A topic that comes up fairly often in the development of Video Games is Fair Use. Typically, the discussion starts “can I redesign this famous character and use it in my game?” What proceeds the question is a large number of incorrect answers that range from “yes, it’s fair use” to “yes if you change it enough.”  The issue is, the ones making these blanket statements either don’t fully understand the concept of Fair Use or they are relying on what Wikipedia told them about fair use.  Today’s blog post is going to clear up the confusion for anyone wondering if their use of someone else’s copyrighted work falls under the fair use protection. This post is going to review the Fair Use definition/history, the factors courts consider when weighing fair use, and why your use in your game is not protected.

Fair Use originated as an equitable concept created by Section 107 of the Copyright Act of 1976. The Fair Use doctrine seeks to advance social interests in having widespread access to works of authorship while preserving copyright owners exclusive rights of control. The original idea of Fair Use dates back to the “Copyright Clause” in the constitution, which purpose is to “promote the Progress of Science and useful Arts.”

One of the earliest cases of Fair Use dates back to 1841 where a Massachusetts court held the use of copyrighted work really and truly passages for the purposes of fair and reasonable criticism.  Folsom v. Marsh, 9 F. Cas. 342, 344 (C.C.D. Mass. 1841) The Folsom Court was reviewing the use of a use of a copyrighted work for criticism in a publication. The court expressed the need to allow those to openly criticize copyrighted works without fear of legal repercussions. Additionally, Fair Use is often referred to as the First Amendment safety valve, as exclusive rights afforded by the Copyright Act are often in tension with the rights of free expression under the First Amendment. Elder v. Ashcroft, 537 U.S. 186, 219-20 (2003).

In Section 107 of the Copyright, Act Congress laid out the framework for evaluating Fair Use. The major issue with Fair Use is no one legal definition exists that Courts can follow, instead, Section 107 sets out guidelines that enable copyright owners, users, and courters to determine whether a particular use may be fair. In fact, Fair Use is one of the most nuanced areas of copyright law as it requires a large degree of subjectivity to determine if the use if protected.

What use falls within the framework of Section 107? Criticism, Comment, News Reporting, Teaching, Scholarship, and Research are some of the non-exhaustive purposes for which use of copyrighted work is likely to be considered fair. However, Congress added a catchall provision which states if the use is deemed sufficiently transformative such that it does not substitute for the copyrighted work than such use may be considered fair. We will examine what is sufficiently transformative later in this blog. Once a determination is made on the type of use, a Court then examines addition factors to determine if that type of use is considered fair. The main four factors A court uses to determine if the use is fair are the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and the effect of the use on the potential market for or value of the copyrighted work.

Let’s review how each factor is examined by the Courts in weighing the use of a copyrighted work.

A Court will review if the use is of a commercial nature and whether the use is transformative.  Non-commercial uses of copyrighted work are, in general, more likely to qualify as fair use than commercial uses.  Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577 (1994). This analysis could be as simple as, is the person making profits from the use of the copyrighted works. However, use does not have to directly involve financial gain to be considered commercial.  For example, the Court in A&M Records, Inc. v. Napster, held saving users the expend f purchasing authorized copies was considered commercial. Additionally, in Compaq Computer Corp. V. Ergonome, the Court held use is commercial if it’s used to induce the purchase of other products.

What about free to play games with no microtransactions? This was a question recently asked, what if I launch a free to play the game to show off my studio, and we don’t have any microtransactions in the game. The answer is in the use, here the game studio wanted to show off its work by giving away its game for free. The game made use of copyrighted work without expressed permission from the original rights holder.  Although the Studio wasn’t making any money from giving away its game, the fact that its free offering was to promote the studio, that promotion arguably is a commercial purpose as a way to gain more sales for the studio’s other offerings.  Therefore, its use of copyrighted works in the free game would more likely than not fair this factor.

What about transformative uses? A use is considered to be transformative if it either adds something new to the underlying copyrighted work, or has a different function, purpose, or character than the original work.  What this means is the use cannot be seen as competitive with or supplanting the demand for the original. However, the idea being transformative is vastly different among the circuit courts. For example, the Ninth Circuit found that where an internet image search engine displays thumbnail copies of copyrighted photos use is transformative because it serves an informational function and the originals have an aesthetic purpose. The Second Circuit held, a copyrighted work is used as raw material for a new work, the new work must have new information, aesthetics, or understands for the use to be deemed transformative.  In the case Blanch v. Koons, the Second Circuit found the use of a copyrighted image of fashion feature in a lifestyle magazine to be fair as Koons only used the legs and feet from the original photo, showed the image in new context (a colleague of feet) and was a commentary on the aesthetic of mass media.

