The fairness factors

5.11 The fair use exception should contain four fairness factors that will serve as a checklist of factors to be considered in a given case. The fairness factors recommended by the ALRC are based upon the four factors that are common to both the US fair use provision and the existing Australian provisions for fair dealing for the purpose of research or study.

Existing fairness factors

5.12 The existing fair dealing exceptions for the purpose of research or study are found in ss 40, 103C and 248A. They list five factors to be considered when determining whether a use constitutes a fair dealing. These factors include, but are not limited to:

  • the purpose and character of the dealing or recording;

  • the nature of the work, adaptation, audiovisual item or performance;

  • the possibility of obtaining the work, adaptation, audiovisual item or an authorised recording of the performance within a reasonable time at an ordinary commercial price;

  • the effect of the dealing or recording upon the potential market for, or value of, the work, adaptation, audiovisual item or authorised recordings of the performance; and

  • in a case where part only of the work, adaptation, audiovisual item or performance is reproduced, copied or recorded, the amount and substantiality of the part copied, taken or recorded in relation to the whole work, adaptation, item or performance.

5.13 In 1976, the Copyright Law Committee that considered reprographic reproduction (the Franki Committee) recommended that this list of factors—with respect to works and adaptations—be included in s 40.[8] The factors listed are based to a large extent on principles derived from the case law on fair dealing.[9] The Franki Committee’s recommendations were influenced by the then proposed fair use exception in s 107 of the US Act.[10]

5.14 The list of matters in ss 40(2) and 103C(2) are not the only relevant matters for assessment of the fairness of a dealing for the purpose of research or study, as these are non-exhaustive lists.[11] The Franki Committee observed that the courts have a duty to decide whether particular uses of copyright material constitute fair dealing and that it would be ‘quite impracticable’ to attempt to remove this duty.[12]

5.15 The approach with respect to the other fair dealing exceptions has been to leave it to the courts to determine what factors are relevant to determining the fairness of a use in a particular case. As stakeholders noted, there is limited guidance to be gleaned from the Australian case law[13] and, in effect, one is ‘forced to look to old English precedents to try to determine what factors a court would be likely to look to when deciding whether a use would be fair’.[14]

5.16 The Copyright Law Review Committee (CLRC) suggested that it was reasonable to assume that the matters listed in s 40(2) ‘are also relevant in determining the fairness of a dealing for purposes other than research or study’.[15] This is because the matters in s 40(2) were derived from principles in the case law and because those principles were not limited to a specific purpose.[16]

5.17 The current situation, where fairness factors are expressly stated only in the research or study fair dealing exceptions, makes ‘little sense’. As Professor Bowrey put it:

There is no logical reason why the fairness factors should be limited to certain nominated kinds of fair dealing or be only considered or addressed in fair dealing cases in an ad hoc fashion.[17]

5.18 The Law Council of Australia’s Intellectual Property Committee (Law Council) welcomed the potential of a fair use exception ‘to re-focus attention on the fairness analysis in light of the limited discussion of fairness considerations in cases such as the Panel case’.[18]

5.19 The Australian Copyright Council stated that ‘people sometimes find the case-by-case nature of fair dealing difficult to apply’ and submitted that applying a general set of fairness factors, such as those already existing with respect to the research or study exceptions, may assist.[19]

5.20 A key advantage of a fair use exception, or the alternative recommendation for a new fair dealing exception,[20] is that the Copyright Act will clearly provide that fairness factors must be considered in determining the fairness of any use or dealing. Users and courts would have more statutory guidance than they currently have with respect to fair dealing (other than for research or study).[21]

Support for the four fairness factors

5.21 Many stakeholders expressed support for the four fairness factors proposed in the Discussion Paper.[22] Reasons given in support of a fair use exception incorporating these factors included:

  • the factors derive from the common law;[23]

  • the four factors in the US and Australia are substantially the same,[24] so Australian courts are familiar with them[25] and so are ‘academics and students who have relied on the fair dealing exception to undertake their own research and study’;[26]

  • they are easy to read and understand,[27] so would ‘assist users to feel confident making their own evaluation of how they are able to use copyright material in their own specific circumstance’;[28]

