Market Harm, Market Help, and Fair Use

Abstract

Judges, commentators, and practitioners alike agree that the final factor of copyright’s four-part statutory fair use defense to copyright infringement requires judges to consider “market harm.” That is, all sources understand this fair use factor to require analysis only of the deleterious economic effects of the defendant’s use on the market for or value of the plaintiff’s work of authorship. Yet this widespread consensus lies at odds with the plain language of the Copyright Act itself, which dictates that fair use analysis requires consideration of all economic effects — harmful and helpful — of an unauthorized use. This Essay investigates this puzzling gap between general practice and statutory text—the “market harm puzzle” — in two parts. Part I seeks to explain the market harm puzzle, locating an explanation in the judicial history of the fair use defense and the framing of the Copyright Act of 1976. Part II proposes a thought experiment: What would it mean for copyright law if judges applied the fourth fair use factor, as the text requires, to entail analysis of the net economic effects on the copyright owner of the defendant’s unauthorized use? This Essay’s second Part answers this question by proposing a taxonomy of infringement’s economic benefits for owners; considering how market help would cash out in doctrinal terms by suggesting an alternative approach that takes account of the net economic effects of unlicensed use; and answering the major objections to including the upsides of infringement as part of the fair use calculus. Finally, the Conclusion shows how this examination of the market harm puzzle sheds light on foundational issues about the roles of owners and users in achieving copyright’s constitutional aspirations.

Keywords: Copyright, fair use, law and economics