Walt Disney Productions v. Air Pirates (581 F.2d 751) -- LexisNexis
This Circuit Court case from 1978 involved a suit by Disney alleging copyright infringement of its characters by Air Pirates for its adult counter-culture comic book. Air Pirates mocked Disney’s Silly Symphony books with its own Silly Sympathies line of comics; the defendant also parodied well-known Disney characters such as Toby Tortoise and Max Hare by changing their personalities. Judge Cummings deliberated back and forth over both (1) whether or not a character from an illustrated book could be copyrighted, and (2) whether or not the change in personalities of the characters was enough to warrant a claim to fair use.

Ultimately, Judge Cummings ruled in favor of Disney, writing that

Defendants' assertion that they copied no more than necessary appears to be based on an affidavit, which stated that ‘the humorous effect of parody is best achieved when at first glance the material appears convincingly to be the original, and upon closer examination is discovered to be quite something else.’ The short answer to this assertion, which would also justify substantially verbatim copying, is that when persons are parodying a copyrighted work, the constraints of the existing precedent do not permit them to take as much of a component part as they need to make the "best parody." Instead, their desire to make the ‘best parody’ is balanced against the rights of the copyright owner in his original expressions. [7]

Though he cited as important Air Pirates’ defense that their characters--though similar in appearance and clearly meant to mock Disney’s characters--”parodied [Disney characters’] personalities, their wholesomeness and their innocence,” Judge Cummings’ ruling was ultimately decided primarily by the third copyright factor: the amount and substantiality of the portion taken.

This was an important ruling because it was cited in Original Appalachian Artworks v. TOPPS Chewing Gum, and in that case helped with the ruling that the Garbage Pail Kids were a copyright infringement of the Cabbage Patch Kids. The precedent set here that a parody cannot be the “best parody” without copying more than fair use allows was later overturned in Campbell v. Acuff-Rose Music, which established that sometimes a parody must be the “best” in order for it to qualify for fair use.