  • they are already being applied by some institutions with respect to orphan works and other copyright material in the mistaken belief that Australia already provides a fair use exception;[29]

  • they are substantially the same as those used in some other countries;[30] and

  • Australian courts, copyright owners and users would be able to have regard to extensive US jurisprudence,[31] as well as that of other countries, who have adopted a similar flexible, fairness-based model.[32]

5.22 However, some stakeholders—those who opposed the enactment of fair use in Australia—criticised the four factors as ‘nebulous’[33] or ‘uncertain’, and ‘complex’ because they involve consideration of multiple issues.[34] Some considered that the factors do not provide enough guidance.[35]

5.23 The ALRC is not persuaded by such characterisations. The four fairness factors may be standard-like (that is, broad and principles-based), but this does not mean that they are inherently uncertain or devoid of meaning. A number of stakeholders spoke favourably of the standard-like nature of the fairness factors. In the words of one stakeholder:

The fairness factors are general in character, inclusive and forward looking. As such they provide a key for the law to accommodate for social and technological change, whilst allowing for consistency and justice in treating analogous cases alike.[36]

5.24 Others referred to the four fairness factors as striking ‘an appropriate balance between familiarity, certainty and flexibility’,[37] and providing clear guidance about determining fairness and going ‘a long way to addressing perceived uncertainties’.[38] Some stakeholders also approved of the ‘balance’ inherent in the four fairness factors between the interests and needs of rights holders and the public[39]—countering any arguments that fair use equates to ‘free riding’.[40]

Interpreting the fairness factors

5.25 In the ALRC’s view, all four fairness factors need to be considered and balanced and a determination made in view of all of them. As in the US, no one factor is to be more important than another.[41]

5.26 This approach was supported in submissions,[42] along with some concern that courts may treat the factors as threshold tests, rather than as factors to be balanced.[43] The latter approach to interpretation of the fairness factors would clearly not be appropriate. It is not intended and is not how existing fair dealing factors are interpreted.

5.27 The following section introduces each of the four fairness factors, explains the wording and discusses aspects of how the factors may be expected to be interpreted.

First factor—purpose and character of use

5.28 The ALRC recommends that the first fairness factor be expressed as ‘the purpose and character of the use’.

5.29 This wording is identical to the first of the existing Australian fairness factors, except the word ‘use’ is used instead of ‘dealing’.

5.30 This wording is also used in the first fairness factor in the US provision where the words are followed by the additional text: ‘including whether such use is of a commercial nature or is for nonprofit educational purposes’.

5.31 Bill Patry has commented that this language at the end of the first US fairness factor was added at ‘the 11th hour’ as a ‘sop’ to educators.[44] He and other commentators have observed that this element of the first US factor has caused difficulties for the US courts over the years.[45] In his opinion:

It is the greatest of ironies that a cosmetic amendment intended purely as a political gesture to nonprofit educators has been misconstrued both as a statement of the nature of the factor as a whole and as a judgment by Congress that commercial uses (which were referred to only to make the gesture to educators less obvious) are to receive unfavourable treatment.[46]


5.32 Interpretation of this factor in the US encompasses two issues.[47] First, was the use ‘transformative’? That is, was the use for a different purpose than the use for which the material was originally created? On some analyses, whether a use is transformative in this sense is the key question in US fair use doctrine. Secondly, was the defendant’s use commercial?

Transformative use

5.33 Some stakeholders called for the Australian fairness factors to acknowledge recent developments in US law specifically, such as the transformative use doctrine,[48] and suggested that a requirement to show ‘transformative use or purpose’ should be included in the Act.[49] Others were opposed to this idea.[50]

5.34 In the ALRC’s view, whether a use is transformative should be a key question when applying the fair use exception—or the new fair dealing exception. The case for introducing a stand-alone transformative use exception, however, has been considered and rejected.[51] In the ALRC’s view, transformative uses of copyright material would be better considered under a fair use exception, where a range of factors can be balanced in determining whether a particular use is permitted.

