William Patry asks a question that I have often asked about copyright law, " What's the Role of the Fourth Fair Use Factor?." His post is a short look at some of the difficulties of this "effect on the market" doctine as it has developed. Read the whole thing.

This is a difficult question. A couple of quick points that I would make would be that we should consider the question of substitution, that is, does the allegedly infringing work substitute for the market for the original? I also believe that there needs to be a distinction with regard to reproduction/distribution and the right of derivative works. The issue of effect on the market should be considered distinctly, depending on whether there is copying or a derivative work. Finally, I think that many (though not all) of these problems would be resolved if we were to rationalize copyright by focusing on public vs. private distribution.