In a world of bustling creativity and a thriving technology industry, it is essential for businesses and startup companies to be wary of copyright issues. Generally, copyright protection is automatic and provides the author exclusive rights to reproduce and distribute the work. However, copyright owners are only entitled to bring a claim for infringement against others if they have registered their copyrighted work. Those who do can then go after infringers who face statutory penalties and damages ranging from $500.00 to $150,000 per work for willful infringement. This does not include other remedies including infringer’s profits, injunctions, actual damages, and more. Fortunately, the doctrine of fair use is a common defense available for defendant litigants to defend themselves in a copyright infringement lawsuit. However, in the realm of technology and the virtual world, other complications may arise when the doctrine of fair use is raised.

Fair use is a legal doctrine that encourages freedom of expression by permitting the unlicensed use of copyright-protected works in particular circumstances. Section 107 of the Copyright Act provides the framework for the determination whether a work is fair use and calls for the consideration of four factors in evaluation: (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. Courts are supposed to consider all of these factors; however, some factors may be given more weight than others based on the type of work and use of it.

Because the outcome of using the fair use doctrine is not clear cut, it is generally best to err on the side of caution and not to use a copyrighted work without explicit consent. Some ways to acquire permission include obtaining a license from the private individual or company for use and purchasing from stock photography companies and the like that provide an accompanying license.

For startup companies in security research and related industries, it may not be feasible to obtain licenses to do the work they have been set out to do. In a copyright infringement suit, such companies may find the first factor useful in utilizing the fair use doctrine in a copyright infringement claim. In a recent case between Apple and Corellium, LLC, the judge ruled that Corellium’s creation of a “virtual” version of Apple’s iPhone to detect potential bugs did not constitute a copyright violation, partly because it was designed to improve the security for all iPhone users. The judge explained that Corellium was not creating a competing product for consumers and that its software emulating the iOS operating system amounted to fair use because it was “transformative” and helped developers find security flaws. Pursuant to the first factor set forth in Section 107 of the Copyright Act, transformative uses are those that add something new, with a further purpose or different character, and do not substitute for the original use of the work.

If upheld, this ruling may implicate victorious results for researchers and companies who desire to modify or tinker with existing software who would otherwise face civil or criminal penalties for reproducing such copyrighted software, particularly as part of efforts to find discrepancies in software programs. Unresolved, the judge also said Corellium could face separate liability under the Digital Millennium Copyright Act (DMCA) which prohibits tools to circumvent security measures. Corellium potentially overrode Apple’s encryption measures to access the iOS code, which is prohibited under the DMCA. Currently, the underlying question is whether the DMCA ruling effectively undermines the fair use ruling. Apple has seemingly lost the copyright battle against Corellium; however, the case is still ongoing and will be an important one to follow along.

Clearly, fair use analysis can be complicated and such claims are evaluated on a case-by-case basis; the outcome of any given case depends on a fact-specific inquiry. Therefore, there is no precise formula to ensure that a predetermined amount of a work may be used without permission. It is best to consult an experienced attorney. If you have any questions regarding copyright, the fair use doctrine, or any of the above mentioned, speak to an attorney with your concerns. We are your Orange County trademark, business, and copyright attorneys here to help.