5.35 A much greater emphasis on transformativeness in US case law followed the influential 1990 Harvard Law Review article by Judge Pierre N Leval, ‘Toward a Fair Use Standard’. The first fairness factor, the purpose and character of the use, Judge Leval said, ‘raises the question of justification’:

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. A quotation of copyrighted material that merely repackages or republishes the original is unlikely to pass the test; in Justice Story’s words, it would merely ‘supersede the objects’ of the original. If, on the other hand, 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.[52]

5.36 This transformative use doctrine was adopted by the US Supreme Court in 1994, in Campbell v Acuff-Rose (Campbell), and may now be ‘the prevailing view in fair use case law’.[53] In Campbell, the Court stated:

Although such transformative use is not absolutely necessary for a finding of fair use, … the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works. Such works thus lie at the heart of the fair use doctrine’s guarantee of breathing space within the confines of copyright … and 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.[54]

5.37 Some commentators have suggested that US jurisprudence on transformative use is not altogether coherent.[55] However, others have found the trend in US court decisions much more consistent. Professor Neil Weinstock Netanal’s review of several empirical studies and his own analysis of US case law led him to conclude that, since 2005, ‘the transformative use paradigm has come to dominate fair use case law and the market-centered paradigm has largely receded into the pages of history’.

Today, the key question for judicial determination of fair use is not whether the copyright holder would have reasonably consented to the use, but whether the defendant used the copyrighted work for a different expressive purpose from that for which the work was created.[56]

5.38 It is important to note the phrase ‘different expressive purpose’. On 14 November 2013, a US court found the digital scanning of entire books so that book text could facilitate search, through the display of snippets, to be ‘highly transformative’.[57] In the Court’s view, Google Books ‘uses words for a different purpose—it uses snippets of text to act as pointers directing users to a broad selection of books’.[58]

5.39 Some have expressed concern that the transformative use doctrine can undermine rights holders’ derivative rights, if it suffices to show that the secondary use has merely had a different ‘character’ from the original. However, Netanel stressed that empirical studies of US cases on fair use in the period 1995–2010 suggest that this concern is not warranted and that the ‘purpose’ of the use is vital:

In case after case decided since Campbell, courts have made clear that what matters for determining whether a use is transformative is whether the use is for a different purpose than that for which the copyright work was created. It can help if the defendant modifies or adds new expressive form or content as well, but different expressive purpose, not new expressive content, is almost always the key.[59]

5.40 The ALRC favours this emphasis on the question of whether a use has a different expressive purpose from that of the original.

5.41 Similar thinking is also evident in the United Kingdom Hargreaves Review, which expressed support for exceptions that do not ‘trade on the underlying creative and expressive purpose on which traditional rights holders in music, publishing, film and television rely’.[60]

5.42 The ALRC considers that the property rights granted to creators and rights holders are important and may be necessary to provide an incentive to create, publish and distribute copyright material.[61] But this should not be extended further than necessary. Rights holders should not be entitled to all conceivable value that might be taken from their material. The incentive to create will not be undermined by the unlicensed use of copyright material for entirely different purposes from the purpose for which copyright material was created, and in markets that do not compete with rights holders. Rather, such uses will stimulate further creativity, and increase competition.

5.43 Under the fair use and new fair dealing exceptions recommended in this Report, a transformative use will be more likely to be fair than a non-transformative use. In fact, a finding that a use is transformative should be one of the more persuasive factors, when considering whether a particular use is fair.

5.44 Uses of copyright material vary in the degree to which they are likely to be transformative. There are uses for purposes different than those for which the material was created. The use of copyright material for criticism or review, parody or satire, reporting the news and for quotation will often be transformative. Where copyright material is cached or indexed, or electronic publications are mined,[62] these uses will also be transformative, as the material was not created for these purposes.

5.45 However, like all other factors in the fair use and fair dealing exceptions, the ALRC considers that ‘transformativeness’ should not be considered determinative, but should be weighed along with other relevant matters. A use is not required to be transformative to be found fair.[63] Some exceptions discussed in this Report are less likely to be transformative—notably, private and educational uses. Such uses may be less likely to be fair for this reason, but other reasons for finding fair use may be found.

