Rob Haggart has the details. The decision is here. Background, including predictions of an easy win for Prince (in response to which someone says: "I wouldn't be so sure: litigation is always uncertain, and never more so than when it comes to appropriation art"), here. Back with more after I've had a chance to read the decision.
UPDATE: I've now read the decision, and the key bit is that the court rejected the fair use defense because, as Artnet's Walter Robinson puts it, "Prince's works do not specifically comment on Cariou's originals." (Robinson says: "Face it, the notion of 'appropriation' just doesn't play well in our law courts.") The NYT's Randy Kennedy writes that "Judge Batts wrote that for fair-use exceptions to apply, a new work of art must be transformative in the sense that it must 'in some way comment on, relate to the historical context of, or critically refer back to the original works' it borrows from."
That hasn't always seemed to be a requirement in other fair use cases. In Blanch v. Koons, for example, the Second Circuit noted that Koons used "Blanch's image as fodder for his commentary on the social and aesthetic consequences of mass media" (rather than, as Judge Batts would seem to require, fodder for his commentary on Blanch's image). Quoting the Supreme Court's Campbell decision, the court said the test of transformativeness is whether the later work "adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message." It's hard to imagine, to take another example, Shepard Fairey's Obama image passing muster under Judge Batts's standard. (That image was many things, but a commentary on the underlying photo was probably not one of them.)
Sergio Muñoz Sarmiento says the decision "give[s] credence to my theory that courts are increasingly becoming agitated with this 'free-for-all' mentality of certain artists when it comes to appropriating and commercializing off of other artists’ works."
The Copyright Litigation Blog's Ray Dowd says "the opinion is noteworthy and will basically EXPLODE the contemporary art world."
Charlie Finch says "having a judge as an interpreter of the meaning of art remains Kafkaesque: we can trot out the entire oeuvre of Andy Warhol, Robert Rauschenberg and a thousand other artists as violators of Judge Batts’ standard. But what of photographer Cariou? Is he not an artist, as well?"
Photo Teacher Paul Turounet "wonder[s] what this might mean for artists such as Thomas Ruff, Penelope Umbrico, Doug Rickard and Michael Wolf, appropriating imagery from the internet, including various search engines, Google Streetview and Flickr?"
Finally, good summaries of the decision from The Art Newspaper's Charlotte Burns and David Walker of Photo District News.
UPDATE 2: More reactions coming in. Ed Winkleman: "The ruling was a chilling decision for artists who work in appropriation."
Peter Friedman: "We need not go so far as to conclude that Cariou’s lawsuit signals the death of appropriation art in all its various guises. Blanch v. Koons alone is proof that is not the case. But if we realize how plainly and directly Prince’s appropriations damaged Cariou’s opportunities to economically benefit from his own work, the outcome (if not all of the reasoning) of this new case is obviously correct" (emphasis added).
Greg Allen, on the other hand, still can't believe Prince "somehow lost his open & shut copyright infringement case," and says the whole thing is "basically a flabbergasting shitshow":
"If it stands, it would have major, sweeping, and stifling effects. Not only would the current operating assumptions of fair use and transformative use be ratcheted way back, but the contemporary art world would be turned upside down. It would restrict both how artists appropriate, or even refer to, copyrighted work. And it would turn galleries into copyright police, with an affirmative responsibility to clear images, sources, and references for the work they show and sell. If visual artists and the art market have been operating in some kind of an appropriation bubble, this decision would pop it. Artists would have to adopt the sampling, licensing, and rights clearing practices and infrastructures of the music industry . . . . [T]he decision has some glaring omissions and relies rather heavily on almost-20-year-old textbooks and articles from law journals, while ignoring several highly relevant, recent decisions. The most notable ignored precedent is Blanch vs. Koons (2006), which happens to involve another Gagosian artist, and which seemed to set out a workable test of transformative use."
UPDATE 3: Interesting interview with Cariou here.