Copyright law gives authors, musicians, filmmakers and other content creators the right to determine when, where and how their work is reproduced, distributed, performed and displayed. Those rights are not absolute, however. Recognizing that society benefits from the free exchange of ideas, the law makes exceptions for the "fair use" of copyrighted material.
The first fair-use exceptions in the United States were created by court rulings based on common law. Fair use became codified in U.S. law in the Copyright Act of 1976. The law recognizes two basic exceptions: comment and criticism, and parody. However, the law does not spell out what exactly constitutes fair use. It merely lays down guidelines for courts to consider when deciding fair-use cases.
Comment and Criticism
It's hard to imagine writing a book review or an analysis of a singer's lyrics if you can't reproduce at least some of the original material. You can't teach students about filmmaking techniques if you're not allowed to show movies in class. A TV news report on a music video that has caused an uproar needs to be able to air a clip of the video to provide context. These kinds of situations underlie the "comment and criticism" exception for fair use. The law recognizes that the public benefits from limited unauthorized use of copyright material in these contexts.
Copyright law recognizes that parody, by its very nature, must reuse large portions of the original work in order to make fun of it. The key, however, is that the original work must be the target of the parody. For example, if you used the characters, dialogue and situations from "Star Wars" to produce a parody of that particular film, you could be protected under fair use. But it you used those characters to tell your own story, that wouldn't be fair use.
The law lists four factors that judges must consider in deciding whether the use of copyrighted material qualifies as fair use. The first is the "purpose and character" of the use. A key issue here is whether the new work is "transformative"--that is, whether it gives the material new meaning--or merely copies the material. "Purpose and character" also takes into account whether the use produced a profit or was educational in nature.
The second factor is the "nature of the copyrighted work." There's more room for fair use when dealing with factual works rather than fiction, and when using material from published works rather than unpublished.
The third factor is the amount of material used in relation to the copyrighted whole. The more you use, the less protection you have. If you play a 15-second snippet of a four-minute song to illustrate a point about a singer's talent, that probably qualifies as fair use; if you play the whole thing, probably not. Showing a thumbnail image of a copyrighted movie poster next to a review is probably fair use; putting up a high-resolution copy is not.
The final factor is the effect of the use on the market--or potential market--for the original. Posting whole songs online, where anyone can download them for free, reduces the market value of those songs because people have the opportunity to get them without paying--regardless of whether anyone actually does so. Creating a sculpture that exactly reproduces a copyrighted photograph is also a violation, because it reduces the copyright holder's ability to sell the sculpture rights himself.
The U.S. Copyright Office advises that the safest course of action is to get permission from the copyright holder before using any copyrighted material. If there's any doubt, it says, consult an attorney.