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Home > Second Circuit Rules: "Hot News" Claims Preempted

Second Circuit Rules: "Hot News" Claims Preempted [1]

Submitted by John Sharkey on Mon, 06/20/2011 - 14:16

In a narrow, fact-bound decision, the Second Circuit today held that a group of investment firms' claims against a news-aggregation company were preempted by federal copyright law. (PDF of the opinion here [2].) The court stopped well short of reaching any larger 1st Amendment issues, however.

The case, Barclays Capital Inc. v. TheFlyOnTheWall.com, dealt with the latter company's republishing the i-banks' stock recommendations as news; the crux was whether republishing of non-copyrightable stock recommendations constituted so-called "hot news" misappropriation, and whether the i-banks' claim was preempted by federal law. We've written about the case before; see Sam Bayard's treatment of the district court result and the case's possible 1st Amendment issues here [3]. For further, even more-thorough details, check out the amicus brief [4] to which CMLP contributed, laying out the 1st Amendment implications. The quick takeaway from today's decision is twofold:

First, TheFlyOnTheWall is in the clear because they didn't meet the Second Circuit's "free-riding" requirement. (Or, to get technical: the "free-riding" requirement the Second Circuit reads into New York law.) Instead, FOTW puts in work of its own to collect news (in this case, the fact that investment firms are recommending a particular security) and to disseminate it, so the banks lose their "hot news" claim. Notably, the court found that the i-banks were not themselves collecting or reporting news, they were creating it -- that is, the fact of their recommendations was the news, which FOTW was breaking. Because the "free-riding" requirement was not met, the Second Circuit found that an additional element was missing that would prevent the i-banks' claim from being preempted by the Copyright Act.

Second, and more important to us observers: the court doesn't touch any of those important 1st Amendment issues. The opinion is certainly a blow to companies looking to flex some hot-news muscle, but the whole thing is tied up in the specifics of the various business models and parties' conduct; indeed, the court explicitly declines to repudiate the entire existence of the hot-news misappropriation tort and washes its hands of any bigger questions.

So, that's where we stand: TheFlyOnTheWall lives on, while we wait for another court to tackle the big 1st Amendment news-aggregation questions.

John Sharkey is a CMLP blogger fresh off his first year at Harvard Law School. Since his last post, the Twins have moved out of the basement.

Jurisdiction: 

  • United States [5]
  • New York [6]

Content Type: 

  • Text [7]

Subject Area: 

  • Newsgathering [8]
  • Hot News Misappropriation [9]

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Source URL (modified on 06/20/2011 - 4:42pm): https://www.dmlp.org/blog/2011/second-circuit-rules-hot-news-claims-preempted

Links
[1] https://www.dmlp.org/blog/2011/second-circuit-rules-hot-news-claims-preempted
[2] https://www.dmlp.org/sites/citmedialaw.org/files/2011-06-20-FOTW%20Decision.pdf
[3] https://www.dmlp.org/blog/2010/barclays-v-theflyonthewallcom-hot-news-doctrine-alive-and-kicking-will-news-aggregators-be
[4] https://www.dmlp.org/sites/citmedialaw.org/files/Reformatted%20Fly%20Brief%20062410%20Final_e-filed-1.pdf
[5] https://www.dmlp.org/jurisdiction/united-states
[6] https://www.dmlp.org/jurisdiction/united-states/new-york
[7] https://www.dmlp.org/content-type/text
[8] https://www.dmlp.org/subject-area/newsgathering
[9] https://www.dmlp.org/subject-area/hot-news-misappropriation