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{{Short description|2004 US Federal Court of Appeals decision}}
{{expert needed|1=Law|date=October 2011|reason=See talk page}}
{{Use American English|date=February 2026}}
{{Use mdy dates|date=September 2023}}
{{Infobox COA case
|Litigants=NXIVM Corp. v. The Ross Institute
|CourtSeal=Seal of the United States Court of Appeals for the Second Circuit.svg
|Court=[[United States Court of Appeals for the Second Circuit]]
|ArgueDate=November 19
|ArgueYear=2003
|DecideDate=April 20
|DecideYear=2004
|FullName=NXIVM Corporation and First Principles, Inc. v. The Ross Institute, et al.
|Citations=364 [[F.3d]] [https://law.justia.com/cases/federal/appellate-courts/F3/364/471/532988/ 471], 70 [[U.S.P.Q.2d]] 1538
|Prior=Preliminary injunction denied ([[United States District Court for the Northern District of New York]] 2003). Appealed to [[United States Court of Appeals for the Second Circuit]]
|Subsequent=Certiorari denied ([[Supreme Court of the United States]] 2004)
|Holding=Defendants’ use of material for critical commentary was [[fair use]] despite [[bad faith]] on the part of the defendants in obtaining the material.
|Judges=Chief Judge [[John M. Walker, Jr.]]; Circuit Judges [[Dennis Jacobs]] and [[Chester J. Straub]]
|Majority=Walker
|JoinMajority=Jacobs
|Concurrence=Jacobs
|LawsApplied={{UnitedStatesCode|17|107}}
}}

'''''NXIVM Corp. v. The Ross Institute''''', 364 [[F.3d]] 471 (2d Cir. 2004),<ref name=justia>{{cite court |litigants=NXIVM Corp. v. Ross Institute |vol=364 |reporter=F.3d |opinion=471 |court=2d Cir. |date=2004 |url=https://law.justia.com/cases/federal/appellate-courts/F3/364/471/532988/ |access-date=2018-02-24 }}</ref> was a [[United States Court of Appeals for the Second Circuit]] decision that held that the defendant's critical analysis of material obtained in [[bad faith]], i.e., in violation of a [[non-disclosure agreement]], was [[fair use]] since the secondary use was [[transformative]] as criticism and was not a potential replacement for the original on the market, regardless of how the material was obtained.<ref name="Casenotes2007">{{cite book|author=Aspen Publishers|title=Copyright. Keyed to Keyed to Course Using Gorman and Ginsburg's Copyright: CAses and Materials Seventh Edition|url=https://books.google.com/books?id=I6gWONBoXpIC&pg=PA95|year=2007|publisher=Wolters Kluwer|isbn=978-0-7355-6176-2|pages=95–96|series=Casenote Legal Briefs}}</ref><ref name="MeinersRingleb2006">{{cite book|author1=Roger E. Meiners|author2=Al H. Ringleb|author3=Frances L. Edwards|title=The legal environment of business|url=https://books.google.com/books?id=8ZvaVXT1n3IC&pg=PA230|year=2006|publisher=Cengage Learning|isbn=978-0-324-20485-8|page=230}}</ref>

[[NXIVM]], pronounced NEX-ee-um,<ref name="Maclean's"/> was a [[sex trafficking]] [[cult]] that claimed to offer a life-improvement seminar called the "Executive Success Program" (ESP). At the time of the court case, NXIVM's status as a sex trafficking cult was not widely known to the public, and would not be until key leaders were indicted in 2018.<ref>{{Cite news|title=Leader of NY Group Branded Women, Made Them Sex Slaves: Feds|url=https://www.nbcnewyork.com/news/local/leader-of-secret-upstate-new-york-group-charged-with-sex-trafficking/450418/|access-date=2021-01-01|website=NBC New York|language=en-US}}</ref> NXIVM sued the [[Ross Institute]] and several individuals for posting quotations from a NXIVM training manual on Ross Institute's website in the context of two written critiques of the manual and NXIVM's training program. NXIVM's lawyers attempted to argue that the [[fair use doctrine]] did not apply since Ross had obtained copies of the manuscript in bad faith, i.e., he obtained them from a former ESP participant who had signed a non-disclosure agreement. Both the district court and the appeals court ruled in Ross's favor. An appeals judge stated, "Certainly, no critic should need an author's permission to make such criticism, regardless of how he came by the original; nor should publication be inhibited by a publisher's anxiety or uncertainty about an author's ethics if his secondary work is transformative."<ref name=justia/>