Commercial use

5.46 Some stakeholders expressed concerns about the possibilities of a fair use exception permitting the unlicensed use of copyright material for commercial purposes.[64] The AFL exemplified this view in stating that a fair use exception would need to ‘explicitly acknowledge that a commercial/profit making purpose or use by third parties cannot be a “fair use”’.[65] However, stakeholders in favour of a fair use exception considered it important that commercial uses not be automatically excluded.[66] Universities Australia, for example, submitted that the ability for a new fair use exception to apply to commercial uses was ‘particularly important in the digital environment’.[67]

5.47 In the ALRC’s view, a use is less likely to be a fair use if it is commercial, but this does not mean that all commercial uses will be unfair. This approach accords with the interpretation of the existing fair dealing exceptions. For example, news organisations are permitted under the existing fair dealing exceptions to make some commercial use of copyright material for the purpose of reporting news.

5.48 Under fair use, while commerciality is relevant, it is also important to focus on the related questions of whether the use is transformative or harms the market of the rights holder. Aspects of US law illustrate this approach.

5.49 In the US, the ‘character of the activity’is more important than whether the use is commercial or not: ‘the commercial or nonprofit educational element of a given use is but one aspect of its more general, multifaceted purpose and character’.[68] This interpretation was applied in Sony Corp of America v Universal City Studios Inc,[69]in which the Supreme Court said that‘the commercial or nonprofit character of an activity’ is to be weighed in any fair use decision, along with other factors. However, the fact that a use is commercial may ‘weigh against a finding of fair use’.[70]

5.50 In Campbell, the Supreme Court observed that essentially all fair use claims are made in the for-profit context of publishing and broadcasting. Commercial use does not lead to a presumption that the use is not fair; and, conversely, the fact that something is non-profit or educational does not lead to a presumption that the use is fair.[71]

5.51 Cases following Campbell have tended to downplay the impact of commercial use, especially where the use is deemed to be transformative. In Kelly v Arriba Soft Corp it was said that, because the use was ‘not highly exploitative, the commercial nature of the use weighs only slightly against a finding of fair use’.[72] It has been observed that commerciality can be placed on a continuum, with use for a ‘transformative, scholarly purpose’ at one extreme, and ‘verbatim, wholesale copying for resale to others’, at the other.[73]

5.52 Other US courts have limited adverse rulings on commerciality to ‘commercial exploitation’, defined as a situation where ‘the copier directly and exclusively acquires conspicuous financial rewards from its use of the copyrighted material’.[74]

5.53 Some guidance may also be obtained from case law in the fair dealing jurisdictions of the UK and Canada. In the UK, the most important factor, in assessing whether commercial use is fair dealing, is the extent to which the use competes with the exploitation of the copyright work by the owner.[75] However, cases of fair dealing for purposes of criticism, review and the reporting of current events are said to ‘raise more difficult problems than cases of non-commercial research and private study’.[76] This is because there may be a risk to the ‘commercial value of the copyright’, but it does not follow that any damage or any risk makes any use of the material unfair:

If it did then there could be no use of copyright material in criticism or review if it could be said that that use might damage the value of the material to the copyright owner. That would be inconsistent with the purpose of the section which is to balance the interests of the copyright owner and the critic.[77]

5.54 Although much criticism, review and reporting of the news is for a ‘commercial purpose’, where this does not directly compete with the copyright owner’s market, it is likely to be ‘fair’, particularly where

there is a moderate taking and there are no special adverse factors, the defence is likely to succeed, especially if the defendant’s additional purpose is to right a wrong, to ventilate an honest grievance, to engage in political controversy, and so on.[78]

5.55 In Canada, as in the US and UK, a commercial use is not determinative, but one of the factors to be taken into account in determining fairness. The Canadian courts also recognise that the nature of commerciality varies, and where the use is to generate revenue in competition to the copyright holder, the use is less likely to be fair.[79] However, if the purpose of the use ‘produces a value to the public interest’ that weighs towards fairness. If commercial returns to the user outweigh any such public benefit, the use may not be fair.[80]

Second factor—nature of the copyright material

5.56 The ALRC recommends that the second fairness factor be expressed as ‘the nature of the copyright material’.

5.57 The ALRC’s recommended wording is the same as the second of the existing Australian fairness factors, except that the term ‘copyright material’ is used instead of ‘work or adaptation’ or ‘audio-visual item’.


