Court Grants AP Summary Judgment, Rejects Meltwater's Search Engine Defense

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By Tamlin H. Bason  

A news clipping service's distribution of excerpts of unlicensed Associated Press news stories to paying customers was not protected by the Copyright Act's fair use provision, the U.S. District Court for the Southern District of New York held March 21 (Associated Press v. Meltwater U.S. Holdings Inc., S.D.N.Y., No. 1:12-cv-01087-DLC, 3/21/13).

The court granted the AP summary judgment on its direct infringement claim against the aggregator, Meltwater US Holdings Inc. In doing so, the court outright rejected Meltwater's transformative use argument that sought to equate its service with internet search engines.

Meltwater argued that it features only small amounts of copyrighted materials on subjects that are of interest to the customers--namely, articles that mention the actual user in question. Accordingly, Meltwater said that, like an internet search engine, its service actually increases use of the original copyrighted materials.

The court rejected this argument in part because Meltwater, in fact, markets its services by telling potential customers that it will save them time by giving them all of the pertinent information in an article without requiring them to read the entire story. Thus, the Meltwater service uses excepts of copyrighted content in order to replace, and directly compete with, the AP, the court said.

Meltwater, Its Customers Face Liability Abroad

Meltwater was founded in Norway in 2001 and operates in 27 countries. The company markets its services to communications and public relations professionals, claiming that it can help them keep track of online mentions of their businesses and brands.

Meltwater uses crawlers--programs that browse the internet as a means of providing up-to-date data--that search for, scrape, and then index material, including copyrighted news articles.

Meltwater's customers have various paid services that they can choose from, one of which allows them to receive daily electronic mail messages labeled “News Reports.” The reports contain excerpts from online articles that mention whatever “agents” or keywords that the customer has entered into the Meltwater news platform.

Both Meltwater, which began offering its services to U.S. companies in 2005, and its clients have faced a number of legal challenges to its services abroad.

In 2011, the England and Wales Court of Appeal held that Meltwater users would infringe news story copyrights unless they have a license, upholding a ruling from the High Court of Justice. That decision was upheld by the U.K. Copyright Tribunal in February 2012, on the same day that AP initiated the instant proceeding.

The AP asserted six causes of action against Meltwater, including claims of direct, contributory, and vicarious copyright infringement. The AP also sought a declaratory judgment of copyright infringement, and sought relief for “hot news” misappropriation under New York common law.

Among Meltwater's four counterclaims was a plea for a declaratory judgment under the Digital Millennium Copyright Act's safe harbor provision.

Meltwater also raised numerous affirmative defenses, arguing that its use of the articles was transformative, and thus protected under the Copyright Act's fair use doctrine, 17 U.S.C. §107. It also raised affirmative defenses of laches, implied license, and copyright misuse.

After limited discovery, the AP moved for summary judgment on its direct copyright infringement claim. Meltwater, too, moved for summary judgment on its affirmative defenses.

Amicus briefs were filed in support of both parties, with a group of newspaper publishers, including the New York Times Co., the Newspaper Association of America, and Gannett Co., filing a brief in support of the AP. The Electronic Frontier Foundation, Public Knowledge, and a number of other internet and computer industry associations filed a brief supporting Meltwater. The Computer and Communications Industry Association filed a brief in support of neither party.

Meltwater Says It Is Like a Search Engine

Meltwater did not contest that it had used the AP's copyrighted content. Rather, it claimed that its service was protected under the fair use doctrine.

The fair use doctrine, codified at 17 U.S.C. §107, spells out the nonexclusive factors that courts must weigh to determine fair use. The factors 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 work;  

(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 the potential market for or value of the copyrighted work.  

 

Reliance on 9th Cir. Thumbnail Cases Misplaced

Although Meltwater had failed to demonstrate how it compared, in terms of transformative use, to internet search engines, it nonetheless urged the court to follow the “thumbnail” jurisprudence from the U.S. Court of Appeals for the Ninth Circuit.