==Facts and procedural history==
NXIVM was a sex trafficking organization that posed as a [[multi-level marketing]] company that offered a life-improvement seminar called the "Executive Success" program (ESP). ESP claimed to train participants in a method NXIVM claimed would improve communication and decision-making.<ref name="Casenotes2007"/><ref name=Parlato15>{{citation|author=Parlato, Frank|date=27 Nov 2015|title=The Bronfman/Raniere Cult Demands Investigation|newspaper=Niagara Falls Reporter|url=http://niagarafallsreporter.com/Stories/2015/NOV27/bron.html}}</ref> As part of the ESP seminar, NXIVM provided a training manual to paying participants who signed non-disclosure agreements that they would not discuss or release the manual to non-participants.<ref name=justia/><ref name="Casenotes2007"/>

As executive director of the nonprofit organization the Ross Institute, [[Rick Alan Ross|Rick Ross]] maintained two websites to provide information to the public about [[cults]] and other controversial groups that had complaints made against them for allegedly using deception and undue influence to manipulate participants.<ref name=Pankaj>{{citation|author=Pankaj, S|year=2005|title=E-commerce|publisher=APH Publishing|isbn=8176488054|pages=207–208|url=https://books.google.com/books?id=-V4ot1Rbt9gC&q=%22rick%20ross%22&pg=PA207}}</ref> Ross received the NXIVM manual through a former ESP participant and commissioned reports from two mental health professionals who analyzed and critiqued the manual, quoting sections of it to support their analysis.<ref>{{citation|last1=Odato|first1=James M.|last2=Gish|first2=Jennifer|date=February 24, 2012|title=Secrets of NXIVM|newspaper=Times Union|url=http://www.timesunion.com/local/article/Secrets-of-NXIVM-2880885.php}}</ref> The reports, which referred to the program as "expensive brainwashing",<ref name="Maclean's">{{citation|title=How to lose $100 million|last=Köhler|first=Nicholas|year=2010|magazine=Maclean's|volume=123|issue=35|page=58|url=http://www.macleans.ca/economy/business/how-to-lose-100-million/|access-date=June 5, 2016|archive-date=May 1, 2018|archive-url=https://web.archive.org/web/20180501045624/http://www.macleans.ca/economy/business/how-to-lose-100-million/|url-status=dead}}</ref><ref name=Parlato15/> were made available to the public on Ross’s websites.<ref name=Berkeley>{{citation|title=NXIVM Corp v. Ross Institute|date=January 2005|journal=Berkeley Technology Law Journal|volume=20|issue=1, 67|page=735|doi=10.15779/Z38K40D|url=http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1556&context=btlj|author1=[[Berkeley Technology Law Journal]]}}</ref><ref name=Hochman>{{citation|title=A Forensic Psychiatrist Evaluates ESP|date=February 2003|publisher=Cult Education Institute|url=https://culteducation.com/group/907-nxivm/6047-a-forensic-psychiatrist-evaluates-esp.html}}</ref> About 17 of 500 pages were republished on Ross's websites in the context of the critiques.<ref name="CrewsButtler2006">{{cite book|author1=Kenneth D. Crews|author2=Dwayne K. Buttler|title=Copyright law for librarians and educators: creative strategies and practical solutions|url=https://books.google.com/books?id=_s_e_YhjQsQC&pg=PA58|year=2006|publisher=ALA Editions|isbn=978-0-8389-0906-5|page=58}}</ref><ref name=Martin1>{{citation|title=A Critical Analysis of the Executive Success Programs Inc.|date=February 2003|publisher=Cult Education Institute|url=https://culteducation.com/group/907-nxivm/5969-a-critical-analysis-of-the-executive-success-programs-inc.html}}</ref><ref name=Martin2>{{citation|title=Robert Jay Lifton's eight criteria of thought reform as applied to the Executive Success Programs |date=February 2003|publisher=Cult Education Institute|url=https://culteducation.com/group/907-nxivm/5980-robert-jay-liftons-eight-criteria-of-thought-reform-as-applied-to-the-executive-success-programs.html}}</ref>

