In the past couple years, media companies doing battle with news aggregators–or competitors–began to turn to the little-known legal doctrine of “hot news.” It stems from a 1918 Supreme Court case that found news organizations might have a “quasi-property” right in news they worked hard to report, even if the news was re-worded to avoid copyright implications. But today ‘hot news’ looks much less attractive as a way to control the news flow; an appeals court has ruled in favor of theflyonthewall.com’s right to broadcast the recommendations of financial analysts.
Even though it has become a lot more popular for media companies to talk about how they were going to use “hot news,” no court in the internet age had actually enforced a hot news claim, until the case of theflyonthewall.com. Now that that’s been overturned on appeal, media companies will be harder pressed to succeed on their hot news claims.
However, it’s worth noting that the lawyer who wrote amicus briefs for The Associated Press and 13 other news organizations in this case, finds the decision to be one worth celebrating–even though the “hot news” claims didn’t succeed. The reason for celebration seems to be simply that the court didn’t adopt the suggestion of Google (NSDQ: GOOG) and Twitter to throw out the tort of “hot news” altogether. Apparently their reading is that as “real” news organizations–not like the big banks in this case–they could still win a hot news case.
In any case, the case at hand: Theflyonthewall.com had been publishing the stock recommendations of analysts from various big banks, including Merrill Lynch, Bank of America, and Morgan Stanley. A group of banks sued the site back in 2006, over both copyright and ‘hot news’ claims. The banks claimed that unless flyonthewall was stopped, their business model–of charging clients for exclusive access to reports and recommendations–would fall apart.
The banks won that lawsuit, but theflyonthewall appealed the ‘hot news’ part of its loss; and today, it’s the ultimate victor in the case.
A three-judge panel from the New York-based U.S. Court of Appeals for the 2nd Circuit ruled [PDF] that theflyonthewall.com wasn’t “free riding” on the work of the banks, because it wasn’t really in the same business as the banks. In any case, it had a right to report the facts of the recommendations. In a sense, it was the banks who were creating the news–by issuing the recommendations–and flyonthewall.com was reporting the news.
“In this case, a Firm’s ability to make news — by issuing a Recommendation that is likely to affect the market price of a security — does not give rise to a right for it to control who breaks that news and how,” states the ruling.
Theflyonthewall told Bloomberg that today’s opinion represented “a complete victory in its long-running battle with the investment firms.” None of the plaintiff banks offered immediate comment on the ruling.
The lower court loss included an injunction against theflyonthewall.com forcing it to hold publication until 10 a.m. or two hours after the banks publish their recommendations. Now that injunction is history.