The AP is a U.S.-based company that produces between 1,000 and 2,000 news articles each day and is owned cooperatively by 1,400 newspapers around the U.S. The articles are researched, written, and edited by AP reporters and editors and copyrighted by the AP. The articles are generally published by the member newspapers, or by licensed publishers ranging from nonmember newspapers, to online news aggregators such as LexisNexis and Factiva.

Meltwater is a worldwide company that provides an online “news monitoring service” to businesses and organizations throughout the U.S. Through this service, customers can select keywords or phrases that they would like to have monitored, such as business or product names. Meltwater uses automated computer programs to “scrape” articles from existing online news sources and provides an excerpt of the article in response to customer searches. These responses, called News Reports, generally included the headline or title of each identified article, source of the article, and two excerpts from the article. The excerpts include about “300 characters ... from the opening text of the article or lede,” then a second excerpt that includes the keyword from the search. Meltwater describes its service as “provid[ing] the most news in the most efficient manner.”

Meltwater did not have a license to use AP’s works, which were frequently included in the news articles that it scraped from the internet and provided in its News Reports to clients. Based on a sample of 33 AP articles that were scraped by Meltwater, AP estimated that the News Reports contained from 4.5% to 60% of the articles’ content. In response to Meltwater’s scraping activity and use of its articles, AP sued Meltwater for copyright infringement and other claims. Meltwater, in its defense, claimed that its use was like that of a search engine and was permitted by the Fair Use Doctrine. Also, that AP failed to take proper and timely actions to protect its copyrights.

In a 91-page opinion (https://www.eff.org/sites/default/files/ap_v._meltwater_sdny_copy.pdf), the court soundly rejected Meltwater’s Fair Use and other defenses. The fair use of copyright works has long been allowed as part of the necessary balance between the exclusive rights of copyright owners, and the need to permit new creative products to build on existing works. The Fair Use Doctrine, now codified in Title 17, Section 107 of the U.S. Code (www.law.cornell.edu/uscode), provides that certain beneficial uses of copyrighted works may be considered fair if they meet certain purposes and criteria. Those purposes include criticism, comment, research, and news reporting. In addition, Fair Use requires an analysis of four factors related to the proposed use of the copyrighted work, including the purpose and character of the use, the nature of the work being used, the amount being used, and the impact on the market for the original work.

Finding that Meltwater’s use of the AP articles failed to meet three of the four factors from the Fair Use doctrine, the court emphatically rejected Meltwater’s Fair Use defense.

In evaluating the first factor, Meltwater claimed that its scraping service was essentially a search engine, locating information based on searches entered by clients. Earlier court decisions involving Google and other search engines had held that while search engines copied some copyrighted words and images as part of the search process, its use of those works was for a different purpose than the original—to provide indexing and access—and was in legal jargon “transformative” and therefore a fair use.

The court, however, determined that Meltwater’s use was closer to “repackaging” than “transforming.” Repackaging information, which includes reformatting, republishing, and “clipping services” is generally not a fair use as repackaging is usually only a substitute for the original, rather than something new. The court also noted that unlike traditional search engines, Meltwater only had a click-through rate of between 0.5% and 0.8%, compared to a reported 56% click-through rate for Google News. That meant that more than 99% of the time, users were able get the information they needed from the articles in the News Reports. The court concluded that the Meltwater service only substituted for the articles and did not transform them.

While the court did find that fact-based news articles were closer to fair use under the “nature of the work” factor, the amount of the article being used was not fair. As noted, Meltwater excerpted between 4.5% and 60% of the sample articles including the critical “lede” paragraph, which summarizes the essence of the article and “takes significant journalistic skill to craft.” The court found that this represented the heart of the work and was not a fair use.

Finally, the court found that Meltwater’s use had a significant impact on AP’s market for licensing its articles and did not support fair use. The court noted that the companies that AP has licenses with “live in the very commercial space that Meltwater resides.” By not paying licensing fees to AP, Meltwater not only reduced AP’s revenue for its content, but it also “cheapens the value” of AP’s work by competing with companies that do pay for licenses. The court also rejected Meltwater’s claims that AP had not done enough to protect its copyrights or not acted promptly enough against Meltwater.

Both AP and Meltwater reacted as expected. In a press release, AP hailed the decision as “a victory for the public and for democracy,” asserting that the argument that “if it is free on the Internet, it is free for the taking” was rejected by the court. Meltwater, in turn, expressed disappointment in the decision, suggesting that the “ruling misapplies the fair use doctrine and is at odds with a variety of prior decisions that have paved the way for today’s Internet.” Meltwater has vowed to appeal.

The case quickly attracted the attention of commentators and bloggers. Several commentators suggested that the decision would chill other services that collect and compile news sources. Commenting in Lexis’s Law360.com, attorney Anthony Dreyer indicated that the case may push others in the marketplace to “revisit what they are doing.” He encouraged aggregators to put their “own spin on the facts” rather than just cutting and pasting existing content. Time.com expects “the fights between the old and new media paradigms to continue.”

Further hearings will take place to determine whether AP can get an injunction against Meltwater and what damages may apply. The expected appeal could take upwards of a year or more to be completed.