How does this work in the Video Game Industry? As a developer, you want to use concert posters from a famous band in your scene your building in your game. Arguably the use of these copyrighted concert posters would be considered fair, as the new use would show the posters in a new context and a purpose that was different from the original purposes.  (See Bill Graham Archives v. Dorling Klindersly Ltd., 448 F.3d 604, 609 (2d Cir. 2006))

Is the use of the work creative or factual? The more creative a work, the closer it is to the core of the scope of copyright protection. (Stewart v. Abend, 495 U.S. 207, 237-38 (1990))  Why? Facts and ideas are not generally protected under the copyright act. The Idea behind the copyright act to protect artistic works, simply using facts or historical settings does not lend its self for copyright protection.  For example, The Second Circuit in The Swatch Group Management Servs. Ltd v. Bloomberg the Court held the use of audio recordings of a company’s earning calls was fair, as it manifestly a factual character.

This factor looks to whether the new work uses only as much of the original work as is necessary. The use of a relatively small portion of a copyrighted work, such as just the legs and feet in the Koons case, generally supports an argument that the use is fair. However, even using a small portion of the work can be deemed unfair if that portion is significant or the “heart” of the original work. (Harper & Row Publishers, 471 U.S. at 598-600)  This factor is often examined in cases where copyrighted characters are used for other purposes in other games. For example, when attempts to use a character like Sonic the Hedgehog in a different setting for a different purpose, but they don’t take the gold rings or the red shoes.  The fact that those are not the “heart” of the character but the ionic look and style of the character as a whole would still deem the use of infringement/unfair.

The Fourth Factor in this analysis is one of the biggest factors when dealing with the copyrighted video characters. The Courts consider both the direct market harm from the use at issue and harms that may result from potential, similar infringing uses. Market Harm can include lost or diverted sales, lost royalties or licensing revenue, or barriers to entry in yet-unexplored markets.  Often times I see people discussing using a character’s likeness without permission, and most people without knowledge claim its ok its fair use. What these individuals don’t understand is using that characters likeness in your game is taking away the potential for the copyright holder to gain licensing revenue.

Iv. Why your use isn’t protected.

Now that you have an understanding of fair use, and how a court determines its protections, let’s do a case study of a recent issue.  The other day a Reddit user on the IndieGaming Subreddit posted a question, is the use of this asset in a video game as a skin fair use. As you can tell from the image, the skin in question looks like Sonic the Hedgehog, what I learned after communicating with the poster is they planned on using the asset in an educational game, and they plan on giving away that game for free.  Now that all the facts are laid out let’s do the Fair Use analysis, Note the asset in question is 100% a derivative work from the original Sonic the Hedgehog, and we will address derivative works in a later post.

Question 1. Does the game fall into a fair use category, and the answer is yes. The poster stated the game was going to be an education game. Now we must look at the 4 factors discussed above.

Question 2. Purpose and Character of the Use. The poster stated this was free to play the game, and stated there is no commercial purpose. However, there is an argument to be had that although there is financial gain from sales, there is a huge financial gain from the promotion and use of the game for his studio.  What about transformative use? Yes, it is transformative to an extent, sonic the hedgehog is an adventure game character, use in an educational game is transformative, however, the fact is its still sonic being used in a video game, therefore still within the original purpose of this character.

Question 3.  The Nature of the Work? Sonic is 100% a creative work, therefore its use without permission would fail this prong.

Question 4. The amount and Substantially of the Portion Used.  Again 100% of the character is used, therefore its use without permission would fail this prong.

Question 5. Effect on the Market for the Copyrighted Work.  Let’s look at how the use of Sonic may cause direct market harm from the use at issue, and harms that may result from potential, similar infringing uses. Direct harm is caused as its devaluing the character, and opening him up to future exposure by infringers.  If allowed to appear in your game without paying a royalty or licensing then Sega/Team Sonic are losing out on that revenue.  Additionally, your blocking Sega/Team Sonic from directly entering education games, affecting their business.

Based on the factors above, its use would not be considered fair, and you would be considered an infringer.

That said Fair Use and copyright laws are tricky, and every use requires some type of analysis. The team at Press Start Legal are experts in Copyright and Intellectual Property Law. We always advise you speak with an Attorney regarding your use of copyrighted works without permission. If you have any questions please contact us at [email protected] for a free consultation.