You should read the law in question. This would be Section 107 of the Copyright Act, which defines "fair use". It's extremely vague and is best interpreted as a set of considerations that the courts should take into account so that they can handle situations like this one on a case by case basis. If Congress wanted to be more prescriptive, they could (ETA: and if they become unhappy with the courts' decisions they still can in the future), but I think that would lead to worse outcomes.
I was really just responding to the implication that SCOTUS did the right thing because "it would be a nightmare scenario" otherwise.
The law also states that copyright's purpose is to stimulate progress of the arts, and that's why fair use is possible. Interpreting the law also means establishing the limits of fair use.
But, still, yes, determining the scope and applicability of fair use is part of applying the law.
Absolutely, but courts are supposed to interpret the law, not rule whichever way avoids nightmare scenarios.
The risk of going too far in that direction (and this is by no means the first case in which SCOTUS c̶l̶e̶a̶r̶l̶y̶ may have rationalized a decision for pragmatic reasons) is that it makes the court more corruptible. I am glad the majority ruled this way, because I agree that it leads to a better outcome in this case. On the other hand, any departure from a pure interpretation of the law is very dangerous, because it normalizes the more-corruptible mode of operation, and that can lead to another kind of "nightmare scenario".