From Santos v. Kimmel, decided today by Second Circuit Judge Raymond Lohier, joined by Judges José Cabranes and Richard Sullivan:
Santos's suit arose after Kimmel, using various fictitious names, submitted requests to Santos for personalized videos through the Cameo platform. Santos fulfilled each request, and Kimmel then aired the videos on JKL as part of a mocking series of segments titled "Will Santos Say It?" …
[1.] In a copyright action, the affirmative defense of fair use "excuses what might otherwise be considered infringing behavior, allowing courts to avoid rigid application of the Copyright Act when it would stifle the very creativity the Act is meant to promote." Under the Copyright Act, we consider the following non-exclusive factors in determining whether fair use has been established: "(1) the purpose and character of the use … ; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used … ; and (4) the effect of the use upon the potential market for or value of the copyrighted work."
In assessing the "purpose and character of the use" factor, we "focus[ ] chiefly on the degree to which the use is transformative, i.e., whether the new work merely supersedes the objects of the original creation, or instead adds something new, with a further purpose or different character." … Santos does not dispute the District Court's finding that the purpose of [Kimmel's] allegedly infringing use was "to comment on the willingness of Santos … to say absurd things for money." He argues instead that this was also his original purpose in making the videos.
But whether a secondary use is transformative turns on what a reasonable observer thinks, not the subjective intent of the copyright holder or that of the secondary user. As Santos's original allegation acknowledges, a reasonable observer here would think the videos conveyed "feelings of hope, strength, perseverance, encouragement, and positivity," not a willingness to say absurd things for money.
Santos also contends that Kimmel's false representations demonstrate bad faith and thus nullify the fair use defense. We disagree. It is true that "[f]air use presupposes good faith and fair dealing." But Santos's complaint contradicts any claim of a purpose on the Defendants' part to "supplant" Santos's "commercially valuable right" in the videos. To the contrary, the complaint paints a portrait of defendants motivated by (sarcastic) criticism and commentary. We thus agree with the District Court that the first factor strongly supports a finding of fair use….
[I]t is [also] clear on the face of Santos's complaint that Santos has not suffered market harm within the meaning of the fourth fair use factor because "[w]e ask not whether the second work would damage the market for the first (by, for example, devaluing it through parody or criticism), but whether it usurps the market for the first by offering a competing substitute." … "[T]he unlikelihood that creators of imaginative works will license critical reviews or lampoons of their own productions removes such uses from the very notion of a potential licensing market." …
[2.] Santos[ alleges] direct breach of contract … under the Cameo Terms of Service. Santos is not party to the Terms of Service to which users (like Kimmel) must agree and that Santos alleges were breached. Under Illinois law, which governs the Terms of Service, there is a "strong presumption against conferring benefits to noncontracting third parties." Indeed, "the implication that the contract applies to third parties must be so strong as to be practically an express declaration." Here, Santos identifies nothing close to an "express declaration" that the relevant provisions of the Terms of Service apply to him or other noncontracting parties. Indeed, other provisions of the Terms of Service do contain third-party beneficiary language, indicating that when the parties to that agreement intended to allow provisions of the contract to be enforced by third parties, they said so expressly.
[3.] We next address Santos's breach of implied contract claim. Under New York law, which governs this claim, we consider "the intent of the parties and the surrounding circumstances" to determine "[w]hether an implied-in-fact contract was formed and, if so, the extent of its terms." In this case, however, Santos's complaint does not "allege, in nonconclusory language, … the essential terms of the parties' … contract, including those specific provisions of the contract upon which liability is predicated." Nor does Santos plausibly allege that there was "an indication of a meeting of minds of the parties constituting an agreement" that Kimmel would adhere to the Terms of Service.
[4.] Finally, Santos challenges the District Court's dismissal of his fraudulent inducement claim for failure to allege any out-of-pocket loss as required under New York law. We agree with the District Court's conclusion that Santos failed to allege that he suffered any actual out-of-pocket loss as the victim of the alleged fraud…
Nathan Siegel, Eric Feder, and Raphael Holoszyc-Pimentel (Davis Wright Tremaine LLP) represent defendants.
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