The Second Circuit issued an extremely important decision yesterday, raising important questions about the durability of the “hot news doctrine.”  This has great importance for journalists, bloggers and everyone else who uses the Internet to distribute or receive news.  The doctrine, which dates to a 1918 Supreme Court decision, has been used to threaten online content providers who are accused of  “poaching” news relating to the activities of “mainstream” providers..  In the context of the Internet,  the doctrine has the effect of raising doubts about the safety of publishing blog posts, news and other material reporting on the work of others. Yesterday’s decision in involved a financial news web site which reports on financial analysts’ stock ratngs.  The Court held that “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 the news and how.”  Significantly, the opinion was written by Judge Robert D. Sack, who was a prominent First Amendment and media lawyer in an earlier professional life, and is regarded as very influential on copyright matters.

Banks Fail To Block News Aggregator’s Reports On Stocks

In a decision that could have broad implications for news aggregation services, the U.S. Court of Appeals for the Second Circuit ruled yesterday that financial news service Theflyonthewall.com can report on securities brokerages’ stock recommendations as soon as it learns of them, as long as it does not violate federal copyright law.

The opinion in Barclays Capital v. Theflyonthewall.com, 10-1372, said that the brokerages’ claims against Fly under New York’s “hot news” misappropriation law were preempted by the Copyright Act.

The unanimous panel consisted of Judge Robert D. Sack, who wrote the opinion, and Judges Rosemary S. Pooler and Reena Raggi. The ruling overturned a decision by Southern District Judge Denise L. Cote, who had enjoined Flyonthewall.com from publishing information about the brokerages’ reports for a limited time after it was released by the brokerages to their customers.

Barclays Capital, Merrill Lynch and Morgan Stanley sued Fly in 2006, alleging that Fly violated the hot news law by learning of the stock recommendations, which the companies send to their paying customers, and publishing them on Fly’s own newswire for its customers. The brokerages allege this undermined their own business and gave rise to a hot news tort claim under New York’s law on misappropriation. The plaintiffs also alleged that Fly infringed their copyrights by publishing some of their reports verbatim.
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