Video Pipeline, Inc. runs the website videodetective.com for downloading and viewing movie trailers. In the declaratory judgment action of Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc.,¹⁴ the U.S. District Court of New Jersey granted summary judgment counterclaims against Video Pipeline for copyright infringement and other claims for placing Disney movie trailers on line after expressly receiving instructions not to do so. Video Pipeline’s main underlying theory, asserted as a number of different defenses, was that a party should have the freedom to use a portion of a copyrighted work to advertise and inform the public about the copyrighted work. The court was not persuaded, and all of Video Pipeline’s motions for summary judgment were denied.

Video Pipeline, Inc. had a license agreement with Buena Vista Home Entertainment, Inc. and Miramax, Inc. (collectively referred to as BVHE), both subsidiaries of Disney that own the copyrights to Disney’s movies. Starting in 1988, Video Pipeline was authorized to make videotapes of movie trailers or previews for exhibition at video rental and sales stores ("in-store"). The license expressly stated that Video Pipeline was not authorized to use the trailers for any other purpose.

In 1997, Video Pipeline informed BVHE that it was placing movie trailers on line. By 1999, Video Pipeline was running videopipeline.net, and, later, videodetective.com to stream trailers.¹⁵ BVHE informed Video Pipeline it was not interested and was pursuing its own interests in this area. Video Pipeline went ahead and provided Disney’s movie trailers on its website anyway.

In September 2000, BVHE sent a cease-and-desist letter demanding that Video Pipeline stop placing Disney’s movie trailers on line. In October 2000, Video Pipeline filed a declaratory judgment action that its placement of the trailers on line was not copyright infringement. In November 2000, BVHE terminated all rights and demanded the return of its trailers in Video Pipeline’s possession. Video Pipeline complied, but then copied sections of 62 videotapes of Disney movies it obtained from video rental stores and made its own two-minute movie-promo preview clips to put on line. Video Pipeline also copied other Disney movie trailers directly from another 34 videotapes.

Limiting its claims to the time period after December 2000 when it was clear that Video Pipeline had no authorization to place Disney trailers on line, BVHE counterclaimed that Video Pipeline committed copyright infringement, both state and federal unfair competition, breach of contract, unjust enrichment, conversion, and replevin. BVHE moved for a preliminary injunction, which was granted.¹⁶ Subsequently, Video Pipeline and BVHE brought motions for summary judgment.

The district court first found that the elements for copyright infringement were present. Video Pipeline engaged in unauthorized copying of works owned by BVHE, and Disney’s own trailers received from BVHE were works derived from the original copyrighted work (a "derivative work"), the making of which is one of the exclusive rights reserved to the copyright owner.¹⁷

Following the reasoning in Lamb v. Starks,¹⁸ both Video Pipeline’s clip previews made from digitally copying the original movie and its copies of BVHE’s movie trailers for placement on line were also held to be derivative works.

A "derivative work" is a work based upon one or more preexisting works, such as a … motion picture version … in which a work may be recast, transformed or adapted. A work consisting of editorial revisions, annotation, elaborations , or other modifications which, as a whole, represent an original work of authorship, is a "derivative work."

17 U.S.C. § 101. Thus, Video Pipeline’s copies of movie trailers fit the statutory definition because they merely copied scenes from the original film. It did not matter that copies were made from the trailer rather than from the original movie. Video Pipeline’s clip previews were also found to be public performances and public displays in violation of the copyright statutes.¹⁹

Video Pipeline asserted that it had the right to make and use clip previews mainly because a party should be free to copy portions of a copyrighted work for advertising and to inform the public about the copyrighted work. For this theory, Video Pipeline asserted the fair use defense, a "collector’s guide" defense, copyright misuse, and a constitutional defense. Another underlying theory was implied authorization argued as the defenses of implied license and estoppel. Finally, Video Pipeline also argued that BVHE lacked subject matter jurisdiction because BVHE had no registered copyrights on the trailers themselves.

It is not a copyright infringement to use a copyrighted work for criticism, comment, news reporting, teaching, scholarship, parody, or research. The factors to be considered when determining fair use should at least include: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted works; (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 potential market for, or value of, the copyrighted work.²⁰

Under this factor, if the copyrighted work is commercial, this tends to weigh against a finding of fair use.²¹ if the work, however, is transformative, fair use can still be found. A work is transformative if, rather than the new work merely superseding the objects of the original creation, it instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message.²² A fair use is favored if the copying complements the use of the copyrighted works and serves a transformative purpose -- that is, a purpose different than that of the copyright owner.

Video Pipeline argued that its purpose was to provide information about the movies, which is a different purpose than a copyright owner’s purpose of artistic expression. The clip previews and trailers are informational, as they provide segments of the actual copyrighted movies to inform customers of the movie’s story line or theme.

