Second circuit reverses hot news misappropriation case June 20, 2011
The second circuit issued an opinion in Barclays v. TheFlyOnTheWall.com today, reversing the district court’s previous ruling in favor of the plaintiffs. The case has been closely watched by content-owners and copyright attorneys since 2010, after the district court enjoined the defendants from publishing the plaintiffs’ financial recommendations to clients until 30 minutes after the securities market opened.
I’ve only had a chance to skim the opinion, but it appears that the court found that the misappropriation claim was federally preempted by the Copyright Act (see 17 USC § 301). It’s worth noting that while this case is important, the facts seem to play a decisive role and the court (unsurprisingly) didn’t opine on the first amendment issues.
For background: The claim in the lawsuit was that TheFlyOnTheWall.com had misappropriated “hot news”– which may be (loosely) described as free-riding off news that was “gathered at the cost of enterprise, organization, skill, labor, and money” of another. The hot news doctrine has a long history that dates back to the early 20th Century as a state common law distinct from copyright infringement. This is important to most content owners because: (1) copyright law protects expression, and generally affords little, if any, protection to factual information (though it still protects the expression of factual information), (2) even when expression is unlawfully reproduced, the fair use doctrine may protect certain uses of the expression. In other words: where copyright law doesn’t provide a legal relief, a state-recognized exclusive property right to news might. The right to hot news was widely recognized until the enactment of the “Copyright Act of 1976″ (the last major overhaul of the Act) in which Congress added an express preemption provision (under 17 USC § 301) that severely limits the ability of state law to mimic rights granted by the Copyright Act. It’s still recognized, but under limited circumstances.