The advent of the internet has accelerated the evolution of business models by creating the possibility for countless novel companies with low start-up costs. One need only look at the fate of newspapers across the country and the pains of the music industry to observe the waning of many formerly successful ways of going about business. Meanwhile, courts have struggled to balance the interests of those driving progress and those giants, arguably dying but holding significant amounts of capital and threatening each to create their own dent in the economy.
Recently, the Second Circuit decided a case determining a plaintiff’s rights extended beyond copyright protection, granted by the 1976 Copyright Act, and implicating the First Amendment of the U.S. Constitution. This court has barely kept alive the “hot news” misappropriation claim. This claim amounts roughly to the use of the product of the plaintiff’s efforts before the plaintiff is able to capitalize on it. Analysis of this claim has developed to strictly require certain factors in order for federal copyright law not to preempt this state law claim.
It was just the late 90s when the Second Circuit identified the existence of this claim since the 1976 Copyright Act as well as Erie Railroad Co. v. Tompkins, which had abolished federal common law. Regardless, the court in NBA v. Motorola attempted to strike a fair balance in a copyright case by finding that, even though a copyright had not been infringed upon, a plaintiff may still have claim based on the misappropriation of “hot news.” Originating from the classic property case International News Service v. Associate Press, this claim barely survives even though INS v. AP is actually no longer good law because of the U.S. Supreme Court decision in Erie.
Now, 15 years later, the confusion only continues. The Court in NBA had created a couple possible tests, which a number of district courts have attempted to apply; a case in the last year from the same court, however, appears to dismiss the tests articulated in NBA as dicta. Instead, the court in this case, Barclays v. Theflyonthewall.com, focuses only on the single factor that had the basis for the NBA holding. Like NBA, the court in Barclays found that the “hot news” claim still existed but had been preempted because this same factor was missing. According to a strict legal interpretation of the word, the defendant was not “free-riding” on plaintiff’s work.
Although courts continually find for the defendant in these cases, the problem with preserving this claim is that these courts are also preserving a menace to innovators without defining a coherent method for identifying a “hot news” misappropriation of property. The claim simply creates uncertainty for defendants not in violation of copyright laws and allows potential plaintiffs to threaten with litigation a company that is simply reporting facts gathered. The claim helps to keep large companies from having to change and improve. What is more, courts have avoided dealing the potential First Amendment issue. Restricting any parties from reporting news may not only prevent their business from operating but also be an impediment to free speech.