As support, Video Pipeline cited Ty v. Publications Int’l Ltd., 292 F.3d 512, 516 (7^th Cir. 2002) and Kelly v. Arriba Soft Corp., 280 F.3d 934 (9^th Cir. 2002). In Ty, the Seventh Circuit Court found that a collection of photographs of Beanie Babies dolls may constitute complements of, rather than substitutes for, the copyrighted material since it has the purpose of informing the collector or consumer about the dolls. Similarly, in Kelly, the Ninth Circuit Court found that online thumbnail-size images, but not full-size images, of copyrighted photographs on a search engine have the function of improving access to information on the Internet, rather than having the same function of artistic expression as the photographers’.

However, the court here was not persuaded. In contrast to the present case, in both Ty and Kelly the original work was significantly changed to form the copied work. The photo collection in Ty added additional evaluative information about the Beanie Babies and represented an entirely different product line. In Kelly, the thumbnail photos were a significant change from the original full-size photos. In contrast to Ty and Kelly, Video Pipeline’s trailers and clip previews did not add further information or provide a significant change because they were merely truncated versions of movies.

In addition, the court determined that the "correct" purpose of Video Pipeline’s copied trailers and clips, rather than to provide information, was to increase sales of Disney’s movies (and videos) for Video Pipeline’s own profit, since Video Pipeline charges for its services. The retailers, distributors, and owners of the copyrighted work all had a purpose similar to that of Video Pipeline: selling and renting the videos of the movies; that was especially so when Disney also created its own trailers to promote its movies. The court concluded that the purposes of the Video Pipeline copied trailers and clips were not transformative, and this factor weighed heavily against fair use.

For this factor, the court found that the copyrighted works were fictional rather than factual, which weighed against fair use to allow the public to have the information provided by the works.

Under this factor, the amount and substantiality of the portion used must be reasonable in relation to the purpose of the copying. The court found that this factor also weighed against fair use. Video Pipeline’s clips and trailers were merely copies of scenes from the copyrighted works, chosen to identify the works, and relied "entirely on the expressive value of defendant’s works" without any transformative changes. It did not matter that the clips were only two minutes long. Following the Supreme Court case of Harper & Row Publishers Inc. v. Nation Enterprises,²³ the court applied the proposition that the importance of the percentage of the original work copied lessens the more the copied portion relies on the expressive value of the defendant’s work. Thus, this factor also weighed against fair use.

Under this factor, the court looked to the effect on the market and value of the copyrighted work. If the intended use of the copy is for commercial gain, the likelihood for market harm can be presumed. Video Pipeline argued that Disney would never directly compete in the same market of movie preview websites and databases because Disney would never show competitor’s previews. The court ignored this argument, implying that Video Pipeline missed the point that the relevant competitors were any website showing Disney’s trailers, whether or not a general website with movie information.

Video Pipeline also argued that its use did not harm Disney’s video sales and rentals and therefore benefited the public and the value of the videos, but the court ignored this argument because Video Pipeline offered no proof.²⁴

Instead, the court found that Video Pipeline directly competed with websites of Disney, BVHE, and such Disney licensees as Apple Computer that show Disney trailers. Video Pipeline directed Internet traffic away from these sites, charged for and advertised its services, and charged for advertising at the beginning and end of the previews. All four of these activities affected the market of websites that legitimately sold or advertised Disney’s videos.

Video Pipeline went on to argue that the impact to these retail businesses was not relevant because the copyright statute does not mention control of retail sales. Again, the court disagreed because even the potential market impact on BVHE of derivative works is relevant to the fair use analysis.

Having found that all four fair use factors weighed against a finding of fair use, the court denied the fair use defense as a matter of law.

Each of Video Pipeline’s other defenses also failed. In contrast to the situation here, copyright misuse is present when the copyright owner, through a license for example, stops a party from making or using something that competes with the copyrighted work, not use of the copyrighted work itself as Video Pipeline argued. Also, Video Pipeline’s database was not a "collection guide" under the copyright laws, the court ruled, because the database was not a separate, distinct product that complemented the copyrighted work. Video Pipeline’s constitutional claim also failed, because even though the dissemination of copyrighted works is a goal of copyright, copyright owners are permitted to have control, even arbitrary control, over their copyrighted work during the term of the copyright.

As to the authorization theories, the court found that no estoppel and implied license can exist when BVHE expressly told Video Pipeline not to place trailers on line. Finally, the court found that it does not matter that the trailers were not registered when the original copyrighted work was registered and the trailers were exact copies of the scenes from the original work.

Conclusion

Website managers should be careful that authorization is documented when providing streaming access to any copyrightable material, be it movies or other items such as video clips, photos, pictures, sound files, or text files. In this case, the court found that the copyright owner can have exclusive control of the dissemination of information regarding the copyrighted movie or video when the tool for providing that information is a derivative work or copy of a portion of the copyrighted movie.