Transformative uses are those that add something new, with a further purpose or different character, and do not substitute for the original use of the work.
Analysis of this factor frequently turns on a determination of whether a proposed use is transformative (e.g., work adapted for a new purpose or unexpected audience) as opposed to mirror-image copying. In this case, the court repeatedly found in favor of GSU because all uses were exclusively nonprofit and educational or for the sole purpose of teaching students in classes at a nonprofit educational institution. The lack of transformative use was not dispositive.
Transformative use is a relatively new addition to fair use law, having been first raised in a Supreme Court decision in 1994. (Campbell v. Acuff-Rose Music, 510 U.S. 569 (1994.) A new work based on an old one work is transformative if it uses the source work in completely new or unexpected ways. Importantly, a work may be transformative, and thus a fair use, even when all four of the statutory factors would traditionally weigh against fair use!
Parody is one of the most clearly identified transformative uses, but any use of a source work that criticizes or comments on the source may be transformative in similar ways. Legal analysis about this kind of transformative use often engages with free speech issues, and unusual artistic techniques.
Courts have also sometimes found copies made as part of the production of new technologies to be transformative uses. One very concrete example has to do with image search engines: search companies make copies of images to make them searchable, and show those copies to people as part of the search results. Courts found that small thumbnail images were a transformative use because the copies were being made for the transformative purpose of search indexing, rather than simple viewing.
