By Joel L. Hecker
On March 26, 2021, in a much-anticipated decision, the 2nd Circuit reversed the Southern District of New York decision, which found that Andy Warhol's creation of 16 silkscreen prints and pencil illustrations of the musical artist Prince, which was based upon a 1981 photograph created by photographer Lynn Goldsmith, was fair use under the United States Copyright Act. The case is The Andy Warhol Foundation for the Visual Arts v. Lynn Goldsmith and Lynn Goldsmith Ltd. (the parties are reversed as Warhol sought a declaratory judgment of non-infringement and Goldsmith counterclaimed for copyright infringement). 2021.03.26 Second Circuit Opinion.pdf
The District Court had found that all 4 of the statutory non-exclusive fair use factors favored Warhol. The 2nd Circuit panel disagreed and concluded that all of the factors actually favored Goldsmith. The 4 factors, set forth in 17 U.S.C. Section 107, are:
(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 principal takeaways from the decision, which are instructive for those who deal with copyright fair use matters, are:
• The panel noted that recent court decisions have placed undue reliance upon the transformative aspect of the first factor, often determining that a transformative use was sufficient for a fair use finding irrespective of the other 3 factors. The panel limited the 2nd Circuit's 2013 Cariou v. Prince decision (714 F. 3d 694) to its facts and went out of its way to write that "our review of the decision below persuades us that some clarification is in order." The Cariou decision has, as the panel noted, "not been immune from criticism." That is an understatement, to say the least, and this reversal in Goldsmith goes a long way to correct what many have perceived to be Cariou's flawed fair use analysis.
• It does not follow that any secondary work that adds a new aesthetic or a new expression to its source material is necessarily transformative. This is particularly instructive as to derivative works, since that category is specifically excluded from the scope of fair use.
• Courts typically consider the purpose of the primary and secondary works in determining if the secondary was transformative. The panel pointed out that the common thread in those cases, "where the secondary work does not obviously comment on or relate back to the original or use the original for a purpose other than that for which it was created," the bare assertion of a "higher or different artistic use " is insufficient to render a work transformative.
On this point the panel held that the secondary work "must, at a bare minimum, comprise something more than the imposition of another artist's style on the primary work such that the secondary work remains both recognizably derived from, and retaining the essential elements of, its source material". That is, the panel found the District Court's conclusion that, "each Prince Series work is immediately recognizable as a Warhol" is irrelevant to the transformative analysis, since that logic "inevitably creates a celebrity-plagiarist privilege."
• The panel unequivocally stated that, as to the fourth factor analysis of effect on the market for the original, that the test is not whether the secondary work would damage the market for the first, but whether it usurps that market by offering a competing substitute. The panel rejected the District Court's rationale that the market for licensing Warhol's works (or by extension any famous artist) is a market for "Warhols" since this would permit this aspect of the fourth factor always to weigh in favor of the alleged infringer when there is an active market for such works. The panel had no problem reversing the District Court on this factor, finding that the markets for licensing Goldsmith's work and the Prince Series overlap in both the existing market, the potential market, and the derivative markets for Goldsmith's photograph. (The case did not involve the sales of the original 16 Warhol works as they were sold or donated to museums prior to the running of the statute of limitations.)
In summary, the panel limited those parts of the Cariou decision that had been subject to extensive criticism, and has clarified to a great extent how the fair use test should be applied. Hopefully, it will provide useful guidance for practitioners in the copyright field. ***DISCLAIMER: Joel L. Hecker was co-counsel for Lynn Goldsmith on the District Court level proceedings, but not on the appeal.