Barclays Capital Inc. v. Theflyonthewall.com, Inc. , 650 F.3d 876 (2d Cir. 2011), is a case that was decided in the US Court of Appeals. for the Second Circuit where the Second Circuit, reversing the decision of the US District Court below it, found that claims from three major financial investment firms (Barclays Investment Bank, Morgan Stanley and Merrill Lynch) to the internet subscription stock news service (theflyonthewall.com) for " Hot-news "Abuse under the common law doctrine of the state can not stand, as they are preempted by some sections of the Federal Copyright Act (17 USC § 106, 17 USC Ã,§ 102, and 17 USC Ã,§ 103).
This case is important because Second Circuit redefines the elements of abuse of "Hot-news" Abuse, breaks with the precedent of Second Circuit before by stating that such precedents are not binding, but only obiter dictated . According to some legal commentators, the decision will have the effect of making it more difficult for future plaintiffs to bring the claim under the doctrine of hot news distraction, at least on Second Circuit.
Video Barclays Capital Inc. v. Theflyonthewall.com, Inc.
The Case Story
The defendant Theflyonthewall.com, Inc., is a company in the business of obtaining, in various ways, daily stock recommendations prepared by plaintiffs, Lehman Brothers (later purchased by Barclays Investment Bank), Morgan Stanley, and Merrill Lynch, in their research report which is highly sought after. The defendant sells services in which the customer may receive these recommendations before they are released by the plaintiff to the general public. The plaintiffs claim that the value of the report for their own clients is based on the timely exclusivity, accuracy, and release of the report (they are often only valuable for a few hours before the stock market opens) and whose value to the company in turn is based on their potential to attract and retain clients, to attract clients to execute stock trading through them, and to differentiate themselves from other financial services firms and to generate revenue through commissions earned from facilitating trade on behalf of such clients.
On June 26, 2006, the plaintiffs filed a lawsuit requesting an order against Theflyonthewall.com ordering them to halt the sharing of exclusive research reports and recommendations therein. The plaintiffs attempted to base their request for compensation for two sets of legal claims: 1) claims that the defendant had infringed their copyright in the research report by copying and spreading verbally the sections of the report and; 2) the claim that the defendant has committed a general law violation of the misuse of "hot news" by publishing the recommendations in the report.
In procedural trials to the courts, defendants essentially recognize their obligations under a copyright claim. Thus, at a trial before the District Court for the Southern District of New York, the remaining issues to be tried are appropriate assistance for copyright claims, as well as obligations and help for the abuse of hot news claims. On 18 March 2010, the District Court decided to support the plaintiffs, issued orders ordering the defendants to stop their publication of the plaintiff's report and recommendations (see summary of court decisions below.)
Shortly afterwards, the defendants appealed to the US Court of Appeals for the Second Circuit. The defendants abandoned their defense of copyright claims and focused solely on findings of abuse of hot news. They argue that the District Court has erred in finding that a claim of abuse of hot news has been established, that claims (made under state law) have been removed and are therefore prohibited by federal copyright law, and that the resulting order is not provided with should. , is an overbroad, and violates the right to freedom of speech of the accused under the First Amendment.
On June 20, 2011, Second Circuit released its decision - canceled the District Court decision below, and ordered him to refuse the claim. A summary of Second Circuit decisions can also be found below.
Maps Barclays Capital Inc. v. Theflyonthewall.com, Inc.
District Court Opinions
Abuse of Heat News
Misuse of hot news as a cause of action comes from International News Service v. Associated Press where the Supreme Court declared that the hot news, defined as time sensitive information, could be protected as "quasi-property". The doctrine of deviation was further developed with the aim of "protecting costly efforts to collect commercially valuable and time sensitive information that should not be protected by law." Significantly, the 'hot' news doctrine relates to "copying and publishing information gathered by others before he is able to take advantage of his competitive advantage." Given that the Copyright Act of 1976 specifically deals with copyright misuse for original works, different jury ownership questions the misuse of hot news as a cause of action. This discussion includes copyright protection because it belongs only to the realm of originality and not the business and ownership that the creative organization of information is copyright but not the information itself. Seventy-nine years later, the National Basketball Association v. Motorola, Inc. ("NBA"), provides answers to the preceding questions and also provides a five-element test to determine the abuse of hot news.
Test for Misleading News-Hot
In Barclays Capital Inc. v. Theflyonthewall.com, Inc., the court uses a test of five elements set out in the NBA, cited in the District Court's opinion as follows:
1) A plaintiff produces or collects information for a fee; 2) This information is time sensitive;
3) The use of information by the defendant constitutes free riding on the plaintiff's attempts; 4) The defendant is in direct competition with the product or service offered by the plaintiff; 5) The ability of others to obtain a free ride over the plaintiff's or other party's efforts will reduce the incentive to produce products or services whose presence or quality will be greatly threatened.
District Court Decisions on Claims of Misuse of Hot-News Company
Element 1
The plaintiffs are satisfied with the first element of heat abuse abuse testing because plaintiffs spend "hundreds of millions of dollars" each year on production of equity research reports, including hiring highly skilled analysts. The defendant did not deny that the plaintiff was involved in the collection of expensive information.
Element 2
The report and the plaintiff's recommendations are considered "time sensitive" based on the fact that the plaintiff's clients are using information for their actions in anticipation of stock price movements. In addition, time sensitivity is very important because plaintiffs spend resources to be the first to communicate these findings to clients and generate commission income. The defendant did not deny that the plaintiff's report and recommendation were time sensitive.