5.58 In considering the nature of the copyright material used, US courts have looked at factors including whether the work has been published, whether it is in print, and whether the content is factual or entertainment.

5.59 Whether a work is unpublished is a ‘key, though not necessarily determinative factor’ against fair use, as the scope of fair use is narrower with respect to unpublished works.[81] One reason is that the ‘the author’s right to control the first public appearance of his undisseminated expression’ will normally mean that it is not ‘fair’ to publish what is not yet before the public.[82]

5.60 An out of print work may, on the other hand, be more likely to be made available under a fair use analysis. Material that is unavailable for purchase through normal channels is unlikely to harm any market for that use.[83]

5.61 If a work is about to be published, or is unavailable due to preparation of a new edition or version, it is not considered likely to be fair to make substantial use of an existing version or edition,[84] particularly where this would impair the copyright owner’s ability to market the new version.[85]

5.62 The converse of the principles governing unpublished works does not follow: ‘the fact that a work is published does not mean that the scope of fair use is broader’.[86]

5.63 Factual works are considered more apt to be available for use under a fairness test: ‘[t]he law generally recognizes a greater need to disseminate factual works than works of fiction or fantasy’.[87] This seems to be because protection of creative endeavour is valued more than compilation of factual material:

Works that are ‘closer to the core of intended copyright protection’, and thus merit greater protection, include original as opposed to derivative works; creative as opposed to factual works; and unpublished as opposed to published works.[88]

5.64 In the UK, preventing the publication of material is regarded as an important aspect of the copyright owner’s rights.[89] Although unpublished material is not exempted from fair dealing, the nature of the material is highly relevant to a decision as to whether it is fair to use such work.[90] This is particularly true when copyright infringement is also a breach of confidence,[91] although it may be fair to inform the public about important matters—even where ‘leaked’ material is used.[92]

5.65 In Commonwealth v John Fairfax & Sons Ltd,[93] a case concerning leaked documents, the High Court of Australia considered whether unpublished material could be published under the fair dealing exception for reporting the news. The litigation concerned a book entitled Documents on Australian Defence and Foreign Policy 1968–1975, which included documents produced by the Department of Foreign Affairs, as well as unpublished government memoranda, assessments, briefings and cables.

5.66 Injunctions to prevent instalments of this book being published in the defendant’s newspaper were granted to the Australian Government, on the basis of breach of copyright in the documents. Mason J held that any dealing with unpublished work would not normally be fair within s 41, if an author had not released it to be the subject of public criticism or review.[94]

5.67 Section 107 of the US Copyright Act concludes with a paragraph stating, ‘The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors’. Some submissions expressed concern that the ALRC’s proposed fair use exception did not contain an equivalent statement.[95] The ALRC does not consider this additional wording to be necessary, if the second fairness factor is interpreted in a way similar to that in the US.

Third factor—amount and substantiality of the part used

5.68 The ALRC recommends that the third fairness factor be expressed as ‘the amount and substantiality of the part used’.

5.69 This factor parallels the fifth factor in the Australian fair dealing exceptions for the purpose of research or study, which is more fully expressed as: ‘in a case where part only of work or adaptation is reproduced—the amount and substantiality of the part taken in relation to the whole work or adaptation’.[96]

5.70 It was suggested that the opening conditional words of the existing factor are not suitable, because of their limiting effect.[97] That is, this factor may have to be ‘disregarded where the entirety of the material is used, while fair use requires each factor to be weighed in every case’.[98] In the ALRC’s view, it is important that this factor does not imply that use of the whole of copyright material can never constitute fair use.


5.71 In the US, interpretation of this factor consists of an evaluation of two matters. First, how much is the defendant alleged to have taken? Second, how important was that taking, in the context of the plaintiff’s work?

