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A federal court has sided with the Associated Press and the New York Times(s nyt) in a closely-watched case involving a company that scraped news content from the internet without paying for it.

The case has important implications for the news industry and for the ongoing debate about what counts as “fair use” under copyright law. Here’s a plain English explanation of what the case is all about and what it means for content creators and free speech.

Fair use or a free ride? The facts of the case

The defendant in the case is Norway-based Meltwater, a service that monitors the internet for news about its clients. Its clients, which include companies and governments, pay thousands of dollars a year to receive news alerts and to search Meltwater’s database.

Meltwater sends its alerts to client in the form of newsletters that include stories from AP and other sources. Meltwater’s reports include headlines, the first part of the story known as the “lede,” and the sentence in the story in which a relevant keyword first appears. The Associated Press demanded Meltwater buy a license to distribute the story excerpts and, when the service refused, the AP sued it for copyright infringement.

Meltwater responded by saying it can use the stories under copyright’s “fair use” rules, which creates an exception for certain activities. Specifically, Meltwater said its activities are akin to a search engine — in the same way that it’s fair use for Google to show headlines and snippets of text in its search results, Meltwater said it’s fair use to clip and display news stories.

The case has divided the tech and publishing communities. The influential Electronic Frontier Foundation filed in support of Meltwater, arguing that AP could inhibit innovation and free expression if it succeeds with the copyright claim. On the other side, the New York Times and other news outlets filed to support the AP; they claim Meltwater was simply free-riding and that the company is undermining the ability to create the sort of journalism on which a free society depends.

A clean win for the AP

In a decision published Thursday in New York, U.S. District Judge Denise Cote shot down Meltwater in blunt language. While much of the 90-page ruling covers procedural issues and other defenses put forth by Meltwater, the heart of the decision is about fair use.

To decide if something is fair use, courts apply a four-part test that turns in large part on whether the defendant is using the copyrighted work for something new or unrelated to its original purpose. Famous examples of fair use include a parody rap song of “Pretty Woman” and Google’s display of thumb-size pictures in its image search. In the AP case, however, Meltwater’s fair use defense failed.

Judge Cote rejected the fair use claim in large part because she didn’t buy Meltwater’s claim that it’s a “search engine” that makes transformative use of the AP’s content. Instead, Cote concluded that Meltwater is more like a business rival to AP: “Instead of driving subscribers to third-party websites, Meltwater News acts as a substitute for news sites operated or licensed by AP.”

Cote’s rejection of Meltwater’s search engine argument was based in part on the “click-through” rate of its stories. Whereas Google News users clicked through to 56 percent of excerpted stories, the equivalent rate for Meltwater was 0.08 percent, according to figures cited in the judgement. Cote’s point was that Meltwater’s service doesn’t provide people with a means to discover the AP’s stories (like a search engine) — but instead is a way to replace them.

The judgement also points to the amount of content that Meltwater replicated. Whereas fair use allows anyone to reproduce a headline and snippets, Cote suggested Meltwater took “the heart” of the copyrighted work by also reproducing the “lede” and other sentences:

“A lede is a sentence that takes significant journalistic skill to craft. [It shows] the creativity and therefore protected expression involved with writing a lede and the skill required to tweak a reader’s interest.”

The ruling added that Meltwater had taken more of the story than was necessary for a search engine and that its economic harm to AP also weighed against finding fair use. And, in a line that likely had news agencies clicking their heels, the judge wrote:

Paraphrasing James Madison, the world is indebted to the press for triumphs which have been gained by reason and humanity over error and oppression […] Permitting Meltwater to take the fruit of AP’s labor for its own profit, without compensating AP, injures AP’s ability to perform this essential function of democracy.

These are what I regard as just some of the most important points of a very long decision. You can read it for yourself below; I have underlined key passages.

Common sense or a chill on free expression?

The decision has already caused concern on the part of internet freedom advocates. Techdirt’s Mike Masnick, for instance, says the ruling has “a ton of problems” and that Cote misapplied the four-part fair use test.

Meanwhile, the company has vowed to appeal and and its CEO claims to be “especially troubled by the implications of this decision for other search engines and services that have long relied on the fair use principles for which Meltwater is fighting.”

Meltwater is likely to face an uphill battle on appeal, however. Cote’s ruling is exhaustive and the Second Circuit Court of Appeals is regarded by many lawyers as sympathetic to the hometown publishing community.

The impact of the ruling, however, will be determined by how far it ripples beyond Meltwater. As all of the clipping service’s competitors have already paid AP for a license, the impact could be insignificant for everyone but Meltwater while, at the same time, boosting the AP’s resources for gathering news.

On the other hand, the ruling could embolden the AP and other news outlets to file more lawsuits. While this could bring more licensing revenue for journalism, it may also produce a phenomenon like what is occurring in France and Germany where publishers are treating copyright like a tax to protect outdated industries — and chilling online innovation in the process.

Meltwater AP Ruling

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