The Second Circuit has revisited the issue of New York “hot news” misappropriation claims, and the extent to which such claims are preempted by the Copyright Act. The plaintiffs in Barclays Capital case were major financial institutions that not only provide securities brokerage services, but also provide research and recommendations concerning the purchase and sale of securities. The plaintiffs distribute these recommendations largely to encourage transactions, and make their money on the transactions (not the recommendations themselves). The defendant, flyonthewall.com, provides an electronically distributed news service and, among other things, uses various means to obtain the plaintiffs’ securities recommendations and then reports them. The plaintiffs sued flyonthewall.com for “hot news” misappropriation.
In holding that the claim at bar was preempted by the Copyright Act (and reversing the district court on that point), a majority of the panel held that the multi-factor preemption test for hot news claims previously set out by the Second Circuit in NBA v. Motorola (or the various versions of the test in that opinion) was essentially dictum. The majority followed the NBA panel, however, in finding that the plaintiffs’ misappropriation claim could not avoid preemption because they could not show that flyonthewall.com was “free riding” in the specific way required by the NBA decision: it was not “taking material that has been acquired by complainant . . . and appropriating it and selling it as the defendant’s own.” The majority found that, because the defendant was citing the plaintiffs as the source of their recommendations, the use was akin to reporting on those recommendations as opposed to simply taking the recommendations and re-distributing them as the defendant’s own recommendations.
Judge Raggi issues a concurrence, disagreeing with the majority’s view regarding the precedential force of the NBA mulit-factor preemption standard, but agreeing on the result that the claim was preempted. Judge Raggi’s concurrence focuses on the view that the defendant’s news service does not directly compete with the plaintiffs’ services. Here is the majority decision and concurrence: