Battle Lines Drawn in 'Hot News' and Copyright Lawsuits
Legal battles continue between traditional news producers and online sources like blogs and so-called news aggregators, which take original content and republish it without payment or attribution to the original source. Copyright law—and particularly "hot news" claims—have been at the forefront of the issue.
Appeals Court Halts Injunction against Financial News Website in 'Hot News' Case
On May 20, 2010, the 2nd Circuit U.S. Court of Appeals stayed an injunction against financial news website Theflyonthewall.com (Fly), which had imposed strict time limits for the site's publication of stock information. The appeals court ordered expedited briefing on the case, and enjoined the lower court ruling in the meantime.
On March 18, Judge Denise L. Cote of the U.S. District Court for the Southern District of New York ruled that Fly had misappropriated the financial recommendations of investment firms Barclays, Merrill Lynch, and Morgan Stanley by combining those recommendations with other financial news items and making them available to Fly subscribers. In Barclays Capital, Inc. v. Theflyonthewall.com, 2010 U.S. Dist. LEXIS 25728 (S.D.N.Y. March 18, 2010), Cote ruled that the stock recommendations and reports the firms created for investors were "hot news," and that Fly's consistent and timely redistribution of them, sometimes verbatim, violated the New York common law of unfair competition, creating a disincentive for the firms to produce the reports.
"Fly's core business is its free-riding off the sustained, costly efforts by the Firms and other investment institutions to generate equity research that is highly valued by investors," Cote wrote. The injunction forbade Fly to publish recommendations issued by the firms when the stock market was closed until after 10 a.m. the following day. When the market was open, Fly could not publish recommendations for two hours after their release. (For more on the injunction, see "Federal Judge Orders Website to Delay Posting of Stock Recommendations" in the Winter/Spring 2010 issue of the Silha Bulletin.)
The "hot news" doctrine was recognized by the U.S. Supreme Court in International News Service v. Associated Press, 248 U.S. 215 (1918), in which the court held that a news organization can claim that "hot news" is its "quasi property," and thus can be protected against a competitor's appropriation. This is in contrast to copyright law, which permits a news organization to claim a copyright to the words and structure of a news story, but not to its underlying facts. "Thus," Judge Cote observed in her March 18 ruling, "in INS, the misappropriation doctrine was developed to protect costly efforts to gather commercially valuable, time-sensitive information that would otherwise be unprotected by law." Although the Supreme Court later held in Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) that federal common law does not apply to state law claims, the "hot news" doctrine persists in several states, including New York. (The Silha Bulletin has covered "hot news" claims previously. See "Federal Judge Recognizes AP's 'Hot News' Claim in Suit over Online Use of Content" in the Winter 2009 issue.)
Numerous interested parties submitted competing amicus curiae briefs in the expedited Barclays case. Fourteen news media companies submitted a brief arguing that the "hot news" doctrine is an important tool in protecting themselves against "free-riding" aggregators. The brief, filed June 21 by Agence France-Presse, The Associated Press (AP), the E.W. Scripps Company, Gannett Company, the McClatchy Company, Newspaper Association of America, Time Inc., The New York Times Company, The Washington Post, and others argued that "free-riders" like Fly threaten their ability to make money doing journalism. "The vulnerability of news originators has grown exponentially in the Internet era," the brief said. "Today, originators make most news stories available on the Web as soon as they leave the editor's desk. With a simple computer program and a few keystrokes, a free-rider can immediately copy that valuable news content from the Internet. The free-rider can then republish the originator's news while it is still 'hot,' in a product that competes for public attention and revenue from such sources as advertising, subscriptions, and paid applications."
