A hot news misappropriation claim under New York law alleging that a licensee of financial data improperly shared the data with another business entity is not preempted by the Copyright Act, because the licensor had sufficiently alleged the "extra elements" of a hot news claim, a district court ruled. The court ruled that the licensor had sufficiently alleged in its complaint that the data was time-sensitive, that it was misappropriated while it was still time-sensitive, and that the licensor and licensee were in direct competition. The court rejected the licensee's argument that the "free-riding" element of a hot news claim was precluded by the fact that the data was licensed in return for a fee, finding that the licensee's actual use of the data was "over and above" the provisions of the license agreement and constituted a breach. The court also declined to rule that the licensor's breach of contract claim was preempted by the Copyright Act, finding that the necessary "extra element" to survive preemption was established by the licensor's promise inherent in the license agreement itself.

Banxcorp v. Costco Wholesale Corp., 2010 U.S. Dist. LEXIS 70380 (S.D.N.Y. July 13, 2010) Download PDF

Editor’s Note: This opinion is also notable for its extensive analysis of the question of copyrightability of data compilations. Compare the ruling in Agora Financial, LLC v. Samler (D. Md. June 17, 2010), finding that a hot news misappropriation claim involving the republishing of stock analysts' recommendations was preempted because the plaintiff had failed to show that the recommendations were noncopyrightable facts. The court held that a recommendation to invest in a company is not a fact, but a copyrightable original work that involves judgment and creativity.