of the public view the performance at different times does not alter this legal consequence.

Professor Nimmer's examination of this definition is particularly pertinent: "if the same copy . . . of a given work is repeatedly played (i.e., 'performed') by different members of the public, albeit at different times, this constitutes a 'public' performance." 2 M. Nimmer, Sec. 8.14[C], at 8-142 (emphasis in original). Indeed, Professor Nimmer would seem to have envisaged Maxwell's when he wrote:

one may anticipate the possibility of theaters in which patrons occupy separate screening rooms, for greater privacy, and in order not to have to await a given hour for commencement of a given film. These too should obviously be regarded as public performances within the underlying rationale of the Copyright Act.

Id. at 8-142. Although Maxwell's has only one copy of each film, it shows each copy repeatedly to different members of the public. This constitutes a public performance.

The First Sale Doctrine

The defendants also contend that their activities are protected by the first sale doctrine. The first sale doctrine is codified in section 109(a) of Title 17. This section provides:

Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.

17 U.S.C. Sec. 109(a) (1982). Section 109(a) is an extension of the principle that ownership of the material object is distinct from ownership of the copyright in this material. See 17 U.S.C. Sec. 202 (1982). The first sale doctrine prevents the copyright owner from controlling the future transfer of a particular copy once its material ownership has been transferred. See, e.g., Bobbs-Merrill [160] Co. v. Straus, 210 U.S. 339, 350, 28 S.Ct. 722, 726, 52 L.Ed. 1086 (1908); Independent News Co. v. Williams, 293 F.2d 510, 515-17 (3d Cir.1961). The transfer of the video cassettes to the defendants, however, did not result in the forfeiture or waiver of all of the exclusive rights found in section 106. See, e.g., United States v. Moore, 604 F.2d 1228, 1232 (9th Cir.1979); United States v. Wise, 550 F.2d 1180, 1187 (9th Cir.), cert. denied, 434 U.S. 929, 98 S.Ct. 416, 54 L.Ed.2d 290 (1977). The copyright owner's exclusive right "to perform the copyrighted work publicly" has not been affected; only its distribution right as to the transferred copy has been circumscribed. See United States v. Powell, 701 F.2d 70, 72 (8th Cir.1983); see generally M. Nimmer, supra, at Sec. 8.12[D].

In essence, the defendants' "first sale" argument is merely another aspect of their argument that their activities are not public performances. For the defendants' argument to succeed, we would have to adopt their characterization of the "showcasing" transaction or activity as an "in-store rental." The facts do not permit such a finding or conclusion. The record clearly demonstrates that showcasing a video cassette at Maxwell's is a significantly different transaction than leasing a tape for home use. Maxwell's never disposed of the tapes in its showcasing operations, nor did the tapes ever leave the store. At all times, Maxwell's maintained physical dominion and control over the tapes. Its employees actually played the cassettes on its machines. The charges or fees received for viewing the cassettes at Maxwell's facilities are analytically indistinguishable from admission fees paid by patrons to gain admission to any public theater. Plainly, in their showcasing operation, the appellants do not sell, rent, or otherwise dispose of the video cassette. On the facts presented, Maxwell's "showcasing" operation is a public performance, which, as a matter of law, constitutes a copyright infringement.

Liability of Co-Defendants

Defendant-appellants, Robert Zeny, Glenn W. Zeny, and Redd Horne, Inc., challenge that part of the district court's order which holds them liable as co-infringers. We agree with the district court and affirm.

It is well settled that "one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing activity of another, may be held liable as a 'contributory' infringer." Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir.1971). An officer or director of a corporation who knowingly participates in the infringement can be held personally liable, jointly and severally, with the corporate defendant. See, e.g., Samet & Wells, Inc. v. Shalom Toy Co., 429 F.Supp. 895, 903-04 (E.D.N.Y.1977), aff'd without opinion, 578 F.2d 1369 (2d Cir.1978); accord Donsco, Inc. v. Casper Corp., 587 F.2d 602, 605-07 (3d Cir.1978) (corporate officer held personally liable in unfair competition action).

Robert Zeny is the president and the sole shareholder of Maxwell's Video Showcase, Ltd. He knowingly initiated and participated in the infringing activity, and ignored repeated requests from the plaintiffs that he cease and desist the activity. He too, therefore, is clearly liable as a co-infringer.

Glenn W. Zeny, Robert's brother, is not a stockholder or officer, nor does he have a direct financial interest in Maxwell's Video Showcase, Ltd. Glenn W. Zeny, however, conducted negotiations and wrote letters, on Redd Horne, Inc., stationery, on behalf of Maxwell's and its predecessor corporation. Some of these letters on Redd Horne, Inc., stationery, refer to "our company" and "our concept" without mentioning Maxwell's. The impression conveyed by the letters is that Glenn Zeny and Redd Horne, Inc., are principals in the venture. Glenn W. Zeny, like his brother, participated knowingly and significantly in the infringing activity and ignored the plaintiffs' persistent requests that the activity cease.

[161] Redd Horne, Inc., conducted all of the advertising and promotional work for Maxwell's. It also provided financial, accounting, and administrative services for Maxwell's. All of these services, and the advertising services in particular, contributed and, indeed, were essential to the copyright infringement. In addition, Glenn W. Zeny's knowledge of, and substantial participation in, the infringing activities may be imputed to his employer, Redd Horne, Inc. See Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 307 (2d Cir.1963); Screen Gems-Columbia Music, Inc., v. Mark-Fi Records, Inc., 327 F.Supp. 788, 792 (S.D.N.Y.1971), rev'd on other grounds, 453 F.2d 552 (2d Cir.1972). Thus, we hold that the substantial, knowing participation of Glenn W. Zeny and Redd Horne, Inc., was more than sufficient to hold them liable as co-infringers.

The Defendants' Counterclaims

The appellants also appeal from the district court's dismissal of their antitrust counterclaims. In considering a motion to dismiss for failure to state a claim for which relief can be granted, the allegations in the complaint are to be liberally construed. A motion under F.R.C.P. 12(b)(6) should be granted only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957)); Miller v. American Tel. & Tel. Co., 507 F.2d 759, 761 (3d Cir.1974). Construing the complaint liberally, we can find no allegations of fact which, if proven, would constitute a violation of the antitrust laws. Therefore, we affirm the district court's dismissal of the counterclaims.

Count I of the defendants' counterclaim alleges a "combination and conspiracy in restraint of trade in violation of the Anti-Trust laws." The facts alleged in support of this claim, however, amount to nothing more than an effort by the plaintiffs to enforce their rights under the copyright laws.

It is not a violation of the antitrust laws for parties with common interests to utilize the courts to protect their business or economic interests from competitors. See, e.g., California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510-11, 92 S.Ct. 609, 611-12, 30 L.Ed.2d 642 (1972); United Mine Workers v. Pennington, 381 U.S. 657, 669-70, 85 S.Ct. 1585, 1592-93, 14 L.Ed.2d 626 (1965); Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 136-38, 81 S.Ct. 523, 528-30, 5 L.Ed.2d 464 (1961). More specifically, a good faith attempt to enforce a copyright does not violate the antitrust laws. Edward B. Marks Music Corp. v. Colorado Magnetics, Inc., 497 F.2d 285, 290 (10th Cir.1974); Alberto-Culver Co. v. Andrea Dumon, Inc., 466 F.2d 705, 711 (7th Cir.1972). Only when resort to the courts is in bad faith and a "mere sham" may antitrust liability be imposed. California Motor Transp., 404 U.S. at 511, 92 S.Ct. at 612 (quoting Noerr, 365 U.S. at 144, 81 S.Ct. at 533).

In their brief, the appellants admit that the "basis of the counterclaims are [sic] quite simply that there is no good faith underlying the plaintiff's [sic] actions. . . ." However, the plaintiffs' success on the merits of their copyright infringement action demonstrates clearly that plaintiffs possessed valid causes of action under the copyright laws which they had the legal right to enforce. Hence, it would be impossible for the appellants to prove bad faith, and the first count of the counterclaim must fail.

The second count of the defendants' counterclaim alleges that the actions of the plaintiffs constitute an "unlawful tying arrangement." A tying arrangement "may be defined as an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product [162] from any other supplier." Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 518-519, 2 L.Ed.2d 545 (1958). See Ungar v. Dunkin' Donuts, Inc., 531 F.2d 1211, 1218 (3d Cir.), cert. denied, 429 U.S. 823, 97 S.Ct. 74, 50 L.Ed.2d 84 (1976). To establish liability, the plaintiff in a "tying" case must also prove that the seller has "sufficient economic power with respect to the tying product to appreciably restrain competition in the market for the tied product," and that "a 'not insubstantial' amount of interstate commerce is affected." Ungar, supra, at 1244 (quoting Northern Pacific, supra, 356 U.S. at 5, 78 S.Ct. at 518). In short, a tying arrangement requires that a seller with sufficient economic power in the tying product coerce the buyer into also buying an unwanted "tied" product. See Ungar, supra, at 1222. The plaintiffs in this case have declined to allow Maxwell's to exhibit their copyrighted works in its stores. They have not attempted to tie any other product to the sale of their video cassettes. A tying arrangement requires two products. Since there is only one in this case, the second count of the counterclaim must also fail.

Conclusion

In view of the foregoing, it is the holding of this Court that the defendants' activities constituted an unauthorized, and, therefore, an unlawful public performance of the plaintiffs' copyrighted motion pictures. We also conclude that the activities of each named defendant were sufficient to hold each jointly and severally liable for the copyright infringement. In addition, we hold that the defendants' counterclaims were properly dismissed.

The judgment of the district court, therefore, will be affirmed.

[*] The Honorable Edward D. Re, Chief Judge, United States Court of International Trade, sitting by designation.

536 F.3d 121

The CARTOON NETWORK LP, LLLP and Cable News Network L.P., L.L.L.P., Plaintiffs-Counter-Claimants-Defendants-Appellees,
Twentieth Century Fox Film Corporation, Universal City Studios Productions LLLP, Paramount Pictures Corporation, Disney Enterprises Inc., CBS Broadcasting Inc., American Broadcasting Companies, Inc., NBC Studios, Inc., Plaintiffs-Counter-Defendants-Appellees,
v.
CSC HOLDINGS, INC. and Cablevision Systems Corporation, Defendants-Counterclaim-Plaintiffs-Third-Party Plaintiffs-Appellants,
v.
Turner Broadcasting System, Inc., Cable News Network LP, LLP, Turner Network Sales, Inc., Turner Classic Movies, L.P., LLLP, Turner Network Television LP, LLLP, Third-Party-Defendants-Appellees.

Docket No. 07-1480-cv(L).
Docket No. 07-1511-cv(CON).
United States Court of Appeals, Second Circuit.
Argued: October 24, 2007.
Decided: August 4, 2008.

[122] Jeffrey A. Lamken (Robert K. Kry and Joshua A. Klein, on the brief), Baker Botts L.L.P., Washington, D.C., and Timothy A. Macht (on the brief), New York, N.Y., for Defendants-Appellants.

Katherine B. Forrest (Antony L. Ryan, on the brief), Cravath, Swaine & Moore LLP, New York, N.Y., for Plaintiffs-Appellees The Cartoon Network LP, LLLP, et al.

Robert Alan Garrett (Hadrian R. Katz, Jon Michaels, Peter L. Zimroth, and Eleanor Lackman, on the brief), Arnold & Porter LLP, Washington, D.C., for Plaintiffs-Appellees Twentieth Century Fox Film Corporation, et al.

Marc E. Isserles, Cohen & Gresser LLP, New York, N.Y., for Amici Curiae Law Professors.

Henry A. Lanman, Trachtenberg Rodes & Friedberg LLP, New York, N.Y., for Amicus Curiae Professor Timothy Wu.

Solveig Singleton, The Progress & Freedom Foundation, Washington, D.C., for Amicus Curiae Progress & Freedom Foundation.

Carol A. Witschel, White & Case LLP, and Richard H. Reimer, New York, N.Y., for Amicus Curiae The American Society of Composers, Authors & Publishers.

Michael E. Salzman, Hughes Hubbard & Reed LLP, and Marvin Berenson, Broadcast Music Inc., New York, N.Y., for Amicus Curiae Broadcast Music, Inc.

David Sohn, Center for Democracy & Technology, Washington, D.C., Fred von Lohman, Electronic Freedom Foundation, San Francisco, Cal., Sherwin Siy, Public Knowledge, Washington D.C., William P. Heaston, Broadband Service Providers Association Regulatory Committee, Jonathan Band PLLC, Washington, D.C., Julie

[123] Kearney, Consumer Electronics Association, Arlington, Va., Michael F. Altschul et al., CTIA-The Wireless Association®, Washington, D.C., Jonathan Banks, USTelecom, Washington, D.C., Michael K. Kellogg et al., Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington D.C., for Amici Curiae Center for Democracy & Technology et al.

Donald B. Verrilli, Jr., et al., Jenner & Block LLP, Washington, D.C., Kenneth L. Doroshow & Scott A. Zebrak, Recording Industry Association of America, Washington, D.C., Jacqueline C. Charlesworth, National Music Publishers' Association, Washington, D.C., Victor S. Perlman, American Society of Media Photographers, Inc., Philadelphia, Pa., Allan Robert Adler, Association of American Publishers, Washington, D.C., Linda Steinman, Davis Wright Tremaine LLP, New York, N.Y., David Korduner, Directors Guild of America, Inc., Los Angeles, Cal., Frederic Hirsch & Chun T. Wright, Entertainment Software Association, Washington, D.C., Susan Cleary, Independent Film & Television Alliance, Los Angeles, Cal., Gary Gertzog, National Football League, New York, N.Y., Thomas Ostertag, Office of the Commissioner of Baseball, New York, N.Y., Duncan Crabtree-Ireland, Screen Actors Guild, Inc., Los Angeles, Cal., John C. Beiter, Loeb & Loeb, LLP, Nashville, Tenn., Anthony R. Segall, Writers Guild of America, West, Inc., Los Angeles, Cal., for Amici Curiae American Society of Media Photographers, Inc. et al.

Steven J. Metalitz & J. Matthew Williams, Washington, D.C., for Amicus Curiae Americans for Tax Reform.

Before: WALKER, SACK, and LIVINGSTON, Circuit Judges.

JOHN M. WALKER, JR., Circuit Judge:

Defendant-Appellant Cablevision Systems Corporation ("Cablevision") wants to market a new "Remote Storage" Digital Video Recorder system ("RS-DVR"), using a technology akin to both traditional, set-top digital video recorders, like TiVo ("DVRs"), and the video-on-demand ("VOD") services provided by many cable companies. Plaintiffs-Appellees produce copyrighted movies and television programs that they provide to Cablevision pursuant to numerous licensing agreements. They contend that Cablevision, through the operation of its RS-DVR system as proposed, would directly infringe their copyrights both by making unauthorized reproductions, and by engaging in public performances, of their copyrighted works. The material facts are not in dispute. Because we conclude that Cablevision would not directly infringe plaintiffs' rights under the Copyright Act by offering its RS-DVR system to consumers, we reverse the district court's award of summary judgment to plaintiffs, and we vacate its injunction against Cablevision.

BACKGROUND

Today's television viewers increasingly use digital video recorders ("DVRs") instead of video cassette recorders ("VCRs") to record television programs and play them back later at their convenience. DVRs generally store recorded programming on an internal hard drive rather than a cassette. But, as this case demonstrates, the generic term "DVR" actually refers to a growing number of different devices and systems. Companies like TiVo sell a stand-alone DVR device that is typically connected to a user's cable box and television much like a VCR. Many cable companies also lease to their subscribers "set-top storage DVRs," which combine many of the functions of a standard cable box and a stand-alone DVR in a single device.

[124] In March 2006, Cablevision, an operator of cable television systems, announced the advent of its new "Remote Storage DVR System." As designed, the RS-DVR allows Cablevision customers who do not have a stand-alone DVR to record cable programming on central hard drives housed and maintained by Cablevision at a "remote" location. RS-DVR customers may then receive playback of those programs through their home television sets, using only a remote control and a standard cable box equipped with the RS-DVR software. Cablevision notified its content providers, including plaintiffs, of its plans to offer RS-DVR, but it did not seek any license from them to operate or sell the RS-DVR.

Plaintiffs, which hold the copyrights to numerous movies and television programs, sued Cablevision for declaratory and injunctive relief. They alleged that Cablevision's proposed operation of the RS-DVR would directly infringe their exclusive rights to both reproduce and publicly perform their copyrighted works. Critically for our analysis here, plaintiffs alleged theories only of direct infringement, not contributory infringement, and defendants waived any defense based on fair use.

Ultimately, the United States District Court for the Southern District of New York (Denny Chin, Judge), awarded summary judgment to the plaintiffs and enjoined Cablevision from operating the RS-DVR system without licenses from its content providers. See Twentieth Century Fox Film Corp. v. Cablevision Sys. Corp. (Cablevision I), 478 F.Supp.2d 607 (S.D.N.Y.2007). At the outset, we think it helpful to an understanding of our decision to describe, in greater detail, both the RS-DVR and the district court's opinion.

I. Operation of the RS-DVR System

Cable companies like Cablevision aggregate television programming from a wide variety of "content providers"—the various broadcast and cable channels that produce or provide individual programs—and transmit those programs into the homes of their subscribers via coaxial cable. At the outset of the transmission process, Cablevision gathers the content of the various television channels into a single stream of data. Generally, this stream is processed and transmitted to Cablevision's customers in real time. Thus, if a Cartoon Network program is scheduled to air Monday night at 8pm, Cartoon Network transmits that program's data to Cablevision and other cable companies nationwide at that time, and the cable companies immediately re-transmit the data to customers who subscribe to that channel.

Under the new RS-DVR, this single stream of data is split into two streams. The first is routed immediately to customers as before. The second stream flows into a device called the Broadband Media Router ("BMR"), id. at 613, which buffers the data stream, reformats it, and sends it to the "Arroyo Server," which consists, in relevant part, of two data buffers and a number of high-capacity hard disks. The entire stream of data moves to the first buffer (the "primary ingest buffer"), at which point the server automatically inquires as to whether any customers want to record any of that programming. If a customer has requested a particular program, the data for that program move from the primary buffer into a secondary buffer, and then onto a portion of one of the hard disks allocated to that customer. As new data flow into the primary buffer, they overwrite a corresponding quantity of data already on the buffer. The primary ingest buffer holds no more than 0.1 seconds of each channel's programming at any moment. Thus, every tenth of a second, the data residing on this buffer are automatically erased and replaced. The [125] data buffer in the BMR holds no more than 1.2 seconds of programming at any time. While buffering occurs at other points in the operation of the RS-DVR, only the BMR buffer and the primary ingest buffer are utilized absent any request from an individual subscriber.

As the district court observed, "the RS-DVR is not a single piece of equipment," but rather "a complex system requiring numerous computers, processes, networks of cables, and facilities staffed by personnel twenty-four hours a day and seven days a week." Id. at 612. To the customer, however, the processes of recording and playback on the RS-DVR are similar to that of a standard set-top DVR. Using a remote control, the customer can record programming by selecting a program in advance from an on-screen guide, or by pressing the record button while viewing a given program. A customer cannot, however, record the earlier portion of a program once it has begun. To begin playback, the customer selects the show from an on-screen list of previously recorded programs. See id. at 614-16. The principal difference in operation is that, instead of sending signals from the remote to an on-set box, the viewer sends signals from the remote, through the cable, to the Arroyo Server at Cablevision's central facility. See id. In this respect, RS-DVR more closely resembles a VOD service, whereby a cable subscriber uses his remote and cable box to request transmission of content, such as a movie, stored on computers at the cable company's facility. Id. at 612. But unlike a VOD service, RS-DVR users can only play content that they previously requested to be recorded.

Cablevision has some control over the content available for recording: a customer can only record programs on the channels offered by Cablevision (assuming he subscribes to them). Cablevision can also modify the system to limit the number of channels available and considered doing so during development of the RS-DVR. Id. at 613.

II. The District Court's Decision

In the district court, plaintiffs successfully argued that Cablevision's proposed system would directly infringe their copyrights in three ways. First, by briefly storing data in the primary ingest buffer and other data buffers integral to the function of the RS-DVR, Cablevision would make copies of protected works and thereby directly infringe plaintiffs' exclusive right of reproduction under the Copyright Act. Second, by copying programs onto the Arroyo Server hard disks (the "playback copies"), Cablevision would again directly infringe the reproduction right. And third, by transmitting the data from the Arroyo Server hard disks to its RS-DVR customers in response to a "playback" request, Cablevision would directly infringe plaintiffs' exclusive right of public performance. See id. at 617. Agreeing with all three arguments, the district court awarded summary declaratory judgment to plaintiffs and enjoined Cablevision from operating the RS-DVR system without obtaining licenses from the plaintiff copyright holders.

As to the buffer data, the district court rejected defendants' arguments 1) that the data were not "fixed" and therefore were not "copies" as defined in the Copyright Act, and 2) that any buffer copying was de minimis because the buffers stored only small amounts of data for very short periods of time. In rejecting the latter argument, the district court noted that the "aggregate effect of the buffering" was to reproduce the entirety of Cablevision's programming, and such copying "can hardly be called de minimis." Id. at 621.

[126] On the issue of whether creation of the playback copies made Cablevision liable for direct infringement, the parties and the district court agreed that the dispositive question was "who makes the copies"? Id. at 617. Emphasizing Cablevision's "unfettered discretion" over the content available for recording, its ownership and maintenance of the RS-DVR components, and its "continuing relationship" with its RS-DVR customers, the district court concluded that "the copying of programming to the RS-DVR's Arroyo servers ... would be done not by the customer but by Cablevision, albeit at the customer's request." Id. at 618, 620, 621.

Finally, as to the public performance right, Cablevision conceded that, during the playback, "the streaming of recorded programming in response to a customer's request is a performance." Id. at 622. Cablevision contended, however, that the work was performed not by Cablevision, but by the customer, an argument the district court rejected "for the same reasons that [it] reject[ed] the argument that the customer is `doing' the copying involved in the RS-DVR." Id. Cablevision also argued that such a playback transmission was not "to the public," and therefore not a public performance as defined in the Copyright Act, because it "emanates from a distinct copy of a program uniquely associated with one customer's set-top box and intended for that customer's exclusive viewing in his or her home." Id. The district court disagreed, noting that "Cablevision would transmit the same program to members of the public, who may receive the performance at different times, depending on whether they view the program in real time or at a later time as an RS-DVR playback." Id. at 623 (emphasis added). The district court also relied on a case from the Northern District of California, On Command Video Corp. v. Columbia Pictures Industries, 777 F.Supp. 787 (N.D.Cal.1991), which held that when the relationship between the transmitter and the audience of a performance is commercial, the transmission is "to the public," see Cablevision I, 478 F.Supp.2d at 623 (citing On Command, 777 F.Supp. at 790).

Finding that the operation of the RS-DVR would infringe plaintiffs' copyrights, the district court awarded summary judgment to plaintiffs and enjoined Cablevision from copying or publicly performing plaintiffs' copyrighted works "in connection with its proposed RS-DVR system," unless it obtained the necessary licenses. Cablevision I, 478 F.Supp.2d at 624. Cablevision appealed.

DISCUSSION

We review a district court's grant of summary judgment de novo. Bill Graham Archives v. Dorling Kindersley Ltd., 448 F.3d 605, 607 (2d Cir.2006).

"Section 106 of the Copyright Act grants copyright holders a bundle of exclusive rights...." Id. at 607-08. This case implicates two of those rights: the right "to reproduce the copyrighted work in copies," and the right "to perform the copyrighted work publicly." 17 U.S.C. § 106(1), (4). As discussed above, the district court found that Cablevision infringed the first right by 1) buffering the data from its programming stream and 2) copying content onto the Arroyo Server hard disks to enable playback of a program requested by an RS-DVR customer. In addition, the district court found that Cablevision would infringe the public performance right by transmitting a program to an RS-DVR customer in response to that customer's playback request. We address each of these three allegedly infringing acts in turn.

I. The Buffer Data

[127] It is undisputed that Cablevision, not any customer or other entity, takes the content from one stream of programming, after the split, and stores it, one small piece at a time, in the BMR buffer and the primary ingest buffer. As a result, the information is buffered before any customer requests a recording, and would be buffered even if no such request were made. The question is whether, by buffering the data that make up a given work, Cablevision "reproduce[s]" that work "in copies," 17 U.S.C. § 106(1), and thereby infringes the copyright holder's reproduction right.

"Copies," as defined in the Copyright Act, "are material objects ... in which a work is fixed by any method ... and from which the work can be ... reproduced." Id. § 101. The Act also provides that a work is "`fixed' in a tangible medium of expression when its embodiment ... is sufficiently permanent or stable to permit it to be ... reproduced ... for a period of more than transitory duration." Id. (emphasis added). We believe that this language plainly imposes two distinct but related requirements: the work must be embodied in a medium, i.e., placed in a medium such that it can be perceived, reproduced, etc., from that medium (the "embodiment requirement"), and it must remain thus embodied "for a period of more than transitory duration" (the "duration requirement"). See 2 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 8.02[B][3], at 8-32 (2007). Unless both requirements are met, the work is not "fixed" in the buffer, and, as a result, the buffer data is not a "copy" of the original work whose data is buffered.

The district court mistakenly limited its analysis primarily to the embodiment requirement. As a result of this error, once it determined that the buffer data was "[c]learly ... capable of being reproduced," i.e., that the work was embodied in the buffer, the district court concluded that the work was therefore "fixed" in the buffer, and that a copy had thus been made. Cablevision I, 478 F.Supp.2d at 621-22. In doing so, it relied on a line of cases beginning with MAI Systems Corp. v. Peak Computer Inc., 991 F.2d 511 (9th Cir.1993). It also relied on the United States Copyright Office's 2001 report on the Digital Millennium Copyright Act, which states, in essence, that an embodiment is fixed "[u]nless a reproduction manifests itself so fleetingly that it cannot be copied." U.S. Copyright Office, DMCA Section 104 Report 111 (Aug.2001) ("DMCA Report") (emphasis added), available at http://www.copyright.gov/reports/studies/dmca/sec-104-report-vol-1.pdf.

The district court's reliance on cases like MAI Systems is misplaced. In general, those cases conclude that an alleged copy is fixed without addressing the duration requirement; it does not follow, however, that those cases assume, much less establish, that such a requirement does not exist. Indeed, the duration requirement, by itself, was not at issue in MAI Systems and its progeny. As a result, they do not speak to the issues squarely before us here: If a work is only "embodied" in a medium for a period of transitory duration, can it be "fixed" in that medium, and thus a copy? And what constitutes a period "of more than transitory duration"?

In MAI Systems, defendant Peak Computer, Inc., performed maintenance and repairs on computers made and sold by MAI Systems. In order to service a customer's computer, a Peak employee had to operate the computer and run the computer's copyrighted operating system software. See MAI Sys., 991 F.2d at 513. The issue in MAI Systems was whether, [128] by loading the software into the computer's RAM,^[1] the repairman created a "copy" as defined in § 101. See id. at 517. The resolution of this issue turned on whether the software's embodiment in the computer's RAM was "fixed," within the meaning of the same section. The Ninth Circuit concluded that

by showing that Peak loads the software into the RAM and is then able to view the system error log and diagnose the problem with the computer, MAI has adequately shown that the representation created in the RAM is "sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration."

Id. at 518 (quoting 17 U.S.C. § 101).

The MAI Systems court referenced the "transitory duration" language but did not discuss or analyze it. The opinion notes that the defendants "vigorously" argued that the program's embodiment in the RAM was not a copy, but it does not specify the arguments defendants made. Id. at 517. This omission suggests that the parties did not litigate the significance of the "transitory duration" language, and the court therefore had no occasion to address it. This is unsurprising, because it seems fair to assume that in these cases the program was embodied in the RAM for at least several minutes.

Accordingly, we construe MAI Systems and its progeny as holding that loading a program into a computer's RAM can result in copying that program. We do not read MAI Systems as holding that, as a matter of law, loading a program into a form of RAM always results in copying. Such a holding would read the "transitory duration" language out of the definition, and we do not believe our sister circuit would dismiss this statutory language without even discussing it. It appears the parties in MAI Systems simply did not dispute that the duration requirement was satisfied; this line of cases simply concludes that when a program is loaded into RAM, the embodiment requirement is satisfied—an important holding in itself, and one we see no reason to quibble with here.^[2]

At least one court, relying on MAI Systems in a highly similar factual setting, has made this point explicitly. In Advanced Computer Services of Michigan, Inc. v. MAI Systems Corp., the district court expressly noted that the unlicensed user in that case ran copyrighted diagnostic software "for minutes or longer," but that the program's embodiment in the computer's RAM might be too ephemeral to be fixed if the computer had been shut down "within [129] seconds or fractions of a second" after loading the copyrighted program. 845 F.Supp. 356, 363 (E.D.Va.1994). We have no quarrel with this reasoning; it merely makes explicit the reasoning that is implicit in the other MAI Systems cases. Accordingly, those cases provide no support for the conclusion that the definition of "fixed" does not include a duration requirement. See Webster v. Fall, 266 U.S. 507, 511, 45 S.Ct. 148, 69 L.Ed. 411 (1924) ("Questions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having been so decided as to constitute precedents.").

Nor does the Copyright Office's 2001 DMCA Report, also relied on by the district court in this case, explicitly suggest that the definition of "fixed" does not contain a duration requirement. However, as noted above, it does suggest that an embodiment is fixed "[u]nless a reproduction manifests itself so fleetingly that it cannot be copied, perceived or communicated." DMCA Report, supra, at 111. As we have stated, to determine whether a work is "fixed" in a given medium, the statutory language directs us to ask not only 1) whether a work is "embodied" in that medium, but also 2) whether it is embodied in the medium "for a period of more than transitory duration." According to the Copyright Office, if the work is capable of being copied from that medium for any amount of time, the answer to both questions is "yes." The problem with this interpretation is that it reads the "transitory duration" language out of the statute.

We assume, as the parties do, that the Copyright Office's pronouncement deserves only Skidmore deference, deference based on its "power to persuade." Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944). And because the Office's interpretation does not explain why Congress would include language in a definition if it intended courts to ignore that language, we are not persuaded.

In sum, no case law or other authority dissuades us from concluding that the definition of "fixed" imposes both an embodiment requirement and a duration requirement. Accord CoStar Group Inc. v. LoopNet, Inc., 373 F.3d 544, 551 (4th Cir. 2004) (while temporary reproductions "may be made in this transmission process, they would appear not to be `fixed' in the sense that they are `of more than transitory duration'"). We now turn to whether, in this case, those requirements are met by the buffer data.

Cablevision does not seriously dispute that copyrighted works are "embodied" in the buffer. Data in the BMR buffer can be reformatted and transmitted to the other components of the RS-DVR system. Data in the primary ingest buffer can be copied onto the Arroyo hard disks if a user has requested a recording of that data. Thus, a work's "embodiment" in either buffer "is sufficiently permanent or stable to permit it to be perceived, reproduced," (as in the case of the ingest buffer) "or otherwise communicated" (as in the BMR buffer). 17 U.S.C. § 101. The result might be different if only a single second of a much longer work was placed in the buffer in isolation. In such a situation, it might be reasonable to conclude that only a minuscule portion of a work, rather than "a work" was embodied in the buffer. Here, however, where every second of an entire work is placed, one second at a time, in the buffer, we conclude that the work is embodied in the buffer.

Does any such embodiment last "for a period of more than transitory duration"? Id. No bit of data remains in any buffer for more than a fleeting 1.2 seconds. And unlike the data in cases like MAI [130] Systems, which remained embodied in the computer's RAM memory until the user turned the computer off, each bit of data here is rapidly and automatically overwritten as soon as it is processed. While our inquiry is necessarily fact-specific, and other factors not present here may alter the duration analysis significantly, these facts strongly suggest that the works in this case are embodied in the buffer for only a "transitory" period, thus failing the duration requirement.

Against this evidence, plaintiffs argue only that the duration is not transitory because the data persist "long enough for Cablevision to make reproductions from them." Br. of Pls.-Appellees the Cartoon Network et al. at 51. As we have explained above, however, this reasoning impermissibly reads the duration language out of the statute, and we reject it. Given that the data reside in no buffer for more than 1.2 seconds before being automatically overwritten, and in the absence of compelling arguments to the contrary, we believe that the copyrighted works here are not "embodied" in the buffers for a period of more than transitory duration, and are therefore not "fixed" in the buffers. Accordingly, the acts of buffering in the operation of the RS-DVR do not create copies, as the Copyright Act defines that term. Our resolution of this issue renders it unnecessary for us to determine whether any copies produced by buffering data would be de minimis, and we express no opinion on that question.

II. Direct Liability for Creating the Playback Copies

In most copyright disputes, the allegedly infringing act and the identity of the infringer are never in doubt. These cases turn on whether the conduct in question does, in fact, infringe the plaintiff's copyright. In this case, however, the core of the dispute is over the authorship of the infringing conduct. After an RS-DVR subscriber selects a program to record, and that program airs, a copy of the program—a copyrighted work—resides on the hard disks of Cablevision's Arroyo Server, its creation unauthorized by the copyright holder. The question is who made this copy. If it is Cablevision, plaintiffs' theory of direct infringement succeeds; if it is the customer, plaintiffs' theory fails because Cablevision would then face, at most, secondary liability, a theory of liability expressly disavowed by plaintiffs.

Few cases examine the line between direct and contributory liability. Both parties cite a line of cases beginning with Religious Technology Center v. Netcom On-Line Communication Services, 907 F.Supp. 1361 (N.D.Cal.1995). In Netcom, a third-party customer of the defendant Internet service provider ("ISP") posted a copyrighted work that was automatically reproduced by the defendant's computer. The district court refused to impose direct liability on the ISP, reasoning that "[a]lthough copyright is a strict liability statute, there should still be some element of volition or causation which is lacking where a defendant's system is merely used to create a copy by a third party." Id. at 1370. Recently, the Fourth Circuit endorsed the Netcom decision, noting that

to establish direct liability under ... the Act, something more must be shown than mere ownership of a machine used by others to make illegal copies. There must be actual infringing conduct with a nexus sufficiently close and causal to the illegal copying that one could conclude that the machine owner himself trespassed on the exclusive domain of the copyright owner."

CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544, 550 (4th Cir.2004).

[131] Here, the district court pigeon-holed the conclusions reached in Netcom and its progeny as "premised on the unique attributes of the Internet." Cablevision I, 478 F.Supp.2d at 620. While the Netcom court was plainly concerned with a theory of direct liability that would effectively "hold the entire Internet liable" for the conduct of a single user, 907 F.Supp. at 1372, its reasoning and conclusions, consistent with precedents of this court and the Supreme Court, and with the text of the Copyright Act, transcend the Internet. Like the Fourth Circuit, we reject the contention that "the Netcom decision was driven by expedience and that its holding is inconsistent with the established law of copyright," CoStar, 373 F.3d at 549, and we find it "a particularly rational interpretation of § 106," id. at 551, rather than a special-purpose rule applicable only to ISPs.

When there is a dispute as to the author of an allegedly infringing instance of reproduction, Netcom and its progeny direct our attention to the volitional conduct that causes the copy to be made. There are only two instances of volitional conduct in this case: Cablevision's conduct in designing, housing, and maintaining a system that exists only to produce a copy, and a customer's conduct in ordering that system to produce a copy of a specific program. In the case of a VCR, it seems clear — and we know of no case holding otherwise — that the operator of the VCR, the person who actually presses the button to make the recording, supplies the necessary element of volition, not the person who manufactures, maintains, or, if distinct from the operator, owns the machine. We do not believe that an RS-DVR customer is sufficiently distinguishable from a VCR user to impose liability as a direct infringer on a different party for copies that are made automatically upon that customer's command.

The district court emphasized the fact that copying is "instrumental" rather than "incidental" to the function of the RS-DVR system. Cablevision I, 478 F.Supp.2d at 620. While that may distinguish the RS-DVR from the ISPs in Netcom and CoStar, it does not distinguish the RS-DVR from a VCR, a photocopier, or even a typical copy shop. And the parties do not seem to contest that a company that merely makes photocopiers available to the public on its premises, without more, is not subject to liability for direct infringement for reproductions made by customers using those copiers. They only dispute whether Cablevision is similarly situated to such a proprietor.

The district court found Cablevision analogous to a copy shop that makes course packs for college professors. In the leading case involving such a shop, for example, "[t]he professor [gave] the copyshop the materials of which the coursepack [was] to be made up, and the copyshop [did] the rest." Princeton Univ. Press v. Mich. Document Servs., 99 F.3d 1381, 1384 (6th Cir.1996) (en banc). There did not appear to be any serious dispute in that case that the shop itself was directly liable for reproducing copyrighted works. The district court here found that Cablevision, like this copy shop, would be "doing" the copying, albeit "at the customer's behest." Cablevision I, 478 F.Supp.2d at 620.

But because volitional conduct is an important element of direct liability, the district court's analogy is flawed. In determining who actually "makes" a copy, a significant difference exists between making a request to a human employee, who then volitionally operates the copying system to make the copy, and issuing a command directly to a system, which automatically obeys commands and engages in no volitional conduct. In cases like Princeton [132] University Press, the defendants operated a copying device and sold the product they made using that device. See 99 F.3d at 1383 ("The corporate defendant ... is a commercial copyshop that reproduced substantial segments of copyrighted works of scholarship, bound the copies into `coursepacks,' and sold the coursepacks to students. ..."). Here, by selling access to a system that automatically produces copies on command, Cablevision more closely resembles a store proprietor who charges customers to use a photocopier on his premises, and it seems incorrect to say, without more, that such a proprietor "makes" any copies when his machines are actually operated by his customers. See Netcom, 907 F.Supp. at 1369. Some courts have held to the contrary, but they do not explicitly explain why, and we find them unpersuasive. See, e.g., Elektra Records Co. v. Gem Elec. Distribs., Inc., 360 F.Supp. 821, 823 (E.D.N.Y.1973) (concluding that, "regardless" of whether customers or defendants' employees operated the tape-copying machines at defendants' stores, defendant had actively infringed copyrights).

The district court also emphasized Cablevision's "unfettered discretion in selecting the programming that it would make available for recording." Cablevision I, 478 F.Supp.2d at 620. This conduct is indeed more proximate to the creation of illegal copying than, say, operating an ISP or opening a copy shop, where all copied content was supplied by the customers themselves or other third parties. Nonetheless, we do not think it sufficiently proximate to the copying to displace the customer as the person who "makes" the copies when determining liability under the Copyright Act. Cablevision, we note, also has subscribers who use home VCRs or DVRs (like TiVo), and has significant control over the content recorded by these customers. But this control is limited to the channels of programming available to a customer and not to the programs themselves. Cablevision has no control over what programs are made available on individual channels or when those programs will air, if at all. In this respect, Cablevision possesses far less control over recordable content than it does in the VOD context, where it actively selects and makes available beforehand the individual programs available for viewing. For these reasons, we are not inclined to say that Cablevision, rather than the user, "does" the copying produced by the RS-DVR system. As a result, we find that the district court erred in concluding that Cablevision, rather than its RS-DVR customers, makes the copies carried out by the RS-DVR system.

Our refusal to find Cablevision directly liable on these facts is buttressed by the existence and contours of the Supreme Court's doctrine of contributory liability in the copyright context. After all, the purpose of any causation-based liability doctrine is to identify the actor (or actors) whose "conduct has been so significant and important a cause that [he or she] should be legally responsible." W. Page Keeton et al., Prosser and Keeton on Torts § 42, at 273 (5th ed.1984). But here, to the extent that we may construe the boundaries of direct liability more narrowly, the doctrine of contributory liability stands ready to provide adequate protection to copyrighted works.

Most of the facts found dispositive by the district court—e.g., Cablevision's "continuing relationship" with its RS-DVR customers, its control over recordable content, and the "instrumental[ity]" of copying to the RS-DVR system, Cablevision I, 478 F.Supp.2d at 618-20—seem to us more relevant to the question of contributory liability. In Sony Corp. of America v. Universal City Studios, Inc., the lack of an [133] "ongoing relationship" between Sony and its VCR customers supported the Court's conclusion that it should not impose contributory liability on Sony for any infringing copying done by Sony VCR owners. 464 U.S. 417, 437-38, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984). The Sony Court did deem it "just" to impose liability on a party in a "position to control" the infringing uses of another, but as a contributory, not direct, infringer. Id. at 437, 104 S.Ct. 774. And asking whether copying copyrighted material is only "incidental" to a given technology is akin to asking whether that technology has "commercially significant noninfringing uses," another inquiry the Sony Court found relevant to whether imposing contributory liability was just. Id. at 442, 104 S.Ct. 774.

The Supreme Court's desire to maintain a meaningful distinction between direct and contributory copyright infringement is consistent with congressional intent. The Patent Act, unlike the Copyright Act, expressly provides that someone who "actively induces infringement of a patent" is "liable as an infringer," 35 U.S.C. § 271(b), just like someone who commits the underlying infringing act by "us[ing]" a patented invention without authorization, id. § 271(a). In contrast, someone who merely "sells ... a material or apparatus for use in practicing a patented process" faces only liability as a "contributory infringer." Id. § 271(c). If Congress had meant to assign direct liability to both the person who actually commits a copyright-infringing act and any person who actively induces that infringement, the Patent Act tells us that it knew how to draft a statute that would have this effect. Because Congress did not do so, the Sony Court concluded that "[t]he Copyright Act does not expressly render anyone liable for infringement committed by another." 464 U.S. at 434, 104 S.Ct. 774. Furthermore, in cases like Sony, the Supreme Court has strongly signaled its intent to use the doctrine of contributory infringement, not direct infringement, to "identify[] the circumstances in which it is just to hold one individual accountable for the actions of another." Id. at 435, 104 S.Ct. 774. Thus, although Sony warns us that "the lines between direct infringement, contributory infringement, and vicarious liability are not clearly drawn," id. at 435 n. 17, 104 S.Ct. 774 (internal quotation marks and citation omitted), that decision does not absolve us of our duty to discern where that line falls in cases, like this one, that require us to decide the question.

The district court apparently concluded that Cablevision's operation of the RS-DVR system would contribute in such a major way to the copying done by another that it made sense to say that Cablevision was a direct infringer, and thus, in effect, was "doing" the relevant copying. There are certainly other cases, not binding on us, that follow this approach. See, e.g., Playboy Enters. v. Russ Hardenburgh, Inc., 982 F.Supp. 503, 513 (N.D.Ohio 1997) (noting that defendant ISP's encouragement of its users to copy protected files was "crucial" to finding that it was a direct infringer). We need not decide today whether one's contribution to the creation of an infringing copy may be so great that it warrants holding that party directly liable for the infringement, even though another party has actually made the copy. We conclude only that on the facts of this case, copies produced by the RS-DVR system are "made" by the RS-DVR customer, and Cablevision's contribution to this reproduction by providing the system does not warrant the imposition of direct liability. Therefore, Cablevision is entitled to summary judgment on this point, and the district court erred in awarding summary judgment to plaintiffs.

III. Transmission of RS-DVR Playback

[134] Plaintiffs' final theory is that Cablevision will violate the Copyright Act by engaging in unauthorized public performances of their works through the playback of the RS-DVR copies. The Act grants a copyright owner the exclusive right, "in the case of ... motion pictures and other audiovisual works, to perform the copyrighted work publicly." 17 U.S.C. § 106(4). Section 101, the definitional section of the Act, explains that

[t]o perform or display a work "publicly" means (1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

Id. § 101.

The parties agree that this case does not implicate clause (1). Accordingly, we ask whether these facts satisfy the second, "transmit clause" of the public performance definition: Does Cablevision "transmit ... a performance ... of the work ... to the public"? Id. No one disputes that the RS-DVR playback results in the transmission of a performance of a work—the transmission from the Arroyo Server to the customer's television set. Cablevision contends that (1) the RS-DVR customer, rather than Cablevision, does the transmitting and thus the performing and (2) the transmission is not "to the public" under the transmit clause.

As to Cablevision's first argument, we note that our conclusion in Part II that the customer, not Cablevision, "does" the copying does not dictate a parallel conclusion that the customer, and not Cablevision, "performs" the copyrighted work. The definitions that delineate the contours of the reproduction and public performance rights vary in significant ways. For example, the statute defines the verb "perform" and the noun "copies," but not the verbs "reproduce" or "copy." Id. We need not address Cablevision's first argument further because, even if we assume that Cablevision makes the transmission when an RS-DVR playback occurs, we find that the RS-DVR playback, as described here, does not involve the transmission of a performance "to the public."

The statute itself does not expressly define the term "performance" or the phrase "to the public." It does explain that a transmission may be "to the public ... whether the members of the public capable of receiving the performance ... receive it in the same place or in separate places and at the same time or at different times." Id. This plain language instructs us that, in determining whether a transmission is "to the public," it is of no moment that the potential recipients of the transmission are in different places, or that they may receive the transmission at different times. The implication from this same language, however, is that it is relevant, in determining whether a transmission is made to the public, to discern who is "capable of receiving" the performance being transmitted. The fact that the statute says "capable of receiving the performance," instead of "capable of receiving the transmission," underscores the fact that a transmission of a performance is itself a performance. Cf. Buck v. Jewell-La Salle Realty Co., 283 U.S. 191, 197-98, 51 S.Ct. 410, 75 L.Ed. 971 (1931). [135] The legislative history of the transmit clause supports this interpretation. The House Report on the 1976 Copyright Act states that

[u]nder the bill, as under the present law, a performance made available by transmission to the public at large is "public" even though the recipients are not gathered in a single place, and even if there is no proof that any of the potential recipients was operating his receiving apparatus at the time of the transmission. The same principles apply whenever the potential recipients of the transmission represent a limited segment of the public, such as the occupants of hotel rooms or the subscribers of a cable television service.

H.R.Rep. No. 94-1476, at 64-65 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5678 (emphases added).

Plaintiffs also reference a 1967 House Report, issued nearly a decade before the Act we are interpreting, stating that the same principles apply where the transmission is "capable of reaching different recipients at different times, as in the case of sounds or images stored in an information system and capable of being performed or displayed at the initiative of individual members of the public." H.R.Rep. No. 90-83, at 29 (1967) (emphases added). We question how much deference this report deserves. But we need not belabor the point here, as the 1967 report is consistent with both legislative history contemporaneous with the Act's passage and our own interpretation of the statute's plain meaning.

From the foregoing, it is evident that the transmit clause directs us to examine who precisely is "capable of receiving" a particular transmission of a performance. Cablevision argues that, because each RS-DVR transmission is made using a single unique copy of a work, made by an individual subscriber, one that can be decoded exclusively by that subscriber's cable box, only one subscriber is capable of receiving any given RS-DVR transmission. This argument accords with the language of the transmit clause, which, as described above, directs us to consider the potential audience of a given transmission. We are unpersuaded by the district court's reasoning and the plaintiffs' arguments that we should consider a larger potential audience in determining whether a transmission is "to the public."

The district court, in deciding whether the RS-DVR playback of a program to a particular customer is "to the public," apparently considered all of Cablevision's customers who subscribe to the channel airing that program and all of Cablevision's RS-DVR subscribers who request a copy of that program. Thus, it concluded that the RS-DVR playbacks constituted public performances because "Cablevision would transmit the same program to members of the public, who may receive the performance at different times, depending on whether they view the program in real time or at a later time as an RS-DVR playback." Cablevision I, 478 F.Supp.2d at 623 (emphasis added). In essence, the district court suggested that, in considering whether a transmission is "to the public," we consider not the potential audience of a particular transmission, but the potential audience of the underlying work (i.e., "the program") whose content is being transmitted.

We cannot reconcile the district court's approach with the language of the transmit clause. That clause speaks of people capable of receiving a particular "transmission" or "performance," and not of the potential audience of a particular "work." Indeed, such an approach would render the "to the public" language surplusage. Doubtless the potential audience for every [136] copyrighted audiovisual work is the general public. As a result, any transmission of the content of a copyrighted work would constitute a public performance under the district court's interpretation. But the transmit clause obviously contemplates the existence of non-public transmissions; if it did not, Congress would have stopped drafting that clause after "performance."

On appeal, plaintiffs offer a slight variation of this interpretation. They argue that both in its real-time cablecast and via the RS-DVR playback, Cablevision is in fact transmitting the "same performance" of a given work: the performance of the work that occurs when the programming service supplying Cablevision's content transmits that content to Cablevision and the service's other licensees. See Br. of Pls.-Appellees Twentieth Century Fox Film Corp. et al. at 27 ("Fox Br.") ("The critical factor ... is that the same performance is transmitted to different subscribers at different times .... more specifically, the performance of that program by HBO or another programming service." (third emphasis added)).

Thus, according to plaintiffs, when Congress says that to perform a work publicly means to transmit ... a performance ... to the public, they really meant "transmit ... the `original performance' ... to the public." The implication of this theory is that to determine whether a given transmission of a performance is "to the public," we would consider not only the potential audience of that transmission, but also the potential audience of any transmission of the same underlying "original" performance.

Like the district court's interpretation, this view obviates any possibility of a purely private transmission. Furthermore, it makes Cablevision's liability depend, in part, on the actions of legal strangers. Assume that HBO transmits a copyrighted work to both Cablevision and Comcast. Cablevision merely retransmits the work from one Cablevision facility to another, while Comcast retransmits the program to its subscribers. Under plaintiffs' interpretation, Cablevision would still be transmitting the performance to the public, solely because Comcast has transmitted the same underlying performance to the public. Similarly, a hapless customer who records a program in his den and later transmits the recording to a television in his bedroom would be liable for publicly performing the work simply because some other party had once transmitted the same underlying performance to the public.

We do not believe Congress intended such odd results. Although the transmit clause is not a model of clarity, we believe that when Congress speaks of transmitting a performance to the public, it refers to the performance created by the act of transmission. Thus, HBO transmits its own performance of a work when it transmits to Cablevision, and Cablevision transmits its own performance of the same work when it retransmits the feed from HBO.

Furthermore, we believe it would be inconsistent with our own transmit clause jurisprudence to consider the potential audience of an upstream transmission by a third party when determining whether a defendant's own subsequent transmission of a performance is "to the public." In National Football League v. PrimeTime 24 Joint Venture (NFL), 211 F.3d 10 (2000), we examined the transmit clause in the context of satellite television provider PrimeTime, which captured protected content in the United States from the NFL, transmitted it from the United States to a satellite ("the uplink"), and then transmitted it from the satellite to subscribers in both the United States and Canada ("the downlink"). PrimeTime had a license to [137] transmit to its U.S. customers, but not its Canadian customers. It argued that although the downlink transmission to its Canadian subscribers was a public performance, it could not be held liable for that act because it occurred entirely outside of the United States and therefore was not subject to the strictures of the Copyright Act. It also argued that the uplink transmission was not a public performance because it was a transmission to a single satellite. See id. at 12.

The NFL court did not question the first assumption, but it flatly rejected the second on a specific and germane ground:

We believe the most logical interpretation of the Copyright Act is to hold that a public performance or display includes each step in the process by which a protected work wends its way to its audience. Under that analysis, it is clear that PrimeTime's uplink transmission of signals captured in the United States is a step in the process by which NFL's protected work wends its way to a public audience.

Id. at 13 (emphasis added) (internal quotation and citation omitted). Thus, while the uplink transmission that took place in the United States was not, in itself, "to the public," the NFL court deemed it so because it ultimately resulted in an undisputed public performance. Notably, the NFL court did not base its decision on the fact that an upstream transmission by another party (the NFL) might have been to the public. Nor did the court base its decision on the fact that Primetime simultaneously transmitted a performance of the work to the public in the United States. Because NFL directs us to look downstream, rather than upstream or laterally, to determine whether any link in a chain of transmissions made by a party constitutes a public performance, we reject plaintiffs' contention that we examine the potential recipients of the content provider's initial transmission to determine who is capable of receiving the RS-DVR playback transmission.

Plaintiffs also rely on NFL for the proposition that Cablevision publicly performs a work when it splits its programming stream and transmits the second stream to the RS-DVR system. Because NFL only supports that conclusion if we determine that the final transmission in the chain (i.e., the RS-DVR playback transmission) is "to the public," plaintiffs' reliance on NFL is misplaced. NFL dealt with a chain of transmissions whose final link was undisputedly a public performance. It therefore does not guide our current inquiry.

In sum, none of the arguments advanced by plaintiffs or the district court alters our conclusion that, under the transmit clause, we must examine the potential audience of a given transmission by an alleged infringer to determine whether that transmission is "to the public." And because the RS-DVR system, as designed, only makes transmissions to one subscriber using a copy made by that subscriber, we believe that the universe of people capable of receiving an RS-DVR transmission is the single subscriber whose self-made copy is used to create that transmission.

Plaintiffs contend that it is "wholly irrelevant, in determining the existence of a public performance, whether `unique' copies of the same work are used to make the transmissions." Fox Br. at 27. But plaintiffs cite no authority for this contention. And our analysis of the transmit clause suggests that, in general, any factor that limits the potential audience of a transmission is relevant.

Furthermore, no transmission of an audiovisual work can be made, we assume, without using a copy of that work: to transmit a performance of a movie, for [138] example, the transmitter generally must obtain a copy of that movie. As a result, in the context of movies, television programs, and other audiovisual works, the right of reproduction can reinforce and protect the right of public performance. If the owner of a copyright believes he is injured by a particular transmission of a performance of his work, he may be able to seek redress not only for the infringing transmission, but also for the underlying copying that facilitated the transmission. Given this interplay between the various rights in this context, it seems quite consistent with the Act to treat a transmission made using Copy A as distinct from one made using Copy B, just as we would treat a transmission made by Cablevision as distinct from an otherwise identical transmission made by Comcast. Both factors—the identity of the transmitter and the source material of the transmission—limit the potential audience of a transmission in this case and are therefore germane in determining whether that transmission is made "to the public."

Indeed, we believe that Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 749 F.2d 154 (3d Cir.1984), relied on by both plaintiffs and the district court, supports our decision to accord significance to the existence and use of distinct copies in our transmit clause analysis. In that case, defendant operated a video rental store, Maxwell's, which also housed a number of small private booths containing seats and a television. Patrons would select a film, enter the booth, and close the door. An employee would then load a copy of the requested movie into a bank of VCRs at the front of the store and push play, thereby transmitting the content of the tape to the television in the viewing booth. See id. at 156-57.

The Third Circuit found that defendants' conduct constituted a public performance under both clauses of the statutory definition. In concluding that Maxwell's violated the transmit clause, that court explicitly relied on the fact that defendants showed the same copy of a work seriatim to its clientele, and it quoted a treatise emphasizing the same fact:

Professor Nimmer's examination of this definition is particularly pertinent: "if the same copy ... of a given work is repeatedly played (i.e., `performed') by different members of the public, albeit at different times, this constitutes a `public' performance." 2 M. Nimmer, § 8.14[C][3], at 8-142 (emphasis in original). ... Although Maxwell's has only one copy of each film, it shows each copy repeatedly to different members of the public. This constitutes a public performance.

Id. at 159 (first omission in original).

Unfortunately, neither the Redd Horne court nor Prof. Nimmer explicitly explains why the use of a distinct copy affects the transmit clause inquiry. But our independent analysis confirms the soundness of their intuition: the use of a unique copy may limit the potential audience of a transmission and is therefore relevant to whether that transmission is made "to the public." Plaintiffs' unsupported arguments to the contrary are unavailing.

Given that each RS-DVR transmission is made to a given subscriber using a copy made by that subscriber, we conclude that such a transmission is not "to the public," without analyzing the contours of that phrase in great detail. No authority cited by the parties or the district court persuades us to the contrary.

In addition to Redd Horne, the district court also cited and analyzed On Command Video Corp. v. Columbia Pictures Industries, 777 F.Supp. 787 (N.D.Cal. 1991), in its transmit clause analysis. In that case, defendant On Command developed [139] and sold "a system for the electronic delivery of movie video tapes," which it sold to hotels. Id. at 788. The hub of the system was a bank of video cassette players, each containing a copy of a particular movie. From his room, a hotel guest could select a movie via remote control from a list on his television. The corresponding cassette player would start, and its output would be transmitted to that guest's room. During this playback, the movie selected was unavailable to other guests. See id. The court concluded that the transmissions made by this system were made to the public "because the relationship between the transmitter of the performance, On Command, and the audience, hotel guests, is a commercial, `public' one regardless of where the viewing takes place." Id. at 790.

Thus, according to the On Command court, any commercial transmission is a transmission "to the public." We find this interpretation untenable, as it completely rewrites the language of the statutory definition. If Congress had wished to make all commercial transmissions public performances, the transmit clause would read: "to perform a work publicly means ... to transmit a performance for commercial purposes." In addition, this interpretation overlooks, as Congress did not, the possibility that even non-commercial transmissions to the public may diminish the value of a copyright. Finally, like Redd Horne, On Command is factually distinguishable, as successive transmissions to different viewers in that case could be made using a single copy of a given work. Thus, at the moment of transmission, any of the hotel's guests was capable of receiving a transmission made using a single copy of a given movie. As a result, the district court in this case erred in relying on On Command.

Plaintiffs also rely on Ford Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277 (3d Cir.1991), in which the Third Circuit interpreted § 106(3) of the Copyright Act, which gives the copyright holder the exclusive right "to distribute copies ... of the copyrighted work to the public," 17 U.S.C. § 106(3) (emphasis added). The court concluded that "even one person can be the public for the purposes of section 106(3)." Ford, 930 F.2d at 299 (emphasis added). Commentators have criticized the Ford court for divesting the phrase "to the public" of "all meaning whatsoever," 2 Nimmer & Nimmer, supra, § 8.11[A], at 8-149, and the decision does appear to have that result. Whether this result was justified in the context of the distribution right is not for us to decide in this case. We merely note that we find no compelling reason, in the context of the transmit clause and the public performance right, to interpret the phrase "to the public" out of existence.

In sum, we find that the transmit clause directs us to identify the potential audience of a given transmission, i.e., the persons "capable of receiving" it, to determine whether that transmission is made "to the public." Because each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances "to the public," and therefore do not infringe any exclusive right of public performance. We base this decision on the application of undisputed facts; thus, Cablevision is entitled to summary judgment on this point.

This holding, we must emphasize, does not generally permit content delivery networks to avoid all copyright liability by making copies of each item of content and associating one unique copy with each subscriber to the network, or by giving their subscribers the capacity to make their own individual copies. We do not address whether such a network operator would be [140] able to escape any other form of copyright liability, such as liability for unauthorized reproductions or liability for contributory infringement.

In sum, because we find, on undisputed facts, that Cablevision's proposed RS-DVR system would not directly infringe plaintiffs' exclusive rights to reproduce and publicly perform their copyrighted works, we grant summary judgment in favor of Cablevision with respect to both rights.

CONCLUSION

For the foregoing reasons, the district court's award of summary judgment to the plaintiffs is REVERSED and the district court's injunction against Cablevision is VACATED. The case is REMANDED for further proceedings consistent with this opinion.

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Notes:

[1] To run a computer program, the data representing that program must be transferred from a data storage medium (such as a floppy disk or a hard drive) to a form of Random Access Memory ("RAM") where the data can be processed. The data buffers at issue here are also a form of RAM.

[2] The same reasoning also distinguishes this court's opinion in Matthew Bender & Co. v. West Publishing Co., 158 F.3d 693 (2d Cir. 1998). Language in that opinion, taken out of context, suggests that the definition of "fixed" imposes only an embodiment requirement: "Under § 101's definition of `copies,' a work satisfies the fixation requirement when it is fixed in a material object from which it can be perceived or communicated directly or with the aid of a machine." Id. at 702. Like the MAI Systems cases, Matthew Bender only addresses the embodiment requirement: specifically, whether West's copyrighted arrangement of judicial opinions was "embedded" in a CD-ROM compilation of opinions when the cases were normally arranged differently but could be manipulated by the user to replicate West's copyrighted arrangement. Id. at 703. The opinion merely quotes the duration language without discussing it, see id. at 702; that case therefore does not compel us to conclude that the definition of "fixed" does not impose a duration requirement.

[1153] Russell J. Frackman and Jeffrey D. Goldman, Mitchell, Silberberg & Knupp LLP, Los Angeles, CA, Jeffrey N. Mausner, Berman, Mausner & Resser, Los Angeles, CA, Daniel J. Cooper, Perfect 10, Inc., Beverly Hills, CA, for plaintiff-appellant Perfect 10, Inc.

Andrew P. Bridges and Jennifer A. Golinveaux, Winston & Strawn LLP, San Francisco, CA, Gene C. Schaerr, Winston & Strawn LLP, Washington, DC, for defendant-appellee and cross-appellant Google Inc.

Mark T. Jansen & Anthony J. Malutta, Townsend and Townsend and Crew LLP, San Francisco, CA, for defendants-appellees Amazon.com and A9.com, Inc.

Fred von Lohmann, Electronic Frontier Foundation, San Francisco, CA, for amicus curiae Electronic Frontier Foundation, American Library Association, Medical Library [1154] Association, American Association of Law Libraries, Association of Research Libraries, and Special Libraries Association in support of Google Inc.

Victor S. Perlman, of counsel, American Society of Media Photographers; Nancy E. Wolff, of counsel, Cowan, DeBaets, Abrahams & Sheppard, LLP; Robert W. Clarida and Jason D. Sanders, Cowan, Liebowitz & Latman, P.C., New York, NY, for amicus curiae American Society of Media Photographers, Inc., Picture Archive Council of America, Inc., British Association of Picture Libraries and Agencies, Inc., Stock Artists Alliance, The Graphic Artists Guild, American Society of Picture Professionals and National Press Photographers, in support of Perfect 10 on issue of Google's liability for the display of full-size images.

Eric J. Schwartz and Steven J. Metalitz, Smith & Metalitz LLP, Washington, DC, for amicus curiae Motion Picture Association of America, Inc. in support of Perfect 10.

Jonathan Band, Jonathan Band PLLC, Washington, DC, for amicus curiae Net-Coalition, Computer and Communications Industry Association, U.S. Internet Service Provider Association, Consumer Electronics Association, Home Recording Rights Coalition, Information Technology Association of America, and Internet Commerce Coalition in support of Google Inc.

Kenneth L. Doroshow and Linda J. Zirkelbach, Recording Industry Association of America, Washington, DC; Jacqueline C. Charlesworth, National Music Publishers' Association, Washington, DC; Robert W. Clarida, Richard S. Mandel and Jonathan Z. King, Cowan, Liebowitz & Latman, P.C., New York, NY, for amicus curiae Recording Industry Association of America and National Music Publishers' Association in support of neither party.

Appeal from the United States District Court for the Central District of California; A. Howard Matz, District Judge, Presiding. D.C. Nos. CV-05-04753-AHM, CV-04-09484-AHM.

Before: CYNTHIA HOLCOMB HALL, HAWKINS, and SANDRA S. IKUTA, Circuit Judges.

IKUTA, Circuit Judge:

In this appeal, we consider a copyright owner's efforts to stop an Internet search engine from facilitating access to infringing images. Perfect 10, Inc. sued Google Inc., for infringing Perfect 10's copyrighted photographs of nude models, among other claims. Perfect 10 brought a similar action against Amazon.com and its subsidiary A9.com (collectively, "Amazon.com"). The district court preliminarily enjoined Google from creating and publicly displaying thumbnail versions of Perfect 10's images, Perfect 10 v. Google, Inc., 416 F.Supp.2d 828 (C.D.Cal.2006), but did not enjoin Google from linking to third-party websites that display infringing full-size versions of Perfect 10's images. Nor did the district court preliminarily enjoin Amazon.com from giving users access to information provided by Google. Perfect 10 and Google both appeal the district court's order. We have jurisdiction pursuant to 28 U.S.C. § 1292(a)(1).^[1]

[1155] The district court handled this complex case in a particularly thoughtful and skillful manner. Nonetheless, the district court erred on certain issues, as we will further explain below. We affirm in part, reverse in part, and remand.

I

Background

Google's computers, along with millions of others, are connected to networks known collectively as the "Internet." "The Internet is a world-wide network of networks ... all sharing a common communications technology." Religious Tech. Ctr. v. Netcom On-Line Commc'n Servs., Inc., 923 F.Supp. 1231, 1238 n. 1 (N.D.Cal.1995). Computer owners can provide information stored on their computers to other users connected to the Internet through a medium called a webpage. A webpage consists of text interspersed with instructions written in Hypertext Markup Language ("HTML") that is stored in a computer. No images are stored on a webpage; rather, the HTML instructions on the webpage provide an address for where the images are stored, whether in the webpage publisher's computer or some other computer. In general, webpages are publicly available and can be accessed by computers connected to the Internet through the use of a web browser.

Google operates a search engine, a software program that automatically accesses thousands of websites (collections of webpages) and indexes them within a database stored on Google's computers. When a Google user accesses the Google website and types in a search query, Google's software searches its database for websites responsive to that search query. Google then sends relevant information from its index of websites to the user's computer. Google's search engines can provide results in the form of text, images, or videos.

The Google search engine that provides responses in the form of images is called "Google Image Search." In response to a search query, Google Image Search identifies text in its database responsive to the query and then communicates to users the images associated with the relevant text. Google's software cannot recognize and index the images themselves. Google Image Search provides search results as a webpage of small images called "thumbnails," which are stored in Google's servers. The thumbnail images are reduced, lower-resolution versions of full-sized images stored on third-party computers.

When a user clicks on a thumbnail image, the user's browser program interprets HTML instructions on Google's webpage. These HTML instructions direct the user's browser to cause a rectangular area (a "window") to appear on the user's computer screen. The window has two separate areas of information. The browser fills the top section of the screen with information from the Google webpage, including the thumbnail image and text. The HTML instructions also give the user's browser the address of the website publisher's computer that stores the full-size version of the thumbnail.^[2] By following [1156] the HTML instructions to access the third-party webpage, the user's browser connects to the website publisher's computer, downloads the full-size image, and makes the image appear at the bottom of the window on the user's screen. Google does not store the images that fill this lower part of the window and does not communicate the images to the user; Google simply provides HTML instructions directing a user's browser to access a third-party website. However, the top part of the window (containing the information from the Google webpage) appears to frame and comment on the bottom part of the window. Thus, the user's window appears to be filled with a single integrated presentation of the full-size image, but it is actually an image from a third-party website framed by information from Google's website. The process by which the webpage directs a user's browser to incorporate content from different computers into a single window is referred to as "in-line linking." Kelly v. Arriba Soft Corp., 336 F.3d 811, 816 (9th Cir.2003). The term "framing" refers to the process by which information from one computer appears to frame and annotate the in-line linked content from another computer. Perfect 10, 416 F.Supp.2d at 833-34.

Google also stores webpage content in its cache.^[3] For each cached webpage, Google's cache contains the text of the webpage as it appeared at the time Google indexed the page, but does not store images from the webpage. Id. at 833. Google may provide a link to a cached webpage in response to a user's search query. However, Google's cache version of the webpage is not automatically updated when the webpage is revised by its owner. So if the webpage owner updates its webpage to remove the HTML instructions for finding an infringing image, a browser communicating directly with the webpage would not be able to access that image. However, Google's cache copy of the webpage would still have the old HTML instructions for the infringing image. Unless the owner of the computer changed the HTML address of the infringing image, or otherwise rendered the image unavailable, a browser accessing Google's cache copy of the website could still access the image where it is stored on the website publisher's computer. In other words, Google's cache copy could provide a user's browser with valid directions to an infringing image even though the updated webpage no longer includes that infringing image.

In addition to its search engine operations, Google generates revenue through a business program called "AdSense." Under this program, the owner of a website can register with Google to become an AdSense "partner." The website owner then places HTML instructions on its webpages that signal Google's server to place advertising on the webpages that is relevant to the webpages' content. Google's computer program selects the advertising automatically by means of an algorithm. AdSense participants agree to share the revenues that flow from such advertising with Google.

[1157] Google also generated revenues through an agreement with Amazon.com that allowed Amazon.com to in-line link to Google's search results. Amazon.com gave its users the impression that Amazon.com was providing search results, but Google communicated the search results directly to Amazon.com's users. Amazon.com routed users' search queries to Google and automatically transmitted Google's responses (i.e., HTML instructions for linking to Google's search results) back to its users.

Perfect 10 markets and sells copyrighted images of nude models. Among other enterprises, it operates a subscription website on the Internet. Subscribers pay a monthly fee to view Perfect 10 images in a "members' area" of the site. Subscribers must use a password to log into the members' area. Google does not include these password-protected images from the members' area in Google's index or database. Perfect 10 has also licensed Fonestarz Media Limited to sell and distribute Perfect 10's reduced-size copyrighted images for download and use on cell phones.

Some website publishers republish Perfect 10's images on the Internet without authorization. Once this occurs, Google's search engine may automatically index the webpages containing these images and provide thumbnail versions of images in response to user inquiries. When a user clicks on the thumbnail image returned by Google's search engine, the user's browser accesses the third-party webpage and in-line links to the full-sized infringing image stored on the website publisher's computer. This image appears, in its original context, on the lower portion of the window on the user's computer screen framed by information from Google's webpage.

Procedural History. In May 2001, Perfect 10 began notifying Google that its thumbnail images and in-line linking to the full-size images infringed Perfect 10's copyright. Perfect 10 continued to send these notices through 2005.

On November 19, 2004, Perfect 10 filed an action against Google that included copyright infringement claims. This was followed by a similar action against Amazon.com on June 29, 2005. On July 1, 2005 and August 24, 2005, Perfect 10 sought a preliminary injunction to prevent Amazon.com and Google, respectively, from "copying, reproducing, distributing, publicly displaying, adapting or otherwise infringing, or contributing to the infringement" of Perfect 10's photographs; linking to websites that provide full-size infringing versions of Perfect 10's photographs; and infringing Perfect 10's username/password combinations.

The district court consolidated the two actions and heard both preliminary injunction motions on November 7, 2005. The district court issued orders granting in part and denying in part the preliminary injunction against Google and denying the preliminary injunction against Amazon.com. Perfect 10 and Google cross-appealed the partial grant and partial denial of the preliminary injunction motion, and Perfect 10 appealed the denial of the preliminary injunction against Amazon.com. On June 15, 2006, the district court temporarily stayed the preliminary injunction.

II

Standard of Review

We review the district court's grant or denial of a preliminary injunction for an abuse of discretion. A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 (9th Cir.2001). The district court must support a preliminary injunction with findings of fact, which we review for clear error. Earth Island Inst. v. U.S. Forest Serv., 442 F.3d 1147, 1156 (9th Cir.2006). We review the district court's conclusions of law de novo. Napster, 239 F.3d at 1013.

[1158] Section 502(a) of the Copyright Act authorizes a court to grant injunctive relief "on such terms as it may deem reasonable to prevent or restrain infringement of a copyright." 17 U.S.C. § 502(a). "Preliminary injunctive relief is available to a party who demonstrates either: (1) a combination of probable success on the merits and the possibility of irreparable harm; or (2) that serious questions are raised and the balance of hardships tips in its favor. These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." Napster, 239 F.3d at 1013 (internal quotation and citation omitted).

Because Perfect 10 has the burden of showing a likelihood of success on the merits, the district court held that Perfect 10 also had the burden of demonstrating a likelihood of overcoming Google's fair use defense under 17 U.S.C. § 107. Perfect 10, 416 F.Supp.2d at 836-37. This ruling was erroneous. At trial, the defendant in an infringement action bears the burden of proving fair use. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 590, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994). Because "the burdens at the preliminary injunction stage track the burdens at trial," once the moving party has carried its burden of showing a likelihood of success on the merits, the burden shifts to the non-moving party to show a likelihood that its affirmative defense will succeed. Gonzales v. O Centro Espirita Beneficente Uniao do Vegetal, 546 U.S. 418, 429, 126 S.Ct. 1211, 163 L.Ed.2d 1017 (2006); see also Abbott Labs. v. Andrx Pharms., Inc., 473 F.3d 1196, 1201 (Fed. Cir.2007) (to defeat a motion for preliminary injunctive relief in a patent infringement case, the non-moving party must establish a likelihood of success in proving its defenses of invalidity or unenforceability); PHG Techs., LLC v. St. John Cos., 469 F.3d 1361, 1365 (Fed.Cir.2006). Accordingly, once Perfect 10 has shown a likelihood of success on the merits, the burden shifts to Google to show a likelihood that its affirmative defenses will succeed.

In addition to its fair use defense, Google also raises an affirmative defense under title II of the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. § 512. Congress enacted title II of the DMCA "to provide greater certainty to service providers concerning their legal exposure for infringements that may occur in the course of their activities." Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir. 2004) (internal quotation omitted). Sections 512(a) through (d) limit liability for (respectively): "(1) transitory digital network communications; (2) system caching; (3) information residing on systems or networks at the direction of users; and (4) information location tools." Id. at 1077. A service provider that qualifies for such protection is not liable for monetary relief and may be subject only to the narrow injunctive relief set forth in section 512(j). 17 U.S.C. § 512(a). If Perfect 10 demonstrates a likelihood of success on the merits, Google must show a likelihood of succeeding in its claim that it qualifies for protection under title II of the DMCA.^[4][1159]

III

Direct Infringement

Perfect 10 claims that Google's search engine program directly infringes two exclusive rights granted to copyright holders: its display rights and its distribution rights.^[5] "Plaintiffs must satisfy two requirements to present a prima facie case of direct infringement: (1) they must show ownership of the allegedly infringed material and (2) they must demonstrate that the alleged infringers violate at least one exclusive right granted to copyright holders under 17 U.S.C. § 106." Napster, 239 F.3d at 1013; see 17 U.S.C. § 501(a). Even if a plaintiff satisfies these two requirements and makes a prima facie case of direct infringement, the defendant may avoid liability if it can establish that its use of the images is a "fair use" as set forth in 17 U.S.C. § 107. See Kelly, 336 F.3d at 817.

Perfect 10's ownership of at least some of the images at issue is not disputed. See Perfect 10, 416 F.Supp.2d at 836.

The district court held that Perfect 10 was likely to prevail in its claim that Google violated Perfect 10's display right with respect to the infringing thumbnails. Id. at 844. However, the district court concluded that Perfect 10 was not likely to prevail on its claim that Google violated either Perfect 10's display or distribution right with respect to its full-size infringing images. Id. at 844-45. We review these rulings for an abuse of discretion. Napster, 239 F.3d at 1013.

A. Display Right

In considering whether Perfect 10 made a prima facie case of violation of its display right, the district court reasoned that a computer owner that stores an image as electronic information and serves that electronic information directly to the user ("i.e., physically sending ones and zeroes over the [I]nternet to the user's browser," Perfect 10, 416 F.Supp.2d at 839) is displaying the electronic information in violation of a copyright holder's exclusive display right. Id. at 843-45; see 17 U.S.C. § 106(5). Conversely, the owner of a computer that does not store and serve the electronic information to a user is not displaying that information, even if such owner in-line links to or frames the electronic information. Perfect 10, 416 F.Supp.2d at 843-45. The district court referred to this test as the "server test." Id. at 838-39.

Applying the server test, the district court concluded that Perfect 10 was likely to succeed in its claim that Google's thumbnails constituted direct infringement but was unlikely to succeed in its claim that Google's in-line linking to full-size infringing images constituted a direct infringement. [1160] Id. at 843-45. As explained below, because this analysis comports with the language of the Copyright Act, we agree with the district court's resolution of both these issues.

We have not previously addressed the question when a computer displays a copyrighted work for purposes of section 106(5). Section 106(5) states that a copyright owner has the exclusive right "to display the copyrighted work publicly." The Copyright Act explains that "display" means "to show a copy of it, either directly or by means of a film, slide, television image, or any other device or process...." 17 U.S.C. § 101. Section 101 defines "copies" as "material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." Id. Finally, the Copyright Act provides that "[a] work is `fixed' in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration." Id.

We must now apply these definitions to the facts of this case. A photographic image is a work that is "`fixed' in a tangible medium of expression," for purposes of the Copyright Act, when embodied (i.e., stored) in a computer's server (or hard disk, or other storage device). The image stored in the computer is the "copy" of the work for purposes of copyright law. See MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 517-18 (9th Cir.1993) (a computer makes a "copy" of a software program when it transfers the program from a third party's computer (or other storage device) into its own memory, because the copy of the program recorded in the computer is "fixed" in a manner that is "sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration" (quoting 17 U.S.C. § 101)). The computer owner shows a copy "by means of a ... device or process" when the owner uses the computer to fill the computer screen with the photographic image stored on that computer, or by communicating the stored image electronically to another person's computer. 17 U.S.C. § 101. In sum, based on the plain language of the statute, a person displays a photographic image by using a computer to fill a computer screen with a copy of the photographic image fixed in the computer's memory. There is no dispute that Google's computers store thumbnail versions of Perfect 10's copyrighted images and communicate copies of those thumbnails to Google's users.^[6] Therefore, Perfect 10 has made a prima facie case that Google's communication of its stored thumbnail images directly infringes Perfect 10's display right.

Google does not, however, display a copy of full-size infringing photographic images for purposes of the Copyright Act when Google frames in-line linked images that appear on a user's computer screen. Because Google's computers do not store the photographic images, Google does not have a copy of the images for purposes of the Copyright Act. In other words, Google does not have any "material objects ... in [1161] which a work is fixed ... and from which the work can be perceived, reproduced, or otherwise communicated" and thus cannot communicate a copy. 17 U.S.C. § 101.

Instead of communicating a copy of the image, Google provides HTML instructions that direct a user's browser to a website publisher's computer that stores the full-size photographic image. Providing these HTML instructions is not equivalent to showing a copy. First, the HTML instructions are lines of text, not a photographic image. Second, HTML instructions do not themselves cause infringing images to appear on the user's computer screen. The HTML merely gives the address of the image to the user's browser. The browser then interacts with the computer that stores the infringing image. It is this interaction that causes an infringing image to appear on the user's computer screen. Google may facilitate the user's access to infringing images. However, such assistance raises only contributory liability issues, see Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 929-30, 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005), Napster, 239 F.3d at 1019, and does not constitute direct infringement of the copyright owner's display rights.

Perfect 10 argues that Google displays a copy of the full-size images by framing the full-size images, which gives the impression that Google is showing the image within a single Google webpage. While in-line linking and framing may cause some computer users to believe they are viewing a single Google webpage, the Copyright Act, unlike the Trademark Act, does not protect a copyright holder against acts that cause consumer confusion. Cf. 15 U.S.C. § 1114(1) (providing that a person who uses a trademark in a manner likely to cause confusion shall be liable in a civil action to the trademark registrant).^[7]

Nor does our ruling that a computer owner does not display a copy of an image when it communicates only the HTML address of the copy erroneously collapse the display right in section 106(5) into the reproduction right set forth in section 106(1). Nothing in the Copyright Act prevents the various rights protected in section 106 from overlapping. Indeed, under some circumstances, more than one right must be infringed in order for an infringement claim to arise. For example, a "Game Genie" device that allowed a player to alter features of a Nintendo computer game did not infringe Nintendo's right to prepare derivative works because the Game Genie did not incorporate any portion of the game itself. See Lewis Galoob Toys, Inc. v. Nintendo of Am., Inc., 964 F.2d 965, 967 (9th Cir.1992). We held that a copyright holder's right to create derivative works is not infringed unless the alleged derivative work "incorporate[s] a protected work in some concrete or permanent `form.'" Id. In other words, in some contexts, the claimant must be able to claim infringement of its reproduction right in order to claim infringement of its right to prepare derivative works.

[1162] Because Google's cache merely stores the text of webpages, our analysis of whether Google's search engine program potentially infringes Perfect 10's display and distribution rights is equally applicable to Google's cache. Perfect 10 is not likely to succeed in showing that a cached webpage that in-line links to full-size infringing images violates such rights. For purposes of this analysis, it is irrelevant whether cache copies direct a user's browser to third-party images that are no longer available on the third party's website, because it is the website publisher's computer, rather than Google's computer, that stores and displays the infringing image.

B. Distribution Right

The district court also concluded that Perfect 10 would not likely prevail on its claim that Google directly infringed Perfect 10's right to distribute its full-size images. Perfect 10, 416 F.Supp.2d at 844-45. The district court reasoned that distribution requires an "actual dissemination" of a copy. Id. at 844. Because Google did not communicate the full-size images to the user's computer, Google did not distribute these images. Id.

Again, the district court's conclusion on this point is consistent with the language of the Copyright Act. Section 106(3) provides that the copyright owner has the exclusive right "to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending." 17 U.S.C. § 106(3). As noted, "copies" means "material objects ... in which a work is fixed." 17 U.S.C. § 101. The Supreme Court has indicated that in the electronic context, copies may be distributed electronically. See N.Y. Times Co. v. Tasini, 533 U.S. 483, 498, 121 S.Ct. 2381, 150 L.Ed.2d 500 (2001) (a computer database program distributed copies of newspaper articles stored in its computerized database by selling copies of those articles through its database service). Google's search engine communicates HTML instructions that tell a user's browser where to find full-size images on a website publisher's computer, but Google does not itself distribute copies of the infringing photographs. It is the website publisher's computer that distributes copies of the images by transmitting the photographic image electronically to the user's computer. As in Tasini, the user can then obtain copies by downloading the photo or printing it.

Perfect 10 incorrectly relies on Hotaling v. Church of Jesus Christ of Latter-Day Saints and Napster for the proposition that merely making images "available" violates the copyright owner's distribution right. Hotaling v. Church of Jesus Christ of Latter-Day Saints, 118 F.3d 199 (4th Cir.1997); Napster, 239 F.3d 1004. Hotaling held that the owner of a collection of works who makes them available to the public may be deemed to have distributed copies of the works. Hotaling, 118 F.3d at 203. Similarly, the distribution rights of the plaintiff copyright owners were infringed by Napster users (private individuals with collections of music files stored on their home computers) when they used the Napster software to make their collections available to all other Napster users. Napster, 239 F.3d at 1011-14.

This "deemed distribution" rule does not apply to Google. Unlike the participants in the Napster system or the library in Hotaling, Google does not own a collection of Perfect 10's full-size images and does not communicate these images to the computers of people using Google's search engine. Though Google indexes these images, it does not have a collection of stored full-size images it makes available to the public. Google therefore cannot be deemed to distribute copies of these images under the reasoning of Napster or [1163] Hotaling. Accordingly, the district court correctly concluded that Perfect 10 does not have a likelihood of success in proving that Google violates Perfect 10's distribution rights with respect to full-size images.

C. Fair Use Defense

Because Perfect 10 has succeeded in showing it would prevail in its prima facie case that Google's thumbnail images infringe Perfect 10's display rights, the burden shifts to Google to show that it will likely succeed in establishing an affirmative defense. Google contends that its use of thumbnails is a fair use of the images and therefore does not constitute an infringement of Perfect 10's copyright. See 17 U.S.C. § 107.

The fair use defense permits the use of copyrighted works without the copyright owner's consent under certain situations. The defense encourages and allows the development of new ideas that build on earlier ones, thus providing a necessary counterbalance to the copyright law's goal of protecting creators' work product. "From the infancy of copyright protection, some opportunity for fair use of copyrighted materials has been thought necessary to fulfill copyright's very purpose...." Campbell, 510 U.S. at 575, 114 S.Ct. 1164. "The fair use doctrine thus `permits [and requires] courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.'" Id. at 577, 114 S.Ct. 1164 (quoting Stewart v. Abend, 495 U.S. 207, 236, 110 S.Ct. 1750, 109 L.Ed.2d 184 (1990)) (alteration in original).

