Shifting approach to fair use of user-generated content

There has been a sea change over the past few years in how the world treats user-generated content. It used to be the case that user-generated content was seen as free for the taking; however, that view has rapidly evolved to a pay for content model as (i) owners have become more savvy about protecting their content; (ii) licensing agencies have become better in quickly acquiring content and defending owners' rights; (iii) platforms have increasingly employed rights management technologies to make it more difficult for viral content to be used without the appropriate rights in place; and (iv) defending an infringement case using a fair use defense is expensive, potentially misguided, and in many cases, ineffective.

The for-pay model has certainly become the norm in relation to entertainment-related content (i.e., content that has little to no instant newsworthy value), because there is little to no case to be made for using that sort of content under the fair-use provisions of U.S. copyright law. However, even in the traditional news space -- where fair-use is most commonly employed -- news broadcasters are also more often than not seeking permission from user-generated content owners who have taken footage of current events.

For example, if one looks at the comment section of news-related YouTube, Facebook or Twitter videos, one will often see comments from news broadcasters asking for rights to use the content. The case law over the years has also continued to favor content owners who defend their rights (see Monge v. Maya Magazines, Inc., 688 F.3d 1164 (9th Cir. 2012)), particularly when many other users in the same space are paying a license fee for use of the content. See L.A. News Serv. v. KCAL-TV Channel 9, 108 F.3d 1119, 1122 (9th Cir. 1997).

Companies that may have attempted to push the envelope with respect to the fair-use provisions of U.S. copyright law are also more reluctant to do so nowadays. Unless a company is absolutely sure that it is protected under the fair use umbrella, they may risk other parts of their business by failing to obtain a license. For example, if a local news station puts on their YouTube channel a video belonging to another user, has not obtained the right to re-post that video, and does not have a valid fair-use argument, the local news station may receive a Digital Millennium Copyright Act takedown request from the video's owner. See 17 U.S.C. Section 512(c)(3)(A). Additionally, if that owner is represented by a professional licensing agency, that agency may issue a copyright "strike" upon that broadcaster's channel -- and too many strikes may lead to the station losing the ability to monetize their channel, or they could lose the channel altogether (if enough strikes for copyright infringement have been issued against it).

Alternatively, the licensing agency defending an owner's rights could "claim" that station's revenue from distribution of the video on YouTube as its own -- making the posting of the video a fruitless exercise for the news station looking to profit in the digital space. See generally Minden Pictures, Inc. v. John Wiley & Sons, Inc., 795 F.3d 997, 1002-03 (9th Cir. 2015).

Moreover, the fair use doctrine has long been characterized as "the most troublesome in the whole law of copyright." See Monge, 688 F.3d at 1170 (quoting Dellar v. Samuel Goldwyn, Inc., 104 F.2d 661, 662 (2d Cir. 1939)). The doctrine's subjective nature means that even when companies are otherwise confident about their fair-use determination from a theoretical perspective, they are nevertheless taking a risk by failing to obtain a license.

Illustrative of such risk is a case involving Jukin, a company that owns of an online library of user-generated video clips, produces of original content, and for which I serve as general counsel. In Equals Three, LLC v. Jukin Media, Inc., 139 F.Supp.3d 1094 (C.D. Cal. 2015), Jukin moved for partial summary judgment on 18 copyright claims against Equals Three (producer of an online humor program that featured many clips owned by Jukin). The court initially ruled that 17 of the 18 disputed clips were "highly transformative" and constituted fair use. The case proceeded to a jury trial and settled prior to the return of a verdict. However, shortly after settlement, several news outlets interviewed a juror who reportedly stated that "the jury came back with a unanimous 'no' on each count, no fair use. We just didn't feel that the videos were transformative enough to count for fair use." Ashley Cullins, "YouTube Trial: Juror Says YouTuber's Incorporation of Unlicensed Clips Is not Fair Use," Hollywood Reporter (March 3, 2016). Thus, even where a company determines that it has a strong fair use argument, it should be quick to consider the inherent uncertainties of jury trials and fair use jurisprudence before neglecting to obtain a license.

Companies face challenges from platforms that are increasingly policing content on the front-end (at the point of upload) as well. For example, if a channel owner on Facebook attempts to upload content that is owned by another user on the platform, Facebook's content identification system may prevent the channel owner from uploading that content altogether. If that content had been licensed from a licensing agency, the agency could have permitted the upload by "whitelisting" the channel as an authorized user of its content.

In the end, it makes far more sense and mitigates risk for companies to pay a licensing fee regardless of whether the content is used in news, entertainment, or commercially. A license protects both a company's digital channels on YouTube, Facebook and elsewhere as well as its production workflow by helping to ensure that original content incorporating third-party content can be uploaded without encountering fair use-related litigation. Plus, payment of a licensing fee may also come with additional benefits, such as indemnities from the licensor, appearance releases for persons featured in the video, and other ancillary benefits (e.g., access to the licensing agency's client platform, which may surface compelling user-generated content more quickly than a producer can find the content -- and the original owner! -- on his or her own.) And payment of a license fee is certainly much cheaper than defending an infringement action, especially when a fair use defense is lacking.