The Hot News Doctrine

For most of the past century, courts have recognized a “hot news” doctrine providing that a party’s misappropriation of information may give rise to a claim for unfair competition based on the principle that a content provider has a protectible interest in valuable, time-sensitive information it provides. The doctrine dates back to the Supreme Court’s decision in International News Service v. Associated Press, 248 U.S. 215 (1918), which upheld a defendant news service’s liability for its unauthorized copying of information from Associated Press news reports. While in many cases such activity could also raise traditional copyright infringement claims, the hot news doctrine extended liability based on re-purposing timely factual information, regardless of whether the copied information would itself be protected by copyright.

Courts discussing the hot news doctrine generally have held that a misappropriation claim exists where (1) the plaintiff generates or gathers information at a cost, (2) the information is timesensitive, (3) the defendant’s use of the information constitutes “free riding” on the efforts of the plaintiff, (4) the defendant is in direct competition with a product or service offered by the plaintiff, and (5) the ability of other parties to free-ride on the plaintiff’s efforts would reduce the incentive to produce the information product or service such that its existence would be “substantially threatened.” National Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 845 (2d Cir. 1997) (“NBA”). The doctrine arises under state tort law, and in the NBA case, the Second Circuit held that a state claim narrowed to the above elements was not preempted by the federal Copyright Act. Id. at 852.

Over the years, the hot news doctrine faced criticism from Judges and scholars who voiced concerns about affording protection to uncopyrightable facts. Hot news misappropriation claims were also sometimes eclipsed by copyright law and business practices conditioning access to information on contractual restrictions. Nonetheless, recent developments in litigation between content providers and online content aggregators suggest that the hot news doctrine may be poised for a renaissance, particularly given the prevalence of news and other information “aggregator” services that free-ride on the efforts of others.

Recent Cases

In Barclays Capital Inc. v. Theflyonthewall. com, No. 06 Civ. 4908(DLC), 2010 WL 1005160 (S.D.N.Y. March 18, 2010), plaintiff Wall Street firms distributed stock analysis documents to their clients for a fee. The analyses included recommendations on what positions to take on certain stocks. The defendant, a subscription service called Theflyonthewall.com, aggregates news from the financial markets, including from plaintiffs’ recommendations, and republishes it as quickly as possible. Based on the defendant’s re-publishing of their recommendations, the plaintiffs asserted a claim under the hot news doctrine, contending that the recommendations were issued by plaintiffs to their close clients, and constituted valuable information about the likely movement of the market.

The district court agreed, holding that the defendant’s publication was a misappropriation of plaintiffs’ valuable time-sensitive information under the hot news doctrine. The court enjoined defendant’s reporting of plaintiffs’ recommendations in a manner that would free-ride on (and therefore undermine) the time-sensitive value of the information. Specifically, the court prohibited the defendant from disseminating plaintiffs’ recommendations until 10 a.m. or half an hour after the market opens (whichever is later) if the recommendation issued when the New York financial market was closed, and for two hours for recommendations issued when the market was open. The court reasoned that the plaintiff financial institutions had incurred substantial expense in gathering the financial information contained in their reports and that the information was unquestionably time-sensitive. The court held that “free-riding exists where a defendant invests little in order to profit from information generated or collected by the plaintiff at great cost,” and found that Theflyonthewall’s business model fit this description, as it performed no original research or analysis of its own.

The court also found that the plaintiffs and defendant were in direct competition, and that the defendant’s activities reduced the incentive for the plaintiffs to perform their own research and analysis. On this last point, the court emphasized that the plaintiffs did not have to show “serious damage at the hands of the defendant, but rather, that the conduct of Fly and other similar parties, if permitted to continue, likely would substantially threaten plaintiffs’ ability to continue to participate in the market.” In other words, the court focused on the aggregate effect of allowing defendants’ activities to go unchecked rather than simply on the specific harm to the plaintiffs.

More recently, in a separate case in the Southern District of New York, Dow Jones & Co. filed suit against the content aggregation website Briefing. com, raising similar hot news appropriation claims. See Dow Jones & Co., Inc. v. Briefing.com, Inc., Complaint filed Apr. 20, 2010, No. 1:10-cv-03321- VM. This case involves not only proprietary financial analysis but also breaking news reports. Dow Jones offers, among other things, proprietary news services that provide its customers with breaking news stories. Briefing.com is an online service that provides “independent, live analysis of the U.S. and international equity markets.” In its complaint, Dow Jones alleges that Briefing.com copied and published substantial portions of Dow Jones news stories outright, constituting copyright infringement and violation of the copyright management information provisions of the Digital Millennium Copyright Act. Dow Jones also asserts hot news appropriation, claiming that “Briefing.com systematically redistributes many stand-alone [Dow Jones] headlines within minutes of their publication by Dow Jones” and thereby is liable for misappropriation of the headlines and articles. Dow Jones emphasizes the market for “electronic delivery of business and financial news” on which subscribers rely to make timely market decisions in advance of their competitors, and it alleges that Briefing.com unfairly competes with Dow Jones by copying and redistributing these breaking news headlines.

Both of these recent cases remain ongoing. In Barclays, Theflyonthewall.com has filed an appeal with the Second Circuit and has sought relief in the district court from the injunction pending appeal. The Dow Jones case was only recently filed, and it remains to be seen how Briefing.com will respond to Dow Jones’ allegations.

Implications for Content Owners

The outcomes of these cases could have serious implications for content owners and news aggregators in situations involving timesensitive content. In the Internet age, online content aggregators have the ability to quickly repackage and disseminate information from content owners in a way that competes directly with content owners. Indeed, a wide variety of news aggregators are among the most popular online destinations. With the growth of such sites, content owners have increasingly raised concerns about aggregators’ reaping benefits from their labors without what content owners view as reasonable compensation.

Recent cases such as those discussed above may establish important precedents that affect the use of a wide array of content and that may apply to any number of news aggregators or other websites that obtain the content they supply on their sites from third party content owners that invest in the creation or gathering of the appropriated information. While it remains to be seen how the Barclays and Dow Jones cases ultimately will be resolved, the district court’s decision in Barclays suggests that content owners may have viable hot news claims against aggregators and other web sites using time-sensitive information in appropriate circumstances. For example, many large news aggregators display headlines and short snippets of article text that, the aggregators may argue, is not protected by copyright or is subject to fair use — but these uses may be actionable hot news misappropriation. Moreover, because hot news claims can be brought for appropriation even of content that is copyrightable (and, at least in the Second Circuit, are not preempted), in appropriate cases, copyright owners might consider whether a hot news misappropriation theory might provide an additional content protection tool, especially where there may be practical difficulties in copyright enforcement or potential defenses to a copyright claim (such as fair use or DMCA).