It should be noted that there was a later case that found the opposite way: Lewis Galoob Toys v. Nintendo of America.
The Galoob dispute was over the "Game Genie" device that you stuck in between the ROM cartridge and the NES game console, which let you poke data into memory locations to change the game. Nintendo tried to argue that doing so created what constituted a derivative work. The court decided that a customer experimenting with the copy they bought is not the creation of derivative work, and even if it were, that'd be fair use.
According to Wikipedia, Galoob was affirmed in the 9th Appellate Circuit and appealed to the Supreme Court, and Certiorari was denied.
> Of course the ultimate problem here is that historically the courts have
> been heavily biased in favor of the copyright holders on the most
> trivial points, with no basis in positive law,
When publishing was a very capital-heavy industry there was no ability for the average individual to participate, so copyright was merely an industrial regulation. When disputes did land in the courts they found both sides well-funded and well-represented and interested in finding a resolution that left the system basically intact, robust, and equitable.
In the 80s and 90s, technology improved to the point where individuals could begin to participate in the reproduction of creative works. Early on, I think, the legal establishment recognized that the industrial regulation should not extend into the homes and social circles of individuals, so you got reforms like the Home Recording Act.
Two things changed that, I believe. The first was the rhetoric about the "knowledge economy" in the 90s -- particularly as an answer to the decline of industrial production in the United States. It was intuitive that a "knowledge economy" needed strong "knowledge property" (so long as you avoided thinking about the very real differences between 'knowledge' and phyisical objects).
The second was the rapid increase in the scale of casual copying. People copying 8-track tapes were unlikely to bring down or even seriously impact the revenues of the music publishing industry. Yet now a musical recording can be copied millions of times and distributed across the planet all for virtually no cost. The result is that an entire industry has been rendered obsolete. Music doesn't need to be published anymore than ice needs delivered in insulated trucks.
Large, powerful industries don't implode quietly, however. Also other "content creation" and publishing industries are looking at music publishing and thinking "there but for the grace of God go I." So now we're in a situation where all the money in Intellectual Property is interested in nothing other than making it stronger, making it more universal, and applying it directly to the activities of individuals.