5.72 Fair use may allow the taking of the whole of a work, where this would be fair.[99] Where the purpose of the use is parody, then taking a large amount of the original may not be excessive: ‘in parody, as in news reporting, context is everything, and the question of fairness asks what else the parodist did besides go to the heart of the original’.[100]

5.73 In Commonwealth v John Fairfax & Sons Ltd, the fairness of using the leaked documents was rejected, as the purpose (criticism or review) was ‘merely a veneer’, since the reproduction of the plaintiff’s documents was to occur on a large scale with little actual comment and in several instalments.[101]

5.74 In Hubbard v Vosper,Lord Denning observed that stating what amount of copyright material could be considered a fair dealing was ‘impossible to define’, and that it ‘must be a question of degree’ to be decided in all the circumstances of the case. These circumtances include the amount considered in the context, and what is appropriate for the purpose, and, ‘after all is said and done, it must be a matter of impression’.[102]

5.75 US case law follows a line of English authorities beginning with the case Bramwell v Halcomb, in saying that: ‘It is not only quantity but value that is always looked to’.[103] US cases refer to considerations of quantity in terms of quality: ‘essentially the heart of the book’; containing the ‘most powerful passages’; and ‘the dramatic focal points’.[104]

5.76 The context of the use will continue to be important when interpreting this factor. As the National Film and Sound Archive observed:

making a copy of a film for research and study is likely to require copying the whole item, a criticism or review of a visual artwork is more likely to use the whole item, but a criticism or review of a book is likely to use smaller proportions of the item. Rather than just considering the ‘amount and substantiality’, a factor might be whether the use of the material is appropriate for the purpose, for example, it may be fair to include the whole artwork in a review but not a large size high resolution copy.[105]

Fourth factor—effect of the use upon the potential market or value

5.77 The ALRC recommends that the fourth fairness factor be expressed as ‘the effect of the use upon the potential market for, or value of, the copyright material’.

5.78 The ALRC’s recommended fourth fairness factor parallels the fourth factor in the Australian fair dealing exceptions, with minor changes: the factor again refers to ‘copyright material’ and the word ‘use’ is used instead of ‘dealing’.


5.79 In the US, this factor requires consideration of the market effect of the use. A number of stakeholders in favour of a fair use exception considered this factor important in protecting the interests of rights holders.[106] Copyright Advisory Group (CAG) Schools stated:

The requirement to consider market harm as part of a fairness assessment is a significant protection to ensure that copyright owner markets are clearly and properly preserved when determining the limits of fair use.[107]

5.80 However, rights holders were concerned at the complexity inherent in the wording of the fourth factor, about likely disputes over meaning and the consequent cost, especially as rights holders may have an onus to establish market effects.[108] Cricket Australia, for example, stated that

this factor imposes an unreasonable burden on copyright owners as it is likely to require copyright owners to obtain and lead complicated evidence regarding the markets for copyright material, the value of the material and the impacts of particular uses.[109]

Market harm

5.81 If a licence can be obtained for a particular use of copyright material, then the unlicensed use of that material will often not be fair. The availability of a licence is an important consideration in determining whether a use is fair, and will weigh against a finding of fair use. This factor helps ensure that copyright exceptions do not unreasonably damage rights holders’ markets or undermine the incentive to create and distribute copyright material.

5.82 US Judge Leval has written concerning the fourth fairness factor:

A secondary use that interferes excessively with an author’s incentives subverts the aims of copyright. Hence the importance of the market factor. … When the injury to the copyright holder’s potential market would substantially impair the incentive to create works for publication, the objectives of the copyright law require that this factor weigh heavily against the secondary user.[110]

5.83 However, the availability of a licence does not settle the question of fairness. Market harm should not be equated with any diminution of licence fees, otherwise this factor would always favour the rights holder.[111] For this factor to weigh against fair use, the harm to the market from the use should be substantial.

5.84 Any harm must also be weighed along with the other fairness factors. Some damage to a rights holder’s market may be justified, for a use that is transformative or has an important social value, particularly if the damage is minor or remote.

5.85 When considering this fairness factor, courts should consider the harm that might result if the use were widespread. One photocopy of a book that displaces one paid copy of the book will not greatly damage the publisher’s market. If the book were photocopied widely, however, the damage may then be substantial.

