The definition of ‘fair use’ is a muddle. We can accept that fair use might apply if a derivative work doesn’t seek to earn a profit, transforms the original in some way, and won’t discourage purchases of the original work. But the key word there is ‘might.’ it’s all a bit vague, and, in the USA, the definition will vary court-to-court, case-to-case. If you’re going to claim ‘fair use,’ be prepared to defend your interpretation in the legal arena.
Prince’s representatives have tussled with fair use claims before, most famously losing the long-running ‘dancing baby’ case. It turns out a short snippet of a song playing in the background of a home video does fall under fair use. That makes sense.
In the most recent fair use case for the Prince estate, Kian Andrew Habib isn’t as fortunate. Via Complete Music Update:
[Prince’s estate] targeted six videos recorded and uploaded to YouTube by a man called Kian Andrew Habib. The estate’s reps argued that the recordings of Prince’s performance infringed the copyright in the songs being performed. […]
[Habib] reckoned fair use applied because his videos were “non-commercial and transformative in nature … used no more of the original than necessary, and had no negative effect on the market for the work”. […]
[However, a judge ruled that] Habib’s artistic decisions when filming Prince perform did not mean his use of the musician’s songs was “transformative in nature”. And while he may not have directly financially benefited from posting his content to YouTube, by bigging up his videos as being “rare” and “amazing” recordings of Prince performing live he drove traffic to his YouTube channel, thus ensuring he benefited from his use of the musician’s work.
So, there you go. Even though you’re not directly earning a profit, using someone else’s work to build your reputation or follower count qualifies as commercial gain in the eyes of the law. I’m no lawyer, but my sound advice is to be wary of the protective value of fair use.