This Article examines two important features of many copyright fair use cases: transformative use and commercial intermediation. While the issue of transformative use has arisen in many fair use cases, there is a lack of consistency and clear guidance on the meaning of “transformativeness” and how the degree of transformativeness is to be assessed. Additionally, in analyzing commercial use, courts have largely failed to appreciate the distinctive role played by “commercial intermediaries” in facilitating socially beneficial uses of copyrighted works. This Article advances economically grounded proposals for improving the way in which courts analyze transformative use and commercial intermediation. First, courts should focus on the economic effects of transformation instead of employing a purely conceptual analysis. In particular, courts should ascertain any complementary or substitutive effects as well as the cost and innovative-efficiency implications of the use: the more transformative the use, the more it tends to minimize market harm to the copyright owner and maximize social benefits such as transaction-cost economies and follow-on innovation. Second, courts should view commercial intermediaries favorably insofar as they facilitate educational or other beneficial fair uses of copyrighted works through cost-efficient production or substantial innovative investments. In other words, courts should view the commercial use in context and recognize that commercial uses may nonetheless produce social benefits that substantially outweigh any harm caused to copyright owners. This Article uses the 2013 Google Books decision as a primary case study, supplemented by related cases from the United States and abroad, to illustrate these arguments, concluding that the court’s decision to uphold Google’s fair use defense for Google Books is well-supported by the complementary relationship between Google Books and copyrighted books, Google’s substantial investments in promoting productive uses of books through Google Books, and transaction-cost and innovative-incentive considerations.