Congress codified the common law of fair use in 17 U.S.C. § 107, which provides:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(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.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

17 U.S.C. § 107.

We must be flexible in applying a fair use analysis; it "is not to be simplified with bright-line rules, for the statute, like the doctrine it recognizes, calls for case-by-case analysis.... Nor may the four statutory factors be treated in isolation, one from another. All are to be explored, and the results weighed together, in light of the purposes of copyright." Campbell, 510 U.S. at 577-78, 114 S.Ct. 1164; see also Kelly, 336 F.3d at 817-18. The purpose of copyright law is "[t]o promote the Progress of Science and useful Arts," U.S. CONST. art. I, § 8, cl. 8, and to serve "`the welfare of the public.'" Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429 n. 10, 104 S.Ct. 774, 78 L.Ed.2d 574 (quoting H.R.Rep. No. 2222, 60th Cong., 2d Sess. 7 (1909)).

[1164] In applying the fair use analysis in this case, we are guided by Kelly v. Arriba Soft Corp., which considered substantially the same use of copyrighted photographic images as is at issue here. See 336 F.3d 811. In Kelly, a photographer brought a direct infringement claim against Arriba, the operator of an Internet search engine. The search engine provided thumbnail versions of the photographer's images in response to search queries. Id. at 815-16. We held that Arriba's use of thumbnail images was a fair use primarily based on the transformative nature of a search engine and its benefit to the public. Id. at 818-22. We also concluded that Arriba's use of the thumbnail images did not harm the photographer's market for his image. Id. at 821-22.

In this case, the district court determined that Google's use of thumbnails was not a fair use and distinguished Kelly. Perfect 10, 416 F.Supp.2d at 845-51. We consider these distinctions in the context of the four-factor fair use analysis.

Purpose and character of the use. The first factor, 17 U.S.C. § 107(1), requires a court to consider "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes." The central purpose of this inquiry is to determine whether and to what extent the new work is "transformative." Campbell, 510 U.S. at 579, 114 S.Ct. 1164. A work is "transformative" when the new work does not "merely supersede the objects of the original creation" but rather "adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message." Id. (internal quotation and alteration omitted). Conversely, if the new work "supersede[s] the use of the original," the use is likely not a fair use. Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 550-51, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985) (internal quotation omitted) (publishing the "heart" of an unpublished work and thus supplanting the copyright holder's first publication right was not a fair use); see also Wall Data Inc. v. L.A. County Sheriff's Dep't, 447 F.3d 769, 778-82 (9th Cir.2006) (using a copy to save the cost of buying additional copies of a computer program was not a fair use).^[8]

As noted in Campbell, a "transformative work" is one that alters the original work [1165] "with new expression, meaning, or message." Campbell, 510 U.S. at 579, 114 S.Ct. 1164. "A use is considered transformative only where a defendant changes a plaintiff's copyrighted work or uses the plaintiff's copyrighted work in a different context such that the plaintiff's work is transformed into a new creation." Wall Data, 447 F.3d at 778.

Google's use of thumbnails is highly transformative. In Kelly, we concluded that Arriba's use of thumbnails was transformative because "Arriba's use of the images serve[d] a different function than Kelly's use—improving access to information on the [I]nternet versus artistic expression." Kelly, 336 F.3d at 819. Although an image may have been created originally to serve an entertainment, aesthetic, or informative function, a search engine transforms the image into a pointer directing a user to a source of information. Just as a "parody has an obvious claim to transformative value" because "it can provide social benefit, by shedding light on an earlier work, and, in the process, creating a new one," Campbell, 510 U.S. at 579, 114 S.Ct. 1164, a search engine provides social benefit by incorporating an original work into a new work, namely, an electronic reference tool. Indeed, a search engine may be more transformative than a parody because a search engine provides an entirely new use for the original work, while a parody typically has the same entertainment purpose as the original work. See, e.g., id. at 594-96, 114 S.Ct. 1164 (holding that 2 Live Crew's parody of "Oh, Pretty Woman" using the words "hairy woman" or "bald headed woman" was a transformative work, and thus constituted a fair use); Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792, 796-98, 800-06 (9th Cir.2003) (concluding that photos parodying Barbie by depicting "nude Barbie dolls juxtaposed with vintage kitchen appliances" was a fair use). In other words, a search engine puts images "in a different context" so that they are "transformed into a new creation." Wall Data, 447 F.3d at 778.

The fact that Google incorporates the entire Perfect 10 image into the search engine results does not diminish the transformative nature of Google's use. As the district court correctly noted, Perfect 10, 416 F.Supp.2d at 848-49, we determined in Kelly that even making an exact copy of a work may be transformative so long as the copy serves a different function than the original work, Kelly, 336 F.3d at 818-19. For example, the First Circuit has held that the republication of photos taken for a modeling portfolio in a newspaper was transformative because the photos served to inform, as well as entertain. See Nunez v. Caribbean Int'l News Corp., 235 F.3d 18, 22-23 (1st Cir.2000). In contrast, duplicating a church's religious book for use by a different church was not transformative. See Worldwide Church of God v. Phila. Church of God, Inc., 227 F.3d 1110, 1117 (9th Cir.2000). Nor was a broadcaster's simple retransmission of a radio broadcast over telephone lines transformative, where the original radio shows were given no "new expression, meaning, or message." Infinity Broad. Corp. v. Kirkwood, 150 F.3d 104, 108 (2d Cir.1998). Here, Google uses Perfect 10's images in a new context to serve a different purpose.

The district court nevertheless determined that Google's use of thumbnail images was less transformative than Arriba's use of thumbnails in Kelly because Google's use of thumbnails superseded Perfect 10's right to sell its reduced-size images for use on cell phones. See Perfect 10, 416 F.Supp.2d at 849. The district court stated that "mobile users can download and save the thumbnails displayed by Google Image Search onto their phones," and concluded "to the extent that users may choose to download free images to their [1166] phone rather than purchase [Perfect 10's] reduced-size images, Google's use supersedes [Perfect 10's]." Id.

Additionally, the district court determined that the commercial nature of Google's use weighed against its transformative nature. Id. Although Kelly held that the commercial use of the photographer's images by Arriba's search engine was less exploitative than typical commercial use, and thus weighed only slightly against a finding of fair use, Kelly, 336 F.3d at 818-20, the district court here distinguished Kelly on the ground that some website owners in the AdSense program had infringing Perfect 10 images on their websites, Perfect 10, 416 F.Supp.2d at 846-47. The district court held that because Google's thumbnails "lead users to sites that directly benefit Google's bottom line," the AdSense program increased the commercial nature of Google's use of Perfect 10's images. Id. at 847.

In conducting our case-specific analysis of fair use in light of the purposes of copyright, Campbell, 510 U.S. at 581, 114 S.Ct. 1164, we must weigh Google's superseding and commercial uses of thumbnail images against Google's significant transformative use, as well as the extent to which Google's search engine promotes the purposes of copyright and serves the interests of the public. Although the district court acknowledged the "truism that search engines such as Google Image Search provide great value to the public," Perfect 10, 416 F.Supp.2d at 848-49, the district court did not expressly consider whether this value outweighed the significance of Google's superseding use or the commercial nature of Google's use. Id. at 849. The Supreme Court, however, has directed us to be mindful of the extent to which a use promotes the purposes of copyright and serves the interests of the public. See Campbell, 510 U.S. at 579, 114 S.Ct. 1164; Harper & Row, 471 U.S. at 556-57, 105 S.Ct. 2218; Sony, 464 U.S. at 431-32, 104 S.Ct. 774.

We note that the superseding use in this case is not significant at present: the district court did not find that any downloads for mobile phone use had taken place. See Perfect 10, 416 F.Supp.2d at 849. Moreover, while Google's use of thumbnails to direct users to AdSense partners containing infringing content adds a commercial dimension that did not exist in Kelly, the district court did not determine that this commercial element was significant. See id. at 848-49. The district court stated that Google's AdSense programs as a whole contributed "$630 million, or 46% of total revenues" to Google's bottom line, but noted that this figure did not "break down the much smaller amount attributable to websites that contain infringing content." Id. at 847 & n. 12 (internal quotation omitted).

We conclude that the significantly transformative nature of Google's search engine, particularly in light of its public benefit, outweighs Google's superseding and commercial uses of the thumbnails in this case. In reaching this conclusion, we note the importance of analyzing fair use flexibly in light of new circumstances. Sony, 464 U.S. at 431-32, 104 S.Ct. 774; id. at 448 n. 31, 104 S.Ct. 774 ("`[Section 107] endorses the purpose and general scope of the judicial doctrine of fair use, but there is no disposition to freeze the doctrine in the statute, especially during a period of rapid technological change.'" (quoting H.R.Rep. No. 94-1476, p. 65-66 (1976), U.S.Code Cong. & Admin. News 1976, p. 5680)). We are also mindful of the Supreme Court's direction that "the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use." Campbell, 510 U.S. at 579, 114 S.Ct. 1164.

[1167] Accordingly, we disagree with the district court's conclusion that because Google's use of the thumbnails could supersede Perfect 10's cell phone download use and because the use was more commercial than Arriba's, this fair use factor weighed "slightly" in favor of Perfect 10. Perfect 10, 416 F.Supp.2d at 849. Instead, we conclude that the transformative nature of Google's use is more significant than any incidental superseding use or the minor commercial aspects of Google's search engine and website. Therefore, this factor weighs heavily in favor of Google.

The nature of the copyrighted work. With respect to the second factor, "the nature of the copyrighted work," 17 U.S.C. § 107(2), our decision in Kelly is directly on point. There we held that the photographer's images were "creative in nature" and thus "closer to the core of intended copyright protection than are more fact-based works." Kelly, 336 F.3d at 820 (internal quotation omitted). However, because the photos appeared on the Internet before Arriba used thumbnail versions in its search engine results, this factor weighed only slightly in favor of the photographer. Id.

Here, the district court found that Perfect 10's images were creative but also previously published. Perfect 10, 416 F.Supp.2d at 850. The right of first publication is "the author's right to control the first public appearance of his expression." Harper & Row, 471 U.S. at 564, 105 S.Ct. 2218. Because this right encompasses "the choices of when, where, and in what form first to publish a work," id., an author exercises and exhausts this one-time right by publishing the work in any medium. See, e.g., Batjac Prods. Inc. v. Good-Times Home Video Corp., 160 F.3d 1223, 1235 (9th Cir.1998) (noting, in the context of the common law right of first publication, that such a right "does not entail multiple first publication rights in every available medium"). Once Perfect 10 has exploited this commercially valuable right of first publication by putting its images on the Internet for paid subscribers, Perfect 10 is no longer entitled to the enhanced protection available for an unpublished work. Accordingly the district court did not err in holding that this factor weighed only slightly in favor of Perfect 10.^[9] See Perfect 10, 416 F.Supp.2d at 849-50.

The amount and substantiality of the portion used. "The third factor asks whether the amount and substantiality of the portion used in relation to the copyrighted work as a whole ... are reasonable in relation to the purpose of the copying." Campbell, 510 U.S. at 586, 114 S.Ct. 1164 (internal quotation omitted); see also 17 U.S.C. § 107(3). In Kelly, we held Arriba's use of the entire photographic image was reasonable in light of the purpose of a search engine. Kelly, 336 F.3d at 821. Specifically, we noted, "[i]t was necessary for Arriba to copy the entire image to allow users to recognize the image and decide whether to pursue more information about the image or the originating [website]. If Arriba only copied part of the image, it would be more difficult to identify it, thereby reducing the usefulness of the visual search engine." Id. Accordingly, we concluded that this factor did not weigh in favor of either [1168] party. Id. Because the same analysis applies to Google's use of Perfect 10's image, the district court did not err in finding that this factor favored neither party.

Effect of use on the market. The fourth factor is "the effect of the use upon the potential market for or value of the copyrighted work." 17 U.S.C. § 107(4). In Kelly, we concluded that Arriba's use of the thumbnail images did not harm the market for the photographer's full-size images. See Kelly, 336 F.3d at 821-22. We reasoned that because thumbnails were not a substitute for the full-sized images, they did not harm the photographer's ability to sell or license his full-sized images. Id. The district court here followed Kelly's reasoning, holding that Google's use of thumbnails did not hurt Perfect 10's market for full-size images. See Perfect 10, 416 F.Supp.2d at 850-51. We agree.

Perfect 10 argues that the district court erred because the likelihood of market harm may be presumed if the intended use of an image is for commercial gain. However, this presumption does not arise when a work is transformative because "market substitution is at least less certain, and market harm may not be so readily inferred." Campbell, 510 U.S. at 591, 114 S.Ct. 1164. As previously discussed, Google's use of thumbnails for search engine purposes is highly transformative, and so market harm cannot be presumed.

Perfect 10 also has a market for reduced-size images, an issue not considered in Kelly. The district court held that "Google's use of thumbnails likely does harm the potential market for the downloading of [Perfect 10's] reduced-size images onto cell phones." Perfect 10, 416 F.Supp.2d at 851 (emphasis omitted). The district court reasoned that persons who can obtain Perfect 10 images free of charge from Google are less likely to pay for a download, and the availability of Google's thumbnail images would harm Perfect 10's market for cell phone downloads. Id. As we discussed above, the district court did not make a finding that Google users have downloaded thumbnail images for cell phone use. This potential harm to Perfect 10's market remains hypothetical. We conclude that this factor favors neither party.

Having undertaken a case-specific analysis of all four factors, we now weigh these factors together "in light of the purposes of copyright." Campbell, 510 U.S. at 578, 114 S.Ct. 1164; see also Kelly, 336 F.3d at 818 ("We must balance[the section 107] factors in light of the objectives of copyright law, rather than view them as definitive or determinative tests."). In this case, Google has put Perfect 10's thumbnail images (along with millions of other thumbnail images) to a use fundamentally different than the use intended by Perfect 10. In doing so, Google has provided a significant benefit to the public. Weighing this significant transformative use against the unproven use of Google's thumbnails for cell phone downloads, and considering the other fair use factors, all in light of the purpose of copyright, we conclude that Google's use of Perfect 10's thumbnails is a fair use. Because the district court here "found facts sufficient to evaluate each of the statutory factors ... [we] need not remand for further factfinding." Harper & Row, 471 U.S. at 560, 105 S.Ct. 2218 (internal quotation omitted). We conclude that Google is likely to succeed in proving its fair use defense and, accordingly, we vacate the preliminary injunction regarding Google's use of thumbnail images.

IV

Secondary Liability for Copyright Infringement

We now turn to the district court's ruling that Google is unlikely to be secondarily [1169] liable for its in-line linking to infringing full-size images under the doctrines of contributory and vicarious infringement.^[10] The district court ruled that Perfect 10 did not have a likelihood of proving success on the merits of either its contributory infringement or vicarious infringement claims with respect to the full-size images. See Perfect 10, 416 F.Supp.2d at 856, 858. In reviewing the district court's conclusions, we are guided by the Supreme Court's recent interpretation of secondary liability, namely: "[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it." Grokster, 545 U.S. at 930, 125 S.Ct. 2764 (internal citations omitted).

Direct Infringement by Third Parties. As a threshold matter, before we examine Perfect 10's claims that Google is secondarily liable, Perfect 10 must establish that there has been direct infringement by third parties. See Napster, 239 F.3d at 1013 n. 2 ("Secondary liability for copyright infringement does not exist in the absence of direct infringement by a third party.").

Perfect 10 alleges that third parties directly infringed its images in three ways. First, Perfect 10 claims that third-party websites directly infringed its copyright by reproducing, displaying, and distributing unauthorized copies of Perfect 10's images. Google does not dispute this claim on appeal.

Second, Perfect 10 claims that individual users of Google's search engine directly infringed Perfect 10's copyrights by storing full-size infringing images on their computers. We agree with the district court's conclusion that Perfect 10 failed to provide sufficient evidence to support this claim. See Perfect 10, 416 F.Supp.2d at 852. There is no evidence in the record directly establishing that users of Google's search engine have stored infringing images on their computers, and the district court did not err in declining to infer the existence of such evidence.

Finally, Perfect 10 contends that users who link to infringing websites automatically make "cache" copies of full-size images and thereby directly infringe Perfect 10's reproduction right. The district court rejected this argument, holding that any such reproduction was likely a "fair use." Id. at 852 n. 17. The district court reasoned that "[l]ocal caching by the browsers of individual users is noncommercial, transformative, and no more than necessary to achieve the objectives of decreasing network latency and minimizing unnecessary bandwidth usage (essential to the [I]nternet). It has a minimal impact on the potential market for the original work...." Id. We agree; even assuming such automatic copying could constitute direct infringement, it is a fair use in this context. The copying function performed automatically by a user's computer to assist in accessing the Internet is a transformative use. Moreover, as noted by the district court, a cache copies no more than is necessary to assist the user in Internet use. It is designed to enhance an individual's computer use, not to supersede the copyright holders' exploitation of their works. Such automatic background copying has no more than a minimal effect on Perfect 10's rights, but a considerable public benefit. Because the four fair use factors weigh in favor of concluding that [1170] cache copying constitutes a fair use, Google has established a likelihood of success on this issue. Accordingly, Perfect 10 has not carried its burden of showing that users' cache copies of Perfect 10's full-size images constitute direct infringement.

Therefore, we must assess Perfect 10's arguments that Google is secondarily liable in light of the direct infringement that is undisputed by the parties: third-party websites' reproducing, displaying, and distributing unauthorized copies of Perfect 10's images on the Internet. Id. at 852.

A. Contributory Infringement

In order for Perfect 10 to show it will likely succeed in its contributory liability claim against Google, it must establish that Google's activities meet the definition of contributory liability recently enunciated in Grokster. Within the general rule that "[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement," Grokster, 545 U.S. at 930, 125 S.Ct. 2764, the Court has defined two categories of contributory liability: "Liability under our jurisprudence may be predicated on actively encouraging (or inducing) infringement through specific acts (as the Court's opinion develops) or on distributing a product distributees use to infringe copyrights, if the product is not capable of `substantial' or `commercially significant' noninfringing uses." Id. at 942, 125 S.Ct. 2764 (Ginsburg, J., concurring) (quoting Sony, 464 U.S. at 442, 104 S.Ct. 774); see also id. at 936-37, 125 S.Ct. 2764.

Looking at the second category of liability identified by the Supreme Court (distributing products), Google relies on Sony, 464 U.S. at 442, 104 S.Ct. 774, to argue that it cannot be held liable for contributory infringement because liability does not arise from the mere sale of a product (even with knowledge that consumers would use the product to infringe) if the product is capable of substantial non-infringing use. Google argues that its search engine service is such a product. Assuming the principle enunciated in Sony is applicable to the operation of Google's search engine, then Google cannot be held liable for contributory infringement solely because the design of its search engine facilitates such infringement. Grokster, 545 U.S. at 931-32, 125 S.Ct. 2764 (discussing Sony, 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574). Nor can Google be held liable solely because it did not develop technology that would enable its search engine to automatically avoid infringing images. See id. at 939 n. 12, 125 S.Ct. 2764. However, Perfect 10 has not based its claim of infringement on the design of Google's search engine and the Sony rule does not immunize Google from other sources of contributory liability. See id. at 933-34, 125 S.Ct. 2764.

We must next consider whether Google could be held liable under the first category of contributory liability identified by the Supreme Court, that is, the liability that may be imposed for intentionally encouraging infringement through specific acts.^[11] Grokster tells us that contribution to infringement must be intentional for liability to arise. Grokster, 545 U.S. at 930, 125 S.Ct. 2764. However, Grokster also directs us to analyze contributory liability in light of "rules of fault-based liability derived from the common law," id. at 934-35, 125 S.Ct. 2764, and [1171] common law principles establish that intent may be imputed. "Tort law ordinarily imputes to an actor the intention to cause the natural and probable consequences of his conduct." DeVoto v. Pac. Fid. Life Ins. Co., 618 F.2d 1340, 1347 (9th Cir. 1980); RESTATEMENT (SECOND) OF TORTS § 8A cmt. b (1965) ("If the actor knows that the consequences are certain, or substantially certain, to result from his act, and still goes ahead, he is treated by the law as if he had in fact desired to produce the result."). When the Supreme Court imported patent law's "staple article of commerce doctrine" into the copyright context, it also adopted these principles of imputed intent. Grokster, 545 U.S. at 932, 125 S.Ct. 2764 ("The [staple article of commerce] doctrine was devised to identify instances in which it may be presumed from distribution of an article in commerce that the distributor intended the article to be used to infringe another's patent, and so may justly be held liable for that infringement."). Therefore, under Grokster, an actor may be contributorily liable for intentionally encouraging direct infringement if the actor knowingly takes steps that are substantially certain to result in such direct infringement.

Our tests for contributory liability are consistent with the rule set forth in Grokster. We have adopted the general rule set forth in Gershwin Publishing Corp. v. Columbia Artists Management, Inc., namely: "one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a `contributory' infringer," 443 F.2d 1159, 1162 (2d Cir.1971). See Ellison, 357 F.3d at 1076; Napster, 239 F.3d at 1019; Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir.1996).

We have further refined this test in the context of cyberspace^[12] to determine when contributory liability can be imposed on a provider of Internet access or services. See Napster, 239 F.3d at 1019-20. In Napster, we considered claims that the operator of an electronic file sharing system was contributorily liable for assisting individual users to swap copyrighted music files stored on their home computers with other users of the system. Napster, 239 F.3d at 1011-13, 1019-22. We stated that "if a computer system operator learns of specific infringing material available on his system and fails to purge such material from the system, the operator knows of and contributes to direct infringement." Id. at 1021. Because Napster knew of the availability of infringing music files, assisted users in accessing such files, and failed to block access to such files, we concluded that Napster materially contributed to infringement. Id. at 1022.

The Napster test for contributory liability was modeled on the influential district court decision in Religious Technology Center v. Netcom On-Line Communication Services, Inc. (Netcom), 907 F.Supp. 1361, 1365-66 (N.D.Cal.1995). See Napster, 239 F.3d at 1021. In Netcom, a disgruntled former Scientology minister posted allegedly infringing copies of Scientological works on an electronic bulletin board service. Netcom, 907 F.Supp. at 1365-66. The messages were stored on the bulletin board operator's computer, then automatically copied onto Netcom's computer, and from there copied onto other computers comprising "a worldwide community" of electronic bulletin board systems. Id. at 1366-67 & n. 4 (internal quotation omitted). Netcom held that if plaintiffs [1172] could prove that Netcom knew or should have known that the minister infringed plaintiffs' copyrights, "Netcom [would] be liable for contributory infringement since its failure to simply cancel [the former minister's] infringing message and thereby stop an infringing copy from being distributed worldwide constitute[d] substantial participation in [the former minister's] public distribution of the message." Id. at 1374.

Although neither Napster nor Netcom expressly required a finding of intent, those cases are consistent with Grokster because both decisions ruled that a service provider's knowing failure to prevent infringing actions could be the basis for imposing contributory liability. Under such circumstances, intent may be imputed. In addition, Napster and Netcom are consistent with the longstanding requirement that an actor's contribution to infringement must be material to warrant the imposition of contributory liability. Gershwin, 443 F.2d at 1162. Both Napster and Netcom acknowledge that services or products that facilitate access to websites throughout the world can significantly magnify the effects of otherwise immaterial infringing activities. See Napster, 239 F.3d at 1022; Netcom, 907 F.Supp. at 1375. The Supreme Court has acknowledged that "[t]he argument for imposing indirect liability" is particularly "powerful" when individuals using the defendant's software could make a huge number of infringing downloads every day. Grokster, 545 U.S. at 929, 125 S.Ct. 2764. Moreover, copyright holders cannot protect their rights in a meaningful way unless they can hold providers of such services or products accountable for their actions pursuant to a test such as that enunciated in Napster. See id. at 929-30, 125 S.Ct. 2764 ("When a widely shared service or product is used to commit infringement, it may be impossible to enforce rights in the protected work effectively against all direct infringers, the only practical alternative being to go against the distributor of the copying device for secondary liability on a theory of contributory or vicarious infringement."). Accordingly, we hold that a computer system operator can be held contributorily liable if it "has actual knowledge that specific infringing material is available using its system," Napster, 239 F.3d at 1022, and can "take simple measures to prevent further damage" to copyrighted works, Netcom, 907 F.Supp. at 1375, yet continues to provide access to infringing works.

Here, the district court held that even assuming Google had actual knowledge of infringing material available on its system, Google did not materially contribute to infringing conduct because it did not undertake any substantial promotional or advertising efforts to encourage visits to infringing websites, nor provide a significant revenue stream to the infringing websites. Perfect 10, 416 F.Supp.2d at 854-56. This analysis is erroneous. There is no dispute that Google substantially assists websites to distribute their infringing copies to a worldwide market and assists a worldwide audience of users to access infringing materials. We cannot discount the effect of such a service on copyright owners, even though Google's assistance is available to all websites, not just infringing ones. Applying our test, Google could be held contributorily liable if it had knowledge that infringing Perfect 10 images were available using its search engine, could take simple measures to prevent further damage to Perfect 10's copyrighted works, and failed to take such steps.

The district court did not resolve the factual disputes over the adequacy of Perfect 10's notices to Google and Google's responses to these notices. Moreover, there are factual disputes over whether there are reasonable and feasible means for Google to refrain from providing access [1173] to infringing images. Therefore, we must remand this claim to the district court for further consideration whether Perfect 10 would likely succeed in establishing that Google was contributorily liable for in-line linking to full-size infringing images under the test enunciated today.^[13]

B. Vicarious Infringement

Perfect 10 also challenges the district court's conclusion that it is not likely to prevail on a theory of vicarious liability against Google. Perfect 10, 416 F.Supp.2d at 856-58. Grokster states that one "infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it." Grokster, 545 U.S. at 930, 125 S.Ct. 2764. As this formulation indicates, to succeed in imposing vicarious liability, a plaintiff must establish that the defendant exercises the requisite control over the direct infringer and that the defendant derives a direct financial benefit from the direct infringement. See id. Grokster further explains the "control" element of the vicarious liability test as the defendant's "right and ability to supervise the direct infringer." Id. at 930 n. 9, 125 S.Ct. 2764. Thus, under Grokster, a defendant exercises control over a direct infringer when he has both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to do so.

We evaluate Perfect 10's arguments that Google is vicariously liable in light of the direct infringement that is undisputed by the parties, namely, the third-party websites' reproduction, display, and distribution of unauthorized copies of Perfect 10's images on the Internet. Perfect 10, 416 F.Supp.2d at 852; see supra Section IV.A. In order to prevail at this preliminary injunction stage, Perfect 10 must demonstrate a likelihood of success in establishing that Google has the right and ability to stop or limit the infringing activities of third party websites. In addition, Perfect 10 must establish a likelihood of proving that Google derives a direct financial benefit from such activities. Perfect 10 has not met this burden.

With respect to the "control" element set forth in Grokster, Perfect 10 has not demonstrated a likelihood of showing that Google has the legal right to stop or limit the direct infringement of third-party websites. See Grokster, 545 U.S. at 930, 125 S.Ct. 2764. Unlike Fonovisa, where by virtue of a "broad contract" with its vendors the defendant swap meet operators had the right to stop the vendors from selling counterfeit recordings on its premises, Fonovisa, 76 F.3d at 263, Perfect 10 has not shown that Google has contracts with third-party websites that empower Google to stop or limit them from reproducing, displaying, and distributing infringing copies of Perfect 10's images on the Internet. Perfect 10 does point to Google's AdSense agreement, which states that Google reserves "the right to monitor and terminate partnerships with entities that violate others' copyright[s]." Perfect 10, 416 F.Supp.2d at 858. However, Google's right to terminate an AdSense partnership does not give Google the right to [1174] stop direct infringement by third-party websites. An infringing third-party website can continue to reproduce, display, and distribute its infringing copies of Perfect 10 images after its participation in the AdSense program has ended.

Nor is Google similarly situated to Napster. Napster users infringed the plaintiffs' reproduction and distribution rights through their use of Napster's proprietary music-file sharing system. Napster, 239 F.3d at 1011-14. There, the infringing conduct was the use of Napster's "service to download and upload copyrighted music." Id. at 1014 (internal quotation omitted). Because Napster had a closed system requiring user registration, and could terminate its users' accounts and block their access to the Napster system, Napster had the right and ability to prevent its users from engaging in the infringing activity of uploading file names and downloading Napster users' music files through the Napster system.^[14] Id. at 1023-24. By contrast, Google cannot stop any of the third-party websites from reproducing, displaying, and distributing unauthorized copies of Perfect 10's images because that infringing conduct takes place on the third-party websites. Google cannot terminate those third-party websites or block their ability to "host and serve infringing full-size images" on the Internet. Perfect 10, 416 F.Supp.2d at 831.

Moreover, the district court found that Google lacks the practical ability to police the third-party websites' infringing conduct. Id. at 857-58. Specifically, the court found that Google's supervisory power is limited because "Google's software lacks the ability to analyze every image on the [I]nternet, compare each image to all the other copyrighted images that exist in the world ... and determine whether a certain image on the web infringes someone's copyright." Id. at 858. The district court also concluded that Perfect 10's suggestions regarding measures Google could implement to prevent its web crawler from indexing infringing websites and to block access to infringing images were not workable. Id. at 858 n. 25. Rather, the suggestions suffered from both "imprecision and overbreadth." Id. We hold that these findings are not clearly erroneous. Without image-recognition technology, Google lacks the practical ability to police the infringing activities of third-party websites. This distinguishes Google from the defendants held liable in Napster and Fonovisa. See Napster, 239 F.3d at 1023-24 (Napster had the ability to identify and police infringing conduct by searching its index for song titles); Fonovisa, 76 F.3d at 262 (swap meet operator had the ability to identify and police infringing activity by patrolling its premises).

Perfect 10 argues that Google could manage its own operations to avoid [1175] indexing websites with infringing content and linking to third-party infringing sites. This is a claim of contributory liability, not vicarious liability. Although "the lines between direct infringement, contributory infringement, and vicarious liability are not clearly drawn," Sony, 464 U.S. at 435 n. 17, 104 S.Ct. 774 (internal quotation omitted), in general, contributory liability is based on the defendant's failure to stop its own actions which facilitate third-party infringement, while vicarious liability is based on the defendant's failure to cause a third party to stop its directly infringing activities. See, e.g., Ellison, 357 F.3d at 1077-78; Fonovisa, 76 F.3d at 261-64. Google's failure to change its operations to avoid assisting websites to distribute their infringing content may constitute contributory liability, see supra Section IV.A. However, this failure is not the same as declining to exercise a right and ability to make third-party websites stop their direct infringement. We reject Perfect 10's efforts to blur this distinction.

Because we conclude that Perfect 10 has not shown a likelihood of establishing Google's right and ability to stop or limit the directly infringing conduct of third-party websites, we agree with the district court's conclusion that Perfect 10 "has not established a likelihood of proving the [control] prong necessary for vicarious liability." Perfect 10, 416 F.Supp.2d at 858.^[15]

C. Digital Millennium Copyright Act

Google claims that it qualifies for the limitations on liability set forth in title II of the DMCA, 17 U.S.C. § 512. In particular, section 512(d) limits the liability of a service provider "for infringement of copyright by reason of the provider referring or linking users to an online location containing infringing material or infringing activity, by using information location tools, including a directory, index, reference, pointer, or hypertext link" if the service provider meets certain criteria. We have held that the limitations on liability contained in 17 U.S.C. § 512 protect secondary infringers as well as direct infringers. Napster, 239 F.3d at 1025.

The parties dispute whether Google meets the specified criteria. Perfect 10 claims that it sent qualifying notices to Google and Google did not act expeditiously to remove the infringing material. Google claims that Perfect 10's notices did not comply with the notice provisions of section 512 and were not adequate to inform Google of the location of the infringing images on the Internet or identify the underlying copyrighted work. Google also claims that it responded to all notices it received by investigating the webpages identified by Perfect 10 and suppressing links to any webpages that Google confirmed were infringing.

Because the district court determined that Perfect 10 was unlikely to succeed on its contributory and vicarious liability claims, it did not reach Google's arguments under section 512. In revisiting the question of Perfect 10's likelihood of success on its contributory infringement claims, the district court should also consider whether Google would likely succeed in showing that it was entitled to the limitations on injunctive relief provided by title II of the DMCA.

V

Amazon.com

Perfect 10 claims that Amazon.com displays and distributes Perfect 10's copyrighted images and is also secondarily [1176] liable for the infringements of third-party websites and Amazon.com users. The district court concluded that Perfect 10 was unlikely to succeed in proving that Amazon.com was a direct infringer, because it merely in-line linked to the thumbnails on Google's servers and to the full-size images on third-party websites.^[16] Perfect 10 v. Amazon, No. 05-4753, consolidated with 04-9484 (C.D.Cal. February 21, 2006) (order denying preliminary injunction). In addition, the district court concluded that Perfect 10's secondary infringement claims against Amazon.com were likely to fail because Amazon.com had no program analogous to AdSense, and thus did not provide any revenues to infringing sites. Id. Finally, the district court determined that Amazon.com's right and ability to control the infringing conduct of third-party websites was substantially less than Google's. Id. Therefore, the district court denied Perfect 10's motion for a preliminary injunction against Amazon.com. Id.

We agree that Perfect 10 has not shown a likelihood that it would prevail on the merits of its claim that Amazon.com directly infringed its images. Amazon.com communicates to its users only the HTML instructions that direct the users' browsers to Google's computers (for thumbnail images) or to a third party's computer (for full-size infringing images). Therefore, Amazon.com does not display or distribute a copy of the thumbnails or full-size images to its users.

We also agree with the district court's conclusion that Amazon.com does not have "the right and ability to supervise the infringing activity" of Google or third parties. The district court did not clearly err in concluding that Amazon.com lacked a direct financial interest in such activities. Therefore, Perfect 10's claim that Amazon.com is vicariously liable for third-party infringement is unlikely to succeed.

However, the district court did not consider whether Amazon.com had "actual knowledge that specific infringing material is available using its system," Napster, 239 F.3d at 1022 (emphasis in original), and could have "take[n] simple measures to prevent further damage" to copyrighted works, Netcom, 907 F.Supp. at 1375, yet continued to provide access to infringing works. Perfect 10 has presented evidence that it notified Amazon.com that it was facilitating its users' access to infringing material. It is disputed whether the notices gave Amazon.com actual knowledge of specific infringing activities available using its system, and whether Amazon.com could have taken reasonable and feasible steps to refrain from providing access to such images, but failed to do so. Nor did the district court consider whether Amazon.com is entitled to limit its liability under title II of the DMCA. On remand, the district court should consider Amazon.com's potential contributory liability, as well as possible limitations on the scope of injunctive relief, in light of our rulings today.

VI

We conclude that Google's fair use defense is likely to succeed at trial, and therefore we reverse the district court's determination that Google's thumbnail versions of Perfect 10's images likely constituted a direct infringement. The district court also erred in its secondary liability [1177] analysis because it failed to consider whether Google and Amazon.com knew of infringing activities yet failed to take reasonable and feasible steps to refrain from providing access to infringing images. Therefore we must also reverse the district court's holding that Perfect 10 was unlikely to succeed on the merits of its secondary liability claims. Due to this error, the district court did not consider whether Google and Amazon.com are entitled to the limitations on liability set forth in title II of the DMCA. The question whether Google and Amazon.com are secondarily liable, and whether they can limit that liability pursuant to title II of the DMCA, raise fact-intensive inquiries, potentially requiring further fact finding, and thus can best be resolved by the district court on remand. We therefore remand this matter to the district court for further proceedings consistent with this decision.

Because the district court will need to reconsider the appropriate scope of injunctive relief after addressing these secondary liability issues, we do not address the parties' arguments regarding the scope of the injunction issued by the district court. For the same reason, we do not address the parties' dispute over whether the district court abused its discretion in determining that Perfect 10 satisfied the irreparable harm element of a preliminary injunction.

Therefore, we reverse the district court's ruling and vacate the preliminary injunction regarding Google's use of thumbnail versions of Perfect 10's images.^[17] We reverse the district court's rejection of the claims that Google and Amazon.com are secondarily liable for infringement of Perfect 10's full-size images. We otherwise affirm the rulings of the district court. We remand this matter for further proceedings consistent with this opinion. Each party shall bear its own costs on appeal. See FED. R. APP. P. 39(a)(4).

AFFIRMED IN PART; REVERSED IN PART; REMANDED.

[1] Google argues that we lack jurisdiction over the preliminary injunction to the extent it enforces unregistered copyrights. Registration is generally a jurisdictional prerequisite to a suit for copyright infringement. See 17 U.S.C. § 411. But section 411 does not limit the remedies a court can grant. Rather, the Copyright Act gives courts broad authority to issue injunctive relief. See 17 U.S.C. § 502(a). Once a court has jurisdiction over an action for copyright infringement under section 411, the court may grant injunctive relief to restrain infringement of any copyright, whether registered or unregistered. See, e.g., Olan Mills, Inc. v. Linn Photo Co., 23 F.3d 1345, 1349 (8th Cir.1994); Pac. & S. Co., Inc. v. Duncan, 744 F.2d 1490, 1499 n. 17 (11th Cir.1984). Because at least some of the Perfect 10 images at issue were registered, the district court did not err in determining that it could issue an order that covers unregistered works. Therefore, we have jurisdiction over the district court's decision and order.

[2] The website publisher may not actually store the photographic images used on its webpages in its own computer, but may provide HTML instructions directing the user's browser to some further computer that stores the image. Because this distinction does not affect our analysis, for convenience, we will assume that the website publisher stores all images used on its webpages in the website publisher's own computer.

[3] Generally, a "cache" is "a computer memory with very short access time used for storage of frequently or recently used instructions or data." United States v. Ziegler, 474 F.3d 1184, 1186 n. 3 (9th Cir.2007) (quoting MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY 171 (11th ed.2003)). There are two types of caches at issue in this case. A user's personal computer has an internal cache that saves copies of webpages and images that the user has recently viewed so that the user can more rapidly revisit these webpages and images. Google's computers also have a cache which serves a variety of purposes. Among other things, Google's cache saves copies of a large number of webpages so that Google's search engine can efficiently organize and index these webpages.

[4] Perfect 10 argues that we are bound by the language and structure of title II of the DMCA in determining Google's liability for copyright infringement. We have noted that the DMCA does not change copyright law; rather, "Congress provided that [the DMCA's] limitations of liability apply if the provider is found to be liable under existing principles of law." Ellison, 357 F.3d at 1077 (emphasis and internal quotation omitted). As a result, "[c]laims against service providers for direct, contributory, or vicarious copyright infringement, therefore, are generally evaluated just as they would be in the non-online world." Id.; see also 17 U.S.C. § 512(l) ("The failure of a service provider's conduct to qualify for limitation of liability under this section shall not bear adversely upon the consideration of a defense by the service provider that the service provider's conduct is not infringing under this title or any other defense."). Therefore, we must consider Google's potential liability under the Copyright Act without reference to title II of the DMCA.

[5] 17 U.S.C. § 106 states, in pertinent part:

Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords;

....

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;

....

(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly....

[6] Because Google initiates and controls the storage and communication of these thumbnail images, we do not address whether an entity that merely passively owns and manages an Internet bulletin board or similar system violates a copyright owner's display and distribution rights when the users of the bulletin board or similar system post infringing works. Cf. CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544 (4th Cir.2004).

[7] Perfect 10 also argues that Google violates Perfect 10's right to display full-size images because Google's in-line linking meets the Copyright Act's definition of "to perform or display a work `publicly.'" 17 U.S.C. § 101. This phrase means "to transmit or otherwise communicate a performance or display of the work to ... the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times." Id. Perfect 10 is mistaken. Google's activities do not meet this definition because Google transmits or communicates only an address which directs a user's browser to the location where a copy of the full-size image is displayed. Google does not communicate a display of the work itself.

[8] We reject at the outset Perfect 10's argument that providing access to infringing websites cannot be deemed transformative and is inherently not fair use. Perfect 10 relies on Video Pipeline, Inc. v. Buena Vista Home Entm't, Inc., 342 F.3d 191 (3d Cir.2003), and Atari Games Corp. v. Nintendo of Am. Inc., 975 F.2d 832, 843 (Fed.Cir.1992). But these cases, in essence, simply apply the general rule that a party claiming fair use must act in a manner generally compatible with principles of good faith and fair dealing. See Harper & Row, 471 U.S. at 562-63, 105 S.Ct. 2218. For this reason, a company whose business is based on providing scenes from copyrighted movies without authorization could not claim that it provided the same public benefit as the search engine in Kelly. See Video Pipeline, 342 F.3d at 198-200. Similarly, a company whose overriding desire to replicate a competitor's computer game led it to obtain a copy of the competitor's source code from the Copyright Office under false pretenses could not claim fair use with respect to its purloined copy. Atari Games, 975 F.2d at 843.

Unlike the alleged infringers in Video Pipeline and Atari Games, who intentionally misappropriated the copyright owners' works for the purpose of commercial exploitation, Google is operating a comprehensive search engine that only incidentally indexes infringing websites. This incidental impact does not amount to an abuse of the good faith and fair dealing underpinnings of the fair use doctrine. Accordingly, we conclude that Google's inclusion of thumbnail images derived from infringing websites in its Internet-wide search engine activities does not preclude Google from raising a fair use defense.

[9] Google contends that Perfect 10's photographic images are less creative and less deserving of protection than the images of the American West in Kelly because Perfect 10 boasts of its un-retouched photos showing the natural beauty of its models. Having reviewed the record, we conclude that the district court's finding that Perfect 10's photographs "consistently reflect professional, skillful, and sometimes tasteful artistry" is not clearly erroneous. Perfect 10, 416 F.Supp.2d at 849 n. 15. We agree with the district court that there is no basis for concluding that photos of the American West are more deserving of protection than photos of nude models. See id.

[10] Because the district court concluded that Perfect 10 was likely to prevail on its direct infringement claim with respect to Google's use of thumbnails, but not with respect to its in-line linking to full-size images, the district court considered Google's potential secondary liability only on the second issue.

[11] Google's activities do not meet the "inducement" test explained in Grokster because Google has not promoted the use of its search engine specifically to infringe copyrights. See Grokster, 545 U.S. at 935-37, 125 S.Ct. 2764. However, the Supreme Court in Grokster did not suggest that a court must find inducement in order to impose contributory liability under common law principles.

[12] "Cyberspace is a popular term for the world of electronic communications over computer networks." Religious Tech. Ctr. v. Netcom On-Line Commc'n Servs., Inc., 907 F.Supp. 1361, 1365 n. 1 (N.D.Cal.1995).

[13] Perfect 10 claims that Google materially contributed to infringement by linking to websites containing unauthorized passwords, which enabled Google users to access Perfect 10's website and make infringing copies of images. However, Perfect 10 points to no evidence that users logging onto the Perfect 10 site with unauthorized passwords infringed Perfect 10's exclusive rights under section 106. In the absence of evidence that Google's actions led to any direct infringement, this argument does not assist Perfect 10 in establishing that it would prevail on the merits of its contributory liability claim. See Napster, 239 F.3d at 1013 n. 2 ("Secondary liability for copyright infringement does not exist in the absence of direct infringement by a third party.").

[14] Napster's system included "Napster's MusicShare software, available free of charge from Napster's Internet site, and Napster's network servers and server-side software." Napster, 239 F.3d at 1011. By downloading Napster's MusicShare software to the user's personal computer, and registering with the Napster system, a user could both upload and download music files. Id. at 1011-13. If the Napster user uploaded a list of music files stored on the user's personal computer to the Napster system, such music files would be automatically available to other Napster users whenever the user was logged on to the Napster system. Id. at 1012. In addition, the Napster user could download music files directly from other users' personal computers. Id. We explained the infringing conduct as "Napster users who upload file names to the [Napster] search index for others to copy violate plaintiffs' distribution rights. Napster users who download files [through the Napster system] containing copyrighted music violate plaintiffs' reproduction rights." Id. at 1014.

[15] Having so concluded, we need not reach Perfect 10's argument that Google received a direct financial benefit.

[16] Amazon.com states that it ended its relationship with Google on April 30, 2006. Perfect 10's action for preliminary injunction against Amazon.com is not moot, however, because Amazon.com has not established "that the allegedly wrongful behavior cannot reasonably be expected to recur." F.T.C. v. Affordable Media, LLC, 179 F.3d 1228, 1238 (9th Cir.1999) (internal quotation omitted).

[17] Because we vacate the injunction, Google's motion for stay of the injunction is moot.

471 U.S. 539
105 S.Ct. 2218
85 L.Ed.2d 588

HARPER & ROW, PUBLISHERS, INC. and the Reader's Digest Association, Inc., Petitioners
v.
NATION ENTERPRISES and the Nation Associates, Inc.

No. 83-1632.
Argued Nov. 6, 1984.
Decided May 20, 1985.

Syllabus

In 1977, former President Ford contracted with petitioners to publish his as yet unwritten memoirs. The agreement gave petitioners the exclusive first serial right to license prepublication excerpts. Two years later, as the memoirs were nearing completion, petitioners, as the copyright holders, negotiated a prepublication licensing agreement with Time Magazine under which Time agreed to pay $25,000 ($12,500 in advance and the balance at publication) in exchange for the right to excerpt 7,500 words from Mr. Ford's account of his pardon of former President Nixon. Shortly before the Time article's scheduled release, an unauthorized source provided The Nation Magazine with the unpublished Ford manuscript. Working directly from this manuscript, an editor of The Nation produced a 2,250-word article, at least 300 to 400 words of which consisted of verbatim quotes of copyrighted expression taken from the manuscript. It was timed to "scoop" the Time article. As a result of the publication of The Nation's article, Time canceled its article and refused to pay the remaining $12,500 to petitioners. Petitioners then brought suit in Federal District Court against respondent publishers of The Nation, alleging, inter alia, violations of the Copyright Act (Act). The District Court held that the Ford memoirs were protected by copyright at the time of The Nation publication and that respondents' use of the copyrighted material constituted an infringement under the Act, and the court awarded actual damages of $12,500. The Court of Appeals reversed, holding that The Nation's publication of the 300 to 400 words it identified as copyrightable expression was sanctioned as a "fair use" of the copyrighted material under § 107 of the Act. Section 107 provides that notwithstanding the provisions of § 106 giving a copyright owner the exclusive right to reproduce the copyrighted work and to prepare derivative works based on the copyrighted work, the fair use of a copyrighted work for purposes such as comment and news reporting is not an infringement of copyright. Section 107 further provides that in determining whether the use was fair the factors to be considered shall include: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the substantiality of the portion used in relation to the [540] copyrighted work as a whole; and (4) the effect on the potential market for or value of the copyrighted work.

Held: The Nation's article was not a "fair use" sanctioned by § 107. Pp. 542-569.

(a) In using generous verbatim excerpts of Mr. Ford's unpublished expression to lend authenticity to its account of the forthcoming memoirs, The Nation effectively arrogated to itself the right of first publication, an important marketable subsidiary right. Pp. 545-549.

(b) Though the right of first publication, like other rights enumerated in § 106, is expressly made subject to the fair use provisions of § 107, fair use analysis must always be tailored to the individual case. The nature of the interest at stake is highly relevant to whether a given use is fair. The unpublished nature of a work is a key, though not necessarily determinative, factor tending to negate a defense of fair use. And under ordinary circumstances, the author's right to control the first public appearance of his undisseminated expression will outweigh a claim of fair use. Pp. 549-555.

(c) In view of the First Amendment's protections embodied in the Act's distinction between copyrightable expression and uncopyrightable facts and ideas, and the latitude for scholarship and comment traditionally afforded by fair use, there is no warrant for expanding, as respondents contend should be done, the fair use doctrine to what amounts to a public figure exception to copyright. Whether verbatim copying from a public figure's manuscript in a given case is or is not fair must be judged according to the traditional equities of fair use. Pp. 555-560.

(d) Taking into account the four factors enumerated in § 107 as especially relevant in determining fair use, leads to the conclusion that the use in question here was not fair. (i) The fact that news reporting was the general purpose of The Nation's use is simply one factor. While The Nation had every right to be the first to publish the information, it went beyond simply reporting uncopyrightable information and actively sought to exploit the headline value of its infringement, making a "news event" out of its unauthorized first publication. The fact that the publication was commercial as opposed to nonprofit is a separate factor tending to weigh against a finding of fair use. Fair use presupposes good faith. The Nation's unauthorized use of the undisseminated manuscript had not merely the incidental effect but the intended purpose of supplanting the copyright holders' commercially valuable right of first publication. (ii) While there may be a greater need to disseminate works of fact than works of fiction, The Nation's taking of copyrighted expression exceeded that necessary to disseminate the facts and infringed the copyright holders' interests in confidentiality and creative control over the first public appearance of the work. (iii) Although the verbatim quotes [541] in question were an insubstantial portion of the Ford manuscript, they qualitatively embodied Mr. Ford's distinctive expression and played a key role in the infringing article. (iv) As to the effect of The Nation's article on the market for the copyrighted work, Time's cancellation of its projected article and its refusal to pay $12,500 were the direct effect of the infringing publication. Once a copyright holder establishes a causal connection between the infringement and loss of revenue, the burden shifts to the infringer to show that the damage would have occurred had there been no taking of copyrighted expression. Petitioners established a prima facie case of actual damage that respondents failed to rebut. More important, to negate a claim of fair use it need only be shown that if the challenged use should become widespread, it would adversely affect the potential market for the copyrighted work. Here, The Nation's liberal use of verbatim excerpts posed substantial potential for damage to the marketability of first serialization rights in the copyrighted work. Pp. 560-569.

723 F.2d 195 (CA2 1983), reversed and remanded.

Edward A. Miller, New York City, for petitioners.

Floyd Abrams, New York City, for respondents.

Justice O'CONNOR delivered the opinion of the Court.

This case requires us to consider to what extent the "fair use" provision of the Copyright Revision Act of 1976, (here [542] inafter the Copyright Act) 17 U.S.C. § 107, sanctions the unauthorized use of quotations from a public figure's unpublished manuscript. In March 1979, an undisclosed source provided The Nation Magazine with the unpublished manuscript of "A Time to Heal: The Autobiography of Gerald R. Ford." Working directly from the purloined manuscript, an editor of The Nation produced a short piece entitled "The Ford Memoirs — Behind the Nixon Pardon." The piece was timed to "scoop" an article scheduled shortly to appear in Time Magazine. Time had agreed to purchase the exclusive right to print prepublication excerpts from the copyright holders, Harper & Row Publishers, Inc. (hereinafter Harper & Row), and Reader's Digest Association, Inc. (hereinafter Reader's Digest). As a result of The Nation article, Time canceled its agreement. Petitioners brought a successful copyright action against The Nation. On appeal, the Second Circuit reversed the lower court's finding of infringement, holding that The Nation's act was sanctioned as a "fair use" of the copyrighted material. We granted certiorari, 467 U.S. 1214, 104 S.Ct. 2655, 81 L.Ed.2d 362 (1984), and we now reverse.

In February 1977, shortly after leaving the White House, former President Gerald R. Ford contracted with petitioners Harper & Row and Reader's Digest, to publish his as yet unwritten memoirs. The memoirs were to contain "significant hitherto unpublished material" concerning the Watergate crisis, Mr. Ford's pardon of former President Nixon and "Mr. Ford's reflections on this period of history, and the morality and personalities involved." App. to Pet. for Cert. C-14 — C-15. In addition to the right to publish the Ford memoirs in book form, the agreement gave petitioners the exclusive right to license prepublication excerpts, known in the trade as "first serial rights." Two years later, as the memoirs were nearing completion, petitioners negotiated a prepublication licensing agreement with Time, a weekly news magazine. Time agreed to pay $25,000, $12,500 in advance and an [543] additional $12,500 at publication, in exchange for the right to excerpt 7,500 words from Mr. Ford's account of the Nixon pardon. The issue featuring the excerpts was timed to appear approximately one week before shipment of the full length book version to bookstores. Exclusivity was an important consideration; Harper & Row instituted procedures designed to maintain the confidentiality of the manuscript, and Time retained the right to renegotiate the second payment should the material appear in print prior to its release of the excerpts.

Two to three weeks before the Time article's scheduled release, an unidentified person secretly brought a copy of the Ford manuscript to Victor Navasky, editor of The Nation, a political commentary magazine. Mr. Navasky knew that his possession of the manuscript was not authorized and that the manuscript must be returned quickly to his "source" to avoid discovery. 557 F.Supp. 1067, 1069 (SDNY 1983). He hastily put together what he believed was "a real hot news story" composed of quotes, paraphrases, and facts drawn exclusively from the manuscript. Ibid. Mr. Navasky attempted no independent commentary, research or criticism, in part because of the need for speed if he was to "make news" by "publish[ing] in advance of publication of the Ford book." App. 416-417. The 2,250-word article, reprinted in the Appendix to this opinion, appeared on April 3, 1979. As a result of The Nation's article, Time canceled its piece and refused to pay the remaining $12,500.

Petitioners brought suit in the District Court for the Southern District of New York, alleging conversion, tortious interference with contract, and violations of the Copyright Act. After a 6-day bench trial, the District Judge found that "A Time to Heal" was protected by copyright at the time of The Nation publication and that respondents' use of the copyrighted material constituted an infringement under the Copyright Act, §§ 106(1), (2), and (3), protecting respectively the right to reproduce the work, the right to license preparation of derivative works, and the right of first distribution of [544] the copyrighted work to the public. App. to Pet. for Cert. C-29 C-30. The District Court rejected respondents' argument that The Nation's piece was a "fair use" sanctioned by § 107 of the Act. Though billed as "hot news," the article contained no new facts. The magazine had "published its article for profit," taking "the heart" of "a soon-to-be-published" work. This unauthorized use "caused the Time agreement to be aborted and thus diminished the value of the copyright." 557 F.Supp., at 1072. Although certain elements of the Ford memoirs, such as historical facts and memoranda, were not per se copyrightable, the District Court held that it was "the totality of these facts and memoranda collected together with Ford's reflections that made them of value to The Nation, [and] this . . . totality . . . is protected by the copyright laws." Id., at 1072-1073. The court awarded actual damages of $12,500.

A divided panel of the Court of Appeals for the Second Circuit reversed. The majority recognized that Mr. Ford's verbatim "reflections" were original "expression" protected by copyright. But it held that the District Court had erred in assuming the "coupling [of these reflections] with uncopyrightable fact transformed that information into a copyrighted 'totality.'" 723 F.2d 195, 205 (CA2 1983). The majority noted that copyright attaches to expression, not facts or ideas. It concluded that, to avoid granting a copyright monopoly over the facts underlying history and news, "'expression' [in such works must be confined] to its barest elements — the ordering and choice of the words themselves." Id., at 204. Thus similarities between the original and the challenged work traceable to the copying or paraphrasing of uncopyrightable material, such as historical facts, memoranda and other public documents, and quoted remarks of third parties, must be disregarded in evaluating whether the second author's use was fair or infringing.

"When the uncopyrighted material is stripped away, the article in The Nation contains, at most, approxi [545] mately 300 words that are copyrighted. These remaining paragraphs and scattered phrases are all verbatim quotations from the memoirs which had not appeared previously in other publications. They include a short segment of Ford's conversations with Henry Kissinger and several other individuals. Ford's impressionistic depictions of Nixon, ill with phlebitis after the resignation and pardon, and of Nixon's character, constitute the major portion of this material. It is these parts of the magazine piece on which [the court] must focus in [its] examination of the question whether there was a 'fair use' of copyrighted matter." Id., at 206.

Examining the four factors enumerated in § 107, see infra, at 547, n. 2, the majority found the purpose of the article was "news reporting," the original work was essentially factual in nature, the 300 words appropriated were insubstantial in relation to the 2,250-word piece, and the impact on the market for the original was minimal as "the evidence [did] not support a finding that it was the very limited use of expression per se which led to Time's decision not to print the excerpt." The Nation's borrowing of verbatim quotations merely "len[t] authenticity to this politically significant material . . . complementing the reporting of the facts." 723 F.2d, at 208. The Court of Appeals was especially influenced by the "politically significant" nature of the subject matter and its conviction that it is not "the purpose of the Copyright Act to impede that harvest of knowledge so necessary to a democratic state" or "chill the activities of the press by forbidding a circumscribed use of copyrighted words." Id., at 197, 209.

We agree with the Court of Appeals that copyright is intended to increase and not to impede the harvest of knowledge. But we believe the Second Circuit gave insufficient deference to the scheme established by the Copyright Act for [546] fostering the original works that provide the seed and substance of this harvest. The rights conferred by copyright are designed to assure contributors to the store of knowledge a fair return for their labors. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84 (1975).

Article I, § 8, of the Constitution provides:

"The Congress shall have Power . . . to Promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

As we noted last Term:

"[This] limited grant is a means by which an important public purpose may be achieved. It is intended to motivate the creative activity of authors and inventors 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 America v. Universal City Studios, Inc., 464 U.S. 417, 429, 104 S.Ct. 774, 782, 78 L.Ed.2d 574 (1984). "The monopoly created by copyright thus rewards the individual author in order to benefit the public." Id., at 477, 104 S.Ct., at 807 (dissenting opinion). This principle applies equally to works of fiction and nonfiction. The book at issue here, for example, was two years in the making, and began with a contract giving the author's copyright to the publishers in exchange for their services in producing and marketing the work. In preparing the book, Mr. Ford drafted essays and word portraits of public figures and participated in hundreds of taped interviews that were later distilled to chronicle his personal viewpoint. It is evident that the monopoly granted by copyright actively served its intended purpose of inducing the creation of new material of potential historical value.

Section 106 of the Copyright Act confers a bundle of exclusive rights to the owner of the copyright.^[1] Under the Copy [547] right Act, these rights — to publish, copy, and distribute the author's work — vest in the author of an original work from the time of its creation. § 106. In practice, the author commonly sells his rights to publishers who offer royalties in exchange for their services in producing and marketing the author's work. The copyright owner's rights, however, are subject to certain statutory exceptions. §§ 107-118. Among these is § 107 which codifies the traditional privilege of other authors to make "fair use" of an earlier writer's work.^[2] In addition, no author may copyright facts or ideas. § 102. The copyright is limited to those aspects of the work — termed "expression" — that display the stamp of the author's originality.

Creation of a nonfiction work, even a compilation of pure fact, entails originality. See, e.g., Schroeder v. William Morrow & Co., 566 F.2d 3 (CA7 1977) (copyright in gardening directory); cf. Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53, 58, 4 S.Ct. 279, 281, 28 L.Ed. 349 (1884) (originator of a photograph may claim copyright in his work). The copyright holders of "A Time to Heal" complied with the relevant statutory notice and reg [548] istration procedures. See §§ 106, 401, 408; App. to Pet. for Cert. C-20. Thus there is no dispute that the unpublished manuscript of "A Time to Heal," as a whole, was protected by § 106 from unauthorized reproduction. Nor do respondents dispute that verbatim copying of excerpts of the manuscript's original form of expression would constitute infringement unless excused as fair use. See 1 M. Nimmer, Copyright § 2.11[B], p. 2-159 (1984) (hereinafter Nimmer). Yet copyright does not prevent subsequent users from copying from a prior author's work those constituent elements that are not original — for example, quotations borrowed under the rubric of fair use from other copyrighted works, facts, or materials in the public domain — as long as such use does not unfairly appropriate the author's original contributions. Ibid.; A. Latman, Fair Use of Copyrighted Works (1958), reprinted as Study No. 14 in Copyright Law Revision Studies Nos. 14-16, prepared for the Senate Committee on the Judiciary, 86th Cong., 2d Sess., 7 (1960) (hereinafter Latman). Perhaps the controversy between the lower courts in this case over copyrightability is more aptly styled a dispute over whether The Nation's appropriation of unoriginal and uncopyrightable elements encroached on the originality embodied in the work as a whole. Especially in the realm of factual narrative, the law is currently unsettled regarding the ways in which uncopyrightable elements combine with the author's original contributions to form protected expression. Compare Wainwright Securities Inc. v. Wall Street Transcript Corp., 558 F.2d 91 (CA2 1977) (protection accorded author's analysis, structuring of material and marshaling of facts), with Hoehling v. Universal City Studios, Inc., 618 F.2d 972 (CA2 1980) (limiting protection to ordering and choice of words). See, e.g., 1 Nimmer § 2.11[D], at 2-164 — 2-165.

We need not reach these issues, however, as The Nation has admitted to lifting verbatim quotes of the author's original language totaling between 300 and 400 words and constituting some 13% of The Nation article. In using generous [549] verbatim excerpts of Mr. Ford's unpublished manuscript to lend authenticity to its account of the forthcoming memoirs, The Nation effectively arrogated to itself the right of first publication, an important marketable subsidiary right. For the reasons set forth below, we find that this use of the copyrighted manuscript, even stripped to the verbatim quotes conceded by The Nation to be copyrightable expression, was not a fair use within the meaning of the Copyright Act.

Fair use was traditionally defined as "a privilege in others than the owner of the copyright to use the copyrighted material in a reasonable manner without his consent." H. Ball, Law of Copyright and Literary Property 260 (1944) (hereinafter Ball). The statutory formulation of the defense of fair use in the Copyright Act reflects the intent of Congress to codify the common-law doctrine. 3 Nimmer § 13.05. Section 107 requires a case-by-case determination whether a particular use is fair, and the statute notes four nonexclusive factors to be considered. This approach was "intended to restate the [pre-existing] judicial doctrine of fair use, not to change, narrow, or enlarge it in any way." H.R.Rep. No. 94-1476, p. 66 (1976) (hereinafter House Report), U.S.Code Cong. & Admin.News 1976, pp. 5659, 5680.

"[T]he author's consent to a reasonable use of his copyrighted works ha[d] always been implied by the courts as a necessary incident of the constitutional policy of promoting the progress of science and the useful arts, since a prohibition of such use would inhibit subsequent writers from attempting to improve upon prior works and thus . . . frustrate the very ends sought to be attained." Ball 260. Professor Latman, in a study of the doctrine of fair use commissioned by Congress for the revision effort, see Sony Corp. of America v. Universal City Studios, Inc., 464 U.S., at 462-463, n. 9, 104 S.Ct., at 781, n. 9 (dissenting opinion), summarized prior law as turning on the "importance [550] of the material copied or performed from the point of view of the reasonable copyright owner. In other words, would the reasonable copyright owner have consented to the use?" Latman 15.^[3]

As early as 1841, Justice Story gave judicial recognition to the doctrine in a case that concerned the letters of another former President, George Washington.

"[A] reviewer may fairly cite largely from the original work, if his design be really and truly to use the passages for the purposes of fair and reasonable criticism. On the other hand, it is as clear, that if he thus cites the most important parts of the work, with a view, not to criticise, but to supersede the use of the original work, and substitute the review for it, such a use will be deemed in law a piracy." Folsom v. Marsh, 9 F.Cas. 342, 344-345 (No. 4,901) (CC Mass.)

As Justice Story's hypothetical illustrates, the fair use doctrine has always precluded a use that "supersede[s] the use of the original." Ibid. Accord, S.Rep. No. 94-473, p. 65 (1975) (hereinafter Senate Report).

Perhaps because the fair use doctrine was predicated on the author's implied consent to "reasonable and customary" use when he released his work for public consumption, fair use traditionally was not recognized as a defense to charges [551] of copying from an author's as yet unpublished works.^[4] Under common-law copyright, "the property of the author . . . in his intellectual creation [was] absolute until he voluntarily part[ed] with the same." American Tobacco Co. v. Werckmeister, 207 U.S. 284, 299, 28 S.Ct. 72, 77, 52 L.Ed. 208 (1907); 2 Nimmer § 8.23, at 8-273. This absolute rule, however, was tempered in practice by the equitable nature of the fair use doctrine. In a given case, factors such as implied consent through de facto publication on performance or dissemination of a work may tip the balance of equities in favor of prepublication use. See Copyright Law Revision — Part 2: Discussion and Comments on Report of the Register of Copyrights on General Revision of the U.S. Copyright Law, 88th Cong., 1st Sess., 27 (H.R.Comm. Print 1963) (discussion suggesting works disseminated to the public in a form not constituting a technical "publication" should nevertheless be subject to fair use); 3 Nimmer § 13.05, at 13-62, n. 2. But it has never been seriously disputed that "the fact that the plaintiff's work is unpublished . . . is a factor tending to negate the defense of fair use." Ibid. Publication of an author's expression before he has authorized its dissemination seriously infringes the author's right to decide when and whether it will be made public, a factor not present in fair use of published works.^[5] [552] Respondents contend, however, that Congress, in including first publication among the rights enumerated in § 106, which are expressly subject to fair use under § 107, intended that fair use would apply in pari materia to published and unpublished works. The Copyright Act does not support this proposition.

The Copyright Act represents the culmination of a major legislative reexamination of copyright doctrine. See Mills Music, Inc. v. Snyder, 469 U.S. 153, 159-160, 105 S.Ct. 638, at —, 83 L.Ed.2d 556 (1985); Sony Corp. of America v. Universal City Studios, Inc., 464 U.S., at 462-463, n. 9, 104 S.Ct., at 781, n. 9 (dissenting opinion). Among its other innovations, it eliminated publication "as a dividing line between common law and statutory protection," House Report, at 129 U.S.Code Cong. & Admin.News 1976, p. 5745, extending statutory protection to all works from the time of their creation. It also recognized for the first time a distinct statutory right of first publication, which had previously been an element of the common-law protections afforded unpublished works. The Report of the House Committee on the Judiciary confirms that "Clause (3) of section 106, establishes the exclusive right of publications. . . . Under this provision the copyright owner would have the right to control the first public distribution of an authorized copy . . . of his work." Id., at 62 U.S.Code Cong. & Admin.News 1976, p. 5675.

Though the right of first publication, like the other rights enumerated in § 106, is expressly made subject to the fair use provision of § 107, fair use analysis must always be tailored to the individual case. Id., at 65; 3 Nimmer § 13.05[A]. The [553] nature of the interest at stake is highly relevant to whether a given use is fair. From the beginning, those entrusted with the task of revision recognized the "overbalancing reasons to preserve the common law protection of undisseminated works until the author or his successor chooses to disclose them." Copyright Law Revision, Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law, 87th Cong., 1st Sess., 41 (Comm. Print 1961). The right of first publication implicates a threshold decision by the author whether and in what form to release his work. First publication is inherently different from other § 106 rights in that only one person can be the first publisher; as the contract with Time illustrates, the commercial value of the right lies primarily in exclusivity. Because the potential damage to the author from judicially enforced "sharing" of the first publication right with unauthorized users of his manuscript is substantial, the balance of equities in evaluating such a claim of fair use inevitably shifts.

The Senate Report confirms that Congress intended the unpublished nature of the work to figure prominently in fair use analysis. In discussing fair use of photocopied materials in the classroom the Committee Report states:

"A key, though not necessarily determinative, factor in fair use is whether or not the work is available to the potential user. If the work is 'out of print' and unavailable for purchase through normal channels, the user may have more justification for reproducing it. . . . The applicability of the fair use doctrine to unpublished works is narrowly limited since, although the work is unavailable, this is the result of a deliberate choice on the part of the copyright owner. Under ordinary circumstances, the copyright owner's 'right of first publication' would outweigh any needs of reproduction for classroom purposes." Senate Report, at 64.

Although the Committee selected photocopying of classroom materials to illustrate fair use, it emphasized that "the same [554] general standards of fair use are applicable to all kinds of uses of copyrighted material." Id., at 65. We find unconvincing respondents' contention that the absence of the quoted passage from the House Report indicates an intent to abandon the traditional distinction between fair use of published and unpublished works. It appears instead that the fair use discussion of photocopying of classroom materials was omitted from the final Report because educators and publishers in the interim had negotiated a set of guidelines that rendered the discussion obsolete. House Report, at 67. The House Report nevertheless incorporates the discussion by reference, citing to the Senate Report and stating: "The Committee has reviewed this discussion, and considers it still has value as an analysis of various aspects of the [fair use] problem." Ibid.

Even if the legislative history were entirely silent, we would be bound to conclude from Congress' characterization of § 107 as a "restatement" that its effect was to preserve existing law concerning fair use of unpublished works as of other types of protected works and not to "change, narrow, or enlarge it." Id., at 66. We conclude that the unpublished nature of a work is "[a] key, though not necessarily determinative, factor" tending to negate a defense of fair use. Senate Report, at 64. See 3 Nimmer § 13.05, at 13-62, n. 2; W. Patry, The Fair Use Privilege in Copyright Law 125 (1985) (hereinafter Patry).

We also find unpersuasive respondents' argument that fair use may be made of a soon-to-be-published manuscript on the ground that the author has demonstrated he has no interest in nonpublication. This argument assumes that the unpublished nature of copyrighted material is only relevant to letters or other confidential writings not intended for dissemination. It is true that common-law copyright was often enlisted in the service of personal privacy. See Brandeis & Warren, The Right to Privacy, 4 Harv.L.Rev. 193, 198-199 (1890). In its commercial guise, however, an author's right to choose when he will publish is no less deserving of pro [555] tection. The period encompassing the work's initiation, its preparation, and its grooming for public dissemination is a crucial one for any literary endeavor. The Copyright Act, which accords the copyright owner the "right to control the first public distribution" of his work, House Report, at 62, echos the common law's concern that the author or copyright owner retain control throughout this critical stage. See generally Comment, The Stage of Publication as a "Fair Use" Factor: Harper & Row, Publishers v. Nation Enterprises, 58 St. John's L.Rev. 597 (1984). The obvious benefit to author and public alike of assuring authors the leisure to develop their ideas free from fear of expropriation outweighs any short-term "news value" to be gained from premature publication of the author's expression. See Goldstein, Copyright and the First Amendment, 70 Colum.L.Rev. 983, 1004-1006 (1970) (The absolute protection the common law accorded to soon-to-be published works "[was] justified by [its] brevity and expedience"). The author's control of first public distribution implicates not only his personal interest in creative control but his property interest in exploitation of prepublication rights, which are valuable in themselves and serve as a valuable adjunct to publicity and marketing. See Belushi v. Woodward, 598 F.Supp. 36 (DC 1984) (successful marketing depends on coordination of serialization and release to public); Marks, Subsidiary Rights and Permissions, in What Happens in Book Publishing 230 (C. Grannis ed. 1967) (exploitation of subsidiary rights is necessary to financial success of new books). Under ordinary circumstances, the author's right to control the first public appearance of his undisseminated expression will outweigh a claim of fair use.

Respondents, however, contend that First Amendment values require a different rule under the circumstances of this case. The thrust of the decision below is that "[t]he scope of [fair use] is undoubtedly wider when the information [556] conveyed relates to matters of high public concern." Consumers Union of the United States, Inc. v. General Signal Corp., 724 F.2d 1044, 1050 (CA2 1983) (construing 723 F.2d 195 (CA2 1983) (case below) as allowing advertiser to quote Consumer Reports), cert. denied, 469 U.S. 823, 104 S.Ct. 2655, 81 L.Ed.2d 362 (1984). Respondents advance the substantial public import of the subject matter of the Ford memoirs as grounds for excusing a use that would ordinarily not pass muster as a fair use — the piracy of verbatim quotations for the purpose of "scooping" the authorized first serialization. Respondents explain their copying of Mr. Ford's expression as essential to reporting the news story it claims the book itself represents. In respondents' view, not only the facts contained in Mr. Ford's memoirs, but "the precise manner in which [he] expressed himself [were] as newsworthy as what he had to say." Brief for Respondents 38-39. Respondents argue that the public's interest in learning this news as fast as possible outweighs the right of the author to control its first publication.

The Second Circuit noted, correctly, that copyright's idea/expression dichotomy "strike[s] a definitional balance between the First Amendment and the Copyright Act by permitting free communication of facts while still protecting an author's expression." 723 F.2d, at 203. No author may copyright his ideas or the facts he narrates. 17 U.S.C. § 102(b). See, e.g., New York Times Co. v. United States, 403 U.S. 713, 726, n., 91 S.Ct. 2140, 2147, n., 29 L.Ed.2d 822 (1971) (BRENNAN, J., concurring) (Copyright laws are not restrictions on freedom of speech as copyright protects only form of expression and not the ideas expressed); 1 Nimmer § 1.10[B][2]. As this Court long ago observed: "[T]he news element — the information respecting current events contained in the literary production — is not the creation of the writer, but is a report of matters that ordinarily are publici juris; it is the history of the day." International News Service v. Associated Press, 248 U.S. 215, 234, 39 S.Ct. 68, 71, 63 L.Ed. 211 (1918). But copyright assures those who write and publish factual narratives such as "A Time to Heal" that [557] they may at least enjoy the right to market the original expression contained therein as just compensation for their investment. Cf. Zacchini v. Scripps-Howard Broadcasting Co., 433 U.S. 562, 575, 97 S.Ct. 2849, 2857, 53 L.Ed.2d 965 (1977).

Respondents' theory, however, would expand fair use to effectively destroy any expectation of copyright protection in the work of a public figure. Absent such protection, there would be little incentive to create or profit in financing such memoirs, and the public would be denied an important source of significant historical information. The promise of copyright would be an empty one if it could be avoided merely by dubbing the infringement a fair use "news report" of the book. See Wainwright Securities Inc. v. Wall Street Transcript Corp., 558 F.2d 91 (CA2 1977), cert. denied, 434 U.S. 1014, 98 S.Ct 730, 54 L.Ed.2d 759 (1978).

Nor do respondents assert any actual necessity for circumventing the copyright scheme with respect to the types of works and users at issue here.^[6] Where an author and publisher have invested extensive resources in creating an original work and are poised to release it to the public, no legitimate aim is served by pre-empting the right of first publication. The fact that the words the author has chosen to clothe his narrative may of themselves be "newsworthy" is not an independent justification for unauthorized copying of the author's expression prior to publication. To paraphrase another recent Second Circuit decision:

"[Respondent] possessed an unfettered right to use any factual information revealed in [the memoirs] for the purpose of enlightening its audience, but it can claim [558] no need to 'bodily appropriate' [Mr. Ford's] 'expression' of that information by utilizing portions of the actual [manuscript]. The public interest in the free flow of information is assured by the law's refusal to recognize a valid copyright in facts. The fair use doctrine is not a license for corporate theft, empowering a court to ignore a copyright whenever it determines the underlying work contains material of possible public importance." Iowa State University Research Foundation, Inc. v. American Broadcasting Cos., Inc., 621 F.2d 57, 61 (CA2 1980) (citations omitted).

Accord, Roy Export Co. Establishment v. Columbia Broadcasting System, Inc., 503 F.Supp. 1137 (SDNY 1980) ("newsworthiness" of material copied does not justify copying), aff'd, 672 F.2d 1095 (CA2), cert. denied, 459 U.S. 826, 103 S.Ct. 60, 74 L.Ed.2d 63 (1982); Quinto v. Legal Times of Washington, Inc., 506 F.Supp. 554 (DC 1981) (same).

In our haste to disseminate news, it should not be forgotten that the Framers intended copyright itself to be the engine of free expression. By establishing a marketable right to the use of one's expression, copyright supplies the economic incentive to create and disseminate ideas. This Court stated in Mazer v. Stein, 347 U.S. 201, 219, 74 S.Ct. 460, 471, 98 L.Ed. 630 (1954):

"The economic philosophy behind the clause empowering Congress to grant patents and copyrights is the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors in 'Science and useful Arts.'"

And again in Twentieth Century Music Corp. v. Aiken:

"The immediate effect of our copyright law is to secure a fair return for an 'author's' creative labor. But the ultimate aim is, by this incentive, to stimulate [the creation of useful works] for the general public good." 422 U.S., at 156, 95 S.Ct., at 2043.

[559] It is fundamentally at odds with the scheme of copyright to accord lesser rights in those works that are of greatest importance to the public. Such a notion ignores the major premise of copyright and injures author and public alike. "[T]o propose that fair use be imposed whenever the 'social value [of dissemination] . . . outweighs any detriment to the artist,' would be to propose depriving copyright owners of their right in the property precisely when they encounter those users who could afford to pay for it." Gordon, Fair Use as Market Failure: A Structural and Economic Analysis of the Betamax Case and its Predecessors, 82 Colum.L.Rev. 1600, 1615 (1982). And as one commentator has noted: "If every volume that was in the public interest could be pirated away by a competing publisher, . . . the public [soon] would have nothing worth reading." Sobel, Copyright and the First Amendment: A Gathering Storm?, 19 ASCAP Copyright Law Symposium 43, 78 (1971). See generally Comment, Copyright and the First Amendment; Where Lies the Public Interest?, 59 Tulane L.Rev. 135 (1984).

Moreover, freedom of thought and expression "includes both the right to speak freely and the right to refrain from speaking at all." Wooley v. Maynard, 430 U.S. 705, 714, 97 S.Ct. 1428, 1435, 51 L.Ed.2d 752 (1977) (BURGER, C.J.). We do not suggest this right not to speak would sanction abuse of the copyright owner's monopoly as an instrument to suppress facts. But in the words of New York's Chief Judge Fuld:

"The essential thrust of the First Amendment is to prohibit improper restraints on the voluntary public expression of ideas; it shields the man who wants to speak or publish when others wish him to be quiet. There is necessarily, and within suitably defined areas, a concomitant freedom not to speak publicly, one which serves the same ultimate end as freedom of speech in its affirmative aspect." Estate of Hemingway v. Random House, Inc., 23 N.Y.2d 341, 348, 296 N.Y.S.2d 771, 776, 244 N.E.2d 250, 255 (1968).

[560] Courts and commentators have recognized that copyright, and the right of first publication in particular, serve this countervailing First Amendment value. See Schnapper v. Foley, 215 U.S.App.D.C. 59, 667 F.2d 102 (1981), cert. denied, 455 U.S. 948, 102 S.Ct. 1448, 71 L.Ed.2d 661 (1982); 1 Nimmer § 1.10[B], at 1-70, n. 24; Patry 140-142.

In view of the First Amendment protections already embodied in the Copyright Act's distinction between copyrightable expression and uncopyrightable facts and ideas, and the latitude for scholarship and comment traditionally afforded by fair use, we see no warrant for expanding the doctrine of fair use to create what amounts to a public figure exception to copyright. Whether verbatim copying from a public figure's manuscript in a given case is or is not fair must be judged according to the traditional equities of fair use.

Fair use is a mixed question of law and fact. Pacific & Southern Co. v. Duncan, 744 F.2d 1490, 1495, n. 8 (CA11 1984). Where the district court has found facts sufficient to evaluate each of the statutory factors, an appellate court "need not remand for further factfinding . . . [but] may conclude as a matter of law that [the challenged use] do[es] not qualify as a fair use of the copyrighted work." Id., at 1495. Thus whether The Nation article constitutes fair use under § 107 must be reviewed in light of the principles discussed above. The factors enumerated in the section are not meant to be exclusive: "[S]ince the doctrine is an equitable rule of reason, no generally applicable definition is possible, and each case raising the question must be decided on its own facts." House Report, at 65, U.S.Code Cong. & Admin.News 1976, p. 5678. The four factors identified by Congress as especially relevant in determining whether the use was fair are: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the substantiality of the portion used in relation to the copyrighted work as [561] a whole; (4) the effect on the potential market for or value of the copyrighted work. We address each one separately.

Purpose of the Use. The Second Circuit correctly identified news reporting as the general purpose of The Nation's use. News reporting is one of the examples enumerated in § 107 to "give some idea of the sort of activities the courts might regard as fair use under the circumstances." Senate Report, at 61. This listing was not intended to be exhaustive, see ibid.; § 101 (definition of "including" and "such as"), or to single out any particular use as presumptively a "fair" use. The drafters resisted pressures from special interest groups to create presumptive categories of fair use, but structured the provision as an affirmative defense requiring a case-by-case analysis. See H.R.Rep. No. 83, 90th Cong., 1st Sess., 37 (1967); Patry 477, n. 4. "[W]hether a use referred to in the first sentence of section 107 is a fair use in a particular case will depend upon the application of the determinative factors, including those mentioned in the second sentence." Senate Report, at 62. The fact that an article arguably is "news" and therefore a productive use is simply one factor in a fair use analysis.

We agree with the Second Circuit that the trial court erred in fixing on whether the information contained in the memoirs was actually new to the public. As Judge Meskill wisely noted, "[c]ourts should be chary of deciding what is and what is not news." 723 F.2d, at 215 (dissenting). Cf. Gertz v. Robert Welch, Inc., 418 U.S. 323, 345-346, 94 S.Ct. 2997, 3009-3010, 41 L.Ed.2d 789 (1974). "The issue is not what constitutes 'news,' but whether a claim of newsreporting is a valid fair use defense to an infringement of copyrightable expression." Patry 119. The Nation has every right to seek to be the first to publish information. But The Nation went beyond simply reporting uncopyrightable information and actively sought to exploit the headline value of its infringement, making a "news event" out of its unauthorized first publication of a noted figure's copyrighted expression.

[562] The fact that a publication was commercial as opposed to nonprofit is a separate factor that tends to weigh against a finding of fair use. "[E]very commercial use of copyrighted material is presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright." Sony Corp. of America v. Universal City Studios, Inc., 464 U.S., at 451, 104 S.Ct., at 793. In arguing that the purpose of news reporting is not purely commercial, The Nation misses the point entirely. The crux of the profit/nonprofit distinction is not whether the sole motive of the use is monetary gain but whether the user stands to profit from exploitation of the copyrighted material without paying the customary price. See Roy Export Co. Establishment v. Columbia Broadcasting System, Inc., 503 F.Supp., at 1144; 3 Nimmer § 13.05[A][1], at 13-71, n. 25.3.

In evaluating character and purpose we cannot ignore The Nation's stated purpose of scooping the forthcoming hardcover and Time abstracts.^[7] App. to Pet. for Cert. C-27. The Nation's use had not merely the incidental effect but the intended purpose of supplanting the copyright holder's commercially valuable right of first publication. See Meredith Corp. v. Harper & Row, Publishers, Inc., 378 F.Supp. 686, 690 (SDNY) (purpose of text was to compete with original), aff'd, 500 F.2d 1221 (CA2 1974). Also relevant to the "character" of the use is "the propriety of the defendant's conduct." 3 Nimmer § 13.05[A], at 13-72. "Fair use presupposes 'good faith' and 'fair dealing.'" Time Inc. v. Bernard Geis Associates, 293 F.Supp. 130, 146 (SDNY 1968), quoting [563] Schulman, Fair Use and the Revision of the Copyright Act, 53 Iowa L.Rev. 832 (1968). The trial court found that The Nation knowingly exploited a purloined manuscript. App. to Pet. for Cert. B-1, C-20 — C-21, C-28 — C-29. Unlike the typical claim of fair use, The Nation cannot offer up even the fiction of consent as justification. Like its competitor newsweekly, it was free to bid for the right of abstracting excerpts from "A Time to Heal." Fair use "distinguishes between 'a true scholar and a chiseler who infringes a work for personal profit.'" Wainwright Securities Inc. v. Wall Street Transcript Corp., 558 F.2d, at 94, quoting from Hearings on Bills for the General Revision of the Copyright Law before the House Committee on the Judiciary, 89th Cong., 1st Sess., ser. 8, pt. 3, p. 1706 (1966) (statement of John Schulman).

Nature of the Copyrighted Work. Second, the Act directs attention to the nature of the copyrighted work. "A Time to Heal" may be characterized as an unpublished historical narrative or autobiography. The law generally recognizes a greater need to disseminate factual works than works of fiction or fantasy. See Gorman, Fact or Fancy? The Implications for Copyright, 29 J. Copyright Soc. 560, 561 (1982).

"[E]ven within the field of fact works, there are gradations as to the relative proportion of fact and fancy. One may move from sparsely embellished maps and directories to elegantly written biography. The extent to which one must permit expressive language to be copied, in order to assure dissemination of the underlying facts, will thus vary from case to case." Id., at 563.

Some of the briefer quotes from the memoirs are arguably necessary adequately to convey the facts; for example, Mr. Ford's characterization of the White House tapes as the "smoking gun" is perhaps so integral to the idea expressed as to be inseparable from it. Cf. 1 Nimmer § 1.10[C]. But The Nation did not stop at isolated phrases and instead excerpted subjective descriptions and portraits of public figures whose power lies in the author's individualized expression. Such [564] use, focusing on the most expressive elements of the work, exceeds that necessary to disseminate the facts.

