Copyright fair use

A statutory affirmative defense in U.S. copyright law, codified at 17 U.S.C. § 107, that permits unauthorized copying of copyrighted material for purposes such as criticism, commentary, scholarship, news reporting, and transformative creative use — evaluated through a four-factor balancing test. The four factors are: the purpose and character of the use (including whether it is transformative), the nature of the copyrighted work, the amount used, and the effect on the market for the original. For litigation funders evaluating copyright claims — particularly in AI training data, music sampling, and content aggregation disputes — fair use is the primary defense variable because its outcome is highly fact-specific and courts have significant discretion. The transformativeness inquiry has produced inconsistent circuit-level results, requiring funders to assess jurisdiction-specific precedent when modeling defense strength.

Fair use is underwritten as a jurisdiction-and-technology-specific variable rather than a stable legal standard, because circuit courts have reached materially different transformativeness conclusions on similar facts — funders backing content, AI-training-data, or sampling disputes commission a circuit-specific precedent review before sizing any commitment. The market-effect factor is weighted most heavily in underwriting, since it is the factor courts most consistently treat as dispositive regardless of how transformative the defendant's use is argued to be.