In a case involving Andy Warhol’s works known as the “Prince Series,” the U.S. Court of Appeals for the Second Circuit reined in the fair-use defense for visual art that is based on copyrighted photos. The works consist of fourteen silkscreen prints and two pencil illustrations based on an unpublished photo of musical artist Prince taken by professional photographer Lynn Goldsmith. In its ruling, the Court clarified that a secondary work must convey a “‘new meaning or message’ entirely separate from its source material” when it does not “comment on or relate back to” the copyrighted material. Using that clarification in its fair-use analysis, the panel found that Warhol’s Prince Series was not fair use. The panel also found that the Prince Series works are substantially similar to Goldsmith’s original photograph.

In 1981, Goldsmith took twenty-three photos of Prince, held a copyright in each of those photos, and licensed one to Vanity Fair as an “artist reference.” Vanity Fair then commissioned Andy Warhol to use that unpublished photo to create an illustration for an article about Prince. But Warhol didn’t stop there. Without Goldsmith’s permission, Warhol used the photo to make fifteen more works, creating the Prince Series.

The Andy Warhol Foundation sued Goldsmith after she notified it of infringement, seeking declaratory judgment of non-infringement or fair use. The district court granted summary judgment for The Andy Warhol Foundation on its fair-use claim. Although it evaluated all four fair-use factors, the decision hinged on the first factor, which requires the court to consider whether a secondary work is “transformative.” According to the district court, the Prince Series works were “transformative” because they “can reasonably be perceived to have transformed Prince from a vulnerable, uncomfortable person to an iconic, larger-than-life figure.” The Second Circuit disagreed.

The district court’s analysis of the transformative character of the Prince Series improperly used a bright-line rule that considers whether a secondary work “has a different character, a new expression, and employs new aesthetics.” The correct test here, according to the Second Circuit panel, requires more than that “bare assertion.” Instead, “the secondary work itself must reasonably be perceived as embodying an entirely distinct artistic purpose, one that conveys a ‘new meaning or message’ entirely separate from its source material.” The opinion adds that “works that simply alter or recast a single work with a new aesthetic” may not convey a “new meaning or message.”

Citing a bevy of fair-use case law, the Court concluded that the Prince Series is not “transformative” because it “retains the essential elements of the Goldsmith Photograph without significantly adding to or altering those elements.” The first factor favored Goldsmith, even though the panel agreed with the district court that the Prince Series works are commercial in nature.

The Court then evaluated each of the remaining fair-use factors: (2) the nature of the copyrighted work, (3) the amount and substantiality of the use, and (4) the effect of the use on the market for the original. The district court erred as to each. These three factors also favored Goldsmith.

The Court held that the fair-use defense failed as a matter of law, reversing the decision below. But the Andy Warhol Foundation had asked the panel to affirm on the alternate grounds that the works were not substantially similar.

Despite the fact that the district court had not evaluated substantial similarity, the Second Circuit took up the issue instead of remanding it. The panel applied the “ordinary observer” test, not the “more discerning observer” test, to conclude that the Goldsmith photo and the Prince Series works were substantially similar as a matter of law: “[G]iven the degree to which Goldsmith’s work remains recognizable within Warhol’s, there can be no reasonable debate that the works are substantially similar.”

Two circuit judges filed concurring opinions.

In a concurring opinion joined by Judge Jacobs, Judge Sullivan highlighted what he called “an over reliance on ‘transformative use’ in [the Court’s] fair use jurisprudence, generally,” and suggested “that a renewed focus on the fourth fair use factor, ‘the effect of the use upon the potential market for or value of the copyrighted work,’ would bring greater coherence and predictability to this area of the law.”

The Second Circuit vacated the judgment below and remanded the case to the Southern District of New York.

The case is Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, 992 F.3d 99 (2d Cir. 2021).