The fact that a work is unpublished is a critical element of its "nature." 3 Nimmer § 13.05[A]; Comment, 58 St. John's L.Rev., at 613. Our prior discussion establishes that the scope of fair use is narrower with respect to unpublished works. While even substantial quotations might qualify as fair use in a review of a published work or a news account of a speech that had been delivered to the public or disseminated to the press, see House Report, at 65, the author's right to control the first public appearance of his expression weighs against such use of the work before its release. The right of first publication encompasses not only the choice whether to publish at all, but also the choices of when, where, and in what form first to publish a work.

In the case of Mr. Ford's manuscript, the copyright holders' interest in confidentiality is irrefutable; the copyright holders had entered into a contractual undertaking to "keep the manuscript confidential" and required that all those to whom the manuscript was shown also "sign an agreement to keep the manuscript confidential." App. to Pet. for Cert. C-19 — C-20. While the copyright holders' contract with Time required Time to submit its proposed article seven days before publication, The Nation's clandestine publication afforded no such opportunity for creative or quality control. Id., at C-18. It was hastily patched together and contained "a number of inaccuracies." App. 300b-300c (testimony of Victor Navasky). A use that so clearly infringes the copyright holder's interests in confidentiality and creative control is difficult to characterize as "fair."

Amount and Substantiality of the Portion Used. Next, the Act directs us to examine the amount and substantiality of the portion used in relation to the copyrighted work as a whole. In absolute terms, the words actually quoted were an insubstantial portion of "A Time to Heal." The District Court, however, found that "[T]he Nation took what was [565] essentially the heart of the book." 557 F.Supp., at 1072. We believe the Court of Appeals erred in overruling the District Judge's evaluation of the qualitative nature of the taking. See, e.g., Roy Export Co. Establishment v. Columbia Broadcasting System, Inc., 503 F.Supp., at 1145 (taking of 55 seconds out of 1 hour and 29-minute film deemed qualitatively substantial). A Time editor described the chapters on the pardon as "the most interesting and moving parts of the entire manuscript." Reply Brief for Petitioners 16, n. 8. The portions actually quoted were selected by Mr. Navasky as among the most powerful passages in those chapters. He testified that he used verbatim excerpts because simply reciting the information could not adequately convey the "absolute certainty with which [Ford] expressed himself," App. 303; or show that "this comes from President Ford," id., at 305; or carry the "definitive quality" of the original, id., at 306. In short, he quoted these passages precisely because they qualitatively embodied Ford's distinctive expression.

As the statutory language indicates, a taking may not be excused merely because it is insubstantial with respect to the infringing work. As Judge Learned Hand cogently remarked, "no plagiarist can excuse the wrong by showing how much of his work he did not pirate." Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 56 (CA2), cert. denied, 298 U.S. 669, 56 S.Ct. 835, 80 L.Ed. 1392 (1936). Conversely, the fact that a substantial portion of the infringing work was copied verbatim is evidence of the qualitative value of the copied material, both to the originator and to the plagiarist who seeks to profit from marketing someone else's copyrighted expression.

Stripped to the verbatim quotes,^[8] the direct takings from the unpublished manuscript constitute at least 13% of the in [566] fringing article. See Meeropol v. Nizer, 560 F.2d 1061, 1071 (CA2 1977) (copyrighted letters constituted less than 1% of infringing work but were prominently featured). The Nation article is structured around the quoted excerpts which serve as its dramatic focal points. See Appendix to this opinion, post, p. 570. In view of the expressive value of the excerpts and their key role in the infringing work, we cannot agree with the Second Circuit that the "magazine took a meager, indeed an infinitesimal amount of Ford's original language." 723 F.2d, at 209.

Effect on the Market. Finally, the Act focuses on "the effect of the use upon the potential market for or value of the copyrighted work." This last factor is undoubtedly the single most important element of fair use.^[9] See 3 Nimmer § 13.05[A], at 13-76, and cases cited therein. "Fair use, when properly applied, is limited to copying by others which [567] does not materially impair the marketability of the work which is copied." 1 Nimmer § 1.10[D], at 1-87. The trial court found not merely a potential but an actual effect on the market. Time's cancellation of its projected serialization and its refusal to pay the $12,500 were the direct effect of the infringement. The Court of Appeals rejected this fact-finding as clearly erroneous, noting that the record did not establish a causal relation between Time's nonperformance and respondents' unauthorized publication of Mr. Ford's expression as opposed to the facts taken from the memoirs. We disagree. Rarely will a case of copyright infringement present such clear-cut evidence of actual damage. Petitioners assured Time that there would be no other authorized publication of any portion of the unpublished manuscript prior to April 23, 1979. Any publication of material from chapters 1 and 3 would permit Time to renegotiate its final payment. Time cited The Nation's article, which contained verbatim quotes from the unpublished manuscript, as a reason for its nonperformance. With respect to apportionment of profits flowing from a copyright infringement, this Court has held that an infringer who commingles infringing and noninfringing elements "must abide the consequences, unless he can make a separation of the profits so as to assure to the injured party all that justly belongs to him." Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390, 406, 60 S.Ct. 681, 687, 84 L.Ed. 825 (1940). Cf. 17 U.S.C. § 504(b) (the infringer is required to prove elements of profits attributable to other than the infringed work). Similarly, once a copyright holder establishes with reasonable probability the existence of a causal connection between the infringement and a loss of revenue, the burden properly shifts to the infringer to show that this damage would have occurred had there been no taking of copyrighted expression. See 3 Nimmer § 14.02, at 14-7— 14-8.1. Petitioners established a prima facie case of actual damage that respondents failed to rebut. See Stevens Linen Associates, [568] Inc. v. Mastercraft Corp., 656 F.2d 11, 15 (CA2 1981). The trial court properly awarded actual damages and accounting of profits. See 17 U.S.C. § 504(b).

More important, to negate fair use one need only show that if the challenged use "should become widespread, it would adversely affect the potential market for the copyrighted work." Sony Corp. of America v. Universal City Studios, Inc., 464 U.S., at 451, 104 S.Ct., at 793 (emphasis added); id., at 484, and n. 36, 104 S.Ct., at 810, and n. 36 (collecting cases) (dissenting opinion). This inquiry must take account not only of harm to the original but also of harm to the market for derivative works. See Iowa State University Research Foundation, Inc. v. American Broadcasting Cos., 621 F.2d 57 (CA2 1980); Meeropol v. Nizer, supra, at 1070; Roy Export v. Columbia Broadcasting System, Inc., 503 F.Supp., at 1146. "If the defendant's work adversely affects the value of any of the rights in the copyrighted work (in this case the adaptation [and serialization] right) the use is not fair." 3 Nimmer § 13.05[B], at 13-77—13-78 (footnote omitted).

It is undisputed that the factual material in the balance of The Nation's article, besides the verbatim quotes at issue here, was drawn exclusively from the chapters on the pardon. The excerpts were employed as featured episodes in a story about the Nixon pardon — precisely the use petitioners had licensed to Time. The borrowing of these verbatim quotes from the unpublished manuscript lent The Nation's piece a special air of authenticity as Navasky expressed it, the reader would know it was Ford speaking and not The Nation. App. 300c. Thus it directly competed for a share of the market for prepublication excerpts. The Senate Report states:

"With certain special exceptions . . . a use that supplants any part of the normal market for a copyrighted work would ordinarily be considered an infringement." Senate Report, at 65.

[569] Placed in a broader perspective, a fair use doctrine that permits extensive prepublication quotations from an unreleased manuscript without the copyright owner's consent poses substantial potential for damage to the marketability of first serialization rights in general. "Isolated instances of minor infringements, when multiplied many times, become in the aggregate a major inroad on copyright that must be prevented." Ibid.

The Court of Appeals erred in concluding that The Nation's use of the copyrighted material was excused by the public's interest in the subject matter. It erred, as well, in overlooking the unpublished nature of the work and the resulting impact on the potential market for first serial rights of permitting unauthorized prepublication excerpts under the rubric of fair use. Finally, in finding the taking "infinitesimal," the Court of Appeals accorded too little weight to the qualitative importance of the quoted passages of original expression. In sum, the traditional doctrine of fair use, as embodied in the Copyright Act, does not sanction the use made by The Nation of these copyrighted materials. Any copyright infringer may claim to benefit the public by increasing public access to the copyrighted work. See Pacific & Southern Co. v. Duncan, 744 F.2d, at 1499-1500. But Congress has not designed, and we see no warrant for judicially imposing, a "compulsory license" permitting unfettered access to the unpublished copyrighted expression of public figures.

The Nation conceded that its verbatim copying of some 300 words of direct quotation from the Ford manuscript would constitute an infringement unless excused as a fair use. Because we find that The Nation's use of these verbatim excerpts from the unpublished manuscript was not a fair use, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

[570] APPENDIX TO OPINION OF THE COURT

The portions of The Nation article which were copied verbatim from "A Time to Heal," excepting quotes from Government documents and quotes attributed by Ford to third persons, are identified in boldface in the text. See ante, at 562, n. 7. The corresponding passages in the Ford manuscript are footnoted.

THE FORD MEMOIRS BEHIND THE NIXON PARDON

In his memoirs, A Time To Heal, which Harper & Row will publish in late May or early June, former President Gerald R. Ford says that the idea of giving a blanket pardon to Richard M. Nixon was raised before Nixon resigned from the Presidency by Gen. Alexander Haig, who was then the White House chief of staff.

Ford also writes that, but for a misunderstanding, he might have selected Ronald Reagan as his 1976 running mate, that Washington lawyer Edward Bennett Williams, a Democrat, was his choice for head of the Central Intelligence Agency, that Nixon was the one who first proposed Rockefeller for Vice President, and that he regretted his "cowardice"^[1] in allowing Rockefeller to remove himself from Vice Presidential contention. Ford also describes his often prickly relations with Henry Kissinger.

The Nation obtained the 655-page typescript before publication. Advance excerpts from the book will appear in Time in mid-April and in The Reader's Digest thereafter. Although the initial print order has not been decided, the figure is tentatively set at 50,000; it could change, depending upon the public reaction to the serialization.

Ford's account of the Nixon pardon contains significant new detail on the negotiations and considerations that sur [571] rounded it. According to Ford's version, the subject was first broached to him by General Haig on August 1, 1974, a week before Nixon resigned. General Haig revealed that the newly transcribed White House tapes were the equivalent of the "smoking gun"^[2] and that Ford should prepare himself to become President.

Ford was deeply hurt by Haig's revelation: "Over the past several months Nixon had repeatedly assured me that he was not involved in Watergate, that the evidence would prove his innocence, that the matter would fade from view."^[3] Ford had believed him, but he let Haig explain the President's alternatives.

He could "ride it out"^[4] or he could resign, Haig said. He then listed the different ways Nixon might resign and concluded by pointing out that Nixon could agree to leave in return for an agreement that the new President, Ford, would pardon him.^[5] Although Ford said it would be improper for him to make any recommendation, he basically agreed with Haig's assessment and adds, "Because of his references to the pardon authority, I did ask Haig about the extent of a President's pardon power."^[6]

"It's my understanding from a White House lawyer," Haig replied, "that a President does have authority to grant a pardon even before criminal action has been taken against an individual."

[572] But because Ford had neglected to tell Haig he thought the idea of a resignation conditioned on a pardon was improper, his press aide, Bob Hartmann, suggested that Haig might well have returned to the White House and told President Nixon that he had mentioned the idea and Ford seemed comfortable with it. "Silence implies assent."

Ford then consulted with White House special counsel James St. Clair, who had no advice one way or the other on the matter more than pointing out that he was not the lawyer who had given Haig the opinion on the pardon. Ford also discussed the matter with Jack Marsh, who felt that the mention of a pardon in this context was a "time bomb," and with Bryce Harlow, who had served six Presidents and who agreed that the mere mention of a pardon "could cause a lot of trouble."^[7]

As a result of these various conversations, Vice President Ford called Haig and read him a written statement:

"I want you to understand that I have no intention of recommending what the President should do about resigning or not resigning and that nothing we talked about yesterday afternoon should be given any consideration in whatever decision the President may wish to make."

Despite what Haig had told him about the "smoking gun" tapes, Ford told a Jackson, Mich., luncheon audience later in the day that the President was not guilty of an impeachable offense. "Had I said otherwise at that moment," he writes, "the whole house of cards might have collapsed."^[8]

In justifying the pardon, Ford goes out of his way to assure the reader that "compassion for Nixon as an individual [573] hadn't prompted my decision at all."^[9] Rather, he did it because he had "to get the monkey off my back one way or the other."^[10]

The precipitating factor in his decision was a series of secret meetings his general counsel, Phil Buchen, held with Watergate Special Prosecutor Leon Jaworski in the Jefferson Hotel, where they were both staying at the time. Ford attributes Jaworski with providing some "crucial" information^[11] —  i.e., that Nixon was under investigation in ten separate areas, and that the court process could "take years."^[12] Ford cites a memorandum from Jaworski's assistant, Henry S. Ruth Jr., as being especially persuasive. Ruth had written:

"If you decide to recommend indictment I think it is fair and proper to notify Jack Miller and the White House sufficiently in advance so that pardon action could be taken before the indictment." He went on to say: "One can make a strong argument for leniency and if President Ford is so inclined, I think he ought to do it early rather than late."

Ford decided that court proceedings against Nixon might take six years, that Nixon "would not spend time quietly in San Clemente,"^[13] and "it would be virtually impossible for me to direct public attention on anything else."^[14]

Buchen, Haig and Henry Kissinger agreed with him. Hartmann was not so sure.

[574] Buchen wanted to condition the pardon on Nixon agreeing to settle the question of who would retain custody and control over the tapes and Presidential papers that might be relevant to various Watergate proceedings, but Ford was reluctant to do that.

At one point a plan was considered whereby the Presidential materials would be kept in a vault at a Federal facility near San Clemente, but the vault would require two keys to open it. One would be retained by the General Services Administration, the other by Richard Nixon.

The White House did, however, want Nixon to make a full confession on the occasion of his pardon or, at a minimum, express true contrition. Ford tells of the negotiation with Jack Miller, Nixon's lawyer, over the wording of Nixon's statement. But as Ford reports Miller's response. Nixon was not likely to yield. "His few meetings with his client had shown him that the former President's ability to discuss Watergate objectively was almost nonexistent."^[15]

The statement they really wanted was never forthcoming. As soon as Ford's emissary arrived in San Clemente, he was confronted with an ultimatum by Ron Zeigler, Nixon's former press secretary. "Lets get one thing straight immediately," Zeigler said. "President Nixon is not issuing any statement whatsoever regarding Watergate, whether Jerry Ford pardons him or not." Zeigler proposed a draft, which was turned down on the ground that "no statement would be better than that."^[16] They went through three more drafts before they agreed on the statement Nixon finally made, which stopped far short of a full confession.

When Ford aide Benton Becker tried to explain to Nixon that acceptance of a pardon was an admission of guilt, he [575] felt the President wasn't really listening. Instead, Nixon wanted to talk about the Washington Redskins. And when Becker left, Nixon pressed on him some cuff links and a tiepin "out of my own jewelry box."

Ultimately, Ford sums up the philosophy underlying his decision as one he picked up as a student at Yale Law School many years before. "I learned that public policy often took precedence over a rule of law. Although I respected the tenet that no man should be above the law, public policy demanded that I put Nixon and Watergate — behind us as quickly as possible."^[17]

Later, when Ford learned that Nixon's phlebitis had acted up and his health was seriously impaired, he debated whether to pay the ailing former President a visit. "If I made the trip it would remind everybody of Watergate and the pardon. If I didn't, people would say I lacked compassion."^[18] Ford went:

He was stretched out flat on his back. There were tubes in his nose and mouth, and wires led from his arms, chest and legs to machines with orange lights that blinked on and off. His face was ashen, and I thought I had never seen anyone closer to death.^[19]

The manuscript made available to The Nation includes many references to Henry Kissinger and other personalities who played a major role during the Ford years.

[576] On Kissinger. Immediately after being informed by Nixon of his intention to resign, Ford returned to the Executive Office Building and phoned Henry Kissinger to let him know how he felt. "Henry," he said, "I need you. The country needs you. I want you to stay. I'll do everything I can to work with you."^[20]

"Sir," Kissinger replied, "it is my job to get along with you and not yours to get along with me."

"We'll get along," Ford said. "I know we'll get along." Referring to Kissinger's joint jobs as Secretary of State and National Security Adviser to the President, Ford said, "I don't want to make any change. I think it's worked out well, so let's keep it that way."^[21]

Later Ford did make the change and relieved Kissinger of his responsibilities as National Security Adviser at the same time that he fired James Schlesinger as Secretary of Defense. Shortly thereafter, he reports, Kissinger presented him with a "draft" letter of resignation, which he said Ford could call upon at will if he felt he needed it to quiet dissent from conservatives who objected to Kissinger's role in the firing of Schlesinger.

On John Connally. When Ford was informed that Nixon wanted him to replace Agnew, he told the President he had "no ambition to hold office after January 1977."^[22] Nixon replied that that was good since his own choice for his running mate in 1976 was John Connally. "He'd be excellent," observed Nixon. Ford says he had "no problem with that."

On the Decision to Run Again. Ford was, he tells us, so sincere in his intention not to run again that he thought he would announce it and enhance his credibility in the country and the Congress, as well as keep the promise he had made to his wife, Betty.

Kissinger talked him out of it. "You can't do that. It would be disastrous from a foreign policy point of view. For the next two and a half years foreign governments would know that they were dealing with a lame-duck President. All our initiatives would be dead in the water, and I wouldn't be able to implement your foreign policy. It would probably have the same consequences in dealing with the Congress on domestic issues. You can't reassert the authority of the Presidency if you leave yourself hanging out on a dead limb. You've got to be an affirmative President."

[577] On David Kennerly, the White House photographer. Schlesinger was arguing with Kissinger and Ford over the appropriate response to the seizure of the Mayaguez. At issue was whether airstrikes against the Cambodians were desirable; Schlesinger was opposed to bombings. Following a lull in the conversation, Ford reports, up spoke the 30-year-old White House photographer, David Kennerly, who had been taking pictures for the last hour.

"Has anyone considered," Kennerly asked, "that this might be the act of a local Cambodian commander who has just taken it into his own hands to stop any ship that comes by?" Nobody, apparently, had considered it, but following several seconds of silence, Ford tells us, the view carried the day. "Massive airstrikes would constitute overkill," Ford decided. "It would be far better to have Navy jets from the Coral Sea make surgical strikes against specific targets."^[23]

[578] On Nixon's Character. Nixon's flaw, according to Ford, was "pride." "A terribly proud man," writes Ford, "he detested weakness in other people. I'd often heard him speak disparagingly of those whom he felt to be soft and expedient. (Curiously, he didn't feel that the press was weak. Reporters, he sensed, were his adversaries. He knew they didn't like him, and he responded with reciprocal disdain.)"^[24]

Nixon felt disdain for the Democratic leadership of the House, whom he also regarded as weak. According to Ford, "His pride and personal contempt for weakness had overcome his ability to tell the difference between right and wrong,"^[25] all of which leads Ford to wonder whether Nixon had known in advance about Watergate.

On hearing Nixon's resignation speech, which Ford felt lacked an adequate plea for forgiveness, he was persuaded that "Nixon was out of touch with reality."^[26]

In February of last year, when The Washington Post obtained and printed advance excerpts from H.R. Haldeman's memoir, The Ends of Power, on the eve of its publication by Times Books, The New York Times called The Post's feat "a second-rate burglary."

The Post disagreed, claiming that its coup represented "first-rate enterprise" and arguing that it had burglarized nothing, that publication of the Haldeman memoir came under the Fair Comment doctrine long recognized by the [579] courts, and that "There is a fundamental journalistic principle here — a First Amendment principle that was central to the Pentagon Papers case."

In the issue of The Nation dated May 5, 1979, our special Spring Books number, we will discuss some of the ethical problems raised by the issue of disclosure.

Justice BRENNAN, with whom Justice WHITE and Justice MARSHALL join, dissenting.

The Court holds that The Nation's quotation of 300 words from the unpublished 200,000-word manuscript of President Gerald R. Ford infringed the copyright in that manuscript, even though the quotations related to a historical event of undoubted significance the resignation and pardon of President Richard M. Nixon. Although the Court pursues the laudable goal of protecting "the economic incentive to create and disseminate ideas," ante, at 558, this zealous defense of the copyright owner's prerogative will, I fear, stifle the broad dissemination of ideas and information copyright is intended to nurture. Protection of the copyright owner's economic interest is achieved in this case through an exceedingly narrow definition of the scope of fair use. The progress of arts and sciences and the robust public debate essential to an enlightened citizenry are ill served by this constricted reading of the fair use doctrine. See 17 U.S.C. § 107. I therefore respectfully dissent.

This case presents two issues. First, did The Nation's use of material from the Ford manuscript in forms other than direct quotation from that manuscript infringe Harper & Row's copyright. Second, did the quotation of approximately 300 words from the manuscript infringe the copyright because this quotation did not constitute "fair use" within the mean [580] ing of § 107 of the Copyright Act. 17 U.S.C. § 107. The Court finds no need to resolve the threshold copyrightability issue. The use of 300 words of quotation was, the Court finds, beyond the scope of fair use and thus a copyright infringement.^[1] Because I disagree with the Court's fair use holding, it is necessary for me to decide the threshold copyrightability question.

"The enactment of copyright legislation by Congress under the terms of the Constitution is not based upon any natural right that the author has in his writings . . . but upon the ground that the welfare of the public will be served and progress of science and useful arts will be promoted by securing to authors for limited periods the exclusive rights to their writings." H.R.Rep. No. 2222, 60th Cong., 2d Sess., 7 (1909). Congress thus seeks to define the rights included in copyright so as to serve the public welfare and not necessarily so as to maximize an author's control over his or her product. The challenge of copyright is to strike the "difficult balance between the interests of authors and inventors in the control and exploitation of their writings and discoveries on the one hand, and society's competing interest in the free flow of ideas, information, and commerce on the other hand." Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 429, 104 S.Ct. 774, 782, 78 L.Ed.2d 574 (1984).

The "originality" requirement now embodied in § 102 of the Copyright Act is crucial to maintenance of the appropriate balance between these competing interests.^[2] Properly in [581] terpreted in the light of the legislative history, this section extends copyright protection to an author's literary form but permits free use by others of the ideas and information the author communicates. See S.Rep. No. 93-983, pp. 107-108 (1974) ("Copyright does not preclude others from using the ideas or information revealed by the author's work. It pertains to the literary . . . form in which the author expressed intellectual concepts"); H.R.Rep. No. 94-1476, pp. 56-57 (1976) (same); New York Times Co. v. United States, 403 U.S. 713, 726, n. *, 91 S.Ct. 2140, 2147, n. *, 29 L.Ed.2d 822 (1971) (BRENNAN, J., concurring) ("[T]he copyright laws, of course, protect only the form of expression and not the ideas expressed"). This limitation of protection to literary form precludes any claim of copyright in facts, including historical narration.

"It is not to be supposed that the framers of the Constitution, when they empowered Congress 'to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries' (Const., Art. I, § 8, par. 8), intended to confer upon one who might happen to be the first to report a historic event the exclusive right for any period to spread the knowledge of it." International News Service v. Associated Press, 248 U.S. 215, 234, 39 S.Ct. 68, 70, 63 L.Ed. 211 (1918).

Accord, Rosemont Enterprises, Inc. v. Random House, Inc., 366 F.2d 303, 309 (CA2 1966), cert. denied, 385 U.S. 1009, 87 S.Ct. 714, 17 L.Ed.2d 546 (1967). See 1 Nimmer § 2.11[A], at 2-158.^[3]

[582] The "promotion of science and the useful arts" requires this limit on the scope of an author's control. Were an author able to prevent subsequent authors from using concepts, ideas, or facts contained in his or her work, the creative process would wither and scholars would be forced into unproductive replication of the research of their predecessors. See Hoehling v. Universal City Studios, Inc., 618 F.2d 972, 979 (CA2 1980). This limitation on copyright also ensures consonance with our most important First Amendment values. Cf. Zacchini v. Scripps-Howard Broadcasting Co., 433 U.S. 562, 577, n. 13, 97 S.Ct. 2849, 2858 n. 13, 53 L.Ed.2d 965 (1977). Our "profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open," New York Times Co. v. Sullivan, 376 U.S. 254, 270, 84 S.Ct. 710, 721, 11 L.Ed.2d 686 (1964), leaves no room for a statutory monopoly over information and ideas. "The arena of public debate would be quiet, indeed, if a politician could copyright his speeches or a philosopher his treatises and thus obtain a monopoly on the ideas they contained." Lee v. Runge, 404 U.S. 887, 893, 92 S.Ct. 197, 200, 30 L.Ed.2d 169 (1971) (Douglas, J., dissenting from denial of certiorari). A broad dissemination of principles, ideas, and factual information is crucial to the robust public debate and informed citizenry that are "the essence of self-government." Garrison v. Louisiana, 379 U.S. 64, 74-75, 85 S.Ct. 209, 215-216, 13 L.Ed.2d 125 (1964). And every citizen must be permitted freely to marshal ideas and facts in the advocacy of particular political choices.^[4]

It follows that infringement of copyright must be based on a taking of literary form, as opposed to the ideas or information contained in a copyrighted work. Deciding whether an infringing appropriation of literary form has occurred is difficult for at least two reasons. First, the distinction between [583] literary form and information or ideas is often elusive in practice. Second, infringement must be based on a substantial appropriation of literary form. This determination is equally challenging. Not surprisingly, the test for infringement has defied precise formulation.^[5] In general, though, the inquiry proceeds along two axes: how closely has the second author tracked the first author's particular language and structure of presentation; and how much of the first author's language and structure has the second author appropriated.^[6]

In the present case the infringement analysis must be applied to a historical biography in which the author has chronicled the events of his White House tenure and commented on those events from his unique perspective. Apart from the quotations, virtually all of the material in The Nation's article indirectly recounted Mr. Ford's factual narrative of the Nixon resignation and pardon, his latter-day reflections on some events of his Presidency, and his perceptions of the personalities at the center of those events. See ante, at 570-579. No copyright can be claimed in this information qua information. Infringement would thus have to be based [584] on too close and substantial a tracking of Mr. Ford's expression of this information.^[7]

The Language. Much of the information The Nation conveyed was not in the form of paraphrase at all, but took the form of synopsis of lengthy discussions in the Ford manuscript.^[8] In the course of this summary presentation, The [585] Nation did use occasional sentences that closely resembled language in the original Ford manuscript.^[9] But these linguistic similarities are insufficient to constitute an infringement for three reasons. First, some leeway must be given to subsequent authors seeking to convey facts because those "wishing to cexpress the ideas contained in a factual work [586] often can choose from only a narrow range of expression." Landsberg v. Scrabble Crossword Game Players, Inc., 736 F.2d 485, 488 (CA9 1984). Second, much of what The Nation paraphrased was material in which Harper & Row could claim no copyright.^[10] Third, The Nation paraphrased nothing approximating the totality of a single paragraph, much less a chapter or the work as a whole. At most The Nation paraphrased disparate isolated sentences from the original. A finding of infringement based on paraphrase generally requires far more close and substantial a tracking of the original language than occurred in this case. See, e.g., Wainwright Securities Inc. v. Wall Street Transcript Corp., 558 F.2d 91 (CA2 1977).

The Structure of Presentation. The article does not mimic Mr. Ford's structure. The information The Nation presents is drawn from scattered sections of the Ford work and does not appear in the sequence in which Mr. Ford presented it.^[11] Some of The Nation's discussion of the pardon does roughly track the order in which the Ford manuscript presents information about the pardon. With respect to this similarity, however, Mr. Ford has done no more than present the facts [587] chronologically and cannot claim infringement when a subsequent author similarly presents the facts of history in a chronological manner. Also, it is difficult to suggest that a 2,000-word article could bodily appropriate the structure of a 200,000-word book. Most of what Mr. Ford created, and most of the history he recounted, were simply not represented in The Nation's article.^[12]

When The Nation was not quoting Mr. Ford, therefore, its efforts to convey the historical information in the Ford manuscript did not so closely and substantially track Mr. Ford's language and structure as to constitute an appropriation of literary form.

The Nation is thus liable in copyright only if the quotation of 300 words infringed any of Harper & Row's exclusive rights under § 106 of the Act. Section 106 explicitly makes the grant of exclusive rights "[s]ubject to section 107 through 118." 17 U.S.C. § 106. Section 107 states: "Notwithstanding the provisions of section 106, the fair use of a copyrighted work . . . for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship or research, is not an infringement of copyright." The question here is whether The Nation's [588] quotation was a noninfringing fair use within the meaning of § 107.

Congress "eschewed a rigid, bright-line approach to fair use." Sony Corp. of America v. Universal City Studios, Inc., 464 U.S., at 449, n. 31, 104 S.Ct., at 792, n. 31. A court is to apply an "equitable rule of reason" analysis, id., at 448, 104 S.Ct., at 792 guided by four statutorily prescribed factors:

"(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." 17 U.S.C. § 107.

These factors are not necessarily the exclusive determinants of the fair use inquiry and do not mechanistically resolve fair use issues; "no generally applicable definition is possible, and each case raising the question must be decided on its own facts." H.R.Rep. No. 94-1476, at 65. See also id., at 66 ("[T]he endless variety of situations and combinations of circumstances that can arise in particular cases precludes the formulation of exact rules in the statute"); S.Rep. No. 94-473, p. 62 (1975). The statutory factors do, however, provide substantial guidance to courts undertaking the proper fact-specific inquiry.

With respect to a work of history, particularly the memoirs of a public official, the statutorily prescribed analysis cannot properly be conducted without constant attention to copyright's crucial distinction between protected literary form and unprotected information or ideas. The question must always be: Was the subsequent author's use of literary form a fair use within the meaning of § 107, in light of the purpose for the use, the nature of the copyrighted work, the amount of literary form used, and the effect of this use of literary form on the value of or market for the original?

[589] Limiting the inquiry to the propriety of a subsequent author's use of the copyright owner's literary form is not easy in the case of a work of history. Protection against only substantial appropriation of literary form does not ensure historians a return commensurate with the full value of their labors. The literary form contained in works like "A Time to Heal" reflects only a part of the labor that goes into the book. It is the labor of collecting, sifting, organizing, and reflecting that predominates in the creation of works of history such as this one. The value this labor produces lies primarily in the information and ideas revealed, and not in the particular collocation of words through which the information and ideas are expressed. Copyright thus does not protect that which is often of most value in a work of history, and courts must resist the tendency to reject the fair use defense on the basis of their feeling that an author of history has been deprived of the full value of his or her labor. A subsequent author's taking of information and ideas is in no sense piratical because copyright law simply does not create any property interest in information and ideas.

The urge to compensate for subsequent use of information and ideas is perhaps understandable. An inequity seems to lurk in the idea that much of the fruit of the historian's labor may be used without compensation. This, however, is not some unforeseen byproduct of a statutory scheme intended primarily to ensure a return for works of the imagination. Congress made the affirmative choice that the copyright laws should apply in this way: "Copyright does not preclude others from using the ideas or information revealed by the author's work. It pertains to the literary . . . form in which the author expressed intellectual concepts." H.R.Rep. No. 94-1476, at 56-57. This distinction is at the essence of copyright. The copyright laws serve as the "engine of free expression," ante, at 558, only when the statutory monopoly does not choke off multifarious indirect uses and consequent broad dissemination of information and ideas. To ensure the progress of arts and sciences and the integrity [590] of First Amendment values, ideas and information must not be freighted with claims of proprietary right.^[13]

In my judgment, the Court's fair use analysis has fallen to the temptation to find copyright violation based on a minimal use of literary form in order to provide compensation for the appropriation of information from a work of history. The failure to distinguish between information and literary form permeates every aspect of the Court's fair use analysis and leads the Court to the wrong result in this case. Application of the statutorily prescribed analysis with attention to the distinction between information and literary form leads to a straightforward finding of fair use within the meaning of § 107.

The Purpose of the Use. The Nation's purpose in quoting 300 words of the Ford manuscript was, as the Court acknowledges, news reporting. See ante, at 651. The Ford work contained information about important events of recent history. Two principals, Mr. Ford and General Alexander Haig, were at the time of The Nation's publication in 1979 widely thought to be candidates for the Presidency. That The Nation objectively reported the information in the Ford manuscript without independent commentary in no way diminishes the conclusion that it was reporting news. A typical newsstory differs from an editorial precisely in that it presents newsworthy information in a straightforward and unelaborated manner. Nor does the source of the information render The Nation's article any less a news report. Often books and manuscripts, solicited and unsolicited, are [591] the subject matter of news reports. E.g., New York Times Co. v. United States, 403 U.S. 713, 91 S.Ct. 2140, 29 L.Ed.2d 822 (1971). Frequently the manuscripts are unpublished at the time of the news report.^[14]

Section 107 lists news reporting as a prime example of fair use of another's expression. Like criticism and all other purposes Congress explicitly approved in § 107, news reporting informs the public; the language of § 107 makes clear that Congress saw the spread of knowledge and information as the strongest justification for a properly limited appropriation of expression. The Court of Appeals was therefore correct to conclude that the purpose of The Nation's use — dissemination of the information contained in the quotations of Mr. Ford's work furthered the public interest. 723 F.2d 195, 207-208 (CA2 1983). In light of the explicit congressional endorsement in § 107, the purpose for which Ford's literary form was borrowed strongly favors a finding of fair use.

The Court concedes the validity of the news reporting purpose^[15] but then quickly offsets it against three purportedly countervailing considerations. First, the Court asserts that because The Nation publishes for profit, its publication of [592] the Ford quotes is a presumptively unfair commercial use. Second, the Court claims that The Nation's stated desire to create a "news event" signaled an illegitimate purpose of supplanting the copyright owner's right of first publication. Ante, at 562-563. Third, The Nation acted in bad faith, the Court claims, because its editor "knowingly exploited a purloined manuscript." Ante, at 563

The Court's reliance on the commercial nature of The Nation's use as "a separate factor that tends to weigh against a finding of fair use," ante, at 562, is inappropriate in the present context. Many uses § 107 lists as paradigmatic examples of fair use, including criticism, comment, and news reporting, are generally conducted for profit in this country, a fact of which Congress was obviously aware when it enacted § 107. To negate any argument favoring fair use based on news reporting or criticism because that reporting or criticism was published for profit is to render meaningless the congressional imprimatur placed on such uses.^[16]

Nor should The Nation's intent to create a "news event" weigh against a finding of fair use. Such a rule, like the [593] Court's automatic presumption against news reporting for profit, would undermine the congressional validation of the news reporting purpose. A news business earns its reputation, and therefore its readership, through consistent prompt publication of news — and often through "scooping" rivals. More importantly, the Court's failure to maintain the distinction between information and literary form colors the analysis of this point. Because Harper & Row had no legitimate copyright interest in the information and ideas in the Ford manuscript, The Nation had every right to seek to be the first to disclose these facts and ideas to the public. The record suggests only that The Nation sought to be the first to reveal the information in the Ford manuscript. The Nation's stated purpose of scooping the competition should under those circumstances have no negative bearing on the claim of fair use. Indeed the Court's reliance on this factor would seem to amount to little more than distaste for the standard journalistic practice of seeking to be the first to publish news.

The Court's reliance on The Nation's putative bad faith is equally unwarranted. No court has found that The Nation possessed the Ford manuscript illegally or in violation of any common-law interest of Harper & Row; all common-law causes of action have been abandoned or dismissed in this case. 723 F.2d, at 199-201. Even if the manuscript had been "purloined" by someone, nothing in this record imputes culpability to The Nation.^[17] On the basis of the record in this case, the most that can be said is that The Nation made use of the contents of the manuscript knowing the copyright owner would not sanction the use.

[594] At several points the Court brands this conduct thievery. See, e.g., ante, at 556, 563. This judgment is unsupportable, and is perhaps influenced by the Court's unspoken tendency in this case to find infringement based on the taking of information and ideas. With respect to the appropriation of information and ideas other than the quoted words, The Nation's use was perfectly legitimate despite the copyright owner's objection because no copyright can be claimed in ideas or information. Whether the quotation of 300 words was an infringement or a fair use within the meaning of § 107 is a close question that has produced sharp division in both this Court and the Court of Appeals. If the Copyright Act were held not to prohibit the use, then the copyright owner would have had no basis in law for objecting. The Nation's awareness of an objection that has a significant chance of being adjudged unfounded cannot amount to bad faith. Imputing bad faith on the basis of no more than knowledge of such an objection, the Court impermissibly prejudices the inquiry and impedes arrival at the proper conclusion that the "purpose" factor of the statutorily prescribed analysis strongly favors a finding of fair use in this case.

The Nature of the Copyrighted Work. In Sony Corp. of America v. Universal City Studios, Inc., we stated that "not . . . all copyrights are fungible" and that "[c]opying a news broadcast may have a stronger claim to fair use than copying a motion picture." 464 U.S., at 455, n. 40, 104 S.Ct., at 795, n. 40. These statements reflect the principle, suggested in § 107(2) of the Act, that the scope of fair use is generally broader when the source of borrowed expression is a factual or historical work. See 3 Nimmer § 13.05[A][2], at 13-73 — 13-74. "[I]nformational works," like the Ford manuscript, "that readily lend themselves to productive use by others, are less protected." Sony Corp. of America v. Universal City Studios, Inc., 464 U.S., at 496-497, 104 S.Ct., at 816 (BLACKMUN, J., dissenting). Thus the second statutory factor also favors a finding of fair use in this case.

[595] The Court acknowledges that "[t]he law generally recognizes a greater need to disseminate factual works than works of fiction or fantasy," ante, at 563, and that "[s]ome of the briefer quotations from the memoir are arguably necessary to convey the facts," ibid. But the Court discounts the force of this consideration, primarily on the ground that "[t]he fact that a work is unpublished is a crucial element of its 'nature.'" Ante, at 564.^[18] At this point the Court introduces into analysis of this case a categorical presumption against prepublication fair use. See ante, at 555 ("Under ordinary circumstances, the author's right to control the first public appearance of his undisseminated expression will outweigh a claim of fair use").

This categorical presumption is unwarranted on its own terms and unfaithful to congressional intent.^[19] Whether a [596] particular prepublication use will impair any interest the Court identifies as encompassed within the right of first publication, see ante, at 552-555,^[20] will depend on the nature of the copyrighted work, the timing of prepublication use, the amount of expression used and the medium in which the second author communicates. Also, certain uses might be tolerable for some purposes but not for others. See Sony Corp. of America v. Universal City Studios, Inc., supra, at 490, n. 40, 104 S.Ct., at 813, n. 40. The Court is ambiguous as to whether it relies on the force of the presumption against prepublication fair use or an analysis of the purpose and effect of this particular use. Compare ante, at 552-555, with ante, at 564. To the extent the Court relies on the presumption, it presumes intolerable [597] injury — in particular the usurpation of the economic interest ^[21] based on no more than a quick litmus test for prepublication timing. Because "Congress has plainly instructed us that fair use analysis calls for a sensitive balancing of interests," we held last Term that the fair use inquiry could never be resolved on the basis of such a "two dimensional" categorical approach. See Sony Corp. of America v. Universal City Studios, Inc., 464 U.S., at 455, n. 40, 104 S.Ct., at 795, n. 40 (rejecting categorical requirement of "productive use").

To the extent the Court purports to evaluate the facts of this case, its analysis relies on sheer speculation. The quotation of 300 words from the manuscript infringed no privacy interest of Mr. Ford. This author intended the words in the manuscript to be a public statement about his Presidency. Lacking, therefore, is the "deliberate choice on the part of the copyright owner" to keep expression confidential, a consideration that the Senate Report — in the passage on which the Court places great reliance, see ante, at 553 — recognized as the impetus behind narrowing fair use for unpublished works. See S.Rep. No. 94-473, at 64. See also 3 Nimmer § 13.05[A], at 13-73 ("[T]he scope of the fair use doctrine is considerably narrower with respect to unpublished works which are held confidential by their copyright owners") (emphasis added). What the Court depicts as the copyright owner's "confidentiality" interest, see ante, at 564, is not a privacy interest at all. Rather, it is no more than an economic interest in capturing the full value of initial release of information to [598] the public, and is properly analyzed as such. See infra, at 602-603. Lacking too is any suggestion that The Nation's use interfered with the copyright owner's interest in editorial control of the manuscript. The Nation made use of the Ford quotes on the eve of official publication.

Thus the only interest The Nation's prepublication use might have infringed is the copyright owner's interest in capturing the full economic value of initial release. By considering this interest as a component of the "nature" of the copyrighted work, the Court's analysis deflates The Nation's claim that the informational nature of the work supports fair use without any inquiry into the actual or potential economic harm of The Nation's particular prepublication use. For this reason, the question of economic harm is properly considered under the fourth statutory factor — the effect on the value of or market for the copyrighted work, 17 U.S.C. § 107(4) — and not as a presumed element of the "nature" of the copyright.

The Amount and Substantiality of the Portion Used. More difficult questions arise with respect to judgments about the importance to this case of the amount and substantiality of the quotations used. The Nation quoted only approximately 300 words from a manuscript of more than 200,000 words, and the quotes are drawn from isolated passages in disparate sections of the work. The judgment that this taking was quantitatively "infinitesimal," 723 F.2d, at 209, does not dispose of the inquiry, however. An evaluation of substantiality in qualitative terms is also required. Much of the quoted material was Mr. Ford's matter-of-fact representation of the words of others in conversations with him; such quotations are "arguably necessary adequately to convey the facts," ante, at 563, and are not rich in expressive content. Beyond these quotations a portion of the quoted material was drawn from the most poignant expression in the Ford manuscript; in particular The Nation made use of six examples of Mr. Ford's expression of his reflections on [599] events or perceptions about President Nixon.^[22] The fair use inquiry turns on the propriety of the use of these quotations with admittedly strong expressive content.

The Court holds that "in view of the expressive value of the excerpts and their key role in the infringing work," this third statutory factor disfavors a finding of fair use.^[23] To support [600] this conclusion, the Court purports to rely on the District Court factual findings that The Nation had taken "the heart of the book." 557 F.Supp. 1062, 1072 (SDNY 1983). This reliance is misplaced, and would appear to be another result of the Court's failure to distinguish between information and literary form. When the District Court made this finding, it was evaluating not the quoted words at issue here but the "totality" of the information and reflective commentary in the Ford work. Ibid. The vast majority of what the District Court considered the heart of the Ford work, therefore, consisted of ideas and information The Nation was free to use. It may well be that, as a qualitative matter, most of the value of the manuscript did lie in the information and ideas The Nation used. But appropriation of the "heart" of the manuscript in this sense is irrelevant to copyright analysis because copyright does not preclude a second author's use of information and ideas.

Perhaps tacitly recognizing that reliance on the District Court finding is unjustifiable, the Court goes on to evaluate independently the quality of the expression appearing in The Nation's article. The Court states that "[t]he portions actually quoted were selected by Mr. Navasky as among the most powerful passages." Ante, at 565. On the basis of no more than this observation, and perhaps also inference from the fact that the quotes were important to The Nation's article,^[24] the Court adheres to its conclusion that The Nation appropriated the heart of the Ford manuscript.

[601] At least with respect to the six particular quotes of Mr. Ford's observations and reflections about President Nixon, I agree with the Court's conclusion that The Nation appropriated some literary form of substantial quality. I do not agree, however, that the substantiality of the expression taken was clearly excessive or inappropriate to The Nation's news reporting purpose.

Had these quotations been used in the context of a critical book review of the Ford work, there is little question that such a use would be fair use within the meaning of § 107 of the Act. The amount and substantiality of the use — in both quantitative and qualitative terms — would have certainly been appropriate to the purpose of such a use. It is difficult to see how the use of these quoted words in a news report is less appropriate. The Court acknowledges as much: "[E]ven substantial quotations might qualify as a fair use in a review of a published work or a news account of a speech that had been delivered to the public." See ante, at 564. With respect to the motivation for the pardon and the insights into the psyche of the fallen President, for example, Mr. Ford's reflections and perceptions are so laden with emotion and deeply personal value judgments that full understanding is immeasurably enhanced by reproducing a limited portion of Mr. Ford's own words. The importance of the work, after all, lies not only in revelation of previously unknown fact but also in revelation of the thoughts, ideas, motivations, and fears of two Presidents at a critical moment in our national history. Thus, while the question is not easily resolved, it is difficult to say that the use of the six quotations was gratuitous in relation to the news reporting purpose.

Conceding that even substantial quotation is appropriate in a news report of a published work, the Court would seem to agree that this quotation was not clearly inappropriate in relation to The Nation's news reporting purpose. For the Court, the determinative factor is again that the substantiality of the use was inappropriate in relation to the pre [602] publication timing of that use. That is really an objection to the effect of this use on the market for the copyrighted work, and is properly evaluated as such.

The Effect on the Market. The Court correctly notes that the effect on the market "is undoubtedly the single most important element of fair use." Ante, at 566, citing 3 Nimmer § 13.05[A], at 13-76, and the Court properly focuses on whether The Nation's use adversely affected Harper & Row's serialization potential and not merely the market for sales of the Ford work itself. Ante, at 566-567. Unfortunately, the Court's failure to distinguish between the use of information and the appropriation of literary form badly skews its analysis of this factor.

For purposes of fair use analysis, the Court holds, it is sufficient that the entire article containing the quotes eroded the serialization market potential of Mr. Ford's work. Ante, at 567. On the basis of Time's cancellation of its serialization agreement, the Court finds that "[r]arely will a case of copyright infringement present such clear-cut evidence of actual damage." Ibid. In essence, the Court finds that by using some quotes in a story about the Nixon pardon, The Nation "competed for a share of the market of prepublication excerpts" ante, at 568, because Time planned to excerpt from the chapters about the pardon.

The Nation's publication indisputably precipitated Time's eventual cancellation. But that does not mean that The Nation's use of the 300 quoted words caused this injury to Harper & Row. Wholly apart from these quoted words, The Nation published significant information and ideas from the Ford manuscript. If it was this publication of information, and not the publication of the few quotations, that caused Time to abrogate its serialization agreement, then whatever the negative effect on the serialization market, that effect was the product of wholly legitimate activity.

The Court of Appeals specifically held that "the evidence does not support a finding that it was the very limited use of expression per se which led to Time's decision not to print ex [603] cerpts." 723 F.2d, at 208. I fully agree with this holding. If The Nation competed with Time, the competition was not for a share of the market in excerpts of literary form but for a share of the market in the new information in the Ford work. That the information, and not the literary form, represents most of the real value of the work in this case is perhaps best revealed by the following provision in the contract between Harper & Row and Mr. Ford:

"Author acknowledges that the value of the rights granted to publisher hereunder would be substantially diminished by Author's public discussion of the unique information not previously disclosed about Author's career and personal life which will be included in the Work, and Author agrees that Author will endeavor not to disseminate any such information in any media, including television, radio and newspaper and magazine interviews prior to the first publication of the work hereunder." App. 484.

The contract thus makes clear that Harper & Row sought to benefit substantially from monopolizing the initial revelation of information known only to Ford.

Because The Nation was the first to convey the information in this case, it did perhaps take from Harper & Row some of the value that publisher sought to garner for itself through the contractual arrangement with Ford and the license to Time. Harper & Row had every right to seek to monopolize revenue from that potential market through contractual arrangements but it has no right to set up copyright as a shield from competition in that market because copyright does not protect information. The Nation had every right to seek to be the first to publish that information.^[25]

[604] Balancing the Interests. Once the distinction between information and literary form is made clear, the statutorily prescribed process of weighing the four statutory fair use factors discussed above leads naturally to a conclusion that The Nation's limited use of literary form was not an infringement. Both the purpose of the use and the nature of the copyrighted work strongly favor the fair use defense here. The Nation appropriated Mr. Ford's expression for a purpose Congress expressly authorized in § 107 and borrowed from a work whose nature justifies some appropriation to facilitate the spread of information. The factor that is perhaps least favorable to the claim of fair use is the amount and substantiality of the expression used. Without question, a portion of the expression appropriated was among the most poignant in the Ford manuscript. But it is difficult to conclude that this taking was excessive in relation to the news reporting purpose. In any event, because the appropriation of literary form — as opposed to the use of information—was not shown to injure Harper & Row's economic interest, any uncertainty with respect to the propriety of the amount of expression borrowed should be resolved in favor of a finding of fair use.^[26] In light of the circumscribed scope of the quotation in The Nation's article and the undoubted validity of the purpose [605] motivating that quotation, I must conclude that the Court has simply adopted an exceedingly narrow view of fair use in order to impose liability for what was in essence a taking of unprotected information.

The Court's exceedingly narrow approach to fair use permits Harper & Row to monopolize information. This holding "effect[s] an important extension of property rights and a corresponding curtailment in the free use of knowledge and of ideas." International News Service v. Associated Press, 248 U.S., at 263, 39 S.Ct., at 81 (Brandeis, J., dissenting). The Court has perhaps advanced the ability of the historian — or at least the public official who has recently left office — to capture the full economic value of information in his or her possession. But the Court does so only by risking the robust debate of public issues that is the "essence of self-government." Garrison v. Louisiana, 379 U.S., at 74-75, 85 S.Ct., at 215-216. The Nation was providing the grist for that robust debate. The Court imposes liability upon The Nation for no other reason than that The Nation succeeded in being the first to provide certain information to the public. I dissent.

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[1] Section 106 provides in pertinent part:

"Subject to sections 107 through 118, the owner of copyright under this title has the exclusive rights to do and authorize any of the following:

"(1) to reproduce the copyrighted work in copies . . .;

"(2) to prepare derivative works based upon the copyrighted work;

"(3) to distribute copies . . . of the copyrighted work to the public. . . ."

[2] Section 107 states:

"Notwithstanding the provisions of section 106, the fair use of a copyrighted work . . . for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include —

"(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."

[3] Professor Nimmer notes: "[Perhaps] no more precise guide can be stated than Joseph McDonald's clever paraphrase of the Golden Rule: 'Take not from others to such an extent and in such a manner that you would be resentful if they so took from you.'" 3 Nimmer § 13.05[A], at 13-66, quoting McDonald, Non-infringing Uses, 9 Bull. Copyright Soc. 466, 467 (1962). This "equitable rule of reason," Sony Corp. of America v. Universal City Studios, Inc., 464 U.S., at 448, 104 S.Ct., at 792, "permits courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster." Iowa State University Research Foundation, Inc. v. American Broadcasting Cos., 621 F.2d 57, 60 (CA2 1980). See generally L. Seltzer, Exemptions and Fair Use in Copyright 18-48 (1978).

[4] See Latman 7; Strauss, Protection of Unpublished Works (1957), reprinted as Study No. 29 in Copyright Law Revision Studies Nos. 29-31, prepared for the Senate Committee on the Judiciary, 86th Cong., 2d Sess., 4, n. 32 (1961) (citing cases); R. Shaw, Literary Property in the United States 67 (1950) ("[T]here can be no 'fair use' of unpublished material"); Ball 260, n. 5 ("[T]he doctrine of fair use does not apply to unpublished works"); A. Weil, American Copyright Law § 276, p. 115 (1917) (the author of an unpublished work "has, probably, the right to prevent even a 'fair use' of the work by others"). Cf., M. Flint, A User's Guide to Copyright ¶ 10.06 (1979) (United Kingdom) ("no fair dealing with unpublished works"); Beloff v. Pressdram Ltd.,[1973] All E.R. 241, 263 (Ch. 1972) (same).

[5] See, e.g., Wheaton v. Peters, 8 Pet. 591, 657, 8 L.Ed. 1055 (1834) (distinguishing the author's common-law right to "obtain redress against anyone who . . . by improperly obtaining a copy [of his unpublished work] endeavors to realize a profit by its publication" from rights in a published work, which are prescribed by statute); Press Publishing Co. v. Monroe, 73 F. 196, 199 (CA2), writ of error dism'd, 164 U.S. 105, 17 S.Ct. 40, 41 L.Ed. 367 (1896); Stanley v. Columbia Broadcasting System, Inc., 35 Cal.2d 653, 660-661, 221 P.2d 73, 77-78 (1950) (en banc); Golding v. RKO Radio Pictures, Inc., 193 P.2d 153, 162 (Cal.App.1948) ("An unauthorized appropriation of [an unpublished work] is not to be neutralized on the plea that 'it is such a little one'"), aff'd, 35 Cal.2d 690, 221 P.2d 95 (1950); Fendler v. Morosco, 253 N.Y. 281, 291, 171 N.E. 56, 59 ("Since plaintiff had not published or produced her play, perhaps any use that others made of it might be unfair"), rehearing denied, 254 N.Y. 563, 173 N.E. 867 (1930).

[6] It bears noting that Congress in the Copyright Act recognized a public interest warranting specific exemptions in a number of areas not within traditional fair use, see, e.g., 17 U.S.C. § 115 (compulsory license for records); § 105 (no copyright in Government works). No such exemption limits copyright in personal narratives written by public servants after they leave Government service.

[7] The dissent excuses The Nation's unconsented use of an unpublished manuscript as "standard journalistic practice," taking judicial notice of New York Times articles regarding the memoirs of John Erlichman, John Dean's "Blind Ambition," and Bernstein and Woodward's "The Final Days" as proof of such practice. Post, at 590-593, and n. 14. Amici curiae sought to bring this alleged practice to the attention of the Court of Appeals for the Second Circuit, citing these same articles. The Court of Appeals, at Harper & Row's motion, struck these exhibits for failure of proof at trial, Record Doc. No. 19; thus they are not a proper subject for this Court's judicial notice.

[8] See Appendix to this opinion, post, p. 570. The Court of Appeals found that only "approximately 300 words" were copyrightable but did not specify which words. The court's discussion, however, indicates it excluded from consideration those portions of The Nation's piece that, although copied verbatim from Ford's manuscript, were quotes attributed by Ford to third persons and quotations from Government documents. At oral argument, counsel for The Nation did not dispute that verbatim quotes and very close paraphrase could constitute infringement. Tr. of Oral Arg. 24-25. Thus the Appendix identifies as potentially infringing only verbatim quotes or very close paraphrase and excludes from consideration Government documents and words attributed to third persons. The Appendix is not intended to endorse any particular rule of copyrightability but is intended merely as an aid to facilitate our discussion.

[9] Economists who have addressed the issue believe the fair use exception should come into play only in those situations in which the market fails or the price the copyright holder would ask is near zero. See, e.g., T. Brennan, Harper & Row v. The Nation, Copyrightability and Fair Use, Dept. of Justice Economic Policy Office Discussion Paper 13-17 (1984); Gordon, Fair Use as Market Failure: A Structural and Economic Analysis of the Betamax Case and its Predecessors, 82 Colum.L.Rev. 1600, 1615 (1982). As the facts here demonstrate, there is a fully functioning market that encourages the creation and dissemination of memoirs of public figures. In the economists' view, permitting "fair use" to displace normal copyright channels disrupts the copyright market without a commensurate public benefit.

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[1] I was angry at myself for showing cowardice in not saying to the ultra-conservatives, "It's going to be Ford and Rockefeller, whatever the consequences." p. 496.

[2] [I]t contained the so-called smoking gun. p. 3.

[3] [O]ver the past several months Nixon had repeatedly assured me that he was not involved in Watergate, that the evidence would prove his innocence, that the matter would fade from view. p. 7.

[4] The first [option] was that he could try to "ride it out" by letting impeachment take its natural course through the House and the Senate trial, fighting against conviction all the way. p. 4.

[5] Finally, Haig said that according to some on Nixon's White House staff, Nixon could agree to leave in return for an agreement that the new President — Gerald Ford — would pardon him. p. 5.

[6] Because of his references to pardon authority, I did ask Haig about the extent of a President's pardon power. pp. 5-6.

[7] Only after I had finished did [Bryce Harlow] let me know in no uncertain terms that he agreed with Bob and Jack, that the mere mention of the pardon option could cause a lot of trouble in the days ahead. p. 18.

[8] During the luncheon I repeated my assertion that the President was not guilty of an impeachable offense. Had I said otherwise at that moment, the whole house of cards might have collapsed. p. 21.

[9] But compassion for Nixon as an individual hadn't prompted my decision at all. p. 266.

[10] I had to get the monkey off my back one way or another. p. 236.

[11] Jaworski gave Phil several crucial pieces of information. p. 246.

[12] And if the verdict was Guilty, one had to assume that Nixon would appeal. That process would take years. p. 248.

[13] The entire process would no doubt require years: a minimum of two, a maximum of six. And Nixon would not spend time quietly in San Clemente. p. 238.

[14] It would be virtually impossible for me to direct public attention on anything else. p. 239.

[15] But [Miller] wasn't optimistic about getting such a statement. His few meetings with his client had shown him that the former President's ability to discuss Watergate objectively was almost nonexistent. p. 246.

[16] When Zeigler asked Becker what he thought of it, Becker replied that no statement would be better than that. p. 251.

[17] Years before, at Yale Law School, I'd learned that public policy often took precedence over a rule of law. Although I respected the tenet that no man should be above the law, public policy demanded that I put Nixon — and Watergate—behind us as quickly as possible. p. 256.

[18] My staff debated whether or not I ought to visit Nixon at the Long Beach Hospital, only half an hour away. If I made the trip, it would remind everyone of Watergate and the pardon. If I didn't, people would say I lacked compassion. I ended their debate as soon as I found out it had begun. Of course I would go. p. 298.

[19] He was stretched out flat on his back. There were tubes in his nose and mouth, and wires led from his arms, chest and legs to machines with orange lights that blinked on and off. His face was ashen, and I thought I had never seen anyone closer to death. p. 299.

[20] "Henry," I said when he came on the line, "I need you. The country needs you. I want you to stay. I'll do everything I can to work with you." p. 46.

[21] "We'll get along," I said. "I know we can get along." We talked about the two hats he wore, as Secretary of State and National Security Adviser to the President. "I don't want to make any change," I said. "I think it's worked out well, so let's keep it that way." p. 46.

[22] I told him about my promise to Betty and said that I had no ambitions to hold office after January 1977. p. 155.

[23] Subjectively, I felt that what Kennerly had said made a lot of sense. Massive airstrikes would constitute overkill. It would be far better to have Navy jets from the Coral Sea make surgical strikes against specific targets in the vicinity of Kompong Som. p. 416.

[24] In Nixon's case, that flaw was pride. A terribly proud man, he detested weakness in other people. I'd often heard him speak disparagingly of those whom he felt to be soft and expedient. (Curiously, he didn't feel that the press was weak. Reporters, he sensed, were his adversaries. He knew they didn't like him, and he responded with reciprocal disdain.) p. 53.

[25] His pride and personal contempt for weakness had overcome his ability to tell the difference between right and wrong. p. 54.

[26] The speech lasted fifteen minutes, and at the end I was convinced Nixon was out of touch with reality. p. 57.

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[1] In bypassing the threshold issue, the Court certainly does not intimate that The Nation's use of ideas and information other than the quoted material would constitute a violation of the copyright laws. At one point in its opinion the Court correctly states the governing principles with respect to the copyrightability question. See ante, at 556 ("No author may copyright his ideas or the facts he narrates").

[2] Section 102(b) states: "In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work." 17 U.S.C. § 102(b). The doctrines of fair use, see 17 U.S.C. § 107, and substantial similarity, see 3 M. Nimmer, Copyright § 13.05 (1984) (hereinafter Nimmer), also function to accommodate these competing considerations. See generally Gorman, Fact or Fancy? The Implications for Copyright, 29 J. Copyright Soc. 560 (1982).

[3] By the same token, an author may not claim copyright in statements made by others and reported verbatim in the author's work. See Suid v. Newsweek Magazine, 503 F.Supp. 146, 148 (DC 1980); Rokeach v. Avco Embassy Pictures Corp., 197 USPQ 155, 161 (SDNY 1978).

[4] It would be perverse to prohibit government from limiting the financial resources upon which a political speaker may draw, see FEC v. National Conservative Political Action Committee, 470 U.S. 480, 105 S.Ct. 1459, 84 L.Ed.2d 455 (1985), but to permit government to limit the intellectual resources upon which that speaker may draw.

[5] The protection of literary form must proscribe more than merely word-for-word appropriation of substantial portions of an author's work. Otherwise a plagiarist could avoid infringement by immaterial variations. Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (CA2 1930). The step beyond the narrow and clear prohibition of wholesale copying is, however, a venture onto somewhat uncertain terrain. Compare Hoehling v. Universal City Studios, Inc., 618 F.2d 972, 974 (CA2 1980), with Wainwright Securities Inc. v. Wall Street Transcript Corp., 558 F.2d 91 (CA2 1977). See also 1 Nimmer § 1.10B, at 1-73 — 1-74 ("It is the particular selection and arrangement of ideas, as well as a given specificity in the form of their expression, which warrants protection"); Chafee, Reflections on the Law of Copyright: I, 45 Colum.L.Rev. 503, 513 (1945) ("[T]he line . . . lie[s] somewhere between the author's idea and the precise form in which he wrote it down. . . . [T]he protection covers the 'pattern' of the work"); Gorman, supra, at 593 ("too literal and substantial copying and paraphrasing of . . . language").

[6] The inquiry into the substantiality of appropriation has a quantitative and a qualitative aspect.

[7] Neither the District Court nor the dissent in the Court of Appeals approached the question in this way. Despite recognizing that this material was not "per se copyrightable," the District Court held that the "totality of these facts and memoranda collected together with Mr. Ford's reflections . . . is protected by the copyright laws." 557 F.Supp. 1067, 1072-1073 (SDNY 1983). The dissent in the Court of Appeals signaled approval of this approach. 723 F.2d 195, 213-214 (CA2 1983) (Meskill, J., dissenting). Such an approach must be rejected. Copyright protection cannot be extended to factual information whenever that information is interwoven with protected expression (purportedly in this case Mr. Ford's reflections) into an expressive "totality." Most works of history or biography blend factual narrative and reflective or speculative commentary in this way. Precluding subsequent use of facts so presented cannot be squared with the specific legislative intent, expressed in both House and Senate Reports, that "[c]opyright does not preclude others from using the . . . information revealed by the author's work." See S.Rep. No. 93-983, pp. 107-108 (1974); H.R.Rep. No. 94-1476, pp. 56-57 (1976). The core purposes of copyright would be thwarted and serious First Amendment concerns would arise. An author could obtain a monopoly on narration of historical events simply by being the first to discuss them in a reflective or analytical manner.

[8] For example, the Ford manuscript expends several hundred words discussing relations between Mr. Ford and Ronald Reagan in the weeks before the Republican Convention of 1976:

"About a month before the convention, my aides had met with Reagan's representatives to discuss the need for party unity. And they had reached an agreement. At the end of the Presidential balloting, the winner would go to the loser's hotel suite and congratulate his opponent for waging a fine campaign. Together, they would appear at a press conference and urge all Republicans to put aside their differences and rally behind the ticket. That was the only way we could leave Kansas City with a hope of victory. When it appeared I was going to win, Sears contacted Cheney and refined the scenario. He insisted on two conditions. The first was that I had to see Reagan alone; there could be no aides from either camp in the room. Secondly, under no circumstances should I offer him the nomination to be Vice President. Reagan had said all along that he wasn't interested in the job. He had meant what he said. If I tried to talk him out of it, he would have to turn me down, and that would be embarrassing because it would appear that he was refusing to help the GOP. When Cheney relayed those conditions to me, I agreed to go along with them. I would need Reagan's assistance in the fall campaign. It would be stupid to anger him or his followers at this moment.

"Later I was told that just before my arrival at the Californian's hotel, one of his closest advisors, businessman Justin Dart, had urged him to say yes if I asked him to be my running mate, Regardless of anything he'd said before, Dart had insisted, it was his patriotic duty to accept the number two post. Finally, according to Dart, Reagan had agreed. But at the time, no one mentioned this new development to me. Had I been aware of the Dart-Reagan conversation, would I have chosen him? I can't say for sure — I thought his challenge had been divisive, and that it would probably hurt the party in the fall campaign; additionally, I resented some of the things that he'd been saying about me and my Administration's policies — but I certainly would have considered him." App. 628-629.

The Nation encapsulated this discussion in the following sentence: "Ford also writes that, but for a misunderstanding, he might have selected Ronald Reagan as his 1976 running mate." Id., at 627. In most other instances, a single sentence or brief paragraph in The Nation's article similarly conveys the gist of a discussion in the Ford manuscript that runs into the hundreds of words. See generally Addendum B to Defendant's Post-Trial Memorandum, id., at 627-704.

[9] For example, at one point The Nation's article reads: "Ford told a Jackson, Mich., luncheon audience later in the day that the President was not guilty of an impeachable offense." Ante, at 572. The portion of the Ford manuscript discussed stated: "Representative Thad Cochran . . . escorted me to a luncheon at the Jackson Hilton Hotel. During the luncheon I repeated my assertion that the President was not guilty of an impeachable offense." App. 649. In several other places the language in The Nation's article parallels Mr. Ford's original expression to a similar degree. Compare ante, at 570-579, with App. 627-704.

[10] Often the paraphrasing was of statements others had made to Mr. Ford. E.g., ante, at 571 ("He could 'ride it out' or he could resign, Haig said"). See generally ante, at 570-579. No copyright can be asserted in the verbatim representation of such statements of others. 17 U.S.C. § 102. See Suid v. Newsweek Magazine, 503 F.Supp., at 148; Rokeach v. Avco Embassy Pictures Corp., 197 USPQ, at 161. Other paraphrased material came from Government documents in which no copyright interest can be claimed. For example, the article quotes from a memorandum prepared by Henry S. Ruth, Jr., in his official capacity as assistant to Watergate Special Prosecutor Leon Jaworski. See ante, at 573. This document is a work of the United States Government. See 17 U.S.C. § 105.

[11] According to an exhibit Harper & Row introduced at trial the pages in the Ford manuscript that correspond to consecutive sections of the article are as follows: 607-608, 401, 44, 496, 1, 2-3, 4, 8, 7, 4-5, 5, 5-6, 8, 14, 15, 16, 16, 18, 19, 21, 266, 236, 246, 248, 249, 238-239, 239, 243, 245, 246, 250, 250-251, 251, 252, 253, 254, 256, 298, 299, 46, 494, 537, 155-156, 216, 415, 416, 416, 53-54, 57. See App. to Pet. for Cert. E-1 to E-41.

[12] In one sense The Nation "copied" Mr. Ford's selection of facts because it reported on only those facts Mr. Ford chose to select for presentation. But this tracking of a historian's selection of facts generally should not supply the basis for a finding of infringement. See Myers v. Mail & Express Co., 36 Copyright Off.Bull. 478 (SDNY 1919) (L. Hand, J.). To hold otherwise would be to require a second author to duplicate the research of the first author so as to avoid reliance on the first author's judgment as to what facts are particularly pertinent. "'It is just such wasted effort that the proscription against the copyright of ideas and facts . . . are designed to prevent.'" Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1371 (CA5 1981), quoting Rosemont Enterprises, Inc. v. Random House, Inc., 366 F.2d 303, 310 (CA2 1966). See Gorman, 29 J. Copyright Soc., at 594-595.

[13] This congressional limitation on the scope of copyright does not threaten the production of history. That this limitation results in significant diminution of economic incentives is far from apparent. In any event noneconomic incentives motivate much historical research and writing. For example, former public officials often have great incentive to "tell their side of the story." And much history is the product of academic scholarship. Perhaps most importantly, the urge to preserve the past is as old as humankind.

[14] E.g., N.Y. Times, Aug. 2, 1984, p. C20, col. 5 (article about revelations in forthcoming biography of Cardinal Spellman); N.Y. Times, Dec. 10, 1981, p. A18, col. 1 (article about revelations in forthcoming book by John Erlichman); N.Y. Times, Sept. 29, 1976, p. 1, col. 2 (article about revelations in forthcoming autobiography of President Nixon); N.Y. Times, Mar. 27, 1976, p. 9, col. 1 (article about revelations concerning President Nixon's resignation in forthcoming book The Final Days); N.Y. Times, Sept. 23, 1976, p. 36, col. 1 (article about revelations concerning President Ford in forthcoming book Blind Ambition by John Dean).

[15] The Court properly rejects the argument that this is not legitimate news. Courts have no business making such evaluations of journalistic quality. See ante, at 561. The Court also properly rejects the argument that this use is nonproductive. See ibid. News reporting, which encompasses journalistic judgment with respect to selection, organization, and presentation of facts and ideas, is certainly a productive use. See Sony Corp. of America v. Universal City Studios, Inc., 464 U.S., at 478-479, 104 S.Ct., at 807-808 (BLACKMUN, J., dissenting).

[16] To support this claim the Court refers to some language in Sony Corp. of America v. Universal City Studios, Inc., supra, to the effect that "every commercial use of copyrighted material is presumptively an unfair exploitation." Id., at 451, 104 S.Ct., at 793. See ante, at 562. Properly understood, this language does not support the Court's position in this case. The Court in Sony Corp. dealt with a use — video recording of copyrighted television programs for personal use — about which Congress had expressed no policy judgment. When a court evaluates uses that Congress has not specifically addressed, the presumption articulated in Sony Corp. is appropriate to effectuate the congressional instruction to consider "whether such use is of a commercial nature." 17 U.S.C. § 107(1). Also, the Court made that statement in the course of evaluating a use that appropriated the entirety of the copyrighted work in a form identical to that of the original; the presumption articulated may well have been intended to apply to takings under these circumstances. But, in light of the specific language of § 107, this presumption is not appropriately employed to negate the weight Congress explicitly gave to news reporting as a justification for limited use of another's expression.

[17] This case is a far cry from Time Inc. v. Bernard Geis Associates, 293 F.Supp. 130, 146 (SDNY 1968), the only case the Court cites to support consideration of The Nation's purported bad faith. In that case the publisher claiming fair use had personally stolen film negatives from the offices of Time and then published graphic representations of the stolen photographic images. And the court found fair use despite these circumstances. Ibid.

[18] The Court also discounts this factor in part because the appropriation of The Nation, "focusing on the most expressive elements of the work, exceeds that necessary to disseminate the facts." Ante,at 564. Whatever the propriety of this view of The Nation's use, it is properly analyzed under the third statutory fair use factor — the amount and substantiality of the expression taken in relation to the copyrighted work as a whole, 17 U.S.C. § 107(3) — and will be analyzed as such in this opinion.

[19] The Court lays claim to specific congressional intent supporting the presumption against prepublication fair use. See ante, at 553, quoting S.Rep. No. 94-473, p. 64 (1975); ante,at 551, n. 4, 553-554. The argument based on congressional intent is unpersuasive for three reasons.

First, the face of the statute clearly allows for prepublication fair use. The right of first publication, like all other rights § 106 of the Act specifically grants copyright owners, is explicitly made "subject to section 107," the statutory fair use provision. See 17 U.S.C. § 106.

Second, the language from the Senate Report on which the Court relies so heavily, see ante,at 553, simply will not bear the weight the Court places on it. The Senate Report merely suggests that prepublication photocopying for classroom purposes will not generally constitute fair use when the author has an interest in the confidentiality of the unpublished work, evidenced by the author's "deliberate choice" not to publish. Given that the face of § 106 specifically allows for prepublication fair use, it would be unfaithful to the intent of Congress to draw from this circumscribed suggestion in the Senate Report a blanket presumption against any amount of prepublication fair use for any purpose and irrespective of the effect of that use on the copyright owner's privacy, editorial, or economic interests.

Third, the Court's reliance on congressional adoption of the common law is also unpersuasive. The common law did not set up the monolithic barrier to prepublication fair use that the Court wishes it did. See, e.g., Estate of Hemingway v. Random House, Inc., 53 Misc.2d 462, 279 N.Y.S.2d 51 (S.Ct.N.Y.Cty.), aff'd, 29 App.Div.2d 633, 285 N.Y.S.2d 568 (1st Jud.Dept.1967), aff'd on other grounds, 23 N.Y.2d 341, 296 N.Y.S.2d 771, 244 N.E.2d 250 (1968).

The statements of general principle the Court cites to support its contrary representation of the common law, see ante, at 551, n. 4, are themselves unsupported by reference to substantial judicial authority. Congressional endorsement of the common law of fair use should not be read as adoption of any rigid presumption against prepublication use. If read that way, the broad statement that the Copyright Act was intended to incorporate the common law would in effect be given the force of nullifying Congress' repeated methodological prescription that definite rules are inappropriate and fact-specific analysis is required. The broad language adopting the common-law approach to fair use is best understood as an endorsement of the essential fact-specificity and case-by-case methodology of the common law of fair use.

[20] The Court finds the right of first publication particularly weighty because it encompasses three important interests: (i) a privacy interest in whether to make expression public at all; (ii) an editorial interest in ensuring control over the work while it is being groomed for public dissemination; and (iii) an economic interest in capturing the full remunerative potential of initial release to the public. Ante, at 552-555.

[21] Perhaps most inappropriate is the Court's apocalyptic prophesy that permitting any prepublication use for news reporting will "effectively destroy any expectation of copyright protection in the work of a public figure." Ante, at 557. The impact of a prepublication use for purposes of news reporting will obviously vary with the circumstances. A claim of news reporting should not be a fig leaf for substantial plagiarism, see Wainwright Securities Inc. v. Wall Street Transcript Corp., 558 F.2d 91 (CA2 1977), but there is no warrant for concluding that prepublication quotation of a few sentences will usually drain all value from a copyright owner's right of first publication.

[22] These six quotes are:

(1) "'[C]ompassion for Nixon as an individual hadn't prompted my decision at all.' Rather, he did it because he had 'to get the monkey off my back one way or the other.'" Ante, at 572-573.

(2) "Nixon 'would not spend the time quietly in San Clemente,' and 'it would be virtually impossible for me to direct public attention on anything else.'" Ante, at 573.

(3) "'I learned that public policy often took precedence over a rule of law. Although I respected the tenet that no man should be above the law, public policy demanded that I put Nixon and Watergate — behind us as quickly as possible.'" Ante, at 575.

(4) "'If I made the trip it would remind everybody of Watergate and the pardon. If I didn't people would say I lacked compassion.'" Ibid.

(5) "He was stretched out flat on his back. There were tubes in his nose and mouth, and wires led from his arms, chest and legs to machines with orange lights that blinked on and off. His face was ashen, and I thought I had never seen anyone closer to death." Ibid.

(6) "'A terribly proud man,' writes Ford, 'he detested weakness in other people. I'd often heard him speak disparagingly of those whom he felt to be soft and expedient. (Curiously, he didn't feel that the press was weak. Reporters, he sensed, were his adversaries. He knew they didn't like him, and he responded with reciprocal disdain.)' . . . 'His pride and personal contempt for weakness had overcome his ability to tell the difference between right and wrong.' . . . 'Nixon was out of touch with reality.'" Ante, at 578.

[23] The Court places some emphasis on the fact that the quotations from the Ford work constituted a substantial portion of The Nation's article. Superficially, the Court would thus appear to be evaluating The Nation's quotation of 300 words in relation to the amount and substantiality of expression used in relation to the second author's work as a whole. The statute directs the inquiry into "the amount and substantiality of the portion used in relation to the copyrighted work as a whole," 17 U.S.C. § 107(3) (emphasis added). As the statutory directive implies, it matters little whether the second author's use is 1 or 100-percent appropriated expression if the taking of that expression had no adverse effect on the copyrighted work. See Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984) (100% of expression taken). I presume, therefore, that the Court considered the role of the expression "in the infringing work" only as indirect evidence of the qualitative value of the expression taken in this case. If read this way, the point dovetails with the Court's major argument that The Nation appropriated the most valuable sentences of the work.

[24] See n. 23, supra.

[25] The Court's reliance on the principle that "an infringer who mingles infringing and noninfringing elements 'must abide the consequences,'" ante, at 567 (citation omitted), is misconceived. Once infringement of a § 106 exclusive right has been shown, it is entirely appropriate to shift to the infringer the burden of showing that the infringement did not cause all the damages shown. But the question in this case is whether this particular use infringed any § 106 rights. Harper & Row may have shown actual damage flowing from The Nation's use of information, but they have not shown actual damage flowing from an infringement of a § 106 exclusive right.

[26] Had The Nation sought to justify a more substantial appropriation of expression on a news reporting rationale, a different case might be presented. The substantiality of the taking would certainly dilute the claim of need to use the first author's exact words to convey a particular thought or sentiment. Even if the claim of need were plausible, the equities would have to favor the copyright owner in order to prevent erosion of virtually all copyright protection for works of former public officials. In this case, however, the need is manifest and the integrity of copyright protection for the works of public officials is not threatened.

Rehearing Denied March 19, 1984. See U.S., 104 S.Ct. 1619.

Syllabus

Petitioner Sony Corp. manufactures home video tape recorders (VTR's), and markets them through retail establishments, some of which are also petitioners. Respondents own the copyrights on some of the television programs that are broadcast on the public airwaves. Respondents brought an action against petitioners in Federal District Court, alleging that VTR consumers had been recording some of respondents' copyrighted works that had been exhibited on commercially sponsored television and thereby infringed respondents' copyrights, and further that petitioners were liable for such copyright infringement because of their marketing of the VTR's. Respondents sought money damages, an equitable accounting of profits, and an injunction against the manufacture and marketing of the VTR's. The District Court denied respondents all relief, holding that noncommercial home use recording of material broadcast over the public airwaves was a fair use of copyrighted works and did not constitute copyright infringement, and that petitioners could not be held liable as contributory infringers even if the home use of a VTR was considered an infringing use. The Court of Appeals reversed, holding petitioners liable for contributory infringement and ordering the District Court to fashion appropriate relief.

Held: The sale of the VTR's to the general public does not constitute contributory infringement of respondents' copyrights. Pp. 428-456.

(a) The protection given to copyrights is wholly statutory, and, in a case like this, in which Congress has not plainly marked the course to be followed by the judiciary, this Court must be circumspect in construing the scope of rights created by a statute that never contemplated such a calculus of interests. Any individual may reproduce a copyrighted work for a "fair use"; the copyright owner does not possess the exclusive right to such a use. Pp. 428-434.

(b) Kalem Co. v. Harper Brothers, 222 U.S. 55, 32 S.Ct. 20, 56 L.Ed. 92, does not support respondents' novel theory that supplying the "means" to accomplish an infringing activity and encouraging that activity through advertisement are sufficient to establish liability for copyright infringement. This case does not fall in the category of those in which it is manifestly just to [418] impose vicarious liability because the "contributory" infringer was in a position to control the use of copyrighted works by others and had authorized the use without permission from the copyright owner. Here, the only contact between petitioners and the users of the VTR's occurred at the moment of sale. And there is no precedent for imposing vicarious liability on the theory that petitioners sold the VTR's with constructive knowledge that their customers might use the equipment to make unauthorized copies of copyrighted material. The sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes, or, indeed, is merely capable of substantial noninfringing uses. Pp. 434-442.

(c) The record and the District Court's findings show (1) that there is a significant likelihood that substantial numbers of copyright holders who license their works for broadcast on free television would not object to having their broadcast time-shifted by private viewers (i.e., recorded at a time when the VTR owner cannot view the broadcast so that it can be watched at a later time); and (2) that there is no likelihood that time-shifting would cause nonminimal harm to the potential market for, or the value of, respondents' copyrighted works. The VTR's are therefore capable of substantial noninfringing uses. Private, noncommercial time-shifting in the home satisfies this standard of noninfringing uses both because respondents have no right to prevent other copyright holders from authorizing such time-shifting for their programs, and because the District Court's findings reveal that even the unauthorized home time-shifting of respondents' programs is legitimate fair use. Pp. 442-456.

659 F.2d 963, reversed.

Dean C. Dunlavey, Los Angeles, Cal., for petitioners.

Stephen A. Kroft, Beverly Hills, Cal., for respondents.

[419] Justice STEVENS delivered the opinion of the Court.

Petitioners manufacture and sell home video tape recorders. Respondents own the copyrights on some of the tele [420] vision programs that are broadcast on the public airwaves. Some members of the general public use video tape recorders sold by petitioners to record some of these broadcasts, as well as a large number of other broadcasts. The question presented is whether the sale of petitioners' copying equipment to the general public violates any of the rights conferred upon respondents by the Copyright Act.

Respondents commenced this copyright infringement action against petitioners in the United States District Court for the Central District of California in 1976. Respondents alleged that some individuals had used Betamax video tape recorders (VTR's) to record some of respondents' copyrighted works which had been exhibited on commercially sponsored television and contended that these individuals had thereby infringed respondents' copyrights. Respondents further maintained that petitioners were liable for the copyright infringement allegedly committed by Betamax consumers because of petitioners' marketing of the Betamax VTR's.^[1] Respondents sought no relief against any Betamax consumer. Instead, they sought money damages and an equitable accounting of profits from petitioners, as well as an injunction against the manufacture and marketing of Betamax VTR's.

After a lengthy trial, the District Court denied respondents all the relief they sought and entered judgment for petitioners. 480 F.Supp. 429 (1979). The United States Court of Appeals for the Ninth Circuit reversed the District Court's judgment on respondent's copyright claim, holding petitioners liable for contributory infringement and ordering the District Court to fashion appropriate relief. 659 F.2d 963 [421] (1981). We granted certiorari, 457 U.S. 1116, 102 S.Ct. 2926, 73 L.Ed.2d 1328 (1982); since we had not completed our study of the case last Term, we ordered reargument, --- U.S. ----, 103 S.Ct. 3568, 77 L.Ed.2d 1409 (1983). We now reverse.

An explanation of our rejection of respondents' unprecedented attempt to impose copyright liability upon the distributors of copying equipment requires a quite detailed recitation of the findings of the District Court. In summary, those findings reveal that the average member of the public uses a VTR principally to record a program he cannot view as it is being televised and then to watch it once at a later time. This practice, known as "time-shifting," enlarges the television viewing audience. For that reason, a significant amount of television programming may be used in this manner without objection from the owners of the copyrights on the programs. For the same reason, even the two respondents in this case, who do assert objections to time-shifting in this litigation, were unable to prove that the practice has impaired the commercial value of their copyrights or has created any likelihood of future harm. Given these findings, there is no basis in the Copyright Act upon which respondents can hold petitioners liable for distributing VTR's to the general public. The Court of Appeals' holding that respondents are entitled to enjoin the distribution of VTR's, to collect royalties on the sale of such equipment, or to obtain other relief, if affirmed, would enlarge the scope of respondents' statutory monopolies to encompass control over an article of commerce that is not the subject of copyright protection. Such an expansion of the copyright privilege is beyond the limits of the grants authorized by Congress.

I

The two respondents in this action, Universal Studios, Inc. and Walt Disney Productions, produce and hold the copyrights on a substantial number of motion pictures and other audiovisual works. In the current marketplace, they can exploit their rights in these [422] by authorizing theatrical exhibitions, by licensing limited showings on cable and network television, by selling syndication rights for repeated airings on local television stations, and by marketing programs on prerecorded videotapes or videodiscs. Some works are suitable for exploitation through all of these avenues, while the market for other works is more limited.

Petitioner Sony manufactures millions of Betamax video tape recorders and markets these devices through numerous retail establishments, some of which are also petitioners in this action.^[2] Sony's Betamax VTR is a mechanism consisting of three basic components: (1) a tuner, which receives electromagnetic signals transmitted over the television band of the public airwaves and separates them into audio and visual signals; (2) a recorder, which records such signals on a magnetic tape; and (3) an adapter, which converts the audio and visual signals on the tape into a composite signal that can be received by a television set.

