Fair Use is an exception to the application of copyright law. It permits a user, under certain circumstances, to use copyrighted materials without the permission of the owner. These so-called circumstances include the use of the material for comment, criticism, news reporting, teaching, scholarship or research. It must also involve balancing four specific factors to determine whether a use is considered "fair". These four factors are the Purpose of the use, the Nature of the work, the Amount of the total work used, and the Effect of the use on the market. Watch this video from MIT , created by a librarian from MIT, for a better understanding of the Fair Use concept.
A subjective decision that a use is "legitimate" does not constitute "Fair Use". It is a complex process and seldom a clear-cut decision. Legal decisions provide guidance, and various guidelines are created to aid in the process. Kenneth Crews from Columbia University shares a determination checklist to help in the determination. The Code of Best Practices in Fair Use for Academic and Research Libraries is another recently crafted tool.
Stanford University compiled a sample of Fair Use cases to show how they were decided and why. It is a good way to learn how the four factors are applied and balanced.
When balancing the Four Factors, "transformative use" favors the first factor (nature of the use) when it can demonstrate that the copied material is used to create something fresh that superceded the original work, or that it served to provide new information or meaning. This is yet another subjective process, but adds a new dimension to the decision. The University of Minnesota calls it the Fifth Fair Use factor.