Meanwhile, in an amicus brief urging the 2nd Circuit to reverse Judge Cote's ruling, Google Inc. and Twitter Inc. argued that the "hot news" doctrine is unconstitutional and violates the Copyright Act, 17 U.S.C. §§ 101-810. The brief said the U.S. Constitution's copyright clause "demands that, in order to 'promote the Progress of Science and useful Arts,' non-original works such as facts are available to any person to use and exploit, regardless of who discovered those facts or at what expense." Further, Google and Twitter argued that the "hot news" doctrine is "not compatible with constitutional principles enunciated" in Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991). In Feist, the U.S. Supreme Court ruled that the names, towns, and telephone numbers in a white and yellow pages directory were facts not protected by copyright, regardless of how much work was expended compiling and organizing them. According to the brief, Feist rejected the logic of INS—that "newsgatherers may secure property rights in facts and block competitors from repeating them." In other words, the brief argued, "the freedom to use facts—even to 'free-ride' on facts gathered by others through great effort—is constitutionally protected."
The Google and Twitter brief also claimed that "in an age of instantaneous, global dissemination of factual information over the Internet, cable, and satellite, a tort of 'hot news' misappropriation is obsolete." Moreover, granting a "temporary monopoly" over news facts undermines the public interest in receiving timely news, the brief argued, and "foster[s] uncertainty among news outlets as to how long they must 'sit' on a story before they are free of a potential 'hot news' claim. ... How, for example, would a court pick a time period during which facts about the recent Times Square bombing attempt would be non-reportable by others?"
The Citizen Media Law Project, Electronic Freedom Foundation, and Public Citizen also submitted an amicus brief on the case, encouraging the 2nd Circuit to consider its First Amendment implications. In the brief, the groups observed that following its recognition in the INS case, "no court has explored carefully the speech implications of the hot news doctrine." Although the brief did not support either party in the Barclays case, the amici argued that the "hot news" doctrine threatens to "impede traditional First Amendment protections for truthful speech on matters of public concern" and "could chill the development of online expression."
The AP reported August 9 that a three-judge panel of the 2nd Circuit court held a hearing on the injunction August 6. In the hearing, Bruce Rich, an attorney for the financial firms, claimed that the suit was not "speech directed" or an attack on the First Amendment. Asked whether the firms would be damaged if news organizations like The New York Times or CNBC reported the firms' recommendations, Rich said, "The difference is that Fly does it for a living. CNBC delivers a broad spectrum of news reporting."
Newspapers Sue and Threaten Blogs over Copyright
Newspapers in Nevada and Colorado have used copyright law to protect their original content and the revenue it generates. On June 14, the Reporters Committee for Freedom of the Press (RCFP) reported that since March 2010, the Las Vegas Review-Journal had sued 37 different website owners and bloggers for using its content without permission. Mark Hinueber, general counsel for Stephens Media, which owns the Review-Journal, told the RCFP that the impetus for the suits was the threat of reduced traffic to the paper's website and harm to online ad revenue. When websites reproduce Review-Journal stories and post them online, they eliminate any reason for readers to visit the newspaper's website, Hinueber said.
Bloggers sued by the Review-Journal have said they feel unfairly targeted because they do not compete with the newspaper for ad revenue or readers. In a June 1 response to a lawsuit filed against madjacksports.com, Jack Wooden, who lives in Columbus, Ind., and runs the site, explained that a user posted a Review-Journal story on a discussion board on his site. Wooden claimed the story was removed when he received the newspaper's complaint, and that the page had been viewed only 29 times while the article was online. Wooden calculated the financial damage to the Review-Journal to be $85.55, because access to the article on the newspaper's online archive cost $2.95 per view. In his response, Wooden assailed Righthaven, L.L.C., the Nevada company acting on the newspaper's behalf, claiming that in many of the cases of infringement "actual damages, if any, are in the $3 to $100 range and could be cured with a phone call or an email." According to the Las Vegas Sun on June 10, the lawsuits typically demand $75,000 in damages.
In a May 28 blog post on the newspaper's website, Review-Journal publisher Sherman Frederick called Righthaven "a local technology company whose only job is to protect copyrighted content. It is our primary hope that Righthaven will stop people from stealing our stuff. It is our secondary hope, if Righthaven shows continued success, that it will find other clients looking for a solution to the theft of copyrighted material."