Element 3
For the third element of free riders, the court found that "the defendant's core business was free from ongoing, costly endeavors by the Company and other investment institutions to generate equity research that was highly valued by investors." The court defines free riders as where there is very little investment by the defendant to benefit from "information generated or collected by the plaintiff at great cost." Whereas the defendant did not in itself produce original research for his "Recommendation", and his ability to profit from reproduction Recommendations depended on the plaintiff's reputation and the expenditure of plaintiff resources to produce expert analysis, the court found that the defendant was free from the plaintiff's work.
Element 4
The court found that the parties were in direct competition as both sought to provide customers with time-sensitive information, and the dissemination of defendant information by the accused before the plaintiff could comply with the demand for stock movement reports in pre-market hours and trade recommendations. Thus, the plaintiff's clients, who have been identified as more likely to trade through the sources from which they ensure news, are less likely to engage in their trade through the plaintiff. In addition, the court notes that defendants and plaintiffs both use the same information distribution channels including access controlled media, licensing third-party distributors to disseminate their information to eligible recipients.
Element 5
The court found that this element requires a demonstration that the defendant's behavior, and others such as the defendant, if allowed to continue, would "most likely threaten the plaintiff's ability to continue participating in the market." The Court noted that plaintiffs rely on the first to report their reports and recommendations to their clients. Thus, if another organization precedes the plaintiff, the knowledge that the plaintiff has spent the money to collect and analyze will be the basis. Thus, the court believes that if the accused, and others like that, are allowed to continue copying and disseminating the plaintiff's research report, they will lose their commission income, and can not offset the cost of producing the research, and stop producing their research.
District Court Decision on Copyright and Compensation Claims
CompanyThe court found that the defendant infringed the copyright of two plaintiffs - Morgan Stanley and Barclays Capital. To meet this requirement, Morgan Stanley provides eight research reports and Barclays Capital provides nine research reports (a total of seventeen research reports), related registration certificates, and seventeen corresponding examples of "direct quotes and verbatim defendants from key citations." During the pre-trial process, Fly defended the copying of his report as fair use under 17 U.S.C. Ã, §§ 107, in the hearing, the defendant did not deny that it infringed copyright in these seventeen reports. Thus, the court decided to support these two plaintiffs and ordered the defendants to pay them nominal compensation, pre-judgment interest on the award of legal damages, and attorney's fees. The court further ordered a permanent order so that the defendant was not allowed to further violate "any portion of the copyright element of any research report" produced by the two plaintiffs.
Opinion of the Second Circuit Court of Appeals
The defendant appealed the District Court ruling on the misuse of the news to the Court of Appeals for the Second Circuit. On appeal, the Second Circuit Court reversed the decision below and ruled in favor of the defendant, finding that the plaintiff's alleged plaintiff's abuse claims were "preceded by federal copyright law."
Preemption Federal
The Court reminded that to determine whether country-law claims are preceded by the federal Copyright Act, 17 U.S.C. Ã,§ 301 sets a two-part test:
- General Scope requirements: if a state-law claim allegedly "strives to defend" legal or equivalent rights' to one of the exclusive rights bundles protected by copyright law under 17 USC à , § 106 ";
and
- Important Material Requirements: "if the work in question is a type of work protected by the Copyright Act under US 17. § 102 and 17 US § 103."
The Second Circuit finds that the plaintiff's recommendations meet the "subject" requirements as well as the "general scope" requirements of the Copyright Act. They argue that the exclusion of hot news abuse from pre-authentication engraved in the case of NBA is explicitly meant to be narrow in scope. In addition, they characterize the 5-part test defined in the NBA and are applied by the District Court as an obit dictum.
Judge Raggi, in a separate concrete opinion, disagrees with the majority that the NBA test dictum, and will declare that even though pre-enforcement occurs; 5-part test is valid, but has been abused in Court below. Organization
About Second Circuit Decision
The case was widely followed and several prominent organizations filed the amicus curiae as interference.
The Electronic Frontier Foundation, Citizens Media Law Project, and Public Citizen, Inc. filed a brief amicus curiae order urging the Second Circuit Court to consider the First Amendment as it relates to the potential limitation of district court prosecutions on the ability of Americans to collect and comment on today's news.
Google and Twitter submitted a short amicus call for the refusal of a hot news abuse lawsuit. The Second Circuit declares that this is beyond the powers of the court and is irrelevant to the case.
American Newspapers Association, New York Times, Philadelphia Media Holdings, Media Stephens, Time and Washington Post filed a short message amicus .
Securities Industry and Financial Markets Association, Dow Jones & amp; The Company, and The Investorside Research Association each filed the amicus brief.
Footnotes Humoris Second Circuit
Irony
In telling the story of the case, the Second Circuit Court wrote that they "found little trouble in the findings of the facts of the district court, which we must respond to, so we borrowed them freely from them." These sentences are followed by footnotes that read, "Ironically in the context of copyright infringement cases and 'hot news' offenses are not lost to us." (Footnote 3).
Biblical References
The Second Circuit Court commented on the character of INS v. AP court against INS behavior as having a "biblical" tone, in which the court of INS v. AP confirmed that the INS has "Taken where it is not sown." This claim is then recorded by the Second Circuit to include the analysis of this phrase as it appears in the Bible: "In the Bible, the substitution of the phrase seems to be more of a threat than a promise.See, for example, Galatians 6: 7:" God is not mocked, for whatever he sows, which he also shall reap. "But see Leviticus 23:22, which sets the circumstances in which people are forbidden to reap where they have sown."
References
External links
- Text Barclays Capital Inc. v. Theflyonthewall.com, Inc. , 650 F.3d 876 (2d Cir. 2011) is available from: CourtListener Ã, Leagle Google Scholar
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