As to the topic—don’t misunderstand me. Fair use can be an entirely plausible defense if you are ever sued for copyright infringement. However, to prove fair use you usually have to go to court. You don’t want to go to court at all if you can help it. In intellectual property law, it is ALWAYS better to ask permission than beg forgiveness.
Tom Sloper has an excellent FAQ concerning when you can and cannot use the copyrighted works, likenesses, and images of others.
You will typically find than "cannot" is a great deal more common than "can".
There is a lot of confusion about fair use and its applicability. There is also some confusion (or in many cases a total lack of knowledge) about the safe harbors provided to some internet websites like YouTube. So this will attempt to address some of those issues from a legal standpoint. Note that I focus here on fair use. I will probably write another entry on fair comment for right of publicity/privacy issues, but for the sake of simplifying this as much as possible I’ll keep fair use separate for now.
Fair Use Is Not an International Right/Defense
U.S. law emphasizes free speech and the alienability (the ability to sell/transfer) of intellectual property. This isn’t the international standard. While most countries that recognize intellectual property rights are signatories to WIPO/TRIPS/the Berne Convention, those International Treaties acknowledge that many countries place a much higher premium on droit morale and author’s rights. Droit morale and author’s rights attach to the author and cannot be assigned or sold. They are unalienable rights that an author has to his or her creation, and they exist so that the artist can protect the integrity of his or her work. While some droit morale can be waived, not all can (thus why I emphasize the contract language "to the extent that they are waivable), and this means that an artist will ALWAYS have a certain stake in their work under international law.
What does this mean for fair use? First, it sets up the dichotomy between U.S. and European/International law. They are not uniform. Second, it means that copyright laws in other countries are designed to protect the integrity of a work to a greater extent than U.S. law. This means that parody and fair comment may be SEVERELY limited or non-existent as they pertain to author’s rights. Third, it means that the only time you can comfortable rely on the U.S.’s fairly liberal fair use doctrine is when you can ONLY be sued in the U.S. Fourth, it makes suing you in a foreign country for certain kinds of copyright infringement very, very attractive.
You actually have to prove that it is Fair Use
Fair Use is an affirmative defense in U.S. law. That’s the legalese way of saying "yes, I broke the law, but I have an excuse." It is not a right you can assert. This means that you can’t simply say "this is fair use" and wait for the other side to prove you wrong. You have the burden of proving that the use is fair. Under U.S. law, there are four factors that courts consider to determine the existence of fair use.
17 U.S.C. §107
1) The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2) The nature of the copyrighted work;
3) The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4) The effect of the use upon the potential market for or value of the copyrighted work.
These factors operate on a sliding scale, and a particular weakness in one factor can be overcome by other factors. This makes the determination of fair use maddeningly unpredictable, as a not-for-profit work can fail the fair use test while a commercial parody of a work may be permissible under fair use.
There is a difference between Parody and Satire
The Supreme Court has drawn a line between parody and satire. Parody is typically fair use, while satire typically is not (I say typically because there are some judges who find this distinction difficult to manage). A parody is a comment on a copyrighted work. You are poking fun at or commenting on the work itself. A satire is using a copyrighted work as a vehicle to make a more general social commentary. Most people who claim that they are "parodying" a work are not. This is an important distinction that most people don’t pay attention to. Don’t make that mistake.
A parody is making a game based on another game for the purpose of pointing out the flaws and bad design of that game. A satire is making a game based on another game to get across a more general social message, like "violent video games are bad." You can imagine how easily this line is blurred when lawyers are involved.
Educational and Scholarly Use is not a complete defense
Using portions of someone else’s work for educational purposes is typically protected under the fair use doctrine if it can be shown that use of the work serves the public interest. However, if it undermines the commercial value of the original work it may fail the fair use test. Professional academics are typically required to get permission to use someone’s work for academic purposes.
The Website Safe Harbors
The DMCA provides safe harbors for internet and online service providers. When a copyright infringement occurs, the copyright owner can sue EVERYONE who participates in the infringement, including retailers, distributors, publishers, etc. They are not limited to only going after the direct infringer. Because this obviously has serious consequences for online service providers, the drafters of the DMCA decided that to protect the free flow of ideas on the internet, safe harbors should be put in place for certain online services. The big questions here are a) who is protected, and b) to what extent do they qualify for protection. Some receive more protection than others.
1) Transitory Digital Network Communications (i.e., hotmail, g-mail, usenet, ISPs). If you are acting as a mere conduit, you typically can’t be held liable for monetary damages. However, you can be prohibited from providing access to identified infringers via injunction.
2) System Caching (i.e. server-side caching): If your system caches transitory data on a temporary basis, you can’t be held liable for monetary damages. However, you can be prohibited from providing access to identified infringers via an injunction.
3) Information Residing on Systems or Networks at Direction of Users (message boards, YouTube, Facebook, Myspace, Imageshack, et al): Sites that allow users to upload content won’t be liable for monetary damages if a) they lack knowledge of the infringement, and upon learning of the infringement they act quickly to remove the infringing content from their site, b) doesn’t get a financial benefit from the infringing content, and c) removes the infringing content once they are put on notice of the existence of the infringing content on their system or network.
4) Information Location Tools (google, yahoo, search engines generally): Search engines that provide links to other sites that contain infringing content can’t be held liable for monetary relief unless a) they have actual or constructive knowledge of the infringement and fail to remove the offending material once they do have knowledge, b) they receive a direct financial benefit from the infringing activity, and 3) they fail to remove the infringing material once they’re put on notice that the infringing material is on their site.
The DMCA sets out Notice requirements for how you can inform a site that your copyright has been infringed. It also lays out Put-Back provisions, which permit users who have had their content removed from websites for infringement purposes to contest the removal.
As more and more internet content becomes user generated, these issues become more prevalent. If you’d like to learn more specifically about the safe harbors, leave a comment and I’ll post a more detailed analysis specifically concerning the safe harbors.