21 June 2011

Second Circuit Rejects Hot News Doctrine In New York State Case

Thwarted in their efforts to use copyright law to legally prohibit others from referencing the content that they produce, some newspapers and news services have been attempting to reinvigorate the common law "hot news" doctrine to make their publications truly "exclusive" for a little while at least.

A ruling released yesterday in the case Barclays Capital, Inc. v. theflyonthewall.com, Inc., from the United States Court of Appeals for the Second Circuit, in which the trial court had issued an injunction protecting Wall Street analyst newsletters based upon the doctrine, dealt a serious blow to that theory.

The core holding of the case is that:

We conclude that under principles that are well established in this Circuit, the plaintiffs' claim against the defendant for "hot news" misappropriation of the plaintiff financial firms'recommendations to clients and prospective clients as to trading in corporate securities is preempted by federal copyright law.

The ruling does not hold that the "hot news" tort is unconstitutional, or even that it is always pre-empted by copyright law, although the analysis does give the First Amendment considerations weight in determining the scope of copyright pre-emption of the doctrine. But, it does dramatically narrow the class of "hot news" cases that are not pre-empted by copyright law from what the leading "hot news" precedent in the Second Circuit, National Basketball Association v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997), had been understood to provide. It distinguishes and greatly narrows NBA, rather than overruling it.

Since the NBA case is the leading precedent in any United States Court of Appeals Circuit holding that the "hot news" doctrine is neither unconstitutional nor fully pre-empted by federal copyright law, the ruling deals a serious blow to the litigation strategy of traditional media outlets seeking to use the doctrine to restrain online news reporting that used traditional media sources.

Some central stated motives for the broader reading of pre-emption doctrines were both (1) the lack of protection afforded the underlying facts that suing media outlets reported, which were historical facts or financial market data, and (2) the concern that media outlets that are targets of "hot news" suits are often Internet based media ventures with sources in many states who would be unfairly subject to state law versions of the common law doctrine that differed materially from state to state, undermining the policy of uniformity that the federal copyright laws were intended to establish.

The blow this ruling presents to litigation strategies designed to give one media outlet exclusive intellectual property rights to a story is particularly great given the surprisingly blog friendly rulings that courts gave to websites republishing substantial parts of newspaper stories on the web under the copyright law's fair use doctrine, sometimes finding that it applied even in verbatim reprints of medium sized news stories or entire news photographs when other favorable conditions (like the limited negative impact a republisher was likely to have on the market for the original work).

1 comment:

Andrew Oh-Willeke said...

More analysis and background here. A Reuters blog figures the result could be worse and emphasizes its limits. Citizen media sees it as a mixed decision.