There are four factors in evaluating a case for fair use:
From copyright.gov: Fair use is a legal doctrine that promotes freedom of expression by permitting the unlicensed use of copyright-protected works in certain circumstances. Section 107 of the Copyright Act provides the statutory framework for determining whether something is a fair use and identifies certain types of uses—such as criticism, comment, news reporting, teaching, scholarship, and research—as examples of activities that may qualify as fair use.
1. What is the character of the use?
Generally, this factor is referred to as the transformative factor. This factor deals with whether the material has been used to help create something new or just simply been copied word-for-word into another work. Ask yourself if the materials you have taken from a work have been transformed by adding a new expression or meaning. And, if a value has been added to the original by creating new information, insights, or understandings. For example, a parody transforms an original copyrighted work through ridicule.
2. What is the nature of the work being used?
Works that disseminate facts or information have more leeway under fair use because they benefit the public, more than fictional works like plays and novels might have.
3. How much of the work are you using?
Along with the nature of a work, and whether subsequent works are transformative of it, the third factor in Fair Use relies on how much of the content you are using. Generally, the less you use the more likely your copying will be excused as a fair use. But, even taking a small portion of a work will not be considered fair use if you copy the "heart" of the work. Be sure to note that the "less is better" rule can fluctuate under this factor.
4. If this new kind of use was widespread, how would it effect the market for the original work or for permissions to the original work?
For this factor, consider whether your use takes from the copyright owner's income or impedes a new/potential market for the copyrighted work. Even if your work is transformative, if it deprives the original copyright owner of income--or if after your transformative work is created there is a high market for your work--it might not be covered under a fair use.
For more information, the Association of Research Libraries (ARL) created a Code of Best Practices in Fair Use for Academic and Research Libraries, which includes clear statements of fair use and approaches to fair use, developed by librarians who support academic inquiry and higher education. A PDF of the code is available for free download on their website, here.