Several capabilities of the machine are noteworthy. The separate tuner in the Betamax enables it to record a broadcast off one station while the television set is tuned to another channel, permitting the viewer, for example, to watch two simultaneous news broadcasts by watching one "live" and recording the other for later viewing. Tapes may be reused, and programs that have been recorded may be erased either before or after viewing. A timer in the Betamax can be used to activate and deactivate the equipment at predetermined [423] times, enabling an intended viewer to record programs that are transmitted when he or she is not at home. Thus a person may watch a program at home in the evening even though it was broadcast while the viewer was at work during the afternoon. The Betamax is also equipped with a pause button and a fast-forward control. The pause button, when depressed, deactivates the recorder until it is released, thus enabling a viewer to omit a commercial advertisement from the recording, provided, of course, that the viewer is present when the program is recorded. The fast forward control enables the viewer of a previously recorded program to run the tape rapidly when a segment he or she does not desire to see is being played back on the television screen.

The respondents and Sony both conducted surveys of the way the Betamax machine was used by several hundred owners during a sample period in 1978. Although there were some differences in the surveys, they both showed that the primary use of the machine for most owners was "time-shifting,"—the practice of recording a program to view it once at a later time, and thereafter erasing it. Time-shifting enables viewers to see programs they otherwise would miss because they are not at home, are occupied with other tasks, or are viewing a program on another station at the time of a broadcast that they desire to watch. Both surveys also showed, however, that a substantial number of interviewees had accumulated libraries of tapes.^[3] Sony's survey indicated [424] that over 80% of the interviewees watched at least as much regular television as they had before owning a Betamax.^[4] Respondents offered no evidence of decreased television viewing by Betamax owners.^[5]

Sony introduced considerable evidence describing television programs that could be copied without objection from any copyright holder, with special emphasis on sports, religious, and educational programming. For example, their survey indicated that 7.3% of all Betamax use is to record sports events, and representatives of professional baseball, football, basketball, and hockey testified that they had no objection to the recording of their televised events for home use.^[6]

[425] Respondents offered opinion evidence concerning the future impact of the unrestricted sale of VTR's on the commercial value of their copyrights. The District Court found, however, that they had failed to prove any likelihood of future harm from the use of VTR's for time-shifting. Id., at 469.

The District Court's Decision

The lengthy trial of the case in the District Court concerned the private, home use of VTR's for recording programs broadcast on the public airwaves without charge to the viewer.^[7] No issue concerning the transfer of tapes to other persons, the use of home-recorded tapes for public performances, or the copying of programs transmitted on pay or cable television systems was raised. See 480 F.Supp. 429, 432-433, 442 (1979).

The District Court concluded that noncommercial home use recording of material broadcast over the public airwaves was a fair use of copyrighted works and did not constitute copyright infringement. It emphasized the fact that the material was broadcast free to the public at large, the noncommercial character of the use, and the private character of the activity conducted entirely within the home. Moreover, the court found that the purpose of this use served the public interest in increasing access to television programming, an interest that "is consistent with the First Amendment policy of providing the fullest possible access to information through the public airwaves. Columbia Broadcasting System, Inc. v. Democratic National Committee, 412 U.S. 94, 102 [93 S.Ct. 2080, 2086, 36 L.Ed.2d 772]." 480 F.Supp., at 454.^[8] Even when an entire copyrighted work was recorded, [426] the District Court regarded the copying as fair use "because there is no accompanying reduction in the market for 'plaintiff's original work.'" Ibid.

As an independent ground of decision, the District Court also concluded that Sony could not be held liable as a contributory infringer even if the home use of a VTR was considered an infringing use. The District Court noted that Sony had no direct involvement with any Betamax purchasers who recorded copyrighted works off the air. Sony's advertising was silent on the subject of possible copyright infringement, but its instruction booklet contained the following statement:

"Television programs, films, videotapes and other materials may be copyrighted. Unauthorized recording of such material may be contrary to the provisions of the United States copyright laws." Id., at 436.

The District Court assumed that Sony had constructive knowledge of the probability that the Betamax machine would be used to record copyrighted programs, but found that Sony merely sold a "product capable of a variety of uses, some of them allegedly infringing." Id., at 461. It reasoned:

"Selling a staple article of commerce e.g., a typewriter, a recorder, a camera, a photocopying machine technically contributes to any infringing use subsequently made thereof, but this kind of 'contribution,' if deemed sufficient as a basis for liability, would expand the theory beyond precedent and arguably beyond judicial management.

"Commerce would indeed be hampered if manufacturers of staple items were held liable as contributory infringers whenever they 'constructively' knew that some purchasers on some occasions would use their product [427] for a purpose which a court later deemed, as a matter of first impression, to be an infringement." Ibid.

Finally, the District Court discussed the respondents' prayer for injunctive relief, noting that they had asked for an injunction either preventing the future sale of Betamax machines, or requiring that the machines be rendered incapable of recording copyrighted works off the air. The court stated that it had "found no case in which the manufacturers, distributors, retailers, and advertisors of the instrument enabling the infringement were sued by the copyright holders," and that the request for relief in this case "is unique." 480 F.Supp., at 465.

It concluded that an injunction was wholly inappropriate because any possible harm to respondents was outweighed by the fact that "the Betamax could still legally be used to record noncopyrighted material or material whose owners consented to the copying. An injunction would deprive the public of the ability to use the Betamax for this noninfringing off-the-air recording." 480 F.Supp., at 468.

The Court of Appeals' Decision

The Court of Appeals reversed the District Court's judgment on respondents' copyright claim. It did not set aside any of the District Court's findings of fact. Rather, it concluded as a matter of law that the home use of a VTR was not a fair use because it was not a "productive use."^[9] It therefore held that it was unnecessary for plaintiffs to prove any harm to the potential market for the copyrighted works, but then observed that it seemed clear that the cumulative effect of mass reproduction made possible by VTR's would tend to diminish the potential market for respondents' works. 659 F.2d, at 974.

[428] On the issue of contributory infringement, the Court of Appeals first rejected the analogy to staple articles of commerce such as tape recorders or photocopying machines. It noted that such machines "may have substantial benefit for some purposes" and do not "even remotely raise copyright problems." Id., at 975. VTR's, however, are sold "for the primary purpose of reproducing television programming" and "virtually all" such programming is copyrighted material. Ibid. The Court of Appeals concluded, therefore, that VTR's were not suitable for any substantial noninfringing use even if some copyright owners elect not to enforce their rights.

The Court of Appeals also rejected the District Court's reliance on Sony's lack of knowledge that home use constituted infringement. Assuming that the statutory provisions defining the remedies for infringement applied also to the non-statutory tort of contributory infringement, the court stated that a defendant's good faith would merely reduce his damages liability but would not excuse the infringing conduct. It held that Sony was chargeable with knowledge of the homeowner's infringing activity because the reproduction of copyrighted materials was either "the most conspicuous use" or "the major use" of the Betamax product. Ibid.

On the matter of relief, the Court of Appeals concluded that "statutory damages may be appropriate," that the District Court should reconsider its determination that an injunction would not be an appropriate remedy; and, referring to "the analogous photocopying area," suggested that a continuing royalty pursuant to a judicially created compulsory license may very well be an acceptable resolution of the relief issue. 659 F.2d, at 976.

II

Article I, Sec. 8 of the Constitution provides that:

"The Congress shall have Power . . . to Promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

[429] The monopoly privileges that Congress may authorize are neither unlimited nor primarily designed to provide a special private benefit. Rather, the limited grant is a means by which an important public purpose may be achieved. It is intended to motivate the creative activity of authors and inventors 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.

"The copyright law, like the patent statute, makes reward to the owner a secondary consideration. In Fox Film Corp. v. Doyal, 286 U.S. 123, 127 [52 S.Ct. 546, 547, 76 L.Ed. 1010], Chief Justice Hughes spoke as follows respecting the copyright monopoly granted by Congress, 'The sole interest of the United States and the primary object in conferring the monopoly lie in the general benefits derived by the public from the labors of authors.' It is said that reward to the author or artist serves to induce release to the public of the products of his creative genius." United States v. Paramount Pictures, 334 U.S. 131, 158, 68 S.Ct. 915, 929, 92 L.Ed. 1260.

As the text of the Constitution makes plain, it is Congress that has been assigned the task of defining the scope of the limited monopoly that should be granted to authors or to inventors in order to give the public appropriate access to their work product. Because this task involves a difficult balance between the interests of authors and inventors in the control and exploitation of their writings and discoveries on the one hand, and society's competing interest in the free flow of ideas, information, and commerce on the other hand, our patent and copyright statutes have been amended repeatedly.^[10]

[430] From its beginning, the law of copyright has developed in response to significant changes in technology.^[11] Indeed, it was the invention of a new form of copying equipment—the printing press—that gave rise to the original need for copyright protection.^[12] Repeatedly, as new developments have [431] occurred in this country, it has been the Congress that has fashioned the new rules that new technology made necessary. Thus, long before the enactment of the Copyright Act of 1909, 35 Stat. 1075, it was settled that the protection given to copyrights is wholly statutory. Wheaton v. Peters, 33 U.S. (8 Peters) 591, 661-662, 8 L.Ed. 1055 (1834). The remedies for infringement "are only those prescribed by Congress." Thompson v. Hubbard, 131 U.S. 123, 151, 9 S.Ct. 710, 720, 33 L.Ed. 76 (1889).

The judiciary's reluctance to expand the protections afforded by the copyright without explicit legislative guidance is a recurring theme. See, e.g., Teleprompter Corp. v. CBS, 415 U.S. 394, 94 S.Ct. 1129, 39 L.Ed.2d 415 (1974); Fortnightly Corp. v. United Artists, 392 U.S. 390, 88 S.Ct. 2084, 20 L.Ed.2d 1176 (1968); White-Smith Music Publishing Co. v. Apollo Co., 209 U.S. 1, 28 S.Ct. 319, 52 L.Ed. 655 (1908); Williams and Wilkins v. United States, 487 F.2d 1345, 203 Ct.Cl. 74 (1973), affirmed by an equally divided court, 420 U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975). Sound policy, as well as history, supports our consistent deference to Congress when major technological innovations alter the market for copyrighted materials. Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology.

In a case like this, in which Congress has not plainly marked our course, we must be circumspect in construing the scope of rights created by a legislative enactment which never contemplated such a calculus of interests. In doing so, we are guided by Justice Stewart's exposition of the correct approach to ambiguities in the law of copyright:

"The limited scope of the copyright holder's statutory monopoly, like the limited copyright duration required by the Constitution, reflects a balance of competing claims upon the public interest: Creative work is to be [432] encouraged and rewarded, but private motivation must ultimately serve the cause of promoting broad public availability of literature, music, and the other arts. The immediate effect of our copyright law is to secure a fair return for an 'author's' creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good. 'The sole interest of the United States and the primary object in conferring the monopoly,' this Court has said, 'lie in the general benefits derived by the public from the labors of authors.' Fox Film Corp. v. Doyal, 286 U.S. 123, 127 [52 S.Ct. 546, 547, 76 L.Ed. 1010]. See Kendall v. Winsor, 21 How. 322, 327-328 [16 L.Ed. 165]; Grant v. Raymond, 6 Pet. 218, 241-242 [8 L.Ed. 376]. When technological change has rendered its literal terms ambiguous, the Copyright Act must be construed in light of this basic purpose." Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84 (footnotes omitted).

Copyright protection "subsists . . . in original works of authorship fixed in any tangible medium of expression." 17 U.S.C. § 102(a). This protection has never accorded the copyright owner complete control over all possible uses of his work.^[13] Rather, the Copyright Act grants the [433] copyright holder "exclusive" rights to use and to authorize the use of his work in five qualified ways, including reproduction of the copyrighted work in copies. Id., § 106.^[14] All reproductions of the work, however, are not within the exclusive domain of the copyright owner; some are in the public domain. Any individual may reproduce a copyrighted work for a "fair use;" the copyright owner does not possess the exclusive right to such a use. Compare id., § 106 with id., § 107.

"Anyone who violates any of the exclusive rights of the copyright owner," that is, anyone who trespasses into his exclusive domain by using or authorizing the use of the copyrighted work in one of the five ways set forth in the statute, "is an infringer of the copyright." Id., § 501(a). Conversely, anyone who is authorized by the copyright owner to use the copyrighted work in a way specified in the statute or who makes a fair use of the work is not an infringer of the copyright with respect to such use.

The Copyright Act provides the owner of a copyright with a potent arsenal of remedies against an infringer of his work, including an injunction to restrain the infringer from violat [434] ing his rights, the impoundment and destruction of all reproductions of his work made in violation of his rights, a recovery of his actual damages and any additional profits realized by the infringer or a recovery of statutory damages, and attorneys fees. Id., §§ 502-505.^[15]

The two respondents in this case do not seek relief against the Betamax users who have allegedly infringed their copyrights. Moreover, this is not a class action on behalf of all copyright owners who license their works for television broadcast, and respondents have no right to invoke whatever rights other copyright holders may have to bring infringement actions based on Betamax copying of their works.^[16] As was made clear by their own evidence, the copying of the respondents' programs represents a small portion of the total use of VTR's. It is, however, the taping of respondents own copyrighted programs that provides them with standing to charge Sony with contributory infringement. To prevail, they have the burden of proving that users of the Betamax have infringed their copyrights and that Sony should be held responsible for that infringement.

III

The Copyright Act does not expressly render anyone liable for infringement committed by another. In contrast, the [435] Patent Act expressly brands anyone who "actively induces infringement of a patent" as an infringer, 35 U.S.C. § 271(b), and further imposes liability on certain individuals labeled "contributory" infringers, id., § 271(c). The absence of such express language in the copyright statute does not preclude the imposition of liability for copyright infringements on certain parties who have not themselves engaged in the infringing activity.^[17] For vicarious liability is imposed in virtually all areas of the law, and the concept of contributory infringement is merely a species of the broader problem of identifying the circumstances in which it is just to hold one individual accountable for the actions of another.

Such circumstances were plainly present in Kalem Co. v. Harper Brothers, 222 U.S. 55, 32 S.Ct. 20, 56 L.Ed. 92 (1911), the copyright decision of this Court on which respondents place their principal reliance. In Kalem, the Court held that the producer of an unauthorized film dramatization of the copyrighted book Ben Hur was liable for his sale of the motion picture to jobbers, who in turn arranged for the commercial exhibition of the film. Justice Holmes, writing for the Court, explained:

"The defendant not only expected but invoked by advertisement the use of its films for dramatic reproduc [436] tion of the story. That was the most conspicuous purpose for which they could be used, and the one for which especially they were made. If the defendant did not contribute to the infringement it is impossible to do so except by taking part in the final act. It is liable on principles recognized in every part of the law." 222 U.S., at 63, 32 S.Ct., at 22.

The use for which the item sold in Kalem had been "especially" made was, of course, to display the performance that had already been recorded upon it. The producer had personally appropriated the copyright owner's protected work and, as the owner of the tangible medium of expression upon which the protected work was recorded, authorized that use by his sale of the film to jobbers. But that use of the film was not his to authorize: the copyright owner possessed the exclusive right to authorize public performances of his work. Further, the producer personally advertised the unauthorized public performances, dispelling any possible doubt as to the use of the film which he had authorized.

Respondents argue that Kalem stands for the proposition that supplying the "means" to accomplish an infringing activity and encouraging that activity through advertisement are sufficient to establish liability for copyright infringement. This argument rests on a gross generalization that cannot withstand scrutiny. The producer in Kalem did not merely provide the "means" to accomplish an infringing activity; the producer supplied the work itself, albeit in a new medium of expression. Petitioners in the instant case do not supply Betamax consumers with respondents' works; respondents do. Petitioners supply a piece of equipment that is generally capable of copying the entire range of programs that may be televised: those that are uncopyrighted, those that are copyrighted but may be copied without objection from the copyright holder, and those that the copyright holder would prefer not to have copied. The Betamax can be used to [437] make authorized or unauthorized uses of copyrighted works, but the range of its potential use is much broader than the particular infringing use of the film Ben Hur involved in Kalem. Kalem does not support respondents' novel theory of liability.

Justice Holmes stated that the producer had "contributed" to the infringement of the copyright, and the label "contributory infringement" has been applied in a number of lower court copyright cases involving an ongoing relationship between the direct infringer and the contributory infringer at the time the infringing conduct occurred. In such cases, as in other situations in which the imposition of vicarious liability is manifestly just, the "contributory" infringer was in a position to control the use of copyrighted works by others and had authorized the use without permission from the copyright owner.^[18] This case, however, plainly does not fall [438] in that category. The only contact between Sony and the users of the Betamax that is disclosed by this record occurred at the moment of sale. The District Court expressly found that "no employee of Sony, Sonam or DDBI had either direct involvement with the allegedly infringing activity or direct contact with purchasers of Betamax who recorded copyrighted works off-the-air." 480 F.Supp., at 460. And it further found that "there was no evidence that any of the copies made by Griffiths or the other individual witnesses in this suit were influenced or encouraged by [Sony's] advertisements." Ibid.

[439] If vicarious liability is to be imposed on petitioners in this case, it must rest on the fact that they have sold equipment with constructive knowledge of the fact that their customers may use that equipment to make unauthorized copies of copyrighted material. There is no precedent in the law of copyright for the imposition of vicarious liability on such a theory. The closest analogy is provided by the patent law cases to which it is appropriate to refer because of the historic kinship between patent law and copyright law.^[19]

[440] In the Patent Code both the concept of infringement and the concept of contributory infringement are expressly defined by statute.^[20] The prohibition against contributory infringement is confined to the knowing sale of a component especially made for use in connection with a particular patent. There is no suggestion in the statute that one patentee may object to the sale of a product that might be used in connection with other patents. Moreover, the Act expressly provides that the sale of a "staple article or commodity of commerce suitable for substantial noninfringing use" is not contributory infringement.

When a charge of contributory infringement is predicated entirely on the sale of an article of commerce that is used by the purchaser to infringe a patent, the public interest in access to that article of commerce is necessarily implicated. A [441] finding of contributory infringement does not, of course, remove the article from the market altogether; it does, however, give the patentee effective control over the sale of that item. Indeed, a finding of contributory infringement is normally the functional equivalent of holding that the disputed article is within the monopoly granted to the patentee.^[21]

For that reason, in contributory infringement cases arising under the patent laws the Court has always recognized the critical importance of not allowing the patentee to extend his monopoly beyond the limits of his specific grant. These cases deny the patentee any right to control the distribution of unpatented articles unless they are "unsuited for any commercial noninfringing use." Dawson Chemical Co. v. Rohm & Hass Co., 448 U.S. 176, 198, 100 S.Ct. 2601, 2614, 65 L.Ed.2d 696 (1980). Unless a commodity "has no use except through practice of the patented method," ibid, the patentee has no right to claim that its distribution constitutes contributory infringement. "To form the basis for contributory infringement the item must almost be uniquely suited as a component of the patented invention." P. Rosenberg, Patent Law Fundamentals § 17.02[2] (1982). "[A] sale of an article which though adapted to an infringing use is also adapted to other and lawful uses, is not enough to make the seller a contributory infringer. Such a rule would block the wheels of commerce." Henry v. A.B. Dick Co., 224 U.S. 1, 48, 32 S.Ct. 364, 379, 56 L.Ed. 645 (1912), overruled on other grounds, [442] Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 517, 37 S.Ct. 416, 421, 61 L.Ed. 871 (1917).

We recognize there are substantial differences between the patent and copyright laws. But in both areas the contributory infringement doctrine is grounded on the recognition that adequate protection of a monopoly may require the courts to look beyond actual duplication of a device or publication to the products or activities that make such duplication possible. The staple article of commerce doctrine must strike a balance between a copyright holder's legitimate demand for effective—not merely symbolic—protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce. Accordingly, the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses.

IV

The question is thus whether the Betamax is capable of commercially significant noninfringing uses. In order to resolve that question, we need not explore all the different potential uses of the machine and determine whether or not they would constitute infringement. Rather, we need only consider whether on the basis of the facts as found by the district court a significant number of them would be non-infringing. Moreover, in order to resolve this case we need not give precise content to the question of how much use is commercially significant. For one potential use of the Betamax plainly satisfies this standard, however it is understood: private, noncommercial time-shifting in the home. It does so both (A) because respondents have no right to prevent other copyright holders from authorizing it for their programs, and (B) because the District Court's factual findings reveal that even the unauthorized home time-shifting of respondents' programs is legitimate fair use.

[443] A. Authorized Time Shifting

Each of the respondents owns a large inventory of valuable copyrights, but in the total spectrum of television programming their combined market share is small. The exact percentage is not specified, but it is well below 10%.^[22] If they were to prevail, the outcome of this litigation would have a significant impact on both the producers and the viewers of the remaining 90% of the programming in the Nation. No doubt, many other producers share respondents' concern about the possible consequences of unrestricted copying. Nevertheless the findings of the District Court make it clear that time-shifting may enlarge the total viewing audience and that many producers are willing to allow private time-shifting to continue, at least for an experimental time period.^[23]

The District Court found:

"Even if it were deemed that home-use recording of copyrighted material constituted infringement, the Betamax could still legally be used to record noncopyrighted material or material whose owners consented to the copying. An injunction would deprive the public of the ability to use the Betamax for this noninfringing off-the-air recording. 

[444] "Defendants introduced considerable testimony at trial about the potential for such copying of sports, religious, educational and other programming. This included testimony from representatives of the Offices of the Commissioners of the National Football, Basketball, Baseball and Hockey Leagues and Associations, the Executive Director of National Religious Broadcasters and various educational communications agencies. Plaintiffs attack the weight of the testimony offered and also contend that an injunction is warranted because infringing uses outweigh noninfringing uses."

"Whatever the future percentage of legal versus illegal home-use recording might be, an injunction which seeks to deprive the public of the very tool or article of commerce capable of some noninfringing use would be an extremely harsh remedy, as well as one unprecedented in copyright law." 480 F.Supp., at 468.

Although the District Court made these statements in the context of considering the propriety of injunctive relief, the statements constitute a finding that the evidence concerning "sports, religious, educational, and other programming" was sufficient to establish a significant quantity of broadcasting whose copying is now authorized, and a significant potential for future authorized copying. That finding is amply supported by the record. In addition to the religious and sports officials identified explicitly by the District Court,^[24] two items in the record deserve specific mention.

[445] First is the testimony of John Kenaston, the station manager of Channel 58, an educational station in Los Angeles affiliated with the Public Broadcasting Service. He explained and authenticated the station's published guide to its programs.^[25] For each program, the guide tells whether unlimited home taping is authorized, home taping is authorized subject to certain restrictions (such as erasure within seven days), or home taping is not authorized at all. The Spring 1978 edition of the guide described 107 programs. Sixty-two of those programs or 58% authorize some home taping. Twenty-one of them or almost 20% authorize unrestricted home taping.^[26]

Second is the testimony of Fred Rogers, president of the corporation that produces and owns the copyright on Mr. Rogers' Neighborhood. The program is carried by more public television stations than any other program. Its audience numbers over 3,000,000 families a day. He testified that he had absolutely no objection to home taping for noncommercial use and expressed the opinion that it is a real service to families to be able to record children's programs and to show them at appropriate times.^[27]

[446] If there are millions of owners of VTR's who make copies of televised sports events, religious broadcasts, and educational programs such as Mister Rogers' Neighborhood, and if the proprietors of those programs welcome the practice, the business of supplying the equipment that makes such copying feasible should not be stifled simply because the equipment is used by some individuals to make unauthorized reproductions of respondents' works. The respondents do not represent a class composed of all copyright holders. Yet a finding of contributory infringement would inevitably frustrate the interests of broadcasters in reaching the portion of their audience that is available only through time-shifting.

Of course, the fact that other copyright holders may welcome the practice of time-shifting does not mean that respondents should be deemed to have granted a license to copy their programs. Third party conduct would be wholly irrelevant in an action for direct infringement of respondents' copyrights. But in an action for contributory infringement against the seller of copying equipment, the copyright holder may not prevail unless the relief that he seeks affects only his programs, or unless he speaks for virtually all copyright holders with an interest in the outcome. In this case, the record makes it perfectly clear that there are many important producers of national and local television programs who find nothing objectionable about the enlargement in the size of the television audience that results from the practice of time-shifting for private home use.^[28] The seller of the equipment that expands those producers' audiences cannot be a con [447] tributory infringer if, as is true in this case, it has had no direct involvement with any infringing activity.

Even unauthorized uses of a copyrighted work are not necessarily infringing. An unlicensed use of the copyright is not an infringement unless it conflicts with one of the specific exclusive rights conferred by the copyright statute. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 154-155, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84. Moreover, the definition of exclusive rights in § 106 of the present Act is prefaced by the words "subject to sections 107 through 118." Those sections describe a variety of uses of copyrighted material that "are not infringements of copyright notwithstanding the provisions of § 106." The most pertinent in this case is § 107, the legislative endorsement of the doctrine of "fair use."^[29]

[448] That section identifies various factors^[30] that enable a Court to apply an "equitable rule of reason" analysis to particular claims of infringement.^[31] Although not conclusive, the first [449] factor requires that "the commercial or nonprofit character of an activity" be weighed in any fair use decision.^[32] If the Betamax were used to make copies for a commercial or profit-making purpose, such use would presumptively be unfair. The contrary presumption is appropriate here, however, because the District Court's findings plainly establish that time-shifting for private home use must be characterized as a noncommercial, nonprofit activity. Moreover, when one considers the nature of a televised copyrighted audiovisual work, see 17 U.S.C. § 107(2), and that timeshifting merely enables a viewer to see such a work which he had been invited to witness in its entirety free of charge, the fact [450] that the entire work is reproduced, see id., at § 107(3), does not have its ordinary effect of militating against a finding of fair use.^[33]

This is not, however, the end of the inquiry because Congress has also directed us to consider "the effect of the use upon the potential market for or value of the copyrighted work." Id., at § 107(4). The purpose of copyright is to create incentives for creative effort. Even copying for noncommercial purposes may impair the copyright holder's ability to obtain the rewards that Congress intended him to have. But a use that has no demonstrable effect upon the potential market for, or the value of, the copyrighted work need not be prohibited in order to protect the author's incentive to create. The prohibition of such noncommercial uses would [451] merely inhibit access to ideas without any countervailing benefit.^[34]

Thus, although every commercial use of copyrighted material is presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright, noncommercial uses are a different matter. A challenge to a noncommercial use of a copyrighted work requires proof either that the particular use is harmful, or that if it should become widespread, it would adversely affect the potential market for the copyrighted work. Actual present harm need not be shown; such a requirement would leave the copyright holder with no defense against predictable damage. Nor is it necessary to show with certainty that future harm will result. What is necessary is a showing by a preponderance of the evidence that some meaningful likelihood of future harm exists. If the intended use is for commercial gain, that likelihood may be presumed. But if it is for a noncommercial purpose, the likelihood must be demonstrated.

In this case, respondents failed to carry their burden with regard to home time-shifting. The District Court described respondents' evidence as follows:

"Plaintiffs' experts admitted at several points in the trial that the time-shifting without librarying would result in 'not a great deal of harm.' Plaintiffs' greatest concern about time-shifting is with 'a point of important philosophy that transcends even commercial judgment.' They fear that with any Betamax usage, 'invisible boundaries' are passed: 'the copyright owner has lost control over his program.'" 480 F.Supp., at 467.

[452] Later in its opinion, the District Court observed:

"Most of plaintiffs' predictions of harm hinge on speculation about audience viewing patterns and ratings, a measurement system which Sidney Sheinberg, MCA's president, calls a 'black art' because of the significant level of imprecision involved in the calculations." Id., at 469.^[35]

There was no need for the District Court to say much about past harm. "Plaintiffs have admitted that no actual harm to their copyrights has occurred to date." Id., at 451.

On the question of potential future harm from time-shifting, the District Court offered a more detailed analysis of the evidence. It rejected respondents' "fear that persons 'watching' the original telecast of a program will not be measured in the live audience and the ratings and revenues will decrease," by observing that current measurement technology allows the Betamax audience to be reflected. Id., at 466.^[36] It rejected respondents' prediction "that live televi [453] sion or movie audiences will decrease as more people watch Betamax tapes as an alternative," with the observation that "[t]here is no factual basis for [the underlying] assumption." Ibid.^[37] It rejected respondents' "fear that time-shifting will reduce audiences for telecast reruns," and concluded instead that "given current market practices, this should aid plaintiffs rather than harm them." Ibid.^[38] And it declared that respondents' suggestion "that theater or film rental exhibition of a program will suffer because of time-shift recording of that program" "lacks merit." 480 F.Supp., at 467.^[39]

[454] After completing that review, the District Court restated its overall conclusion several times, in several different ways. "Harm from time-shifting is speculative and, at best, minimal." Ibid. "The audience benefits from the time-shifting capability have already been discussed. It is not implausible that benefits could also accrue to plaintiffs, broadcasters, and advertisers, as the Betamax makes it possible for more persons to view their broadcasts." Ibid. "No likelihood of harm was shown at trial, and plaintiffs admitted that there had been no actual harm to date." Id., at 468-469. "Testimony at trial suggested that Betamax may require adjustments in marketing strategy, but it did not establish even a likelihood of harm." Id., at 469. "Television production by plaintiffs today is more profitable than it has ever been, and, in five weeks of trial, there was no concrete evidence to suggest that the Betamax will change the studios' financial picture." Ibid.

The District Court's conclusions are buttressed by the fact that to the extent time-shifting expands public access to freely broadcast television programs, it yields societal benefits. Earlier this year, in Community Television of Southern California v. Gottfried, --- U.S. ----, ---- - ----, n. 12, 103 S.Ct. 885, 891-892, 74 L.Ed.2d 705 (1983), we acknowledged the public interest in making television broadcasting more available. Concededly, that interest is not unlimited. But it supports an interpretation of the concept of "fair use" that requires the copyright holder to demonstrate some likelihood of harm before he may condemn a private act of time-shifting as a violation of federal law.

When these factors are all weighed in the "equitable rule of reason" balance, we must conclude that this record amply [455] supports the District Court's conclusion that home time-shifting is fair use. In light of the findings of the District Court regarding the state of the empirical data, it is clear that the Court of Appeals erred in holding that the statute as presently written bars such conduct.^[40]

[456] In summary, the record and findings of the District Court lead us to two conclusions. First, Sony demonstrated a significant likelihood that substantial numbers of copyright holders who license their works for broadcast on free television would not object to having their broadcasts time-shifted by private viewers. And second, respondents failed to demonstrate that time-shifting would cause any likelihood of nonminimal harm to the potential market for, or the value of, their copyrighted works. The Betamax is, therefore, capable of substantial noninfringing uses. Sony's sale of such equipment to the general public does not constitute contributory infringement of respondent's copyrights.

V

"The direction of Art. I is that Congress shall have the power to promote the progress of science and the useful arts. When, as here, the Constitution is permissive, the sign of how far Congress has chosen to go can come only from Congress." Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 530, 92 S.Ct. 1700, 1707, 32 L.Ed.2d 273 (1972).

One may search the Copyright Act in vain for any sign that the elected representatives of the millions of people who watch television every day have made it unlawful to copy a program for later viewing at home, or have enacted a flat prohibition against the sale of machines that make such copying possible.

It may well be that Congress will take a fresh look at this new technology, just as it so often has examined other innovations in the past. But it is not our job to apply laws that have not yet been written. Applying the copyright statute, as it now reads, to the facts as they have been developed in this case, the judgment of the Court of Appeals must be reversed.

It is so ordered.

__________

[457] Justice BLACKMUN, with whom Justice MARSHALL, Justice POWELL, and Justice REHNQUIST join, dissenting.

A restatement of the facts and judicial history of this case is necessary, in my view, for a proper focus upon the issues. Respondents' position is hardly so "unprecedented," ante, at 421, in the copyright law, nor does it really embody a "gross generalization," ante, at 436, or a "novel theory of liability," ante, at 437, and the like, as the Court, in belittling their claims, describes the efforts of respondents.

I

The introduction of the home videotape recorder (VTR) upon the market has enabled millions of Americans to make recordings of television programs in their homes, for future and repeated viewing at their own convenience. While this practice has proved highly popular with owners of television sets and VTRs, it understandably has been a matter of concern for the holders of copyrights in the recorded programs. A result is the present litigation, raising the issues whether the home recording of a copyrighted television program is an infringement of the copyright, and, if so, whether the manufacturers and distributors of VTRs are liable as contributory infringers. I would hope that these questions ultimately will be considered seriously and in depth by the Congress and be resolved there, despite the fact that the Court's decision today provides little incentive for congressional action. Our task in the meantime, however, is to resolve these issues as best we can in the light of ill-fitting existing copyright law.

It is no answer, of course, to say and stress, as the Court does, this Court's "consistent deference to Congress" whenever "major technological innovations" appear. Ante, at 431. Perhaps a better and more accurate description is that the Court has tended to evade the hard issues when they arise in the area of copyright law. I see no reason for the Court to be particularly pleased with this tradition or to continue it. Indeed, it is fairly clear from the legislative history of the 1976 Act that Congress meant to change the old pattern and [458] enact a statute that would cover new technologies, as well as old.

II

In 1976, respondents Universal City Studios, Inc., and Walt Disney Productions (Studios) brought this copyright infringement action in the United States District Court for the Central District of California against, among others, petitioners Sony Corporation, a Japanese corporation, and Sony Corporation of America, a New York corporation, the manufacturer and distributor, respectively, of the Betamax VTR. The Studios sought damages, profits, and a wide-ranging injunction against further sales or use of the Betamax or Betamax tapes.

The Betamax, like other VTRs, presently is capable of recording television broadcasts off the air on videotape cassettes, and playing them back at a later time.^[1] Two kinds of Betamax usage are at issue here.^[2] The first is "time-shifting," whereby the user records a program in order to watch it at a later time, and then records over it, and thereby erases the program, after a single viewing. The second is "library- [459] building," in which the user records a program in order to keep it for repeated viewing over a longer term. Sony's advertisements, at various times, have suggested that Betamax users "record favorite shows" or "build a library." Sony's Betamax advertising has never contained warnings about copyright infringement, although a warning does appear in the Betamax operating instructions.

The Studios produce copyrighted "movies" and other works that they release to theaters and license for television broadcast. They also rent and sell their works on film and on prerecorded videotapes and videodiscs. License fees for television broadcasts are set according to audience ratings, compiled by rating services that do not measure any playbacks of videotapes. The Studios make the serious claim that VTR recording may result in a decrease in their revenue from licensing their works to television and from marketing them in other ways.

After a 5-week trial, the District Court, with a detailed opinion, ruled that home VTR recording did not infringe the Studios' copyrights under either the Act of March 4, 1909 (1909 Act), 35 Stat. 1075, as amended (formerly codified as 17 U.S.C. § 1 et seq. (1976 ed.)), or the Copyright Revision Act of 1976 (1976 Act), 90 Stat. 2541, 17 U.S.C. § 101 et seq. (1982 ed.).^[3] The District Court also held that even if home VTR recording were an infringement, Sony could not be held liable under theories of direct infringement, contributory infringement, or vicarious liability. Finally, the court concluded that an injunction against sales of the Betamax would be inappropriate even if Sony were liable under one or more of those theories. 480 F.Supp. 429 (1979).

[460] The United States Court of Appeals for the Ninth Circuit reversed in virtually every respect. 659 F.2d 963 (1981). It held that the 1909 Act and the 1976 Act contained no implied exemption for "home use" recording, that such recording was not "fair use," and that the use of the Betamax to record the Studios' copyrighted works infringed their copyrights. The Court of Appeals also held Sony liable for contributory infringement, reasoning that Sony knew and anticipated that the Betamax would be used to record copyrighted material off the air, and that Sony, indeed, had induced, caused, or materially contributed to the infringing conduct. The Court of Appeals remanded the case to the District Court for appropriate relief; it suggested that the District Court could consider the award of damages or a continuing royalty in lieu of an injunction. Id., at 976.

III

The Copyright Clause of the Constitution, Art. I, § 8, cl. 8, empowers Congress "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." This Nation's initial copyright statute was passed by the First Congress. Entitled "An Act for the encouragement of learning," it gave an author "the sole right and liberty of printing, reprinting, publishing and vending" his "map, chart, book or books" for a period of 14 years. Act of May 31, 1790, § 1, 1 Stat. 124. Since then, as the technology available to authors for creating and preserving their writings has changed, the governing statute has changed with it. By many amendments, and by complete revisions in 1831, 1870, 1909, and 1976,^[4] authors' rights have been [461] expanded to provide protection to any "original works of authorship fixed in any tangible medium of expression," including "motion pictures and other audiovisual works." 17 U.S.C. § 102(a).^[5]

Section 106 of the 1976 Act grants the owner of a copyright a variety of exclusive rights in the copyrighted work,^[6] includ[462]ing the right "to reproduce the copyrighted work in copies or phonorecords."^[7] This grant expressly is made subject to §§ 107-118, which create a number of exemptions and limitations on the copyright owner's rights. The most important of these sections, for present purposes, is § 107; that section states that "the fair use of a copyrighted work . . . is not an infringement of copyright."^[8]

The 1976 Act, like its predecessors,^[9] does not give the copyright owner full and complete control over all possible [463] uses of his work. If the work is put to some use not enumerated in § 106, the use is not an infringement. See Fortnightly Corp. v. United Artists, 392 U.S. 390, 393-395, 88 S.Ct. 2084, 2085-2086, 20 L.Ed.2d 1176 (1968). Thus, before considering whether home videotaping comes within the scope of the fair use exemption, one first must inquire whether the practice appears to violate the exclusive right, granted in the first instance by § 106(1), "to reproduce the copyrighted work in copies or phonorecords."

Although the word "copies" is in the plural in § 106(1), there can be no question that under the Act the making of even a single unauthorized copy is prohibited. The Senate and House Reports explain: "The references to 'copies or phonorecords,' although in the plural, are intended here and throughout the bill to include the singular (1 U.S.C. § 1)."^[10] [464] S.Rep. No. 94-473, p. 58 (1975) (1975 Senate Report); H.R.Rep. No. 94-1476, p. 61 (1976) (1976 House Report), U.S.Code Cong. & Admin.News 1976, p. 5675. The Reports then describe the reproduction right established by § 106(1):

"[T]he right 'to reproduce the copyrighted work in copies or phonorecords' means the right to produce a material object in which the work is duplicated, transcribed, imitated, or simulated in a fixed form from which it can be 'perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.' As under the present law, a copyrighted work would be infringed by reproducing it in whole or in any substantial part, and by duplicating it exactly or by imitation or simulation." 1975 Senate Report 58; 1976 House Report 61, U.S.Code Cong. & Admin.News 1976, p. 5675.

The making of even a single videotape recording at home falls within this definition; the VTR user produces a material object from which the copyrighted work later can be perceived. Unless Congress intended a special exemption for the making of a single copy for personal use, I must conclude that VTR recording is contrary to the exclusive rights granted by § 106(1).

The 1976 Act and its accompanying reports specify in some detail the situations in which a single copy of a copyrighted work may be made without infringement concerns. Section 108(a), for example, permits a library or archives "to reproduce no more than one copy or phonorecord of a work" for a patron, but only under very limited conditions; an entire work, moreover, can be copied only if it cannot be obtained elsewhere at a fair price.^[11] § 108(e); see also § 112(a) (broad [465] caster may "make no more than one copy or phonorecord of a particular transmission program," and only under certain conditions). In other respects, the making of single copies is permissible only within the limited confines of the fair use doctrine. The Senate report, in a section headed "Single and multiple copying," notes that the fair use doctrine would permit a teacher to make a single copy of a work for use in the classroom, but only if the work was not a "sizable" one such as a novel or treatise. 1975 Senate Report 63-64; accord, 1976 House Report 68-69, 71. Other situations in which the making of a single copy would be fair use are described in the House and Senate reports.^[12] But neither the statute nor its legislative history suggests any intent to create a general exemption for a single copy made for personal or private use.

Indeed, it appears that Congress considered and rejected the very possibility of a special private use exemption. The issue was raised early in the revision process, in one of the studies prepared for Congress under the supervision of the Copyright Office. Latman, Fair Use of Copyrighted Works (1958), reprinted in Senate Committee on the Judiciary, Copyright Law Revision, Studies Prepared for the Subcommittee on Patents, Trademarks, and Copyrights, 86th Cong., 2d Sess., 1 (1960) (Latman Fair Use Study). This study found no reported case supporting the existence of an exemption for private use, although it noted that "the purpose and nature of a private use, and in some [466] cases the small amount taken, might lead a court to apply the general principles of fair use in such a way as to deny liability." Id., at 12. After reviewing a number of foreign copyright laws that contained explicit statutory exemptions for private or personal use, id., at 25, Professor Latman outlined several approaches that a revision bill could take to the general issue of exemptions and fair use. One of these was the adoption of particularized rules to cover specific situations, including "the field of personal use." Id., at 33.^[13]

Rejecting the latter alternative, the Register of Copyrights recommended that the revised copyright statute simply mention the doctrine of fair use and indicate its general scope. The Register opposed the adoption of rules and exemptions to cover specific situations,^[14] preferring, instead, to rely on the judge-made fair use doctrine to resolve new problems as they arose. See Register's 1961 Report 25; Register's Supplementary Report 27-28.

The Register's approach was reflected in the first copyright revision bills, drafted by the Copyright Office in 1964. [467] These bills, like the 1976 Act, granted the copyright owner the exclusive right to reproduce the copyrighted work, subject only to the exceptions set out in later sections. H.R. 11947/S. 3008, 88th Cong., 2d Sess., § 5(a) (1964). The primary exception was fair use, § 6, containing language virtually identical to § 107 of the 1976 Act. Although the copyright revision bills underwent change in many respects from their first introduction in 1964 to their final passage in 1976, these portions of the bills did not change.^[15] I can conclude only that Congress, like the Register, intended to rely on the fair use doctrine, and not on a per se exemption for private use, to separate permissible copying from the impermissible.^[16] 

[468] When Congress intended special and protective treatment for private use, moreover, it said so explicitly. One such explicit statement appears in § 106 itself. The copyright owner's exclusive right to perform a copyrighted work, in contrast to his right to reproduce the work in copies, is limited. Section 106(4) grants a copyright owner the exclusive right to perform the work "publicly," but does not afford the owner protection with respect to private performances by others. A motion picture is "performed" whenever its images are shown or its sounds are made audible. § 101. Like "sing [469] [ing] a copyrighted lyric in the shower," Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 155, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84 (1975), watching television at home with one's family and friends is now considered a performance. 1975 Senate Report 59-60; 1976 House Report 63.^[17] Home television viewing nevertheless does not infringe any copyright—but only because § 106(4) contains the word "publicly."^[18] See generally 1975 Senate Report 60-61; 1976 House Report 63-64; Register's 1961 Report 29-30. No such distinction between public and private uses appears in § 106(1)'s prohibition on the making of copies.^[19]

Similarly, an explicit reference to private use appears in § 108. Under that section, a library can make a copy for a patron only for specific types of private use: "private study, scholarship, or research."^[20] §§ 108(d)(1) and (e)(1); see 37[470] CFR § 201.14(b) (1982). Limits also are imposed on the extent of the copying and the type of institution that may make copies, and the exemption expressly is made inapplicable to motion pictures and certain other types of works. § 108(h). These limitations would be wholly superfluous if an entire copy of any work could be made by any person for private use.^[21]

B

The District Court in this case nevertheless concluded that the 1976 Act contained an implied exemption for "home-use recording." 480 F.Supp., at 444-446. The court relied primarily on the legislative history of a 1971 amendment to the 1909 Act, a reliance that this Court today does not duplicate. Ante, at 430, n. 11. That amendment, however, was addressed to the specific problem of commercial piracy of sound recordings. Act of Oct. 15, 1971, 85 Stat. 391 (1971 Amendment). The House Report on the 1971 Amendment, in a section entitled "Home Recording," contains the following statement:

"In approving the creation of a limited copyright in sound recordings it is the intention of the Committee that this limited copyright not grant any broader rights than are accorded to other copyright proprietors under the existing title 17. Specifically, it is not the intention of the Committee to restrain the home recording, from broadcasts or from tapes or records, of recorded per [471] formances, where the home recording is for private use and with no purpose of reproducing or otherwise capitalizing commercially on it. This practice is common and unrestrained today, and the record producers and performers would be in no different position from that of the owners of copyright in recorded musical compositions over the past 20 years." H.R.Rep. No. 92-487, p. 7 (1971) (1971 House Report).

Similar statements were made during House hearings on the bill^[22] and on the House floor,^[23] although not in the Senate [472] proceedings. In concluding that these statements created a general exemption for home recording, the District Court, in my view, paid too little heed to the context in which the statements were made, and failed to consider the limited purpose of the 1971 Amendment and the structure of the 1909 Act.

Unlike television broadcasts and other types of motion pictures, sound recordings were not protected by copyright prior to the passage of the 1971 Amendment. Although the underlying musical work could be copyrighted, the 1909 Act provided no protection for a particular performer's rendition of the work. Moreover, copyrighted musical works that had been recorded for public distribution were subject to a "compulsory license": any person was free to record such a work upon payment of a 2-cent royalty to the copyright owner. § 1(e), 35 Stat. 1075-1076. While reproduction without payment of the royalty was an infringement under the 1909 Act, damages were limited to three times the amount of the unpaid royalty. § 25(e), 35 Stat. 1081-1082; Shapiro, Bernstein & Co. v. Goody, 248 F.2d 260, 262-263, 265 (CA2 1957), cert. denied, 355 U.S. 952, 78 S.Ct. 536, 2 L.Ed.2d 529 (1958). It was observed that the practical effect of these provisions was to legalize record piracy. See S.Rep. No. 92-72, p. 4 (1971); 1971 House Report 2.

In order to suppress this piracy, the 1971 Amendment extended copyright protection beyond the underlying work and to the sound recordings themselves. Congress chose, however, to provide only limited protection: owners of copyright in sound recordings were given the exclusive right "[t]o reproduce [their works] and distribute [them] to the public."

[473] 1971 Amendment, § 1(a), 85 Stat. 391 (formerly codified as 17 U.S.C. § 1(f) (1976 ed.)).^[24] This right was merely the right of commercial distribution. See 117 Cong.Rec. 34748-34749 (1971) (colloquy of Reps. Kazen & Kastenmeier) ("the bill protects copyrighted material that is duplicated for commercial purposes only").

Against this background, the statements regarding home recording under the 1971 Amendment appear in a very different light. If home recording was "common and unrestrained" under the 1909 Act, see 1971 House Report 7, it was because sound recordings had no copyright protection and the owner of a copyright in the underlying musical work could collect no more than a 2-cent royalty plus 6 cents in damages for each unauthorized use. With so little at stake, it is not at all surprising that the Assistant Register "d[id] not see anybody going into anyone's home and preventing this sort of thing." 1971 House Hearings 23.

But the references to home sound recording in the 1971 Amendment's legislative history demonstrate no congressional intent to create a generalized home use exemption from copyright protection. Congress, having recognized that the 1909 Act had been unsuccessful in controlling home sound recording, addressed only the specific problem of commercial record piracy. To quote Assistant Register Ringer again, home use was "not what this legislation [was] addressed to." 1971 House Hearings 22.^[25]

[474] While the 1971 Amendment narrowed the sound recordings loophole in then existing copyright law, motion pictures and other audiovisual works have been accorded full copyright protection since at least 1912, see Act of Aug. 24, 1912, 37 Stat. 488, and perhaps before, see Edison v. Lubin, 122 F. 240 (CA3 1903), app. dism'd, 195 U.S. 625, 25 S.Ct. 790, 49 L.Ed. 349 (1904). Congress continued this protection in the 1976 Act. Unlike the sound recording rights created by the 1971 Amendment, the reproduction rights associated with motion pictures under § 106(1) are not limited to reproduction for public distribution; the copyright owner's right to reproduce the work exists independently, and the "mere duplication of a copy may constitute an infringement even if it is never distributed." Register's Supplementary Report 16; see 1975 Senate Report 57 and 1976 House Report 61. Moreover, the 1976 Act was intended as a comprehensive treatment of all aspects of copyright law. The reports accompanying the 1976 Act, unlike the 1971 House Report, contain no suggestion that home-use recording is somehow outside the scope of this all-inclusive statute. It was clearly the intent of Congress that no additional exemptions were to be implied.^[26] [475] I therefore find in the 1976 Act no implied exemption to cover the home taping of television programs, whether it be for a single copy, for private use, or for home use. Taping a copyrighted television program is infringement unless it is permitted by the fair use exemption contained in § 107 of the 1976 Act. I now turn to that issue.

IV

Fair Use

The doctrine of fair use has been called, with some justification, "the most troublesome in the whole law of copyright." Dellar v. Samuel Goldwyn, Inc., 104 F.2d 661, 662 (CA2 1939); see Triangle Publications, Inc. v. Knight-Ridder Newspapers, Inc., 626 F.2d 1171, 1174 (CA5 1980); Meeropol v. Nizer, 560 F.2d 1061, 1068 (CA2 1977), cert. denied, 434 U.S. 1013, 98 S.Ct. 727, 54 L.Ed.2d 756 (1978). Although courts have constructed lists of factors to be considered in determining whether a particular use is fair,^[27] no fixed criteria have emerged by which that [476] determination can be made. This Court thus far has provided no guidance; although fair use issues have come here twice, on each occasion the Court was equally divided and no opinion was forthcoming. Williams & Wilkins Co. v. United States, 203 Ct.Cl. 74, 487 F.2d 1345 (1973), aff'd, 420 U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975); Benny v. Loew's, Inc., 239 F.2d 532 (CA9 1956), aff'd sub nom. CBS, Inc. v. Loew's Inc., 356 U.S. 43, 78 S.Ct. 667, 2 L.Ed.2d 583 (1958).

Nor did Congress provide definitive rules when it codified the fair use doctrine in the 1976 Act; it simply incorporated a list of factors "to be considered": the "purpose and character of the use," the "nature of the copyrighted work," the "amount and substantiality of the portion used," and, perhaps the most important, the "effect of the use upon the potential market for or value of the copyrighted work" (emphasis supplied). § 107. No particular weight, however, was assigned to any of these, and the list was not intended to be exclusive. The House and Senate Reports explain that § 107 does no more than give "statutory recognition" to the fair use doctrine; it was intended "to restate the present judicial doctrine of fair use, not to change, narrow, or enlarge it in any way." 1976 House Report 66, U.S.Code Cong. & Admin.News 1976, p. 5680. See 1975 Senate Report 62; S.Rep. No. 93-983, p. 116 (1974); H.R.Rep. No. 83, 90th Cong., 1st Sess., 32 (1967); H.R.Rep. No. 2237, 89th Cong., 2d Sess., 61 (1966).

[477] A

Despite this absence of clear standards, the fair use doctrine plays a crucial role in the law of copyright. The purpose of copyright protection, in the words of the Constitution, is to "promote the Progress of Science and useful Arts." Copyright is based on the belief that by granting authors the exclusive rights to reproduce their works, they are given an incentive to create, and that "encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors in 'Science and the useful Arts.' " Mazer v. Stein, 347 U.S. 201, 219, 74 S.Ct. 460, 471, 98 L.Ed. 630 (1954). The monopoly created by copyright thus rewards the individual author in order to benefit the public. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84 (1975); Fox Film Corp. v. Doyal, 286 U.S. 123, 127-128, 52 S.Ct. 546, 547, 76 L.Ed. 1010 (1932); see H.R.Rep. No. 2222, 60th Cong., 2d Sess., 7 (1909).

There are situations, nevertheless, in which strict enforcement of this monopoly would inhibit the very "Progress of Science and useful Arts" that copyright is intended to promote. An obvious example is the researcher or scholar whose own work depends on the ability to refer to and to quote the work of prior scholars. Obviously, no author could create a new work if he were first required to repeat the research of every author who had gone before him.^[28] The scholar, like the ordinary user, of course could be left to bargain with each copyright owner for permission to quote from or refer to prior works. But there is a crucial difference between the scholar and the ordinary user. When the ordinary user decides that the owner's price is too high, and forgoes use of the work, only the individual is the loser. When the scholar forgoes the use of a prior work, not only does his own [478] work suffer, but the public is deprived of his contribution to knowledge. The scholar's work, in other words, produces external benefits from which everyone profits. In such a case, the fair use doctrine acts as a form of subsidy—albeit at the first author's expense—to permit the second author to make limited use of the first author's work for the public good. See Latman Fair Use Study 31; Gordon, Fair Use as Market Failure: A Structural Analysis of the Betamax Case and its Predecessors, 82 Colum.L.Rev. 1600, 1630 (1982).

A similar subsidy may be appropriate in a range of areas other than pure scholarship. The situations in which fair use is most commonly recognized are listed in § 107 itself; fair use may be found when a work is used "for purposes such as criticism, comment, news reporting, teaching, . . . scholarship, or research." The House and Senate Reports expand on this list somewhat,^[29] and other examples may be found in the case law.^[30] Each of these uses, however, reflects a common theme: each is a productive use, resulting in some added benefit to the public beyond that produced by the first author's work.^[31] The fair use doctrine, in other words, permits works [479] to be used for "socially laudable purposes." See Copyright Office, Briefing Papers on Current Issues, reprinted in 1975 House Hearings 2051, 2055. I am aware of no case in which the reproduction of a copyrighted work for the sole benefit of the user has been held to be fair use.^[32]

I do not suggest, of course, that every productive use is a fair use. A finding of fair use still must depend on the facts of the individual case, and on whether, under the circumstances, it is reasonable to expect the user to bargain with the copyright owner for use of the work. The fair use doctrine must strike a balance between the dual risks created by the copyright system: on the one hand, that depriving authors of their monopoly will reduce their incentive to create, and, on the other, that granting authors a complete monopoly will reduce the creative ability of others.^[33] The inquiry is [480] necessarily a flexible one, and the endless variety of situations that may arise precludes the formulation of exact rules. But when a user reproduces an entire work and uses it for its original purpose, with no added benefit to the public, the doctrine of fair use usually does not apply. There is then no need whatsoever to provide the ordinary user with a fair use subsidy at the author's expense.

The making of a videotape recording for home viewing is an ordinary rather than a productive use of the Studios' copyrighted works. The District Court found that "Betamax owners use the copy for the same purpose as the original. They add nothing of their own." 480 F.Supp., at 453. Although applying the fair use doctrine to home VTR recording, as Sony argues, may increase public access to material broadcast free over the public airwaves, I think Sony's argument misconceives the nature of copyright. Copyright gives the author a right to limit or even to cut off access to his work. Fox Film Corp. v. Doyal, 286 U.S. 123, 127, 52 S.Ct. 546, 547, 76 L.Ed. 1010 (1932). A VTR recording creates no public benefit sufficient to justify limiting this right. Nor is this right extinguished by the copyright owner's choice to make the work available over the airwaves. Section 106 of the 1976 Act grants the copyright owner the exclusive right to control the performance and the reproduction of his work, and the fact that he has licensed a single television performance is really irrelevant to the existence of his right to control its reproduction. Although a television broadcast may be free to the viewer, this fact is equally irrelevant; a book borrowed from the public library may not be copied any more freely than a book that is purchased.

It may be tempting, as, in my view, the Court today is tempted, to stretch the doctrine of fair use so as to permit unfettered use of this new technology in order to increase ac [481] cess to television programming. But such an extension risks eroding the very basis of copyright law, by depriving authors of control over their works and consequently of their incentive to create.^[34] Even in the context of highly productive educational uses, Congress has avoided this temptation; in passing the 1976 Act, Congress made it clear that off-the-air videotaping was to be permitted only in very limited situations. See 1976 House Report 71; 1975 Senate Report 64. And, the Senate report adds, "[t]he committee does not intend to suggest . . . that off-the-air recording for convenience would under any circumstances, be considered 'fair use.' " Id., at 66. I cannot disregard these admonitions.

B

I recognize, nevertheless, that there are situations where permitting even an unproductive use would have no effect on the author's incentive to create, that is, where the use would not affect the value of, or the market for, the author's work. Photocopying an old newspaper clipping to send to a friend [482] may be an example; pinning a quotation on one's bulletin board may be another. In each of these cases, the effect on the author is truly de minimis. Thus, even though these uses provide no benefit to the public at large, no purpose is served by preserving the author's monopoly, and the use may be regarded as fair.

Courts should move with caution, however, in depriving authors of protection from unproductive "ordinary" uses. As has been noted above, even in the case of a productive use, § 107(4) requires consideration of "the effect of the use upon the potential market for or value of the copyrighted work" (emphasis added). "[A] particular use which may seem to have little or no economic impact on the author's rights today can assume tremendous importance in times to come." Register's Supplementary Report 14. Although such a use may seem harmless when viewed in isolation, "[i]solated instances of minor infringements, when multiplied many times, become in the aggregate a major inroad on copyright that must be prevented." 1975 Senate Report 65.

I therefore conclude that, at least when the proposed use is an unproductive one, a copyright owner need prove only a potential for harm to the market for or the value of the copyrighted work. See 3 M. Nimmer, Copyright § 13.05[E][4][c], p. 13-84 (1982). Proof of actual harm, or even probable harm, may be impossible in an area where the effect of a new technology is speculative, and requiring such proof would present the "real danger . . . of confining the scope of an author's rights on the basis of the present technology so that, as the years go by, his copyright loses much of its value because of unforeseen technical advances." Register's Supplementary Report 14. Infringement thus would be found if the copyright owner demonstrates a reasonable possibility that harm will result from the proposed use. When the use is one that creates no benefit to the public at large, copyright protection should not be denied on the basis that a new technology that may result in harm has not yet done so.

[483] The Studios have identified a number of ways in which VTR recording could damage their copyrights. VTR recording could reduce their ability to market their works in movie theaters and through the rental or sale of pre-recorded videotapes or videodiscs; it also could reduce their rerun audience, and consequently the license fees available to them for repeated showings. Moreover, advertisers may be willing to pay for only "live" viewing audiences, if they believe VTR viewers will delete commercials or if rating services are unable to measure VTR use; if this is the case, VTR recording could reduce the license fees the Studios are able to charge even for first-run showings. Library-building may raise the potential for each of the types of harm identified by the Studios, and time-shifting may raise the potential for substantial harm as well.^[35]

Although the District Court found no likelihood of harm from VTR use, 480 F.Supp., at 468, I conclude that it applied an incorrect substantive standard and misallocated the [484] burden of proof. The District Court reasoned that the Studios had failed to prove that library-building would occur "to any significant extent," id., at 467; that the Studios' prerecorded videodiscs could compete with VTR recordings and were "arguably . . . more desirable," ibid; that it was "not clear that movie audiences will decrease," id., at 468; and that the practice of deleting commercials "may be too tedious" for many viewers, ibid. To the extent any decrease in advertising revenues would occur, the court concluded that the Studios had "marketing alternatives at hand to recoup some of that predicted loss." Id., at 452. Because the Studios' prediction of harm was "based on so many assumptions and on a system of marketing which is rapidly changing," the court was "hesitant to identify 'probable effects' of home-use copying." Ibid.

The District Court's reluctance to engage in prediction in this area is understandable, but, in my view, the court was mistaken in concluding that the Studios should bear the risk created by this uncertainty. The Studios have demonstrated a potential for harm, which has not been, and could not be, refuted at this early stage of technological development.

The District Court's analysis of harm, moreover, failed to consider the effect of VTR recording on "the potential market for or the value of the copyrighted work," as required by § 107(4).^[36] The requirement that a putatively infringing use [485] of a copyrighted work, to be "fair," must not impair a "potential" market for the work has two implications. First, an infringer cannot prevail merely by demonstrating that the copyright holder suffered no net harm from the infringer's action. Indeed, even a showing that the infringement has resulted in a net benefit to the copyright holder will not suffice. Rather, the infringer must demonstrate that he had not impaired the copyright holder's ability to demand compensation from (or to deny access to) any group who would otherwise be willing to pay to see or hear the copyrighted work. Second, the fact that a given market for a copyrighted work would not be available to the copyright holder were it not for the infringer's activities does not permit the infringer to exploit that market without compensating the copyright holder. See Iowa State University Research Foundation, Inc. v. American Broadcasting Cos., 621 F.2d 57 (CA2 1980).

In this case, the Studios and their amici demonstrate that the advent of the VTR technology created a potential market for their copyrighted programs. That market consists of those persons who find it impossible or inconvenient to watch the programs at the time they are broadcast, and who wish to watch them at other times. These persons are willing to pay for the privilege of watching copyrighted work at their convenience, as is evidenced by the fact that they are willing to pay for VTRs and tapes; undoubtedly, most also would be willing to pay some kind of royalty to copyright holders. The Studios correctly argue that they have been deprived of the ability to exploit this sizable market.

It is thus apparent from the record and from the findings of the District Court that time-shifting does have a substantial [486] adverse effect upon the "potential market for" the Studios' copyrighted works. Accordingly, even under the formulation of the fair use doctrine advanced by Sony, time-shifting cannot be deemed a fair use.

V

Contributory Infringement

From the Studios' perspective, the consequences of home VTR recording are the same as if a business had taped the Studios' works off the air, duplicated the tapes, and sold or rented them to members of the public for home viewing. The distinction is that home VTR users do not record for commercial advantage; the commercial benefit accrues to the manufacturer and distributors of the Betamax. I thus must proceed to discuss whether the manufacturer and distributors can be held contributorily liable if the product they sell is used to infringe.

It is well established that liability for copyright infringement can be imposed on persons other than those who actually carry out the infringing activity. Kalem Co. v. Harper Brothers, 222 U.S. 55, 62-63, 32 S.Ct. 20, 21-22, 56 L.Ed. 92 (1911); 3 M. Nimmer, Copyright § 12.04[A] (1982); see Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 160, n. 11, 95 S.Ct. 2040, 2046, n. 11, 45 L.Ed.2d 84 (1975); Buck v. Jewell-LaSalle Realty Co., 283 U.S. 191, 198, 51 S.Ct. 410, 411, 75 L.Ed. 971 (1931). Although the liability provision of the 1976 Act provides simply that "[a]nyone who violates any of the exclusive rights of the copyright owner . . . is an infringer of the copyright," 17 U.S.C. § 501(a), the House and Senate Reports demonstrate that Congress intended to retain judicial doctrines of contributory infringement. 1975 Senate Report 57; 1976 House Report 61.^[37]

[487] The doctrine of contributory copyright infringement, however, is not well-defined. One of the few attempts at definition appears in Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159 (CA2 1971). In that case the Second Circuit stated that "one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a 'contributory' infringer." Id., at 1162 (footnote omitted). While I have no quarrel with this general statement, it does not easily resolve the present case; the District Court and the Court of Appeals, both purporting to apply it, reached diametrically opposite results.

A.

In absolving Sony from liability, the District Court reasoned that Sony had no direct involvement with individual Betamax users, did not participate in any off-the-air copying, and did not know that such copying was an infringement of the Studios' copyright. 480 F.Supp., at 460. I agree with the Gershwin court that contributory liability may be imposed even when the defendant has no formal control over the infringer. The defendant in Gershwin was a concert promoter operating through local concert associations that it sponsored; it had no formal control over the infringing performers themselves. 443 F.2d, [488] at 1162-1163. See also Twentieth Century Music Corp. v. Aiken, 422 U.S., at 160, n. 11, 95 S.Ct., at 2046, n. 11. Moreover, a finding of contributory infringement has never depended on actual knowledge of particular instances of infringement; it is sufficient that the defendant have reason to know that infringement is taking place. 443 F.2d, at 1162; see Screen Gems-Columbia Music, Inc. v. Mark-Fi Records, Inc., 256 F.Supp. 399 (SDNY 1966).^[38] In the so-called "dance hall" cases, in which questions of contributory infringement arise with some frequency, proprietors of entertainment establishments routinely are held liable for unauthorized performances on their premises, even when they have no knowledge that copyrighted works are being performed. In effect, the proprietors in those cases are charged with constructive knowledge of the performances.^[39]

[489] Nor is it necessary that the defendant be aware that the infringing activity violates the copyright laws. Section 504(c)(2) of the 1976 Act provides for a reduction in statutory damages when an infringer proves he "was not aware and had no reason to believe that his or her acts constituted an infringement of copyright," but the statute establishes no general exemption for those who believe their infringing activities are legal. Moreover, such an exemption would be meaningless in a case such as this, in which prospective relief is sought; once a court has established that the copying at issue is infringement, the defendants are necessarily aware of that fact for the future. It is undisputed in this case that Sony had reason to know the Betamax would be used by some owners to tape copyrighted works off the air. See 480 F.Supp., at 459-460.

The District Court also concluded that Sony had not caused, induced, or contributed materially to any infringing activities of Betamax owners. 480 F.Supp., at 460. In a case of this kind, however, causation can be shown indirectly; it does not depend on evidence that particular Betamax owners relied on particular advertisements. In an analogous case decided just two Terms ago, this Court approved a lower court's conclusion that liability for contributory trademark infringement could be imposed on a manufacturer who "suggested, even by implication" that a retailer use the manufacturer's goods to infringe the trademark of another. Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 851, 102 S.Ct. 2182, 2186, 72 L.Ed.2d 606 (1982); see id., at 860, 102 S.Ct., at 2191 (concurring opinion). I think this standard is equally appropriate in the copyright context.

The District Court found that Sony has advertised the Betamax as suitable for off-the-air recording of "favorite shows," "novels for television," and "classic movies," 480 F.Supp., at 436, with no visible warning that such recording [490] could constitute copyright infringement. It is only with the aid of the Betamax or some other VTR, that it is possible today for home television viewers to infringe copyright by recording off-the-air. Off-the-air recording is not only a foreseeable use for the Betamax, but indeed is its intended use. Under the circumstances, I agree with the Court of Appeals that if off-the-air recording is an infringement of copyright, Sony has induced and materially contributed to the infringing conduct of Betamax owners.^[40]

B

Sony argues that the manufacturer or seller of a product used to infringe is absolved from liability whenever the product can be put to any substantial noninfringing use. Brief for Petitioners 41-42. The District Court so held, borrowing the "staple article of commerce" doctrine governing liability for contributory infringement of patents. See 35 U.S.C. § 271.^[41] This Court today is much less positive. See ante, [491] at 440-442. I do not agree that this technical judge-made doctrine of patent law, based in part on considerations irrelevant to the field of copyright, see generally Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S. 176, 187-199, 100 S.Ct. 2601, 2608-2614, 65 L.Ed.2d 696 (1980), should be imported wholesale into copyright law. Despite their common constitutional source, see U.S. Const., Art. I, § 8, cl. 8, patent and copyright protections have not developed in a parallel fashion, and this Court in copyright cases in the past has borrowed patent concepts only sparingly. See Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 345-346, 28 S.Ct. 722, 724, 52 L.Ed. 1086 (1908).

I recognize, however, that many of the concerns underlying the "staple article of commerce" doctrine are present in copyright law as well. As the District Court noted, if liability for contributory infringement were imposed on the manufacturer or seller of every product used to infringe—a typewriter, a camera, a photocopying machine—the "wheels of commerce" would be blocked. 480 F.Supp., at 461; see also Kalem Co. v. Harper Brothers, 222 U.S., at 62, 32 S.Ct., at 21.

I therefore conclude that if a significant portion of the product's use is noninfringing, the manufacturers and sellers cannot be held contributorily liable for the product's infringing uses. See ante, at 440-441. If virtually all of the product's use, however, is to infringe, contributory liability may be imposed; if no one would buy the product for noninfringing purposes alone, it is clear that the manufacturer is purposely profiting from the infringement, and that liability is appropriately imposed. In such a case, the copyright owner's monopoly would not be extended beyond its proper bounds; the manufacturer of such a product contributes to the infringing activities of others and profits directly thereby, while [492] providing no benefit to the public sufficient to justify the infringement.

The Court of Appeals concluded that Sony should be held liable for contributory infringement, reasoning that "[v]ideotape recorders are manufactured, advertised, and sold for the primary purpose of reproducing television programming," and "[v]irtually all television programming is copyrighted material." 659 F.2d, at 975. While I agree with the first of these propositions,^[42] the second, for me, is problematic. The key question is not the amount of television programming that is copyrighted, but rather the amount of VTR usage that is infringing.^[43] Moreover, the parties and their amici have argued vigorously about both the amount of television programming that is covered by copyright and the amount for which permission to copy has been given. The proportion of VTR recording that is infringing is ultimately a question of fact,^[44] and the District Court specifically declined to make [493] findings on the "percentage of legal versus illegal home-use recording." 480 F.Supp., at 468. In light of my view of the law, resolution of this factual question is essential. I therefore would remand the case for further consideration of this by the District Court.

VI

The Court has adopted an approach very different from the one I have outlined. It is my view that the Court's approach alters dramatically the doctrines of fair use and contributory infringement as they have been developed by Congress and the courts. Should Congress choose to respond to the Court's decision, the old doctrines can be resurrected. As it stands, however, the decision today erodes much of the coherence that these doctrines have struggled to achieve.

The Court's disposition of the case turns on its conclusion that time-shifting is a fair use. Because both parties agree that time-shifting is the primary use of VTRs, that conclusion, if correct, would settle the issue of Sony's liability under almost any definition of contributory infringement. The Court concludes that time-shifting is fair use for two reasons. Each is seriously flawed.

The Court's first reason for concluding that time-shifting is fair use is its claim that many copyright holders have no objection to time-shifting, and that "respondents have no right to prevent other copyright holders from authorizing it for their programs." Ante, at 442. The Court explains that a finding of contributory infringement would "inevitably frustrate the interests of broadcasters in reaching the portion of their audience that is available only through time-shifting." [494] Ante, at 446. Such reasoning, however, simply confuses the question of liability with the difficulty of fashioning an appropriate remedy. It may be that an injunction prohibiting the sale of VTRs would harm the interests of copyright holders who have no objection to others making copies of their programs. But such concerns should and would be taken into account in fashioning an appropriate remedy once liability has been found. Remedies may well be available that would not interfere with authorized time-shifting at all. The Court of Appeals mentioned the possibility of a royalty payment that would allow VTR sales and time-shifting to continue unabated, and the parties may be able to devise other narrowly tailored remedies. Sony may be able, for example, to build a VTR that enables broadcasters to scramble the signal of individual programs and "jam" the unauthorized recording of them. Even were an appropriate remedy not available at this time, the Court should not misconstrue copyright holders' rights in a manner that prevents enforcement of them when, through development of better techniques, an appropriate remedy becomes available.^[45]

[495] The Court's second stated reason for finding that Sony is not liable for contributory infringement is its conclusion that even unauthorized time-shifting is fair use. Ante, at 447. This conclusion is even more troubling. The Court begins by suggesting that the fair use doctrine operates as a general "equitable rule of reason." That interpretation mischaracterizes the doctrine, and simply ignores the language of the statute. Section 107 establishes the fair use doctrine "for purposes such as criticism, comment, news reporting, teaching, . . . scholarship, or research." These are all productive uses. It is true that the legislative history states repeatedly that the doctrine must be applied flexibly on a case-by-case basis, but those references were only in the context of productive uses. Such a limitation on fair use comports with its purpose, which is to facilitate the creation of new works. There is no indication that the fair use doctrine has any application for purely personal consumption on the scale involved in this case,^[46] and the Court's application of it here deprives fair use of the major cohesive force that has guided evolution of the doctrine in the past.

[496] Having bypassed the initial hurdle for establishing that a use is fair, the Court then purports to apply to time-shifting the four factors explicitly stated in the statute. The first is "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes." § 107(1). The Court confidently describes time-shifting as a noncommercial, nonprofit activity. It is clear, however, that personal use of programs that have been copied without permission is not what § 107(1) protects. The intent of the section is to encourage users to engage in activities the primary benefit of which accrues to others. Time-shifting involves no such humanitarian impulse. It is likewise something of a mischaracterization of time-shifting to describe it as noncommercial in the sense that that term is used in the statute. As one commentator has observed, time-shifting is noncommercial in the same sense that stealing jewelry and wearing it—instead of reselling it—is noncommercial.^[47] Purely consumptive uses are certainly not what the fair use doctrine was designed to protect, and the awkwardness of applying the statutory language to time-shifting only makes clearer that fair use was designed to protect only uses that are productive.

The next two statutory factors are all but ignored by the Court—though certainly not because they have no applicability. The second factor—"the nature of the copyrighted work"—strongly supports the view that time-shifting is an infringing use. The rationale guiding application of this factor is that certain types of works, typically those involving "more of diligence than of originality or inventiveness," New York Times Co. v. Roxbury Data Interface, Inc., 434 F.Supp. 217, 221 (NJ 1977), require less copyright protection than other original works. Thus, for example, informational [497] works, such as news reports, that readily lend themselves to productive use by others, are less protected than creative works of entertainment. Sony's own surveys indicate that entertainment shows account for more than 80 percent of the programs recorded by Betamax owners.^[48]

The third statutory factor—"the amount and substantiality of the portion used"—is even more devastating to the Court's interpretation. It is undisputed that virtually all VTR owners record entire works, see 480 F.Supp., at 454, thereby creating an exact substitute for the copyrighted original. Fair use is intended to allow individuals engaged in productive uses to copy small portions of original works that will facilitate their own productive endeavors. Time-shifting bears no resemblance to such activity, and the complete duplication that it involves might alone be sufficient to preclude a finding of fair use. It is little wonder that the Court has chosen to ignore this statutory factor.^[49]

The fourth factor requires an evaluation of "the effect of the use upon the potential market for or value of the copyrighted work." This is the factor upon which the Court focuses, but once again, the Court has misread the statute. As mentioned above, the statute requires a court to consider the effect of the use on the potential market for the copyrighted work. The Court has struggled mightily to show that VTR use has not reduced the value of the Studios' copyrighted works in their present markets. Even if true, that showing only begins the proper inquiry. The development [498] of the VTR has created a new market for the works produced by the Studios. That market consists of those persons who desire to view television programs at times other than when they are broadcast, and who therefore purchase VTR recorders to enable them to time-shift.^[50] Because time-shifting of the Studios' copyrighted works involves the copying of them, however, the Studios are entitled to share in the benefits of that new market. Those benefits currently go to Sony through Betamax sales. Respondents therefore can show harm from VTR use simply by showing that the value of their copyrights would increase if they were compensated for the copies that are used in the new market. The existence of this effect is self-evident.

Because of the Court's conclusion concerning the legality of time-shifting, it never addresses the amount of noninfringing use that a manufacturer must show to absolve itself from liability as a contributory infringer. Thus, it is difficult to discuss how the Court's test for contributory infringement would operate in practice under a proper analysis of time-shifting. One aspect of the test as it is formulated by the Court, however, particularly deserves comment. The Court explains that a manufacturer of a product is not liable for contributory infringement as long as the product is "capable of substantial noninfringing uses." Ante, at 442 (emphasis supplied). Such a definition essentially eviscerates the concept of contributory infringement. Only the most unimaginative manufacturer would be unable to demonstrate that a image-duplicating product is "capable" of substantial noninfringing uses. Surely Congress desired to prevent the sale of products that are used almost exclusively to infringe copyrights; [499] the fact that noninfringing uses exist presumably would have little bearing on that desire.

More importantly, the rationale for the Court's narrow standard of contributory infringement reveals that, once again, the Court has confused the issue of liability with that of remedy. The Court finds that a narrow definition of contributory infringement is necessary in order to protect "the rights of others freely to engage in substantially unrelated areas of commerce." Ante, at 442. But application of the contributory infringement doctrine implicates such rights only if the remedy attendant upon a finding of liability were an injunction against the manufacture of the product in question. The issue of an appropriate remedy is not before the Court at this time, but it seems likely that a broad injunction is not the remedy that would be ordered. It is unfortunate that the Court has allowed its concern over a remedy to infect its analysis of liability.

VII

The Court of Appeals, having found Sony liable, remanded for the District Court to consider the propriety of injunctive or other relief. Because of my conclusion as to the issue of liability, I, too, would not decide here what remedy would be appropriate if liability were found. I concur, however, in the Court of Appeals' suggestion that an award of damages, or continuing royalties, or even some form of limited injunction, may well be an appropriate means of balancing the equities in this case.^[51] Although I express no view on the merits [500] of any particular proposal, I am certain that, if Sony were found liable in this case, the District Court would be able to fashion appropriate relief. The District Court might conclude, of course, that a continuing royalty or other equitable relief is not feasible. The Studios then would be relegated to statutory damages for proved instances of infringement. But the difficulty of fashioning relief, and the possibility that complete relief may be unavailable, should not affect our interpretation of the statute.

Like so many other problems created by the interaction of copyright law with a new technology, "[t]here can be no really satisfactory solution to the problem presented here, until Congress acts." Twentieth Century Music Corp. v. Aiken, 422 U.S., at 167, 95 S.Ct., at 2049 (dissenting opinion). But in the absence of a congressional solution, courts cannot avoid difficult problems by refusing to apply the law. We must "take the Copyright Act . . . as we find it," Fortnightly Corp. v. United Artists, 392 U.S. 390, 401-402, 88 S.Ct. 2084, 2090, 20 L.Ed.2d 1176 (1968), and "do as little damage as possible to traditional copyright principles . . . until the Congress legislates." Id., at 404, 88 S.Ct., at 2091 (dissenting opinion).

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[1] The respondents also asserted causes of action under state law and § 43(a) of the Trademark Act of 1946, 60 Stat. 441, 15 U.S.C. § 1125(a). These claims are not before this Court.

[2] The four retailers are Carter, Hawley, Hales, Stores, Inc.; Associated Dry Goods Corp.; Federated Department Stores, Inc.; and Henry's Camera Corp. The principal defendants are Sony Corporation, the manufacturer of the equipment, and its wholly owned subsidiary, Sony Corporation of America. The advertising agency of Doyle, Dane, Burnbock, Inc., also involved in marketing the Betamax, is also a petitioner. An individual VTR user, Willis Griffiths, was named as a defendant in the District Court, but respondent sought no relief against him. Griffiths is not a petitioner. For convenience, we shall refer to petitioners collectively as Sony.

[3] As evidence of how a VTR may be used, respondents offered the testimony of William Griffiths. Griffiths, although named as an individual defendant, was a client of plaintiffs' law firm. The District Court summarized his testimony as follows:

"He owns approximately 100 tapes. When Griffiths bought his Betamax, he intended not only to time-shift (record, play-back and then erase) but also to build a library of cassettes. Maintaining a library, however, proved too expensive, and he is now erasing some earlier tapes and reusing them.

"Griffiths copied about 20 minutes of a Universal motion picture called 'Never Give An Inch,' and two episodes from Universal television series entitled 'Baa Baa Black Sheep' and 'Holmes and Yo Yo.' He would have erased each of these but for the request of plaintiffs' counsel that it be kept. Griffiths also testified that he had copied but already erased Universal films called 'Alpha Caper' (erased before anyone saw it) and 'Amelia Earhart.' At the time of his deposition Griffiths did not intend to keep any Universal film in his library.

"Griffiths has also recorded documentaries, news broadcasts, sporting events and political programs such as a rerun of the Nixon/Kennedy debate." 480 F.Supp., at 436-437.

Four other witnesses testified to having engaged in similar activity.

[4] The District Court summarized some of the findings in these surveys as follows:

"According to plaintiffs' survey, 75.4% of the VTR owners use their machines to record for time-shifting purposes half or most of the time. Defendants' survey showed that 96% of the Betamax owners had used the machine to record programs they otherwise would have missed.

"When plaintiffs asked interviewees how many cassettes were in their library, 55.8% said there were 10 or fewer. In defendants' survey, of the total programs viewed by interviewees in the past month, 70.4% had been viewed only that one time and for 57.9%, there were no plans for further viewing." 480 F.Supp., at 438.

[5] "81.9% of the defendants' interviewees watched the same amount or more of regular television as they did before owning a Betamax. 83.2% reported their frequency of movie going was unaffected by Betamax." 480 F.Supp., at 439.

[6] See Def.Exh. OT, Table 20; Tr. 2447-2450, 2480, 2486-2487, 2515-2516, 2530-2534.

[7] The trial also briefly touched upon demonstrations of the Betamax by the retailer petitioners which were alleged to be infringements by respondents. The District Court held against respondents on this claim, 480 F.Supp., at 456-457, the Court of Appeals affirmed this holding, 659 F.2d, at 976, and respondents did not cross-petition on this issue.

[8] The court also found that this "access is not just a matter of convenience, as plaintiffs have suggested. Access has been limited not simply by inconvenience but by the basic need to work. Access to the better program has also been limited by the competitive practice of counterprogramming." 480 F.Supp., at 454.

[9]

"Without a 'productive use', i.e. when copyrighted material is reproduced for its intrinsic use, the mass copying of the sort involved in this case precludes an application of fair use." 659 F.2d, at 971-972.

[10] In its report accompanying the comprehensive revision of the Copyright Act in 1909, the Judiciary Committee of the House of Representatives explained this balance:

"The enactment of copyright legislation by Congress under the terms of the Constitution is not based upon any natural right that the author has in his writings, . . . but upon the ground that the welfare of the public will be served and progress of science and useful arts will be promoted by securing to authors for limited periods the exclusive rights to their writings.

* * * *

"In enacting a copyright law Congress must consider . . . two questions: First, how much will the legislation stimulate the producer and so benefit the public, and, second, how much will the monopoly granted be detrimental to the public? The granting of such exclusive rights, under the proper terms and conditions, confers a benefit upon the public that outweighs the evils of the temporary monopoly." H.R.Rep. No. 2222, 60th Cong., 2d Sess. 7 (1909).

[11] Thus, for example, the development and marketing of player pianos and perforated roles of music, see White-Smith Music Publishing Co. v. Apollo Co., 209 U.S. 1, 28 S.Ct. 319, 52 L.Ed. 655 (1908), preceded the enactment of the Copyright Act of 1909; innovations in copying techniques gave rise to the statutory exemption for library copying embodied in § 108 of the 1976 revision of the Copyright law; the development of the technology that made it possible to retransmit television programs by cable or by microwave systems, see Fortnightly Corp. v. United Artists, 392 U.S. 390, 88 S.Ct. 2084, 20 L.Ed.2d 1176 (1968), and Teleprompter Corp. v. CBS, 415 U.S. 394, 94 S.Ct. 1129, 39 L.Ed.2d 415 (1974), prompted the enactment of the complex provisions set forth in 17 U.S.C. § 111(d)(2)(B) and § 111(d)(5) after years of detailed congressional study, see Eastern Microwave, Inc. v. Doubleday Sports, Inc., 691 F.2d 125, 129 (CA2 1982).

By enacting the Sound Recording Amendment of 1971, 85 Stat. 391, Congress also provided the solution to the "record piracy" problems that had been created by the development of the audio tape recorder. Sony argues that the legislative history of that Act, see especially H.Rep. No. 487, 92nd Cong., 1st Sess., p. 7, indicates that Congress did not intend to prohibit the private home use of either audio or video tape recording equipment. In view of our disposition of the contributory infringement issue, we express no opinion on that question.

[12]

"Copyright protection became necessary with the invention of the printing press and had its early beginnings in the British censorship laws. The fortunes of the law of copyright have always been closely connected with freedom of expression, on the one hand, and with technological improvements in means of dissemination, on the other. Successive ages have drawn different balances among the interest of the writer in the control and exploitation of his intellectual property, the related interest of the publisher, and the competing interest of society in the untrammeled dissemination of ideas." Foreword to B. Kaplan, An Unhurried View of Copyright vii-viii (1967).

