Measuring Fair Use's Market Effect

Abstract

Copyright law seeks to encourage creativity and the creation of new works of authorship. To facilitate this creativity, the law allows authors to utilize portions of preexisting copyrighted materials when the new use survives a “fair use” analysis. In adjudicating the fair use question, courts apply a multifactor test which includes consideration of the new work’s market effect. This market effect consideration asks how the new work influences sales of the original. The scholarship analyzing this market effect is incomplete because this inquiry requires empirically measuring how consumers react to the third-party reuse of a copyrighted work. Thus, courts and authors are currently ill equipped to accurately forecast ex ante market effects because these empirical determinations occur only after the work has been reused—i.e., ex post to creation of the putative fair use. Building from this recognition, we provide a more robust theoretical framework for categorizing and analyzing market effects.

This Article builds from our expanded theory by empirically measuring the effect of reusing copyrighted material in subsequent works. We use a novel experimental design with one type of third-party reuse (music sampling) and find that the market reception of a new work that incorporates copyrighted material can impact perceptions about the original work (and thus, influence the original’s market). We find evidence that negative perceptions about an earlier work are created when sampled in a new work that itself is a failure. Accordingly, our study points to a negative spillover effect that may harm perceptions of the underlying copyrighted work. Because this recognition expands the foundation for courts considering a new work’s market effect, we argue that these insights are crucial to making efficient and effective fair use determinations.

Keywords: copyright, market effect, fair use, music, sampling, spillovers