On the 20th of March this year, the United States District Court for the Southern District of New York, in the person of Judge Denise Cote, emitted a ruling fated to prompt lively debate and marked reactions. A closer look at the analysis conducted by the Judge will provide further insight into the reasons determining this outcome, which was largely focused on issues of law as the factual ground was almost totally undisputed.
The ruling concerned copyright law and, more specifically, the application of the doctrine of Fair Use, according to which certain uses of copyrighted work for certain purposes such as news reporting or criticism do not constitute an infringement of copyright, as clearly stated by §107 of the Copyright Act. As is well known, in order to fall within the scope of Fair Use, a given use of a copyrighted work must be assessed by four criteria laid out in §107 of the US Copyright Act.
The plaintiff, Associated Press, which has been an important news cooperative operative in the United States since 1846, filed a motion for summary judgment claiming infringement of copyright against Meltwater US1 Inc., an online service company founded in Norway in 2001.
The latter, by means of its “Meltwater News” service, has been providing its subscribers with weekly reports containing excerpts of news articles, among which some taken verbatim from AP’s copyrighted articles.
Meltwater’s main defense consisted essentially in alleging that its activities were the same as the usual transformative use made by search engines, hence it accordingly stressed that they were to be considered as Fair Use. In this respect the Judge established that the defendant had failed to provide sufficient evidence that the activity it had been engaging in could be equated with that conducted by any known search engine, especially on the grounds of the “click-through” test, and thus it could not be included in what the Judge called “breathing space”, making reference to Fair Use.
In the Judge’s opinion, an accurate assessment of the four factors constituting Fair Use in light of the purpose of Copyright Law weighed heavily against Meltwater and thus the defendant was to be considered culpable of copyright infringement.
With specific regard to the first factor (Purpose and Character of the Use), Meltwater’s conduct was referred to as “free-riding”, clearly aimed at supplanting the service that AP and its licensees offer the public. The Court found no element in favor of a finding of transformative use as Meltwater had constantly engaged in verbatim reporting of key words and excerpts surrounding them, from AP.
Moreover the Judge considered the Meltwater News click through rate as not comparable with that of other search engines. More specifically, it clearly emerged from undisputed evidence that Meltwater subscribers very rarely accessed third-party websites (i.e. the original source of the information), thus making the argument by which the service in dispute could be equated with that offered by a search engine quite difficult to sustain. In fact, the very low click through rate only seemed to strengthen the Judge’s conviction that Meltwater was acting as a substitute service for AP or its licensees rather than encouraging its subscribers to access original articles.
Moreover, in the context of a comparison between Meltwater News and Google News Alerts, the Judge granted AP’s argument that Google’s excerpts do not usually include the lede and are also considerably shorter. This appeared to be a strong factor in the Judge’s final decision, especially in consideration of the fact that Meltwater failed to provide any sufficient element to demonstrate that its service could be equated with that of a search engine.
The conclusion concerning the first element of Fair Use made by the Court, whilst rejecting further arguments offered by Meltwater in relation to previous cases such as Perfect 10, Inc. v. Amazon.com  and Kelly v. Arriba Soft Corp , appears to be as follows: search engines usually engage in transformative uses of copyrighted works, however, since Meltwater failed to provide sufficient evidence that its use is similar to that of a search engine, since it is not transformative, its activity cannot fall under the scope of Fair Use. The first factor thus weighed strongly against Meltwater.
Such a finding is of great importance as it draws a clear line between what can be considered a transformative use and what cannot. The interpretation of the role of the lede and of the composition of the articles also played an important role in considering Meltwater’s use to be non-transformative. Although reporting of facts is not copyrightable, the way news is reported “may display originality” and therefore may be subject to protection under Copyright Law.
The Judge also made a short digression on the requisites for a finding of fair use in relation to the nature of the copyrighted work, recalling the necessity for a clear difference in treatment for fictional and factual copyrighted works and also concerning their published or unpublished status. Accordingly, this element was considered to be neutral as AP deals with news articles, which are much more subject to application of Fair Use than works of fiction.
It was in relation to the factor concerning the amount and substantiality of the copying that Meltwater’s defense strategy appeared to be totally deficient. In taking a closer look at the qualitative aspect of this element, it is important to highlight the conflicting interpretation of the role of the lede of the articles. According to AP, in fact it “is meant to convey the heart of the story”, with its crafting requiring a high degree of journalistic skill. Conversely, Meltwater News service, which, according to a Meltwater employee, was aimed at saving client time “so you don’t have to read the full article”, harnessed the lede as a teaser and not as a summary of the news.
From a merely quantitative point of view, although the court admitted that “no bright-line rule exists with respect to how much copying is too much”, recalling the Supreme Court’s outcome in Campbell v. Acuff-Rose  sufficed to consider the copied portions of the articles excessive.
Not only did the claims raised by AP result in being highly effective for their purpose, but Meltwater lacked appeal to the court, with all its arguments being rejected, particularly that stressing its equivalence to a search engine.
Lastly, there are the Court’s consideration of the effect of Meltwater News activities on AP’s market contained in the introduction to the final assessment on Fair Use. The impact on potential licensing revenues was found essential for the simple reason that the Court qualified Meltwater’s activity as non-transformative, thus acting on a market where the copyright holder was a player. Morever, Meltwater is considered to be not only a direct competitor of AP as its use of the work substitutes the latter’s products, but it also does not pay any licensing fee, thus obtaining an unfair commercial advantage.
The Court finally stated that Meltwater News, far from possibly being considered a search engine, is nothing but a news clipping service, gaining an unfair commercial advantage, whose business model is strictly based on non-transformative, systematic copying of other’s copyrighted expressions.
Meltwater also pointed out without any positive result that, similarly to the famous cases Field v. Google, Inc.  and Parker v. Yahoo! Inc. , it had an implied license to report the excerpts. Unfortunately for Meltwater, the factual background of the mentioned cases, unlike that of the case at issue, unequivocally demonstrated that the copyright owners were aware of the no-archive meta-tag and of the availability of the search engines to remove the content upon request.
It clearly appears that although Meltwater qualified itself as a search engine, its failure to demonstrate this and the use of its News clipping service by subscribers strongly persuaded the court that its main function was not that of a location tool. The verbatim copying of the lede and of considerable portions of articles, alongside a very low click-through rate strengthened such an interpretation, and also indicated the direction of possible future developments in the judicial interpretation of Fair Use.
The link to the ruling: http://www.nysd.uscourts.gov/cases/show.php?db=special&id=279
 508 F.3d 1146 (9th Cir. 2007)
 336 F.3d 811(CA9 2003)
 510 U.S. 569, 114 S. Ct. 1164, 127 L. Ed. 2d 500 (1994)
 412 F.Supp. 2d 1106 (D. Nev. 2006)
 2008 WL 4410095 (E.D. Pa. Sept. 25, 2008)