On June 9, Los Angeles Times columnist James Rainey reported that "Righthaven was founded by an intellectual property attorney funded in part by a company connected to Stephens Media, which owns the Review-Journal." Rainey chronicled the story of another website sued by the Review-Journal via Righthaven, the City Felines Blog, owned by Allegra and Emerson Wong. According to Rainey, the Wongs were sued after they posted a Review-Journal story about a fire at a wildlife sanctuary. Rainey said he "suggested to the Vegas crew that [the City Felines Blog]—a homey little site, bereft of advertising—appeared to be less than a menacing opponent." Although Righthaven CEO Steve Gibson told Rainey that whether a site's use was commercial or non-commercial was not relevant to an infringement claim, Rainey said Hinueber, Stephens Media general counsel, "seemed to have a sense that his paper effectively had blasted a small tabby with a howitzer. He didn't promise to drop the suit, but offered: 'I just learned about the filing on the cat thing. I'm going to talk to [Righthaven] about that.'"
In Colorado, the website ColoradoPols.com reported July 7 that it received a cease and desist demand on May 21 from an attorney representing Media News Group, Freedom Communications Inc., and Swift Communications Corp., which publish daily newspapers in Colorado including The Denver Post, The Gazette of Colorado Springs, the Boulder Daily Camera, and Greeley Tribune. In the letter, Christopher P. Beall of Levine, Sullivan, Koch and Schulz, L.L.P. accused ColoradoPols.com of "flagrant and persistent theft of our clients' intellectual property" by "wholesale, and unjustified, use of the news content published by our clients, which is produced at significant expense by them and from which your firm is deriving advertising revenue everyday [sic]."
According to Denver alternative weekly Westword, Beall drafted the letter after reporters at the Post noticed that the number of paragraphs excerpted with links and attribution to Post stories on ColoradoPols.com had been increasing. "There had been a gentleman's understanding between the political desk at the Post that Colorado Pols would take no more than two paragraphs" from articles it was referencing, Beall told Westword. "That had been the Post's expectation and understanding. But at some point this year, it appeared to the Post that something had changed, and Colorado Pols had been going well beyond two paragraphs."
But Jason Bane, the ColoradoPols.com principal to whom the letter was addressed, said he had heard of no such agreement, and he disputed Beall's assertion that posts and links on ColoradoPols.com did not generate traffic to the original stories on the newspaper websites.
In its July 7 post, ColoradoPols.com also disputed the claim that the website's use of the newspaper's content violated the Copyright Act and the "hot news" doctrine. The post said "you can't steal something that is already given away for free" and noted that posts always included a link and attribution to the original author and source. Moreover, the website contended, "the stories that we have referenced from the Post are not 'exclusive stories,' and thus they have no claim to the 'hot news doctrine.' If we reference a Denver Post story about the winners at the state convention, we're doing so as a way to quickly catch up a reader at Colorado Pols as to a subject we are about to discuss. But we could just as easily do the same thing by using another news outlet as the source, or by not using another news outlet at all. It's not exactly a big secret when the winners are announced at the Democratic or Republican state conventions, and we get all the same press releases [the newspapers] do. We also get a tremendous amount of breaking news and inside information directly, just like the Post and other news outlets."
Nevertheless, ColoradoPols.com reported that it stopped posting any content from the newspapers shortly after the letter was received. Bane told Westword "we haven't linked to the Post in six weeks and nobody even noticed. Nobody mentioned it online. And that bears out what we're saying. The Denver Post and these other outlets think they're so valuable that websites like Colorado Pols have to link to them, have to use their content. But there are so many outlets out there, and so many people out there discussing the same things. Which isn't to say they don't provide value. But it doesn't mean anything to the future of Colorado Pols to not use their content."
For more on news organization lawsuits over copyright and "fair use," see "AP Challenges Web Sites over Fair Use, Limits Still Unclear" in the Summer 2008 issue of the Silha Bulletin.
