What is “Derivative Work” in the Digital Age?

on the top, Seltzer v. Green Day; on the bottom, Kienitz v. Sconnie Nation

Part I: The Problem with “Derivative Work”

The right to prepare derivative works is one of the exclusive rights copyright holders have under §106 of the Copyright Act. Other copyright holders’ exclusive rights include the right to make and distribute copies, and to display or perform a work publicly. 

Lately, we’ve seen a congeries of novel conceptions about “derivative works.” For example, a reader of our blog stated that when looking at AI models and AI outputs, works should be considered infringing “derivatives” even when there is no substantial similarity between the infringing AI model/outputs and the ingested originals. Even in the courts, we’ve seen confusion, for example, Hachette v. Internet Archive presented us with the following statement about derivative works:

Changing the medium of a work is a derivative use rather than a transformative one. . . . In fact, we have characterized this exact use―“the recasting of a novel as an e-book”―as a “paradigmatic” example of a derivative work. [citation omitted; emphasis added]

These statements leave one to wonder—what is a copy, a derivative work, an infringing use, and a transformative fair use in the context of U.S. copyright law? In order to have some clarity on these questions, it’s helpful to juxtapose “derivative works” first with “copies” and then with “transformative uses.” We think the confusion about derivative work and its related concepts arises out of using the phrase to mean “a work that is substantially similar to the original work” as well as “a work that is so in an unauthorized way, not excused from liabilities.”

There are many immediate real world implications for confusion over the meaning of “derivative work.” In privately negotiated agreements, licensees who have a right to make reproductions but not derivative works may be confused as to what medium their use is restricted to. For example, a publisher of a book with a license that allows it to make reproductions but not derivatives might be confused as to whether, under the Hachette court’s reasoning, it is allowed to republish a print book in a digital format such as a simple PDF of a scan. Similarly, for public licenses, such as the CC ND licenses, where a licensor stipulates restriction on the creation of derivative works, it causes confusion for downstream users whether, say, changing a pdf into a Word document is allowed. 

This is also an important topic to explore both in the recent hot debates over Controlled Digital Lending and generative artificial intelligence, as well as in an author’s everyday work—for instance, would quoting someone else’s work make your article/book a derivative work of the original? 

Part II: “Copies” and “Derivatives”

Our basic understanding of derivative works comes from the 1976 Copyright Act. The §101 definition tells us:

A "derivative work" is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a "derivative work".

The U.S. Copyright Office published Circular 14 gives some further helpful guidance as to what a §106 derivative work would look like:

To be copyrightable, a derivative work must incorporate some or all of a preexisting “work” and add new original copyrightable authorship to that work. The derivative work right is often referred to as the adaptation right. The following are examples of the many different types of derivative works: 

• A motion picture based on a play or novel 

• A translation of an novel written in English into another language

• A revision of a previously published book 

• A sculpture based on a drawing 

• A drawing based on a photograph 

• A lithograph based on a painting 

• A drama about John Doe based on the letters and journal entries of John Doe 

• A musical arrangement of a preexisting musical work 

• A new version of an existing computer program 

• An adaptation of a dramatic work 

• A revision of a website

One immediate observation that can be made from reading these, is that “ebook” or “digitized version of a work” is not listed as, nor similar to any of the exemplary derivative works in the Copyright Act or the Copyright Office Circular. By contrast, “ebook” or “digitized version of a work” seems to fit much better under the § 101 definition of “copies”:

“Copies” are material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term “copies” includes the material object, other than a phonorecord, in which the work is first fixed.

The most crucial difference between a “copy” and a “derivative work” is whether new authorship is added. If no new authorship is added, merely changing the material that the work is fixed on does not create a new copyrightable derivative work. This, in fact, is observed by many courts before Hachette. For example, in Corel v. Bridgeman Art Gallery, the court unequivocally held that there is no new copyright granted to photos of public domain paintings. 

Additionally, as we know from Feist v. Rural Tel., “[t]he mere fact that a work is copyrighted does not mean that every element of the work may be protected.” Copyright protection is only limited to the original elements of a work. We cannot call a work “derivative” of another if it does not incorporate any copyrightable elements from the original copyrighted work. For example, the "Game Genie" device, which let players change elements of a Nintendo game, was not found to be a derivative work by the court because it didn't incorporate any part of the Nintendo game. 

It is clear from this examination that sometimes a later-created work is a copy, sometimes a derivative, and sometimes it may not implicate any of the exclusive rights of the original.

