The U.S. Supreme Court affirmed the judgment of the Second Circuit in the case of Andy Warhol Found. for Visual Arts, Inc. v. Goldsmith in a 7-2 decision issued May 18, 2023, authored by Justice Sotomayor. The Court held that the first factor of the copyright fair use test favored respondent photographer, Lynn Goldsmith, rather than petitioner, Andy Warhol Foundation for the Visual Arts (“AWF”). The decision was limited to AWF’s commercial licensing of a silkscreen image of Prince, based on Goldsmith’s underlying photograph, to Condé Nast. Below, we have highlighted the key factual background in the case and some takeaways from the Court’s decision. For more information, please see Cleary Gottlieb’s client alert.
Facts and Procedural Background:
The case before the Supreme Court centered around a photograph of the late singer Prince, captured by professional photographer, Lynn Goldsmith, in 1981. Goldsmith later granted a limited, “one time” license to Vanity Fair in 1984 for the magazine to use the photograph as an artist reference. Vanity Fair engaged Andy Warhol to create an illustration based on Goldsmith’s photograph for use in the magazine. In addition to the work commissioned by Vanity Fair, Warhol made 15 other works based on Goldsmith’s photograph (known as the “Prince Series”). Goldsmith was unaware of these additional works. When Prince died in April 2016, Vanity Fair’s parent company, Condé Nast, licensed another image from the Prince Series (“Orange Prince”) from AWF, which it used as the cover of a Prince tribute edition magazine. Around this time, Goldsmith learned of the additional works comprising the Prince Series. She contacted AWF alleging infringement of her copyright in her photograph. In response, AWF sued Goldsmith, seeking a declaratory judgment of non-infringement, or alternatively, fair use. Goldsmith counterclaimed for copyright infringement.
The District Court for the Southern District of New York granted summary judgment in favor of AWF on the fair use claim, holding the works were transformative because they “can reasonably be perceived to have transformed Prince from a vulnerable, uncomfortable person to an iconic, larger-than-life figure.” The Second Circuit reversed the district court, finding that the Prince Series “retain[ed] the essential elements” of Goldsmith’s photograph “without significantly adding to or altering those elements.” AWF petitioned the Supreme Court for certiorari, which was granted solely to consider whether the first factor of the Copyright Act’s fair use test (“the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes”) weighed in AWF’s favor.
The Court’s Opinion:
The Court narrowly framed the purpose of the use at issue in the case, focusing on the specific use challenged by Goldsmith – AWF’s commercial licensing of “Orange Prince” to Condé Nast for publication in a magazine issue about Prince’s life. This strategy sidestepped larger questions regarding whether the creation of the Prince Series itself or the display or sale of those works qualify as fair use, which AWF had urged the Court to consider. Instead, the Court left open the possibility that the “same copying may be fair when used for one purpose but not another,” a position the government argued for in its amicus brief supporting Goldsmith.
A critical fact that appeared to drive the Court’s reasoning was that Goldsmith also licensed her photographs of Prince to various magazines. Notably, after Prince’s death, People magazine paid Goldsmith a fee of $1,000 to use one of her photographs in a collector’s edition issue. Accordingly, the Court concluded that both Goldsmith’s photograph and “Orange Prince” essentially shared the same purpose. They “are portraits of Prince used in magazines to illustrate stories about Prince.” Framed this way, the Court held the first factor favored Goldsmith.
AWF had argued that the first factor weighed in its favor because the Prince Series transformed Goldsmith’s underlying photograph by adding new expression and meaning. Though the purpose and character of the use is only one factor of the Copyright Act’s four-part test for fair use, the concept of transformativeness under factor one has historically been influential in the lower courts. One recent study surveying fair use opinions between 1991 and 2017 found that 152 out of 315 cases that discussed transformative use found the use at issue in the case was transformative (a little less than half). However, of those 152 transformative use cases, 138 held the use was fair use (more than 90%). Successfully characterizing a use as transformative is critical, because transformative use has overwhelmingly been considered fair use.
In a spirited dissent, Justice Kagan, joined by Chief Justice Roberts, criticized the majority for denying fair use based merely on a marketing decision, the commercial licensing of Warhol’s work, and giving too little weight to the Warhol work’s transformative meaning, message and expression, and warned that the majority’s approach hampers creative progress and undermines creative freedom. According to the dissent, the majority’s failure to adequately engage with both the purpose and the character of the use left the Supreme Court’s “first-factor inquiry in shambles,” in a significant departure from prior precedent. In particular, the dissent said the majority conflated the first and fourth factors of the fair use test by engaging in “a kind of market analysis” that is better suited to factor four (“the effect of the use upon the potential market for or value of the copyrighted work”). This “reductionist view” of the character of the use over-emphasized the commercial licensing of the work, upending the balance “between rewarding original creators and enabling others to build on their works.” By “treat[ing] creativity as a trifling part of the fair-use inquiry,” the copyright holder’s interests are double-counted in the fair use assessment, making it very difficult for a later user to qualify for fair use.
Though it did not entirely dismiss the role of new expression, the majority noted that more is needed to have a “sufficiently distinct purpose or character” under the first factor. Otherwise, the majority said, “‘transformative use’ would swallow the copyright owner’s exclusive right to prepare derivative works.” The Court appeared to set a higher bar for a secondary use to qualify as transformative, suggesting that some degree of commentary on, or targeting of, the underlying work is required. The dissent disputed this, noting that the importance of targeting should decrease as the degree of transformativeness increases. Arguably, the Court’s holding is narrow and therefore limited to these facts. However, there are some important takeaways. Critically, different uses of the same work may be subject to separate fair use analyses. For this reason, the decision creates significant uncertainty for artists and artists’ estates and foundations. The majority’s ruling means that a work may be “transformative” enough such that its creation, sale and display are fair use (not requiring a license from the author of the first work); but the artist would still not be free to exploit this transformative work and could face the risk of copyright infringement for future uses (including licensing) of the work, which will require new fair use analysis for each such use. That, some would argue, undermines the whole purpose of the fair use defense and may discourage creativity. At the same time, this gives more power to some copyright owners, including artists, whose works are used by third parties to create other works, by enabling these copyright owners to have a “second bite at the apple” and assert infringement based not on the creation of the other works (the initial use) but on some subsequent commercial exploitation that is not “transformative.” Additionally, the degree of similarity between the copyright owner’s use and the specific disputed use matters to the factor one analysis. This complicates the fair use landscape for later users, who may not know exactly how the copyright owner is exploiting the underlying work, and thus whether their own use may infringe.