NEW YORK — A media monitoring company is cheating Fox News out of revenue by failing to pay for some content it resells, a federal appeals court said Tuesday in a decision closely watched in the news broadcasting industry.
The 2nd U.S. Circuit Court of Appeals ruled against TVEyes Inc., a Fairfield, Connecticut-based company distributing television clips and snippets of transcripts to its customers.
"The success of the TVEyes business model demonstrates that deep-pocketed consumers are willing to pay well for a service that allows them to search for and view selected television clips, and that this market is worth millions of dollars in the aggregate," the appeals court said.
It said TVEyes was depriving Fox of licensing revenues and it should be left up to Fox whether it wants to create a similar service itself or license it to others.
"At bottom, TVEyes is unlawfully profiting off the work of others by commercially redistributing all of that work that a viewer wishes to use, without payment or license," the 2nd Circuit said in an opinion written by Judge Dennis Jacobs.
Attorney Dale Cendali, who represented Fox News, called it "a significant win in the field of fair use law."
"We cannot emphasize enough the practical effect this win should have for content holders of all stripes," Cendali said.
In a statement, TVEyes said it was disappointed by the ruling and was evaluating it and considering its options.
"We continue to believe that TVEyes offers an irreplaceable public service to its customers, including elected officials and government agencies, the military, law enforcement and the news media itself, within the bounds of the law," the company said.
The appeals court said the company, which enables customers for about $500 monthly to sift through large quantities of television clips to find what interests them, was unlawfully profiting off the work of others because its product was only modestly transformative, not enough to be considered fair use of the television content.
However, the appeals court noted that Fox News did not challenge the media monitoring company's creation of a text-searchable database. The company's clients include journalists, government and political organizations, law enforcement, the military, for-profit companies and nonprofits, the court said.
District Judge Lewis A. Kaplan, sitting temporarily on the 2nd Circuit three-judge panel, wrote separately that he agreed with the majority's conclusion but thought it went too far in finding the TVEyes product "modestly transformative."
"It does no more than repackage and deliver the original works. It adds no new information, no new aesthetics, and no new insights or understandings. I therefore doubt that it is transformative," Kaplan said.
The majority opinion from the three-judge panel said some claims by TVEyes were similar to those made by Google Inc. when it successfully defended its creation of a text-searchable database of millions of books. But the 2nd Circuit noted that it was testing the boundaries of fair use when it ruled that Google's service was "transformative" — a legal requirement that enables a user of content to overcome copyright objections.
"We conclude that defendant TVEyes has exceeded those bounds," the panel said.
It said Google's snippet function was designed to ensure users viewed a tiny piece of a book's contents while TVEyes enables customers to see 10-minute long segments, likely allowing them to access all the Fox programming they seek.
TVEyes records all television broadcasts as they happen, drawing from over 1,400 channels around-the-clock. It then enables a client to search video clips no more than 10 minutes long for mentions of a particular term. The 2nd Circuit said the service lets clients measure the frequency of discussion of a subject or to learn for marketing or public relations purposes how a product is mentioned in the media.
In a written submission prior to the ruling, Google had urged the 2nd Circuit to rule in favor of TVEyes, saying the issues were of "particular importance to Google."
"This Court's approach to TVEyes' technology matters a great deal to Google and other innovators working to take search in new directions," it said.
In another written submission, the nonprofit National Association of Broadcasters told the court that services like TVEyes "drains away advertising and licensing revenue critical to broadcasters' ability to fulfill their public-interest obligation to meet the needs of the communities they serve."