20 March 2010

How to hit a misappropriating fly on the wall

My fly on the wallphoto © 2009 Clare Bell | more info (via: Wylio)

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.


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Comments (13)

  1. 9 April 2010

    Good morning, This page is rather informative and fun to read. I am a huge follower of the things blogged about. I also love reading the comments, but it seems like a great deal of readers need to stay on topic to try and add something to the original topic. I would also encourage all of you to bookmark this page to your most used service to help get the word out. Thanks

  2. 9 April 2010
    harold butler said...

    my God, i thought you were going to chip in with some decisive insght at the end there, not leave it with ‘we leave it to you to decide’.

  3. 13 April 2010
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  4. 13 April 2010
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  5. 9 July 2010
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  7. 12 July 2010

    Helloadmin I enjoy with your information . May i save this article for my university test ? thanks admin

    • 12 July 2010

      Hi Delaine,

      no problems with saving – please observe the terms of the Creative Commons license on the front page of the Reguligence weblog -).

  8. 18 September 2010

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  9. 20 September 2010
    Shaun Pritts said...

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  10. 23 September 2010
    Travel Planners said...

    Nice site. I love the way you write the blog. As you said I won’t allow the farmer to harvest unless he is investing in it.

  11. 7 October 2010

    Bookmarking now thanks, found you through Google.

  12. 2 December 2010

    Any way I’ll be subscribing to your feed and I hope you post again soon. You should ask your readers for new topics.

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