Imagine you were a farmer and invested lots of time and effort to sow seeds and watched the crops grow. Now imagine another farmer who attempted to harvest your crops without having invested any time and labour therein. Would you allow such farmer to reap your crops? You most probably would not.
In a very recent case , the New York District Court for the Southern District had to deal with a question pretty much like the one above. The claimants Barclays Capital Inc, Merril Lynch, Pierce, Fenner & Smith Inc and Morgan Stanley & Co Inc accused the defendant theflyonthewall.com of copyright infringement and of hot-news misappropriation relating to claimants’ recommendations that claimants have researched for their paying clients.
In particular, the claimants accused the defendant to have undertaken a regular, systematic, and timely taking of claimants’ hot-news and to have disseminated them through unauthorised channels of electronic distribution before the claimants had an opportunity to share these recommendations with their clients.
As for the claim regarding copyright infringement, defendant did not dispute ther arrangement therein. As for the claim relating to hot-news misappropriation, however, defendant contested its liability thereunder.
Not surprisingly, the Court found defendant liable in both instances.
This ruling, albeit delivered by a lower court, is, I believe, remarkable for Court’s dissection of the law of unfair competition and, misappropriation, in particular. The Court started with INS vs AP, went through Cheney Bros vs Doris Silk and Capitol Records vs Mercury Records and ended up with NBA vs Motorola. A very important thing in my view, is Court’s dedication to the question as to whether federal law preempted forms of state-law misappropriation, and particularly, misappropriation of time-sensitive “hot news”. The Court further cited a “mysterious footnote” from Feist, according to which the protection for “hot news” should not be sought under copyright law, but under an INS-type misappropriation theory.
Finally Justice Denise Cote spent some considerations on the public policy. Besides the value of claimants’ hot-news to the market, she thereby noted that such recommendations were not mere objective facts, but rather, subjective judgments based on complex and imperfect evidence and could therefore attract copyright protection. With respect to public’s interest to access financial information on reasonable terms, the Court stated that a balance need be struck between establishing rewards to stimulate socially useful efforts on the one hand, and permitting maximum access to the fruits of those efforts on the other. However, no other was the purpose of the INS-tort or the one of the traditionally accepted goal of intellectual property law – and this is – to provide an incentive for the production of socially useful information without either under- or overprotecting the efforts to gather such information.
Put it all together, the 89 pages long ruling of the New York District Court for the Southern District definitely hits the misappropriating fly on the wall. Bearing its unique dissection of the US law of unfair competition, this ruling and any acompanying comments should be communicated to as many practitioners or just people interested in the matter as only possible.
