"Hot News" doctrine gets a body-blow

Electronic Frontier Foundation copyright attorney Corynne McSherry has news about Barclays v FlyOnTheWall.com, a case that asked the Second Circuit Court of Appeals to rule on whether the "Hot News" doctrine could be applied in the digital era. "Hot News" is an obscure corner of law that lets newsagencies treat publicly available facts as property and prevent others from reporting on them for a set time.

In Fly, the court heard argument that FlyOnTheWall.com was endangering the business-models of several financial recommendation services that provided stock-tips by reporting on those tips as soon as they were published. The court's decision is instructive:

The adoption of a new technology that injures or destroys present business models is commonplace. Whether fair or not, that cannot, without more, be prevented by application of the misappropriation tort... The Firms are making news; Fly, despite the Firms' understandable desire to protect their business model, is breaking it.
The court found in Fly's favor, and ruled that the "Hot News" doctrine is even narrower than previously thought, and can only be applied in true "free riding" cases where one news-entity is copying a competitor verbatim -- Merrill Lynch, Morgan Stanley, and Lehman Brothers and the other plaintiffs aren't news agencies, they're news. Their stock tips are newsworthy. When Fly reported on them and undermined their profitability, it was tough noogies (an incredibly underused legal concept, IME).

EFF was amicus on the case, and filed comments with Citizen Media Law Project and Public Citizen asking the court to find as it did. Other amici who took the defendant's side included Google and Twitter.

The "Hot News" Doctrine After Fly On the Wall: Surviving, But On Life Support

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  1. The “Tough Noogies” doctrine needs to be referenced more often in legal decisions, I think. Maybe if someone nominates Doctorow for SCOTUS?

  2. I honestly don’t know what draconian state the USA would be in right now if it wasn’t for the efforts of the EFF.

    Today’s a good day to give them another donation.

  3. I can’t believe I’m taking the bankster’s side, but I am in this case. Why is that? Because FlyOnTheWall.com is a subscription-only service. They are not simply reporting investment advice, they are directly profiting from that advice. Some quotes from their web site:

    “Theflyonthewall.com can turn you into… an informed investor!”
    “TheFly has been serving professional and individual investors worldwide for more than 12 years.”
    “flyonthewall.com has become the source of information for buy and sell side equity professionals.”

    Fly is not a news service, it is an investment service. It would be like Merrill Lynch taking the work of Morgan Stanley and passing that off as its own. If they were to offer their news service for free and further develop additional paid offerings, I could support them. But they don’t, so I don’t. And, the fact that Google and Twitter support them is not surprising. Google made its entire fortune off of the backs of others.

    1. Investment news that helps investors make informed decisions is not an investment service.

      That’s saying that all trade rags are not news services. It’s a ridiculous premise that makes no sense at all, and is not even arguable.

  4. The bemusing thing to me is that anyone considers that this lot’s “stock tips are newsworthy”.

  5. Is the “hot news” doctrine also what’s used to prevent the free distribution of up-to-the-minute sports scores?

    Because although I’m not a sports fan, prohibitions on sharing that information have always offended me. I’d cheer to see that arrangement weakened as well.

    1. No, sports scores are kept under wraps mostly because the sporting associations involved negotiate with the news agencies. “We won’t let you into the game, and you won’t be able to report on it at all, unless you agree to a delay in publishing/transmitting scores so that people who may see those scores actually have some incentive to actually watch the game.”

      The hot news doctrine states that facts may be treated somewhat like trade secrets, and not so much copyright. On the one hand, facts are facts, and no on owns a fact. Which is what the judge said in this case. This was an example of a lawyer trying to be clever by stretching a law into a region where it doesn’t belong, and they failed.

      On the other hand, society benefits from news reporting, and news-as-a-business demands certain laws to guarantee fair play. The hot news doctrine essentially says, “it’s not fair for a news agency A to read about a fact in news agency B’s paper, then publish those facts without consideration (credit and maybe payment) to news agency B.” All agencies either have to do their own dirty work (hire reporters), or pay the people who did the work (subscribe to news agencies, pay for distribution rights to another’s story). They cannot just rely on their competitors to manufacture a listing of facts for them to poach before the next morning edition.

  6. Lagged2Death: I’m reasonably certain it isn’t. The Hot News doctrine was essentially meant to keep newspapers from firing all their reporters, getting news reports from reporters at another newspaper (through potentially dubious means), and then quickly writing articles and publishing first. It must be noted, however, that the legitimate newspaper could make such a strategy very difficult by increasing security.

    Personally, I agree that it doesn’t apply in this case: the banks are releasing recommendations, and FlyOnTheWall was reporting them; that’s not a free ride, that’s just reporting in the same way many news agencies do. If, on the other hand, FlyOnTheWall were obtaining reports before they were published, and publishing the recommendations before the banks did, I would think the situation would be different.

    In general, I have to disagree with the EFF: the Hot News doctrine, to me, would seem primarily to only prevent people from talking about news of the day if they’re making a business model of getting that news from reporters before they have a chance to report. It would be like a scientist who used their funding in order to run their lab preparing a paper on research findings, and having someone who used their funding to hire people to sit around in the other lab’s printer room grab a copy of a draft paper, write up the findings as their own, and then publish it as their own research. It isn’t a copyright violation, but it’s dubious as to whether it should be allowed.

    1. “It would be like a scientist who used their funding in order to run their lab preparing a paper on research findings, and having someone who used their funding to hire people to sit around in the other lab’s printer room grab a copy of a draft paper, write up the findings as their own, and then publish it as their own research. It isn’t a copyright violation, but it’s dubious as to whether it should be allowed.”

      That *is* copyright infringement. It’s also plagiarism.

  7. Subscription-only … you mean like a newspaper? They’re a for-profit media company just like the NY Times, Wall Street Journal, CNN, ABC, CBS, Fox News, etc.

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