Of the four factors in a Fair Use defense, Factor 4 is the most easy to understand, and it is the second most important after Factor 1. Did the unauthorized use of the copyrighted work diminish the copyright holder’s ability to make money from the work? This could happen because the unauthorized use ruined the uniqueness of the work by creating a substitute product; because the work is now so commonplace that nobody sees the need to pay for it; or because it was used in a negative way that became so infamous that the work is now associated with the negativity and is thus no longer wanted.
A good example of this is 2 Live Crew’s use of Roy Orbison’s Oh Pretty Woman. Nobody is going to mistake the two songs, and nobody who wants to hear Roy Orbison’s version is going to purchase the 2 Live Crew version instead. If anything, 2 Live Crew’s song boosted sales of the original 1964 song, bringing it for the first time to the attention of a younger generation. On the other hand, the rock group Van Halen also did a version of Oh Pretty Woman, but their’s was a cover of the entire song with the only differences being the Van Halen guitar work and David Lee Roth’s voice. If the group hadn’t licensed the song properly as it did and Roy Orbison sued, this factor may weigh against Van Halen because anyone who wanted to purchase a copy of Oh Pretty Woman would choose the version he liked best, and it could be argued that every purchase of the Van Halen version was one less purchase of the Roy Orbison version.
In order for Factor 4 to weigh in favor of the copyright holder, he must put forth some evidence that he has the ability to enter a market in the first place. For example, a photographer who is hired by a company to take photographs of its factory for use on its sales brochures, while retaining the copyright, may be prohibited from selling the photos in a secondary market per the contract with the company (who would want them anyway?) Going back to the Nunez case detailed earlier, Nunez took the photos of Joyce Giraud for her modeling portfolio. Giraud purchased multiple 8” x 10” glossy prints from Nunez, which she freely passed out to modeling agencies. Other than selling more photos to Giraud when she runs out, there is no other market. Who would buy a photo from Nunez when they can get a free one from Giraud? The publication of the photo in the newspaper would have no negative effect on Nunez’s ability to sell more photos to Giraud. In fact, the extra publicity might spur more modeling agencies to request her photos, causing Nunez’s income to actually increase.
Factor 4 goes somewhat hand-in-hand with Factor 1, because if the use is ruled commercial in regard to Factor 1, the Factor 4 pendulum by default swings a little towards the copyright holder because the existence of a commercial market for the photo has been established—there is at least one company in need of such a photo. Now that a market has been established, the question becomes, “Has the unauthorized use of the photos hurt the photographer’s ability to market the photos in the future?” The photographer must now come up with a convincing argument.
In the Graham case, the court ruled that potential markets not only included “traditional and reasonable markets,” but also “likely to be developed markets.” Thus, just because you haven’t sold photos now doesn’t mean you won’t be able to in the future. I photographed the sites in Selma, Alabama, l and never sold a single photo until the Selma movie came out. Not only did I license a number of these photos after the movie’s release, but they were also used without authorization by dozens of magazines, local businesses, and even the State of Alabama. I have photos of many small towns and historic sites, and though I may not have sold any of them, all it takes is for a newsworthy event to occur at the site and the demand for the photos will be created.
Another case that reinforces the notion of “future markets” is Rogers v. Koons. Art Rogers took a photo of a man and woman holding a bunch of puppies. Sculptor Jeff Koons made a sculpture based on the photo, and other than some odd color choices, it was a fairly close representation of the photo. Rogers sued Koons, who claimed the sculpture was a parody and thus his use of the photo was fair. In regard to any detrimental financial impact to the photographer, Koons argued that Rogers was a photographer, not a sculptor, so his sculpture had no impact on Rogers’ ability to make money from the dog photo. That’s about as sensible an argument as I’ve heard, but on that point the court ruled that it didn’t matter if Rogers had ever made sculptures, or even had the talent to make sculptures, because if he ever decided to take up sculpting he wouldn’t be able to sell his own sculpture based on his own photo because Koons had already saturated the market. (Nobody believed Koons’ claim that the sculpture was a parody, and in the end it was ruled that his sculpture “was done in bad faith, primarily for profit-making motives, and did not constitute a parody of the original work.”)
Keep in mind that you do not have to be a full-time professional photographer, or even a photographer who makes money on the side, to have a copyright violation affect you financially. Jonathan Otto was at a friend’s wedding at Trump National Golf Club when Donald Trump showed up to “crash” the wedding. He snapped a photo and posted it to one of his social media accounts. It was taken and used by a number of news agencies without permission, though all settled with Otto except Hearst Communications, which used the photo on Esquire.com to illustrate an article about Trump crashing weddings. This prompted Otto to file a lawsuit (Otto v. Hearst Communications, Inc.). In regard to Factor 4, though Otto was a banker and had no track record of making money from photography, there was a market for his timely and newsworthy photograph; the fact that five news agencies used the photo without permission validates this point. The widespread, unauthorized use of the photo diminished Otto’s ability to sell the photo, and thus the fourth factor weighed in his favor.
Hearst Communications lost the case, but Otto was only awarded $750. The judge for the Southern District of New York was purposely making a statement against absurd statutory damage awards for copyright infringements involving no real actual damages. The court determined a reasonable licensing fee was $100 and that five times this fee was a sufficient fine, though the amount was raised to $750 to meet the minimum required statutory damages.
“An award [of $750] is in accordance with the trend in this Circuit to award a prevailing copyright infringement plaintiff statutory damages in an amount that is a single-digit multiple of a reasonable licensing fee.”