[13] See, e.g., White-Smith Music Publishing Co. v. Apollo Co., 209 U.S. 1, 19, 28 S.Ct. 319, 323, 52 L.Ed. 655 (1908); cf. Deep South Packing Co. v. Lathram Corp., 406 U.S. 518, 530-531, 92 S.Ct. 1700, 1707-1708, 32 L.Ed.2d 273 (1972). While the law has never recognized an author's right to absolute control of his work, the natural tendency of legal rights to express themselves in absolute terms to the exclusion of all else is particularly pronounced in the history of the constitutionally sanctioned monopolies of the copyright and the patent. See e.g., United States v. Paramount Pictures, 334 U.S. 131, 156-158, 68 S.Ct. 915, 928-929, 92 L.Ed. 1260 (1948) (copyright owners claiming right to tie license of one film to license of another under copyright law); Fox Film Corp. v. Doyal, 286 U.S. 123, 52 S.Ct. 546, 76 L.Ed. 1010 (1932) (copyright owner claiming copyright renders it immune from state taxation of copyright royalties); Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 349-351, 28 S.Ct. 722, 725-726, 52 L.Ed. 1086 (1908) (copyright owner claiming that a right to fix resale price of his works within the scope of his copyright); International Business Machines v. United States, 298 U.S. 131, 56 S.Ct. 701, 80 L.Ed. 1085 (1936) (patentees claiming right to tie sale of unpatented article to lease of patented device).

[14] Section 106 of the Act provides:

"'Subject to sections 107 through 118, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords;

(2) to prepare derivative works based upon the copyrighted work;

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;

(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; and

(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly."

[15] Moreover, anyone who willfully infringes the copyright to reproduce a motion picture for purposes of commercial advantage or private financial gain is subject to criminal penalties of one year imprisonment and a $25,000 fine for the first offense and two years imprisonment and a $50,000 fine for each subsequent offense, 17 U.S.C. § 506(a), and the fruits and instrumentalities of the crime are forfeited upon conviction, id., § 506(b).

[16] In this regard, we reject respondent's attempt to cast this action as comparable to a class action because of the positions taken by amici with copyright interests and their attempt to treat the statements made by amici as evidence in this case. See Brief for Respondent, at 1, and n. 1, 6, 52, 53 and n. 116. The stated desires of amici concerning the outcome of this or any litigation are no substitute for a class action, are not evidence in the case, and do not influence our decision; we examine an amicus curiae brief solely for whatever aid it provides in analyzing the legal questions before us.

[17] As the District Court correctly observed, however, "the lines between direct infringement, contributory infringement, and vicarious liability are not clearly drawn. . . ." 480 F.Supp. 457-458. The lack of clarity in this area may, in part, be attributable to the fact that an infringer is not merely one who uses a work without authorization by the copyright owner, but also one who authorizes the use of a copyrighted work without actual authority from the copyright owner.

We note the parties' statements that the questions of petitioners' liability under the "doctrines" of "direct infringement" and "vicarious liability" are not nominally before this Court. Compare Respondents' Brief, at 9, n. 22, 41, n. 90 with Petitioners' Reply Brief, at 1, n. 2. We also observe, however, that reasoned analysis of respondents' unprecedented contributory infringement claim necessarily entails consideration of arguments and case law which may also be forwarded under the other labels, and indeed the parties to a large extent rely upon such arguments and authority in support of their respective positions on the issue of contributory infringement.

[18] The so-called "dance hall cases," Famous Music Corp. v. Bay State Harness Horse Racing and Breeding Ass'n, 554 F.2d 1213 (CA1 1977) (racetrack retained infringer to supply music to paying customers); KECA MUSIC, Inc. v. Dingus McGee's Co., 432 F.Supp. 72 (W.D.Mo.1977) (cocktail lounge hired musicians to supply music to paying customers); Dreamland Ball Room v. Shapiro, Bernstein & Co., 36 F.2d 354 (CA7 1929) (dance hall hired orchestra to supply music to paying customers) are often contrasted with the so-called landlord-tenant cases, in which landlords who leased premises to a direct infringer for a fixed rental and did not participate directly in any infringing activity were found not to be liable for contributory infringement. E.g., Deutsch v. Arnold, 98 F.2d 686 (CA2 1938).

In Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304 (CA2 1963) the owner of twenty-three chain stores retained the direct infringer to run its record departments. The relationship was structured as a licensing arrangement, so that the defendant bore none of the business risk of running the department. Instead, it received 10% or 12% of the direct infringer's gross receipts. The Court of Appeals concluded:

"[The dance-hall cases] and this one lie closer on the spectrum to the employer-employee model, than to the landlord-tenant model. On the particular facts before us, . . . Green's relationship to its infringing licensee, as well as its strong concern for the financial success of the phonograph record concession, renders it liable for the unauthorized sales of the 'bootleg' records.

"[T]he imposition of vicarious liability in the case before us cannot be deemed unduly harsh or unfair. Green has the power to police carefully the conduct of its concessionaire; our judgment will simply encourage it to do so, thus placing responsibility where it can and should be effectively exercised." Id., at 308 (emphasis in original).

In Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159 (CA2 1971), the direct infringers retained the contributory infringer to manage their performances. The contributory infringer would contact each direct infringer, obtain the titles of the musical compositions to be performed, print the programs, and then sell the programs to its own local organizations for distribution at the time of the direct infringement. Id., at 1161. The Court of Appeals emphasized that the contributory infringer had actual knowledge that the artists it was managing were performing copyrighted works, was in a position to police the infringing conduct of the artists, and derived substantial benefit from the actions of the primary infringers. Id., at 1163.

In Screen Gems-Columbia Music, Inc. v. Mark-Fi Records, Inc., 256 F.Supp. 399 (SDNY 1966), the direct infringer manufactured and sold bootleg records. In denying a motion for summary judgment, the District Court held that the infringer's advertising agency, the radio stations that advertised the infringer's works, and the service agency that boxed and mailed the infringing goods could all be held liable, if at trial it could be demonstrated that they knew or should have known that they were dealing in illegal goods.

[19] E.g., United States v. Paramount Pictures, 334 U.S. 131, 158, 68 S.Ct. 915, 929, 92 L.Ed. 1260 (1948); Fox Film Corp. v. Doyal, 286 U.S. 123, 131, 52 S.Ct. 546, 548, 76 L.Ed. 1010 (1932); Wheaton and Donaldson v. Peters and Grigg, 33 U.S. (8 Pet.) 591, 657-658, 8 L.Ed. 1055 (1834). The two areas of the law, naturally, are not identical twins, and we exercise the caution which we have expressed in the past in applying doctrine formulated in one area to the other. See generally, Mazer v. Stein, 347 U.S. 201, 217-218, 74 S.Ct. 460, 470, 98 L.Ed. 630 (1954); Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 345, 28 S.Ct. 722, 724, 52 L.Ed. 1086 (1908).

We have consistently rejected the proposition that a similar kinship exists between copyright law and trademark law, and in the process of doing so have recognized the basic similarities between copyrights and patents. The Trade-Mark Cases, 100 U.S. 82, 91-92, 25 L.Ed. 550 (1879); see also, United Drug Co. v. Rectanus Co., 248 U.S. 90, 97, 39 S.Ct. 48, 50, 63 L.Ed. 141 (1918) (trademark right "has little or no analogy" to copyright or patent); McLean v. Fleming, 96 U.S. 245, 254 (1877); Canal Co. v. Clark, 13 Wall. 311, 322, 20 L.Ed. 581 (1871). Given the fundamental differences between copyright law and trademark law, in this copyright case we do not look to the standard for contributory infringement set forth in Inwood Laboratories v. Ives Laboratories, 456 U.S. 844, 854-855, 102 S.Ct. 2182, 2188, 72 L.Ed.2d 606 (1982), which was crafted for application in trademark cases. There we observed that a manufacturer or distributor could be held liable to the owner of a trademark if it intentionally induced a merchant down the chain of distribution to pass off its product as that of the trademark owner's or if it continued to supply a product which could readily be passed off to a particular merchant whom it knew was mislabeling the product with the trademark owner's mark. If Inwood's narrow standard for contributory trademark infringement governed here, respondents' claim of contributory infringement would merit little discussion. Sony certainly does not "intentionally induce[ ]" its customers to make infringing uses of respondents' copyrights, nor does it supply its products to identified individuals known by it to be engaging in continuing infringement of respondents' copyrights, see id., at 855, 102 S.Ct., at 2188.

[20] 35 U.S.C. § 271 provides:

"(a) Except as otherwise provided in this title, whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent.

"(b) Whoever actively induces infringement of a patent shall be liable as an infringer.

"(c) Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.

"(d) No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having done one or more of the following: (1) derived revenue from acts which if performed by another without his consent would constitute contributory infringement of the patent; (2) licensed or authorized another to perform acts which if performed without his consent would constitute contributory infringement of the patent; (3) sought to enforce his patent rights against infringement or contributory infringement."

[21] It seems extraordinary to suggest that the Copyright Act confers upon all copyright owners collectively, much less the two respondents in this case, the exclusive right to distribute VTR's simply because they may be used to infringe copyrights. That, however, is the logical implication of their claim. The request for an injunction below indicates that respondents seek, in effect, to declare VTR's contraband. Their suggestion in this Court that a continuing royalty pursuant to a judicially created compulsory license would be an acceptable remedy merely indicates that respondents, for their part, would be willing to license their claimed monopoly interest in VTR's to petitioners in return for a royalty.

[22] The record suggests that Disney's programs at the time of trial consisted of approximately one hour a week of network television and one syndicated series. Universal's percentage in the Los Angeles market on commercial television stations was under 5%. See Tr. 532-533, 549-550.

[23] The District Court did not make any explicit findings with regard to how much broadcasting is wholly uncopyrighted. The record does include testimony that at least one movie—My Man Godfrey —falls within that category, Tr. 2300-2301, and certain broadcasts produced by the federal government are also uncopyrighted. See 17 U.S.C. § 105. Cf. Schnapper v. Foley, 667 F.2d 102 (CADC 1981) (explaining distinction between work produced by the government and work commissioned by the government). To the extent such broadcasting is now significant, it further bolsters our conclusion. Moreover, since copyright protection is not perpetual, the number of audiovisual works in the public domain necessarily increases each year.

[24] See Tr. 2447-2450 (Alexander Hadden, Major League Baseball); Tr. 2480, 2486-2487 (Jay Moyer, National Football League); Tr. 2515-2516 (David Stern, National Basketball Association); Tr. 2530-2534 (Gilbert Stein, National Hockey League); Tr. 2543-2552 (Thomas Hansen, National Collegiate Athletic Association); Tr. 2565-2572 (Benjamin Armstrong, National Religious Broadcasters). Those officials were authorized to be the official spokespersons for their respective institutions in this litigation. Tr. 2432, 2479, 2509-2510, 2530, 2538, 2563. See Fed.Rules Civ.Proc. 30(b)(6).

[25] Tr. 2863-2902; Def. Exh. PI.

[26] See also Tr. 2833-2844 (similar testimony by executive director of New Jersey Public Broadcasting Authority). Cf. Tr. 2592-2605 (testimony by chief of New York Education Department's Bureau of Mass Communications approving home taping for educational purposes).

[27]

"Some public stations, as well as commercial stations, program the 'Neighborhood' at hours when some children cannot use it. I think that it's a real service to families to be able to record such programs and show them at appropriate times. I have always felt that with the advent of all of this new technology that allows people to tape the 'Neighborhood' off-the-air, and I'm speaking for the 'Neighborhood' because that's what I produce, that they then become much more active in the programming of their family's television life. Very frankly, I am opposed to people being programmed by others. My whole approach in broadcasting has always been 'You are an important person just the way you are. You can make healthy decisions.' Maybe I'm going on too long, but I just feel that anything that allows a person to be more active in the control of his or her life, in a healthy way, is important." T.R. 2920-2921. See also Def. Exh. PI, p. 85.

[28] It may be rare for large numbers of copyright owners to authorize duplication of their works without demanding a fee from the copier. In the context of public broadcasting, however, the user of the copyrighted work is not required to pay a fee for access to the underlying work. The traditional method by which copyright owners capitalize upon the television medium commercially sponsored free public broadcast over the public airwaves—is predicated upon the assumption that compensation for the value of displaying the works will be received in the form of advertising revenues.

In the context of television programming, some producers evidently believe that permitting home viewers to make copies of their works off the air actually enhances the value of their copyrights. Irrespective of their reasons for authorizing the practice, they do so, and in significant enough numbers to create a substantial market for a non-infringing use of the Sony VTR's. No one could dispute the legitimacy of that market if the producers had authorized home taping of their programs in exchange for a license fee paid directly by the home user. The legitimacy of that market is not compromised simply because these producers have authorized home taping of their programs without demanding a fee from the home user. The copyright law does not require a copyright owner to charge a fee for the use of his works, and as this record clearly demonstrates, 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. It is not the role of the courts to tell copyright holders the best way for them to exploit their copyrights: even if respondents' competitors were ill-advised in authorizing home videotaping, that would not change the fact that they have created a substantial market for a paradigmatic non-infringing use of petitioners' product.

[29] The Copyright Act of 1909, 35 Stat. 1075, did not have a "fair use" provision. Although that Act's compendium of exclusive rights "to print, reprint, publish, copy, and vend the copyrighted work" was broad enough to encompass virtually all potential interactions with a copyrighted work, the statute was never so construed. The courts simply refused to read the statute literally in every situation. When Congress amended the statute in 1976, it indicated that it "intended to restate the present judicial doctrine of fair use, not to change, narrow, or enlarge it in any way." House Report No. 94-1476, 94th Cong., 2d Sess., p. 66, U.S.Code Code & Admin.News 1976, pp. 5659, 5679.

[30] Section 107 provides:

"Notwithstanding the provisions of section 106, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

"(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." 17 U.S.C. § 107.

[31] The House Report expressly stated that the fair use doctrine is an "equitable rule of reason" in its explanation of the fair use section:

"Although the courts have considered and ruled upon the fair use doctrine over and over again, no real definition of the concept has ever emerged. Indeed, since the doctrine is an equitable rule of reason, no generally applicable definition is possible, and each case raising the question must be decided on its own facts. . . .

General intention behind the provision

"The statement of the fair use doctrine in section 107 offers some guidance to users in determining when the principles of the doctrine apply. However, the endless variety of situations and combinations of circumstances that can rise in particular cases precludes the formulation of exact rules in the statute. The bill endorses the purpose and general scope of the judicial doctrine of fair use, but there is no disposition to freeze the doctrine in the statute, especially during a period of rapid technological change. Beyond a very broad statutory explanation of what fair use is and some of the criteria applicable to it, the courts must be free to adapt the doctrine to particular situations on a case-by-case basis." H.Rep. No. 94-1476, pp. 65-66, U.S.Code Cong. & Admin.News 1976, p. 5680.

The Senate Committee similarly eschewed a rigid, bright line approach to fair use. The Senate Report endorsed the view "that off-the-air recording for convenience" could be considered "fair use" under some circumstances, although it then made it clear that it did not intend to suggest that off-the-air recording for convenience should be deemed fair use under any circumstances imaginable. Senate Report 94-473, pp. 65-66. The latter qualifying statement is quoted by the dissent, post, at 481, and if read in isolation, would indicate that the Committee intended to condemn all off-the-air recording for convenience. Read in context, however, it is quite clear that that was the farthest thing from the Committee's intention.

[32]

"The Committee has amended the first of the criteria to be considered—'the purpose and character of the use'—to state explicitly that this factor includes a consideration of 'whether such use is of a commercial nature or is for non-profit educational purposes.' This amendment is not intended to be interpreted as any sort of not-for-profit limitation on educational uses of copyrighted works. It is an express recognition that, as under the present law, the commercial or non-profit character of an activity, while not conclusive with respect to fair use, can and should be weighed along with other factors in fair use decisions." H.Rep. No. 94-1476, p. 66, U.S.Code Cong. & Admin.News 1976, p. 5679.

[33] It has been suggested that "consumptive uses of copyrights by home VTR users are commercial even if the consumer does not sell the homemade tape because the consumer will not buy tapes separately sold by the copyrightholder." Home Recording of Copyrighted Works: Hearing before Subcommittee on Courts, Civil Liberties and the Administration of Justice of the House Committee on the Judiciary, 97th Congress, 2d Session, pt. 2, p. 1250 (1982) (memorandum of Prof. Laurence H. Tribe). Furthermore, "[t]he error in excusing such theft as noncommercial," we are told, "can be seen by simple analogy: jewel theft is not converted into a noncommercial veniality if stolen jewels are simply worn rather than sold." Ibid. The premise and the analogy are indeed simple, but they add nothing to the argument. The use to which stolen jewelery is put is quite irrelevant in determining whether depriving its true owner of his present possessory interest in it is venial; because of the nature of the item and the true owner's interests in physical possession of it, the law finds the taking objectionable even if the thief does not use the item at all. Theft of a particular item of personal property of course may have commercial significance, for the thief deprives the owner of his right to sell that particular item to any individual. Timeshifting does not even remotely entail comparable consequences to the copyright owner. Moreover, the timeshifter no more steals the program by watching it once than does the live viewer, and the live viewer is no more likely to buy pre-recorded videotapes than is the timeshifter. Indeed, no live viewer would buy a pre-recorded videotape if he did not have access to a VTR.

[34] Cf. Latman, Fair Use of Copyrighted Works (1958), reprinted as Study No. 14 in Senate Judiciary Committee, Copyright Law Revision, Studies Prepared for the Subcommittee on Patents, Trademarks, and Copyrights, 86th Cong., 2d Sess., p. 30 (1960):

"In certain situations, the copyright owner suffers no substantial harm from the use of the work. . . . Here again, is the partial marriage between the doctrine of fair use and the legal maxim de minimis non curat lex."

[35] See also 480 F.Supp., at 451:

"It should be noted, however, that plaintiffs' argument is more complicated and speculative than was the plaintiff's in Williams & Wilkins. . . . Here, plaintiffs ask the court to find harm based on many more assumptions. . . . As is discussed more fully in Part IV, infra, some of these assumptions are based on neither fact nor experience, and plaintiffs admit that they are to some extent inconsistent and illogical."

[36] "There was testimony at trial, however, that Nielsen Ratings has already developed the ability to measure when a Betamax in a sample home is recording the program. Thus, the Betamax will be measured as a part of the live audience. The later diary can augment that measurement with information about subsequent viewing." 480 F.Supp., at 466.

In a separate section, the District Court rejected plaintiffs' suggestion that the commercial attractiveness of television broadcasts would be diminished because Betamax owners would use the pause button or fast-forward control to avoid viewing advertisements:

"It must be remembered, however, that to omit commercials, Betamax owners must view the program, including the commercials, while recording. To avoid commercials during playback, the viewer must fast-forward and, for the most part, guess as to when the commercial has passed. For most recordings, either practice may be too tedious. As defendants' survey showed, 92% of the programs were recorded with commercials and only 25% of the owners fast-forward through them. Advertisers will have to make the same kinds of judgments they do now about whether persons viewing televised programs actually watch the advertisements which interrupt them." Id., at 468.

[37]

"Here plaintiffs assume that people will view copies when they would otherwise be watching television or going to the movie theater. There is no factual basis for this assumption. It seems equally likely that Betamax owners will play their tapes when there is nothing on television they wish to see and no movie they want to attend. Defendants' survey does not show any negative effect of Betamax ownership on television viewing or theater attendance." Ibid.

[38]

"The underlying assumptions here are particularly difficult to accept. Plaintiffs explain that the Betamax increases access to the original televised material and that the more people there are in this original audience, the fewer people the rerun will attract. Yet current marketing practices, including the success of syndication, show just the opposite. Today, the larger the audience for the original telecast, the higher the price plaintiffs can demand from broadcasters from rerun rights. There is no survey within the knowledge of this court to show that the rerun audience is comprised of persons who have not seen the program. In any event, if ratings can reflect Betamax recording, original audiences may increase and, given market practices, this should aid plaintiffs rather than harm them." Ibid.

[39] "This suggestion lacks merit. By definition, time-shift recording entails viewing and erasing, so the program will no longer be on tape when the later theater run begins. Of course, plaintiffs may fear that the Betamax will keep the tapes long enough to satisfy all their interest in the program and will, therefore, not patronize later theater exhibitions. To the extent this practice involves librarying, it is addressed in section V.C., infra. It should also be noted that there is no evidence to suggest that the public interest in later theatrical exhibitions of motion pictures will be reduced any more by Betamax recording than it already is by the television broadcast of the film." 480 F.Supp., at 467.

[40] The Court of Appeals chose not to engage in any "equitable rule of reason" analysis in this case. Instead, it assumed that the category of "fair use" is rigidly circumscribed by a requirement that every such use must be "productive." It therefore concluded that copying a television program merely to enable the viewer to receive information or entertainment that he would otherwise miss because of a personal scheduling conflict could never be fair use. That understanding of "fair use" was erroneous.

Congress has plainly instructed us that fair use analysis calls for a sensitive balancing of interests. The distinction between "productive" and "unproductive" uses may be helpful in calibrating the balance, but it cannot be wholly determinative. Although copying to promote a scholarly endeavor certainly has a stronger claim to fair use than copying to avoid interrupting a poker game, the question is not simply two-dimensional. For one thing, it is not true that all copyrights are fungible. Some copyrights govern material with broad potential secondary markets. Such material may well have a broader claim to protection because of the greater potential for commercial harm. Copying a news broadcast may have a stronger claim to fair use than copying a motion picture. And, of course, not all uses are fungible. Copying for commercial gain has a much weaker claim to fair use than copying for personal enrichment. But the notion of social "productivity" cannot be a complete answer to this analysis. A teacher who copies to prepare lecture notes is clearly productive. But so is a teacher who copies for the sake of broadening his personal understanding of his specialty. Or a legislator who copies for the sake of broadening her understanding of what her constituents are watching; or a constituent who copies a news program to help make a decision on how to vote.

Making a copy of a copyrighted work for the convenience of a blind person is expressly identified by the House Committee Report as an example of fair use, with no suggestion that anything more than a purpose to entertain or to inform need motivate the copying. In a hospital setting, using a VTR to enable a patient to see programs he would otherwise miss has no productive purpose other than contributing to the psychological well-being of the patient. Virtually any time-shifting that increases viewer access to television programming may result in a comparable benefit. The statutory language does not identify any dichotomy between productive and nonproductive time-shifting, but does require consideration of the economic consequences of copying.

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[1] The Betamax has three primary components: a tuner that receives television ("RF") signals broadcast over the airwaves; an adapter that converts the RF signals into audio-video signals; and a recorder that places the audio-video signals on magnetic tape. Sony also manufactures VTRs without built-in tuners; these are capable of playing back prerecorded tapes and recording home movies on videotape, but cannot record off the air. Since the Betamax has its own tuner, it can be used to record off one channel while another channel is being watched.

The Betamax is available with auxiliary features, including a timer, a pause control, and a fast-forward control; these allow Betamax owners to record programs without being present, to avoid (if they are present) recording commercial messages, and to skip over commercials while playing back the recording. Videotape is reusable; the user erases its record by recording over it.

[2] This case involves only the home recording for home use of television programs broadcast free over the airwaves. No issue is raised concerning cable or pay television, or the sharing or trading of tapes.

[3] At the trial, the Studios proved 32 individual instances where their copyrighted works were recorded on Betamax VTRs. Two of these instances occurred after January 1, 1978, the primary effective date of the 1976 Act; all the others occurred while the 1909 Act was still effective. My analysis focuses primarily on the 1976 Act, but the principles governing copyright protection for these works are the same under either Act.

[4] Act of Feb. 3, 1831, ch. 16, 4 Stat. 436; Act of July 8, 1870, §§ 85-111, 16 Stat. 212-217; Act of Mar. 4, 1909, 35 Stat. 1075 (formerly codified as 17 U.S.C. § 1 et seq. (1976 ed.)); Copyright Revision Act of 1976, 90 Stat. 2541 (codified as 17 U.S.C. § 101 et seq. (1982 ed.)).

[5] Section 102(a) provides:

"Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. Works of authorship include the following categories:

"(1) literary works;

"(2) musical works, including any accompanying words;

"(3) dramatic works, including any accompanying music;

"(4) pantomimes and choreographic works;

"(5) pictorial, graphic, and sculptural works;

"(6) motion pictures and other audiovisual works; and

"(7) sound recordings."

Definitions of terms used in § 102(a)(6) are provided by § 101:¶ "Audiovisual works" are "works that consist of a series of related images which are intrinsically intended to be shown by the use of machines, or devices such as projectors, viewers, or electronic equipment, together with accompanying sounds, if any, regardless of the nature of the material objects, such as films or tapes, in which the works are embodied." And "motion pictures" are "audiovisual works consisting of a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any." Most commercial television programs, if fixed on film or tape at the time of broadcast or before, qualify as "audiovisual works." Since the categories set forth in § 102(a) are not mutually exclusive, a particular television program may also qualify for protection as a dramatic, musical, or other type of work.

[6] Section 106 provides:

"Subject to sections 107 through 118, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

"(1) to reproduce the copyrighted work in copies or phonorecords;

"(2) to prepare derivative works based upon the copyrighted work;

"(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;

"(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; and

"(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly."

[7] A "phonorecord" is defined by § 101 as a reproduction of sounds other than sounds accompanying an audiovisual work, while a "copy" is a reproduction of a work in any form other than a phonorecord.

[8] Section 107 provides:

"Notwithstanding the provisions of section 106, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

"(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."

Section 101 makes it clear that the four factors listed in this section are "illustrative and not limitative."

[9] The 1976 Act was the product of a revision effort lasting more than 20 years. Spurred by the recognition that "significant developments in technology and communications" had rendered the 1909 Act inadequate, S.Rep. No. 94-473, p. 47 (1975); see H.R.Rep. No. 94-1476, p. 47 (1976), U.S.Code Cong. & Admin.News 1976, p. 5660, Congress in 1955 authorized the Copyright Office to prepare a series of studies on all aspects of the existing copyright law. Thirty-four studies were prepared and presented to Congress. The Register of Copyrights drafted a comprehensive report with recommendations, House Committee on the Judiciary, Copyright Law Revision, Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law, 87th Cong., 1st Sess. (Comm.Print 1961) (Register's 1961 Report), and general revision bills were introduced near the end of the 88th Congress in 1964. H.R.11947/S.3008, 88th Cong., 2d Sess. (1964). The Register issued a second report in 1965, with revised recommendations. House Committee on the Judiciary, Copyright Law Revision, Pt. 6, Supplementary Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law: 1965 Revision Bill, 89th Cong., 1st Sess. (Comm.Print 1965) (Register's Supplementary Report). Action on copyright revision was delayed from 1967 to 1974 by a dispute on cable television, see generally Second Supplementary Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law: 1975 Revision Bill, ch. V, pp. 2-26 (Draft Oct.-Dec. 1975) (Register's Second Supplementary Report), but a compromise led to passage of the present Act in 1976.

[10] 1 U.S.C. § 1 provides in relevant part:

"In determining the meaning of any Act of Congress, unless the context indicates otherwise . . . words importing the plural include the singular. . . ."

[11] The library photocopying provisions of § 108 do not excuse any person who requests "a copy" from a library if the requester's use exceeds fair use. § 108(f)(2). Moreover, a library is absolved from liability for the unsupervised use of its copying equipment provided that the equipment bears a notice informing users that "the making of a copy" may violate the copyright law. § 108(f)(1).

[12] For example, "the making of a single copy or phonorecord by an individual as a free service for a blind person" would be a fair use, as would "a single copy reproduction of an excerpt from a copyrighted work by a calligrapher for a single client" or "a single reproduction of excerpts from a copyrighted work by a student calligrapher or teacher in a learning situation." 1975 Senate Report 66-67; see 1976 House Report 73-74, U.S.Code Cong. & Admin.News 1976, p. 5687. Application of the fair use doctrine in these situations, of course, would be unnecessary if the 1976 Act created a general exemption for the making of a single copy.

[13] Professor Latman made special mention of the "personal use" issue because the area was one that

"has become disturbed by recent developments . . . . Photoduplication devices may make authors' and publishers' groups apprehensive. The Copyright Charter recently approved by [the International Confederation of Societies of Authors and Composers] emphasizes the concern of authors over 'private' uses which, because of technological developments, are said to be competing seriously with the author's economic interests." Latman Fair Use Study 33-34.

[14] The one exemption proposed by the Register, permitting a library to make a single photocopy of an out-of-print work and of excerpts that a requester certified were needed for research, met with opposition and was not included in the bills initially introduced in Congress. See Register's 1961 Report 26; H.R. 11947/S. 3008, 88th Cong., 2d Sess. (1964); Register's Supplementary Report 26. A library copying provision was restored to the bill in 1969, after pressure from library associations. Register's Second Supplementary Report, ch. III, pp. 10-11; see S. 543, 91st Cong., 1st Sess., § 108 (Comm.Print Dec. 10, 1969); 1975 Senate Report 48.

[15] The 1964 bills provided that the fair use of copyrighted material for purposes "such as criticism, comment, news reporting, teaching, scholarship, or research" was not an infringement of copyright, and listed four "factors to be considered" in determining whether any other particular use was fair. H.R.11947/S.3008, 88th Cong., 2d Sess., § 6 (1964). Revised bills, drafted by the Copyright Office in 1965, contained a fair use provision merely mentioning the doctrine but not indicating its scope: "Notwithstanding the provisions of section 106, the fair use of a copyrighted work is not an infringement of copyright." H.R.4347/S.1006, 89th Cong., 1st Sess., § 107 (1965). The House Judiciary Committee restored the provision to its earlier wording, H.R.Rep. No. 2237, 89th Cong., 2d Sess., 5, 58 (1966), and the language adopted by the Committee remained in the bill in later Congresses. See H.R.2512/S.597, 90th Cong., 1st Sess., § 107 (1967); S.543, 91st Cong., 1st Sess., § 107 (1969); S.644, 92d Cong., 1st Sess., § 107 (1971); S.1361, 93d Cong., 1st Sess., § 107 (1973); H.R.2223/S.22, 94th Cong., 1st Sess., § 107 (1975). With a few additions by the House Judiciary Committee in 1976, see 1976 House Report 5; H.R.Conf.Rep. No. 94-1733, p. 70 (1976), U.S.Code Cong. & Admin.News 1976, p. 5659, the same language appears in § 107 of the 1976 Act.

[16] In Williams & Wilkins Co. v. United States, 203 Ct.Cl. 74, 487 F.2d 1345 (1973), aff'd by an equally divided Court, 420 U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975), decided during the process of the revision of the copyright statutes, the Court of Claims suggested that copying for personal use might be outside the scope of copyright protection under the 1909 Act. The court reasoned that because "hand copying" for personal use has always been regarded as permissible, and because the practice of making personal copies continued after typewriters and photostat machines were developed, the making of personal copies by means other than hand copying should be permissible as well. Id., at 84-88, 487 F.2d, at 1350-1352.

There appear to me to be several flaws in this reasoning. First, it is by no means clear that the making of a "hand copy" of an entire work is permissible; the most that can be said is that there is no reported case on the subject, possibly because no copyright owner ever thought it worthwhile to sue. See Latman Fair Use Study 11-12; 3 M. Nimmer, Copyright § 13.05[E][4][a] (1982). At least one early treatise asserted that infringement would result "if an individual made copies for his personal use, even in his own handwriting, as there is no rule of law excepting manuscript copies from the law of infringment." A. Weil, American Copyright Law § 1066 (1917). Second, hand copying or even copying by typewriter is self-limiting. The drudgery involved in making hand copies ordinarily ensures that only necessary and fairly small portions of a work are taken; it is unlikely that any user would make a hand copy as a substitute for one that could be purchased. The harm to the copyright owner from hand copying thus is minimal. The recent advent of inexpensive and readily available copying machines, however, has changed the dimensions of the problem. See Register's Second Supplementary Report ch. III, p. 3; Hearings on H.R. 2223 before the Subcommittee on Courts, Civil Liberties, and the Administration of Justice of the House Judiciary Committee, 94th Cong., 1st Sess., 194 (1975) (1975 House Hearings) (remarks of Rep. Danielson); id., at 234 (statement of Robert W. Cairns); id., at 250 (remarks of Rep. Danielson); id., at 354 (testimony of Irwin Karp); id., at 467 (testimony of Rondo Cameron); id., at 1795 (testimony of Barbara Ringer, Register of Copyrights). Thus, "[t]he supposition that there is no tort involved in a scholar copying a copyrighted text by hand does not much advance the question of machine copying." B. Kaplan, An Unhurried View of Copyright 101-102 (1967).

[17] In a trio of cases, Fortnightly Corp. v. United Artists, 392 U.S. 390, 398, 88 S.Ct. 2084, 2088, 20 L.Ed.2d 1176 (1968); Teleprompter Corp. v. Columbia Broadcasting System, Inc., 415 U.S. 394, 403-405, 94 S.Ct. 1129, 1135-1136, 39 L.Ed.2d 415 (1974); and Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 95 S.Ct. 2040, 45 L.Ed.2d 84 (1975), this Court had held that the reception of a radio or television broadcast was not a "performance" under the 1909 Act. The Court's "narrow construction" of the word "perform" was "completely overturned by the [1976 Act] and its broad definition of 'perform' in section 101." 1976 House Report 87, U.S.Code Cong. & Admin.News 1976, p. 5701.

[18] A work is performed "publicly" if it takes place "at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered." § 101.

[19] One purpose of the exemption for private performances was to permit the home viewing of lawfully made videotapes. The Register noted in 1961 that "[n]ew technical devices will probably make it practical in the future to reproduce televised motion pictures in the home. We do not believe the private use of such a reproduction can or should be precluded by copyright." Register's 1961 Report 30 (emphasis added). The Register did not suggest that the private making of a reproduction of a televised motion picture would be permitted by the copyright law. The Register later reminded Congress that "[i]n general the concept of 'performance' must be distinguished sharply from the reproduction of copies." Register's Supplementary Report 22.

[20] During hearings on this provision, Representative Danielson inquired whether it would apply to works of fiction such as "Gone With the Wind," or whether it was limited to "strictly technical types of information." The uncontradicted response was that it would apply only in "general terms of science . . . [and] the useful arts." 1975 House Hearings 251 (testimony of Robert W. Cairns); cf. id., at 300 (statement of Harry Rosenfield) ("We are not asking . . . for the right to copy 'Gone With the Wind' ").

[21] The mention in the Senate and House Reports of situations in which copies for private use would be permissible under the fair use doctrine—for example, the making of a free copy for a blind person, 1975 Senate Report 66; 1975 House Report 73, or the "recordings of performances by music students for purposes of analysis and criticism," 1975 Senate Report 63—would be superfluous as well. See n. 12, supra.

[22] The following exchange took place during the testimony of Barbara Ringer, then Assistant Register of Copyrights:

"[Rep.] Biester. . . . I can tell you I must have a small pirate in my own home. My son has a cassette tape recorder, and as a particular record becomes a hit, he will retrieve it onto his little set. . . . [T]his legislation, of course, would not point to his activities, would it?

"Miss Ringer. I think the answer is clearly, 'No, it would not.' I have spoken at a couple of seminars on video cassettes lately, and this question is usually asked: 'What about the home recorders?' The answer I have given and will give again is that this is something you cannot control. You simply cannot control it. My own opinion, whether this is philosophical dogma or not, is that sooner or later there is going to be a crunch here. But that is not what this legislation is addressed to, and I do not see the crunch coming in the immediate future. . . . I do not see anybody going into anyone's home and preventing this sort of thing, or forcing legislation that would engineer a piece of equipment not to allow home taping." Hearings on S. 646 and H.R. 6927 before Subcommittee No. 3 of the House Committee on the Judiciary, 92d Cong., 1st Sess., 22-23 (1971) (1971 House Hearings).

[23] Shortly before passage of the bill, a colloquy took place between Representative Kastenmeier, chairman of the House subcommittee that produced the bill, and Representative Kazen, who was not on the committee:

"Mr. Kazen. Am I correct in assuming that the bill protects copyrighted material that is duplicated for commercial purposes only?

"Mr. Kastenmeier. Yes.

"Mr. Kazen. In other words, if your child were to record off of a program which comes through the air on the radio or television, and then used it for her own personal pleasure, for listening pleasure, this use would not be included under the penalties of this bill?

"Mr. Kastenmeier. This is not included in the bill. I am glad the gentleman raises the point.

"On page 7 of the report, under 'Home Recordings,' Members will note that under the bill the same practice which prevails today is called for; namely, this is considered both presently and under the proposed law to be fair use. The child does not do this for commercial purposes. This is made clear in the report." 117 Cong.Rec. 34748-34749 (1971).

[24] The 1909 Act's grant of an exclusive right to "copy," § 1(a), was of no assistance to the owner of a copyright in a sound recording, because a reproduction of a sound recording was technically considered not to be a "copy." See 1971 House Hearings 18 (testimony of Barbara Ringer, Assistant Register of Copyrights); 1971 Amendment, § 1(e), 85 Stat. 391 (formerly codified as 17 U.S.C. § 26 (1976 ed.)) ("For the purposes of [specified sections, not including § 1(a) ], but not for any other purpose, a reproduction of a [sound recording] shall be considered to be a copy thereof"). This concept is carried forward into the 1976 Act, which distinguishes between "copies" and "phonorecords." See n. 7, supra.

[25] During consideration of the 1976 Act, Congress, of course, was well aware of the limited nature of the protection granted to sound recordings under the 1971 Amendment. See 1975 House Hearings 113 (testimony of Barbara Ringer, Register of Copyrights) (1971 Amendment "created a copyright in a sound recording . . . but limited it to the particular situation of so-called piracy"); id., at 1380 (letter from John Lorenz, Acting Librarian of Congress) (under 1971 Amendment "only the unauthorized reproduction and distribution to the public of copies of the sound recording is prohibited. Thus, the duplication of sound recordings for private, personal use and the performance of sound recordings through broadcasting or other means are outside the scope of the amendment").

[26] Representative Kastenmeier, the principal House sponsor of the 1976 revision bill and chairman of the House subcommittee that produced it, made this explicit on the opening day of the House hearings:

"[F]rom time to time, certain areas have not been covered in the bill. But is it not the case, this being a unified code, that the operation of the bill does apply whether or not we specifically deal with a subject or not? . . .

"Therefore, we can really not fail to deal with an issue. It will be dealt with one way or the other. The code, title 17, will cover it. So we have made a conscious decision even by omission. . . .

"By virtue of passing this bill, we will deal with every issue. Whether we deal with it completely or not for the purpose of resolving the issues involved is the only question, not whether it has dealt with the four corners of the bill because the four corners of the bill will presume to deal with everything in copyright." 1975 House Hearings 115.

[27] The precise phrase "fair use" apparently did not enter the case law until 1869, see Lawrence v. Dana, 15 F.Cas. 26, 60 (No. 8,136) (CC Mass.), but the doctrine itself found early expression in Folsom v. Marsh, 9 F.Cas. 342 (No. 4,901) (CC Mass.1841). Justice Story was faced there with the "intricate and embarrassing questio[n]" whether a biography containing copyrighted letters was "a justifiable use of the original materials, such as the law recognizes as no infringement of the copyright of the plaintiffs." Id., at 344, 348. In determining whether the use was permitted, it was necessary, said Justice Story, to consider "the nature and objects of the selections made, the quantity and value of the materials used, and the degree in which the use may prejudice the sale, or diminish the profits, or supersede the objects, of the original work. . . . Much must, in such cases, depend upon the nature of the new work, the value and extent of the copies, and the degree in which the original authors may be injured thereby." Id., at 348-349.

Similar lists were compiled by later courts. See, e.g., Tennessee Fabricating Co. v. Moultrie Mfg. Co., 421 F.2d 279, 283 (CA5), cert. denied, 398 U.S. 928, 90 S.Ct. 1819, 26 L.Ed.2d 91 (1970); Mathews Conveyer Co. v. Palmer-Bee Co., 135 F.2d 73, 85 (CA6 1943); Columbia Pictures Corp. v. National Broadcasting Co., 137 F.Supp. 348 (SD Cal.1955); Shapiro, Bernstein & Co. v. P.F. Collier & Son Co., 26 U.S.P.Q. 40, 43 (SDNY 1934); Hill v. Whalen & Martell, Inc., 220 F. 359, 360 (SDNY 1914).

[28] "The world goes ahead because each of us builds on the work of our predecessors. 'A dwarf standing on the shoulders of a giant can see farther than the giant himself.' " Chafee, Reflections on the Law of Copyright: I, 45 Colum.L.Rev. 503, 511 (1945).

[29] Quoting from the Register's 1961 Report, the Senate and House Reports give examples of possible fair uses:

" 'quotation of excerpts in a review or criticism for purposes of illustration or comment; quotation of short passages in a scholarly or technical work, for illustration or clarification of the author's observations; use in a parody of some of the content of the work parodied; summary of an address or article, with brief quotations, in a news report; reproduction by a library of a portion of a work to replace part of a damaged copy; reproduction by a teacher or student of a small part of a work to illustrate a lesson; reproduction of a work in legislative or judicial proceedings or reports; incidental and fortuitous reproduction, in a newsreel or broadcast, of a work located in the scene of an event being recorded.' " 1975 Senate Report 61-62; 1976 House Report 65, U.S.Code Cong. & Admin.News 1976, p. 5678.

[30] See, e.g., Triangle Publications, Inc. v. Knight-Ridder Newspapers, Inc., 626 F.2d 1171 (CA5 1980) (comparative advertising).

[31] Professor Seltzer has characterized these lists of uses as "reflect[ing] what in fact the subject matter of fair use has in the history of its adjudication consisted in: it has always had to do with the use by a second author of a first author's work." L. Seltzer, Exemptions and Fair Use in Copyright 24 (1978) (emphasis removed). He distinguishes "the mere reproduction of a work in order to use it for its intrinsic purpose—to make what might be called the 'ordinary' use of it." When copies are made for "ordinary" use of the work, "ordinary infringement has customarily been triggered, not notions of fair use" (emphasis in original). Ibid. See also M. Nimmer, Copyright § 13.05[A][1] (1982) ("Use of a work in each of the foregoing contexts either necessarily or usually involves its use in a derivative work").

[32] Williams & Wilkins Co. v. United States, 203 Ct.Cl. 74, 487 F.2d 1345 (1973), aff'd by an equally divided Court, 420 U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975), involved the photocopying of scientific journal articles; the Court of Claims stressed that the libraries performing the copying were "devoted solely to the advancement and dissemination of medical knowledge," 203 Ct.Cl., at 91, 487 F.2d, at 1354, and that "medical science would be seriously hurt if such library photocopying were stopped." Id., at 95, 487 F.2d, at 1356.

The issue of library copying is now covered by § 108 of the 1976 Act. That section, which Congress regarded as "authoriz[ing] certain photocopying practices which may not qualify as a fair use," 1975 Senate Report 67; 1976 House Report 74, U.S.Code Cong. & Admin.News 1976, p. 5688, permits the making of copies only for "private study, scholarship, or research." §§ 108(d)(1) and (e)(1).

[33] In the words of Lord Mansfield: "[W]e must take care to guard against two extremes equally prejudicial; the one, that men of ability, who have employed their time for the service of the community, may not be deprived of their just merits, and the reward of their ingenuity and labour; the other, that the world may not be deprived of improvements, nor the progress of the arts be retarded." Sayre v. Moore, 1 East 361 n. (b), 102 Eng.Rep. 139, 140 n. (b) (K.B.1785). See Register's Supplementary Report 13.

[34] This point was brought home repeatedly by the Register of Copyrights. Mentioning the "multitude of technological developments" since passage of the 1909 Act, including "remarkable developments in the use of video tape," Register's Supplementary Report xiv-xv, the Register cautioned:

"I realize, more clearly now than I did in 1961, that the revolution in communications has brought with it a serious challenge to the author's copyright. This challenge comes not only from the ever-growing commercial interests who wish to use the author's works for private gain. An equally serious attack has come from people with a sincere interest in the public welfare who fully recognize . . . 'that the real heart of civilization . . . owes its existence to the author'; ironically, in seeking to make the author's works widely available by freeing them from copyright restrictions, they fail to realize that they are whittling away the very thing that nurtures authorship in the first place. An accommodation among conflicting demands must be worked out, true enough, but not by denying the fundamental constitutional directive: to encourage cultural progress by securing the author's exclusive rights to him for a limited time." Id., at xv; see 1975 House Hearings 117 (testimony of Barbara Ringer, Register of Copyrights).

[35] A VTR owner who has taped a favorite movie for repeated viewing will be less likely to rent or buy a tape containing the same movie, watch a televised rerun, or pay to see the movie at a theater. Although time-shifting may not replace theater or rerun viewing or the purchase of prerecorded tapes or discs, it may well replace rental usage; a VTR user who has recorded a first-run movie for later viewing will have no need to rent a copy when he wants to see it. Both library-builders and time-shifters may avoid commercials; the library builder may use the pause control to record without them, and all users may fast-forward through commercials on playback.

The Studios introduced expert testimony that both time-shifting and librarying would tend to decrease their revenue from copyrighted works. See 480 F.Supp., at 440. The District Court's findings also show substantial library-building and avoidance of commercials. Both sides submitted surveys showing that the average Betamax user owns between 25 and 32 tapes. The Studios' survey showed that at least 40% of users had more than 10 tapes in a "library"; Sony's survey showed that more than 40% of users planned to view their tapes more than once; and both sides' surveys showed that commercials were avoided at least 25% of the time. Id., at 438-439.

[36] Concern over the impact of a use upon "potential" markets is to be found in cases decided both before and after § 107 lent Congress' imprimatur to the judicially-created doctrine of fair use. See, e.g., Iowa State University Research Foundation, Inc. v. American Broadcasting Cos., 621 F.2d 57, 60 (CA2 1980) ("the effect of the use on the copyright holder's potential market for the work"); Meeropol v. Nizer, 560 F.2d 1061, 1070 (CA2 1977) ("A key issue in fair use cases is whether the defendant's work tends to diminish or prejudice the potential sale of plaintiff's work"), cert. denied, 434 U.S. 1013, 98 S.Ct. 727, 54 L.Ed.2d 756 (1978); Williams & Wilkins Co. v. United States, 203 Ct.Cl. 74, 88, 487 F.2d 1345, 1352 (1973) ("the effect of the use on a copyright owner's potential market for and value of his work"), aff'd by an equally divided Court, 420 U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975); Encyclopaedia Britannica Educational Corp. v. Crooks, 542 F.Supp. 1156, 1173 (WDNY 1982) ("[T]he concern here must be focused on a copyrighted work's potential market. It is perfectly possible that plaintiffs' profits would have been greater, but for the kind of videotaping in question") (emphasis in original).

[37] This intent is manifested further by provisions of the 1976 Act that exempt from liability persons who, while not participating directly in any infringing activity, could otherwise be charged with contributory infringement. See § 108(f)(1) (library not liable "for the unsupervised use of reproducing equipment located on its premises," provided that certain warnings are posted); § 110(6) ("governmental body" or "nonprofit agricultural or horticultural organization" not liable for infringing performance by concessionaire "in the course of an annual agricultural or horticultural fair or exhibition").

[38] In Screen Gems, on which the Gershwin court relied, the court held that liability could be imposed on a shipper of unauthorized "bootleg" records and a radio station that broadcast advertisements of the records, provided they knew or should have known that the records were infringing. The court concluded that the records' low price and the manner in which the records were marketed could support a finding of "constructive knowledge" even if actual knowledge were not shown.

[39] See, e.g., Famous Music Corp. v. Bay State Harness Horse Racing & Breeding Assn., Inc., 554 F.2d 1213 (CA1 1977); Dreamland Ball Room, Inc. v. Shapiro, Bernstein & Co., 36 F.2d 354 (CA7 1929); M. Witmark & Sons v. Tremont Social & Athletic Club, 188 F.Supp. 787, 790 (Mass.1960); see also Twentieth Century Music Corp. v. Aiken, 422 U.S., at 157, 95 S.Ct., at 2044; Buck v. Jewell-LaSalle Realty Co., 283 U.S. 191, 198-199, 51 S.Ct. 410, 411-412, 75 L.Ed. 971 (1931); 3 M. Nimmer, Copyright § 12.04[A], pp. 12-35 (1982).

Courts have premised liability in these cases on the notion that the defendant had the ability to supervise or control the infringing activities, see, e.g., Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 307 (CA2 1963); KECA Music, Inc. v. Dingus McGee's Co., 432 F.Supp. 72, 74 (WD Mo.1977). This notion, however, is to some extent fictional; the defendant cannot escape liability by instructing the performers not to play copyrighted music, or even by inserting a provision to that effect into the performers' contract. Famous Music Corp. v. Bay State Harness Horse Racing & Breeding Assn., Inc., 554 F.2d, at 1214-1215; KECA Music, Inc. v. Dingus McGee's Co., 432 F.Supp., at 75; Shapiro, Bernstein & Co. v. Veltin, 47 F.Supp. 648, 649 (WD La.1942). Congress expressly rejected a proposal to exempt proprietors from this type of liability under the 1976 Act. See 1975 Senate Report 141-142; 1976 House Report 159-160; 1975 House Hearings 1812-1813 (testimony of Barbara Ringer, Register of Copyrights); id., at 1813 (colloquy between Rep. Pattison and Barbara Ringer).

The Court's attempt to distinguish these cases on the ground of "control," ante, at 437, is obviously unpersuasive. The direct infringer ordinarily is not employed by the person held liable; instead, he is an independent contractor. Neither is he always an agent of the person held liable; Screen Gems makes this apparent.

[40] My conclusion respecting contributory infringement does not include the retailer defendants. The District Court found that one of the retailer defendants had assisted in the advertising campaign for the Betamax, but made no other findings respecting their knowledge of the Betamax's intended uses. I do not agree with the Court of Appeals, at least on this record, that the retailers "are sufficiently engaged in the enterprise to be held accountable," 659 F.2d, at 976. In contrast, the advertising agency employed to promote the Betamax was far more actively engaged in the advertising campaign, and petitioners have not argued that the agency's liability differs in any way from that of Sony Corporation and Sony Corporation of America.

[41] The "staple article of commerce" doctrine protects those who manufacture products incorporated into or used with patented inventions—for example, the paper and ink used with patented printing machines, Henry v. A.B. Dick Co., 224 U.S. 1, 32 S.Ct. 364, 56 L.Ed. 645 (1912), or the dry ice used with patented refrigeration systems, Carbice Corp. v. American Patents Corp., 283 U.S. 27, 51 S.Ct. 334, 75 L.Ed. 819 (1931). Because a patent-holder has the right to control the use of the patented item as well as its manufacture, see Motion Picture Patents Co. v. Universal Film Co., 243 U.S. 502, 509-510, 37 S.Ct. 416, 417-418, 61 L.Ed. 871 (1917); 35 U.S.C. 271(a), such protection for the manufacturer of the incorporated product is necessary to prevent patent-holders from extending their monopolies by suppressing competition in unpatented components and supplies suitable for use with the patented item. See Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S. 176, 197-198, 100 S.Ct. 2601, 2613-2614, 65 L.Ed.2d 696 (1980). The doctrine of contributory patent infringement has been the subject of attention by the courts and by Congress, see id., at 202-212, 100 S.Ct., at 2616-2621, and has been codified since 1952, 66 Stat. 792, but was never mentioned during the copyright law revision process as having any relevance to contributory copyright infringement.

[42] Although VTRs also may be used to watch prerecorded video cassettes and to make home motion pictures, these uses do not require a tuner such as the Betamax contains. See n. 1, supra. The Studios do not object to Sony's sale of VTRs without tuners. Brief for Respondents 5, n. 9. In considering the noninfringing uses of the Betamax, therefore, those uses that would remain possible without the Betamax's built-in tuner should not be taken into account.

[43] Noninfringing uses would include, for example, recording works that are not protected by copyright, recording works that have entered the public domain, recording with permission of the copyright owner, and, of course, any recording that qualifies as fair use. See, e.g., Bruzzone v. Miller Brewing Co., 202 U.S.P.Q. 809 (N.D.Cal.1979) (use of home VTR for market research studies).

[44] Sony asserts that much or most television broadcasting is available for home recording because (1) no copyright owner other than the Studios has brought an infringement action, and (2) much televised material is ineligible for copyright protection because videotapes of the broadcasts are not kept. The first of these assertions is irrelevant; Sony's liability does not turn on the fact that only two copyright owners thus far have brought suit. The amount of infringing use must be determined through consideration of the television market as a whole. Sony's second assertion is based on a faulty premise; the Copyright Office permits audiovisual works transmitted by television to be registered by deposit of sample frames plus a description of the work. See 37 CFR §§ 202.20(c)(2)(ii) and 202.21(g) (1982). Moreover, although an infringement action cannot be brought unless the work is registered, 17 U.S.C. § 411(a), registration is not a condition of copyright protection. § 408(a). Copying an unregistered work still may be infringement. Cf. § 506(a) (liability for criminal copyright infringement; not conditioned on prior registration).

[45] Even if concern with remedy were appropriate at the liability stage, the Court's use of the District Court's findings is somewhat cavalier. The Court relies heavily on testimony by representatives of professional sports leagues to the effect that they have no objection to VTR recording. The Court never states, however, whether the sports leagues are copyright holders, and if so, whether they have exclusive copyrights to sports broadcasts. Of course, one who does not hold an exclusive copyright does not have authority to consent to copying.

Assuming that the various sports leagues do have exclusive copyrights in some of their broadcasts, the amount of authorized time-shifting still would not be overwhelming. Sony's own survey indicated that only 7.3 percent of all Betamax use is to record sports events of all kinds. Def. Exh. OT, Table 20. Because Sony's witnesses did not represent all forms of sports events, moreover, this figure provides only a tenuous basis for this Court to engage in fact-finding of its own.

The only witness at trial who was clearly an exclusive copyright owner and who expressed no objection to unauthorized time-shifting was the owner of the copyright in Mister Rogers' Neighborhood. But the Court cites no evidence in the record to the effect that anyone makes VTR copies of that program. The simple fact is that the District Court made no findings on the amount of authorized time-shifting that takes place. The Court seems to recognize this gap in its reasoning, and phrases its argument as a hypothetical. The Court states: "If there are millions of owners of VTR's who make copies of televised sports events, religious broadcasts, and educational programs such as Mister Rogers' Neighborhood, and if the proprietors of those programs welcome the practice," the sale of VTR's "should not be stifled" in order to protect respondent's copyrights. Ante, at 446 (emphasis supplied). Given that the Court seems to recognize that its argument depends on findings that have not been made, it seems that a remand is inescapable.

[46] As has been explained, some uses of time-shifting, such as copying an old newspaper clipping for a friend, are fair use because of their de minimis effect on the copyright holder. The scale of copying involved in this case, of course, is of an entirely different magnitude, precluding application of such an exception.

[47] Home Recording of Copyrighted Works: Hearing before Subcomm. on Courts, Civil Liberties and the Administration of Justice of the House Comm. on the Judiciary, 97th Cong., 2d Sess., pt. 2, p. 1250 (1982) (memorandum of Prof. Laurence H. Tribe).

[48] See A Survey of Betamax Owners, R. 2353, Def. Exh. OT, Table 20, cited in Brief for Respondents 52.

[49] The Court's one oblique acknowledgement of this third factor, ante, at 447, seems to suggest that the fact that time-shifting involves copying complete works is not very significant because the viewers already have been asked to watch the initial broadcast free. This suggestion misses the point. As has been noted, a book borrowed from a public library may not be copied any more freely than one that has been purchased. An invitation to view a showing is completely different from an invitation to copy a copyrighted work.

[50] The Court implicitly has recognized that this market is very significant. The central concern underlying the Court's entire opinion is that there is a large audience who would like very much to be able to view programs at times other than when they are broadcast. Ante, at 446. The Court simply misses the implication of its own concerns.

[51] Other Nations have imposed royalties on the manufacturers of products used to infringe copyright. See, e.g., Copyright Laws and Treaties of the World (UNESCO/BNA 1982) (English translation), reprinting Federal Act On Copyright in Works of Literature and Art and on Related Rights (Austria), § 42(5)-(7), and An Act dealing with Copyright and Related Rights (Federal Republic of Germany), Art. 53(5). A study produced for the Commission of European Communities has recommended that these requirements "serve as a pattern" for the European community. A. Dietz, Copyright Law in the European Community 135 (1978). While these royalty systems ordinarily depend on the existence of authors' collecting societies, see id., at 119, 136, such collecting societies are a familiar part of our copyright law. See generally Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 4-5, 99 S.Ct. 1551, 1554, 60 L.Ed.2d 1 (1979). Fashioning relief of this sort, of course, might require bringing other copyright owners into court through certification of a class or otherwise.

510 U.S. 569

CAMPBELL, AKA SKYYWALKER, ET AL.
v.
ACUFF-ROSE MUSIC, INC.

No. 92-1292.

Supreme Court of United States.

Argued November 9, 1993.

Decided March 7, 1994.

Respondent Acuff-Rose Music, Inc., filed suit against petitioners, the members of the rap music group 2 Live Crew and their record company, claiming that 2 Live Crew's song, "Pretty Woman," infringed Acuff-Rose's copyright in Roy Orbison's rock ballad, "Oh, Pretty Woman." The District Court granted summary judgment for 2 Live Crew, holding that its song was a parody that made fair use of the original song. See Copyright Act of 1976, 17 U. S. C. § 107. The Court of Appeals reversed and remanded, holding that the commercial nature of the parody rendered it presumptively unfair under the first of four factors relevant under § 107; that, by taking the "heart" of the original and making it the "heart" of a new work, 2 Live Crew had, qualitatively, taken too much under the third § 107 factor; and that market harm for purposes of the fourth § 107 factor had been established by a presumption attaching to commercial uses.

Held: 2 Live Crew's commercial parody may be a fair use within the meaning of § 107. Pp. 574-594.

(a) Section 107, which provides that "the fair use of a copyrighted work . . . for purposes such as criticism [or] comment . . . is not an infringement . . .," continues the common-law tradition of fair use adjudication and requires case-by-case analysis rather than bright-line rules. The statutory examples of permissible uses provide only general guidance. The four statutory factors are to be explored and weighed together in light of copyright's purpose of promoting science and the arts. Pp. 574-578.

(b) Parody, like other comment and criticism, may claim fair use. Under the first of the four § 107 factors, "the purpose and character of the use, including whether such use is of a commercial nature . . .," the enquiry focuses on whether the new work merely supersedes the objects of the original creation, or whether and to what extent it is "transformative," altering the original with new expression, meaning, or message. The more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use. The heart of any parodist's claim to quote from existing material is the use of some elements of a prior author's composition to [510 U.S. 570] create a new one that, at least in part, comments on that author's work. But that tells courts little about where to draw the line. Thus, like other uses, parody has to work its way through the relevant factors. Pp. 578-581.

(c) The Court of Appeals properly assumed that 2 Live Crew's song contains parody commenting on and criticizing the original work, but erred in giving virtually dispositive weight to the commercial nature of that parody by way of a presumption, ostensibly culled from Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417, 451, that "every commercial use of copyrighted material is presumptively . . . unfair. . . ." The statute makes clear that a work's commercial nature is only one element of the first factor enquiry into its purpose and character, and Sony itself called for no hard evidentiary presumption. The Court of Appeals's rule runs counter to Sony and to the long common-law tradition of fair use adjudication. Pp. 581-585.

(d) The second § 107 factor, "the nature of the copyrighted work," is not much help in resolving this and other parody cases, since parodies almost invariably copy publicly known, expressive works, like the Orbison song here. P. 586.

(e) The Court of Appeals erred in holding that, as a matter of law, 2 Live Crew copied excessively from the Orbison original under the third § 107 factor, which asks whether "the amount and substantiality of the portion used in relation to the copyrighted work as a whole" are reasonable in relation to the copying's purpose. Even if 2 Live Crew's copying of the original's first line of lyrics and characteristic opening bass riff may be said to go to the original's "heart," that heart is what most readily conjures up the song for parody, and it is the heart at which parody takes aim. Moreover, 2 Live Crew thereafter departed markedly from the Orbison lyrics and produced otherwise distinctive music. As to the lyrics, the copying was not excessive in relation to the song's parodic purpose. As to the music, this Court expresses no opinion whether repetition of the bass riff is excessive copying, but remands to permit evaluation of the amount taken, in light of the song's parodic purpose and character, its transformative elements, and considerations of the potential for market substitution. Pp. 586-589.

(f) The Court of Appeals erred in resolving the fourth § 107 factor, "the effect of the use upon the potential market for or value of the copyrighted work," by presuming, in reliance on Sony, supra, at 451, the likelihood of significant market harm based on 2 Live Crew's use for commercial gain. No "presumption" or inference of market harm that might find support in Sony is applicable to a case involving something beyond mere duplication for commercial purposes. The cognizable harm is market substitution, not any harm from criticism. As to parody [510 U.S. 571] pure and simple, it is unlikely that the work will act as a substitute for the original, since the two works usually serve different market functions. The fourth factor requires courts also to consider the potential market for derivative works. See, e. g., Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U. S. 539, 568. If the later work has cognizable substitution effects in protectible markets for derivative works, the law will look beyond the criticism to the work's other elements. 2 Live Crew's song comprises not only parody but also rap music. The absence of evidence or affidavits addressing the effect of 2 Live Crew's song on the derivative market for a nonparody, rap version of "Oh, Pretty Woman" disentitled 2 Live Crew, as the proponent of the affirmative defense of fair use, to summary judgment. Pp. 590-594.

972 F. 2d 1429, reversed and remanded.

SOUTER, J., delivered the opinion for a unanimous Court. KENNEDY, J., filed a concurring opinion, post, p. 596.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Bruce S. Rogow argued the cause for petitioners. With him on the briefs was Alan Mark Turk.

Sidney S. Rosdeitcher argued the cause for respondent. With him on the brief were Peter L. Felcher and Stuart M. Cobert.^[*]

JUSTICE SOUTER delivered the opinion of the Court.

We are called upon to decide whether 2 Live Crew's commercial parody of Roy Orbison's song, "Oh, Pretty Woman," [510 U.S. 572] may be a fair use within the meaning of the Copyright Act of 1976, 17 U. S. C. § 107 (1988 ed. and Supp. IV). Although the District Court granted summary judgment for 2 Live Crew, the Court of Appeals reversed, holding the defense of fair use barred by the song's commercial character and excessive borrowing. Because we hold that a parody's commercial character is only one element to be weighed in a fair use enquiry, and that insufficient consideration was given to the nature of parody in weighing the degree of copying, we reverse and remand.

I

In 1964, Roy Orbison and William Dees wrote a rock ballad called "Oh, Pretty Woman" and assigned their rights in it to respondent Acuff-Rose Music, Inc. See Appendix A, infra, at 594. Acuff-Rose registered the song for copyright protection.

Petitioners Luther R. Campbell, Christopher Wongwon, Mark Ross, and David Hobbs are collectively known as 2 Live Crew, a popular rap music group.^[1] In 1989, Campbell wrote a song entitled "Pretty Woman," which he later described in an affidavit as intended, "through comical lyrics, to satirize the original work. . . ." App. to Pet. for Cert. 80a. On July 5, 1989, 2 Live Crew's manager informed Acuff-Rose that 2 Live Crew had written a parody of "Oh, Pretty Woman," that they would afford all credit for ownership and authorship of the original song to Acuff-Rose, Dees, and Orbison, and that they were willing to pay a fee for the use they wished to make of it. Enclosed with the letter were a copy of the lyrics and a recording of 2 Live Crew's song. See Appendix B, infra, at 595. Acuff-Rose's agent refused permission, stating that "I am aware of the success [510 U.S. 573] enjoyed by `The 2 Live Crews', but I must inform you that we cannot permit the use of a parody of `Oh, Pretty Woman.'" App. to Pet. for Cert. 85a. Nonetheless, in June or July 1989,^[2] 2 Live Crew released records, cassette tapes, and compact discs of "Pretty Woman" in a collection of songs entitled "As Clean As They Wanna Be." The albums and compact discs identify the authors of "Pretty Woman" as Orbison and Dees and its publisher as Acuff-Rose.

Almost a year later, after nearly a quarter of a million copies of the recording had been sold, Acuff-Rose sued 2 Live Crew and its record company, Luke Skyywalker Records, for copyright infringement. The District Court granted summary judgment for 2 Live Crew,^[3] reasoning that the commercial purpose of 2 Live Crew's song was no bar to fair use; that 2 Live Crew's version was a parody, which "quickly degenerates into a play on words, substituting predictable lyrics with shocking ones" to show "how bland and banal the Orbison song" is; that 2 Live Crew had taken no more than was necessary to "conjure up" the original in order to parody it; and that it was "extremely unlikely that 2 Live Crew's song could adversely affect the market for the original." 754 F. Supp. 1150, 1154-1155, 1157-1158 (MD Tenn. 1991). The District Court weighed these factors and held that 2 Live Crew's song made fair use of Orbison's original. Id., at 1158-1159.

The Court of Appeals for the Sixth Circuit reversed and remanded. 972 F. 2d 1429, 1439 (1992). Although it assumed for the purpose of its opinion that 2 Live Crew's song [510 U.S. 574] was a parody of the Orbison original, the Court of Appeals thought the District Court had put too little emphasis on the fact that "every commercial use . . . is presumptively . . . unfair," Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417, 451 (1984), and it held that "the admittedly commercial nature" of the parody "requires the conclusion" that the first of four factors relevant under the statute weighs against a finding of fair use. 972 F. 2d, at 1435, 1437. Next, the Court of Appeals determined that, by "taking the heart of the original and making it the heart of a new work," 2 Live Crew had, qualitatively, taken too much. Id., at 1438. Finally, after noting that the effect on the potential market for the original (and the market for derivative works) is "undoubtedly the single most important element of fair use," Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U. S. 539, 566 (1985), the Court of Appeals faulted the District Court for "refus[ing] to indulge the presumption" that "harm for purposes of the fair use analysis has been established by the presumption attaching to commercial uses." 972 F. 2d, at 1438-1439. In sum, the court concluded that its "blatantly commercial purpose . . . prevents this parody from being a fair use." Id., at 1439.

We granted certiorari, 507 U. S. 1003 (1993), to determine whether 2 Live Crew's commercial parody could be a fair use.

II

It is uncontested here that 2 Live Crew's song would be an infringement of Acuff-Rose's rights in "Oh, Pretty Woman," under the Copyright Act of 1976, 17 U. S. C. § 106 (1988 ed. and Supp. IV), but for a finding of fair use through parody.^[4][510 U.S. 575] From the infancy of copyright protection, some opportunity for fair use of copyrighted materials has been thought necessary to fulfill copyright's very purpose, "[t]o promote the Progress of Science and useful Arts. . . ." U. S. Const., Art. I, § 8, cl. 8.^[5] For as Justice Story explained, "[i]n truth, in literature, in science and in art, there are, and can be, few, if any, things, which in an abstract sense, are strictly new and original throughout. Every book in literature, science and art, borrows, and must necessarily borrow, and use much which was well known and used before." Emerson v. Davies, 8 F. Cas. 615, 619 (No. 4,436) (CCD Mass. 1845). Similarly, Lord Ellenborough expressed the inherent tension in the need simultaneously to protect copyrighted material and to allow others to build upon it when he wrote, "while I shall think myself bound to secure every man in the enjoyment of his copy-right, one must not put manacles upon science." [510 U.S. 576] Carey v. Kearsley, 4 Esp. 168, 170, 170 Eng. Rep. 679, 681 (K. B. 1803). In copyright cases brought under the Statute of Anne of 1710,^[6] English courts held that in some instances "fair abridgements" would not infringe an author's rights, see W. Patry, The Fair Use Privilege in Copyright Law 6-17 (1985) (hereinafter Patry); Leval, Toward a Fair Use Standard, 103 Harv. L. Rev. 1105 (1990) (hereinafter Leval), and although the First Congress enacted our initial copyright statute, Act of May 31, 1790, 1 Stat. 124, without any explicit reference to "fair use," as it later came to be known,^[7] the doctrine was recognized by the American courts nonetheless.

In Folsom v. Marsh, 9 F. Cas. 342 (No. 4,901) (CCD Mass. 1841), Justice Story distilled the essence of law and methodology from the earlier cases: "look to the nature and objects of the selections made, the quantity and value of the materials used, and the degree in which the use may prejudice the sale, or diminish the profits, or supersede the objects, of the original work." Id., at 348. Thus expressed, fair use remained exclusively judge-made doctrine until the passage of the 1976 Copyright Act, in which Justice Story's summary is discernible:^[8]

"§ 107. Limitations on exclusive rights: Fair use

"Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular [510 U.S. 577] case is a fair use the factors to be considered shall include—

"(1) the purpose and character of the use, including whether such use is of a commercial nature or is for non-profit 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.

"The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors." 17 U. S. C. § 107 (1988 ed. and Supp. IV).

Congress meant § 107 "to restate the present judicial doctrine of fair use, not to change, narrow, or enlarge it in any way" and intended that courts continue the common-law tradition of fair use adjudication. H. R. Rep. No. 94-1476, p. 66 (1976) (hereinafter House Report); S. Rep. No. 94-473, p. 62 (1975) (hereinafter Senate Report). The fair use doctrine thus "permits [and requires] courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster." Stewart v. Abend, 495 U. S. 207, 236 (1990) (internal quotation marks and citation omitted).

The task is not to be simplified with bright-line rules, for the statute, like the doctrine it recognizes, calls for case-by-case analysis. Harper & Row, 471 U. S., at 560; Sony, 464 U. S., at 448, and n. 31; House Report, pp. 65-66; Senate Report, p. 62. The text employs the terms "including" and "such as" in the preamble paragraph to indicate the "illustrative and not limitative" function of the examples given, § 101; see Harper & Row, supra, at 561, which thus provide only general guidance about the sorts of copying that courts and [510 U.S. 578] Congress most commonly had found to be fair uses.^[9] Nor may the four statutory factors be treated in isolation, one from another. All are to be explored, and the results weighed together, in light of the purposes of copyright. See Leval 1110-1111; Patry & Perlmutter, Fair Use Misconstrued: Profit, Presumptions, and Parody, 11 Cardozo Arts & Ent. L. J. 667, 685-687 (1993) (hereinafter Patry & Perlmutter).^[10]

A

The first factor in a fair use enquiry is "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes." § 107(1). This factor draws on Justice Story's formulation, "the nature and objects of the selections made." Folsom v. Marsh, supra, at 348. The enquiry here 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, [510 U.S. 579] and the like, see § 107. The central purpose of this investigation is to see, in Justice Story's words, whether the new work merely "supersede[s] the objects" of the original creation, Folsom v. Marsh, supra, at 348; accord, Harper & Row, supra, at 562 ("supplanting" the original), or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is "transformative." Leval 1111. Although such transformative use is not absolutely necessary for a finding of fair use, Sony, supra, at 455, n. 40,^[11] the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works. Such works thus lie at the heart of the fair use doctrine's guarantee of breathing space within the confines of copyright, see, e. g., Sony, supra, at 478-480 (Blackmun, J., dissenting), and the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.

This Court has only once before even considered whether parody may be fair use, and that time issued no opinion because of the Court's equal division. Benny v. Loew's Inc., 239 F. 2d 532 (CA9 1956), aff'd sub nom. Columbia Broadcasting System, Inc. v. Loew's Inc., 356 U. S. 43 (1958). Suffice it to say now that parody has an obvious claim to transformative value, as Acuff-Rose itself does not deny. Like less ostensibly humorous forms of criticism, it can provide social benefit, by shedding light on an earlier work, and, in the process, creating a new one. We thus line up with the courts that have held that parody, like other comment or criticism, may claim fair use under § 107. See, e. g., Fisher v. Dees, 794 F. 2d 432 (CA9 1986) ("When Sonny Sniffs Glue," a parody of "When Sunny Gets Blue," is fair use); Elsmere Music, Inc. v. National Broadcasting Co., 482 F. Supp. 741 [510 U.S. 580] (SDNY), aff'd, 623 F. 2d 252 (CA2 1980) ("I Love Sodom," a "Saturday Night Live" television parody of "I Love New York," is fair use); see also House Report, p. 65; Senate Report, p. 61 ("[U]se in a parody of some of the content of the work parodied" may be fair use).

The germ of parody lies in the definition of the Greek parodeia, quoted in Judge Nelson's Court of Appeals dissent, as "a song sung alongside another." 972 F. 2d, at 1440, quoting 7 Encyclopedia Britannica 768 (15th ed. 1975). Modern dictionaries accordingly describe a parody as a "literary or artistic work that imitates the characteristic style of an author or a work for comic effect or ridicule,"^[12] or as a "composition in prose or verse in which the characteristic turns of thought and phrase in an author or class of authors are imitated in such a way as to make them appear ridiculous."^[13] For the purposes of copyright law, the nub of the definitions, and the heart of any parodist's claim to quote from existing material, is the use of some elements of a prior author's composition to create a new one that, at least in part, comments on that author's works. See, e. g., Fisher v. Dees, supra, at 437; MCA, Inc. v. Wilson, 677 F. 2d 180, 185 (CA2 1981). If, on the contrary, the commentary has no critical bearing on the substance or style of the original composition, which the alleged infringer merely uses 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.^[14] Parody needs to mimic [510 U.S. 581] an original to make its point, and so has some claim to use the creation of its victim's (or collective victims') imagination, whereas satire can stand on its own two feet and so requires justification for the very act of borrowing.^[15] See ibid.; Bisceglia, Parody and Copyright Protection: Turning the Balancing Act Into a Juggling Act, in ASCAP, Copyright Law Symposium, No. 34, p. 25 (1987).

The fact that parody can claim legitimacy for some appropriation does not, of course, tell either parodist or judge much about where to draw the line. Like a book review quoting the copyrighted material criticized, parody may or may not be fair use, and petitioners' suggestion that any parodic use is presumptively fair has no more justification in law or fact than the equally hopeful claim that any use for news reporting should be presumed fair, see Harper & Row, 471 U. S., at 561. The Act has no hint of an evidentiary preference for parodists over their victims, and no workable presumption for parody could take account of the fact that parody often shades into satire when society is lampooned through its creative artifacts, or that a work may contain both parodic and nonparodic elements. Accordingly, parody, like any other use, has to work its way through the relevant factors, and be judged case by case, in light of the ends of the copyright law.

Here, the District Court held, and the Court of Appeals assumed, that 2 Live Crew's "Pretty Woman" contains parody, [510 U.S. 582] commenting on and criticizing the original work, whatever it may have to say about society at large. As the District Court remarked, the words of 2 Live Crew's song copy the original's first line, but then "quickly degenerat[e] into a play on words, substituting predictable lyrics with shocking ones . . . [that] derisively demonstrat[e] how bland and banal the Orbison song seems to them." 754 F. Supp., at 1155 (footnote omitted). Judge Nelson, dissenting below, came to the same conclusion, that the 2 Live Crew song "was clearly intended to ridicule the white-bread original" and "reminds us that sexual congress with nameless streetwalkers is not necessarily the stuff of romance and is not necessarily without its consequences. The singers (there are several) have the same thing on their minds as did the lonely man with the nasal voice, but here there is no hint of wine and roses." 972 F. 2d, at 1442. Although the majority below had difficulty discerning any criticism of the original in 2 Live Crew's song, it assumed for purposes of its opinion that there was some. Id., at 1435-1436, and n. 8.

We have less difficulty in finding that critical element in 2 Live Crew's song than the Court of Appeals did, although having found it we will not take the further step of evaluating its quality. The threshold question when fair use is raised in defense of parody is whether a parodic character may reasonably be perceived.^[16] Whether, going beyond that, parody is in good taste or bad does not and should not matter to fair use. As Justice Holmes explained, "[i]t would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of [a work], outside of the narrowest and most obvious limits. At [510 U.S. 583] the one extreme some works of genius would be sure to miss appreciation. Their very novelty would make them repulsive until the public had learned the new language in which their author spoke." Bleistein v. Donaldson Lithographing Co., 188 U. S. 239, 251 (1903) (circus posters have copyright protection); cf. Yankee Publishing Inc. v. News America Publishing, Inc., 809 F. Supp. 267, 280 (SDNY 1992) (Leval, J.) ("First Amendment protections do not apply only to those who speak clearly, whose jokes are funny, and whose parodies succeed") (trademark case).

While we might not assign a high rank to the parodic element here, we think it fair to say that 2 Live Crew's song reasonably could be perceived as commenting on the original or criticizing it, to some degree. 2 Live Crew juxtaposes the romantic musings of a man whose fantasy comes true, with degrading taunts, a bawdy demand for sex, and a sigh of relief from paternal responsibility. The later words can be taken as a comment on the naivete of the original of an earlier day, as a rejection of its sentiment that ignores the ugliness of street life and the debasement that it signifies. It is this joinder of reference and ridicule that marks off the author's choice of parody from the other types of comment and criticism that traditionally have had a claim to fair use protection as transformative works.^[17]

The Court of Appeals, however, immediately cut short the enquiry into 2 Live Crew's fair use claim by confining its treatment of the first factor essentially to one relevant fact, the commercial nature of the use. The court then inflated the significance of this fact by applying a presumption ostensibly [510 U.S. 584] culled from Sony, that "every commercial use of copy-righted material is presumptively . . . unfair. . . ." Sony, 464 U. S., at 451. In giving virtually dispositive weight to the commercial nature of the parody, the Court of Appeals erred.

The language of the statute makes clear that the commercial or nonprofit educational purpose of a work is only one element of the first factor enquiry into its purpose and character. Section 107(1) uses the term "including" to begin the dependent clause referring to commercial use, and the main clause speaks of a broader investigation into "purpose and character." As we explained in Harper & Row, Congress resisted attempts to narrow the ambit of this traditional enquiry by adopting categories of presumptively fair use, and it urged courts to preserve the breadth of their traditionally ample view of the universe of relevant evidence. 471 U. S., at 561; House Report, p. 66. Accordingly, the mere fact that a use is educational and not for profit does not insulate it from a finding of infringement, any more than the commercial character of a use bars a finding of fairness. If, indeed, commerciality carried presumptive force against a finding of fairness, the presumption would swallow nearly all of the illustrative uses listed in the preamble paragraph of § 107, including news reporting, comment, criticism, teaching, scholarship, and research, since these activities "are generally conducted for profit in this country." Harper & Row, supra, at 592 (Brennan, J., dissenting). Congress could not have intended such a rule, which certainly is not inferable from the common-law cases, arising as they did from the world of letters in which Samuel Johnson could pronounce that "[n]o man but a blockhead ever wrote, except for money." 3 Boswell's Life of Johnson 19 (G. Hill ed. 1934).

Sony itself called for no hard evidentiary presumption. There, we emphasized the need for a "sensitive balancing of interests," 464 U. S., at 455, n. 40, noted that Congress had "eschewed a rigid, bright-line approach to fair use," id., at [510 U.S. 585] 449, n. 31, and stated that the commercial or nonprofit educational character of a work is "not conclusive," id., at 448-449, but rather a fact to be "weighed along with other[s] in fair use decisions," id., at 449, n. 32 (quoting House Report, p. 66). The Court of Appeals's elevation of one sentence from Sony to a per se rule thus runs as much counter to Sony itself as to the long common-law tradition of fair use adjudication. Rather, as we explained in Harper & Row, Sony stands for the proposition that the "fact that a publication was commercial as opposed to nonprofit is a separate factor that tends to weigh against a finding of fair use." 471 U. S., at 562. But that is all, and the fact that even the force of that tendency will vary with the context is a further reason against elevating commerciality to hard presumptive significance. 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. See generally Patry & Perlmutter 679-680; Fisher v. Dees, 794 F. 2d, at 437; Maxtone-Graham v. Burtchaell, 803 F. 2d 1253, 1262 (CA2 1986); Sega Enterprises Ltd. v. Accolade, Inc., 977 F. 2d 1510, 1522 (CA9 1992).^[18]

[510 U.S. 586] B

The second statutory factor, "the nature of the copy-righted work," § 107(2), draws on Justice Story's expression, the "value of the materials used." Folsom v. Marsh, 9 F. Cas., at 348. 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. See, e. g., Stewart v. Abend, 495 U. S., at 237-238 (contrasting fictional short story with factual works); Harper & Row, 471 U. S., at 563-564 (contrasting soon-to-be-published memoir with published speech); Sony, 464 U. S., at 455, n. 40 (contrasting motion pictures with news broadcasts); Feist, 499 U. S., at 348-351 (contrasting creative works with bare factual compilations); 3 M. Nimmer & D. Nimmer, Nimmer on Copyright § 13.05[A][2] (1993) (hereinafter Nimmer); Leval 1116. We agree with both the District Court and the Court of Appeals that the Orbison original's creative expression for public dissemination falls within the core of the copyright's protective purposes. 754 F. Supp., at 1155-1156; 972 F. 2d, at 1437. This fact, however, is not much help in this case, or ever likely to help much in separating the fair use sheep from the infringing goats in a parody case, since parodies almost invariably copy publicly known, expressive works.

C

The third factor asks whether "the amount and substantiality of the portion used in relation to the copyrighted work as a whole," § 107(3) (or, in Justice Story's words, "the quantity and value of the materials used," Folsom v. Marsh, supra, at 348) are reasonable in relation to the purpose of the copying. Here, attention turns to the persuasiveness of a parodist's justification for the particular copying done, and the enquiry will harken back to the first of the statutory factors, for, as in prior cases, we recognize that the extent of permissible copying varies with the purpose and character [510 U.S. 587] of the use. See Sony, supra, at 449-450 (reproduction of entire work "does not have its ordinary effect of militating against a finding of fair use" as to home videotaping of television programs); Harper & Row, supra, at 564 ("[E]ven substantial quotations might qualify as fair use in a review of a published work or a news account of a speech" but not in a scoop of a soon-to-be-published memoir). The facts bearing on this factor will also tend to address the fourth, by revealing the degree to which the parody may serve as a market substitute for the original or potentially licensed derivatives. See Leval 1123.

The District Court considered the song's parodic purpose in finding that 2 Live Crew had not helped themselves overmuch. 754 F. Supp., at 1156-1157. The Court of Appeals disagreed, stating that "[w]hile it may not be inappropriate to find that no more was taken than necessary, the copying was qualitatively substantial. . . . We conclude that taking the heart of the original and making it the heart of a new work was to purloin a substantial portion of the essence of the original." 972 F. 2d, at 1438.

The Court of Appeals is of course correct that this factor calls for thought not only about the quantity of the materials used, but about their quality and importance, too. In Harper & Row, for example, the Nation had taken only some 300 words out of President Ford's memoirs, but we signaled the significance of the quotations in finding them to amount to "the heart of the book," the part most likely to be newsworthy and important in licensing serialization. 471 U. S., at 564-566, 568 (internal quotation marks omitted). We also agree with the Court of Appeals that whether "a substantial portion of the infringing work was copied verbatim" from the copyrighted work is a relevant question, see id., at 565, for it may reveal a dearth of transformative character or purpose under the first factor, or a greater likelihood of market harm under the fourth; a work composed primarily of an original, particularly its heart, with little added or changed, [510 U.S. 588] is more likely to be a merely superseding use, fulfilling demand for the original.

Where we part company with the court below is in applying these guides to parody, and in particular to parody in the song before us. Parody presents a difficult case. Parody's humor, or in any event its comment, necessarily springs from recognizable allusion to its object through distorted imitation. Its art lies in the tension between a known original and its parodic twin. When parody takes aim at a particular original work, the parody must be able to "conjure up" at least enough of that original to make the object of its critical wit recognizable. See, e. g., Elsmere Music, 623 F. 2d, at 253, n. 1; Fisher v. Dees, 794 F. 2d, at 438-439. What makes for this recognition is quotation of the original's most distinctive or memorable features, which the parodist can be sure the audience will know. Once enough has been taken to assure identification, how much more is reasonable will depend, say, on the extent to which the song's overriding purpose and character is to parody the original or, in contrast, the likelihood that the parody may serve as a market substitute for the original. But using some characteristic features cannot be avoided.

We think the Court of Appeals was insufficiently appreciative of parody's need for the recognizable sight or sound when it ruled 2 Live Crew's use unreasonable as a matter of law. It is true, of course, that 2 Live Crew copied the characteristic opening bass riff (or musical phrase) of the original, and true that the words of the first line copy the Orbison lyrics. But if quotation of the opening riff and the first line may be said to go to the "heart" of the original, the heart is also what most readily conjures up the song for parody, and it is the heart at which parody takes aim. Copying does not become excessive in relation to parodic purpose merely because the portion taken was the original's heart. If 2 Live Crew had copied a significantly less memorable part of the original, it is difficult to see how its parodic character [510 U.S. 589] would have come through. See Fisher v. Dees, supra, at 439.