5.86 When considering harm to the rights holder’s markets, the relevant markets are those that are ‘traditional, reasonable or likely to be developed’. If a use fills a ‘market niche’ that the rights holder ‘simply had no interest in occupying’,[112] then the fourth factor may not disfavour fair use.

5.87 This interpretation given to the US fair use provision should address the concern expressed by the Australian Competition and Consumer Commission (ACCC) that the word ‘market’ in this fairness factor might be given an overly broad interpretation, and that rights would be ‘extended in ways where they effectively create monopoly-type characteristics in markets that are ancillary to the primary market for the copyright materials’:

The conceptual problem with a definition of markets that captures all ancillary markets is likely to be most evident in the consideration of ‘potential markets,’ where copyright holders may not be best placed, skilled or incentivised to innovate and create potential markets.[113]

5.88 Some argue that unremunerated exceptions to copyright should only be available when there is market failure, and that if a licence is available, an unlicensed use should never be fair. International copyright agreements do not mandate such a principle. The three-step test provides that free-use exceptions should not ‘unreasonably prejudice the legitimate interests of the author’.[114] It does not say an exception must never prejudice any interest of an author.

5.89 In the UK, certain exceptions do not apply if a licence can be obtained for the use, however these provisions are now being amended. The UK Government has concluded that, while the existence or otherwise of a licence may be an important factor in deciding fair dealing, other factors are also important, such as ‘the terms on which the licence is available, including the ease with which it may be obtained, the value of the permitted acts to society as a whole, and the likelihood and extent of any harm to right holders’. For this reason, the UK Government rejected the argument that the ‘mere availability of a licence should automatically require licensing a permitted act’.[115]

5.90 The fourth fairness factor can also act as an incentive for rights holders to offer reasonable and convenient licences for the use of their material. Where such licences are not offered, it will more difficult to argue that an unpaid use harmed the rights holder’s market. In Cambridge University Press v Becker, a US court found that publishers who did not offer licences for electronic excerpts of their books, could not claim that the unpaid use of electronic excerpts harmed the publishers’ markets.[116]

5.91 Finally, it is important to recognise that the harm this factor is concerned with is harm that comes from a use that usurps the market of the original material. Judge Leval explains:

Not every type of market impairment opposes fair use. An adverse criticism impairs a book’s market. A biography may impair the market for books by the subject if it exposes him as a fraud, or satisfies the public’s interest in that person. Such market impairments are not relevant to the fair use determination. The fourth factor disfavors a finding of fair use only when the market is impaired because the quoted material serves the consumer as a substitute, or, in Story’s words ‘supersede[s] the use of the original.’ Only to that extent are the purposes of copyright implicated.[117]

5.92 The US Supreme Court stated in Campbell that the ‘market for potential derivative uses includes only those that creators of original works would in general develop or license others to develop’.[118] The concept of a ‘transformative market’, which has emerged in US jurisprudence, is also helpful:

A non-transformative use that competes directly in the rights-holder’s traditional market, or that seeks to avoid a traditional licensing arrangement, will not be favoured by this factor. A transformative use that falls within a ‘transformative market’ (rather than a ‘traditional, reasonable or likely to be developed market’) probably will be. Crucially, US courts do not allow a rights-holder to pre-empt a transformative market through conjecture about impairment of the possibility of licensing the transformative use.[119]

Additional factors?

5.93 A number of other fairness factors have been suggested and are discussed below. In the ALRC’s view, the new fair use exception should not include these, or any other, additional fairness factors.

Ordinary commercial price

5.94 An additional factor specified in the Australian fair dealing exceptions for the purpose of research or study refers to ‘the possibility of obtaining the work or adaptation within a reasonable time at an ordinary commercial price’.[120]

5.95 Some stakeholders expressed concern at the omission of this factor.[121] Media, Entertainment & Arts Alliance submitted that including this factor would ‘at least demonstrate some recognition of the rights of copyright creators and owners’.[122] The Print Music Publishers Group was concerned that omitting this factor would send the wrong message to consumers.[123]

