French photojournalist Patrick Cariou spent six years in the 1990s living among Rastafarians in Jamaica and documenting their lifestyle. Cariou’s work was compiled in a book titled “Yes Rasta,” a collection of black and white portraits. Powerhouse Books Inc., an independent press in New York, published the book in 2000, producing only 7,000 copies. All told, Cariou earned $8,000 for his work.

While “Yes Rasta” enjoyed only modest commercial success, the photos got a second life in the art world. But it wasn’t one that Cariou ever expected. Pop artist Richard Prince used Cariou’s photography in a series of works called “Canal Zone.” Prince printed Cariou’s photographs on huge canvases and modified them. In one piece, Prince superimposed a cut out of an electric guitar into the hands of a Rastafarian man. In others, Prince covered Cariou’s subjects’ eyes and mouths with bright circles of paint, or dotted the landscapes with images of naked women.

“Canal Zone” debuted in an exhibition at New York’s Gagosian Gallery in 2008. It was an unqualified hit. Celebrities including Tom Brady, Angelina Jolie and Jay-Z attended the opening. A single painting sold for more than $2 million. Prince and Gagosian hadn’t paid Cariou or Powerhouse a dime.

When Cariou learned of the show, he sued. A federal district court agreed that “Canal Zone” infringed Cariou’s copyrights, ordering Prince to turn over remaining works to Cariou. But the 2nd Circuit took a different view. It reversed, finding that 25 of the 30 works constituted “fair use” of Cariou’s photography. The decision has divided the IP bar. Some hail it as a victory for imaginative pop artists and creative remixers. Others take a dimmer view.

“This is a case about a rich artist who took a poor artist’s work and didn’t pay him for it,” says Caroline Soodek, of counsel at Bryan Cave. “The core of fair use is to allow you to look at someone else’s work and talk about and comment on it, not to make an edited work and then make money from it.”

Eye of the Beholder

Under the Copyright Act of 1976, courts consider four factors to decide whether a work is fair use: the character of the later use; the nature of the copyright work; the amount of the copyright work used; and the effect of the use on the market for the copyright work.

The 2nd Circuit focused primarily on the first factor, which it boiled down to a question of whether the later use would appear to be “transformative” to a reasonable observer. The court determined as a matter of law that all but five of Prince’s paintings were fair use because they “manifest an entirely different aesthetic from Cariou’s photographs,” describing Cariou’s photographs as “serene and deliberately composed” and Prince’s works as “crude and jarring.” The decision to ratify certain works while remanding others for the district court’s consideration has left many IP practitioners scratching their heads, especially because the court offered little guidance on what distinguished the five offending works. 

“The reasonable observer test presents a paradox—it’s supposed to remove the subjective intent of the alleged infringer from the analysis, but it makes the test even more subjective,” says Kim Landsman, a partner at Golenbock Eiseman Assor Bell & Peskoe. “What’s reasonable to one judge may not be to another.”

Other observers expressed discomfort with the notion that whether a work is transformative can be decided without submitting the question to a jury.

“The fair use analysis, when done properly, is such a fact-specific balancing inquiry that it really shouldn’t be taken away from the jury’s consideration lightly,” says Paul Fakler, a partner at Arent Fox. “Fair use is one of the most thorny and difficult metaphysical issues in the copyright law. But the trend in the past 10 years has been to avoid the hard work of examining each of the factors and instead resolving cases on summary judgment.”

Holding the Bag

While the fair use question received the most attention, the Cariou case also set off alarm bells for numerous amici, including Google and the Association of Art Museum Directors, because of the district court’s comments on vicarious liability for infringing works. In addition to finding that Prince’s works infringed Cariou’s copyright, the district court also determined that the Gagosian Gallery was liable as a “vicarious infringer” because it displayed and sold the infringing works.

That language had museums and Internet hosts concerned that the court may be broadening the standard for holding them liable for infringement. Typically, a third party such as a gallery is not liable unless it directs or has a direct financial interest in the infringing activity. The 2nd Circuit reversed the district court’s decision with regard to Gagosian’s liability, but was frustratingly silent on the issue of when a museum might become financially responsible for an artists’ infringement.

“The court offered no guidance on that whatsoever,” Landsman says.