VII.  Misapplication of the Fourth Factor

In addition, it appears that the Ninth Circuit misapplied the fourth factor of the fair use test when it found that Arriba's use of Kelly's images did not negatively affect the market for, or value of, these images.144  The fourth factor determines the effect of the infringer's use upon the potential market value for the work.145  It requires courts to take into account whether the new use caused market harm and whether the new user's widespread conduct would result in an adverse impact on the potential market of the copyright holder.146

Various uses of the same work for differing advertising purposes not approved by the copyright owner frequently diminish the value of the work.147  For instance, in Brewer v. Hustler Magazine, Inc.,148 the Ninth Circuit recognized that a jury could find that the value of the copyright holder's photograph would suffer from overexposure through the defendant's use.149

Kelly illustrates that this overexposure is only exacerbated on the Internet.150  Despite the fact that after 2000, a user was directed to Kelly's website after clicking a thumbnail, Kelly's images still widely suffered from unauthorized exposure.  Kelly used the photographs on his website as content in order to attract viewers to his website.151  Original content is advantageous because “[t]he more desirable and unique a web site's content is, the more viewers will visit it, and the more its owners can charge for advertising on it.”152  Although after 2000, a user was taken to Kelly's website after clicking on a thumbnail, Arriba still made Kelly's images accessible on a website other than his own.

Due to the court's analysis, Kelly essentially was stripped of the power to control how his photographs were utilized.153  Kelly did not have the ability to control the conditions or the context in which his photographs were displayed or used.154  This loss of control could preclude the copyright holder from fully taking advantage of the market for his work.155  For instance, the thumbnails of Kelly's images were not displayed with advertising selected and sanctioned by Kelly.156  Instead, it was chosen by Arriba.157  As a result, this unauthorized use could ultimately dilute the advertising value of Kelly's photographs.158

Although it could be argued that Arriba's services provided an economic benefit to Kelly's work by drawing more viewers to his websites, courts have previously rejected this assertion.159  For example, in DC Comics, Inc. v. Reel Fantasy, Inc.,160 the plaintiff book publisher filed an action against the defendant's store for copyright infringement.161  The court rejected the argument that the defendant's use of the copyrighted work supported a finding of fair use because the use led to a commercial benefit for the plaintiff.162  Rather, the court maintained that the advantage of copyright ownership was “the right to license its use for a fee.”163  Since one of the economic advantages of copyright ownership is a licensing right, the court found that a potential increase in the plaintiff's sales as a result of the defendant's infringement would not invoke the fair use defense as a matter of law.164

Likewise, in UMG Recordings, Inc. v. MP3.com,165 the court dismissed the defendant's argument that its activities could only increase plaintiff's sales.  The defendant asserted that subscribers to defendant's service were unable to retrieve its recordings unless they had already bought or agreed to buy their own CD copies of those recordings.166  The court found that “any allegedly positive impact of defendant's activities on plaintiffs' prior market in no way frees defendant to usurp a further market that directly derives from reproduction of the plaintiffs' copyrighted works.”167  Thus, an infringer's alleged benefit to the copyright holder does not necessarily sustain a fair use defense.168