Making Movies Out of Craigslist Ad

Dear Rich: I have a series that I've been working on for a big part of the year called The Best of Craigslist. It's been doing pretty well on Funny or Die. Here's a link to one episode. So they've been really well received and I think there's an opportunity here to take them to YouTube and make some money by selling ads or partnering with a client. Each video is made from an actual Craigslist post. Now my understanding is that Craigslist technically owns the rights to these posts. Am I correct in that? If I started to make money-- do you think I'd be liable as I make money? Could they be portrayed as a parody? We answered a related Craigslist question about six months ago and in that time, Craigslist changed its Terms of Use (TOU). We think you are correct and now, contributors automatically grant rights to Craigslist to "copy, perform, display, distribute, prepare derivative works from" their ads. More importantly, the contributor assigns to Craigslist all rights to pursue "unauthorized copying, performance, display, distribution, use or exploitation of, or creation of derivative works from, any content that you post." In other words, even if the contributor retains copyright -- it's not clear whether the grant is exclusive -- only Craigslist has the right to pursue infringers. That means Craigslist, not the contributor can go after you for your movies (which would be considered derivative works).
Okay, so what if Craigslist sues you for copyright infringement? Assuming the Craigslist TOU holds up in court -- that is rights actually go from contributor to Craigslist -- you will be on the defensive. You will have to demonstrate either that (1) the ad is unprotectible under copyright because it's too short or trivial (we've seen your videos and we think the ads are long enough to merit separate copyright protection), or (2) the movies are a fair use. You have a reasonable fair use argument in that the ads are not being used for their intended purpose (to sell stuff) and your movies are commenting upon or parodying the ads. As we always warn, making a fair use argument against a well-heeled company is an uphill battle that could prove costly. BTW, the fact that you are making money off the movies doesn't affect the ability of Craigslist to come after you for infringement.
Trademark issues. In addition to copyright claims, Craigslist has the ability to come after you for trademark claims --  that is, you are creating the impression that Craigslist endorses or is associated with your movies. In your favor is the fact that you are arguably making an editorial use of their mark (for example, similar to "Best Cars Made By General Motors" or "Great Strategies of Fortune 500 Companies). Working against you is the fact that you use the trademark so prominently and Craigslist is already using a similar title at its site (and for a similar purpose, to highlight the wackier ads).
Bottom line dept. As with all potential infringement claims, the higher your profile, the more likely you will attract attention from Craigslist. We are hesitant to suggest that you stop your creative work. After all, some artists have jumpstarted their careers with infringements. For what it's worth, Craigslist is a relatively forward-thinking (and generally lovable) company and it's possible that their management may take a more enlightened approach to your work -- or at least, will offer means for you to halt without dragging you through litigation. But certainly if you intend to move to higher levels of exposure, at some point you will likely have to deal with the company.