In one of those cases, Perfect 10 Inc. v. Amazon.com Inc., 487 F.3d 701, 82 U.S.P.Q.2d 1609 (9th Cir. 2007), the Ninth Circuit held that Google Inc.'s communication of stored thumbnail versions of the plaintiff's copyrighted images to users is highly transformative, because, among other matters, it provides a social benefit by incorporating the original work into an electronic reference tool.

Similarly, a search engine's use of low-resolution thumbnail images of a plaintiff's copyrighted photographs was also deemed protected fair use in the other case that Meltwater relied on, Kelly v. Arriba Soft Corp., 336 F.3d 811, 67 U.S.P.Q.2d 1297 (9th Cir. 2003).

The court here discounted Meltwater's reliance on those cases, noting that “several distinctions” distinguished them from the record at hand.

“The first and most obvious [distinction] is that it was undisputed in both cases that the fair use defense was being applied to a search engine,” the court said. “Unlike the searches in Perfect 10 and Kelly, Meltwater's searches are not publicly available and are run against a defined list of content providers,” the court said.

Moreover, the court said that Meltwater had not otherwise shown that “it actually functions like a search engine in other important aspects.”

But even if the Ninth Circuit cases were relevant to this case, there was no reason to believe that fair use jurisprudence with respect to photographs, “which by their nature are indivisible,” would be applicable to Meltwater's use of substantial portions of AP's copyrighted news articles, the court said.

“Neither Perfect 10nor Kelly can be fairly read to support Meltwater's claim that it is irrelevant how much of the Registered Articles it displayed in its search results,” the court said.

Meltwater Competes With AP

In any event, even if Meltwater did function as a search engine, in order to prevail on its fair use defense it still must demonstrate that it had transformed, rather than merely repackaged, the AP articles, the court said. On that score, the court said Meltwater had failed altogether. The court said:

Meltwater's business model relies on the systematic copying of protected expression and the sale of collections of those copies in reports that compete directly with the copyright owner and that owner's licensees and that deprive that owner of a stream of income to which it is entitled. Meltwater's News Reports gather and deliver news coverage to its subscribers. It is a classic news clipping service. This is not a transformative use. As significantly, the rejection of the fair use defense here will further the ultimate aim of the Copyright Act, which is to stimulate the creation of useful works for the public good.  

 

More Discovery Needed on Secondary Claims

Meltwater sought summary judgment on the AP's contributory and vicarious infringement claims. These claims ware based on allegations that Meltwater had encouraged its customers to copy and distribute versions of the entire AP articles. There was no evidence that any of Meltwater's customers had ever stored or distributed full length articles, Meltwater argued, and thus it argued that it was entitled to summary judgment on those claims.

The court noted that the AP had filed a request for further discovery on those claims.

“Because Meltwater's motion for summary judgment is based principally on AP's failure of proof, and because AP is entitled to additional discovery on these claims, Meltwater's motion is denied without prejudice to renewal,” the court said.

The court granted the AP's motion for summary judgment. In a separate order issued March 21, the court set a hearing for March 28 to determine damages and the appropriate scope of injunctive relief.

The AP was represented by Elizabeth McNamara of Davis Wright Tremaine, New York. Meltwater was represented by David Kramer of Wilson Sonsini Goodrich & Rosati, New York. The amici newspaper organizations were represented by Charles S. Sims of Proskauer Rose, New York. The internet association amici were represented by Julie A. Aherns of Stanford Law School's Center for Internet & Society, Stanford, Calif. Amicus CCIA was represented by Kathleen M. Sullivan of Quinn Emanuel Urquhart & Sullivan, New York.

By Tamlin H. Bason  


Text is available at http://www2.bloomberglaw.com/desktop/public/document/The_Associated_Press_v_Meltwater_US_Holdings_Inc_et_al_Docket_No_/1.