Over on the Trademark Blog, Marty Schwimmer takes a look at a fair use copyright case that involves the Grateful Dead (Please Don't Dominate The Rap, Jack). Authors of a history of the group, Grateful Dead: The Illustrated Trip, had attempted to get permission to use reproductions of concert posters but, unable to come to an agreement with the copyright holder, used thumbnails without permission and were sued. Of particular interest, says Schwimmer, is the fourth element of the court's fair use analysis regarding the effect on the market.

I think it's helpful that the Court is trying to give contours to what types of lost licensing opportunities count as harm under the fourth factor. However, looking to whether the use is "transformative" may be the wrong inquiry, and probably proves too much. For instance, turning a 60 page play into a 2 and a half hour feature movie is highly transformative, but that doesn't mean that making a movie is a fair use of the play, or that it isn't taking away from the copyright owner's "traditional" market for the work."

So the court found that 'the transformative nature of the use is outside the ambit of lost licensing opportunities' and this there was no negative effect on plaintiff's market. Fair use.