Leslie A. Kelly, et al. v. Arriba Soft Corp., et al., SA CV 99-560 GLT[JW]. (US District Court, Central District of California, Southern Division Dec. 15, 1999)
This case concerned a search engine run by Arriba Soft displaying thumbnail images of Kelly's copyrighted photographs. In deciding that the use was fair and therefore acceptable for Arriba to continue, the court set an important precedent in applying the guidelines of fair use to determine infringement. Four basic principles could be applied to a use to weigh whether or not it is legal: the purpose and character of the use, the nature of the original work, the amount or substantiality of the portion used, and the impact upon the potential market for the original work. According to how a use fares in each of these categories, the court may decide that it is fair.

First of all when it comes to anime, the nature of the original work is almost never anything but pure entertainment-and thus not favorable for allowed fair use. Sometimes anime music videos honestly transformative, when they display completely new stories or mash-ups of various anime. All (or most) by definition add a certain basic level of creativity not necessarily found in the original. But they all still use copyrighted characters in a (most often) non-parody work of original fiction. They also "quote" heavily (given that a single anime is the focus) from a single artistic source for arguably no critical/analytical point; although usually only 2-5 minutes of footage are taken, those few minutes will often contain the "heart" of the original work. AMVs are often concerned with bringing out themes, relationships, plots or action sequences already visible in the original anime. Thus, they are a sort of highlighted text thrown into a tumble dryer. While a level of creativity is evident in virtually every anime music video, that alone may not excuse the distribution of material centered on copyrighted and protected characters. And although they are not sold for profit and their character is largely to enrich the fan community and inspire creativity, there are still ways in which distributors indirectly benefit financially-through internet ad space, or through expensive convention tickets where AMV contests/showings are a main attraction. However, it would be hard to make a case claiming AMVs impacted the market for the original product. They surely straddle the line between fair and unfair use, but as far as the American copyright holders are concerned, the most important aspect of music videos seems to be their usefulness as tools to excite existing fans and advertise to new ones.