"She was joking. She’s talking about Santa Claus, for Christ’s sake," Ailes says of the media furor around his 9 p.m. anchor insisting St. Nicholas is white. "But the people who are jealous of her, who want to bring down or hurt Fox News, see an opportunity. If they have to beat up somebody as talented as Megyn Kelly on Santa Claus, they’re pathetic."

Is Fox News about to be decimated by a media-monitoring service? Or is the cable news channel attempting to establish exclusive control over its news content and silence its critics? Both questions are being examined in an extremely important copyright lawsuit that could soon be decided on summary judgment.

Last September, we spotlighted how Fox News v. TVEyes had the potential of impacting the future of the news business. At the time, we focused on Fox News' attempt to use a nearly century-old legal doctrine called "hot news misappropriation" on top of copyright claims to protect itself from a company that records, indexes and then distributes television clips to customers that include the United States Department of Defense, the United Nations, The New York Times, Time Warner Cable and professional sports leagues.

On Tuesday, summary judgment motions from both sides became public (minus redactions), telling the tale of litigation stakes even larger than previously imagined. Just what is this lawsuit about?

According to Fox News, it's about a digital service that is destroying its considerable investment in news reporting. It's about a defendant that charges customers a flat fee of $500 a month to watch live streams, view past television programs, download unlimited high-definition video clips and then edit them and share them with others. The availability of unlimited clips in real time happens without copyright notices and in unfair competition with an authorized clip-licensing service, says Fox.

"TVEyes' subscribers who watch FNC and FBN on TVEyes (not on television) are not included in Fox News' ratings," says the plaintiff's memorandum. "Therefore, TVEyes' service devalues Fox News' content to Fox News' affiliates, who will seek lower carriage fees as a result. If this use becomes widespread, the effect would decimate Fox News. Thus, TVEyes' service substantially diminishes the value of Fox News' copyrighted programming."

Now, let's turn to TVEyes, which is mounting a fair use defense in large part by focusing on who is using its service.

"TVEyes' clients use the service in various ways to facilitate their research objectives," says the defendant's memorandum. "For example, journalists use TVEyes to comment on and criticize broadcast news channels (including Fox), often by comparing and contrasting how the major news networks cover particular news events. Government officials and corporations use TVEyes to monitor the accuracy of facts reported by the media so they can make timely corrections when necessary. Political campaigns use TVEyes to monitor political advertising and appearances of candidates in election years. Financial firms use TVEyes to track and archive public statements made about securities by their employees for regulatory compliance. The White House uses TVEyes to evaluate news stories and give feedback to the press corps, including Fox News. Without TVEyes or a service akin to it, there would be no way to effectively accomplish these objectives."

About those journalists...

TVEyes mentions that one of its clients is Media Matters — the George Soros-funded organization that often picks apart inflammatory Fox News segments to feed to other media organizations. Indeed, practically every day, CNN and MSNBC use Fox News clips on evening telecasts. And in Fox News' own summary judgment motion, it's noted that TVEyes has entered into license agreements with other content owners (with specific names blacked out).

The defendant believes there's something rotten happening.

"Cable news shows about the news media's coverage of the news, and media watchdogs that criticize and expose what they deem bias and misinformation, demonstrate the extent to which news reporting is the subject of legitimate and widespread political debate," continues the defendant's memorandum. "Denying TVEyes the ability to make excerpts of Fox broadcasts available to subscribers for research — especially for research that results in criticism of Fox — elevates Fox's rights to exclusive ownership and control over the public's right to continue to access information and effectively engage in political discourse. There is a public benefit to — and a First Amendment interest in — giving the public the means to carry on this conversation on its own terms."

Fox News counters that the fair use scale tips its own way.

Besides taking shots at CNN and MSNBC for allegedly moving away from covering breaking news and describing the potential irreparable harm to its own news-gathering operation, the plaintiff focuses squarely on what TVEyes — and not its customers — is doing. As a clipping service, TVEyes isn't transforming the copyrighted content with new purpose, Fox argues, but merely providing a "direct substitute" for Fox News' use.

The parties argue how Google's digital scanning of library books fits in. TVEyes says it "adds something new" by transforming broadcasts into data for purposes of substantive research, akin to how scholars might use Google Books. But Fox says that TVEyes is a commercial service with no security measures and is taking more than just snippets.

Under this backdrop, the forthcoming decision in Fox News v. TVEyes will present the latest balance between intellectual property and the First Amendment in the digital age. Here's Fox News' full memorandum as well as TVEyes' memorandum.

Email: Eriq.Gardner@THR.com

Twitter: @eriqgardner