This is not, of course, to say that anyone who calls himself a parodist can skim the cream and get away scot free. In parody, as in news reporting, see Harper & Row, supra, context is everything, and the question of fairness asks what else the parodist did besides go to the heart of the original. It is significant that 2 Live Crew not only copied the first line of the original, but thereafter departed markedly from the Orbison lyrics for its own ends. 2 Live Crew not only copied the bass riff and repeated it,^[19] but also produced otherwise distinctive sounds, interposing "scraper" noise, over-laying the music with solos in different keys, and altering the drum beat. See 754 F. Supp., at 1155. This is not a case, then, where "a substantial portion" of the parody itself is composed of a "verbatim" copying of the original. It is not, that is, a case where the parody is so insubstantial, as compared to the copying, that the third factor must be resolved as a matter of law against the parodists.

Suffice it to say here that, as to the lyrics, we think the Court of Appeals correctly suggested that "no more was taken than necessary," 972 F. 2d, at 1438, but just for that reason, we fail to see how the copying can be excessive in relation to its parodic purpose, even if the portion taken is the original's "heart." As to the music, we express no opinion whether repetition of the bass riff is excessive copying, and we remand to permit evaluation of the amount taken, in light of the song's parodic purpose and character, its transformative elements, and considerations of the potential for market substitution sketched more fully below.

[510 U.S. 590] D

The fourth fair use factor is "the effect of the use upon the potential market for or value of the copyrighted work." § 107(4). It requires courts to consider not only the extent of market harm caused by the particular actions of the alleged infringer, but also "whether unrestricted and widespread conduct of the sort engaged in by the defendant . . . would result in a substantially adverse impact on the potential market" for the original. Nimmer § 13.05[A][4], p. 13-102.61 (footnote omitted); accord, Harper & Row, 471 U. S., at 569; Senate Report, p. 65; Folsom v. Marsh, 9 F. Cas., at 349. The enquiry "must take account not only of harm to the original but also of harm to the market for derivative works." Harper & Row, supra, at 568.

Since fair use is an affirmative defense,^[20] its proponent would have difficulty carrying the burden of demonstrating fair use without favorable evidence about relevant markets.^[21] In moving for summary judgment, 2 Live Crew left themselves at just such a disadvantage when they failed to address the effect on the market for rap derivatives, and confined themselves to uncontroverted submissions that there was no likely effect on the market for the original. They did not, however, thereby subject themselves to the evidentiary presumption applied by the Court of Appeals. In assessing the likelihood of significant market harm, the Court of Appeals [510 U.S. 591] quoted from language in Sony that "`[i]f the intended use is for commercial gain, that likelihood may be presumed. But if it is for a noncommercial purpose, the likelihood must be demonstrated.'" 972 F. 2d, at 1438, quoting Sony, 464 U. S., at 451. The court reasoned that because "the use of the copyrighted work is wholly commercial, . . . we presume that a likelihood of future harm to Acuff-Rose exists." 972 F. 2d, at 1438. In so doing, the court resolved the fourth factor against 2 Live Crew, just as it had the first, by applying a presumption about the effect of commercial use, a presumption which as applied here we hold to be error.

No "presumption" or inference of market harm that might find support in Sony is applicable to a case involving something beyond mere duplication for commercial purposes. Sony's discussion of a presumption contrasts a context of verbatim copying of the original in its entirety for commercial purposes, with the noncommercial context of Sony itself (home copying of television programming). In the former circumstances, what Sony said simply makes common sense: when a commercial use amounts to mere duplication of the entirety of an original, it clearly "supersede[s] the objects," Folsom v. Marsh, supra, at 348, of the original and serves as a market replacement for it, making it likely that cognizable market harm to the original will occur. Sony, supra, at 451. But when, on the contrary, the second use is transformative, market substitution is at least less certain, and market harm may not be so readily inferred. Indeed, as to parody pure and simple, it is more likely that the new work will not affect the market for the original in a way cognizable under this factor, that is, by acting as a substitute for it ("supersed[ing] [its] objects"). See Leval 1125; Patry & Perlmutter 692, 697-698. This is so because the parody and the original usually serve different market functions. Bisceglia, ASCAP, Copyright Law Symposium, No. 34, at 23.

We do not, of course, suggest that a parody may not harm the market at all, but when a lethal parody, like a scathing [510 U.S. 592] theater review, kills demand for the original, it does not produce a harm cognizable under the Copyright Act. Because "parody may quite legitimately aim at garroting the original, destroying it commercially as well as artistically," B. Kaplan, An Unhurried View of Copyright 69 (1967), the role of the courts is to distinguish between "[b]iting criticism [that merely] suppresses demand [and] copyright infringement[, which] usurps it." Fisher v. Dees, 794 F. 2d, at 438.

This distinction between potentially remediable displacement and unremediable disparagement is reflected in the rule that there is no protectible derivative market for criticism. The market for potential derivative uses includes only those that creators of original works would in general develop or license others to develop. Yet the unlikelihood that creators of imaginative works will license critical reviews or lampoons of their own productions removes such uses from the very notion of a potential licensing market. "People ask . . . for criticism, but they only want praise." S. Maugham, Of Human Bondage 241 (Penguin ed. 1992). Thus, to the extent that the opinion below may be read to have considered harm to the market for parodies of "Oh, Pretty Woman," see 972 F. 2d, at 1439, the court erred. Accord, Fisher v. Dees, supra, at 437; Leval 1125; Patry & Perlmutter 688-691.^[22]

In explaining why the law recognizes no derivative market for critical works, including parody, we have, of course, been speaking of the later work as if it had nothing but a critical aspect (i. e., "parody pure and simple," supra, at 591). But the later work may have a more complex character, with effects not only in the arena of criticism but also in protectible markets for derivative works, too. In that sort of case, the law looks beyond the criticism to the other elements of the work, as it does here. 2 Live Crew's song comprises not [510 U.S. 593] only parody but also rap music, and the derivative market for rap music is a proper focus of enquiry, see Harper & Row, supra, at 568; Nimmer § 13.05[B]. Evidence of substantial harm to it would weigh against a finding of fair use,^[23] because the licensing of derivatives is an important economic incentive to the creation of originals. See 17 U. S. C. § 106(2) (copyright owner has rights to derivative works). Of course, the only harm to derivatives that need concern us, as discussed above, is the harm of market substitution. The fact that a parody may impair the market for derivative uses by the very effectiveness of its critical commentary is no more relevant under copyright than the like threat to the original market.^[24]

Although 2 Live Crew submitted uncontroverted affidavits on the question of market harm to the original, neither they, nor Acuff-Rose, introduced evidence or affidavits addressing the likely effect of 2 Live Crew's parodic rap song on the market for a nonparody, rap version of "Oh, Pretty Woman." And while Acuff-Rose would have us find evidence of a rap market in the very facts that 2 Live Crew recorded a rap parody of "Oh, Pretty Woman" and another rap group sought a license to record a rap derivative, there was no evidence that a potential rap market was harmed in any way by 2 Live Crew's parody, rap version. The fact that 2 Live Crew's parody sold as part of a collection of rap songs says very little about the parody's effect on a market for a rap version of the original, either of the music alone or of the music with its lyrics. The District Court essentially passed [510 U.S. 594] on this issue, observing that Acuff-Rose is free to record "whatever version of the original it desires," 754 F. Supp., at 1158; the Court of Appeals went the other way by erroneous presumption. Contrary to each treatment, it is impossible to deal with the fourth factor except by recognizing that a silentrecord on an important factor bearing on fair use disentitled the proponent of the defense, 2 Live Crew, to summary judgment. The evidentiary hole will doubtless be plugged on remand.

III

It was error for the Court of Appeals to conclude that the commercial nature of 2 Live Crew's parody of "Oh, Pretty Woman" rendered it presumptively unfair. No such evidentiary presumption is available to address either the first factor, the character and purpose of the use, or the fourth, market harm, in determining whether a transformative use, such as parody, is a fair one. The court also erred in holding that 2 Live Crew had necessarily copied excessively from the Orbison original, considering the parodic purpose of the use. We therefore reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.

It is so ordered.

APPENDIX A TO OPINION OF THE COURT

"Oh, Pretty Woman" by Roy Orbison and William Dees

Pretty Woman, walking down the street,

Pretty Woman, the kind I like to meet,

Pretty Woman, I don't believe you, you're not the truth,

No one could look as good as you Mercy

Pretty Woman, won't you pardon me,

Pretty Woman, I couldn't help but see,

[510 U.S. 595] Pretty Woman, that you look lovely as can be Are you lonely just like me?

Pretty Woman, stop a while,

Pretty Woman, talk a while,

Pretty Woman give your smile to me

Pretty Woman, yeah, yeah, yeah

Pretty Woman, look my way,

Pretty Woman, say you'll stay with me

'Cause I need you, I'll treat you right

Come to me baby, Be mine tonight

Pretty Woman, don't walk on by,

Pretty Woman, don't make me cry,

Pretty Woman, don't walk away,

Hey, O. K.

If that's the way it must be, O. K.

I guess I'll go on home, it's late

There'll be tomorrow night, but wait!

What do I see

Is she walking back to me?

Yeah, she's walking back to me!

Oh, Pretty Woman.

APPENDIX B TO OPINION OF THE COURT

"Pretty Woman" as Recorded by 2 Live Crew

Pretty woman walkin' down the street

Pretty woman girl you look so sweet

Pretty woman you bring me down to that knee

Pretty woman you make me wanna beg please

Oh, pretty woman

Big hairy woman you need to shave that stuff

Big hairy woman you know I bet it's tough

Big hairy woman all that hair it ain't legit

[510 U.S. 596] 'Cause you look like ‘Cousin It'

Big hairy woman

Bald headed woman girl your hair won't grow

Bald headed woman you got a teeny weeny afro

Bald headed woman you know your hair could look nice

Bald headed woman first you got to roll it with rice

Bald headed woman here, let me get this hunk of biz for ya

Ya know what I'm saying you look better than rice a roni

Oh bald headed woman

Big hairy woman come on in

And don't forget your bald headed friend

Hey pretty woman let the boys Jump in

Two timin' woman girl you know you ain't right

Two timin' woman you's out with my boy last night

Two timin' woman that takes a load off my mind

Two timin' woman now I know the baby ain't mine

Oh, two timin' woman

Oh pretty woman

JUSTICE KENNEDY, concurring.

I agree that remand is appropriate and join the opinion of the Court, with these further observations about the fair use analysis of parody.

The common-law method instated by the fair use provision of the copyright statute, 17 U. S. C. § 107 (1988 ed. and Supp. IV), presumes that rules will emerge from the course of decisions. I agree that certain general principles are now discernible to define the fair use exception for parody. One of these rules, as the Court observes, is that parody may qualify as fair use regardless of whether it is published or performed [510 U.S. 597] for profit. Ante, at 591. Another is that parody may qualify as fair use only if it draws upon the original composition to make humorous or ironic commentary about that same composition. Ante, at 580. It is not enough that the parody use the original in a humorous fashion, however creative that humor may be. The parody must target the original, and not just its general style, the genre of art to which it belongs, or society as a whole (although if it targets the original, it may target those features as well). See Rogers v. Koons, 960 F. 2d 301, 310 (CA2 1992) ("[T]hough the satire need not be only of the copied work and may . . . also be a parody of modern society, the copied work must be, at least in part, an object of the parody"); Fisher v. Dees, 794 F. 2d 432, 436 (CA9 1986) ("[A] humorous or satiric work deserves protection under the fair-use doctrine only if the copied work is at least partly the target of the work in question"). This prerequisite confines fair use protection to works whose very subject is the original composition and so necessitates some borrowing from it. See MCA, Inc. v. Wilson, 677 F. 2d 180, 185 (CA2 1981) ("[I]f the copyrighted song is not at least in part an object of the parody, there is no need to conjure it up"); Bisceglia, Parody and Copyright Protection: Turning the Balancing Act Into a Juggling Act, in ASCAP, Copyright Law Symposium, No. 34, pp. 23-29 (1987). It also protects works we have reason to fear will not be licensed by copyright holders who wish to shield their works from criticism. See Fisher, supra, at 437 ("Self-esteem is seldom strong enough to permit the granting of permission even in exchange for a reasonable fee"); Posner, When Is Parody Fair Use?, 21 J. Legal Studies 67, 73 (1992) ("There is an obstruction when the parodied work is a target of the parodist's criticism, for it may be in the private interest of the copyright owner, but not in the social interest, to suppress criticism of the work") (emphasis deleted).

If we keep the definition of parody within these limits, we have gone most of the way towards satisfying the four-factor [510 U.S. 598] fair use test in § 107. The first factor (the purpose and character of use) itself concerns the definition of parody. The second factor (the nature of the copyrighted work) adds little to the first, since "parodies almost invariably copy publicly known, expressive works." Ante, at 586. The third factor (the amount and substantiality of the portion used in relation to the whole) is likewise subsumed within the definition of parody. In determining whether an alleged parody has taken too much, the target of the parody is what gives content to the inquiry. Some parodies, by their nature, require substantial copying. See Elsmere Music, Inc. v. National Broadcasting Co., 623 F. 2d 252 (CA2 1980) (holding that "I Love Sodom" skit on "Saturday Night Live" is legitimate parody of the "I Love New York" campaign). Other parodies, like Lewis Carroll's "You Are Old, Father William," need only take parts of the original composition. The third factor does reinforce the principle that courts should not accord fair use protection to profiteers who do no more than add a few silly words to someone else's song or place the characters from a familiar work in novel or eccentric poses. See, e. g., Walt Disney Productions v. Air Pirates, 581 F. 2d 751 (CA9 1978); DC Comics Inc. v. Unlimited Monkey Business, Inc., 598 F. Supp. 110 (ND Ga. 1984). But, as I believe the Court acknowledges, ante, at 588-589, it is by no means a test of mechanical application. In my view, it serves in effect to ensure compliance with the targeting requirement.

As to the fourth factor (the effect of the use on the market for the original), the Court acknowledges that it is legitimate for parody to suppress demand for the original by its critical effect. Ante, at 591-592. What it may not do is usurp demand by its substitutive effect. Ibid. It will be difficult, of course, for courts to determine whether harm to the market results from a parody's critical or substitutive effects. But again, if we keep the definition of parody within appropriate bounds, this inquiry may be of little significance. If a work targets another for humorous or ironic effect, it is by definition [510 U.S. 599] a new creative work. Creative works can compete with other creative works for the same market, even if their appeal is overlapping. Factor four thus underscores the importance of ensuring that the parody is in fact an independent creative work, which is why the parody must "make some critical comment or statement about the original work which reflects the original perspective of the parodist—thereby giving the parody social value beyond its entertainment function." Metro-Goldwyn-Mayer, Inc. v. Showcase Atlanta Cooperative Productions, Inc., 479 F. Supp. 351, 357 (ND Ga. 1979).

The fair use factors thus reinforce the importance of keeping the definition of parody within proper limits. More than arguable parodic content should be required to deem a would-be parody a fair use. Fair use is an affirmative defense, so doubts about whether a given use is fair should not be resolved in favor of the self-proclaimed parodist. We should not make it easy for musicians to exploit existing works and then later claim that their rendition was a valuable commentary on the original. Almost any revamped modern version of a familiar composition can be construed as a "comment on the naivete of the original," ante, at 583, because of the difference in style and because it will be amusing to hear how the old tune sounds in the new genre. Just the thought of a rap version of Beethoven's Fifth Symphony or "Achy Breaky Heart" is bound to make people smile. If we allow any weak transformation to qualify as parody, however, we weaken the protection of copyright. And under-protection of copyright disserves the goals of copyright just as much as overprotection, by reducing the financial incentive to create.

The Court decides it is "fair to say that 2 Live Crew's song reasonably could be perceived as commenting on the original or criticizing it, to some degree." Ibid. (applying the first fair use factor). While I am not so assured that 2 Live Crew's song is a legitimate parody, the Court's treatment of [510 U.S. 600] the remaining factors leaves room for the District Court to determine on remand that the song is not a fair use. As future courts apply our fair use analysis, they must take care to ensure that not just any commercial takeoff is rationalized post hoc as a parody.

With these observations, I join the opinion of the Court.

[*] Briefs of amici curiae urging reversal were filed for the American Civil Liberties Union by Steven F. Reich, Steven R. Shapiro, Marjorie Heins, and John A. Powell; for Capitol Steps Production, Inc., et al. by William C. Lane; for the Harvard Lampoon, Inc., by Robert H. Loeffler and Jonathan Band; for the PEN American Center by Leon Friedman; and for Robert C. Berry et al. by Alfred C. Yen.

Briefs of amici curiae urging affirmance were filed for the National Music Publishers' Association, Inc., et al. by Marvin E. Frankel and Michael S. Oberman; and for Fred Ebb et al. by Stephen Rackow Kaye, Charles S. Sims, and Jon A. Baumgarten.

Briefs of amici curiae were filed for Home Box Office et al. by Daniel M. Waggoner, P. Cameron DeVore, George Vradenburg, Bonnie Bogin, and Richard Cotton; and for Warner Bros. by Cary H. Sherman and Robert Alan Garrett.

__________

[1] Rap has been defined as a "style of black American popular music consisting of improvised rhymes performed to a rhythmic accompaniment." The Norton/Grove Concise Encyclopedia of Music 613 (1988). 2 Live Crew plays "[b]ass music," a regional, hip-hop style of rap from the Liberty City area of Miami, Florida. Brief for Petitioners 34.

[2] The parties argue about the timing. 2 Live Crew contends that the album was released on July 15, and the District Court so held. 754 F. Supp. 1150, 1152 (MD Tenn. 1991). The Court of Appeals states that Campbell's affidavit puts the release date in June, and chooses that date. 972 F. 2d 1429, 1432 (CA6 1992). We find the timing of the request irrelevant for purposes of this enquiry. See n. 18, infra, discussing good faith.

[3] 2 Live Crew's motion to dismiss was converted to a motion for summary judgment. Acuff-Rose defended against the motion, but filed no cross-motion.

[4] Section 106 provides in part:

"Subject to sections 107 through 120, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

"(1) to reproduce the copyrighted work in copies or phonorecords;

"(2) to prepare derivative works based upon the copyrighted work;

"(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending . . . ."

A derivative work is defined as one "based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a `derivative work.' " 17 U. S. C. § 101.

2 Live Crew concedes that it is not entitled to a compulsory license under § 115 because its arrangement changes "the basic melody or fundamental character" of the original. § 115(a)(2).

[5] The exclusion of facts and ideas from copyright protection serves that goal as well. See § 102(b) ("In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery..."); Feist Publications, Inc. v. Rural Telephone Service Co., 499 U. S. 340, 359 (1991) ("[F]acts contained in existing works may be freely copied"); Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U. S. 539, 547 (1985) (copyright owner's rights exclude facts and ideas, and fair use).

[6] An Act for the Encouragement of Learning, 8 Anne, ch. 19.

[7] Patry 27, citing Lawrence v. Dana, 15 F. Cas. 26, 60 (No. 8,136) (CCD Mass. 1869).

[8] Leval 1105. For a historical account of the development of the fair use doctrine, see Patry 1-64.

[9] See Senate Report, p. 62 ("[W]hether a use referred to in the first sentence of section 107 is a fair use in a particular case will depend upon the application of the determinative factors").

[10] Because the fair use enquiry often requires close questions of judgment as to the extent of permissible borrowing in cases involving parodies (or other critical works), courts may also wish to bear in mind that the goals of the copyright law, "to stimulate the creation and publication of edifying matter," Leval 1134, are not always best served by automatically granting injunctive relief when parodists are found to have gone beyond the bounds of fair use. See 17 U. S. C. § 502(a) (court "may . . . grant . . . injunctions on such terms as it may deem reasonable to prevent or restrain infringement") (emphasis added); Leval 1132 (while in the "vast majority of cases, [an injunctive] remedy is justified because most infringements are simple piracy," such cases are "worlds apart from many of those raising reasonable contentions of fair use" where "there may be a strong public interest in the publication of the secondary work [and] the copyright owner's interest may be adequately protected by an award of damages for whatever infringement is found"); Abend v. MCA, Inc., 863 F. 2d 1465, 1479 (CA9 1988) (finding "special circumstances" that would cause "great injustice" to defendants and "public injury" were injunction to issue), aff'd sub nom. Stewart v. Abend, 495 U. S. 207 (1990).

[11] The obvious statutory exception to this focus on transformative uses is the straight reproduction of multiple copies for classroom distribution.

[12] American Heritage Dictionary 1317 (3d ed. 1992).

[13] 11 Oxford English Dictionary 247 (2d ed. 1989).

[14] A parody that more loosely targets an original than the parody presented here may still be sufficiently aimed at an original work to come within our analysis of parody. If a parody whose wide dissemination in the market runs the risk of serving as a substitute for the original or licensed derivatives (see infra, at 590-594, discussing factor four), it is more incumbent on one claiming fair use to establish the extent of transformation and the parody's critical relationship to the original. By contrast, when there is little or no risk of market substitution, whether because of the large extent of transformation of the earlier work, the new work's minimal distribution in the market, the small extent to which it borrows from an original, or other factors, taking parodic aim at an original is a less critical factor in the analysis, and looser forms of parody may be found to be fair use, as may satire with lesser justification for the borrowing than would otherwise be required.

[15] Satire has been defined as a work "in which prevalent follies or vices are assailed with ridicule," 14 Oxford English Dictionary, supra, at 500, or are "attacked through irony, derision, or wit," American Heritage Dictionary, supra, at 1604.

[16] The only further judgment, indeed, that a court may pass on a work goes to an assessment of whether the parodic element is slight or great, and the copying small or extensive in relation to the parodic element, for a work with slight parodic element and extensive copying will be more likely to merely "supersede the objects" of the original. See infra, at 586-594, discussing factors three and four.

[17] We note in passing that 2 Live Crew need not label their whole album, or even this song, a parody in order to claim fair use protection, nor should 2 Live Crew be penalized for this being its first parodic essay. Parody serves its goals whether labeled or not, and there is no reason to require parody to state the obvious (or even the reasonably perceived). See Patry & Perlmutter 716-717.

[18] Finally, regardless of the weight one might place on the alleged infringer's state of mind, compare Harper & Row, 471 U. S., at 562 (fair use presupposes good faith and fair dealing) (quotation marks omitted), with Folsom v. Marsh, 9 F. Cas. 342, 349 (No. 4,901) (CCD Mass. 1841) (good faith does not bar a finding of infringement); Leval 1126-1127 (good faith irrelevant to fair use analysis), we reject Acuff-Rose's argument that 2 Live Crew's request for permission to use the original should be weighed against a finding of fair use. Even if good faith were central to fair use, 2 Live Crew's actions do not necessarily suggest that they believed their version was not fair use; the offer may simply have been made in a good-faith effort to avoid this litigation. If the use is otherwise fair, then no permission need be sought or granted. Thus, being denied permission to use a work does not weigh against a finding of fair use. See Fisher v. Dees, 794 F. 2d 432, 437 (CA9 1986).

[19] This may serve to heighten the comic effect of the parody, as one witness stated, App. 32a, Affidavit of Oscar Brand; see also Elsmere Music, Inc. v. National Broadcasting Co., 482 F. Supp. 741, 747 (SDNY 1980) (repetition of "I Love Sodom"), or serve to dazzle with the original's music, as Acuff-Rose now contends.

[20] Harper & Row, 471 U. S., at 561; H. R. Rep. No. 102-836, p. 3, n. 3 (1992).

[21] Even favorable evidence, without more, is no guarantee of fairness. Judge Leval gives the example of the film producer's appropriation of a composer's previously unknown song that turns the song into a commercial success; the boon to the song does not make the film's simple copying fair. Leval 1124, n. 84. This factor, no less than the other three, may be addressed only through a "sensitive balancing of interests." Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417, 455, n. 40 (1984). Market harm is a matter of degree, and the importance of this factor will vary, not only with the amount of harm, but also with the relative strength of the showing on the other factors.

[22] We express no opinion as to the derivative markets for works using elements of an original as vehicles for satire or amusement, making no comment on the original or criticism of it.

[23] See Nimmer § 13.05[A][4], p. 13-102.61 ("a substantially adverse impact on the potential market"); Leval 1125 ("reasonably substantial" harm); Patry & Perlmutter 697-698 (same).

[24] In some cases it may be difficult to determine whence the harm flows. In such cases, the other fair use factors may provide some indicia of the likely source of the harm. A work whose overriding purpose and character is parodic and whose borrowing is slight in relation to its parody will be far less likely to cause cognizable harm than a work with little parodic content and much copying.

Melvin L. Wulf, Beldock, Levine & Hoffman, LLP, New York City, for Defendants-Appellants.

David Dunn, Davis, Weber & Edwards, P.C., New York City, for Plaintiff-Appellee.

Before: VAN GRAAFEILAND and WALKER, Circuit Judges, and RAKOFF, District Judge.^[*]

JOHN M. WALKER, Jr., Circuit Judge:

This case presents two interesting and somewhat novel issues of copyright law. The first is whether The Seinfeld Aptitude Test, a trivia quiz book devoted exclusively to testing its readers' recollection of scenes and events from the fictional television series Seinfeld, takes sufficient protected expression from the original, as evidenced by the book's substantial similarity to the television series, such that, in the absence of any defenses, the book would infringe the copyright in Seinfeld. The second is whether The Seinfeld Aptitude Test (also referred to as The SAT) constitutes fair use of the Seinfeld television series.

Defendants-appellants Carol Publishing Group, Inc. and Beth B. Golub appeal from the July 23, 1997 judgment of the United States District Court for the Southern District of New York (Sonia Sotomayor, District Judge) granting, pursuant to Fed.R.Civ.P. 56, plaintiff-appellee Castle Rock Entertainment, Inc.'s ("Castle Rock") motion for summary judgment; denying defendants' cross-motion for summary judgment; awarding Castle Rock $403,000 for defendants' copyright infringement; and permanently enjoining defendants from publishing The Seinfeld Aptitude Test.

We conclude that The SAT unlawfully copies from Seinfeld and that its copying does not constitute fair use and thus is an actionable infringement. Accordingly, we affirm the judgment in favor of Castle Rock.

Background

The material facts in this case are undisputed. Plaintiff Castle Rock is the producer and copyright owner of each episode of the Seinfeld television series. The series revolves around the petty tribulations in the lives of four single, adult friends in New York: Jerry Seinfeld, George Costanza, Elaine Benes, and Cosmo Kramer. Defendants are Beth Golub, the author, and Carol Publishing Group, Inc., the publisher, of The SAT, a 132-page book containing 643 trivia questions and answers about the events and characters depicted in Seinfeld. These include 211 multiple choice questions, in which only one out of three to five answers is correct; 93 matching questions; and a number of short-answer questions. The questions are divided into five levels of difficulty, labeled (in increasing order of difficulty) "Wuss Questions," "This, That, and the Other Questions," "Tough Monkey Questions," "Atomic Wedgie Questions," and "Master of Your Domain Questions." Selected examples from level 1 are indicative of the questions throughout The SAT:

1. To impress a woman, George passes himself off as

a) a gynecologist

b) a geologist

c) a marine biologist

d) a meteorologist

11. What candy does Kramer snack on while observing a surgical procedure from an operating-room balcony?

12. Who said, "I don't go for those nonrefundable deals ... I can't commit to a woman ... I'm not committing to an airline."?

a) Jerry

b) George

c) Kramer^[2]

The book draws from 84 of the 86 Seinfeld episodes that had been broadcast as of the time The SAT was published. Although Golub created the incorrect answers to the multiple choice questions, every question and correct answer has as its source a fictional moment in a Seinfeld episode. Forty-one questions and/or answers contain dialogue from Seinfeld. The single episode most drawn upon by The SAT, "The Cigar Store Indian," is the source of 20 questions that directly quote between 3.6% and 5.6% of that episode (defendants' and plaintiff's calculations, respectively).

The name "Seinfeld" appears prominently on the front and back covers of The SAT, and pictures of the principal actors in Seinfeld appear on the cover and on several pages of the book. On the back cover, a disclaimer states that "This book has not been approved or licensed by any entity involved in creating or producing Seinfeld."^[3] The front cover bears the title "The Seinfeld Aptitude Test" and describes the book as containing "[h]undreds of spectacular questions of minute details from TV's greatest show about absolutely nothing." The back cover asks:

Just how well do you command the buzzwords, peccadilloes, petty annoyances, and triflingly complex escapades of Jerry Seinfeld, Elaine Benes, George Costanza, and Kramer—the fabulously neurotic foursome that makes the offbeat hit TV series Seinfeld tick?

....

If you think you know the answers—and really keep track of Seinfeld minutiae—challenge yourself and your friends with these 550 trivia questions and 10 extra matching quizzes. No, The Seinfeld Aptitude Test can't tell you whether you're Master of Your Domain, but it will certify your status as King or Queen of Seinfeld trivia. So twist open a Snapple, double-dip a chip, and open this book to satisfy your between-episode cravings.

Golub has described The SAT as a "natural outgrowth" of Seinfeld which, "like the Seinfeld show, is devoted to the trifling, picayune and petty annoyances encountered by the show's characters on a daily basis." According to Golub, she created The SAT by taking notes from Seinfeld programs at the time they were aired on television and subsequently reviewing videotapes of several of the episodes, as recorded by her or various friends.

The SAT's publication did not immediately provoke a challenge. The National Broadcasting Corporation, which broadcasted Seinfeld, requested free copies of The SAT from defendants and distributed them together with promotions for the program. Seinfeld's executive producer characterized The SAT as "a fun little book." There is no evidence that The SAT's publication diminished Seinfeld's profitability, and in fact Seinfeld's audience grew after The SAT was first published.

Castle Rock has nevertheless been highly selective in marketing products associated with Seinfeld, rejecting numerous proposals from publishers seeking approval for a variety of projects related to the show. Castle Rock licensed one Seinfeld book, The Entertainment Weekly Seinfeld Companion, and has licensed the production of a CD-ROM product that includes discussions of Seinfeld episodes; the CD-ROM allegedly might ultimately include a trivia bank. Castle Rock claims in this litigation that it plans to pursue a more aggressive marketing strategy for Seinfeld-related products, including "publication of books relating to Seinfeld."

In November 1994, Castle Rock notified defendants of its copyright and trademark infringement claims. In February 1995, after defendants continued to distribute The SAT, Castle Rock filed this action alleging federal copyright and trademark infringement and state law unfair competition. Subsequently, both parties moved, pursuant to Fed.R.Civ.P. 56, for summary judgment on both the copyright and unfair competition claims.

The district court granted summary judgment to Castle Rock on the copyright claim. It held that defendants had violated plaintiff's copyrights in Seinfeld and that such copying did not constitute fair use. See Castle Rock Entertainment v. Carol Publ'g Group, Inc., 955 F.Supp. 260, 274 (S.D.N.Y. 1997). The district court did not grant summary judgment to either party on the unfair competition claim. See id. The parties then stipulated to damages and attorneys' fees on the copyright infringement claim and, presumably to facilitate the appeal, to the dismissal without prejudice of all remaining claims. Carol Publishing's cross-claims against Golub were dismissed with prejudice. The district court entered final judgment on the copyright infringement claim, awarded Castle Rock $403,000 with interest, permanently enjoined defendants from publishing or distributing The SAT, and ordered defendants to destroy all copies of The SAT in their custody or control. Defendants now appeal.

Discussion

Standard of Review

Summary judgment is appropriate only if the moving party can show that there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The court "must draw all reasonable inferences and resolve all ambiguities in favor of the non-moving party." Garza v. Marine Transp. Lines, Inc., 861 F.2d 23, 26 (2d Cir.1988). Although "[f]air use is a mixed question of law and fact," Harper & Row, Publishers, Inc. v. Nation Enter., 471 U.S. 539, 560, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985), this court has on a number of occasions "resolved fair use determinations at the summary judgment stage" where, as here, there are no genuine issues of material fact. Wright v. Warner Books, Inc., 953 F.2d 731, 735 (2d Cir.1991); Leibovitz v. Paramount Pictures Corp., 137 F.3d 109 (2d Cir.1998) (affirming summary judgment awarded to defendants on basis of fair use defense); Harper & Row, 471 U.S. at 560, 105 S.Ct. 2218. We review the district court's legal conclusions de novo and its findings of fact for clear error. See American Geophysical Union v. Texaco Inc., 60 F.3d 913, 918 (2d Cir.1994).

Copyright Infringement

The Copyright Act of 1976 ("Copyright Act"), 17 U.S.C. §§ 101-803, grants copyright owners a bundle of exclusive rights, including the rights to "reproduce the copyrighted work in copies" and "to prepare derivative works based upon the copyrighted work." Id. § 106. "Copyright infringement is established when the owner of a valid copyright demonstrates unauthorized copying." Repp v. Webber, 132 F.3d 882, 889 (2d Cir.1997); see Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991). There are two main components of this prima facie case of infringement: "a plaintiff must first show that his work was actually copied .... [and] then must show that the copying amounts to an improper or unlawful appropriation." Laureyssens v. Idea Group, Inc., 964 F.2d 131, 139-40 (2d Cir.1992) (quotation marks and citations omitted). Actual copying may be established "either by direct evidence of copying or by indirect evidence, including access to the copyrighted work, similarities that are probative of copying between the works, and expert testimony." Id. at 140. As we have noted before, "probative," rather than "substantial" similarity is the correct term in referring to the plaintiff's initial burden of proving actual copying by indirect evidence. See Webber, 132 F.3d at 889 n. 1; Laureyssens, 964 F.2d at 140. "It is only after actual copying is established that one claiming infringement" then proceeds to demonstrate that the copying was improper or unlawful by showing that the second work bears "substantial similarity" to protected expression in the earlier work. Webber, 132 F.3d at 889; Laureyssens, 964 F.2d at 140.

In the instant case, no one disputes that Castle Rock owns valid copyrights in the Seinfeld television programs and that defendants actually copied from those programs in creating The SAT. Golub freely admitted that she created The SAT by taking notes from Seinfeld programs at the time they were aired on television and subsequently reviewing videotapes of several of the episodes that she or her friends recorded. Since the fact of copying is acknowledged and undisputed, the critical question for decision is whether the copying was unlawful or improper in that it took a sufficient amount of protected expression from Seinfeld as evidenced by its substantial similarity to such expression.

Substantial Similarity

We have stated that "substantial similarity"

requires that the copying [be] quantitatively and qualitatively sufficient to support the legal conclusion that infringement (actionable copying) has occurred. The qualitative component concerns the copying of expression, rather than ideas [, facts, works in the public domain, or any other non-protectable elements].... The quantitative component generally concerns the amount of the copyrighted work that is copied,

which must be more than "de minimis." Ringgold v. Black Entertainment Television, Inc., 126 F.3d 70, 75 (2d Cir.1997) (emphasis added).

As to the quantitative element, we conclude that The SAT has crossed the de minimis threshold. At the outset, we observe that the fact that the copying appears in question and answer form is by itself without particular consequence: the trivia quiz copies fragments of Seinfeld in the same way that a collection of Seinfeld jokes or trivia would copy fragments of the series. In order to determine the quantitative extent of the defendants' copying, we must then decide whether to analyze separately the amount of expression copied from each individually copyrighted Seinfeld episode, or to analyze in the aggregate the amount copied from the eighty-four Seinfeld episodes. As defendants observe, 17 U.S.C. § 106 speaks throughout in the singular, referring to the allegedly infringed "work," thus bolstering an individual-episode analysis. Our precedents, however, tend to support the aggregate analysis. See Twin Peaks Prods., Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1372-73, 1381 (2d Cir.1993) (finding substantial similarity between infringing book and 8 episodes of Twin Peaks weekly television series seen as a whole, but awarding statutory damages on per-episode basis); Wainwright Secs. Inc. v. Wall St. Transcript Corp., 558 F.2d 91, 94 (2d Cir.1977) (abstracts of a number of research reports treated cumulatively in fair use analysis); see also Craft v. Kobler, 667 F.Supp. 120, 124-25 (S.D.N.Y.1987) (passages taken from 15 separate books of copyright holder treated cumulatively in finding infringement); cf. New Era Publications Int'l, ApS v. Carol Publ'g Group, 904 F.2d 152, 158 (2d Cir.1990) (in analyzing whether critical biography was fair use of 48 original writings, court noted that biography "uses overall a small percentage of [plaintiff's] works" but also noted that percentage of copying taken from each individual work was not "unfair") (emphasis added); but see Salinger v. Random House, Inc., 811 F.2d 90, 98 (2d Cir.1987) (copying of Salinger letters not fair use because, among other factors, secondary work copied one-third of 17 letters and 10 percent of 42 letters).

As in Twin Peaks, for the purposes of the quantitative copying analysis we shall treat Seinfeld—a discrete, continuous television series—as a single work.^[4] Where the secondary work focuses on an entire continuous television series such as Seinfeld, there is no basis for looking in isolation at the amount copied from each separately copyrighted episode. Although 17 U.S.C. § 106 speaks in terms of a singular copyrighted "work," it would elevate form over substance to conclude that The SAT's copying of 643 fragments from 84 individually copyrighted Seinfeld episodes is indistinguishable from a case in which a 634-question trivia quiz book poses a few questions from each of 84 unrelated television programs, books, movies, or any combination of creative works that do not constitute a discrete series of works. Had The SAT copied a few fragments from each of 84 unrelated television programs (perhaps comprising the entire line-up on broadcast television), defendants would have a stronger case under the de minimis doctrine. By copying not a few but 643 fragments from the Seinfeld television series, however, The SAT has plainly crossed the quantitative copying threshold under Ringgold.

As to Ringgold's qualitative component, each SAT trivia question is based directly upon original, protectable expression in Seinfeld. As noted by the district court, The SAT did not copy from Seinfeld unprotected facts, but, rather, creative expression. Cf. Feist, 499 U.S. at 364, 111 S.Ct. 1282 (finding no infringement where defendant produced a multi-county phone directory, in part, by obtaining names and phone numbers from plaintiffs' single-county directory). Unlike the facts in a phone book, which "do not owe their origin to an act of authorship," id. at 347, 111 S.Ct. 1282, each "fact" tested by The SAT is in reality fictitious expression created by Seinfeld's authors. The SAT does not quiz such true facts as the identity of the actors in Seinfeld, the number of days it takes to shoot an episode, the biographies of the actors, the location of the Seinfeld set, etc. Rather, The SAT tests whether the reader knows that the character Jerry places a Pez dispenser on Elaine's leg during a piano recital, that Kramer enjoys going to the airport because he's hypnotized by the baggage carousels, and that Jerry, opining on how to identify a virgin, said "It's not like spotting a toupee." Because these characters and events spring from the imagination of Seinfeld's authors, The SAT plainly copies copyrightable, creative expression.^[5]See Feist, 499 U.S. at 347, 111 S.Ct. 1282 (discussing distinction between discovered facts, which do not "owe their origin to an act of authorship" and therefore are not protected by copyright, and created facts, which constitute original, protected expression).

We find support for this conclusion in a previous case in which we held that a series of still photographs of a ballet may in some cases infringe the copyright in an original choreographic work. See Horgan v. Macmillan, Inc., 789 F.2d 157, 163 (2d Cir.1986). The defendants in Horgan claimed that still photographs could not "capture the flow of movement, which is the essence of dance," that "the staged performance could not be recreated from the photographs," and thus, that the photographs were not substantially similar to the choreographic work. Id. at 161-62 (quotation marks omitted). Although noting that the issue "was not a simple one," this court rejected that argument, holding that "the standard for determining copyright infringement is not whether the original could be recreated from the allegedly infringing copy, but whether the latter is substantially similar to the former." Id. at 162 (quotation marks omitted). That observation applies with equal force to the trivia quiz fragments in this case. Although Seinfeld could not be "recreated" from The SAT, Castle Rock has nevertheless established both the quantitative and qualitative components of the substantial similarity test, establishing a prima facie case of copyright infringement.

Other Tests

As defendants note, substantial similarity usually "arises out of a claim of infringement as between comparable works .... [where] because of the equivalent nature of the competing works, the question of similarity can be tested conventionally by comparing comparable elements of the two works." Because in the instant case the original and secondary works are of different genres and to a lesser extent because they are in different media, tests for substantial similarity other than the quantitative/qualitative approach are not particularly helpful to our analysis.

Under the "ordinary observer" test, for example, "[t]wo works are substantially similar where 'the ordinary observer, unless he set out to detect the disparities, would be disposed to overlook them, and regard [the] aesthetic appeal [of the two works] as the same.'" Arica Inst., Inc. v. Palmer, 970 F.2d 1067, 1072 (2d Cir.1992) (quoting Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir.1960) (L.Hand, J.) (comparing dress designs)) (alterations in original). Undoubtedly, Judge Hand did not have in mind a comparison of aesthetic appeal as between a television series and a trivia quiz and, in the usual case, we might question whether any "ordinary observer" would "regard [the] aesthetic appeal" in a situation-comedy television program as being identical to that of any book, let alone a trivia quiz book, about that program. Cf. Laureyssens, 964 F.2d at 132, 141 (applying "ordinary observer" test to compare two sets of foam rubber puzzles). We note here, however, that plaintiff has a plausible claim that there is a common aesthetic appeal between the two works based on The SAT's plain copying of Seinfeld and Golub's statement on the back cover that the book was designed to complement the aesthetic appeal of the television series. See The SAT ("So twist open a Snapple, double-dip a chip, and open this book to satisfy your between episode cravings.").

Under the "total concept and feel" test, urged by defendants, we analyze "the similarities in such aspects as the total concept and feel, theme, characters, plot, sequence, pace, and setting" of the original and the allegedly infringing works. Williams v. Crichton, 84 F.3d 581, 588 (2d Cir.1996) (comparing children's books with novel and movie); Reyher v. Children's Television Workshop, 533 F.2d 87, 91 (2d Cir.1976) (comparing children's book with story in Sesame Street Magazine). Defendants contend that The SAT and the Seinfeld programs are incomparable in conventional terms such as plot, sequence, themes, pace, and setting. For example, The SAT has no plot; "[t]he notion of pace ... cannot be said even to exist in the book"; The SAT's "sequence has no relationship to the sequences of any of the Seinfeld episodes, since it is a totally random and scattered collection of questions relating to events that occurred in the shows"; and The SAT's only theme "is how much a Seinfeld fan can remember of 84 different programs." The total concept and feel test, however, is simply not helpful in analyzing works that, because of their different genres and media, must necessarily have a different concept and feel. Indeed, many "derivative" works of different genres, in which copyright owners have exclusive rights, see 17 U.S.C. § 106, may have a different total concept and feel from the original work.

Finally, we do not apply the "fragmented literal similarity" test,^[6] which focuses upon copying of direct quotations or close paraphrasing, or the "comprehensive nonliteral similarity" test, which examines whether "the fundamental essence or structure of one work is duplicated in another." 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.03[A][1], at 13-29, § 13.03[A][2], at 13-45 (1997) (hereafter "Nimmer"); Twin Peaks, 996 F.2d at 1372-73 (applying Nimmer test); Warner Bros. Inc. v. American Broad. Cos., 720 F.2d 231, 240, 242 (2d Cir.1983) (applying Nimmer test to compare Superman and The Greatest American Hero). In the instant case, because the direct quotations or close paraphrases that The SAT copied from the Seinfeld series are few and almost irrelevant to The SAT, undue focus upon these isolated quotations could improperly distract us from inquiring as to whether substantial similarity exists between Seinfeld and The SAT.

Castle Rock's comprehensive nonliteral similarity argument—that the defendants "literally constructed the SAT with 643 fragments of Seinfeld's creative whole"—is also unhelpful to our analysis and unnecessary to our determination that The SAT is substantially similar to Seinfeld. Without having viewed Seinfeld itself, no SAT reader could plausibly "construct" in his or her mind the plot of any Seinfeld episode, nor any of Seinfeld's settings (the Seinfeld and Kramer apartments, the foursome's restaurant hangout, George Steinbrenner's office, etc.), nor even the four principal Seinfeld characters. Nor does The SAT "[duplicate] the fundamental essence or structure" of Seinfeld. 4 Nimmer § 13.03[A][1], at 13-29; cf. Twin Peaks, 996 F.2d 1372-73 (finding "substantial similarity through comprehensive nonliteral similarity" where chapter of infringing book "is essentially a detailed recounting of the first eight episodes of the [television] series" and "[e]very intricate plot twist and element of character development appear in the Book in the same sequence as in the teleplays"). However, "[t]he standard for determining copyright infringement is not whether the original could be recreated from the allegedly infringing copy, but whether the latter is 'substantially similar' to the former," Horgan, 789 F.2d at 162, and in copying a sufficient amount of protected expression from the Seinfeld television series, The SAT easily passes the threshold of substantial similarity between the contents of the secondary work and the protected expression in the original.

Fair Use

Defendants claim that, even if The SAT's copying of Seinfeld constitutes prima facie infringement, The SAT is nevertheless a fair use of Seinfeld. "From the infancy of copyright protection," the fair use doctrine "has been thought necessary to fulfill copyright's very purpose, '[t]o promote the Progress of Science and useful Arts.'" Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 575, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994) (quoting U.S. Const., art. I, § 8, cl. 8). As noted in Campbell, "in truth, in literature, in science and in art, there are, and can be, few, if any, things, which in an abstract sense, are strictly new and original throughout. Every book in literature, science and art, borrows, and must necessarily borrow, and use much which was well known and used before." Id. (quotation marks omitted). Until the 1976 Copyright Act, the doctrine of fair use grew exclusively out of the common law. See id. at 576, 114 S.Ct. 1164; Folsom v. Marsh, 9 F.Cas. 342, 348 (C.D.Mass.1900) (CCD Mass. 1841) (Story, J.) (stating fair use test); Pierre N. Leval, Toward a Fair Use Standard, 103 Harv. L.Rev. 1105, 1105 (1990) ("Leval").

In the Copyright Act, Congress restated the common law tradition of fair use:

[T]he fair use of a copyrighted work ... for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(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.

17 U.S.C. § 107. This section "intended that courts continue the common law tradition of fair use adjudication" and "permits and requires courts to avoid rigid application of the copyright statute, when, on occasion, it would stifle the very creativity which that law is designed to foster." Campbell, 510 U.S. at 577, 114 S.Ct. 1164 (quotation marks omitted). Fair use analysis, therefore, always "calls for case-by-case analysis." Id. The fair use examples provided in § 107 are "illustrative and not limitative" and "provide only general guidance about the sorts of copying that courts and Congress most commonly had found to be fair uses." Id. at 577-78, 114 S.Ct. 1164. Similarly, the four listed statutory factors in § 107 guide but do not control our fair use analysis and "are to be explored, and the results weighed together, in light of the purposes of copyright." Id.; see 4 Nimmer § 13.05[A], at 13-153 ("[T]he factors contained in Section 107 are merely by way of example, and are not an exhaustive enumeration."). The ultimate test of fair use, therefore, is whether the copyright law's goal of "promot[ing] the Progress of Science and useful Arts," U.S. Const., art. I, § 8, cl. 8, "would be better served by allowing the use than by preventing it." Arica, 970 F.2d at 1077.

Purpose/Character of Use

The first fair use factor to consider is "the purpose and character of the [allegedly infringing] use, including whether such use is of a commercial nature or is for nonprofit educational purposes." 17 U.S.C. § 107(1). That The SAT's use is commercial, at most, "tends to weigh against a finding of fair use." Campbell, 510 U.S. at 585, 114 S.Ct. 1164 (quotation marks omitted); Texaco, 60 F.3d at 921. But we do not make too much of this point. As noted in Campbell, "nearly all of the illustrative uses listed in the preamble paragraph of § 107, including news reporting, comment, criticism, teaching, scholarship, and research ... are generally conducted for profit in this country," 510 U.S. at 584, 114 S.Ct. 1164 (quotation marks omitted), and "no man but a blockhead ever wrote, except for money," id. (quoting 3 Boswell's Life of Johnson 19 (G. Hill ed.1934)). We therefore do not give much weight to the fact that the secondary use was for commercial gain.

The more critical inquiry under the first factor and in fair use analysis generally is whether the allegedly infringing work "merely supersedes" the original work "or instead adds something new, with a further purpose or different character, altering the first with new ... meaning [ ] or message," in other words "whether and to what extent the new work is 'transformative.'" Id. at 579, 114 S.Ct. 1164 (quoting Leval at 1111). If "the secondary use adds value to the original—if [copyrightable expression in the original work] is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings—this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society." Leval at 1111. In short, "the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works." Campbell, 510 U.S. at 579, 114 S.Ct. 1164.

Defendants claim two primary "transformative" qualities of The SAT. First, as noted by the district court, "a text testing one's knowledge of Joyce's Ulysses, or Shakespeare's Hamlet, would qualify as 'criticism, comment, scholarship, or research,' or such. The same must be said, then, of a text testing one's knowledge of Castle Rock's Seinfeld." Castle Rock, 955 F.Supp. at 268 (citing Twin Peaks, 996 F.2d at 1374 ("A comment is as eligible for fair use protection when it concerns 'Masterpiece Theater' and appears in the New York Review of Books as when it concerns 'As the World Turns' and appears in Soap Opera Digest.")). In other words, the fact that the subject matter of the quiz is plebeian, banal, or ordinary stuff does not alter the fair use analysis. Criticism, comment, scholarship, research, and other potential fair uses are no less protectable because their subject is the ordinary.

Second, defendants style The SAT as a work "decod[ing] the obsession with ... and mystique that surround[s] 'Seinfeld,'" by "critically restructur[ing] [Seinfeld's mystique] into a system complete with varying levels of 'mastery' that relate the reader's control of the show's trivia to knowledge of and identification with their hero, Jerry Seinfeld." Citing one of their own experts for the proposition that "[t]he television environment cannot speak for itself but must be spoken for and about," defendants argue that "The SAT is a quintessential example of critical text of the TV environment .... expos[ing] all of the show's nothingness to articulate its true motive forces and its social and moral dimensions." (Quotation marks omitted). Castle Rock dismisses these arguments as post hoc rationalizations, claiming that had defendants been half as creative in creating The SAT as were their lawyers in crafting these arguments about transformation, defendants might have a colorable fair use claim.

Any transformative purpose possessed by The SAT is slight to non-existent. We reject the argument that The SAT was created to educate Seinfeld viewers or to criticize, "expose," or otherwise comment upon Seinfeld. The SAT's purpose, as evidenced definitively by the statements of the book's creators and by the book itself, is to repackage Seinfeld to entertain Seinfeld viewers. The SAT's back cover makes no mention of exposing Seinfeld to its readers, for example, as a pitiably vacuous reflection of a puerile and pervasive television culture, but rather urges SAT readers to "open this book to satisfy [their] between-episode [Seinfeld] cravings." Golub, The SAT's author, described the trivia quiz book not as a commentary or a Seinfeld research tool, but as an effort to "capture Seinfeld's flavor in quiz book fashion." Finally, even viewing The SAT in the light most favorable to defendants, we find scant reason to conclude that this trivia quiz book seeks to educate, criticize, parody, comment, report upon, or research Seinfeld, or otherwise serve a transformative purpose.^[7] The book does not contain commentary or analysis about Seinfeld, nor does it suggest how The SAT can be used to research Seinfeld; rather, the book simply poses trivia questions. The SAT's plain purpose, therefore, is not to expose Seinfeld's "nothingness," but to satiate Seinfeld fans' passion for the "nothingness" that Seinfeld has elevated into the realm of protectable creative expression.

Although a secondary work need not necessarily transform the original work's expression to have a transformative purpose, see, e.g., 4 Nimmer § 13.05[D][2], at 13-227-13-228 (discussing reproduction of entire works in judicial proceedings), the fact that The SAT so minimally alters Seinfeld's original expression in this case is further evidence of The SAT's lack of transformative purpose. To be sure, the act of testing trivia about a creative work, in question and answer form, involves some creative expression. While still minimal, it does require posing the questions and hiding the correct answer among three or four incorrect ones.^[8] Also, dividing the trivia questions into increasing levels of difficulty is somewhat more original than arranging names in a telephone book in alphabetical order. See Feist, 499 U.S. at 362-63, 111 S.Ct. 1282. The SAT's incorrect multiple choice answers are also original. However, the work as a whole, drawn directly from the Seinfeld episodes without substantial alteration, is far less transformative than other works we have held not to constitute fair use. See, e.g., Twin Peaks, 996 F.2d at 1378 (book about Twin Peaks television series that discusses show's popularity, characters, actors, plots, creator, music, and poses trivia questions about show held not to be fair use).

Finally, we note a potential source of confusion in our copyright jurisprudence over the use of the term "transformative." A "derivative work," over which a copyright owner has exclusive control, is defined as

a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted.

17 U.S.C. §§ 101, 106(2) (emphasis added). Although derivative works that are subject to the author's copyright transform an original work into a new mode of presentation, such works—unlike works of fair use—take expression for purposes that are not "transformative."^[9] In the instant case, since The SAT has transformed Seinfeld's expression into trivia quiz book form with little, if any, transformative purpose, the first fair use factor weighs against defendants.

Nature of the Copyrighted Work

The second statutory factor, "the nature of the copyrighted work," 17 U.S.C. § 107(2), "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, 114 S.Ct. 1164. Defendants concede that the scope of fair use is somewhat narrower with respect to fictional works, such as Seinfeld, than to factual works. See Stewart v. Abend, 495 U.S. 207, 237, 110 S.Ct. 1750, 109 L.Ed.2d 184 (1990) ("In general, fair use is more likely to be found in factual works than in fictional works"); Twin Peaks, 996 F.2d at 1376 (second factor "favor[s] ... creative and fictional work"). Although this factor may be of less (or even of no) importance when assessed in the context of certain transformative uses, see, e.g., Campbell, 510 U.S. at 586, 114 S.Ct. 1164 (creative nature of original "Pretty Woman" song "not much help" to fair use analysis "since parodies almost invariably copy ... expressive works"), the fictional nature of the copyrighted work remains significant in the instant case, where the secondary use is at best minimally transformative. Thus, the second statutory factor favors the plaintiff.

Amount and Substantiality of the Portion Used in Relation to the Copyrighted Work as a Whole

As a preliminary matter, the district court held that its determination that The SAT is substantially similar to Seinfeld "'should suffice for a determination that the third fair use factor favors the plaintiff.'" Castle Rock, 955 F.Supp. at 269-70 (quoting Twin Peaks, 996 F.2d at 1377). However, because secondary users need invoke the fair use defense only where there is substantial similarity between the original and allegedly infringing works, and thus actionable copying, the district court's analysis is of little if any assistance. Under the district court's analysis, the third fair use factor would always and unfairly favor the original copyright owner claiming no fair use. See 4 Nimmer § 13.05[A], at 13-152 ("[F]air use is a defense not because of the absence of substantial similarity but rather despite the fact that the similarity is substantial.").

In Campbell, a decision post-dating Twin Peaks, the Supreme Court clarified that the third factor—the amount and substantiality of the portion of the copyrighted work used—must be examined in context. The inquiry must focus upon whether "[t]he extent of ... copying" is consistent with or more than necessary to further "the purpose and character of the use." 510 U.S. at 586-87, 114 S.Ct. 1164; see Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 449-50, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984) (reproduction of entire work "does not have its ordinary effect of militating against a finding of fair use" as to home videotaping of television programs); Harper & Row, 471 U.S. at 564, 105 S.Ct. 2218 ("[E]ven substantial quotations might qualify as fair use in a review of a published work or a news account of a speech" but not in a scoop of a soon-to-be-published memoir.). "[B]y focussing [sic] on the amount and substantiality of the original work used by the secondary user, we gain insight into the purpose and character of the use as we consider whether the quantity of the material used was reasonable in relation to the purpose of the copying." Texaco, 60 F.3d at 926 (quotation marks omitted). In Campbell, for example, the Supreme Court determined that a "parody must be able to 'conjure up' at least enough of [the] original [work] to make the object of its critical wit recognizable" and then determined whether the amount used of the original work was "no more than necessary" to satisfy the purpose of parody. 510 U.S. at 588-89, 114 S.Ct. 1164.

In the instant case, it could be argued that The SAT could not expose Seinfeld's "nothingness" without repeated, indeed exhaustive examples deconstructing Seinfeld's humor, thereby emphasizing Seinfeld's meaninglessness to The SAT's readers. That The SAT posed as many as 643 trivia questions to make this rather straightforward point, however, suggests that The SAT's purpose was entertainment, not commentary. Such an argument has not been advanced on appeal, but if it had been, it would not disturb our conclusion that, under any fair reading, The SAT does not serve a critical or otherwise transformative purpose. Accordingly, the third factor weighs against fair use.

Effect of Use Upon Potential Market for or Value of Copyrighted Work

Defendants claim that the fourth factor favors their case for fair use because Castle Rock has offered no proof of actual market harm to Seinfeld caused by The SAT. To the contrary, Seinfeld's audience grew after publication of The SAT, and Castle Rock has evidenced no interest in publishing Seinfeld trivia quiz books and only minimal interest in publishing Seinfeld-related books.

The Supreme Court has recently retreated from its earlier cases suggesting that the fourth statutory factor is the most important element of fair use, see Harper & Row, 471 U.S. at 566, 105 S.Ct. 2218, recognizing instead that "[a]ll [factors] are to be explored, and the results weighed together, in light of the purposes of copyright," Campbell, 510 U.S. at 578, 114 S.Ct. 1164; see Texaco, 60 F.3d at 926 (applying Campbell approach). Under this factor, we "consider not only the extent of market harm caused by the particular actions of the alleged infringer, but also whether unrestricted and widespread conduct of the sort engaged in by the defendant ... would result in a substantially adverse impact on the potential market for the original." Campbell, 510 U.S. at 590, 114 S.Ct. 1164 (quotation marks and citation omitted). The fourth factor must also "take account ... of harm to the market for derivative works," id., defined as those markets "that creators of original works would in general develop or license others to develop," id. at 592, 114 S.Ct. 1164.

In considering the fourth factor, our concern is not whether the secondary use suppresses or even destroys the market for the original work or its potential derivatives, but whether the secondary use usurps or substitutes for the market of the original work. Id. at 593, 114 S.Ct. 1164. The more transformative the secondary use, the less likelihood that the secondary use substitutes for the original. Id. at 591, 114 S.Ct. 1164. As noted by the district court, "[b]y the very nature of [transformative] endeavors, persons other than the copyright holder are undoubtedly better equipped, and more likely, to fill these particular market and intellectual niches." Castle Rock, 955 F.Supp. at 271. And yet the fair use, being transformative, might well harm, or even destroy, the market for the original. See Campbell, 510 U.S. at 591-92, 114 S.Ct. 1164 ("[A] lethal parody, like a scathing theater review, kills demand for the original, [but] does not produce a harm cognizable under the Copyright Act."); New Era Publications, 904 F.2d at 160 ("a critical biography serves a different function than does an authorized, favorable biography, and thus injury to the potential market for the favorable biography by the publication of the unfavorable biography does not affect application of factor four").^[10]

Unlike parody, criticism, scholarship, news reporting, or other transformative uses, The SAT substitutes for a derivative market that a television program copyright owner such as Castle Rock "would in general develop or license others to develop." Campbell, 510 U.S. at 592, 114 S.Ct. 1164.^[11] Because The SAT borrows exclusively from Seinfeld and not from any other television or entertainment programs, The SAT is likely to fill a market niche that Castle Rock would in general develop. Moreover, as noted by the district court, this "Seinfeld trivia game is not critical of the program, nor does it parody the program; if anything, SAT pays homage to Seinfeld." Castle Rock, 955 F.Supp. at 271-72. Although Castle Rock has evidenced little if any interest in exploiting this market for derivative works based on Seinfeld, such as by creating and publishing Seinfeld trivia books (or at least trivia books that endeavor to "satisfy" the "between-episode cravings" of Seinfeld lovers), the copyright law must respect that creative and economic choice. "It would ... not serve the ends of the Copyright Act—i.e., to advance the arts—if artists were denied their monopoly over derivative versions of their creative works merely because they made the artistic decision not to saturate those markets with variations of their original." Castle Rock, 955 F.Supp. at 272; see Salinger, 811 F.2d at 99 ("The need to assess the effect on the market for Salinger's letters is not lessened by the fact that their author has disavowed any intention to publish them during his lifetime."). The fourth statutory factor therefore favors Castle Rock.

Other Factors

As we have noted, the four statutory fair use factors are non-exclusive and serve only as a guide to promote the purposes underlying the copyright law. One factor that is of no relevance to the fair use equation, however, is defendants' continued distribution of The SAT after Castle Rock notified defendants of its copyright infringement claim, because "[i]f the use is otherwise fair, then no permission need be sought or granted.... [B]eing denied permission to use a work does not weigh against a finding of fair use." Campbell, 510 U.S. at 585 n. 18, 114 S.Ct. 1164; see Wright, 953 F.2d at 737 (rejecting as irrelevant to fair use analysis argument that defendant failed to get plaintiff's permission to create work).

We also note that free speech and public interest considerations are of little relevance in this case, which concerns garden-variety infringement of creative fictional works. See 4 Nimmer § 13.05[B][4], at 13-205 ("The public interest is also a factor that continually informs the fair use analysis."); cf. Time Inc. v. Bernard Geis Assocs., 293 F.Supp. 130, 146 (S.D.N.Y.1968) (discussing importance of access to information about President Kennedy assassination in fair use analysis of home video of assassination).

Aggregate Assessment

Considering all of the factors discussed above, we conclude that the copyright law's objective "[t]o promote the Progress of Science and useful Arts" would be undermined by permitting The SAT's copying of Seinfeld, see Arica, 970 F.2d at 1077, and we therefore reject defendants' fair use defense. Finally, we note that defendants do not assert that Castle Rock abandoned, forfeited, or misused copyrights in Seinfeld, and that defendants have asserted no defense on appeal other than that of fair use.

Conclusion

Undoubtedly, innumerable books could "expose" the "nothingness" or otherwise comment upon, criticize, educate the public about, or research Seinfeld and contemporary television culture. The SAT, however, is not such a book. For the reasons set forth above, the judgment of the district court is affirmed.^[12]

[*] The Honorable Jed S. Rakoff, of the United States District Court for the Southern District of New York, sitting by designation.

[2] An example of the trivia quiz book's matching questions (entitled "Family Trees") is as follows:

1. Cousin Jeffrey 2. Uncle Leo 3. Manya 4. Isaac 5. Mr. Seinfeld 6. Mrs. Seinfeld 7. Mr. Benes 8. Mr. Costanza 9. Mrs. Costanza 10. Mrs. Kramer.

(a) Former condo association president

(b) Drinks Colt 45 in the nude

(c) Arm-grabbing, loquacious garbage can picker

(d) Leaves a rent-controlled New York City apartment for the Phoenix sunshine

(e) Gruff-talking, well-known novelist

(f) New York City employee who watches the Nature Channel

(g) Wears sneakers in the swimming pool and has to "get the good spot in front of the good building in the good neighborhood"

(h) Enjoys the heat and never uses air conditioning

(i) Elderly immigrant whose beloved pony was "the pride of Krakow"

(j) Nagging, shrill-voiced Glamour magazine reader who was hospitalized for a back injury

[3] As noted later, this opinion does not address issues of trademark or unfair competition.

[4] Because the parties have stipulated to damages, we need not address, as did Twin Peaks, whether damages should be assessed on a per episode basis.

[5] We appreciate that the line between unprotected fact and protected creative expression may in some instances be less clear. Where a "fictional" single mother in a popular television series engages in real political discourse with a real Vice-President of the United States, for example, it is less clear whether the television "script" is fiction—in the sense that it is only a television script, or fact—in the sense that it is a real dialogue with a real political figure about contemporary issues. Whatever the line between historical fact and creative expression, however, Seinfeld is securely on the side of creative expression.

[6] We do not understand Ringgold's quantitative analysis to be the same as a fragmented similarity analysis. The former considers the amount of copying not only of direct quotations and close paraphrasing, but also of all other protectable expression in the original work.

[7] Had The SAT's incorrect answer choices attempted to parody Seinfeld, for example, defendants would have a stronger case for fair use. See Campbell, 510 U.S. at 588, 114 S.Ct. 1164.

[8] In the time it took to write this last sentence, for example, one could have easily created the following trivia question about the film trilogy Star Wars: "Luke Skywalker was aghast to learn that Darth Vader was Luke's (a) father (b) father-in-law (c) best friend (d) Jerry Seinfeld," and innumerable other such trivia questions about original creative works.

[9] Indeed, if the secondary work sufficiently transforms the expression of the original work such that the two works cease to be substantially similar, then the secondary work is not a derivative work and, for that matter, does not infringe the copyright of the original work. See 1 Nimmer § 3.01, at 3-3 (stating that "a work will be considered a derivative work only if it would be considered an infringing work" if it were unauthorized).

[10] By the same token, because a "film producer's appropriation of a composer's previously unknown song that turns the song into a commercial success" is a market substitute, that use is not made fair because it increases the market for the original work. Campbell, 510 U.S. at 591 n. 21, 114 S.Ct. 1164.

[11] Just as secondary users may not exploit markets that original copyright owners would "in general develop or license others to develop" even if those owners had not actually done so, copyright owners may not preempt exploitation of transformative markets, which they would not "in general develop or license others to develop," by actually developing or licensing others to develop those markets. Thus, by developing or licensing a market for parody, news reporting, educational or other transformative uses of its own creative work, a copyright owner plainly cannot prevent others from entering those fair use markets. See 4 Nimmer § 13.05[A][4], at 13-181-13-182 (recognizing "danger of circularity" where original copyright owner redefines "potential market" by developing or licensing others to develop that market); Texaco, 60 F.3d at 930 ("Only an impact on potential licensing revenues for traditional, reasonable, or likely to be developed markets" is relevant to fourth factor.).

[12] For any reader of this opinion still possessed by post-Seinfeld "cravings," the answers to the trivia questions posed supra, at 3-4 & n. 2, are: 1-c, 11-"Junior Mints," 12-a; matching: 1-f, 2-c, 3-i, 4-d, 5-a, 6-h, 7-e, 8-g, 9-j, 10-b.

203 F.3d 596 (9th Cir. 2000)

SONY COMPUTER ENTERTAINMENT, INC., a Japanese corporation; SONY COMPUTER ENTERTAINMENT AMERICA, INC., a Delaware corporation, Plaintiffs-Appellees,
v.
CONNECTIX CORPORATION, a California corporation, Defendant-Appellant.

No. 99-15852.
U.S. Court of Appeals for the Ninth Circuit.
Argued and Submitted September 14, 1999.
Filed February 10, 2000.

[598] COUNSEL: William S. Coats, III, Howrey & Simon, Menlo Park, California, for the defendant-appellant.

Ezra Hendon, Crosby, Heafey, Roach & May, Oakland, California; James G. Gilliland, Jr., Townsend and Townsend and Crew, San Francisco, California, for the plaintiffs-appellees.

Annette L. Hurst, Howard, Rice, Nemerovski, Canady, Falk & Rabkin, San Francisco, California, for amicus Institute for Electrical and Electronics Engineers USA. Peter M. C. Choy, American Committee for Interoperable Systems, Palo Alto, California, for amici American Committee for Interoperable Systems and Computer & Communications Industry Association. Mark Lemley, University of Texas at Austin, Austin, Texas, for amicus Law Professors. Steven J. Metalitz, Smith & Metalitz, Washington, D.C., for amici Nintendo of America, Inc., Sega of America, Inc., and 3dfx Interactive.

Appeal from the United States District Court for the Northern District of California; Charles A. Legge, District Judge, Presiding D.C. No. CV-99-00390-CAL.

Before: Herbert Y. C. Choy, William C. Canby, Jr. and Barry G. Silverman, Circuit Judges.

CANBY, Circuit Judge:

In this case we are called upon once again to apply the principles of copyright law to computers and their software, to determine what must be protected as expression and what must be made accessible to the public as function. Sony Computer Entertainment, Inc., which brought this copyright infringement action, produces and markets the Sony PlayStation console, a small computer with hand controls that connects to a television console and plays games that are inserted into the PlayStation on compact discs (CDs). Sony owns the copyright on the basic input-output system or BIOS, which is the software program that operates its PlayStation. Sony has asserted no patent rights in this proceeding.

The defendant is the Connectix Corporation, which makes and sells a software program called "Virtual Game Station." The purpose of the Virtual Game Station is to emulate on a regular computer the functioning of the Sony PlayStation console, so that computer owners who buy the Virtual Game Station software can play Sony PlayStation games on their computers. The Virtual Game Station does not contain any of Sony's copyrighted material. In the process of producing the Virtual Game Station, however, Connectix repeatedly copied Sony's copyrighted BIOS during a process of "reverse engineering" that Connectix conducted in order to find out how the Sony PlayStation worked. Sony claimed infringement and sought a preliminary injunction. The district court concluded [599] that Sony was likely to succeed on its infringement claim because Connectix's "intermediate copying" was not a protected "fair use" under 17 U.S.C. S 107. The district court enjoined Connectix from selling the Virtual Game Station or from copying or using the Sony BIOS code in the development of other Virtual Game Station products.

Connectix now appeals. We reverse and remand with instructions to dissolve the injunction. The intermediate copies made and used by Connectix during the course of its reverse engineering of the Sony BIOS were protected fair use, necessary to permit Connectix to make its non-infringing Virtual Game Station function with PlayStation games. Any other intermediate copies made by Connectix do not support injunctive relief, even if those copies were infringing.

The district court also found that Sony is likely to prevail on its claim that Connectix's sale of the Virtual Game Station program tarnishes the Sony PlayStation mark under 15 U.S.C. S 1125. We reverse that ruling as well.

I. Background

A. The products

Sony is the developer, manufacturer and distributor of both the Sony PlayStation and Sony PlayStation games. Sony also licenses other companies to make games that can play on the PlayStation. The PlayStation system consists of a console (essentially a mini-computer), controllers, and software that produce a three-dimensional game for play on a television set. The PlayStation games are CDs that load into the top of the console. The PlayStation console contains both (1) hardware components and (2) software known as firmware that is written onto a read-only memory (ROM) chip. The firmware is the Sony BIOS. Sony has a copyright on the BIOS. It has claimed no patent relevant to this proceeding on any component of the PlayStation. PlayStation is a registered trademark of Sony.

Connectix's Virtual Game Station is software that "emulates" the functioning of the PlayStation console. That is, a consumer can load the Virtual Game Station software onto a computer, load a PlayStation game into the computer's CDROM drive, and play the PlayStation game. The Virtual Game Station software thus emulates both the hardware and firmware components of the Sony console. The Virtual Game Station does not play PlayStation games as well as Sony's PlayStation does. At the time of the injunction, Connectix had marketed its Virtual Game Station for Macintosh computer systems but had not yet completed Virtual Game Station software for Windows.

B. Reverse engineering

Copyrighted software ordinarily contains both copyrighted and unprotected or functional elements. Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d 1510, 1520 (9th Cir. 1993) (amended opinion); see 17 U.S.C. S 102(b) (Copyright protection does not extend to any "idea, procedure, process, system, method of operation, concept, principle, or discovery" embodied in the copyrighted work.). Software engineers designing a product that must be compatible with a copyrighted product frequently must "reverse engineer" the copyrighted product to gain access to the functional elements of the copyrighted product. See Andrew Johnson-Laird, Software Reverse Engineering in the Real World, 19 U. Dayton L. Rev. 843, 845-46 (1994).

Reverse engineering encompasses several methods of gaining access to the functional elements of a software program. They include: (1) reading about the program; (2) observing "the program in operation by using it on a computer;" (3) performing a "static examination of the individual computer instructions contained within the program;" and (4) performing a "dynamic examination of the individual computer instructions as the program is being run on a computer." Id. at 846. [600] Method (1) is the least effective, because individual software manuals often misdescribe the real product. See id. It would be particularly ineffective in this case because Sony does not make such information available about its PlayStation. Methods (2), (3), and (4) require that the person seeking access load the target program on to a computer, an operation that necessarily involves copying the copyrighted program into the computer's random access memory or RAM.^[1]

Method (2), observation of a program, can take several forms. The functional elements of some software programs, for example word processing programs, spreadsheets, and video game displays may be discernible by observation of the computer screen. See Sega, 977 F.2d at 1520. Of course, the reverse engineer in such a situation is not observing the object code itself,^[2] only the external visual expression of this code's operation on the computer. Here, the software program is copied each time the engineer boots up the computer, and the computer copies the program into RAM.

Other forms of observation are more intrusive. Operations systems, system interface procedures, and other programs like the Sony BIOS are not visible to the user when they are operating. See id. One method of "observing" the operation of these programs is to run the program in an emulated environment. In the case of the Sony BIOS, this meant operating the BIOS on a computer with software that simulated the operation of the PlayStation hardware; operation of the program, in conjunction with another program known as a "debugger," permitted the engineers to observe the signals sent between the BIOS and other programs on the computer. This latter method required copying the Sony BIOS from a chip in the PlayStation onto the computer. The Sony BIOS was copied again each time the engineers booted up their computer and the computer copied the program into RAM. All of this copying was intermediate; that is, none of the Sony copyrighted material was copied into, or appeared in, Connectix's final product, the Virtual Game Station.

Methods (3) and (4) constitute "disassembly" of object code into source code.^[3] In each case, engineers use a program known as a "dissassembler" to translate the ones and zeros of binary machine-readable object code into the words and mathematical symbols of source code. This translated source code is similar to the source code used originally to create the object code^[4] but lacks the annotations drafted by the authors of the program that help explain the functioning of the source code. In a static examination of the computer instructions, method (3), the engineer disassembles the object code of all or part of the program. The program must generally be copied one or more times to perform disassembly. In a dynamic examination of the computer instructions, method (4), the engineer uses the disassembler program to disassemble parts of the program, one instruction at a time, while the program is running. This method also requires copying [601] the program and, depending on the number of times this operation is performed, may require additional copying of the program into RAM every time the computer is booted up.

C. Connectix's reverse engineering of the Sony BIOS

Connectix began developing the Virtual Game Station for Macintosh on about July 1, 1998. In order to develop a PlayStation emulator, Connectix needed to emulate both the PlayStation hardware and the firmware (the Sony BIOS).

Connectix first decided to emulate the PlayStation's hardware. In order to do so, Connectix engineers purchased a Sony PlayStation console and extracted the Sony BIOS from a chip inside the console. Connectix engineers then copied the Sony BIOS into the RAM of their computers and observed the functioning of the Sony BIOS in conjunction with the Virtual Game Station hardware emulation software as that hardware emulation software was being developed by Connectix. The engineers observed the operation of the Sony BIOS through use of a debugging program that permitted the engineers to observe the signals sent between the BIOS and the hardware emulation software. During this process, Connectix engineers made additional copies of the Sony BIOS every time they booted up their computer and the Sony BIOS was loaded into RAM.

Once they had developed the hardware emulation software, Connectix engineers also used the Sony BIOS to "debug" the emulation software. In doing so, they repeatedly copied and disassembled discrete portions of the Sony BIOS.

Connectix also used the Sony BIOS to begin development of the Virtual Game Station for Windows. Specifically, they made daily copies to RAM of the Sony BIOS and used the Sony BIOS to develop certain Windows-specific systems for the Virtual Game Station for Windows. Although Connectix had its own BIOS at the time, Connectix engineers used the Sony BIOS because it contained CD-ROM code that the Connectix BIOS did not contain.

Early in the development process, Connectix engineer Aaron Giles disassembled a copy of the entire Sony BIOS that he had downloaded from the Internet. He did so for the purpose of testing a "disassembler" program he had written. The print-out of the source code was not used to develop the Virtual Game Station emulator. Connectix engineers initially used this copy of the Sony BIOS to begin the reverse engineering process, but abandoned it after realizing that it was a Japanese-language version.

During development of the Virtual Game Station, Connectix contacted Sony and requested "technical assistance" from Sony to complete the development of the Virtual Game Station. Connectix and Sony representatives met during September 1998. Sony declined Connectix's request for assistance.

Connectix completed Virtual Game Station for Macintosh computers in late December 1998 or early January 1999. Connectix announced its new product at the MacWorld Expo on January 5, 1999. At MacWorld, Connectix marketed the Virtual Game Station as a "PlayStation emulator." The materials stated that the Virtual Game Station permits users to play "their favorite Playstation games" on a computer "even if you don't yet have a Sony PlayStation console."

D. Procedural history

On January 27, 1999, Sony filed a complaint alleging copyright infringement and other causes of action against Connectix. Sony subsequently moved for a preliminary injunction on the grounds of copyright and trademark infringement. The district court granted the motion, enjoining Connectix: (1) from copying or using the Sony BIOS code in the development of the Virtual Game Station for Windows; and (2) from selling the Virtual Game Station for Macintosh or the Virtual Game [602] Station for Windows. Order on Mot. for Prelim. Inj. at 27. The district court also impounded all Connectix's copies of the Sony BIOS and all copies of works based upon or incorporating Sony BIOS. Id. at 27-28. Connectix now appeals from this order.

II. Discussion

To prevail on its motion for injunctive relief, Sony was required to demonstrate "either a likelihood of success on the merits and the possibility of irreparable injury or that serious questions going to the merits were raised and the balance of the hardships tip sharply in its favor." Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d 824, 826 (9th Cir. 1997) (internal quotation marks and bracket omitted), cert. denied, 523 U.S. 1118 (1998). We reverse the grant of a preliminary injunction only when "the district court abused its discretion or based its decision on an erroneous legal standard or on clearly erroneous findings of fact." Roe v. Anderson, 134 F.3d 1400, 1402 n.1 (9th Cir. 1998) (internal quotation marks omitted), aff'd on other grounds, sub nom. Saenz v. Roe, 526 U.S. 489 (1999). We review the scope of injunctive relief for an abuse of discretion. SEC v. Interlink Data Network of L.A., Inc., 77 F.3d 1201, 1204 (9th Cir. 1996).

Connectix admits that it copied Sony's copyrighted BIOS software in developing the Virtual Game Station but contends that doing so was protected as a fair use under 17 U.S.C. S 107. Connectix also challenges the district court's conclusion that Sony has established a likelihood that Connectix's Virtual Game Station tarnishes the PlayStation trademark. We consider each of these claims below.

A. Fair use

The fair use issue arises in the present context because of certain characteristics of computer software. The object code of a program may be copyrighted as expression, 17 U.S.C. S 102(a), but it also contains ideas and performs functions that are not entitled to copyright protection. See 17 U.S.C. S 102(b). Object code cannot, however, be read by humans. The unprotected ideas and functions of the code therefore are frequently undiscoverable in the absence of investigation and translation that may require copying the copyrighted material. We conclude that, under the facts of this case and our precedent, Connectix's intermediate copying and use of Sony's copyrighted BIOS was a fair use for the purpose of gaining access to the unprotected elements of Sony's software.

The general framework for analysis of fair use is established by statute, 17 U.S.C. S 107.^[5] We have applied this statute and the fair use doctrine to the disassembly of computer software in the case of Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1993) (amended opinion). Central to our decision today is the rule set forth in Sega:

[W]here disassembly is the only way to gain access to the ideas and functional elements embodied in a copyrighted computer program and where there is a legitimate reason for seeking such access, disassembly is a fair use of the copyrighted work, as a matter of law.

Id. at 1527-28 (emphasis added). In Sega, we recognized that intermediate copying could constitute copyright [603] infringement even when the end product did not itself contain copyrighted material. Id. at 1518-19. But this copying nonetheless could be protected as a fair use if it was "necessary" to gain access to the functional elements of the software itself. Id. at 1524-26. We drew this distinction because the Copyright Act protects expression only, not ideas or the functional aspects of a software program. See id. at 1524 (citing 17 U.S.C. S 102(b)). We also recognized that, in the case of computer programs, this idea/expression distinction poses "unique problems" because computer programs are "in essence, utilitarian articles — articles that accomplish tasks. As such, they contain many logical, structural, and visual display elements that are dictated by the function to be performed, by considerations of efficiency, or by external factors such as compatibility requirements and industry demands." Id. Thus, the fair use doctrine preserves public access to the ideas and functional elements embedded in copyrighted computer software programs. This approach is consistent with the "'ultimate aim [of the Copyright Act], to stimulate artistic creativity for the general public good.'" Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 432 (1984) (quoting Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975)).

We turn then to the statutory fair use factors, as informed by our precedent in Sega.

1. Nature of the copyrighted work

Under our analysis of the second statutory factor, nature of the copyrighted work, we recognize that "some works are closer to the core of intended copyright protection than others." Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 586 (1994). Sony's BIOS lies at a distance from the core because it contains unprotected aspects that cannot be examined without copying. See Sega, 977 F.2d at 1526. We consequently accord it a "lower degree of protection than more traditional literary works." Id. As we have applied this standard, Connectix's copying of the Sony BIOS must have been "necessary" to have been fair use. See id. at 1524-26. We conclude that it was.

There is no question that the Sony BIOS contains unprotected functional elements. Nor is it disputed that Connectix could not gain access to these unprotected functional elements without copying the Sony BIOS. Sony admits that little technical information about the functionality of the Sony BIOS is publicly available. The Sony BIOS is an internal operating system that does not produce a screen display to reflect its functioning. Consequently, if Connectix was to gain access to the functional elements of the Sony BIOS it had to be through a form of reverse engineering that required copying the Sony BIOS onto a computer.^[6] Sony does not dispute this proposition.

The question then becomes whether the methods by which Connectix reverse-engineered the Sony BIOS were necessary to gain access to the unprotected functional elements within the program. We conclude that they were. Connectix employed several methods of reverse engineering (observation and observation with partial disassembly) each of which required Connectix to make intermediate copies of copyrighted material. Neither of these methods renders fair use protection inapplicable. Sega expressly sanctioned [604] disassembly. See id. at 1527-28. We see no reason to distinguish observation of copyrighted software in an emulated computer environment. Both methods require the reverse engineer to copy protected as well as unprotected elements of the computer program. Because this intermediate copying is the gravamen of the intermediate infringement claim, see 17 U.S.C. S 106(1); Sega, 977 F.2d at 1518-19, and both methods of reverse engineering require it, we find no reason inherent in these methods to prefer one to another as a matter of copyright law. Connectix presented evidence that it observed the Sony BIOS in an emulated environment to observe the functional aspects of the Sony BIOS. When this method of reverse engineering was unsuccessful, Connectix engineers disassembled discrete portions of the Sony BIOS to view directly the ideas contained therein. We conclude that intermediate copying in this manner was "necessary" within the meaning of Sega.

We decline to follow the approach taken by the district court. The district court did not focus on whether Connectix's copying of the Sony BIOS was necessary for access to functional elements. Instead, it found that Connectix's copying and use of the Sony BIOS to develop its own software exceeded the scope of Sega. See Order at 17 ("[T]hey disassembled Sony's code not just to study the concepts. They actually used that code in the development of [their] product."). This rationale is unpersuasive. It is true that Sega referred to "studying or examining the unprotected aspects of a copyrighted computer program." 977 F.2d at 1520 (emphasis added). But in Sega, Accolade's copying, observation and disassembly of Sega's game cartridges was held to be fair use, even though Accolade "loaded the disassembled code back into a computer, and experimented to discover the interface specifications for the Genesis console by modifying the programs and studying the results." Id. at 1515. Thus, the distinction between "studying" and "use" is unsupported in Sega. Moreover, reverse engineering is a technically complex, frequently iterative process. Johnson-Laird, 19 U. Dayton L. Rev. at 843-44. Within the limited context of a claim of intermediate infringement, we find the semantic distinction between "studying" and "use" to be artificial, and decline to adopt it for purposes of determining fair use.^[7]

We also reject the argument, urged by Sony, that Connectix infringed the Sony copyright by repeatedly observing the Sony BIOS in an emulated environment, thereby making repeated copies of the Sony BIOS. These intermediate copies could not have been "necessary" under Sega, contends Sony, because Connectix engineers could have disassembled the entire Sony BIOS first, then written their own Connectix BIOS, and used the Connectix BIOS to develop the Virtual Game Station hardware emulation software. We accept Sony's factual predicate for the limited purpose of this appeal.^[8] Our doing so, however, does not aid Sony.

