This section contains the nature of the case and procedural background.

P compiles movie trailers onto videotape for home video retailers to display in their stores. P enters into agreements with various entertainment companies. It entered into such an agreement with Disney in 1988, and Disney thereafter provided P with over 500 trailers for its movies. In 1997, P started VideoPipeline.net and VideoDetective.com. The company maintains a database accessible from VideoPipeline.net, which contains movie trailers P has received throughout the years. P's internet clients -- retail websites selling home videos -- use VideoPipeline.net to display trailers to site visitors. The site visitors access trailers by clicking on a button labeled 'preview' for a particular motion picture. The requested trailer is then 'streamed' for the visitor to view (because it is streamed the trailer cannot be downloaded to or stored on the visitor's computer). P's internet clients -- pay a fee to have the trailers streamed based on the number of megabytes shown to site visitors. P has agreements to stream trailers with approximately 25 online retailers, including Yahoo!, Amazon, and Best Buy. P also operates VideoDetective.com. On this website, visitors can search for movies by title, actor, scene, genre, etc. When a search is entered, the site returns a list of movies and information about them and allows the user to stream trailers from VideoPipeline.net. VideoDetective.com includes a 'Shop Now' button to link the user to a website selling the requested video. Visitors to VideoDetective.com can also win prizes by playing 'Can You Name that Movie?' after viewing a trailer on the site. P included in its online database trailers it received under the License Agreement from Disney. Because the License Agreement did not permit this use, Disney requested that P remove the trailers from the database. P complied. P then filed a complaint seeking a declaratory judgment that its online use of the trailers did not violate federal copyright law. Disney terminated the License Agreement. P then copied approximately two minutes from each of at least 62 Disney movies to create its own clip previews of the movies. The clip previews differ from the trailers. Each clip preview opens with a display of the Miramax or Disney trademark and the title of the movie, then shows one or two scenes from the first half of the movie, and closes with the title again. Disney's trailers are designed to entice sales from a target market by using techniques such as voice-over, narration, editing, and additional music. P sought to use the clip previews. Disney filed a counterclaim alleging copyright infringement. The court entered a preliminary injunction against P. P appealed.

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