A crucial factor in current legal analysis of derivative works is transformativeness, largely as a result of the Supreme Court's 1994 decision in Campbell v. Acuff-Rose Music, Inc. The Court's opinion emphasized the importance of transformativeness in its fair use analysis of the parody of "Oh, Pretty Woman" involved in the Campbell case. In parody, as the Court explained, the transformativeness is the new insight that readers, listeners, or viewers gain from the parodic treatment of the original work. As the Court pointed out, the words of the parody "derisively demonstrat how bland and banal the Orbison song" is.
The modern emphasis of transformativeness in fair use analysis stems from a 1990 article by Judge Pierre N. Leval in the Harvard Law Review, "Toward a Fair Use Standard", which the Court quoted and cited extensively in its Campbell opinion. In his article, Leval explained the social importance of transformative use of another's work and what justifies such a taking:
I believe the answer to the question of justification turns primarily on whether, and to what extent, the challenged use is transformative. The use must be productive and must employ the quoted matter in a different manner or for a different purpose from the original. ... the secondary use adds value to the original--if the quoted matter is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings--this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society.
Transformative uses may include criticizing the quoted work, exposing the character of the original author, proving a fact, or summarizing an idea argued in the original in order to defend or rebut it. They also may include parody, symbolism, aesthetic declarations, and innumerable other uses.
The concept, as Leval and the Campbell Court described it, developed in relation to fair use of traditional works: literary works, musical works, and pictorial works. But recently courts have extended this rationale to Internet and computer-related works. In such cases, as illustrated by Kelly v. Arriba Soft Corporation and Perfect 10, Inc. v. Amazon.com, Inc., the courts find a use (such as that of thumbnails in an image search engine, for indexing purposes) transformative because it provides an added benefit to the public, which was not previously available and might remain unavailable without the derivative or secondary use. The Ninth Circuit Court explained this in the Perfect 10 case:
Google’s use of thumbnails is highly transformative. In Kelly we concluded that Arriba’s use of thumbnails was transformative because “Arriba’s use of the images served a different function than Kelly’s use — improving access to information on the Internet versus artistic expression." Although an image may have been created originally to serve an entertainment, aesthetic, or informative function, a search engine transforms the image into a pointer directing a user to a source of information. Just as a “parody has an obvious claim to transformative value” because “it can provide social benefit, by shedding light on an earlier work, and, in the process, creating a new one,” a search engine provides social benefit by incorporating an original work into a new work, namely, an electronic reference tool. Indeed, a search engine may be more transformative than a parody because a search engine provides an entirely new use for the original work, while a parody typically has the same entertainment purpose as the original work.
…In conducting our case-specific analysis of fair use in light of the purposes of copyright, we must weigh Google’s superseding and commercial uses of thumbnail images against Google’s significant transformative use, as well as the extent to which Google’s search engine promotes the purposes of copyright and serves the interests of the public. Although the district court acknowledged the “truism that search engines such as Google Image Search provide great value to the public,” the district court did not expressly consider whether this value outweighed the significance of Google’s superseding use or the commercial nature of Google’s use. The Supreme Court, however, has directed us to be mindful of the extent to which a use promotes the purposes of copyright and serves the interests of the public.
…We conclude that the significantly transformative nature of Google’s search engine, particularly in light of its public benefit, outweighs Google’s superseding and commercial uses of the thumbnails in this case. … We are also mindful of the Supreme Court’s direction that “the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.”
The Ninth Circuit's treatment of transformativeness and fair use in the Arriba Soft and Perfect 10 cases illustrates different data points on the copyright infringement spectrum, at least with respect to transformativeness and fair use. Arriba Soft was a relatively polar case. The harm to Kelly, the copyright owner, was negligible; it was hardly more than hurt feelings. Thus, the Ninth Circuit said in its opinion that "Arriba's creation and use of the thumbnails does not harm the market for or value of Kelly' s images." On the other hand, the court found that Arriba's use benefited the public: "Arriba's use of the images serves a different function than Kelly's use — improving access to information on the internet versus artistic expression." The balance thus tilted strongly in Arriba's favor. This led the Ninth Circuit to be the first court to make the equation highly beneficial to public = transformative, and as the Supreme Court explained in Campbell, the more transformative a derivative use the more likely the use is to be a fair use.
The Campbell Court recognized that the balance may not always be one-sided, as it was in Campbell itself and in Arriba Soft. In the Perfect 10 case the interests were more evenly balanced, for the first time in a derivative work case involving new information technology. Both Google and Perfect 10 had legitimate interests at stake and support for their respective positions. Thus, there was a finding that "Google’s wide-ranging use of thumbnails is highly transformative: their creation and display is designed to, and does, display visual search results quickly and efficiently to users of Google Image Search." But Google's use had some commercial aspects and was claimed to impair P10's commercial interests. Yet, on balance the Ninth Circuit found that the transformativeness outweighed the other fair use factors because "Google has provided a significant benefit to the public" in facilitating image searches by means of thumbnail images.
The use of pop-up advertising, in which third-party advertisements pop up on a competitor’s Web page and change its appearance to create a derivative work, may present transformativeness issues, because the pop-ups provide the public with additional information about making buying decisions (particularly in the form of price comparisons), but adversely affect the Web page proprietor's interest in the integrity of its Web page and its investment interest in creating and maintaining the page. No court has yet addressed derivative work copyright considerations in terms of balancing the interests at stake, although several courts have found no copyright infringement for one reason or another. An example of promotional advertising for a pop-up company, illustrating various pop-up techniques for changing the appearance of another firm's Web page is shown in this Flash.
Read more about this topic: Derivative Work, United States Law