Part III: “Derivative” and “Transformative” Works

Let’s quickly recap the context in which courts are confusing “derivative” and “transformative” works—

A prima facie case of copyright infringement requires the copyright holder to prove (1) ownership of a valid copyright, and (2) inappropriate copying of original elements. We will not go into more details here, but essentially, the inappropriate copying prong requires plaintiffs to assert and prove defendant’s access to the plaintiff’s work as well as a level of similarity between the works in question that shows improper appropriation of the plaintiff’s work. If the similarity between the defendant’s work and protectable elements in the plaintiff’s work is minimal, then there is no infringement. As seen in the  "Game Genie" example above, courts can rely on substantial similarity analysis to determine whether a work is indeed a potentially-infringing copy or derivative of the plaintiff's work.

Once the plaintiff establishes a prima facie infringement case—e.g., the defendant’s work is shown to be a derivative or a copy of the plaintiff’s registered work—the defendant may still nevertheless be free to make the use if the use falls outside the ambit of the copyright holder’s §106 rights, such as uses that are fair use. Whether a work is a derivative work under § 106 is no longer a relevant inquiry after establishing a prima facie case: this point is starkly obvious when looking at the many plausible defenses a defendant can raise (including fair use) where even the verbatim copying of a work is authorized by law. 

As the court stated in Authors Guild v. Hathitrust, “there are important limits to an author’s rights to control original and derivative works. One such limit is the doctrine of ‘fair use,’ which allows the public to draw upon copyrighted materials without the permission of the copyright holder in certain circumstances.” When a prima facie infringement case is already established, yet a court still discusses whether the defendant’s work is a “derivative work,” at a minimum, the court adds confusion by beyond the § 101  definition of a derivative work. 

In fact, a distinct new significance is being given to “derivative work” in recent years in the context of the “purpose and character” factor of fair use, specifically, when analyzing if a use has a transformative purpose. The shift in a word’s meaning or a concept is not per se unimaginable or objectionable. It is misguided to consider the copyright legal landscape static. As law professor Pamela Samuelson pointed out, before the mid-19th century, most courts did not even think copyright holders were entitled to demand compensation from others preparing derivative works. The 1976 Copyright Act finally codified copyright holders’ exclusive right to prepare derivative works. And, now, some rights holders want the courts to say there are categorical derivative uses that can never be considered fair use.

The Hachette court is among those that have unfortunately bought into this novel approach. The court seems not only to misconstrue the salient distinction between a ‘copy of a work’ and a ‘derivative work’, they appear to give heightened protections to works they now define as ‘derivative’. If this misconception becomes widespread, we will be living in a world where if a use is new-derivative, then it is never transformative (and, if it is not transformative, it is likely not fair). Ultimately, it is purely circular for a court to say that the reason for denying the fair use defense is that the use is derivative. When we buy into this setup of “derivative v.s. transformative,” it is difficult to ever say with confidence that a work is transformative, because at the same time we remember how a transformative use should often fit in the actual definition of derivative work under § 101, “derivative”—just like the Green Day rendition of the plaintiff’s art in Seltzer v. Green Day.  

Clearly, if we take “derivative work” at its true § 101 definition, out of all potentially infringing works, “transformative fair use” is not an absolute complement, but a possible subset, of derivative works. We know from Campbell v. Acuff-Rose that “transformativeness is a matter of degree, not a binary;” whereas no such sliding scale is plausible for derivative works. A work is either a derivative or it is not: there’s never a “somewhat derivative” work in copyright. All in all, it makes little sense to frame the issues as “transformative v.s. derivative work”—such discussions inevitably buy into the rhetorics of copyright expansionists. We have already warned the court in Warhol against the danger of speaking heedlessly about derivative works in the context of fair use. We must ensure that the “derivative v.s. transformative” dichotomy does not come to dominate future discussions of fair use, so that we conserve the utility and clarity of the fair use doctrine.

The expansion of the relevance of “derivative work” beyond the establishment of a prima facie infringement case not only creates a circular reasoning for denying fair use, but also makes it impossible to make sense of the case law we have accumulated on fair use. Take Seltzer v. Green Day for example, the court held that a work can be transformative even if that work “makes few physical changes to the original.” The Green Day concert background art with a red cross superimposed was found to be a fair use of the original street art—a classic example of how a prima facie infringing derivative work can nevertheless be a transformative, and thus fair, use. Similarly, in Kienitz v. Sconnie Nation, a derivative use of a photo on a tshirt was found to be a fair use. Ideas and concepts, including “derivative works,” are only important to the extent they elucidate our understanding of the world. When the use of “derivative works” leads to more confusion than clarity, we should be cautious in adopting the new meaning being superimposed on “derivative works.”