[605] Sony contends that Connectix's reverse engineering of the Sony BIOS should be considered unnecessary on the rationale that Connectix's decision to observe the Sony BIOS in an emulated environment required Connectix to make more intermediate copies of the Sony BIOS than if Connectix had performed a complete disassembly of the program. Under this logic, at least some of the intermediate copies were not necessary within the meaning of Sega. This construction stretches Sega too far. The "necessity" we addressed in Sega was the necessity of the method, i.e., disassembly, not the necessity of the number of times that method was applied. See 977 F.2d at 1524-26. In any event, the interpretation advanced by Sony would be a poor criterion for fair use. Most of the intermediate copies of the Sony BIOS were made by Connectix engineers when they booted up their computers and the Sony BIOS was copied into RAM. But if Connectix engineers had left their computers turned on throughout the period during which they were observing the Sony BIOS in an emulated environment, they would have made far fewer intermediate copies of the Sony BIOS (perhaps as few as one per computer). Even if we were inclined to supervise the engineering solutions of software companies in minute detail, and we are not, our application of the copyright law would not turn on such a distinction.^[9] Such a rule could be easily manipulated. More important, the rule urged by Sony would require that a software engineer, faced with two engineering solutions that each require intermediate copying of protected and unprotected material, often follow the least efficient solution. (In cases in which the solution that required the fewest number of intermediate copies was also the most efficient, an engineer would pursue it, presumably, without our urging.) This is precisely the kind of "wasted effort that the proscription against the copyright of ideas and facts . . . [is] designed to prevent." Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 354 (1991) (internal quotation marks omitted). Such an approach would erect an artificial hurdle in the way of the public's access to the ideas contained within copyrighted software programs. These are "aspects that were expressly denied copyright protection by Congress." Sega, 977 F.2d at 1526 (citing 17 U.S.C. S 102(b)). We decline to erect such a barrier in this case. If Sony wishes to obtain a lawful monopoly on the functional concepts in its software, it must satisfy the more stringent standards of the patent laws. See Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 160-61 (1989); Sega, 977 F.2d at 1526. This Sony has not done. The second statutory factor strongly favors Connectix.

2. Amount and substantiality of the portion used

With respect to the third statutory factor, amount and substantiality of the portion [606] used in relation to the copyrighted work as a whole, Connectix disassembled parts of the Sony BIOS and copied the entire Sony BIOS multiple times. This factor therefore weighs against Connectix. But as we concluded in Sega, in a case of intermediate infringement when the final product does not itself contain infringing material, this factor is of "very little weight." Sega, 977 F.2d at 152627; see also Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 449-50 (1984) (copying of entire work does not preclude fair use).

3. Purpose and character of the use

Under the first factor, purpose and character of the use, we inquire into whether Connectix's Virtual Game Station merely supersedes the objects of the original cre ation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is "transformative."

Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994) (internal quotation marks and citations omitted). As an initial matter, we conclude that the district court applied an erroneous legal standard; the district court held that Connectix's commercial purpose in copying the Sony BIOS gave rise to a "presumption of unfairness that . . . can be rebutted by the characteristics of a particular commercial use." Order at 14-15 (citing Sega, 977 F.2d at 1522). Since Sega, however, the Supreme Court has rejected this presumption as applied to the first and fourth factor of the fair use analysis. Acuff-Rose, 510 U.S. at 584, 594 (clarifying Sony, 464 U.S. at 451). Instead, the fact that Connectix's copying of the Sony BIOS was for a commercial purpose is only a "separate factor that tends to weigh against a finding of fair use." Id. at 585 (internal quotation marks omitted).^[10]

We find that Connectix's Virtual Game Station is modestly transformative. The product creates a new platform, the personal computer, on which consumers can play games designed for the Sony PlayStation. This innovation affords opportunities for game play in new environments, specifically anywhere a Sony PlayStation console and television are not available, but a computer with a CD-ROM drive is. More important, the Virtual Game Station itself is a wholly new product, notwithstanding the similarity of uses and functions between the Sony PlayStation and the Virtual Game Station. The expressive element of software lies as much in the organization and structure of the object code that runs the computer as it does in the visual expression of that code that appears on a computer screen. See 17 U.S.C. S 102(a) (extending copyright protection to original works of authorship that "can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device"). Sony does not claim that the Virtual Game Station itself contains object code that infringes Sony's copyright. We are therefore at a loss to see how Connectix's drafting of entirely new object code for its VGS [607] program could not be transformative, despite the similarities in function and screen output.

Finally, we must weigh the extent of any transformation in Connectix's Virtual Game Station against the significance of other factors, including commercialism, that militate against fair use. See Acuff-Rose, 510 U.S. at 579. Connectix's commercial use of the copyrighted material was an intermediate one, and thus was only "indirect or derivative." Sega, 977 F.2d at 1522. Moreover, Connectix reverse-engineered the Sony BIOS to produce a product that would be compatible with games designed for the Sony PlayStation. We have recognized this purpose as a legitimate one under the first factor of the fair use analysis. See id. Upon weighing these factors, we find that the first factor favors Connectix.

The district court ruled, however, that the Virtual Game Station was not transformative on the rationale that a computer screen and a television screen are interchangeable, and the Connectix product therefore merely "supplants" the Sony PlayStation console. Order at 15. The district court clearly erred. For the reasons stated above, the Virtual Game Station is transformative and does not merely supplant the PlayStation console. In reaching its decision, the district court apparently failed to consider the expressive nature of the Virtual Game Station software itself. Sony's reliance on Infinity Broadcast Corp. v. Kirkwood, 150 F.3d 104 (2d Cir. 1998), suffers from the same defect. The Infinity court reasoned that a "change of format, though useful, is not technically a transformation." Id. at 108 n.2. But the infringing party in that case was merely taking copyrighted radio transmissions and retransmitting them over telephone lines; there was no new expression. Id. at 108. Infinity does not change our conclusion; the purpose and character of Connectix's copying points toward fair use.

4. Effect of the use upon the potential market

We also find that the fourth factor, effect of the use upon the potential market, favors Connectix. Under this factor, we consider

not only the extent of market harm caused by the particular actions of the alleged infringer, but also "whether unrestricted and widespread conduct of the sort engaged in by the defendant . . . would result in a substantially adverse impact on the potential market" for the original.

Acuff-Rose, 510 U.S. at 590 (quoting 3 M. Nimmer & D. Nimmer, Nimmer on Copyright, S 13.05[A][4], at 13-102.61 (1993)). Whereas a work that merely supplants or supersedes another is likely to cause a substantially adverse impact on the potential market of the original, a transformative work is less likely to do so. See id. at 591; Harper & Row, Publishers, Inc. v. Nation Enters, Inc., 471 U.S. 539, 567-69 (1985).

The district court found that "[t]o the extent that such a substitution [of Connectix's Virtual Game Station for Sony PlayStation console] occurs, Sony will lose console sales and profits." Order at 19. We recognize that this may be so. But because the Virtual Game Station is transformative, and does not merely supplant the PlayStation console, the Virtual Game Station is a legitimate competitor in the market for platforms on which Sony and Sony-licensed games can be played. See Sega, 977 F.2d at 1522-23. For this reason, some economic loss by Sony as a result of this competition does not compel a finding of no fair use. Sony understandably seeks control over the market for devices that play games Sony produces or licenses. The copyright law, however, does not confer such a monopoly. See id. at 1523-24 ("[A]n attempt to monopolize the market by making it impossible for others to compete runs counter to the statutory purpose of promoting creative [608] expression and cannot constitute a strong equitable basis for resisting the invocation of the fair use doctrine."). This factor favors Connectix.

The four statutory fair use factors must be "weighed together, in light of the purposes of copyright." Acuff-Rose, 510 U.S. at 578. Here, three of the factors favor Connectix; one favors Sony, and it is of little weight. Of course, the statutory factors are not exclusive, Harper & Row, 471 U.S. at 560, but we are unaware of other factors not already considered that would affect our analysis. Accordingly, we conclude that Connectix's intermediate copying of the Sony BIOS during the course of its reverse engineering of that product was a fair use under 17 U.S.C. S 107, as a matter of law. With respect to its claim of copyright infringement, Sony has not established either a likelihood of success on the merits or that the balance of hardships tips in its favor. See Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d 824, 826 (9th Cir. 1997), cert. denied, 523 U.S. 1118 (1998). Accordingly, we need not address defenses asserted by Connectix under 17 U.S.C. S 117(a)(1) and our doctrine of copyright misuse. We reverse the district court's grant of a preliminary injunction on the ground of copyright infringement.^[11]

B. Tarnishment

The district court found that Connectix's sale of the Virtual Game Station tarnished Sony's "PlayStation" mark under 15 U.S.C. S 1125(c)(1). The district court based its preliminary injunction, however, exclusively on Sony's copyright claim, and did not cite its tarnishment finding as a ground for the injunction. Although we can "affirm the district court on any ground supported by the record," Charley's Taxi Radio Dispatch Corp. v. SIDA of Haw., Inc., 810 F.2d 869, 874 (9th Cir. 1987), we decline to affirm on this alternative ground. Sony has not shown a likelihood of success on each element of the tarnishment claim.

To prevail on its tarnishment claim, Sony must show that (1) the PlayStation "mark is famous;" (2) Connectix is "making a commercial use of the mark;" (3) Connectix's "use began after the mark became famous;" and (4) Connectix's "use of the mark dilutes the quality of the mark by diminishing the capacity of the mark to identify and distinguish goods and services." Films of Distinction, Inc. v. Allegro Film Prods., Inc., 12 F. Supp. 2d 1068, 1078 (C.D. Cal. 1998); 15 U.S.C. SS 1125(c)(1), 1127 (definition of "dilution"). Connectix does not dispute the first and third of these elements. We address only the fourth element.

Because Sony proceeds under a tarnishment theory of dilution, it must show under this fourth element that its PlayStation mark will "suffer negative associations" through Connectix's use. Hormel Foods Corp. v. Jim Henson Prods., Inc., 73 F.3d 497, [609] 507 (2d Cir. 1996); see also 4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition S 24.95 (4th ed. 1996 & Supp. 1999). The district court found the Virtual Game Station does not play PlayStation games as well as the PlayStation console, and that although the Virtual Game Station's packaging contains a disclaimer to this effect, "game players do not comprehend this distinction." Order at 24-25. The Sony PlayStation mark therefore suffers negative associations because of this confusion on the part of consumers who play Sony games on the Virtual Game Station software. Id. at 25.

The evidence on the record does not support such a finding of misattribution. The district court relied primarily on a series of semi-anonymous reviews posted on the Internet and submitted by Connectix. As the district court acknowledged, these reviews were neither authenticated nor identified. More important, the print-out of the comments does not reveal the context in which the comments were made; this omission makes the extent of any confusion by game players difficult to assess reliably. The district court also referred to two focus group studies conducted by market research firms at Sony's bequest. These studies address the difference of quality between the Virtual Game Station and PlayStation, but shed no light on the question of misattribution. Thus, we reject as clearly erroneous the district court's finding that the Virtual Game Station tarnishes the Sony PlayStation mark on a misattribution theory of tarnishment.

Nor are we persuaded by Sony's argument that the difference in quality between the two platforms is itself sufficient to find tarnishment. See Deere & Co. v. MTD Prods, Inc., 41 F.3d 39, 43 (2d Cir. 1994) ("'Tarnishment' generally arises when the plaintiff's trademark is linked to products of shoddy quality," diminishing the value of the mark "because the public will associate the lack of quality . . . with the plaintiff's unrelated goods."). Even if we assume, without deciding, that the concept of tarnishment is applicable to the present factual scenario, there is insufficient evidence to support a finding of tarnishment. "The sine qua non of tarnishment is a finding that plaintiff's mark will suffer negative associations through defendant's use." Hormel Foods, 73 F.3d at 507. The evidence here fails to show or suggest that Sony's mark or product was regarded or was likely to be regarded negatively because of its performance on Connectix's Virtual Game Station. The evidence is not even substantial on the quality of that performance. The Sony studies, each of included eight participants, presented a range of conclusions. One study concluded that "[o]n balance, the results of this focus group study show that the testers preferred the PlayStation gaming experience over the Virtual Game Station gaming experience." The other concluded that consumers found the Virtual Game Station was "generally acceptable" for one game, but "nearly unplayable" on another. The internet reviews submitted by Connectix also presented a range of opinion; while some anonymous reviewers loved the Virtual Game Station, some were ambivalent, and a relative few hated the Virtual Game Station emulation. In the only review for attribution, Newsweek said the software played "surprisingly well," and that some games on the Virtual Game Station "rocked." Steven Levy, "Play it Your Way," Newsweek, Mar. 15, 1999, at 84. This evidence is insufficient to support a conclusion that the shoddiness of the Virtual Game Station alone tarnishes the Sony mark. Sony's tarnishment claim cannot support the injunction.

Connectix's reverse engineering of the Sony BIOS extracted from a Sony PlayStation console purchased by Connectix engineers is protected as a fair use. Other intermediate copies of the Sony BIOS made by Connectix, if they infringed Sony's copyright, do not justify injunctive relief. For these reasons, the district [610] court's injunction is dissolved and the case is remanded to the district court. We also reverse the district court's finding that Connectix's Virtual Game Station has tarnished the Sony PlayStation mark.

REVERSED AND REMANDED.

[1] Any purchaser of a copyrighted software program must copy the program into the memory of a computer in order to make any use at all of the program. For that reason, 17 U.S.C. S 117(a)(1) provides that it shall not be an infringement for one who owns a software copy to make another copy "created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner." Connectix contends that its copying is within the protection of section 117, but our disposition of the fair use issue makes it unnecessary for us to address that contention. See Sega, 977 F.2d at 1517-18 (rejecting contention that disassembly is protected by section 117).

[2] Object code is binary code, consisting of a series of the numerals zero and one, readable only by computers.

[3] Source code is readable by software engineers, but not by computers.

[4] Software is generally written by programmers in source code (and in other more conceptual formats) and then assembled into object code.

[5] The factors for determining fair use include:

(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.

17 U.S.C. S 107.

[6] Connectix offers evidence that it attempted to gain access to the functionality of the Sony BIOS by attaching a "logic analyzer" to the input and output leads of the chip on which the Sony BIOS was located within the PlayStation console. This form of observation does not appear to require the making of an intermediate copy, but was of limited value because it permitted the observation of inter-chip, but not intra-chip signals. Sony does not suggest that this form of observation alone would have permitted Connectix engineers to gain access to the functional elements of the Sony BIOS.

[7] We are unable to locate evidence in the record to support the district court's finding that Connectix "gradually convert[ed] Sony's code to their own code," Order at 11, if by this statement the court meant that Connectix engineers failed to create an original work. True, Connectix engineers admitted to combining the Sony BIOS with the Virtual Game Station hardware emulation software to test and develop the hardware emulation software. But in drafting the Connectix BIOS, Connectix engineers never claimed to do anything other than write their own code, even though they used, observed, copied and sometimes disassembled the Sony BIOS as they did so. Sony presents no evidence to the contrary, nor does Sony contend that Connectix's final product contains infringing material.

[8] The depositions of Connectix engineers Aaron Giles and Eric Traut suggest that Connectix engineers recognized that other engineering solutions were sometimes available.

With respect to the observation of the Sony BIOS in an emulated environment, Traut admitted that it was easier to use the Sony BIOS to develop the hardware emulation software than to develop Connectix own BIOS first, and then use the Connectix BIOS to develop the hardware emulation software.

With respect to the observation of the Sony BIOS with selective disassembly of the code, Traut stated with respect to one bug that there would have been no way to fix the bug without disassembling a portion of the Sony BIOS. He also stated that at other times he disassembled portions of the Sony BIOS when doing so was "the most efficient way of finding that bug." In a subsequent question, he clarified that disassembly was not the only way to fix the bug, just the fastest way to do so.

With respect to Connectix's observation of the Sony BIOS in the development of the Virtual Game Station for Windows, other solutions, presumably disassembly, may have been possible. Connectix engineer Giles responded "I don't know" when asked by Sony counsel if "it would have been possible to write the CD-ROM code before building the emulator."

[9] Sony relies on these RAM copies for its contention, which we reject, that there is no significant difference between the facts of this case and our decisions in Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1995) and MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993). Those cases are inapposite to our fair use analysis. Neither involved reverse engineering of software to gain access to unprotected functional elements.

[10] Sony points to Micro Star v. Formgen, Inc., 154 F.3d 1107 (9th Cir. 1998), for the proposition that commercial use creates a presumption of unfairness. See id. at 1113 (quoting Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 451 (1984)). We do not read Micro Star that way; moreover, such a reading would be contrary to Acuff-Rose. AcuffRose expressly rejected such a "hard evidentiary presumption" and stated that the Court of Appeals "erred" by giving such dispositive weight to the commercial nature of the use. 510 U.S. at 584. Also, Micro Star itself involved a use that was non-transformative, which is not the case here. See Micro Star, 154 F.3d at 1113 & n.6. Cf. American Geophysical Union v. Texaco, Inc., 60 F.3d 913, 921-22 (2d Cir. 1995) (amended opinion) (rejecting, on grounds of Acuff-Rose and collected cases, presumption of unfairness for commercial use as applied to Texaco's intermediate copying of copyrighted articles).

[11] We do not accept Sony's argument that the downloading of Sony's BIOS from the Internet was itself an infringement justifying the injunction. The evidence of record suggests that the downloaded BIOS played a minimal role, if any, in development of the Virtual Game Station. We conclude that, on this record, the downloading infringement, if such it was, would not justify our upholding the injunction on the development and sale of the Virtual Game Station. The Virtual Game Station itself infringes no copyright. Bearing in mind the goals of the copyright law, "to stimulate artistic creativity for the general public good," Sony, 464 U.S. at 432 (internal quotation marks omitted), we conclude that there is a legitimate public interest in the publication of Connectix's software, and that this interest is not overborne by the record evidence related to the downloaded BIOS. The imposition of an injunction is discretionary. See 17 U.S.C. S 502(a). On this record, we conclude that it would be inappropriate to uphold the injunction because of Connectix's copying and use of the downloaded Sony BIOS; damages would adequately protect Sony's interest with respect to that alleged infringement. See Acuff-Rose, 510 U.S. at 578 n.10 (discussing factors to be evaluated in deciding whether to enjoin product found to have exceeded bounds of fair use).

[1153] Russell J. Frackman and Jeffrey D. Goldman, Mitchell, Silberberg & Knupp LLP, Los Angeles, CA, Jeffrey N. Mausner, Berman, Mausner & Resser, Los Angeles, CA, Daniel J. Cooper, Perfect 10, Inc., Beverly Hills, CA, for plaintiff-appellant Perfect 10, Inc.

Andrew P. Bridges and Jennifer A. Golinveaux, Winston & Strawn LLP, San Francisco, CA, Gene C. Schaerr, Winston & Strawn LLP, Washington, DC, for defendant-appellee and cross-appellant Google Inc.

Mark T. Jansen & Anthony J. Malutta, Townsend and Townsend and Crew LLP, San Francisco, CA, for defendants-appellees Amazon.com and A9.com, Inc.

Fred von Lohmann, Electronic Frontier Foundation, San Francisco, CA, for amicus curiae Electronic Frontier Foundation, American Library Association, Medical Library [1154] Association, American Association of Law Libraries, Association of Research Libraries, and Special Libraries Association in support of Google Inc.

Victor S. Perlman, of counsel, American Society of Media Photographers; Nancy E. Wolff, of counsel, Cowan, DeBaets, Abrahams & Sheppard, LLP; Robert W. Clarida and Jason D. Sanders, Cowan, Liebowitz & Latman, P.C., New York, NY, for amicus curiae American Society of Media Photographers, Inc., Picture Archive Council of America, Inc., British Association of Picture Libraries and Agencies, Inc., Stock Artists Alliance, The Graphic Artists Guild, American Society of Picture Professionals and National Press Photographers, in support of Perfect 10 on issue of Google's liability for the display of full-size images.

Eric J. Schwartz and Steven J. Metalitz, Smith & Metalitz LLP, Washington, DC, for amicus curiae Motion Picture Association of America, Inc. in support of Perfect 10.

Jonathan Band, Jonathan Band PLLC, Washington, DC, for amicus curiae Net-Coalition, Computer and Communications Industry Association, U.S. Internet Service Provider Association, Consumer Electronics Association, Home Recording Rights Coalition, Information Technology Association of America, and Internet Commerce Coalition in support of Google Inc.

Kenneth L. Doroshow and Linda J. Zirkelbach, Recording Industry Association of America, Washington, DC; Jacqueline C. Charlesworth, National Music Publishers' Association, Washington, DC; Robert W. Clarida, Richard S. Mandel and Jonathan Z. King, Cowan, Liebowitz & Latman, P.C., New York, NY, for amicus curiae Recording Industry Association of America and National Music Publishers' Association in support of neither party.

Appeal from the United States District Court for the Central District of California; A. Howard Matz, District Judge, Presiding. D.C. Nos. CV-05-04753-AHM, CV-04-09484-AHM.

Before: CYNTHIA HOLCOMB HALL, HAWKINS, and SANDRA S. IKUTA, Circuit Judges.

IKUTA, Circuit Judge:

In this appeal, we consider a copyright owner's efforts to stop an Internet search engine from facilitating access to infringing images. Perfect 10, Inc. sued Google Inc., for infringing Perfect 10's copyrighted photographs of nude models, among other claims. Perfect 10 brought a similar action against Amazon.com and its subsidiary A9.com (collectively, "Amazon.com"). The district court preliminarily enjoined Google from creating and publicly displaying thumbnail versions of Perfect 10's images, Perfect 10 v. Google, Inc., 416 F.Supp.2d 828 (C.D.Cal.2006), but did not enjoin Google from linking to third-party websites that display infringing full-size versions of Perfect 10's images. Nor did the district court preliminarily enjoin Amazon.com from giving users access to information provided by Google. Perfect 10 and Google both appeal the district court's order. We have jurisdiction pursuant to 28 U.S.C. § 1292(a)(1).^[1]

[1155] The district court handled this complex case in a particularly thoughtful and skillful manner. Nonetheless, the district court erred on certain issues, as we will further explain below. We affirm in part, reverse in part, and remand.

I

Background

Google's computers, along with millions of others, are connected to networks known collectively as the "Internet." "The Internet is a world-wide network of networks ... all sharing a common communications technology." Religious Tech. Ctr. v. Netcom On-Line Commc'n Servs., Inc., 923 F.Supp. 1231, 1238 n. 1 (N.D.Cal.1995). Computer owners can provide information stored on their computers to other users connected to the Internet through a medium called a webpage. A webpage consists of text interspersed with instructions written in Hypertext Markup Language ("HTML") that is stored in a computer. No images are stored on a webpage; rather, the HTML instructions on the webpage provide an address for where the images are stored, whether in the webpage publisher's computer or some other computer. In general, webpages are publicly available and can be accessed by computers connected to the Internet through the use of a web browser.

Google operates a search engine, a software program that automatically accesses thousands of websites (collections of webpages) and indexes them within a database stored on Google's computers. When a Google user accesses the Google website and types in a search query, Google's software searches its database for websites responsive to that search query. Google then sends relevant information from its index of websites to the user's computer. Google's search engines can provide results in the form of text, images, or videos.

The Google search engine that provides responses in the form of images is called "Google Image Search." In response to a search query, Google Image Search identifies text in its database responsive to the query and then communicates to users the images associated with the relevant text. Google's software cannot recognize and index the images themselves. Google Image Search provides search results as a webpage of small images called "thumbnails," which are stored in Google's servers. The thumbnail images are reduced, lower-resolution versions of full-sized images stored on third-party computers.

When a user clicks on a thumbnail image, the user's browser program interprets HTML instructions on Google's webpage. These HTML instructions direct the user's browser to cause a rectangular area (a "window") to appear on the user's computer screen. The window has two separate areas of information. The browser fills the top section of the screen with information from the Google webpage, including the thumbnail image and text. The HTML instructions also give the user's browser the address of the website publisher's computer that stores the full-size version of the thumbnail.^[2] By following [1156] the HTML instructions to access the third-party webpage, the user's browser connects to the website publisher's computer, downloads the full-size image, and makes the image appear at the bottom of the window on the user's screen. Google does not store the images that fill this lower part of the window and does not communicate the images to the user; Google simply provides HTML instructions directing a user's browser to access a third-party website. However, the top part of the window (containing the information from the Google webpage) appears to frame and comment on the bottom part of the window. Thus, the user's window appears to be filled with a single integrated presentation of the full-size image, but it is actually an image from a third-party website framed by information from Google's website. The process by which the webpage directs a user's browser to incorporate content from different computers into a single window is referred to as "in-line linking." Kelly v. Arriba Soft Corp., 336 F.3d 811, 816 (9th Cir.2003). The term "framing" refers to the process by which information from one computer appears to frame and annotate the in-line linked content from another computer. Perfect 10, 416 F.Supp.2d at 833-34.

Google also stores webpage content in its cache.^[3] For each cached webpage, Google's cache contains the text of the webpage as it appeared at the time Google indexed the page, but does not store images from the webpage. Id. at 833. Google may provide a link to a cached webpage in response to a user's search query. However, Google's cache version of the webpage is not automatically updated when the webpage is revised by its owner. So if the webpage owner updates its webpage to remove the HTML instructions for finding an infringing image, a browser communicating directly with the webpage would not be able to access that image. However, Google's cache copy of the webpage would still have the old HTML instructions for the infringing image. Unless the owner of the computer changed the HTML address of the infringing image, or otherwise rendered the image unavailable, a browser accessing Google's cache copy of the website could still access the image where it is stored on the website publisher's computer. In other words, Google's cache copy could provide a user's browser with valid directions to an infringing image even though the updated webpage no longer includes that infringing image.

In addition to its search engine operations, Google generates revenue through a business program called "AdSense." Under this program, the owner of a website can register with Google to become an AdSense "partner." The website owner then places HTML instructions on its webpages that signal Google's server to place advertising on the webpages that is relevant to the webpages' content. Google's computer program selects the advertising automatically by means of an algorithm. AdSense participants agree to share the revenues that flow from such advertising with Google.

[1157] Google also generated revenues through an agreement with Amazon.com that allowed Amazon.com to in-line link to Google's search results. Amazon.com gave its users the impression that Amazon.com was providing search results, but Google communicated the search results directly to Amazon.com's users. Amazon.com routed users' search queries to Google and automatically transmitted Google's responses (i.e., HTML instructions for linking to Google's search results) back to its users.

Perfect 10 markets and sells copyrighted images of nude models. Among other enterprises, it operates a subscription website on the Internet. Subscribers pay a monthly fee to view Perfect 10 images in a "members' area" of the site. Subscribers must use a password to log into the members' area. Google does not include these password-protected images from the members' area in Google's index or database. Perfect 10 has also licensed Fonestarz Media Limited to sell and distribute Perfect 10's reduced-size copyrighted images for download and use on cell phones.

Some website publishers republish Perfect 10's images on the Internet without authorization. Once this occurs, Google's search engine may automatically index the webpages containing these images and provide thumbnail versions of images in response to user inquiries. When a user clicks on the thumbnail image returned by Google's search engine, the user's browser accesses the third-party webpage and in-line links to the full-sized infringing image stored on the website publisher's computer. This image appears, in its original context, on the lower portion of the window on the user's computer screen framed by information from Google's webpage.

Procedural History. In May 2001, Perfect 10 began notifying Google that its thumbnail images and in-line linking to the full-size images infringed Perfect 10's copyright. Perfect 10 continued to send these notices through 2005.

On November 19, 2004, Perfect 10 filed an action against Google that included copyright infringement claims. This was followed by a similar action against Amazon.com on June 29, 2005. On July 1, 2005 and August 24, 2005, Perfect 10 sought a preliminary injunction to prevent Amazon.com and Google, respectively, from "copying, reproducing, distributing, publicly displaying, adapting or otherwise infringing, or contributing to the infringement" of Perfect 10's photographs; linking to websites that provide full-size infringing versions of Perfect 10's photographs; and infringing Perfect 10's username/password combinations.

The district court consolidated the two actions and heard both preliminary injunction motions on November 7, 2005. The district court issued orders granting in part and denying in part the preliminary injunction against Google and denying the preliminary injunction against Amazon.com. Perfect 10 and Google cross-appealed the partial grant and partial denial of the preliminary injunction motion, and Perfect 10 appealed the denial of the preliminary injunction against Amazon.com. On June 15, 2006, the district court temporarily stayed the preliminary injunction.

II

Standard of Review

We review the district court's grant or denial of a preliminary injunction for an abuse of discretion. A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 (9th Cir.2001). The district court must support a preliminary injunction with findings of fact, which we review for clear error. Earth Island Inst. v. U.S. Forest Serv., 442 F.3d 1147, 1156 (9th Cir.2006). We review the district court's conclusions of law de novo. Napster, 239 F.3d at 1013.

[1158] Section 502(a) of the Copyright Act authorizes a court to grant injunctive relief "on such terms as it may deem reasonable to prevent or restrain infringement of a copyright." 17 U.S.C. § 502(a). "Preliminary injunctive relief is available to a party who demonstrates either: (1) a combination of probable success on the merits and the possibility of irreparable harm; or (2) that serious questions are raised and the balance of hardships tips in its favor. These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." Napster, 239 F.3d at 1013 (internal quotation and citation omitted).

Because Perfect 10 has the burden of showing a likelihood of success on the merits, the district court held that Perfect 10 also had the burden of demonstrating a likelihood of overcoming Google's fair use defense under 17 U.S.C. § 107. Perfect 10, 416 F.Supp.2d at 836-37. This ruling was erroneous. At trial, the defendant in an infringement action bears the burden of proving fair use. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 590, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994). Because "the burdens at the preliminary injunction stage track the burdens at trial," once the moving party has carried its burden of showing a likelihood of success on the merits, the burden shifts to the non-moving party to show a likelihood that its affirmative defense will succeed. Gonzales v. O Centro Espirita Beneficente Uniao do Vegetal, 546 U.S. 418, 429, 126 S.Ct. 1211, 163 L.Ed.2d 1017 (2006); see also Abbott Labs. v. Andrx Pharms., Inc., 473 F.3d 1196, 1201 (Fed. Cir.2007) (to defeat a motion for preliminary injunctive relief in a patent infringement case, the non-moving party must establish a likelihood of success in proving its defenses of invalidity or unenforceability); PHG Techs., LLC v. St. John Cos., 469 F.3d 1361, 1365 (Fed.Cir.2006). Accordingly, once Perfect 10 has shown a likelihood of success on the merits, the burden shifts to Google to show a likelihood that its affirmative defenses will succeed.

In addition to its fair use defense, Google also raises an affirmative defense under title II of the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. § 512. Congress enacted title II of the DMCA "to provide greater certainty to service providers concerning their legal exposure for infringements that may occur in the course of their activities." Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir. 2004) (internal quotation omitted). Sections 512(a) through (d) limit liability for (respectively): "(1) transitory digital network communications; (2) system caching; (3) information residing on systems or networks at the direction of users; and (4) information location tools." Id. at 1077. A service provider that qualifies for such protection is not liable for monetary relief and may be subject only to the narrow injunctive relief set forth in section 512(j). 17 U.S.C. § 512(a). If Perfect 10 demonstrates a likelihood of success on the merits, Google must show a likelihood of succeeding in its claim that it qualifies for protection under title II of the DMCA.^[4][1159]

III

Direct Infringement

Perfect 10 claims that Google's search engine program directly infringes two exclusive rights granted to copyright holders: its display rights and its distribution rights.^[5] "Plaintiffs must satisfy two requirements to present a prima facie case of direct infringement: (1) they must show ownership of the allegedly infringed material and (2) they must demonstrate that the alleged infringers violate at least one exclusive right granted to copyright holders under 17 U.S.C. § 106." Napster, 239 F.3d at 1013; see 17 U.S.C. § 501(a). Even if a plaintiff satisfies these two requirements and makes a prima facie case of direct infringement, the defendant may avoid liability if it can establish that its use of the images is a "fair use" as set forth in 17 U.S.C. § 107. See Kelly, 336 F.3d at 817.

Perfect 10's ownership of at least some of the images at issue is not disputed. See Perfect 10, 416 F.Supp.2d at 836.

The district court held that Perfect 10 was likely to prevail in its claim that Google violated Perfect 10's display right with respect to the infringing thumbnails. Id. at 844. However, the district court concluded that Perfect 10 was not likely to prevail on its claim that Google violated either Perfect 10's display or distribution right with respect to its full-size infringing images. Id. at 844-45. We review these rulings for an abuse of discretion. Napster, 239 F.3d at 1013.

A. Display Right

In considering whether Perfect 10 made a prima facie case of violation of its display right, the district court reasoned that a computer owner that stores an image as electronic information and serves that electronic information directly to the user ("i.e., physically sending ones and zeroes over the [I]nternet to the user's browser," Perfect 10, 416 F.Supp.2d at 839) is displaying the electronic information in violation of a copyright holder's exclusive display right. Id. at 843-45; see 17 U.S.C. § 106(5). Conversely, the owner of a computer that does not store and serve the electronic information to a user is not displaying that information, even if such owner in-line links to or frames the electronic information. Perfect 10, 416 F.Supp.2d at 843-45. The district court referred to this test as the "server test." Id. at 838-39.

Applying the server test, the district court concluded that Perfect 10 was likely to succeed in its claim that Google's thumbnails constituted direct infringement but was unlikely to succeed in its claim that Google's in-line linking to full-size infringing images constituted a direct infringement. [1160] Id. at 843-45. As explained below, because this analysis comports with the language of the Copyright Act, we agree with the district court's resolution of both these issues.

We have not previously addressed the question when a computer displays a copyrighted work for purposes of section 106(5). Section 106(5) states that a copyright owner has the exclusive right "to display the copyrighted work publicly." The Copyright Act explains that "display" means "to show a copy of it, either directly or by means of a film, slide, television image, or any other device or process...." 17 U.S.C. § 101. Section 101 defines "copies" as "material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." Id. Finally, the Copyright Act provides that "[a] work is `fixed' in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration." Id.

We must now apply these definitions to the facts of this case. A photographic image is a work that is "`fixed' in a tangible medium of expression," for purposes of the Copyright Act, when embodied (i.e., stored) in a computer's server (or hard disk, or other storage device). The image stored in the computer is the "copy" of the work for purposes of copyright law. See MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 517-18 (9th Cir.1993) (a computer makes a "copy" of a software program when it transfers the program from a third party's computer (or other storage device) into its own memory, because the copy of the program recorded in the computer is "fixed" in a manner that is "sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration" (quoting 17 U.S.C. § 101)). The computer owner shows a copy "by means of a ... device or process" when the owner uses the computer to fill the computer screen with the photographic image stored on that computer, or by communicating the stored image electronically to another person's computer. 17 U.S.C. § 101. In sum, based on the plain language of the statute, a person displays a photographic image by using a computer to fill a computer screen with a copy of the photographic image fixed in the computer's memory. There is no dispute that Google's computers store thumbnail versions of Perfect 10's copyrighted images and communicate copies of those thumbnails to Google's users.^[6] Therefore, Perfect 10 has made a prima facie case that Google's communication of its stored thumbnail images directly infringes Perfect 10's display right.

Google does not, however, display a copy of full-size infringing photographic images for purposes of the Copyright Act when Google frames in-line linked images that appear on a user's computer screen. Because Google's computers do not store the photographic images, Google does not have a copy of the images for purposes of the Copyright Act. In other words, Google does not have any "material objects ... in [1161] which a work is fixed ... and from which the work can be perceived, reproduced, or otherwise communicated" and thus cannot communicate a copy. 17 U.S.C. § 101.

Instead of communicating a copy of the image, Google provides HTML instructions that direct a user's browser to a website publisher's computer that stores the full-size photographic image. Providing these HTML instructions is not equivalent to showing a copy. First, the HTML instructions are lines of text, not a photographic image. Second, HTML instructions do not themselves cause infringing images to appear on the user's computer screen. The HTML merely gives the address of the image to the user's browser. The browser then interacts with the computer that stores the infringing image. It is this interaction that causes an infringing image to appear on the user's computer screen. Google may facilitate the user's access to infringing images. However, such assistance raises only contributory liability issues, see Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 929-30, 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005), Napster, 239 F.3d at 1019, and does not constitute direct infringement of the copyright owner's display rights.

Perfect 10 argues that Google displays a copy of the full-size images by framing the full-size images, which gives the impression that Google is showing the image within a single Google webpage. While in-line linking and framing may cause some computer users to believe they are viewing a single Google webpage, the Copyright Act, unlike the Trademark Act, does not protect a copyright holder against acts that cause consumer confusion. Cf. 15 U.S.C. § 1114(1) (providing that a person who uses a trademark in a manner likely to cause confusion shall be liable in a civil action to the trademark registrant).^[7]

Nor does our ruling that a computer owner does not display a copy of an image when it communicates only the HTML address of the copy erroneously collapse the display right in section 106(5) into the reproduction right set forth in section 106(1). Nothing in the Copyright Act prevents the various rights protected in section 106 from overlapping. Indeed, under some circumstances, more than one right must be infringed in order for an infringement claim to arise. For example, a "Game Genie" device that allowed a player to alter features of a Nintendo computer game did not infringe Nintendo's right to prepare derivative works because the Game Genie did not incorporate any portion of the game itself. See Lewis Galoob Toys, Inc. v. Nintendo of Am., Inc., 964 F.2d 965, 967 (9th Cir.1992). We held that a copyright holder's right to create derivative works is not infringed unless the alleged derivative work "incorporate[s] a protected work in some concrete or permanent `form.'" Id. In other words, in some contexts, the claimant must be able to claim infringement of its reproduction right in order to claim infringement of its right to prepare derivative works.

[1162] Because Google's cache merely stores the text of webpages, our analysis of whether Google's search engine program potentially infringes Perfect 10's display and distribution rights is equally applicable to Google's cache. Perfect 10 is not likely to succeed in showing that a cached webpage that in-line links to full-size infringing images violates such rights. For purposes of this analysis, it is irrelevant whether cache copies direct a user's browser to third-party images that are no longer available on the third party's website, because it is the website publisher's computer, rather than Google's computer, that stores and displays the infringing image.

B. Distribution Right

The district court also concluded that Perfect 10 would not likely prevail on its claim that Google directly infringed Perfect 10's right to distribute its full-size images. Perfect 10, 416 F.Supp.2d at 844-45. The district court reasoned that distribution requires an "actual dissemination" of a copy. Id. at 844. Because Google did not communicate the full-size images to the user's computer, Google did not distribute these images. Id.

Again, the district court's conclusion on this point is consistent with the language of the Copyright Act. Section 106(3) provides that the copyright owner has the exclusive right "to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending." 17 U.S.C. § 106(3). As noted, "copies" means "material objects ... in which a work is fixed." 17 U.S.C. § 101. The Supreme Court has indicated that in the electronic context, copies may be distributed electronically. See N.Y. Times Co. v. Tasini, 533 U.S. 483, 498, 121 S.Ct. 2381, 150 L.Ed.2d 500 (2001) (a computer database program distributed copies of newspaper articles stored in its computerized database by selling copies of those articles through its database service). Google's search engine communicates HTML instructions that tell a user's browser where to find full-size images on a website publisher's computer, but Google does not itself distribute copies of the infringing photographs. It is the website publisher's computer that distributes copies of the images by transmitting the photographic image electronically to the user's computer. As in Tasini, the user can then obtain copies by downloading the photo or printing it.

Perfect 10 incorrectly relies on Hotaling v. Church of Jesus Christ of Latter-Day Saints and Napster for the proposition that merely making images "available" violates the copyright owner's distribution right. Hotaling v. Church of Jesus Christ of Latter-Day Saints, 118 F.3d 199 (4th Cir.1997); Napster, 239 F.3d 1004. Hotaling held that the owner of a collection of works who makes them available to the public may be deemed to have distributed copies of the works. Hotaling, 118 F.3d at 203. Similarly, the distribution rights of the plaintiff copyright owners were infringed by Napster users (private individuals with collections of music files stored on their home computers) when they used the Napster software to make their collections available to all other Napster users. Napster, 239 F.3d at 1011-14.

This "deemed distribution" rule does not apply to Google. Unlike the participants in the Napster system or the library in Hotaling, Google does not own a collection of Perfect 10's full-size images and does not communicate these images to the computers of people using Google's search engine. Though Google indexes these images, it does not have a collection of stored full-size images it makes available to the public. Google therefore cannot be deemed to distribute copies of these images under the reasoning of Napster or [1163] Hotaling. Accordingly, the district court correctly concluded that Perfect 10 does not have a likelihood of success in proving that Google violates Perfect 10's distribution rights with respect to full-size images.

C. Fair Use Defense

Because Perfect 10 has succeeded in showing it would prevail in its prima facie case that Google's thumbnail images infringe Perfect 10's display rights, the burden shifts to Google to show that it will likely succeed in establishing an affirmative defense. Google contends that its use of thumbnails is a fair use of the images and therefore does not constitute an infringement of Perfect 10's copyright. See 17 U.S.C. § 107.

The fair use defense permits the use of copyrighted works without the copyright owner's consent under certain situations. The defense encourages and allows the development of new ideas that build on earlier ones, thus providing a necessary counterbalance to the copyright law's goal of protecting creators' work product. "From the infancy of copyright protection, some opportunity for fair use of copyrighted materials has been thought necessary to fulfill copyright's very purpose...." Campbell, 510 U.S. at 575, 114 S.Ct. 1164. "The fair use doctrine thus `permits [and requires] courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.'" Id. at 577, 114 S.Ct. 1164 (quoting Stewart v. Abend, 495 U.S. 207, 236, 110 S.Ct. 1750, 109 L.Ed.2d 184 (1990)) (alteration in original).

Congress codified the common law of fair use in 17 U.S.C. § 107, which provides:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(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.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

17 U.S.C. § 107.

We must be flexible in applying a fair use analysis; it "is not to be simplified with bright-line rules, for the statute, like the doctrine it recognizes, calls for case-by-case analysis.... Nor may the four statutory factors be treated in isolation, one from another. All are to be explored, and the results weighed together, in light of the purposes of copyright." Campbell, 510 U.S. at 577-78, 114 S.Ct. 1164; see also Kelly, 336 F.3d at 817-18. The purpose of copyright law is "[t]o promote the Progress of Science and useful Arts," U.S. CONST. art. I, § 8, cl. 8, and to serve "`the welfare of the public.'" Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429 n. 10, 104 S.Ct. 774, 78 L.Ed.2d 574 (quoting H.R.Rep. No. 2222, 60th Cong., 2d Sess. 7 (1909)).

[1164] In applying the fair use analysis in this case, we are guided by Kelly v. Arriba Soft Corp., which considered substantially the same use of copyrighted photographic images as is at issue here. See 336 F.3d 811. In Kelly, a photographer brought a direct infringement claim against Arriba, the operator of an Internet search engine. The search engine provided thumbnail versions of the photographer's images in response to search queries. Id. at 815-16. We held that Arriba's use of thumbnail images was a fair use primarily based on the transformative nature of a search engine and its benefit to the public. Id. at 818-22. We also concluded that Arriba's use of the thumbnail images did not harm the photographer's market for his image. Id. at 821-22.

In this case, the district court determined that Google's use of thumbnails was not a fair use and distinguished Kelly. Perfect 10, 416 F.Supp.2d at 845-51. We consider these distinctions in the context of the four-factor fair use analysis.

Purpose and character of the use. The first factor, 17 U.S.C. § 107(1), requires a court to consider "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes." The central purpose of this inquiry is to determine whether and to what extent the new work is "transformative." Campbell, 510 U.S. at 579, 114 S.Ct. 1164. A work is "transformative" when the new work does not "merely supersede the objects of the original creation" but rather "adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message." Id. (internal quotation and alteration omitted). Conversely, if the new work "supersede[s] the use of the original," the use is likely not a fair use. Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 550-51, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985) (internal quotation omitted) (publishing the "heart" of an unpublished work and thus supplanting the copyright holder's first publication right was not a fair use); see also Wall Data Inc. v. L.A. County Sheriff's Dep't, 447 F.3d 769, 778-82 (9th Cir.2006) (using a copy to save the cost of buying additional copies of a computer program was not a fair use).^[8]

As noted in Campbell, a "transformative work" is one that alters the original work [1165] "with new expression, meaning, or message." Campbell, 510 U.S. at 579, 114 S.Ct. 1164. "A use is considered transformative only where a defendant changes a plaintiff's copyrighted work or uses the plaintiff's copyrighted work in a different context such that the plaintiff's work is transformed into a new creation." Wall Data, 447 F.3d at 778.

Google's use of thumbnails is highly transformative. In Kelly, we concluded that Arriba's use of thumbnails was transformative because "Arriba's use of the images serve[d] a different function than Kelly's use—improving access to information on the [I]nternet versus artistic expression." Kelly, 336 F.3d at 819. Although an image may have been created originally to serve an entertainment, aesthetic, or informative function, a search engine transforms the image into a pointer directing a user to a source of information. Just as a "parody has an obvious claim to transformative value" because "it can provide social benefit, by shedding light on an earlier work, and, in the process, creating a new one," Campbell, 510 U.S. at 579, 114 S.Ct. 1164, a search engine provides social benefit by incorporating an original work into a new work, namely, an electronic reference tool. Indeed, a search engine may be more transformative than a parody because a search engine provides an entirely new use for the original work, while a parody typically has the same entertainment purpose as the original work. See, e.g., id. at 594-96, 114 S.Ct. 1164 (holding that 2 Live Crew's parody of "Oh, Pretty Woman" using the words "hairy woman" or "bald headed woman" was a transformative work, and thus constituted a fair use); Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792, 796-98, 800-06 (9th Cir.2003) (concluding that photos parodying Barbie by depicting "nude Barbie dolls juxtaposed with vintage kitchen appliances" was a fair use). In other words, a search engine puts images "in a different context" so that they are "transformed into a new creation." Wall Data, 447 F.3d at 778.

The fact that Google incorporates the entire Perfect 10 image into the search engine results does not diminish the transformative nature of Google's use. As the district court correctly noted, Perfect 10, 416 F.Supp.2d at 848-49, we determined in Kelly that even making an exact copy of a work may be transformative so long as the copy serves a different function than the original work, Kelly, 336 F.3d at 818-19. For example, the First Circuit has held that the republication of photos taken for a modeling portfolio in a newspaper was transformative because the photos served to inform, as well as entertain. See Nunez v. Caribbean Int'l News Corp., 235 F.3d 18, 22-23 (1st Cir.2000). In contrast, duplicating a church's religious book for use by a different church was not transformative. See Worldwide Church of God v. Phila. Church of God, Inc., 227 F.3d 1110, 1117 (9th Cir.2000). Nor was a broadcaster's simple retransmission of a radio broadcast over telephone lines transformative, where the original radio shows were given no "new expression, meaning, or message." Infinity Broad. Corp. v. Kirkwood, 150 F.3d 104, 108 (2d Cir.1998). Here, Google uses Perfect 10's images in a new context to serve a different purpose.

The district court nevertheless determined that Google's use of thumbnail images was less transformative than Arriba's use of thumbnails in Kelly because Google's use of thumbnails superseded Perfect 10's right to sell its reduced-size images for use on cell phones. See Perfect 10, 416 F.Supp.2d at 849. The district court stated that "mobile users can download and save the thumbnails displayed by Google Image Search onto their phones," and concluded "to the extent that users may choose to download free images to their [1166] phone rather than purchase [Perfect 10's] reduced-size images, Google's use supersedes [Perfect 10's]." Id.

Additionally, the district court determined that the commercial nature of Google's use weighed against its transformative nature. Id. Although Kelly held that the commercial use of the photographer's images by Arriba's search engine was less exploitative than typical commercial use, and thus weighed only slightly against a finding of fair use, Kelly, 336 F.3d at 818-20, the district court here distinguished Kelly on the ground that some website owners in the AdSense program had infringing Perfect 10 images on their websites, Perfect 10, 416 F.Supp.2d at 846-47. The district court held that because Google's thumbnails "lead users to sites that directly benefit Google's bottom line," the AdSense program increased the commercial nature of Google's use of Perfect 10's images. Id. at 847.

In conducting our case-specific analysis of fair use in light of the purposes of copyright, Campbell, 510 U.S. at 581, 114 S.Ct. 1164, we must weigh Google's superseding and commercial uses of thumbnail images against Google's significant transformative use, as well as the extent to which Google's search engine promotes the purposes of copyright and serves the interests of the public. Although the district court acknowledged the "truism that search engines such as Google Image Search provide great value to the public," Perfect 10, 416 F.Supp.2d at 848-49, the district court did not expressly consider whether this value outweighed the significance of Google's superseding use or the commercial nature of Google's use. Id. at 849. The Supreme Court, however, has directed us to be mindful of the extent to which a use promotes the purposes of copyright and serves the interests of the public. See Campbell, 510 U.S. at 579, 114 S.Ct. 1164; Harper & Row, 471 U.S. at 556-57, 105 S.Ct. 2218; Sony, 464 U.S. at 431-32, 104 S.Ct. 774.

We note that the superseding use in this case is not significant at present: the district court did not find that any downloads for mobile phone use had taken place. See Perfect 10, 416 F.Supp.2d at 849. Moreover, while Google's use of thumbnails to direct users to AdSense partners containing infringing content adds a commercial dimension that did not exist in Kelly, the district court did not determine that this commercial element was significant. See id. at 848-49. The district court stated that Google's AdSense programs as a whole contributed "$630 million, or 46% of total revenues" to Google's bottom line, but noted that this figure did not "break down the much smaller amount attributable to websites that contain infringing content." Id. at 847 & n. 12 (internal quotation omitted).

We conclude that the significantly transformative nature of Google's search engine, particularly in light of its public benefit, outweighs Google's superseding and commercial uses of the thumbnails in this case. In reaching this conclusion, we note the importance of analyzing fair use flexibly in light of new circumstances. Sony, 464 U.S. at 431-32, 104 S.Ct. 774; id. at 448 n. 31, 104 S.Ct. 774 ("`[Section 107] endorses the purpose and general scope of the judicial doctrine of fair use, but there is no disposition to freeze the doctrine in the statute, especially during a period of rapid technological change.'" (quoting H.R.Rep. No. 94-1476, p. 65-66 (1976), U.S.Code Cong. & Admin. News 1976, p. 5680)). We are also mindful of the Supreme Court's direction that "the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use." Campbell, 510 U.S. at 579, 114 S.Ct. 1164.

[1167] Accordingly, we disagree with the district court's conclusion that because Google's use of the thumbnails could supersede Perfect 10's cell phone download use and because the use was more commercial than Arriba's, this fair use factor weighed "slightly" in favor of Perfect 10. Perfect 10, 416 F.Supp.2d at 849. Instead, we conclude that the transformative nature of Google's use is more significant than any incidental superseding use or the minor commercial aspects of Google's search engine and website. Therefore, this factor weighs heavily in favor of Google.

The nature of the copyrighted work. With respect to the second factor, "the nature of the copyrighted work," 17 U.S.C. § 107(2), our decision in Kelly is directly on point. There we held that the photographer's images were "creative in nature" and thus "closer to the core of intended copyright protection than are more fact-based works." Kelly, 336 F.3d at 820 (internal quotation omitted). However, because the photos appeared on the Internet before Arriba used thumbnail versions in its search engine results, this factor weighed only slightly in favor of the photographer. Id.

Here, the district court found that Perfect 10's images were creative but also previously published. Perfect 10, 416 F.Supp.2d at 850. The right of first publication is "the author's right to control the first public appearance of his expression." Harper & Row, 471 U.S. at 564, 105 S.Ct. 2218. Because this right encompasses "the choices of when, where, and in what form first to publish a work," id., an author exercises and exhausts this one-time right by publishing the work in any medium. See, e.g., Batjac Prods. Inc. v. Good-Times Home Video Corp., 160 F.3d 1223, 1235 (9th Cir.1998) (noting, in the context of the common law right of first publication, that such a right "does not entail multiple first publication rights in every available medium"). Once Perfect 10 has exploited this commercially valuable right of first publication by putting its images on the Internet for paid subscribers, Perfect 10 is no longer entitled to the enhanced protection available for an unpublished work. Accordingly the district court did not err in holding that this factor weighed only slightly in favor of Perfect 10.^[9] See Perfect 10, 416 F.Supp.2d at 849-50.

The amount and substantiality of the portion used. "The third factor asks whether the amount and substantiality of the portion used in relation to the copyrighted work as a whole ... are reasonable in relation to the purpose of the copying." Campbell, 510 U.S. at 586, 114 S.Ct. 1164 (internal quotation omitted); see also 17 U.S.C. § 107(3). In Kelly, we held Arriba's use of the entire photographic image was reasonable in light of the purpose of a search engine. Kelly, 336 F.3d at 821. Specifically, we noted, "[i]t was necessary for Arriba to copy the entire image to allow users to recognize the image and decide whether to pursue more information about the image or the originating [website]. If Arriba only copied part of the image, it would be more difficult to identify it, thereby reducing the usefulness of the visual search engine." Id. Accordingly, we concluded that this factor did not weigh in favor of either [1168] party. Id. Because the same analysis applies to Google's use of Perfect 10's image, the district court did not err in finding that this factor favored neither party.

Effect of use on the market. The fourth factor is "the effect of the use upon the potential market for or value of the copyrighted work." 17 U.S.C. § 107(4). In Kelly, we concluded that Arriba's use of the thumbnail images did not harm the market for the photographer's full-size images. See Kelly, 336 F.3d at 821-22. We reasoned that because thumbnails were not a substitute for the full-sized images, they did not harm the photographer's ability to sell or license his full-sized images. Id. The district court here followed Kelly's reasoning, holding that Google's use of thumbnails did not hurt Perfect 10's market for full-size images. See Perfect 10, 416 F.Supp.2d at 850-51. We agree.

Perfect 10 argues that the district court erred because the likelihood of market harm may be presumed if the intended use of an image is for commercial gain. However, this presumption does not arise when a work is transformative because "market substitution is at least less certain, and market harm may not be so readily inferred." Campbell, 510 U.S. at 591, 114 S.Ct. 1164. As previously discussed, Google's use of thumbnails for search engine purposes is highly transformative, and so market harm cannot be presumed.

Perfect 10 also has a market for reduced-size images, an issue not considered in Kelly. The district court held that "Google's use of thumbnails likely does harm the potential market for the downloading of [Perfect 10's] reduced-size images onto cell phones." Perfect 10, 416 F.Supp.2d at 851 (emphasis omitted). The district court reasoned that persons who can obtain Perfect 10 images free of charge from Google are less likely to pay for a download, and the availability of Google's thumbnail images would harm Perfect 10's market for cell phone downloads. Id. As we discussed above, the district court did not make a finding that Google users have downloaded thumbnail images for cell phone use. This potential harm to Perfect 10's market remains hypothetical. We conclude that this factor favors neither party.

Having undertaken a case-specific analysis of all four factors, we now weigh these factors together "in light of the purposes of copyright." Campbell, 510 U.S. at 578, 114 S.Ct. 1164; see also Kelly, 336 F.3d at 818 ("We must balance[the section 107] factors in light of the objectives of copyright law, rather than view them as definitive or determinative tests."). In this case, Google has put Perfect 10's thumbnail images (along with millions of other thumbnail images) to a use fundamentally different than the use intended by Perfect 10. In doing so, Google has provided a significant benefit to the public. Weighing this significant transformative use against the unproven use of Google's thumbnails for cell phone downloads, and considering the other fair use factors, all in light of the purpose of copyright, we conclude that Google's use of Perfect 10's thumbnails is a fair use. Because the district court here "found facts sufficient to evaluate each of the statutory factors ... [we] need not remand for further factfinding." Harper & Row, 471 U.S. at 560, 105 S.Ct. 2218 (internal quotation omitted). We conclude that Google is likely to succeed in proving its fair use defense and, accordingly, we vacate the preliminary injunction regarding Google's use of thumbnail images.

IV

Secondary Liability for Copyright Infringement

We now turn to the district court's ruling that Google is unlikely to be secondarily [1169] liable for its in-line linking to infringing full-size images under the doctrines of contributory and vicarious infringement.^[10] The district court ruled that Perfect 10 did not have a likelihood of proving success on the merits of either its contributory infringement or vicarious infringement claims with respect to the full-size images. See Perfect 10, 416 F.Supp.2d at 856, 858. In reviewing the district court's conclusions, we are guided by the Supreme Court's recent interpretation of secondary liability, namely: "[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it." Grokster, 545 U.S. at 930, 125 S.Ct. 2764 (internal citations omitted).

Direct Infringement by Third Parties. As a threshold matter, before we examine Perfect 10's claims that Google is secondarily liable, Perfect 10 must establish that there has been direct infringement by third parties. See Napster, 239 F.3d at 1013 n. 2 ("Secondary liability for copyright infringement does not exist in the absence of direct infringement by a third party.").

Perfect 10 alleges that third parties directly infringed its images in three ways. First, Perfect 10 claims that third-party websites directly infringed its copyright by reproducing, displaying, and distributing unauthorized copies of Perfect 10's images. Google does not dispute this claim on appeal.

Second, Perfect 10 claims that individual users of Google's search engine directly infringed Perfect 10's copyrights by storing full-size infringing images on their computers. We agree with the district court's conclusion that Perfect 10 failed to provide sufficient evidence to support this claim. See Perfect 10, 416 F.Supp.2d at 852. There is no evidence in the record directly establishing that users of Google's search engine have stored infringing images on their computers, and the district court did not err in declining to infer the existence of such evidence.

Finally, Perfect 10 contends that users who link to infringing websites automatically make "cache" copies of full-size images and thereby directly infringe Perfect 10's reproduction right. The district court rejected this argument, holding that any such reproduction was likely a "fair use." Id. at 852 n. 17. The district court reasoned that "[l]ocal caching by the browsers of individual users is noncommercial, transformative, and no more than necessary to achieve the objectives of decreasing network latency and minimizing unnecessary bandwidth usage (essential to the [I]nternet). It has a minimal impact on the potential market for the original work...." Id. We agree; even assuming such automatic copying could constitute direct infringement, it is a fair use in this context. The copying function performed automatically by a user's computer to assist in accessing the Internet is a transformative use. Moreover, as noted by the district court, a cache copies no more than is necessary to assist the user in Internet use. It is designed to enhance an individual's computer use, not to supersede the copyright holders' exploitation of their works. Such automatic background copying has no more than a minimal effect on Perfect 10's rights, but a considerable public benefit. Because the four fair use factors weigh in favor of concluding that [1170] cache copying constitutes a fair use, Google has established a likelihood of success on this issue. Accordingly, Perfect 10 has not carried its burden of showing that users' cache copies of Perfect 10's full-size images constitute direct infringement.

Therefore, we must assess Perfect 10's arguments that Google is secondarily liable in light of the direct infringement that is undisputed by the parties: third-party websites' reproducing, displaying, and distributing unauthorized copies of Perfect 10's images on the Internet. Id. at 852.

A. Contributory Infringement

In order for Perfect 10 to show it will likely succeed in its contributory liability claim against Google, it must establish that Google's activities meet the definition of contributory liability recently enunciated in Grokster. Within the general rule that "[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement," Grokster, 545 U.S. at 930, 125 S.Ct. 2764, the Court has defined two categories of contributory liability: "Liability under our jurisprudence may be predicated on actively encouraging (or inducing) infringement through specific acts (as the Court's opinion develops) or on distributing a product distributees use to infringe copyrights, if the product is not capable of `substantial' or `commercially significant' noninfringing uses." Id. at 942, 125 S.Ct. 2764 (Ginsburg, J., concurring) (quoting Sony, 464 U.S. at 442, 104 S.Ct. 774); see also id. at 936-37, 125 S.Ct. 2764.

Looking at the second category of liability identified by the Supreme Court (distributing products), Google relies on Sony, 464 U.S. at 442, 104 S.Ct. 774, to argue that it cannot be held liable for contributory infringement because liability does not arise from the mere sale of a product (even with knowledge that consumers would use the product to infringe) if the product is capable of substantial non-infringing use. Google argues that its search engine service is such a product. Assuming the principle enunciated in Sony is applicable to the operation of Google's search engine, then Google cannot be held liable for contributory infringement solely because the design of its search engine facilitates such infringement. Grokster, 545 U.S. at 931-32, 125 S.Ct. 2764 (discussing Sony, 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574). Nor can Google be held liable solely because it did not develop technology that would enable its search engine to automatically avoid infringing images. See id. at 939 n. 12, 125 S.Ct. 2764. However, Perfect 10 has not based its claim of infringement on the design of Google's search engine and the Sony rule does not immunize Google from other sources of contributory liability. See id. at 933-34, 125 S.Ct. 2764.

We must next consider whether Google could be held liable under the first category of contributory liability identified by the Supreme Court, that is, the liability that may be imposed for intentionally encouraging infringement through specific acts.^[11] Grokster tells us that contribution to infringement must be intentional for liability to arise. Grokster, 545 U.S. at 930, 125 S.Ct. 2764. However, Grokster also directs us to analyze contributory liability in light of "rules of fault-based liability derived from the common law," id. at 934-35, 125 S.Ct. 2764, and [1171] common law principles establish that intent may be imputed. "Tort law ordinarily imputes to an actor the intention to cause the natural and probable consequences of his conduct." DeVoto v. Pac. Fid. Life Ins. Co., 618 F.2d 1340, 1347 (9th Cir. 1980); RESTATEMENT (SECOND) OF TORTS § 8A cmt. b (1965) ("If the actor knows that the consequences are certain, or substantially certain, to result from his act, and still goes ahead, he is treated by the law as if he had in fact desired to produce the result."). When the Supreme Court imported patent law's "staple article of commerce doctrine" into the copyright context, it also adopted these principles of imputed intent. Grokster, 545 U.S. at 932, 125 S.Ct. 2764 ("The [staple article of commerce] doctrine was devised to identify instances in which it may be presumed from distribution of an article in commerce that the distributor intended the article to be used to infringe another's patent, and so may justly be held liable for that infringement."). Therefore, under Grokster, an actor may be contributorily liable for intentionally encouraging direct infringement if the actor knowingly takes steps that are substantially certain to result in such direct infringement.

Our tests for contributory liability are consistent with the rule set forth in Grokster. We have adopted the general rule set forth in Gershwin Publishing Corp. v. Columbia Artists Management, Inc., namely: "one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a `contributory' infringer," 443 F.2d 1159, 1162 (2d Cir.1971). See Ellison, 357 F.3d at 1076; Napster, 239 F.3d at 1019; Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir.1996).

We have further refined this test in the context of cyberspace^[12] to determine when contributory liability can be imposed on a provider of Internet access or services. See Napster, 239 F.3d at 1019-20. In Napster, we considered claims that the operator of an electronic file sharing system was contributorily liable for assisting individual users to swap copyrighted music files stored on their home computers with other users of the system. Napster, 239 F.3d at 1011-13, 1019-22. We stated that "if a computer system operator learns of specific infringing material available on his system and fails to purge such material from the system, the operator knows of and contributes to direct infringement." Id. at 1021. Because Napster knew of the availability of infringing music files, assisted users in accessing such files, and failed to block access to such files, we concluded that Napster materially contributed to infringement. Id. at 1022.

The Napster test for contributory liability was modeled on the influential district court decision in Religious Technology Center v. Netcom On-Line Communication Services, Inc. (Netcom), 907 F.Supp. 1361, 1365-66 (N.D.Cal.1995). See Napster, 239 F.3d at 1021. In Netcom, a disgruntled former Scientology minister posted allegedly infringing copies of Scientological works on an electronic bulletin board service. Netcom, 907 F.Supp. at 1365-66. The messages were stored on the bulletin board operator's computer, then automatically copied onto Netcom's computer, and from there copied onto other computers comprising "a worldwide community" of electronic bulletin board systems. Id. at 1366-67 & n. 4 (internal quotation omitted). Netcom held that if plaintiffs [1172] could prove that Netcom knew or should have known that the minister infringed plaintiffs' copyrights, "Netcom [would] be liable for contributory infringement since its failure to simply cancel [the former minister's] infringing message and thereby stop an infringing copy from being distributed worldwide constitute[d] substantial participation in [the former minister's] public distribution of the message." Id. at 1374.

Although neither Napster nor Netcom expressly required a finding of intent, those cases are consistent with Grokster because both decisions ruled that a service provider's knowing failure to prevent infringing actions could be the basis for imposing contributory liability. Under such circumstances, intent may be imputed. In addition, Napster and Netcom are consistent with the longstanding requirement that an actor's contribution to infringement must be material to warrant the imposition of contributory liability. Gershwin, 443 F.2d at 1162. Both Napster and Netcom acknowledge that services or products that facilitate access to websites throughout the world can significantly magnify the effects of otherwise immaterial infringing activities. See Napster, 239 F.3d at 1022; Netcom, 907 F.Supp. at 1375. The Supreme Court has acknowledged that "[t]he argument for imposing indirect liability" is particularly "powerful" when individuals using the defendant's software could make a huge number of infringing downloads every day. Grokster, 545 U.S. at 929, 125 S.Ct. 2764. Moreover, copyright holders cannot protect their rights in a meaningful way unless they can hold providers of such services or products accountable for their actions pursuant to a test such as that enunciated in Napster. See id. at 929-30, 125 S.Ct. 2764 ("When a widely shared service or product is used to commit infringement, it may be impossible to enforce rights in the protected work effectively against all direct infringers, the only practical alternative being to go against the distributor of the copying device for secondary liability on a theory of contributory or vicarious infringement."). Accordingly, we hold that a computer system operator can be held contributorily liable if it "has actual knowledge that specific infringing material is available using its system," Napster, 239 F.3d at 1022, and can "take simple measures to prevent further damage" to copyrighted works, Netcom, 907 F.Supp. at 1375, yet continues to provide access to infringing works.

Here, the district court held that even assuming Google had actual knowledge of infringing material available on its system, Google did not materially contribute to infringing conduct because it did not undertake any substantial promotional or advertising efforts to encourage visits to infringing websites, nor provide a significant revenue stream to the infringing websites. Perfect 10, 416 F.Supp.2d at 854-56. This analysis is erroneous. There is no dispute that Google substantially assists websites to distribute their infringing copies to a worldwide market and assists a worldwide audience of users to access infringing materials. We cannot discount the effect of such a service on copyright owners, even though Google's assistance is available to all websites, not just infringing ones. Applying our test, Google could be held contributorily liable if it had knowledge that infringing Perfect 10 images were available using its search engine, could take simple measures to prevent further damage to Perfect 10's copyrighted works, and failed to take such steps.

The district court did not resolve the factual disputes over the adequacy of Perfect 10's notices to Google and Google's responses to these notices. Moreover, there are factual disputes over whether there are reasonable and feasible means for Google to refrain from providing access [1173] to infringing images. Therefore, we must remand this claim to the district court for further consideration whether Perfect 10 would likely succeed in establishing that Google was contributorily liable for in-line linking to full-size infringing images under the test enunciated today.^[13]

B. Vicarious Infringement

Perfect 10 also challenges the district court's conclusion that it is not likely to prevail on a theory of vicarious liability against Google. Perfect 10, 416 F.Supp.2d at 856-58. Grokster states that one "infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it." Grokster, 545 U.S. at 930, 125 S.Ct. 2764. As this formulation indicates, to succeed in imposing vicarious liability, a plaintiff must establish that the defendant exercises the requisite control over the direct infringer and that the defendant derives a direct financial benefit from the direct infringement. See id. Grokster further explains the "control" element of the vicarious liability test as the defendant's "right and ability to supervise the direct infringer." Id. at 930 n. 9, 125 S.Ct. 2764. Thus, under Grokster, a defendant exercises control over a direct infringer when he has both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to do so.

We evaluate Perfect 10's arguments that Google is vicariously liable in light of the direct infringement that is undisputed by the parties, namely, the third-party websites' reproduction, display, and distribution of unauthorized copies of Perfect 10's images on the Internet. Perfect 10, 416 F.Supp.2d at 852; see supra Section IV.A. In order to prevail at this preliminary injunction stage, Perfect 10 must demonstrate a likelihood of success in establishing that Google has the right and ability to stop or limit the infringing activities of third party websites. In addition, Perfect 10 must establish a likelihood of proving that Google derives a direct financial benefit from such activities. Perfect 10 has not met this burden.

With respect to the "control" element set forth in Grokster, Perfect 10 has not demonstrated a likelihood of showing that Google has the legal right to stop or limit the direct infringement of third-party websites. See Grokster, 545 U.S. at 930, 125 S.Ct. 2764. Unlike Fonovisa, where by virtue of a "broad contract" with its vendors the defendant swap meet operators had the right to stop the vendors from selling counterfeit recordings on its premises, Fonovisa, 76 F.3d at 263, Perfect 10 has not shown that Google has contracts with third-party websites that empower Google to stop or limit them from reproducing, displaying, and distributing infringing copies of Perfect 10's images on the Internet. Perfect 10 does point to Google's AdSense agreement, which states that Google reserves "the right to monitor and terminate partnerships with entities that violate others' copyright[s]." Perfect 10, 416 F.Supp.2d at 858. However, Google's right to terminate an AdSense partnership does not give Google the right to [1174] stop direct infringement by third-party websites. An infringing third-party website can continue to reproduce, display, and distribute its infringing copies of Perfect 10 images after its participation in the AdSense program has ended.

Nor is Google similarly situated to Napster. Napster users infringed the plaintiffs' reproduction and distribution rights through their use of Napster's proprietary music-file sharing system. Napster, 239 F.3d at 1011-14. There, the infringing conduct was the use of Napster's "service to download and upload copyrighted music." Id. at 1014 (internal quotation omitted). Because Napster had a closed system requiring user registration, and could terminate its users' accounts and block their access to the Napster system, Napster had the right and ability to prevent its users from engaging in the infringing activity of uploading file names and downloading Napster users' music files through the Napster system.^[14] Id. at 1023-24. By contrast, Google cannot stop any of the third-party websites from reproducing, displaying, and distributing unauthorized copies of Perfect 10's images because that infringing conduct takes place on the third-party websites. Google cannot terminate those third-party websites or block their ability to "host and serve infringing full-size images" on the Internet. Perfect 10, 416 F.Supp.2d at 831.

Moreover, the district court found that Google lacks the practical ability to police the third-party websites' infringing conduct. Id. at 857-58. Specifically, the court found that Google's supervisory power is limited because "Google's software lacks the ability to analyze every image on the [I]nternet, compare each image to all the other copyrighted images that exist in the world ... and determine whether a certain image on the web infringes someone's copyright." Id. at 858. The district court also concluded that Perfect 10's suggestions regarding measures Google could implement to prevent its web crawler from indexing infringing websites and to block access to infringing images were not workable. Id. at 858 n. 25. Rather, the suggestions suffered from both "imprecision and overbreadth." Id. We hold that these findings are not clearly erroneous. Without image-recognition technology, Google lacks the practical ability to police the infringing activities of third-party websites. This distinguishes Google from the defendants held liable in Napster and Fonovisa. See Napster, 239 F.3d at 1023-24 (Napster had the ability to identify and police infringing conduct by searching its index for song titles); Fonovisa, 76 F.3d at 262 (swap meet operator had the ability to identify and police infringing activity by patrolling its premises).

Perfect 10 argues that Google could manage its own operations to avoid [1175] indexing websites with infringing content and linking to third-party infringing sites. This is a claim of contributory liability, not vicarious liability. Although "the lines between direct infringement, contributory infringement, and vicarious liability are not clearly drawn," Sony, 464 U.S. at 435 n. 17, 104 S.Ct. 774 (internal quotation omitted), in general, contributory liability is based on the defendant's failure to stop its own actions which facilitate third-party infringement, while vicarious liability is based on the defendant's failure to cause a third party to stop its directly infringing activities. See, e.g., Ellison, 357 F.3d at 1077-78; Fonovisa, 76 F.3d at 261-64. Google's failure to change its operations to avoid assisting websites to distribute their infringing content may constitute contributory liability, see supra Section IV.A. However, this failure is not the same as declining to exercise a right and ability to make third-party websites stop their direct infringement. We reject Perfect 10's efforts to blur this distinction.

Because we conclude that Perfect 10 has not shown a likelihood of establishing Google's right and ability to stop or limit the directly infringing conduct of third-party websites, we agree with the district court's conclusion that Perfect 10 "has not established a likelihood of proving the [control] prong necessary for vicarious liability." Perfect 10, 416 F.Supp.2d at 858.^[15]

C. Digital Millennium Copyright Act

Google claims that it qualifies for the limitations on liability set forth in title II of the DMCA, 17 U.S.C. § 512. In particular, section 512(d) limits the liability of a service provider "for infringement of copyright by reason of the provider referring or linking users to an online location containing infringing material or infringing activity, by using information location tools, including a directory, index, reference, pointer, or hypertext link" if the service provider meets certain criteria. We have held that the limitations on liability contained in 17 U.S.C. § 512 protect secondary infringers as well as direct infringers. Napster, 239 F.3d at 1025.

The parties dispute whether Google meets the specified criteria. Perfect 10 claims that it sent qualifying notices to Google and Google did not act expeditiously to remove the infringing material. Google claims that Perfect 10's notices did not comply with the notice provisions of section 512 and were not adequate to inform Google of the location of the infringing images on the Internet or identify the underlying copyrighted work. Google also claims that it responded to all notices it received by investigating the webpages identified by Perfect 10 and suppressing links to any webpages that Google confirmed were infringing.

Because the district court determined that Perfect 10 was unlikely to succeed on its contributory and vicarious liability claims, it did not reach Google's arguments under section 512. In revisiting the question of Perfect 10's likelihood of success on its contributory infringement claims, the district court should also consider whether Google would likely succeed in showing that it was entitled to the limitations on injunctive relief provided by title II of the DMCA.

V

Amazon.com

Perfect 10 claims that Amazon.com displays and distributes Perfect 10's copyrighted images and is also secondarily [1176] liable for the infringements of third-party websites and Amazon.com users. The district court concluded that Perfect 10 was unlikely to succeed in proving that Amazon.com was a direct infringer, because it merely in-line linked to the thumbnails on Google's servers and to the full-size images on third-party websites.^[16] Perfect 10 v. Amazon, No. 05-4753, consolidated with 04-9484 (C.D.Cal. February 21, 2006) (order denying preliminary injunction). In addition, the district court concluded that Perfect 10's secondary infringement claims against Amazon.com were likely to fail because Amazon.com had no program analogous to AdSense, and thus did not provide any revenues to infringing sites. Id. Finally, the district court determined that Amazon.com's right and ability to control the infringing conduct of third-party websites was substantially less than Google's. Id. Therefore, the district court denied Perfect 10's motion for a preliminary injunction against Amazon.com. Id.

We agree that Perfect 10 has not shown a likelihood that it would prevail on the merits of its claim that Amazon.com directly infringed its images. Amazon.com communicates to its users only the HTML instructions that direct the users' browsers to Google's computers (for thumbnail images) or to a third party's computer (for full-size infringing images). Therefore, Amazon.com does not display or distribute a copy of the thumbnails or full-size images to its users.

We also agree with the district court's conclusion that Amazon.com does not have "the right and ability to supervise the infringing activity" of Google or third parties. The district court did not clearly err in concluding that Amazon.com lacked a direct financial interest in such activities. Therefore, Perfect 10's claim that Amazon.com is vicariously liable for third-party infringement is unlikely to succeed.

However, the district court did not consider whether Amazon.com had "actual knowledge that specific infringing material is available using its system," Napster, 239 F.3d at 1022 (emphasis in original), and could have "take[n] simple measures to prevent further damage" to copyrighted works, Netcom, 907 F.Supp. at 1375, yet continued to provide access to infringing works. Perfect 10 has presented evidence that it notified Amazon.com that it was facilitating its users' access to infringing material. It is disputed whether the notices gave Amazon.com actual knowledge of specific infringing activities available using its system, and whether Amazon.com could have taken reasonable and feasible steps to refrain from providing access to such images, but failed to do so. Nor did the district court consider whether Amazon.com is entitled to limit its liability under title II of the DMCA. On remand, the district court should consider Amazon.com's potential contributory liability, as well as possible limitations on the scope of injunctive relief, in light of our rulings today.

VI

We conclude that Google's fair use defense is likely to succeed at trial, and therefore we reverse the district court's determination that Google's thumbnail versions of Perfect 10's images likely constituted a direct infringement. The district court also erred in its secondary liability [1177] analysis because it failed to consider whether Google and Amazon.com knew of infringing activities yet failed to take reasonable and feasible steps to refrain from providing access to infringing images. Therefore we must also reverse the district court's holding that Perfect 10 was unlikely to succeed on the merits of its secondary liability claims. Due to this error, the district court did not consider whether Google and Amazon.com are entitled to the limitations on liability set forth in title II of the DMCA. The question whether Google and Amazon.com are secondarily liable, and whether they can limit that liability pursuant to title II of the DMCA, raise fact-intensive inquiries, potentially requiring further fact finding, and thus can best be resolved by the district court on remand. We therefore remand this matter to the district court for further proceedings consistent with this decision.

Because the district court will need to reconsider the appropriate scope of injunctive relief after addressing these secondary liability issues, we do not address the parties' arguments regarding the scope of the injunction issued by the district court. For the same reason, we do not address the parties' dispute over whether the district court abused its discretion in determining that Perfect 10 satisfied the irreparable harm element of a preliminary injunction.

Therefore, we reverse the district court's ruling and vacate the preliminary injunction regarding Google's use of thumbnail versions of Perfect 10's images.^[17] We reverse the district court's rejection of the claims that Google and Amazon.com are secondarily liable for infringement of Perfect 10's full-size images. We otherwise affirm the rulings of the district court. We remand this matter for further proceedings consistent with this opinion. Each party shall bear its own costs on appeal. See FED. R. APP. P. 39(a)(4).

AFFIRMED IN PART; REVERSED IN PART; REMANDED.

[1] Google argues that we lack jurisdiction over the preliminary injunction to the extent it enforces unregistered copyrights. Registration is generally a jurisdictional prerequisite to a suit for copyright infringement. See 17 U.S.C. § 411. But section 411 does not limit the remedies a court can grant. Rather, the Copyright Act gives courts broad authority to issue injunctive relief. See 17 U.S.C. § 502(a). Once a court has jurisdiction over an action for copyright infringement under section 411, the court may grant injunctive relief to restrain infringement of any copyright, whether registered or unregistered. See, e.g., Olan Mills, Inc. v. Linn Photo Co., 23 F.3d 1345, 1349 (8th Cir.1994); Pac. & S. Co., Inc. v. Duncan, 744 F.2d 1490, 1499 n. 17 (11th Cir.1984). Because at least some of the Perfect 10 images at issue were registered, the district court did not err in determining that it could issue an order that covers unregistered works. Therefore, we have jurisdiction over the district court's decision and order.

[2] The website publisher may not actually store the photographic images used on its webpages in its own computer, but may provide HTML instructions directing the user's browser to some further computer that stores the image. Because this distinction does not affect our analysis, for convenience, we will assume that the website publisher stores all images used on its webpages in the website publisher's own computer.

[3] Generally, a "cache" is "a computer memory with very short access time used for storage of frequently or recently used instructions or data." United States v. Ziegler, 474 F.3d 1184, 1186 n. 3 (9th Cir.2007) (quoting MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY 171 (11th ed.2003)). There are two types of caches at issue in this case. A user's personal computer has an internal cache that saves copies of webpages and images that the user has recently viewed so that the user can more rapidly revisit these webpages and images. Google's computers also have a cache which serves a variety of purposes. Among other things, Google's cache saves copies of a large number of webpages so that Google's search engine can efficiently organize and index these webpages.

[4] Perfect 10 argues that we are bound by the language and structure of title II of the DMCA in determining Google's liability for copyright infringement. We have noted that the DMCA does not change copyright law; rather, "Congress provided that [the DMCA's] limitations of liability apply if the provider is found to be liable under existing principles of law." Ellison, 357 F.3d at 1077 (emphasis and internal quotation omitted). As a result, "[c]laims against service providers for direct, contributory, or vicarious copyright infringement, therefore, are generally evaluated just as they would be in the non-online world." Id.; see also 17 U.S.C. § 512(l) ("The failure of a service provider's conduct to qualify for limitation of liability under this section shall not bear adversely upon the consideration of a defense by the service provider that the service provider's conduct is not infringing under this title or any other defense."). Therefore, we must consider Google's potential liability under the Copyright Act without reference to title II of the DMCA.

[5] 17 U.S.C. § 106 states, in pertinent part:

Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords;

....

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;

....

(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly....

[6] Because Google initiates and controls the storage and communication of these thumbnail images, we do not address whether an entity that merely passively owns and manages an Internet bulletin board or similar system violates a copyright owner's display and distribution rights when the users of the bulletin board or similar system post infringing works. Cf. CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544 (4th Cir.2004).

[7] Perfect 10 also argues that Google violates Perfect 10's right to display full-size images because Google's in-line linking meets the Copyright Act's definition of "to perform or display a work `publicly.'" 17 U.S.C. § 101. This phrase means "to transmit or otherwise communicate a performance or display of the work to ... the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times." Id. Perfect 10 is mistaken. Google's activities do not meet this definition because Google transmits or communicates only an address which directs a user's browser to the location where a copy of the full-size image is displayed. Google does not communicate a display of the work itself.

[8] We reject at the outset Perfect 10's argument that providing access to infringing websites cannot be deemed transformative and is inherently not fair use. Perfect 10 relies on Video Pipeline, Inc. v. Buena Vista Home Entm't, Inc., 342 F.3d 191 (3d Cir.2003), and Atari Games Corp. v. Nintendo of Am. Inc., 975 F.2d 832, 843 (Fed.Cir.1992). But these cases, in essence, simply apply the general rule that a party claiming fair use must act in a manner generally compatible with principles of good faith and fair dealing. See Harper & Row, 471 U.S. at 562-63, 105 S.Ct. 2218. For this reason, a company whose business is based on providing scenes from copyrighted movies without authorization could not claim that it provided the same public benefit as the search engine in Kelly. See Video Pipeline, 342 F.3d at 198-200. Similarly, a company whose overriding desire to replicate a competitor's computer game led it to obtain a copy of the competitor's source code from the Copyright Office under false pretenses could not claim fair use with respect to its purloined copy. Atari Games, 975 F.2d at 843.

Unlike the alleged infringers in Video Pipeline and Atari Games, who intentionally misappropriated the copyright owners' works for the purpose of commercial exploitation, Google is operating a comprehensive search engine that only incidentally indexes infringing websites. This incidental impact does not amount to an abuse of the good faith and fair dealing underpinnings of the fair use doctrine. Accordingly, we conclude that Google's inclusion of thumbnail images derived from infringing websites in its Internet-wide search engine activities does not preclude Google from raising a fair use defense.

[9] Google contends that Perfect 10's photographic images are less creative and less deserving of protection than the images of the American West in Kelly because Perfect 10 boasts of its un-retouched photos showing the natural beauty of its models. Having reviewed the record, we conclude that the district court's finding that Perfect 10's photographs "consistently reflect professional, skillful, and sometimes tasteful artistry" is not clearly erroneous. Perfect 10, 416 F.Supp.2d at 849 n. 15. We agree with the district court that there is no basis for concluding that photos of the American West are more deserving of protection than photos of nude models. See id.

