Fox News has come out victorious in a blockbuster ruling on Tuesday that could cause a sharp derailment in the sharing of clips from the conservative cable newscaster. In the decision, the 2nd Circuit Court of Appeals analyzes copyright fair use and comes to the conclusion that TVEyes, a media monitoring service, went too far by giving its customers the ability to watch virtually all of Fox News' content.

Although TVEyes isn't a particularly well-known service, it is an important one that's used by the White House, more than 100 members of Congress, the Department of Defense, the American Red Cross, investment banks, trial lawyers, and most especially, other members of the media. The value of this service is that it allows customers to create customized search terms and access transcripts and video clips for the purposes of research, evaluation and commentary. The fruits of TVEyes often go viral on social media and appear on news commentary programs. But Fox News sued TVEyes, alleging that a service that permits the nearly limitless watching of live streams and archives would "decimate" its business.

At the district court level, a federal judge issued a series of mixed decisions, but one that gave Fox News the edge. U.S. District Judge Alvin Hellerstein agreed with TVEyes that the indexing and excerpting of cable news programming is a transformative use of copyrighted material, but later, ruled that TVEyes had overstepped by letting its subscribers search, download and share clips. The judge issued an injunction that restricted the sharing of clips through email and on social media, but the injunction was paused to allow the appeal to play out.

Today, 2nd Circuit Dennis Jacobs reverses Hellerstein in the finding of any fair use.

"TVEyes’s re?distribution of Fox’s audiovisual content serves a transformative purpose in that it enables TVEyes’s clients to isolate from the vast corpus of Fox’s content the material that is responsive to their interests, and to access that material in a convenient manner," he writes. "But because that re?distribution makes available virtually all of Fox’s copyrighted audiovisual content — including all of the Fox content that TVEyes’s clients wish to see and hear — and because it deprives Fox of revenue that properly belongs to the copyright holder, TVEyes has failed to show that the product it offers to its clients can be justified as a fair use."

Here's the full opinion.

The case is remanded back to the federal judge to revise an injunction in light of this determination. However, it's possible that TVEyes could seek a rehearing before a fuller panel at the 2nd Circuit or take this case to the Supreme Court.

The appeal largely focused on TVEyes' "Watch" function rather than its "Search" function, but ultimately since everything is intertwined, TVEyes' entire suite of services is now legally suspect. TVEyes customers pay $500 a month for a subscription — an expensive proposition that TVEyes argued could hardly be a market substitute. Nevertheless, the fact that the Watch function allows TVEyes clients to view up to 10-minute clips at a time caused great concern at the 2nd Circuit, which heard oral arguments in this case in March 2017.

Both sides focused on squaring this case with the past 2nd Circuit decision over Google Books, a project to digitize tens of millions of books. In that case, the appellate court held that Google's copying served a transformative purpose by creating a text-searchable database and that since Google had only allowed the viewing of "snippets," this was a permissible fair use of copyright.

As much as TVEyes initially resembles Google Books in that it enables users to isolate their interests from an ocean of information, enhancing the efficiency of researchers, it's transformative. But the purpose and character of one's use is just one of four factors comprising a fair use. TVEyes runs into trouble on the third and fourth factors — the amount and substantiality of the portion taken as well as the effect of the use upon the potential market.

"The third factor strongly favors Fox because the Watch function allows TVEyes’s clients to see and hear virtually all of the Fox programming that they wish," writes Jacobs. "And the fourth factor favors Fox as well because TVEyes has usurped a function for which Fox is entitled to demand compensation under a licensing agreement."

Jacobs adds, "At bottom, TVEyes is unlawfully profiting off the work of others by commercially re?distributing all of that work that a viewer wishes to use, without payment or license. Having weighed the required factors, we conclude that the balance strongly favors Fox and defeats the defense of fair use."

Dale Cendali of Kirkland & Ellis represented Fox News in the case.

"This is a significant win in the field of fair use law because to the extent that transformativeness has become the litmus test of fair use for some courts, the court in this case, similar to the Harry Potter Lexicon case, held that even where a use may be modestly transformative, it is critical for a court to evaluate all of the fair use factors," she comments.

Cendali adds, "We cannot emphasize enough the practical effect this win should have for content holders of all stripes in not being deprived of the benefit of monetizing content by those standing on fair use grounds."

In a statement after the ruling, TVEyes said, "While we are disappointed by the decision, we continue to believe that TVEyes offers an irreplaceable public service to its customers, including elected officials and government agencies, the military, law enforcement and the news media itself, within the bounds of the law. We are in the process of evaluating the decision and considering our options.”