The Second Circuit Court of Appeals ruled that the “hot news doctrine” does not bar a website from republishing investment banks’ financial analysis simultaneous to its release to bank clients.
A number of national banks claimed the site theflyonthewall.com shared their analysts’ reports with subscribers, sometimes before their own clients had received them. A lower court applied the hot news doctrine and took the unusual (and, arguably, unconstitutional) step of restraining theflyonthewall from publishing news by ordering it to wait “until one half-hour after the opening of the New York Stock Exchange or 10:00 a.m., whichever is later” before publishing the analyst reports.
The doctrine is a rarely used supplement to copyright law, which does not protect facts or ideas (as opposed to the ways in which they are conveyed). It was intended to allow those who invest resources in investigating or compiling information to profit from their efforts without having to compete against freeloaders who are able to immediately republish the same information without any overhead costs. While “hot news” claims often arise simultaneously with copyright claims, courts have held that the doctrine is not rooted in copyright but in the law of commercial misappropriation.
If applied to the Internet, the doctrine could be a thorn in the sides of the countless blogs, aggregators, and other sites that draw traffic by republishing excerpts and synopsis of outside content. As Righthaven is finding out, many such sites are outside the reach of traditional copyright law because, for instance, their work is considered a “fair use” of copyrighted content. To that end, several traditional news organizations filed briefs urging the court to keep the doctrine alive, while new media organizations urged the court to hold that the doctrine is preempted by copyright law.
While the Second Circuit acknowledged that theflyonthewall’s business model “tends to remove the informational and attendant trading advantage of the Firms’ clients,” this did not suffice to bring the site within the reach of the hot news doctrine. The court held that the site’s profits came from breaking news, not selling stocks or receiving commissions. The site, therefore, was not “misappropriating” the banks’ profits by competing with them. Further, the site was not passing the banks’ work as its own – indeed, the newsworthiness of the analysis came from its being the work of the banks.
Although the court did not abolish the hot news doctrine like some had hoped, the opinion should, at least, reassure news aggregators that they are unlikely to be held liable as long as they attribute their aggregated stories to their original sources and operate within the confines of copyright law.
Previously on Post or Perish: Newspapers Accuse Blog of Stealing “Hot News”
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