5.96 Some went further, submitting that fair use should not apply where a use may be licensed on reasonable terms.[124] That is, the legislation ‘should squarely state that if something is commercially available—including under a licence—then it is immediately disqualified’ from fair use.[125] This view can be challenged, however, because such an assessment would essentially be a ‘one factor test’.[126]

5.97 The Australian Copyright Council submitted that an ‘ordinary commercial price’ factor should be a fundamental part of any fair use exception. The Council considered that this factor is not subsumed by the fourth factor—‘the effect of the use upon the potential market for, or value of, the copyright material’—but rather, is complementary:

the former factor deals with the existing market and the latter deals with future markets. The former factor provides a concrete means of assessing the effect on the existing market and therefore provides an insight into what might be a ‘normal exploitation’ of the relevant copyright material.[127]

5.98 Other stakeholders submitted that an ‘ordinary commercial price’ factor should not be included in the fair use exception.[128] The ALRC takes this view for a number of reasons.

5.99 First, it is unnecessary. This factor is related to, or possibly a ‘subset’[129] of, the fourth factor—concerning market effect. So, to the extent that it is relevant, it will be considered as part of a fairness determination.

5.100 A related consideration is that advances in digital technology are increasingly facilitating the licensing of low value uses. This has led to claims by collecting societies that a fair use exception ‘conflicts with a normal exploitation of the work’ and ‘unreasonably prejudices the legitimate interests of the rights holder’.[130] CAG Schools observed:

If these claims are accepted, fair use would have little if any role to play in a digital environment where a licence can be sought and granted with relative ease. Taken to its logical conclusion, this is an entirely circular argument: any use which a rights holder is prepared to licence would be per se ‘unfair’ if done without permission.[131]

5.101 Secondly, the US and other jurisdictions, which have adopted a fair use exception, do not expressly include this factor in their legislation.

5.102 Singapore is the only jurisdiction which includes an ‘ordinary commercial price’ factor in its open-ended fair dealing provision. The factor was added as part of amendments in 2004. When Singapore extended its fair dealing regime, a number of rights holder interests opposed the introduction of this factor.[132] One commentator explained:

There is a view that the presence of this new factor weighs against the copyright owner in that it embodies an ‘implication that a copyright owner’s pricing and distribution decisions could somehow convert an infringement into a fair dealing’.[133]

5.103 The Copyright Review Committee (Ireland) has recommended the inclusion of a factor referring to ‘the possibility of obtaining the work, or sufficient rights therein, within a reasonable time at an ordinary commercial price, such that the use in question is not necessary in all the circumstances of the case’[134] in its fair use exception. However, the fair use exception recommended for Ireland is substantially different from that in the US,[135] involving the determination of fairness by reference to up to eight factors.

5.104 Thirdly, an ‘ordinary commercial price’ factor may not be appropriate in determining the fairness of a range of uses including, for example, ‘criticism or review’ and ‘parody or satire’.

5.105 Finally, while such a factor is said to be derived from case law on fair dealing, there is little such case law, compared with that concerning the other fairness factors.

Other factors?

5.106 Other factors that were suggested as desirable included the existing requirement for sufficient acknowledgement;[136] and ‘the non-financial impact of the use on the copyright owner’, such as damage to reputation or brand.[137]

5.107 Whether sufficient acknowledgement was made can be considered in the context of the first fairness factor,[138] and an assessment of fairness could include consideration of damage to reputation or brand—although this is not traditionally considered when determining whether there has been infringement of copyright.

5.108 In any case, the ALRC recommends that the list of fairness factors should be non-exhaustive. Other relevant factors may be considered in a given case. For example, principles of justice, equity and perhaps acknowledgement of moral rights may also be relevant in determining fairness.

5.109 While some stakeholders who opposed a fair use exception criticised the non-exhaustive nature of the list as exacerbating the subjectivity, vagueness and imprecision they considered inherent in the fair use concept,[139] others acknowledged that this would enable other relevant public policy factors to be taken into account.[140]

Recommendation 5–2 The non-exhaustive list of fairness factors should be:

(a) the purpose and character of the use;

(b) the nature of the copyright material;

(c) the amount and substantiality of the part used; and

(d) the effect of the use upon the potential market for, or value of, the copyright material.