[10] Because the district court concluded that Perfect 10 was likely to prevail on its direct infringement claim with respect to Google's use of thumbnails, but not with respect to its in-line linking to full-size images, the district court considered Google's potential secondary liability only on the second issue.

[11] Google's activities do not meet the "inducement" test explained in Grokster because Google has not promoted the use of its search engine specifically to infringe copyrights. See Grokster, 545 U.S. at 935-37, 125 S.Ct. 2764. However, the Supreme Court in Grokster did not suggest that a court must find inducement in order to impose contributory liability under common law principles.

[12] "Cyberspace is a popular term for the world of electronic communications over computer networks." Religious Tech. Ctr. v. Netcom On-Line Commc'n Servs., Inc., 907 F.Supp. 1361, 1365 n. 1 (N.D.Cal.1995).

[13] Perfect 10 claims that Google materially contributed to infringement by linking to websites containing unauthorized passwords, which enabled Google users to access Perfect 10's website and make infringing copies of images. However, Perfect 10 points to no evidence that users logging onto the Perfect 10 site with unauthorized passwords infringed Perfect 10's exclusive rights under section 106. In the absence of evidence that Google's actions led to any direct infringement, this argument does not assist Perfect 10 in establishing that it would prevail on the merits of its contributory liability claim. See Napster, 239 F.3d at 1013 n. 2 ("Secondary liability for copyright infringement does not exist in the absence of direct infringement by a third party.").

[14] Napster's system included "Napster's MusicShare software, available free of charge from Napster's Internet site, and Napster's network servers and server-side software." Napster, 239 F.3d at 1011. By downloading Napster's MusicShare software to the user's personal computer, and registering with the Napster system, a user could both upload and download music files. Id. at 1011-13. If the Napster user uploaded a list of music files stored on the user's personal computer to the Napster system, such music files would be automatically available to other Napster users whenever the user was logged on to the Napster system. Id. at 1012. In addition, the Napster user could download music files directly from other users' personal computers. Id. We explained the infringing conduct as "Napster users who upload file names to the [Napster] search index for others to copy violate plaintiffs' distribution rights. Napster users who download files [through the Napster system] containing copyrighted music violate plaintiffs' reproduction rights." Id. at 1014.

[15] Having so concluded, we need not reach Perfect 10's argument that Google received a direct financial benefit.

[16] Amazon.com states that it ended its relationship with Google on April 30, 2006. Perfect 10's action for preliminary injunction against Amazon.com is not moot, however, because Amazon.com has not established "that the allegedly wrongful behavior cannot reasonably be expected to recur." F.T.C. v. Affordable Media, LLC, 179 F.3d 1228, 1238 (9th Cir.1999) (internal quotation omitted).

[17] Because we vacate the injunction, Google's motion for stay of the injunction is moot.

Rehearing Denied March 19, 1984. See U.S., 104 S.Ct. 1619.

Syllabus

Petitioner Sony Corp. manufactures home video tape recorders (VTR's), and markets them through retail establishments, some of which are also petitioners. Respondents own the copyrights on some of the television programs that are broadcast on the public airwaves. Respondents brought an action against petitioners in Federal District Court, alleging that VTR consumers had been recording some of respondents' copyrighted works that had been exhibited on commercially sponsored television and thereby infringed respondents' copyrights, and further that petitioners were liable for such copyright infringement because of their marketing of the VTR's. Respondents sought money damages, an equitable accounting of profits, and an injunction against the manufacture and marketing of the VTR's. The District Court denied respondents all relief, holding that noncommercial home use recording of material broadcast over the public airwaves was a fair use of copyrighted works and did not constitute copyright infringement, and that petitioners could not be held liable as contributory infringers even if the home use of a VTR was considered an infringing use. The Court of Appeals reversed, holding petitioners liable for contributory infringement and ordering the District Court to fashion appropriate relief.

Held: The sale of the VTR's to the general public does not constitute contributory infringement of respondents' copyrights. Pp. 428-456.

(a) The protection given to copyrights is wholly statutory, and, in a case like this, in which Congress has not plainly marked the course to be followed by the judiciary, this Court must be circumspect in construing the scope of rights created by a statute that never contemplated such a calculus of interests. Any individual may reproduce a copyrighted work for a "fair use"; the copyright owner does not possess the exclusive right to such a use. Pp. 428-434.

(b) Kalem Co. v. Harper Brothers, 222 U.S. 55, 32 S.Ct. 20, 56 L.Ed. 92, does not support respondents' novel theory that supplying the "means" to accomplish an infringing activity and encouraging that activity through advertisement are sufficient to establish liability for copyright infringement. This case does not fall in the category of those in which it is manifestly just to [418] impose vicarious liability because the "contributory" infringer was in a position to control the use of copyrighted works by others and had authorized the use without permission from the copyright owner. Here, the only contact between petitioners and the users of the VTR's occurred at the moment of sale. And there is no precedent for imposing vicarious liability on the theory that petitioners sold the VTR's with constructive knowledge that their customers might use the equipment to make unauthorized copies of copyrighted material. The sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes, or, indeed, is merely capable of substantial noninfringing uses. Pp. 434-442.

(c) The record and the District Court's findings show (1) that there is a significant likelihood that substantial numbers of copyright holders who license their works for broadcast on free television would not object to having their broadcast time-shifted by private viewers (i.e., recorded at a time when the VTR owner cannot view the broadcast so that it can be watched at a later time); and (2) that there is no likelihood that time-shifting would cause nonminimal harm to the potential market for, or the value of, respondents' copyrighted works. The VTR's are therefore capable of substantial noninfringing uses. Private, noncommercial time-shifting in the home satisfies this standard of noninfringing uses both because respondents have no right to prevent other copyright holders from authorizing such time-shifting for their programs, and because the District Court's findings reveal that even the unauthorized home time-shifting of respondents' programs is legitimate fair use. Pp. 442-456.

659 F.2d 963, reversed.

Dean C. Dunlavey, Los Angeles, Cal., for petitioners.

Stephen A. Kroft, Beverly Hills, Cal., for respondents.

[419] Justice STEVENS delivered the opinion of the Court.

Petitioners manufacture and sell home video tape recorders. Respondents own the copyrights on some of the tele [420] vision programs that are broadcast on the public airwaves. Some members of the general public use video tape recorders sold by petitioners to record some of these broadcasts, as well as a large number of other broadcasts. The question presented is whether the sale of petitioners' copying equipment to the general public violates any of the rights conferred upon respondents by the Copyright Act.

Respondents commenced this copyright infringement action against petitioners in the United States District Court for the Central District of California in 1976. Respondents alleged that some individuals had used Betamax video tape recorders (VTR's) to record some of respondents' copyrighted works which had been exhibited on commercially sponsored television and contended that these individuals had thereby infringed respondents' copyrights. Respondents further maintained that petitioners were liable for the copyright infringement allegedly committed by Betamax consumers because of petitioners' marketing of the Betamax VTR's.^[1] Respondents sought no relief against any Betamax consumer. Instead, they sought money damages and an equitable accounting of profits from petitioners, as well as an injunction against the manufacture and marketing of Betamax VTR's.

After a lengthy trial, the District Court denied respondents all the relief they sought and entered judgment for petitioners. 480 F.Supp. 429 (1979). The United States Court of Appeals for the Ninth Circuit reversed the District Court's judgment on respondent's copyright claim, holding petitioners liable for contributory infringement and ordering the District Court to fashion appropriate relief. 659 F.2d 963 [421] (1981). We granted certiorari, 457 U.S. 1116, 102 S.Ct. 2926, 73 L.Ed.2d 1328 (1982); since we had not completed our study of the case last Term, we ordered reargument, --- U.S. ----, 103 S.Ct. 3568, 77 L.Ed.2d 1409 (1983). We now reverse.

An explanation of our rejection of respondents' unprecedented attempt to impose copyright liability upon the distributors of copying equipment requires a quite detailed recitation of the findings of the District Court. In summary, those findings reveal that the average member of the public uses a VTR principally to record a program he cannot view as it is being televised and then to watch it once at a later time. This practice, known as "time-shifting," enlarges the television viewing audience. For that reason, a significant amount of television programming may be used in this manner without objection from the owners of the copyrights on the programs. For the same reason, even the two respondents in this case, who do assert objections to time-shifting in this litigation, were unable to prove that the practice has impaired the commercial value of their copyrights or has created any likelihood of future harm. Given these findings, there is no basis in the Copyright Act upon which respondents can hold petitioners liable for distributing VTR's to the general public. The Court of Appeals' holding that respondents are entitled to enjoin the distribution of VTR's, to collect royalties on the sale of such equipment, or to obtain other relief, if affirmed, would enlarge the scope of respondents' statutory monopolies to encompass control over an article of commerce that is not the subject of copyright protection. Such an expansion of the copyright privilege is beyond the limits of the grants authorized by Congress.

I

The two respondents in this action, Universal Studios, Inc. and Walt Disney Productions, produce and hold the copyrights on a substantial number of motion pictures and other audiovisual works. In the current marketplace, they can exploit their rights in these [422] by authorizing theatrical exhibitions, by licensing limited showings on cable and network television, by selling syndication rights for repeated airings on local television stations, and by marketing programs on prerecorded videotapes or videodiscs. Some works are suitable for exploitation through all of these avenues, while the market for other works is more limited.

Petitioner Sony manufactures millions of Betamax video tape recorders and markets these devices through numerous retail establishments, some of which are also petitioners in this action.^[2] Sony's Betamax VTR is a mechanism consisting of three basic components: (1) a tuner, which receives electromagnetic signals transmitted over the television band of the public airwaves and separates them into audio and visual signals; (2) a recorder, which records such signals on a magnetic tape; and (3) an adapter, which converts the audio and visual signals on the tape into a composite signal that can be received by a television set.

Several capabilities of the machine are noteworthy. The separate tuner in the Betamax enables it to record a broadcast off one station while the television set is tuned to another channel, permitting the viewer, for example, to watch two simultaneous news broadcasts by watching one "live" and recording the other for later viewing. Tapes may be reused, and programs that have been recorded may be erased either before or after viewing. A timer in the Betamax can be used to activate and deactivate the equipment at predetermined [423] times, enabling an intended viewer to record programs that are transmitted when he or she is not at home. Thus a person may watch a program at home in the evening even though it was broadcast while the viewer was at work during the afternoon. The Betamax is also equipped with a pause button and a fast-forward control. The pause button, when depressed, deactivates the recorder until it is released, thus enabling a viewer to omit a commercial advertisement from the recording, provided, of course, that the viewer is present when the program is recorded. The fast forward control enables the viewer of a previously recorded program to run the tape rapidly when a segment he or she does not desire to see is being played back on the television screen.

The respondents and Sony both conducted surveys of the way the Betamax machine was used by several hundred owners during a sample period in 1978. Although there were some differences in the surveys, they both showed that the primary use of the machine for most owners was "time-shifting,"—the practice of recording a program to view it once at a later time, and thereafter erasing it. Time-shifting enables viewers to see programs they otherwise would miss because they are not at home, are occupied with other tasks, or are viewing a program on another station at the time of a broadcast that they desire to watch. Both surveys also showed, however, that a substantial number of interviewees had accumulated libraries of tapes.^[3] Sony's survey indicated [424] that over 80% of the interviewees watched at least as much regular television as they had before owning a Betamax.^[4] Respondents offered no evidence of decreased television viewing by Betamax owners.^[5]

Sony introduced considerable evidence describing television programs that could be copied without objection from any copyright holder, with special emphasis on sports, religious, and educational programming. For example, their survey indicated that 7.3% of all Betamax use is to record sports events, and representatives of professional baseball, football, basketball, and hockey testified that they had no objection to the recording of their televised events for home use.^[6]

[425] Respondents offered opinion evidence concerning the future impact of the unrestricted sale of VTR's on the commercial value of their copyrights. The District Court found, however, that they had failed to prove any likelihood of future harm from the use of VTR's for time-shifting. Id., at 469.

The District Court's Decision

The lengthy trial of the case in the District Court concerned the private, home use of VTR's for recording programs broadcast on the public airwaves without charge to the viewer.^[7] No issue concerning the transfer of tapes to other persons, the use of home-recorded tapes for public performances, or the copying of programs transmitted on pay or cable television systems was raised. See 480 F.Supp. 429, 432-433, 442 (1979).

The District Court concluded that noncommercial home use recording of material broadcast over the public airwaves was a fair use of copyrighted works and did not constitute copyright infringement. It emphasized the fact that the material was broadcast free to the public at large, the noncommercial character of the use, and the private character of the activity conducted entirely within the home. Moreover, the court found that the purpose of this use served the public interest in increasing access to television programming, an interest that "is consistent with the First Amendment policy of providing the fullest possible access to information through the public airwaves. Columbia Broadcasting System, Inc. v. Democratic National Committee, 412 U.S. 94, 102 [93 S.Ct. 2080, 2086, 36 L.Ed.2d 772]." 480 F.Supp., at 454.^[8] Even when an entire copyrighted work was recorded, [426] the District Court regarded the copying as fair use "because there is no accompanying reduction in the market for 'plaintiff's original work.'" Ibid.

As an independent ground of decision, the District Court also concluded that Sony could not be held liable as a contributory infringer even if the home use of a VTR was considered an infringing use. The District Court noted that Sony had no direct involvement with any Betamax purchasers who recorded copyrighted works off the air. Sony's advertising was silent on the subject of possible copyright infringement, but its instruction booklet contained the following statement:

"Television programs, films, videotapes and other materials may be copyrighted. Unauthorized recording of such material may be contrary to the provisions of the United States copyright laws." Id., at 436.

The District Court assumed that Sony had constructive knowledge of the probability that the Betamax machine would be used to record copyrighted programs, but found that Sony merely sold a "product capable of a variety of uses, some of them allegedly infringing." Id., at 461. It reasoned:

"Selling a staple article of commerce e.g., a typewriter, a recorder, a camera, a photocopying machine technically contributes to any infringing use subsequently made thereof, but this kind of 'contribution,' if deemed sufficient as a basis for liability, would expand the theory beyond precedent and arguably beyond judicial management.

"Commerce would indeed be hampered if manufacturers of staple items were held liable as contributory infringers whenever they 'constructively' knew that some purchasers on some occasions would use their product [427] for a purpose which a court later deemed, as a matter of first impression, to be an infringement." Ibid.

Finally, the District Court discussed the respondents' prayer for injunctive relief, noting that they had asked for an injunction either preventing the future sale of Betamax machines, or requiring that the machines be rendered incapable of recording copyrighted works off the air. The court stated that it had "found no case in which the manufacturers, distributors, retailers, and advertisors of the instrument enabling the infringement were sued by the copyright holders," and that the request for relief in this case "is unique." 480 F.Supp., at 465.

It concluded that an injunction was wholly inappropriate because any possible harm to respondents was outweighed by the fact that "the Betamax could still legally be used to record noncopyrighted material or material whose owners consented to the copying. An injunction would deprive the public of the ability to use the Betamax for this noninfringing off-the-air recording." 480 F.Supp., at 468.

The Court of Appeals' Decision

The Court of Appeals reversed the District Court's judgment on respondents' copyright claim. It did not set aside any of the District Court's findings of fact. Rather, it concluded as a matter of law that the home use of a VTR was not a fair use because it was not a "productive use."^[9] It therefore held that it was unnecessary for plaintiffs to prove any harm to the potential market for the copyrighted works, but then observed that it seemed clear that the cumulative effect of mass reproduction made possible by VTR's would tend to diminish the potential market for respondents' works. 659 F.2d, at 974.

[428] On the issue of contributory infringement, the Court of Appeals first rejected the analogy to staple articles of commerce such as tape recorders or photocopying machines. It noted that such machines "may have substantial benefit for some purposes" and do not "even remotely raise copyright problems." Id., at 975. VTR's, however, are sold "for the primary purpose of reproducing television programming" and "virtually all" such programming is copyrighted material. Ibid. The Court of Appeals concluded, therefore, that VTR's were not suitable for any substantial noninfringing use even if some copyright owners elect not to enforce their rights.

The Court of Appeals also rejected the District Court's reliance on Sony's lack of knowledge that home use constituted infringement. Assuming that the statutory provisions defining the remedies for infringement applied also to the non-statutory tort of contributory infringement, the court stated that a defendant's good faith would merely reduce his damages liability but would not excuse the infringing conduct. It held that Sony was chargeable with knowledge of the homeowner's infringing activity because the reproduction of copyrighted materials was either "the most conspicuous use" or "the major use" of the Betamax product. Ibid.

On the matter of relief, the Court of Appeals concluded that "statutory damages may be appropriate," that the District Court should reconsider its determination that an injunction would not be an appropriate remedy; and, referring to "the analogous photocopying area," suggested that a continuing royalty pursuant to a judicially created compulsory license may very well be an acceptable resolution of the relief issue. 659 F.2d, at 976.

II

Article I, Sec. 8 of the Constitution provides that:

"The Congress shall have Power . . . to Promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

[429] The monopoly privileges that Congress may authorize are neither unlimited nor primarily designed to provide a special private benefit. Rather, the limited grant is a means by which an important public purpose may be achieved. It is intended to motivate the creative activity of authors and inventors 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.

"The copyright law, like the patent statute, makes reward to the owner a secondary consideration. In Fox Film Corp. v. Doyal, 286 U.S. 123, 127 [52 S.Ct. 546, 547, 76 L.Ed. 1010], Chief Justice Hughes spoke as follows respecting the copyright monopoly granted by Congress, 'The sole interest of the United States and the primary object in conferring the monopoly lie in the general benefits derived by the public from the labors of authors.' It is said that reward to the author or artist serves to induce release to the public of the products of his creative genius." United States v. Paramount Pictures, 334 U.S. 131, 158, 68 S.Ct. 915, 929, 92 L.Ed. 1260.

As the text of the Constitution makes plain, it is Congress that has been assigned the task of defining the scope of the limited monopoly that should be granted to authors or to inventors in order to give the public appropriate access to their work product. Because this task involves a difficult balance between the interests of authors and inventors in the control and exploitation of their writings and discoveries on the one hand, and society's competing interest in the free flow of ideas, information, and commerce on the other hand, our patent and copyright statutes have been amended repeatedly.^[10]

[430] From its beginning, the law of copyright has developed in response to significant changes in technology.^[11] Indeed, it was the invention of a new form of copying equipment—the printing press—that gave rise to the original need for copyright protection.^[12] Repeatedly, as new developments have [431] occurred in this country, it has been the Congress that has fashioned the new rules that new technology made necessary. Thus, long before the enactment of the Copyright Act of 1909, 35 Stat. 1075, it was settled that the protection given to copyrights is wholly statutory. Wheaton v. Peters, 33 U.S. (8 Peters) 591, 661-662, 8 L.Ed. 1055 (1834). The remedies for infringement "are only those prescribed by Congress." Thompson v. Hubbard, 131 U.S. 123, 151, 9 S.Ct. 710, 720, 33 L.Ed. 76 (1889).

The judiciary's reluctance to expand the protections afforded by the copyright without explicit legislative guidance is a recurring theme. See, e.g., Teleprompter Corp. v. CBS, 415 U.S. 394, 94 S.Ct. 1129, 39 L.Ed.2d 415 (1974); Fortnightly Corp. v. United Artists, 392 U.S. 390, 88 S.Ct. 2084, 20 L.Ed.2d 1176 (1968); White-Smith Music Publishing Co. v. Apollo Co., 209 U.S. 1, 28 S.Ct. 319, 52 L.Ed. 655 (1908); Williams and Wilkins v. United States, 487 F.2d 1345, 203 Ct.Cl. 74 (1973), affirmed by an equally divided court, 420 U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975). Sound policy, as well as history, supports our consistent deference to Congress when major technological innovations alter the market for copyrighted materials. Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology.

In a case like this, in which Congress has not plainly marked our course, we must be circumspect in construing the scope of rights created by a legislative enactment which never contemplated such a calculus of interests. In doing so, we are guided by Justice Stewart's exposition of the correct approach to ambiguities in the law of copyright:

"The limited scope of the copyright holder's statutory monopoly, like the limited copyright duration required by the Constitution, reflects a balance of competing claims upon the public interest: Creative work is to be [432] encouraged and rewarded, but private motivation must ultimately serve the cause of promoting broad public availability of literature, music, and the other arts. The immediate effect of our copyright law is to secure a fair return for an 'author's' creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good. 'The sole interest of the United States and the primary object in conferring the monopoly,' this Court has said, 'lie in the general benefits derived by the public from the labors of authors.' Fox Film Corp. v. Doyal, 286 U.S. 123, 127 [52 S.Ct. 546, 547, 76 L.Ed. 1010]. See Kendall v. Winsor, 21 How. 322, 327-328 [16 L.Ed. 165]; Grant v. Raymond, 6 Pet. 218, 241-242 [8 L.Ed. 376]. When technological change has rendered its literal terms ambiguous, the Copyright Act must be construed in light of this basic purpose." Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84 (footnotes omitted).

Copyright protection "subsists . . . in original works of authorship fixed in any tangible medium of expression." 17 U.S.C. § 102(a). This protection has never accorded the copyright owner complete control over all possible uses of his work.^[13] Rather, the Copyright Act grants the [433] copyright holder "exclusive" rights to use and to authorize the use of his work in five qualified ways, including reproduction of the copyrighted work in copies. Id., § 106.^[14] All reproductions of the work, however, are not within the exclusive domain of the copyright owner; some are in the public domain. Any individual may reproduce a copyrighted work for a "fair use;" the copyright owner does not possess the exclusive right to such a use. Compare id., § 106 with id., § 107.

"Anyone who violates any of the exclusive rights of the copyright owner," that is, anyone who trespasses into his exclusive domain by using or authorizing the use of the copyrighted work in one of the five ways set forth in the statute, "is an infringer of the copyright." Id., § 501(a). Conversely, anyone who is authorized by the copyright owner to use the copyrighted work in a way specified in the statute or who makes a fair use of the work is not an infringer of the copyright with respect to such use.

The Copyright Act provides the owner of a copyright with a potent arsenal of remedies against an infringer of his work, including an injunction to restrain the infringer from violat [434] ing his rights, the impoundment and destruction of all reproductions of his work made in violation of his rights, a recovery of his actual damages and any additional profits realized by the infringer or a recovery of statutory damages, and attorneys fees. Id., §§ 502-505.^[15]

The two respondents in this case do not seek relief against the Betamax users who have allegedly infringed their copyrights. Moreover, this is not a class action on behalf of all copyright owners who license their works for television broadcast, and respondents have no right to invoke whatever rights other copyright holders may have to bring infringement actions based on Betamax copying of their works.^[16] As was made clear by their own evidence, the copying of the respondents' programs represents a small portion of the total use of VTR's. It is, however, the taping of respondents own copyrighted programs that provides them with standing to charge Sony with contributory infringement. To prevail, they have the burden of proving that users of the Betamax have infringed their copyrights and that Sony should be held responsible for that infringement.

III

The Copyright Act does not expressly render anyone liable for infringement committed by another. In contrast, the [435] Patent Act expressly brands anyone who "actively induces infringement of a patent" as an infringer, 35 U.S.C. § 271(b), and further imposes liability on certain individuals labeled "contributory" infringers, id., § 271(c). The absence of such express language in the copyright statute does not preclude the imposition of liability for copyright infringements on certain parties who have not themselves engaged in the infringing activity.^[17] For vicarious liability is imposed in virtually all areas of the law, and the concept of contributory infringement is merely a species of the broader problem of identifying the circumstances in which it is just to hold one individual accountable for the actions of another.

Such circumstances were plainly present in Kalem Co. v. Harper Brothers, 222 U.S. 55, 32 S.Ct. 20, 56 L.Ed. 92 (1911), the copyright decision of this Court on which respondents place their principal reliance. In Kalem, the Court held that the producer of an unauthorized film dramatization of the copyrighted book Ben Hur was liable for his sale of the motion picture to jobbers, who in turn arranged for the commercial exhibition of the film. Justice Holmes, writing for the Court, explained:

"The defendant not only expected but invoked by advertisement the use of its films for dramatic reproduc [436] tion of the story. That was the most conspicuous purpose for which they could be used, and the one for which especially they were made. If the defendant did not contribute to the infringement it is impossible to do so except by taking part in the final act. It is liable on principles recognized in every part of the law." 222 U.S., at 63, 32 S.Ct., at 22.

The use for which the item sold in Kalem had been "especially" made was, of course, to display the performance that had already been recorded upon it. The producer had personally appropriated the copyright owner's protected work and, as the owner of the tangible medium of expression upon which the protected work was recorded, authorized that use by his sale of the film to jobbers. But that use of the film was not his to authorize: the copyright owner possessed the exclusive right to authorize public performances of his work. Further, the producer personally advertised the unauthorized public performances, dispelling any possible doubt as to the use of the film which he had authorized.

Respondents argue that Kalem stands for the proposition that supplying the "means" to accomplish an infringing activity and encouraging that activity through advertisement are sufficient to establish liability for copyright infringement. This argument rests on a gross generalization that cannot withstand scrutiny. The producer in Kalem did not merely provide the "means" to accomplish an infringing activity; the producer supplied the work itself, albeit in a new medium of expression. Petitioners in the instant case do not supply Betamax consumers with respondents' works; respondents do. Petitioners supply a piece of equipment that is generally capable of copying the entire range of programs that may be televised: those that are uncopyrighted, those that are copyrighted but may be copied without objection from the copyright holder, and those that the copyright holder would prefer not to have copied. The Betamax can be used to [437] make authorized or unauthorized uses of copyrighted works, but the range of its potential use is much broader than the particular infringing use of the film Ben Hur involved in Kalem. Kalem does not support respondents' novel theory of liability.

Justice Holmes stated that the producer had "contributed" to the infringement of the copyright, and the label "contributory infringement" has been applied in a number of lower court copyright cases involving an ongoing relationship between the direct infringer and the contributory infringer at the time the infringing conduct occurred. In such cases, as in other situations in which the imposition of vicarious liability is manifestly just, the "contributory" infringer was in a position to control the use of copyrighted works by others and had authorized the use without permission from the copyright owner.^[18] This case, however, plainly does not fall [438] in that category. The only contact between Sony and the users of the Betamax that is disclosed by this record occurred at the moment of sale. The District Court expressly found that "no employee of Sony, Sonam or DDBI had either direct involvement with the allegedly infringing activity or direct contact with purchasers of Betamax who recorded copyrighted works off-the-air." 480 F.Supp., at 460. And it further found that "there was no evidence that any of the copies made by Griffiths or the other individual witnesses in this suit were influenced or encouraged by [Sony's] advertisements." Ibid.

[439] If vicarious liability is to be imposed on petitioners in this case, it must rest on the fact that they have sold equipment with constructive knowledge of the fact that their customers may use that equipment to make unauthorized copies of copyrighted material. There is no precedent in the law of copyright for the imposition of vicarious liability on such a theory. The closest analogy is provided by the patent law cases to which it is appropriate to refer because of the historic kinship between patent law and copyright law.^[19]

[440] In the Patent Code both the concept of infringement and the concept of contributory infringement are expressly defined by statute.^[20] The prohibition against contributory infringement is confined to the knowing sale of a component especially made for use in connection with a particular patent. There is no suggestion in the statute that one patentee may object to the sale of a product that might be used in connection with other patents. Moreover, the Act expressly provides that the sale of a "staple article or commodity of commerce suitable for substantial noninfringing use" is not contributory infringement.

When a charge of contributory infringement is predicated entirely on the sale of an article of commerce that is used by the purchaser to infringe a patent, the public interest in access to that article of commerce is necessarily implicated. A [441] finding of contributory infringement does not, of course, remove the article from the market altogether; it does, however, give the patentee effective control over the sale of that item. Indeed, a finding of contributory infringement is normally the functional equivalent of holding that the disputed article is within the monopoly granted to the patentee.^[21]

For that reason, in contributory infringement cases arising under the patent laws the Court has always recognized the critical importance of not allowing the patentee to extend his monopoly beyond the limits of his specific grant. These cases deny the patentee any right to control the distribution of unpatented articles unless they are "unsuited for any commercial noninfringing use." Dawson Chemical Co. v. Rohm & Hass Co., 448 U.S. 176, 198, 100 S.Ct. 2601, 2614, 65 L.Ed.2d 696 (1980). Unless a commodity "has no use except through practice of the patented method," ibid, the patentee has no right to claim that its distribution constitutes contributory infringement. "To form the basis for contributory infringement the item must almost be uniquely suited as a component of the patented invention." P. Rosenberg, Patent Law Fundamentals § 17.02[2] (1982). "[A] sale of an article which though adapted to an infringing use is also adapted to other and lawful uses, is not enough to make the seller a contributory infringer. Such a rule would block the wheels of commerce." Henry v. A.B. Dick Co., 224 U.S. 1, 48, 32 S.Ct. 364, 379, 56 L.Ed. 645 (1912), overruled on other grounds, [442] Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 517, 37 S.Ct. 416, 421, 61 L.Ed. 871 (1917).

We recognize there are substantial differences between the patent and copyright laws. But in both areas the contributory infringement doctrine is grounded on the recognition that adequate protection of a monopoly may require the courts to look beyond actual duplication of a device or publication to the products or activities that make such duplication possible. The staple article of commerce doctrine must strike a balance between a copyright holder's legitimate demand for effective—not merely symbolic—protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce. Accordingly, the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses.

IV

The question is thus whether the Betamax is capable of commercially significant noninfringing uses. In order to resolve that question, we need not explore all the different potential uses of the machine and determine whether or not they would constitute infringement. Rather, we need only consider whether on the basis of the facts as found by the district court a significant number of them would be non-infringing. Moreover, in order to resolve this case we need not give precise content to the question of how much use is commercially significant. For one potential use of the Betamax plainly satisfies this standard, however it is understood: private, noncommercial time-shifting in the home. It does so both (A) because respondents have no right to prevent other copyright holders from authorizing it for their programs, and (B) because the District Court's factual findings reveal that even the unauthorized home time-shifting of respondents' programs is legitimate fair use.

[443] A. Authorized Time Shifting

Each of the respondents owns a large inventory of valuable copyrights, but in the total spectrum of television programming their combined market share is small. The exact percentage is not specified, but it is well below 10%.^[22] If they were to prevail, the outcome of this litigation would have a significant impact on both the producers and the viewers of the remaining 90% of the programming in the Nation. No doubt, many other producers share respondents' concern about the possible consequences of unrestricted copying. Nevertheless the findings of the District Court make it clear that time-shifting may enlarge the total viewing audience and that many producers are willing to allow private time-shifting to continue, at least for an experimental time period.^[23]

The District Court found:

"Even if it were deemed that home-use recording of copyrighted material constituted infringement, the Betamax could still legally be used to record noncopyrighted material or material whose owners consented to the copying. An injunction would deprive the public of the ability to use the Betamax for this noninfringing off-the-air recording. 

[444] "Defendants introduced considerable testimony at trial about the potential for such copying of sports, religious, educational and other programming. This included testimony from representatives of the Offices of the Commissioners of the National Football, Basketball, Baseball and Hockey Leagues and Associations, the Executive Director of National Religious Broadcasters and various educational communications agencies. Plaintiffs attack the weight of the testimony offered and also contend that an injunction is warranted because infringing uses outweigh noninfringing uses."

"Whatever the future percentage of legal versus illegal home-use recording might be, an injunction which seeks to deprive the public of the very tool or article of commerce capable of some noninfringing use would be an extremely harsh remedy, as well as one unprecedented in copyright law." 480 F.Supp., at 468.

Although the District Court made these statements in the context of considering the propriety of injunctive relief, the statements constitute a finding that the evidence concerning "sports, religious, educational, and other programming" was sufficient to establish a significant quantity of broadcasting whose copying is now authorized, and a significant potential for future authorized copying. That finding is amply supported by the record. In addition to the religious and sports officials identified explicitly by the District Court,^[24] two items in the record deserve specific mention.

[445] First is the testimony of John Kenaston, the station manager of Channel 58, an educational station in Los Angeles affiliated with the Public Broadcasting Service. He explained and authenticated the station's published guide to its programs.^[25] For each program, the guide tells whether unlimited home taping is authorized, home taping is authorized subject to certain restrictions (such as erasure within seven days), or home taping is not authorized at all. The Spring 1978 edition of the guide described 107 programs. Sixty-two of those programs or 58% authorize some home taping. Twenty-one of them or almost 20% authorize unrestricted home taping.^[26]

Second is the testimony of Fred Rogers, president of the corporation that produces and owns the copyright on Mr. Rogers' Neighborhood. The program is carried by more public television stations than any other program. Its audience numbers over 3,000,000 families a day. He testified that he had absolutely no objection to home taping for noncommercial use and expressed the opinion that it is a real service to families to be able to record children's programs and to show them at appropriate times.^[27]

[446] If there are millions of owners of VTR's who make copies of televised sports events, religious broadcasts, and educational programs such as Mister Rogers' Neighborhood, and if the proprietors of those programs welcome the practice, the business of supplying the equipment that makes such copying feasible should not be stifled simply because the equipment is used by some individuals to make unauthorized reproductions of respondents' works. The respondents do not represent a class composed of all copyright holders. Yet a finding of contributory infringement would inevitably frustrate the interests of broadcasters in reaching the portion of their audience that is available only through time-shifting.

Of course, the fact that other copyright holders may welcome the practice of time-shifting does not mean that respondents should be deemed to have granted a license to copy their programs. Third party conduct would be wholly irrelevant in an action for direct infringement of respondents' copyrights. But in an action for contributory infringement against the seller of copying equipment, the copyright holder may not prevail unless the relief that he seeks affects only his programs, or unless he speaks for virtually all copyright holders with an interest in the outcome. In this case, the record makes it perfectly clear that there are many important producers of national and local television programs who find nothing objectionable about the enlargement in the size of the television audience that results from the practice of time-shifting for private home use.^[28] The seller of the equipment that expands those producers' audiences cannot be a con [447] tributory infringer if, as is true in this case, it has had no direct involvement with any infringing activity.

Even unauthorized uses of a copyrighted work are not necessarily infringing. An unlicensed use of the copyright is not an infringement unless it conflicts with one of the specific exclusive rights conferred by the copyright statute. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 154-155, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84. Moreover, the definition of exclusive rights in § 106 of the present Act is prefaced by the words "subject to sections 107 through 118." Those sections describe a variety of uses of copyrighted material that "are not infringements of copyright notwithstanding the provisions of § 106." The most pertinent in this case is § 107, the legislative endorsement of the doctrine of "fair use."^[29]

[448] That section identifies various factors^[30] that enable a Court to apply an "equitable rule of reason" analysis to particular claims of infringement.^[31] Although not conclusive, the first [449] factor requires that "the commercial or nonprofit character of an activity" be weighed in any fair use decision.^[32] If the Betamax were used to make copies for a commercial or profit-making purpose, such use would presumptively be unfair. The contrary presumption is appropriate here, however, because the District Court's findings plainly establish that time-shifting for private home use must be characterized as a noncommercial, nonprofit activity. Moreover, when one considers the nature of a televised copyrighted audiovisual work, see 17 U.S.C. § 107(2), and that timeshifting merely enables a viewer to see such a work which he had been invited to witness in its entirety free of charge, the fact [450] that the entire work is reproduced, see id., at § 107(3), does not have its ordinary effect of militating against a finding of fair use.^[33]

This is not, however, the end of the inquiry because Congress has also directed us to consider "the effect of the use upon the potential market for or value of the copyrighted work." Id., at § 107(4). The purpose of copyright is to create incentives for creative effort. Even copying for noncommercial purposes may impair the copyright holder's ability to obtain the rewards that Congress intended him to have. But a use that has no demonstrable effect upon the potential market for, or the value of, the copyrighted work need not be prohibited in order to protect the author's incentive to create. The prohibition of such noncommercial uses would [451] merely inhibit access to ideas without any countervailing benefit.^[34]

Thus, although every commercial use of copyrighted material is presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright, noncommercial uses are a different matter. A challenge to a noncommercial use of a copyrighted work requires proof either that the particular use is harmful, or that if it should become widespread, it would adversely affect the potential market for the copyrighted work. Actual present harm need not be shown; such a requirement would leave the copyright holder with no defense against predictable damage. Nor is it necessary to show with certainty that future harm will result. What is necessary is a showing by a preponderance of the evidence that some meaningful likelihood of future harm exists. If the intended use is for commercial gain, that likelihood may be presumed. But if it is for a noncommercial purpose, the likelihood must be demonstrated.

In this case, respondents failed to carry their burden with regard to home time-shifting. The District Court described respondents' evidence as follows:

"Plaintiffs' experts admitted at several points in the trial that the time-shifting without librarying would result in 'not a great deal of harm.' Plaintiffs' greatest concern about time-shifting is with 'a point of important philosophy that transcends even commercial judgment.' They fear that with any Betamax usage, 'invisible boundaries' are passed: 'the copyright owner has lost control over his program.'" 480 F.Supp., at 467.

[452] Later in its opinion, the District Court observed:

"Most of plaintiffs' predictions of harm hinge on speculation about audience viewing patterns and ratings, a measurement system which Sidney Sheinberg, MCA's president, calls a 'black art' because of the significant level of imprecision involved in the calculations." Id., at 469.^[35]

There was no need for the District Court to say much about past harm. "Plaintiffs have admitted that no actual harm to their copyrights has occurred to date." Id., at 451.

On the question of potential future harm from time-shifting, the District Court offered a more detailed analysis of the evidence. It rejected respondents' "fear that persons 'watching' the original telecast of a program will not be measured in the live audience and the ratings and revenues will decrease," by observing that current measurement technology allows the Betamax audience to be reflected. Id., at 466.^[36] It rejected respondents' prediction "that live televi [453] sion or movie audiences will decrease as more people watch Betamax tapes as an alternative," with the observation that "[t]here is no factual basis for [the underlying] assumption." Ibid.^[37] It rejected respondents' "fear that time-shifting will reduce audiences for telecast reruns," and concluded instead that "given current market practices, this should aid plaintiffs rather than harm them." Ibid.^[38] And it declared that respondents' suggestion "that theater or film rental exhibition of a program will suffer because of time-shift recording of that program" "lacks merit." 480 F.Supp., at 467.^[39]

[454] After completing that review, the District Court restated its overall conclusion several times, in several different ways. "Harm from time-shifting is speculative and, at best, minimal." Ibid. "The audience benefits from the time-shifting capability have already been discussed. It is not implausible that benefits could also accrue to plaintiffs, broadcasters, and advertisers, as the Betamax makes it possible for more persons to view their broadcasts." Ibid. "No likelihood of harm was shown at trial, and plaintiffs admitted that there had been no actual harm to date." Id., at 468-469. "Testimony at trial suggested that Betamax may require adjustments in marketing strategy, but it did not establish even a likelihood of harm." Id., at 469. "Television production by plaintiffs today is more profitable than it has ever been, and, in five weeks of trial, there was no concrete evidence to suggest that the Betamax will change the studios' financial picture." Ibid.

The District Court's conclusions are buttressed by the fact that to the extent time-shifting expands public access to freely broadcast television programs, it yields societal benefits. Earlier this year, in Community Television of Southern California v. Gottfried, --- U.S. ----, ---- - ----, n. 12, 103 S.Ct. 885, 891-892, 74 L.Ed.2d 705 (1983), we acknowledged the public interest in making television broadcasting more available. Concededly, that interest is not unlimited. But it supports an interpretation of the concept of "fair use" that requires the copyright holder to demonstrate some likelihood of harm before he may condemn a private act of time-shifting as a violation of federal law.

When these factors are all weighed in the "equitable rule of reason" balance, we must conclude that this record amply [455] supports the District Court's conclusion that home time-shifting is fair use. In light of the findings of the District Court regarding the state of the empirical data, it is clear that the Court of Appeals erred in holding that the statute as presently written bars such conduct.^[40]

[456] In summary, the record and findings of the District Court lead us to two conclusions. First, Sony demonstrated a significant likelihood that substantial numbers of copyright holders who license their works for broadcast on free television would not object to having their broadcasts time-shifted by private viewers. And second, respondents failed to demonstrate that time-shifting would cause any likelihood of nonminimal harm to the potential market for, or the value of, their copyrighted works. The Betamax is, therefore, capable of substantial noninfringing uses. Sony's sale of such equipment to the general public does not constitute contributory infringement of respondent's copyrights.

V

"The direction of Art. I is that Congress shall have the power to promote the progress of science and the useful arts. When, as here, the Constitution is permissive, the sign of how far Congress has chosen to go can come only from Congress." Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 530, 92 S.Ct. 1700, 1707, 32 L.Ed.2d 273 (1972).

One may search the Copyright Act in vain for any sign that the elected representatives of the millions of people who watch television every day have made it unlawful to copy a program for later viewing at home, or have enacted a flat prohibition against the sale of machines that make such copying possible.

It may well be that Congress will take a fresh look at this new technology, just as it so often has examined other innovations in the past. But it is not our job to apply laws that have not yet been written. Applying the copyright statute, as it now reads, to the facts as they have been developed in this case, the judgment of the Court of Appeals must be reversed.

It is so ordered.

__________

[457] Justice BLACKMUN, with whom Justice MARSHALL, Justice POWELL, and Justice REHNQUIST join, dissenting.

A restatement of the facts and judicial history of this case is necessary, in my view, for a proper focus upon the issues. Respondents' position is hardly so "unprecedented," ante, at 421, in the copyright law, nor does it really embody a "gross generalization," ante, at 436, or a "novel theory of liability," ante, at 437, and the like, as the Court, in belittling their claims, describes the efforts of respondents.

I

The introduction of the home videotape recorder (VTR) upon the market has enabled millions of Americans to make recordings of television programs in their homes, for future and repeated viewing at their own convenience. While this practice has proved highly popular with owners of television sets and VTRs, it understandably has been a matter of concern for the holders of copyrights in the recorded programs. A result is the present litigation, raising the issues whether the home recording of a copyrighted television program is an infringement of the copyright, and, if so, whether the manufacturers and distributors of VTRs are liable as contributory infringers. I would hope that these questions ultimately will be considered seriously and in depth by the Congress and be resolved there, despite the fact that the Court's decision today provides little incentive for congressional action. Our task in the meantime, however, is to resolve these issues as best we can in the light of ill-fitting existing copyright law.

It is no answer, of course, to say and stress, as the Court does, this Court's "consistent deference to Congress" whenever "major technological innovations" appear. Ante, at 431. Perhaps a better and more accurate description is that the Court has tended to evade the hard issues when they arise in the area of copyright law. I see no reason for the Court to be particularly pleased with this tradition or to continue it. Indeed, it is fairly clear from the legislative history of the 1976 Act that Congress meant to change the old pattern and [458] enact a statute that would cover new technologies, as well as old.

II

In 1976, respondents Universal City Studios, Inc., and Walt Disney Productions (Studios) brought this copyright infringement action in the United States District Court for the Central District of California against, among others, petitioners Sony Corporation, a Japanese corporation, and Sony Corporation of America, a New York corporation, the manufacturer and distributor, respectively, of the Betamax VTR. The Studios sought damages, profits, and a wide-ranging injunction against further sales or use of the Betamax or Betamax tapes.

The Betamax, like other VTRs, presently is capable of recording television broadcasts off the air on videotape cassettes, and playing them back at a later time.^[1] Two kinds of Betamax usage are at issue here.^[2] The first is "time-shifting," whereby the user records a program in order to watch it at a later time, and then records over it, and thereby erases the program, after a single viewing. The second is "library- [459] building," in which the user records a program in order to keep it for repeated viewing over a longer term. Sony's advertisements, at various times, have suggested that Betamax users "record favorite shows" or "build a library." Sony's Betamax advertising has never contained warnings about copyright infringement, although a warning does appear in the Betamax operating instructions.

The Studios produce copyrighted "movies" and other works that they release to theaters and license for television broadcast. They also rent and sell their works on film and on prerecorded videotapes and videodiscs. License fees for television broadcasts are set according to audience ratings, compiled by rating services that do not measure any playbacks of videotapes. The Studios make the serious claim that VTR recording may result in a decrease in their revenue from licensing their works to television and from marketing them in other ways.

After a 5-week trial, the District Court, with a detailed opinion, ruled that home VTR recording did not infringe the Studios' copyrights under either the Act of March 4, 1909 (1909 Act), 35 Stat. 1075, as amended (formerly codified as 17 U.S.C. § 1 et seq. (1976 ed.)), or the Copyright Revision Act of 1976 (1976 Act), 90 Stat. 2541, 17 U.S.C. § 101 et seq. (1982 ed.).^[3] The District Court also held that even if home VTR recording were an infringement, Sony could not be held liable under theories of direct infringement, contributory infringement, or vicarious liability. Finally, the court concluded that an injunction against sales of the Betamax would be inappropriate even if Sony were liable under one or more of those theories. 480 F.Supp. 429 (1979).

[460] The United States Court of Appeals for the Ninth Circuit reversed in virtually every respect. 659 F.2d 963 (1981). It held that the 1909 Act and the 1976 Act contained no implied exemption for "home use" recording, that such recording was not "fair use," and that the use of the Betamax to record the Studios' copyrighted works infringed their copyrights. The Court of Appeals also held Sony liable for contributory infringement, reasoning that Sony knew and anticipated that the Betamax would be used to record copyrighted material off the air, and that Sony, indeed, had induced, caused, or materially contributed to the infringing conduct. The Court of Appeals remanded the case to the District Court for appropriate relief; it suggested that the District Court could consider the award of damages or a continuing royalty in lieu of an injunction. Id., at 976.

III

The Copyright Clause of the Constitution, Art. I, § 8, cl. 8, empowers Congress "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." This Nation's initial copyright statute was passed by the First Congress. Entitled "An Act for the encouragement of learning," it gave an author "the sole right and liberty of printing, reprinting, publishing and vending" his "map, chart, book or books" for a period of 14 years. Act of May 31, 1790, § 1, 1 Stat. 124. Since then, as the technology available to authors for creating and preserving their writings has changed, the governing statute has changed with it. By many amendments, and by complete revisions in 1831, 1870, 1909, and 1976,^[4] authors' rights have been [461] expanded to provide protection to any "original works of authorship fixed in any tangible medium of expression," including "motion pictures and other audiovisual works." 17 U.S.C. § 102(a).^[5]

Section 106 of the 1976 Act grants the owner of a copyright a variety of exclusive rights in the copyrighted work,^[6] includ[462]ing the right "to reproduce the copyrighted work in copies or phonorecords."^[7] This grant expressly is made subject to §§ 107-118, which create a number of exemptions and limitations on the copyright owner's rights. The most important of these sections, for present purposes, is § 107; that section states that "the fair use of a copyrighted work . . . is not an infringement of copyright."^[8]

The 1976 Act, like its predecessors,^[9] does not give the copyright owner full and complete control over all possible [463] uses of his work. If the work is put to some use not enumerated in § 106, the use is not an infringement. See Fortnightly Corp. v. United Artists, 392 U.S. 390, 393-395, 88 S.Ct. 2084, 2085-2086, 20 L.Ed.2d 1176 (1968). Thus, before considering whether home videotaping comes within the scope of the fair use exemption, one first must inquire whether the practice appears to violate the exclusive right, granted in the first instance by § 106(1), "to reproduce the copyrighted work in copies or phonorecords."

Although the word "copies" is in the plural in § 106(1), there can be no question that under the Act the making of even a single unauthorized copy is prohibited. The Senate and House Reports explain: "The references to 'copies or phonorecords,' although in the plural, are intended here and throughout the bill to include the singular (1 U.S.C. § 1)."^[10] [464] S.Rep. No. 94-473, p. 58 (1975) (1975 Senate Report); H.R.Rep. No. 94-1476, p. 61 (1976) (1976 House Report), U.S.Code Cong. & Admin.News 1976, p. 5675. The Reports then describe the reproduction right established by § 106(1):

"[T]he right 'to reproduce the copyrighted work in copies or phonorecords' means the right to produce a material object in which the work is duplicated, transcribed, imitated, or simulated in a fixed form from which it can be 'perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.' As under the present law, a copyrighted work would be infringed by reproducing it in whole or in any substantial part, and by duplicating it exactly or by imitation or simulation." 1975 Senate Report 58; 1976 House Report 61, U.S.Code Cong. & Admin.News 1976, p. 5675.

The making of even a single videotape recording at home falls within this definition; the VTR user produces a material object from which the copyrighted work later can be perceived. Unless Congress intended a special exemption for the making of a single copy for personal use, I must conclude that VTR recording is contrary to the exclusive rights granted by § 106(1).

The 1976 Act and its accompanying reports specify in some detail the situations in which a single copy of a copyrighted work may be made without infringement concerns. Section 108(a), for example, permits a library or archives "to reproduce no more than one copy or phonorecord of a work" for a patron, but only under very limited conditions; an entire work, moreover, can be copied only if it cannot be obtained elsewhere at a fair price.^[11] § 108(e); see also § 112(a) (broad [465] caster may "make no more than one copy or phonorecord of a particular transmission program," and only under certain conditions). In other respects, the making of single copies is permissible only within the limited confines of the fair use doctrine. The Senate report, in a section headed "Single and multiple copying," notes that the fair use doctrine would permit a teacher to make a single copy of a work for use in the classroom, but only if the work was not a "sizable" one such as a novel or treatise. 1975 Senate Report 63-64; accord, 1976 House Report 68-69, 71. Other situations in which the making of a single copy would be fair use are described in the House and Senate reports.^[12] But neither the statute nor its legislative history suggests any intent to create a general exemption for a single copy made for personal or private use.

Indeed, it appears that Congress considered and rejected the very possibility of a special private use exemption. The issue was raised early in the revision process, in one of the studies prepared for Congress under the supervision of the Copyright Office. Latman, Fair Use of Copyrighted Works (1958), reprinted in Senate Committee on the Judiciary, Copyright Law Revision, Studies Prepared for the Subcommittee on Patents, Trademarks, and Copyrights, 86th Cong., 2d Sess., 1 (1960) (Latman Fair Use Study). This study found no reported case supporting the existence of an exemption for private use, although it noted that "the purpose and nature of a private use, and in some [466] cases the small amount taken, might lead a court to apply the general principles of fair use in such a way as to deny liability." Id., at 12. After reviewing a number of foreign copyright laws that contained explicit statutory exemptions for private or personal use, id., at 25, Professor Latman outlined several approaches that a revision bill could take to the general issue of exemptions and fair use. One of these was the adoption of particularized rules to cover specific situations, including "the field of personal use." Id., at 33.^[13]

Rejecting the latter alternative, the Register of Copyrights recommended that the revised copyright statute simply mention the doctrine of fair use and indicate its general scope. The Register opposed the adoption of rules and exemptions to cover specific situations,^[14] preferring, instead, to rely on the judge-made fair use doctrine to resolve new problems as they arose. See Register's 1961 Report 25; Register's Supplementary Report 27-28.

The Register's approach was reflected in the first copyright revision bills, drafted by the Copyright Office in 1964. [467] These bills, like the 1976 Act, granted the copyright owner the exclusive right to reproduce the copyrighted work, subject only to the exceptions set out in later sections. H.R. 11947/S. 3008, 88th Cong., 2d Sess., § 5(a) (1964). The primary exception was fair use, § 6, containing language virtually identical to § 107 of the 1976 Act. Although the copyright revision bills underwent change in many respects from their first introduction in 1964 to their final passage in 1976, these portions of the bills did not change.^[15] I can conclude only that Congress, like the Register, intended to rely on the fair use doctrine, and not on a per se exemption for private use, to separate permissible copying from the impermissible.^[16] 

[468] When Congress intended special and protective treatment for private use, moreover, it said so explicitly. One such explicit statement appears in § 106 itself. The copyright owner's exclusive right to perform a copyrighted work, in contrast to his right to reproduce the work in copies, is limited. Section 106(4) grants a copyright owner the exclusive right to perform the work "publicly," but does not afford the owner protection with respect to private performances by others. A motion picture is "performed" whenever its images are shown or its sounds are made audible. § 101. Like "sing [469] [ing] a copyrighted lyric in the shower," Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 155, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84 (1975), watching television at home with one's family and friends is now considered a performance. 1975 Senate Report 59-60; 1976 House Report 63.^[17] Home television viewing nevertheless does not infringe any copyright—but only because § 106(4) contains the word "publicly."^[18] See generally 1975 Senate Report 60-61; 1976 House Report 63-64; Register's 1961 Report 29-30. No such distinction between public and private uses appears in § 106(1)'s prohibition on the making of copies.^[19]

Similarly, an explicit reference to private use appears in § 108. Under that section, a library can make a copy for a patron only for specific types of private use: "private study, scholarship, or research."^[20] §§ 108(d)(1) and (e)(1); see 37[470] CFR § 201.14(b) (1982). Limits also are imposed on the extent of the copying and the type of institution that may make copies, and the exemption expressly is made inapplicable to motion pictures and certain other types of works. § 108(h). These limitations would be wholly superfluous if an entire copy of any work could be made by any person for private use.^[21]

B

The District Court in this case nevertheless concluded that the 1976 Act contained an implied exemption for "home-use recording." 480 F.Supp., at 444-446. The court relied primarily on the legislative history of a 1971 amendment to the 1909 Act, a reliance that this Court today does not duplicate. Ante, at 430, n. 11. That amendment, however, was addressed to the specific problem of commercial piracy of sound recordings. Act of Oct. 15, 1971, 85 Stat. 391 (1971 Amendment). The House Report on the 1971 Amendment, in a section entitled "Home Recording," contains the following statement:

"In approving the creation of a limited copyright in sound recordings it is the intention of the Committee that this limited copyright not grant any broader rights than are accorded to other copyright proprietors under the existing title 17. Specifically, it is not the intention of the Committee to restrain the home recording, from broadcasts or from tapes or records, of recorded per [471] formances, where the home recording is for private use and with no purpose of reproducing or otherwise capitalizing commercially on it. This practice is common and unrestrained today, and the record producers and performers would be in no different position from that of the owners of copyright in recorded musical compositions over the past 20 years." H.R.Rep. No. 92-487, p. 7 (1971) (1971 House Report).

Similar statements were made during House hearings on the bill^[22] and on the House floor,^[23] although not in the Senate [472] proceedings. In concluding that these statements created a general exemption for home recording, the District Court, in my view, paid too little heed to the context in which the statements were made, and failed to consider the limited purpose of the 1971 Amendment and the structure of the 1909 Act.

Unlike television broadcasts and other types of motion pictures, sound recordings were not protected by copyright prior to the passage of the 1971 Amendment. Although the underlying musical work could be copyrighted, the 1909 Act provided no protection for a particular performer's rendition of the work. Moreover, copyrighted musical works that had been recorded for public distribution were subject to a "compulsory license": any person was free to record such a work upon payment of a 2-cent royalty to the copyright owner. § 1(e), 35 Stat. 1075-1076. While reproduction without payment of the royalty was an infringement under the 1909 Act, damages were limited to three times the amount of the unpaid royalty. § 25(e), 35 Stat. 1081-1082; Shapiro, Bernstein & Co. v. Goody, 248 F.2d 260, 262-263, 265 (CA2 1957), cert. denied, 355 U.S. 952, 78 S.Ct. 536, 2 L.Ed.2d 529 (1958). It was observed that the practical effect of these provisions was to legalize record piracy. See S.Rep. No. 92-72, p. 4 (1971); 1971 House Report 2.

In order to suppress this piracy, the 1971 Amendment extended copyright protection beyond the underlying work and to the sound recordings themselves. Congress chose, however, to provide only limited protection: owners of copyright in sound recordings were given the exclusive right "[t]o reproduce [their works] and distribute [them] to the public."

[473] 1971 Amendment, § 1(a), 85 Stat. 391 (formerly codified as 17 U.S.C. § 1(f) (1976 ed.)).^[24] This right was merely the right of commercial distribution. See 117 Cong.Rec. 34748-34749 (1971) (colloquy of Reps. Kazen & Kastenmeier) ("the bill protects copyrighted material that is duplicated for commercial purposes only").

Against this background, the statements regarding home recording under the 1971 Amendment appear in a very different light. If home recording was "common and unrestrained" under the 1909 Act, see 1971 House Report 7, it was because sound recordings had no copyright protection and the owner of a copyright in the underlying musical work could collect no more than a 2-cent royalty plus 6 cents in damages for each unauthorized use. With so little at stake, it is not at all surprising that the Assistant Register "d[id] not see anybody going into anyone's home and preventing this sort of thing." 1971 House Hearings 23.

But the references to home sound recording in the 1971 Amendment's legislative history demonstrate no congressional intent to create a generalized home use exemption from copyright protection. Congress, having recognized that the 1909 Act had been unsuccessful in controlling home sound recording, addressed only the specific problem of commercial record piracy. To quote Assistant Register Ringer again, home use was "not what this legislation [was] addressed to." 1971 House Hearings 22.^[25]

[474] While the 1971 Amendment narrowed the sound recordings loophole in then existing copyright law, motion pictures and other audiovisual works have been accorded full copyright protection since at least 1912, see Act of Aug. 24, 1912, 37 Stat. 488, and perhaps before, see Edison v. Lubin, 122 F. 240 (CA3 1903), app. dism'd, 195 U.S. 625, 25 S.Ct. 790, 49 L.Ed. 349 (1904). Congress continued this protection in the 1976 Act. Unlike the sound recording rights created by the 1971 Amendment, the reproduction rights associated with motion pictures under § 106(1) are not limited to reproduction for public distribution; the copyright owner's right to reproduce the work exists independently, and the "mere duplication of a copy may constitute an infringement even if it is never distributed." Register's Supplementary Report 16; see 1975 Senate Report 57 and 1976 House Report 61. Moreover, the 1976 Act was intended as a comprehensive treatment of all aspects of copyright law. The reports accompanying the 1976 Act, unlike the 1971 House Report, contain no suggestion that home-use recording is somehow outside the scope of this all-inclusive statute. It was clearly the intent of Congress that no additional exemptions were to be implied.^[26] [475] I therefore find in the 1976 Act no implied exemption to cover the home taping of television programs, whether it be for a single copy, for private use, or for home use. Taping a copyrighted television program is infringement unless it is permitted by the fair use exemption contained in § 107 of the 1976 Act. I now turn to that issue.

IV

Fair Use

The doctrine of fair use has been called, with some justification, "the most troublesome in the whole law of copyright." Dellar v. Samuel Goldwyn, Inc., 104 F.2d 661, 662 (CA2 1939); see Triangle Publications, Inc. v. Knight-Ridder Newspapers, Inc., 626 F.2d 1171, 1174 (CA5 1980); Meeropol v. Nizer, 560 F.2d 1061, 1068 (CA2 1977), cert. denied, 434 U.S. 1013, 98 S.Ct. 727, 54 L.Ed.2d 756 (1978). Although courts have constructed lists of factors to be considered in determining whether a particular use is fair,^[27] no fixed criteria have emerged by which that [476] determination can be made. This Court thus far has provided no guidance; although fair use issues have come here twice, on each occasion the Court was equally divided and no opinion was forthcoming. Williams & Wilkins Co. v. United States, 203 Ct.Cl. 74, 487 F.2d 1345 (1973), aff'd, 420 U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975); Benny v. Loew's, Inc., 239 F.2d 532 (CA9 1956), aff'd sub nom. CBS, Inc. v. Loew's Inc., 356 U.S. 43, 78 S.Ct. 667, 2 L.Ed.2d 583 (1958).

Nor did Congress provide definitive rules when it codified the fair use doctrine in the 1976 Act; it simply incorporated a list of factors "to be considered": the "purpose and character of the use," the "nature of the copyrighted work," the "amount and substantiality of the portion used," and, perhaps the most important, the "effect of the use upon the potential market for or value of the copyrighted work" (emphasis supplied). § 107. No particular weight, however, was assigned to any of these, and the list was not intended to be exclusive. The House and Senate Reports explain that § 107 does no more than give "statutory recognition" to the fair use doctrine; it was intended "to restate the present judicial doctrine of fair use, not to change, narrow, or enlarge it in any way." 1976 House Report 66, U.S.Code Cong. & Admin.News 1976, p. 5680. See 1975 Senate Report 62; S.Rep. No. 93-983, p. 116 (1974); H.R.Rep. No. 83, 90th Cong., 1st Sess., 32 (1967); H.R.Rep. No. 2237, 89th Cong., 2d Sess., 61 (1966).

[477] A

Despite this absence of clear standards, the fair use doctrine plays a crucial role in the law of copyright. The purpose of copyright protection, in the words of the Constitution, is to "promote the Progress of Science and useful Arts." Copyright is based on the belief that by granting authors the exclusive rights to reproduce their works, they are given an incentive to create, and that "encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors in 'Science and the useful Arts.' " Mazer v. Stein, 347 U.S. 201, 219, 74 S.Ct. 460, 471, 98 L.Ed. 630 (1954). The monopoly created by copyright thus rewards the individual author in order to benefit the public. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84 (1975); Fox Film Corp. v. Doyal, 286 U.S. 123, 127-128, 52 S.Ct. 546, 547, 76 L.Ed. 1010 (1932); see H.R.Rep. No. 2222, 60th Cong., 2d Sess., 7 (1909).

There are situations, nevertheless, in which strict enforcement of this monopoly would inhibit the very "Progress of Science and useful Arts" that copyright is intended to promote. An obvious example is the researcher or scholar whose own work depends on the ability to refer to and to quote the work of prior scholars. Obviously, no author could create a new work if he were first required to repeat the research of every author who had gone before him.^[28] The scholar, like the ordinary user, of course could be left to bargain with each copyright owner for permission to quote from or refer to prior works. But there is a crucial difference between the scholar and the ordinary user. When the ordinary user decides that the owner's price is too high, and forgoes use of the work, only the individual is the loser. When the scholar forgoes the use of a prior work, not only does his own [478] work suffer, but the public is deprived of his contribution to knowledge. The scholar's work, in other words, produces external benefits from which everyone profits. In such a case, the fair use doctrine acts as a form of subsidy—albeit at the first author's expense—to permit the second author to make limited use of the first author's work for the public good. See Latman Fair Use Study 31; Gordon, Fair Use as Market Failure: A Structural Analysis of the Betamax Case and its Predecessors, 82 Colum.L.Rev. 1600, 1630 (1982).

A similar subsidy may be appropriate in a range of areas other than pure scholarship. The situations in which fair use is most commonly recognized are listed in § 107 itself; fair use may be found when a work is used "for purposes such as criticism, comment, news reporting, teaching, . . . scholarship, or research." The House and Senate Reports expand on this list somewhat,^[29] and other examples may be found in the case law.^[30] Each of these uses, however, reflects a common theme: each is a productive use, resulting in some added benefit to the public beyond that produced by the first author's work.^[31] The fair use doctrine, in other words, permits works [479] to be used for "socially laudable purposes." See Copyright Office, Briefing Papers on Current Issues, reprinted in 1975 House Hearings 2051, 2055. I am aware of no case in which the reproduction of a copyrighted work for the sole benefit of the user has been held to be fair use.^[32]

I do not suggest, of course, that every productive use is a fair use. A finding of fair use still must depend on the facts of the individual case, and on whether, under the circumstances, it is reasonable to expect the user to bargain with the copyright owner for use of the work. The fair use doctrine must strike a balance between the dual risks created by the copyright system: on the one hand, that depriving authors of their monopoly will reduce their incentive to create, and, on the other, that granting authors a complete monopoly will reduce the creative ability of others.^[33] The inquiry is [480] necessarily a flexible one, and the endless variety of situations that may arise precludes the formulation of exact rules. But when a user reproduces an entire work and uses it for its original purpose, with no added benefit to the public, the doctrine of fair use usually does not apply. There is then no need whatsoever to provide the ordinary user with a fair use subsidy at the author's expense.

The making of a videotape recording for home viewing is an ordinary rather than a productive use of the Studios' copyrighted works. The District Court found that "Betamax owners use the copy for the same purpose as the original. They add nothing of their own." 480 F.Supp., at 453. Although applying the fair use doctrine to home VTR recording, as Sony argues, may increase public access to material broadcast free over the public airwaves, I think Sony's argument misconceives the nature of copyright. Copyright gives the author a right to limit or even to cut off access to his work. Fox Film Corp. v. Doyal, 286 U.S. 123, 127, 52 S.Ct. 546, 547, 76 L.Ed. 1010 (1932). A VTR recording creates no public benefit sufficient to justify limiting this right. Nor is this right extinguished by the copyright owner's choice to make the work available over the airwaves. Section 106 of the 1976 Act grants the copyright owner the exclusive right to control the performance and the reproduction of his work, and the fact that he has licensed a single television performance is really irrelevant to the existence of his right to control its reproduction. Although a television broadcast may be free to the viewer, this fact is equally irrelevant; a book borrowed from the public library may not be copied any more freely than a book that is purchased.

It may be tempting, as, in my view, the Court today is tempted, to stretch the doctrine of fair use so as to permit unfettered use of this new technology in order to increase ac [481] cess to television programming. But such an extension risks eroding the very basis of copyright law, by depriving authors of control over their works and consequently of their incentive to create.^[34] Even in the context of highly productive educational uses, Congress has avoided this temptation; in passing the 1976 Act, Congress made it clear that off-the-air videotaping was to be permitted only in very limited situations. See 1976 House Report 71; 1975 Senate Report 64. And, the Senate report adds, "[t]he committee does not intend to suggest . . . that off-the-air recording for convenience would under any circumstances, be considered 'fair use.' " Id., at 66. I cannot disregard these admonitions.

B

I recognize, nevertheless, that there are situations where permitting even an unproductive use would have no effect on the author's incentive to create, that is, where the use would not affect the value of, or the market for, the author's work. Photocopying an old newspaper clipping to send to a friend [482] may be an example; pinning a quotation on one's bulletin board may be another. In each of these cases, the effect on the author is truly de minimis. Thus, even though these uses provide no benefit to the public at large, no purpose is served by preserving the author's monopoly, and the use may be regarded as fair.

Courts should move with caution, however, in depriving authors of protection from unproductive "ordinary" uses. As has been noted above, even in the case of a productive use, § 107(4) requires consideration of "the effect of the use upon the potential market for or value of the copyrighted work" (emphasis added). "[A] particular use which may seem to have little or no economic impact on the author's rights today can assume tremendous importance in times to come." Register's Supplementary Report 14. Although such a use may seem harmless when viewed in isolation, "[i]solated instances of minor infringements, when multiplied many times, become in the aggregate a major inroad on copyright that must be prevented." 1975 Senate Report 65.

I therefore conclude that, at least when the proposed use is an unproductive one, a copyright owner need prove only a potential for harm to the market for or the value of the copyrighted work. See 3 M. Nimmer, Copyright § 13.05[E][4][c], p. 13-84 (1982). Proof of actual harm, or even probable harm, may be impossible in an area where the effect of a new technology is speculative, and requiring such proof would present the "real danger . . . of confining the scope of an author's rights on the basis of the present technology so that, as the years go by, his copyright loses much of its value because of unforeseen technical advances." Register's Supplementary Report 14. Infringement thus would be found if the copyright owner demonstrates a reasonable possibility that harm will result from the proposed use. When the use is one that creates no benefit to the public at large, copyright protection should not be denied on the basis that a new technology that may result in harm has not yet done so.

[483] The Studios have identified a number of ways in which VTR recording could damage their copyrights. VTR recording could reduce their ability to market their works in movie theaters and through the rental or sale of pre-recorded videotapes or videodiscs; it also could reduce their rerun audience, and consequently the license fees available to them for repeated showings. Moreover, advertisers may be willing to pay for only "live" viewing audiences, if they believe VTR viewers will delete commercials or if rating services are unable to measure VTR use; if this is the case, VTR recording could reduce the license fees the Studios are able to charge even for first-run showings. Library-building may raise the potential for each of the types of harm identified by the Studios, and time-shifting may raise the potential for substantial harm as well.^[35]

Although the District Court found no likelihood of harm from VTR use, 480 F.Supp., at 468, I conclude that it applied an incorrect substantive standard and misallocated the [484] burden of proof. The District Court reasoned that the Studios had failed to prove that library-building would occur "to any significant extent," id., at 467; that the Studios' prerecorded videodiscs could compete with VTR recordings and were "arguably . . . more desirable," ibid; that it was "not clear that movie audiences will decrease," id., at 468; and that the practice of deleting commercials "may be too tedious" for many viewers, ibid. To the extent any decrease in advertising revenues would occur, the court concluded that the Studios had "marketing alternatives at hand to recoup some of that predicted loss." Id., at 452. Because the Studios' prediction of harm was "based on so many assumptions and on a system of marketing which is rapidly changing," the court was "hesitant to identify 'probable effects' of home-use copying." Ibid.

The District Court's reluctance to engage in prediction in this area is understandable, but, in my view, the court was mistaken in concluding that the Studios should bear the risk created by this uncertainty. The Studios have demonstrated a potential for harm, which has not been, and could not be, refuted at this early stage of technological development.

The District Court's analysis of harm, moreover, failed to consider the effect of VTR recording on "the potential market for or the value of the copyrighted work," as required by § 107(4).^[36] The requirement that a putatively infringing use [485] of a copyrighted work, to be "fair," must not impair a "potential" market for the work has two implications. First, an infringer cannot prevail merely by demonstrating that the copyright holder suffered no net harm from the infringer's action. Indeed, even a showing that the infringement has resulted in a net benefit to the copyright holder will not suffice. Rather, the infringer must demonstrate that he had not impaired the copyright holder's ability to demand compensation from (or to deny access to) any group who would otherwise be willing to pay to see or hear the copyrighted work. Second, the fact that a given market for a copyrighted work would not be available to the copyright holder were it not for the infringer's activities does not permit the infringer to exploit that market without compensating the copyright holder. See Iowa State University Research Foundation, Inc. v. American Broadcasting Cos., 621 F.2d 57 (CA2 1980).

In this case, the Studios and their amici demonstrate that the advent of the VTR technology created a potential market for their copyrighted programs. That market consists of those persons who find it impossible or inconvenient to watch the programs at the time they are broadcast, and who wish to watch them at other times. These persons are willing to pay for the privilege of watching copyrighted work at their convenience, as is evidenced by the fact that they are willing to pay for VTRs and tapes; undoubtedly, most also would be willing to pay some kind of royalty to copyright holders. The Studios correctly argue that they have been deprived of the ability to exploit this sizable market.

It is thus apparent from the record and from the findings of the District Court that time-shifting does have a substantial [486] adverse effect upon the "potential market for" the Studios' copyrighted works. Accordingly, even under the formulation of the fair use doctrine advanced by Sony, time-shifting cannot be deemed a fair use.

V

Contributory Infringement

From the Studios' perspective, the consequences of home VTR recording are the same as if a business had taped the Studios' works off the air, duplicated the tapes, and sold or rented them to members of the public for home viewing. The distinction is that home VTR users do not record for commercial advantage; the commercial benefit accrues to the manufacturer and distributors of the Betamax. I thus must proceed to discuss whether the manufacturer and distributors can be held contributorily liable if the product they sell is used to infringe.

It is well established that liability for copyright infringement can be imposed on persons other than those who actually carry out the infringing activity. Kalem Co. v. Harper Brothers, 222 U.S. 55, 62-63, 32 S.Ct. 20, 21-22, 56 L.Ed. 92 (1911); 3 M. Nimmer, Copyright § 12.04[A] (1982); see Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 160, n. 11, 95 S.Ct. 2040, 2046, n. 11, 45 L.Ed.2d 84 (1975); Buck v. Jewell-LaSalle Realty Co., 283 U.S. 191, 198, 51 S.Ct. 410, 411, 75 L.Ed. 971 (1931). Although the liability provision of the 1976 Act provides simply that "[a]nyone who violates any of the exclusive rights of the copyright owner . . . is an infringer of the copyright," 17 U.S.C. § 501(a), the House and Senate Reports demonstrate that Congress intended to retain judicial doctrines of contributory infringement. 1975 Senate Report 57; 1976 House Report 61.^[37]

[487] The doctrine of contributory copyright infringement, however, is not well-defined. One of the few attempts at definition appears in Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159 (CA2 1971). In that case the Second Circuit stated that "one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a 'contributory' infringer." Id., at 1162 (footnote omitted). While I have no quarrel with this general statement, it does not easily resolve the present case; the District Court and the Court of Appeals, both purporting to apply it, reached diametrically opposite results.

A.

In absolving Sony from liability, the District Court reasoned that Sony had no direct involvement with individual Betamax users, did not participate in any off-the-air copying, and did not know that such copying was an infringement of the Studios' copyright. 480 F.Supp., at 460. I agree with the Gershwin court that contributory liability may be imposed even when the defendant has no formal control over the infringer. The defendant in Gershwin was a concert promoter operating through local concert associations that it sponsored; it had no formal control over the infringing performers themselves. 443 F.2d, [488] at 1162-1163. See also Twentieth Century Music Corp. v. Aiken, 422 U.S., at 160, n. 11, 95 S.Ct., at 2046, n. 11. Moreover, a finding of contributory infringement has never depended on actual knowledge of particular instances of infringement; it is sufficient that the defendant have reason to know that infringement is taking place. 443 F.2d, at 1162; see Screen Gems-Columbia Music, Inc. v. Mark-Fi Records, Inc., 256 F.Supp. 399 (SDNY 1966).^[38] In the so-called "dance hall" cases, in which questions of contributory infringement arise with some frequency, proprietors of entertainment establishments routinely are held liable for unauthorized performances on their premises, even when they have no knowledge that copyrighted works are being performed. In effect, the proprietors in those cases are charged with constructive knowledge of the performances.^[39]

[489] Nor is it necessary that the defendant be aware that the infringing activity violates the copyright laws. Section 504(c)(2) of the 1976 Act provides for a reduction in statutory damages when an infringer proves he "was not aware and had no reason to believe that his or her acts constituted an infringement of copyright," but the statute establishes no general exemption for those who believe their infringing activities are legal. Moreover, such an exemption would be meaningless in a case such as this, in which prospective relief is sought; once a court has established that the copying at issue is infringement, the defendants are necessarily aware of that fact for the future. It is undisputed in this case that Sony had reason to know the Betamax would be used by some owners to tape copyrighted works off the air. See 480 F.Supp., at 459-460.

The District Court also concluded that Sony had not caused, induced, or contributed materially to any infringing activities of Betamax owners. 480 F.Supp., at 460. In a case of this kind, however, causation can be shown indirectly; it does not depend on evidence that particular Betamax owners relied on particular advertisements. In an analogous case decided just two Terms ago, this Court approved a lower court's conclusion that liability for contributory trademark infringement could be imposed on a manufacturer who "suggested, even by implication" that a retailer use the manufacturer's goods to infringe the trademark of another. Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 851, 102 S.Ct. 2182, 2186, 72 L.Ed.2d 606 (1982); see id., at 860, 102 S.Ct., at 2191 (concurring opinion). I think this standard is equally appropriate in the copyright context.

The District Court found that Sony has advertised the Betamax as suitable for off-the-air recording of "favorite shows," "novels for television," and "classic movies," 480 F.Supp., at 436, with no visible warning that such recording [490] could constitute copyright infringement. It is only with the aid of the Betamax or some other VTR, that it is possible today for home television viewers to infringe copyright by recording off-the-air. Off-the-air recording is not only a foreseeable use for the Betamax, but indeed is its intended use. Under the circumstances, I agree with the Court of Appeals that if off-the-air recording is an infringement of copyright, Sony has induced and materially contributed to the infringing conduct of Betamax owners.^[40]

B

Sony argues that the manufacturer or seller of a product used to infringe is absolved from liability whenever the product can be put to any substantial noninfringing use. Brief for Petitioners 41-42. The District Court so held, borrowing the "staple article of commerce" doctrine governing liability for contributory infringement of patents. See 35 U.S.C. § 271.^[41] This Court today is much less positive. See ante, [491] at 440-442. I do not agree that this technical judge-made doctrine of patent law, based in part on considerations irrelevant to the field of copyright, see generally Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S. 176, 187-199, 100 S.Ct. 2601, 2608-2614, 65 L.Ed.2d 696 (1980), should be imported wholesale into copyright law. Despite their common constitutional source, see U.S. Const., Art. I, § 8, cl. 8, patent and copyright protections have not developed in a parallel fashion, and this Court in copyright cases in the past has borrowed patent concepts only sparingly. See Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 345-346, 28 S.Ct. 722, 724, 52 L.Ed. 1086 (1908).

I recognize, however, that many of the concerns underlying the "staple article of commerce" doctrine are present in copyright law as well. As the District Court noted, if liability for contributory infringement were imposed on the manufacturer or seller of every product used to infringe—a typewriter, a camera, a photocopying machine—the "wheels of commerce" would be blocked. 480 F.Supp., at 461; see also Kalem Co. v. Harper Brothers, 222 U.S., at 62, 32 S.Ct., at 21.

I therefore conclude that if a significant portion of the product's use is noninfringing, the manufacturers and sellers cannot be held contributorily liable for the product's infringing uses. See ante, at 440-441. If virtually all of the product's use, however, is to infringe, contributory liability may be imposed; if no one would buy the product for noninfringing purposes alone, it is clear that the manufacturer is purposely profiting from the infringement, and that liability is appropriately imposed. In such a case, the copyright owner's monopoly would not be extended beyond its proper bounds; the manufacturer of such a product contributes to the infringing activities of others and profits directly thereby, while [492] providing no benefit to the public sufficient to justify the infringement.

The Court of Appeals concluded that Sony should be held liable for contributory infringement, reasoning that "[v]ideotape recorders are manufactured, advertised, and sold for the primary purpose of reproducing television programming," and "[v]irtually all television programming is copyrighted material." 659 F.2d, at 975. While I agree with the first of these propositions,^[42] the second, for me, is problematic. The key question is not the amount of television programming that is copyrighted, but rather the amount of VTR usage that is infringing.^[43] Moreover, the parties and their amici have argued vigorously about both the amount of television programming that is covered by copyright and the amount for which permission to copy has been given. The proportion of VTR recording that is infringing is ultimately a question of fact,^[44] and the District Court specifically declined to make [493] findings on the "percentage of legal versus illegal home-use recording." 480 F.Supp., at 468. In light of my view of the law, resolution of this factual question is essential. I therefore would remand the case for further consideration of this by the District Court.

VI

The Court has adopted an approach very different from the one I have outlined. It is my view that the Court's approach alters dramatically the doctrines of fair use and contributory infringement as they have been developed by Congress and the courts. Should Congress choose to respond to the Court's decision, the old doctrines can be resurrected. As it stands, however, the decision today erodes much of the coherence that these doctrines have struggled to achieve.

The Court's disposition of the case turns on its conclusion that time-shifting is a fair use. Because both parties agree that time-shifting is the primary use of VTRs, that conclusion, if correct, would settle the issue of Sony's liability under almost any definition of contributory infringement. The Court concludes that time-shifting is fair use for two reasons. Each is seriously flawed.

The Court's first reason for concluding that time-shifting is fair use is its claim that many copyright holders have no objection to time-shifting, and that "respondents have no right to prevent other copyright holders from authorizing it for their programs." Ante, at 442. The Court explains that a finding of contributory infringement would "inevitably frustrate the interests of broadcasters in reaching the portion of their audience that is available only through time-shifting." [494] Ante, at 446. Such reasoning, however, simply confuses the question of liability with the difficulty of fashioning an appropriate remedy. It may be that an injunction prohibiting the sale of VTRs would harm the interests of copyright holders who have no objection to others making copies of their programs. But such concerns should and would be taken into account in fashioning an appropriate remedy once liability has been found. Remedies may well be available that would not interfere with authorized time-shifting at all. The Court of Appeals mentioned the possibility of a royalty payment that would allow VTR sales and time-shifting to continue unabated, and the parties may be able to devise other narrowly tailored remedies. Sony may be able, for example, to build a VTR that enables broadcasters to scramble the signal of individual programs and "jam" the unauthorized recording of them. Even were an appropriate remedy not available at this time, the Court should not misconstrue copyright holders' rights in a manner that prevents enforcement of them when, through development of better techniques, an appropriate remedy becomes available.^[45]

[495] The Court's second stated reason for finding that Sony is not liable for contributory infringement is its conclusion that even unauthorized time-shifting is fair use. Ante, at 447. This conclusion is even more troubling. The Court begins by suggesting that the fair use doctrine operates as a general "equitable rule of reason." That interpretation mischaracterizes the doctrine, and simply ignores the language of the statute. Section 107 establishes the fair use doctrine "for purposes such as criticism, comment, news reporting, teaching, . . . scholarship, or research." These are all productive uses. It is true that the legislative history states repeatedly that the doctrine must be applied flexibly on a case-by-case basis, but those references were only in the context of productive uses. Such a limitation on fair use comports with its purpose, which is to facilitate the creation of new works. There is no indication that the fair use doctrine has any application for purely personal consumption on the scale involved in this case,^[46] and the Court's application of it here deprives fair use of the major cohesive force that has guided evolution of the doctrine in the past.

[496] Having bypassed the initial hurdle for establishing that a use is fair, the Court then purports to apply to time-shifting the four factors explicitly stated in the statute. The first is "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes." § 107(1). The Court confidently describes time-shifting as a noncommercial, nonprofit activity. It is clear, however, that personal use of programs that have been copied without permission is not what § 107(1) protects. The intent of the section is to encourage users to engage in activities the primary benefit of which accrues to others. Time-shifting involves no such humanitarian impulse. It is likewise something of a mischaracterization of time-shifting to describe it as noncommercial in the sense that that term is used in the statute. As one commentator has observed, time-shifting is noncommercial in the same sense that stealing jewelry and wearing it—instead of reselling it—is noncommercial.^[47] Purely consumptive uses are certainly not what the fair use doctrine was designed to protect, and the awkwardness of applying the statutory language to time-shifting only makes clearer that fair use was designed to protect only uses that are productive.

The next two statutory factors are all but ignored by the Court—though certainly not because they have no applicability. The second factor—"the nature of the copyrighted work"—strongly supports the view that time-shifting is an infringing use. The rationale guiding application of this factor is that certain types of works, typically those involving "more of diligence than of originality or inventiveness," New York Times Co. v. Roxbury Data Interface, Inc., 434 F.Supp. 217, 221 (NJ 1977), require less copyright protection than other original works. Thus, for example, informational [497] works, such as news reports, that readily lend themselves to productive use by others, are less protected than creative works of entertainment. Sony's own surveys indicate that entertainment shows account for more than 80 percent of the programs recorded by Betamax owners.^[48]

The third statutory factor—"the amount and substantiality of the portion used"—is even more devastating to the Court's interpretation. It is undisputed that virtually all VTR owners record entire works, see 480 F.Supp., at 454, thereby creating an exact substitute for the copyrighted original. Fair use is intended to allow individuals engaged in productive uses to copy small portions of original works that will facilitate their own productive endeavors. Time-shifting bears no resemblance to such activity, and the complete duplication that it involves might alone be sufficient to preclude a finding of fair use. It is little wonder that the Court has chosen to ignore this statutory factor.^[49]

The fourth factor requires an evaluation of "the effect of the use upon the potential market for or value of the copyrighted work." This is the factor upon which the Court focuses, but once again, the Court has misread the statute. As mentioned above, the statute requires a court to consider the effect of the use on the potential market for the copyrighted work. The Court has struggled mightily to show that VTR use has not reduced the value of the Studios' copyrighted works in their present markets. Even if true, that showing only begins the proper inquiry. The development [498] of the VTR has created a new market for the works produced by the Studios. That market consists of those persons who desire to view television programs at times other than when they are broadcast, and who therefore purchase VTR recorders to enable them to time-shift.^[50] Because time-shifting of the Studios' copyrighted works involves the copying of them, however, the Studios are entitled to share in the benefits of that new market. Those benefits currently go to Sony through Betamax sales. Respondents therefore can show harm from VTR use simply by showing that the value of their copyrights would increase if they were compensated for the copies that are used in the new market. The existence of this effect is self-evident.