FTC Staff Report Raises Discussion on Federal 'Hot News' Law, Amendments to Copyright Act
On May 24, 2010, upon announcing the last of a series of Federal Trade Commission (FTC) hearings on the future of the news media to be held on June 15, the commission released a staff report that included discussion of the copyright and "hot news" issues. The report discussed proposals to amend the Copyright Act to explicitly recognize a claim of "hot news" misappropriation, to amend the Copyright Act to clarify that it does not preempt state law claims of "hot news" misappropriation, and to restrict or clarify the "fair use" defense to copyright infringement to exclude the types of activities engaged in by aggregators and other online sources, such as the routine copying and reposting of original content. The report is available online at http://www.ftc.gov/opp/workshops/news/index.shtml.
According to the report, supporters of a clearer, more easily enforced "hot news" doctrine are divided over whether federal law should provide a uniform nationwide standard or encourage development at the state common law level. Advocates of a uniform federal approach "are concerned that state law evolution cannot provide the clarity or uniformity required for interstate news media," the report said, while proponents of state law development "worry that the uncertainty surrounding the preemption issue discourages some news organizations from filing state law hot news claims" and "argue that specific statutory hot news protections would likely be too rigid to deal efficiently with the rapid evolution of news media and markets."
The FTC also reported that media attorneys and newspaper groups like the Newspaper Association of America had suggested that the "fair use" defense be limited or clarified. According to Section 107 of the Copyright Act, the limited use of another's copyrighted work in news reporting or commentary on news reporting generally constitutes "fair use" and therefore does not infringe copyright. Under the U.S. Supreme Court's decision in Harper & Row Publishers Inc. v. Nation Enterprises, 471 U.S. 539 (1985), to decide whether a use is "fair," courts must consider the purpose of the use of copyrighted material, the nature of the copyrighted material, the "amount and substantiality of the portion used," and the effect the use has on the market.
According to the staff report, "statutory amendment of fair use raises difficult questions about unintended consequences. News organizations themselves rely on fair use in multiple ways to support news reporting and commentary. Fair use also protects copying done for purposes other than news reporting, such as 'criticism, comment, ... teaching ... scholarship, or research,' subject to the balancing of the four factors."
The report prompted some criticism among media commentators. Media critic Jeff Jarvis, in a May 29 post on his blog BuzzMachine, said the report was biased against digital and online media sources. "The FTC defines journalism as what newspapers do and aligns itself with protecting the old power structure of media," Jarvis wrote. In a June 3 op-ed in the New York Post, Jarvis called the discussion of revisions to copyright law "most dangerous of all," saying the FTC was considering "a doctrine of 'proprietary facts,'" adding, "copyright law protects the presentation of news but no one owns facts—and if anyone did, you could be forbidden from sharing them. How does that serve free speech?"
In a June 28 BuzzMachine post titled "There is no hot news. All news is hot news," Jarvis called the doctrine "ridiculously obsolete," and said "hot news limitations should be repellant to journalists, even desperate ones, because every journalist builds on the facts revealed by others. It should further be repugnant to them as it constitutes a form of court-supervised prior restraint. Hot news restrictions would be suicidal to news organizations—even though they foolishly think it would protect them—because it would restrict everyone's ability to spread the news via links and send journalists audience [sic]. Hot news should worry every citizen because the free flow of information is vital to a democracy."
At the June 15 FTC hearing, Gannett Co. Vice President and Senior Associate General Counsel Barbara Wall said Gannett "come[s] down somewhere in the middle from the local news gathering perspective. Our product is unique and we want to be able to protect it. That said, we believe there's value in ... the First Amendment interests that need to be protected in any sort of fair use environment. And we also see in the Internet age value in what the journalists call curating the Web for our audiences."
Wall said it was "premature" to propose a federal "hot news" statute. "I don't think it's time or even necessary at this point for the federal government to step in and say, 'We need to legislate hot news,'" Wall said. "I do think there could be unintended consequences for free speech that those of us who care about journalism should be afraid of."
- Patrick File
Silha Fellow and Bulletin Editor