In 2003, NXIVM filed a federal trade-secrets lawsuit against the Ross Institute, Rick Ross, the authors of the reports, and the former ESP participant who provided the manual to them, alleging copyright infringement for their use of quotations from NXIVM's "secret" manual in the online critical reports of the manual and training program, arguing that the [[fair use doctrine]] should not apply since the manual had been obtained through the violation of a nondisclosure agreement, constituting [[bad faith]].<ref name=Parlato15/>

Finding that the reports were likely protected by the fair use doctrine, the district court denied NXIVM's motion seeking a preliminary [[injunction]] directing Ross to remove the material from his websites. NXIVM appealed the decision to the [[United States Court of Appeals for the Second Circuit]].<ref name=Berkeley/>

==Issue==
The issue before the Court was whether a fair use defense was available where the materials used were obtained in bad faith.<ref name="Casenotes2007"/>

== Opinion of the court ==
The court noted that defendants’ misconduct in obtaining unauthorized material is one of several relevant factors in a fair use defense as set forth by the [[Supreme Court of the United States|Supreme Court]] in ''[[Harper & Row v. Nation Enterprises]]'', but that obtaining the manuscript in bad faith does not preclude a fair use defense.<ref name=Berkeley/>

The court weighed the [[s:United States Code/Title 17/Chapter 1/Section 107|four fair use factors]] to determine if Ross’s use was fair, and made the following findings:<ref name="Casenotes2007"/>

# The purpose and character of the use was [[transformative]] as criticism and favored the defendants even if the defendants’ bad faith in obtaining the manual favored the plaintiffs.
# The nature of the copyrighted work was unpublished and favored the plaintiffs.
# The amount and substantiality of the portion used in relation to the copyrighted work as a whole did not favor the plaintiffs as (1) it was reasonable for the defendants to quote liberally from the manual in order to critically comment on it and (2) there was no identifiable "heart" of the manual.
# The market inquiry heavily favored the defendants because, "as a general matter, criticisms of a seminar or organization cannot substitute for the seminar or organization itself or hijack its market."

The court ruled in favor of the defendants and affirmed the denial of the preliminary injunction, stating,
<blockquote>If criticisms on defendants' websites kill the demand for plaintiffs' service, that is the price that, under the First Amendment, must be paid in the open marketplace for ideas...Certainly, no critic should need an author's permission to make such criticism, regardless of how he came by the original; nor should publication be inhibited by a publisher's anxiety or uncertainty about an author's ethics if his secondary work is transformative.<ref name=justia/></blockquote>

== See also ==
* ''[[Campbell v. Acuff-Rose Music, Inc.]]''

==References==
{{reflist}}

==External links==
* {{wikisource-inline|NXIVM Corp. v. Ross Institute|''NXIVM Corp. v. Ross Institute''}}
* {{caselaw source
| case = ''NXIVM Corp. v. The Ross Institute'', 364 F.3d 471 (2d Cir. 2004)
| courtlistener =https://www.courtlistener.com/opinion/785777/nxivm-corporation-and-first-principles-inc-v-the-ross-institute-rick/
| googlescholar = https://scholar.google.com/scholar_case?case=7931284525578289653
| justia =https://law.justia.com/cases/federal/appellate-courts/F3/364/471/532988/
}}
* [http://www.citmedialaw.org/threats/nxivm-corp-v-ross Summary and related court documents at Citizen Media Law Project]
*[http://www.culteducation.com/group/907-nxivm/6047-a-forensic-psychiatrist-evaluates-esp.html "A Forensic Psychiatrist Evaluates ESP"], NXIVM report on Cult Education Institute's website (formerly The Ross Institute)
* {{cite journal |doi=10.2139/ssrn.2131483 |title=Copyright Infringement and the Second Generation of Social Media Websites: Why Pinterest Users Should Be Protected from Copyright Infringement by the Fair Use Defense |journal=SSRN Electronic Journal |year=2012 |last1=Carpenter |first1=Craig C }}

{{USCopyrightActs}}

[[Category:United States copyright case law]]
[[Category:Fair use case law]]
[[Category:NXIVM]]
[[Category:2004 in United States case law]]

NXIVM Corp. v. Ross Institute - Revision history

imported>Panamitsu: add {{Use American English}} template per MOS:TIES