By Eugene Volokh

Copyright reason

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…