Thursday, 16 July 2009

Hot news misappropriation claim survives motion to dismiss

Authors: Ben Lehman and Marie-Louise Mortimer (Duncan Bucknell Company)

Associated Press v All Headline News Corp., 2009 WL 382690 (SDNY, 17 February 2009)

The District Court of the Southern District of New York considered the application of ‘hot news’ misappropriation in the context of an internet-based news headlines aggregation service.

Legal Context

The doctrine of hot news misappropriation was established as a type of unfair competition in 1918 by the US Supreme Court in International News Service v Associated Press. The doctrine serves to protect the ‘quasi-property’ rights of news-gathering organizations in breaking news—time-sensitive content that quickly loses value as it comes into the public realm. Since its origin, misappropriation has survived various changes to the ways in which Federal and State laws interact, albeit in a narrower niche (described in National Basketball Association v Motorola Inc. 105 F.3d 841 (2d Cir. 1997)):

* a plaintiff generates or gathers information at a cost;
* the information is time-sensitive;
* a defendant's use of the information constitutes free-riding on the plaintiff's efforts;
* the defendant is in direct competition with a product or service offered by the plaintiffs; and
* the ability of other parties to free-ride on the efforts of the plaintiff or others would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened.

Facts

Being a pre-trial motion, the facts as pleaded by AP were assumed as being true and inferences were drawn in favour of the plaintiff. Having said that, many of the facts relevant to the ‘hot news’ decision are relatively uncontroversial as relevant to application of the doctrine.

AP is a long-established and well-known news organization. AP submitted that it goes to great effort and expense to report original news from around the globe. AHN in contrast is focused on providing news content feeds for paid subscription. AHN's business was based (in part) on re-writing AP's headlines for publication throughout its distribution network. One persuasive fact was that AHN did not undertake any significant research themselves in creating the news stories.

Analysis

The District Court confirmed that a cause of action for ‘hot news’ misappropriation remains viable under New York law, and is not pre-empted by federal law, where the NBA test is met.

One key requirement to establish ‘hot news’ misappropriation is that there be an element of ‘free-riding’. In most ‘hot news’ cases (at least those which would cause so much concern as to get to court), the other requirements are almost taken as read.

The other key requirement is that the action be available in the relevant jurisdiction. On the facts the District court found that New York law governed AP's claim (being where the company is headquartered), but a different finding on this point could have meant that ‘hot news’ misappropriation was not available as a cause of action.

Remember that in the context of this motion to dismiss, AP needed only to establish that chances of success for its claim for relief (based on an assumption that the evidence pleaded in its complaint were true) are something above merely speculative and moving towards plausible. That being the case, the comments from the court are far from the last word on ‘hot news’ misappropriation.

US Courts have considered ‘hot news’ misappropriation in two other recent cases also: Silver v Lavandeira, 2009 WL 513031 (SDNY, 26 February 2009) where the court decided on the facts that the relevant news was disseminated so widely that the plaintiff did not satisfy the first limb; and The Scranton Times, LP v Wilkes-Barre Publishing Co., 3:08-cv-02135-ARC (M.D. Pa., 6 March 2009) where the court held that republication of obituaries did not pose a threat to the plaintiff's publication.

Practical significance

It is important to consider other causes of action when reviewing circumstances which present as a possible copyright infringement.

The court in this case and others has not provided significant guidance as to what constitutes a ‘free-ride’. This is of particular concern at the interface of ‘traditional’ and ‘new network economy’ business models, where one focuses on the value of information itself, whereas the latter assumes that information is freely available and the value comes from the service to provide and organize it.

Consider, for example, an internet-based news aggregator distributing news headlines in a searchable format from a number of other online services: is that a free-ride? Some might argue that the aggregator only exists because of the content. Others might argue that the innovation of the aggregating service is something to be encouraged and, given the development effort involved, should not be considered a free-ride.

Even if it is a free-ride, there are many situations where such service results in a benefit (rather than a detriment) to the original source. The aggregation and distribution of news headlines could arguably result in a benefit to an otherwise would be plaintiff, if website traffic was sent back to the news source. Requirement five for misappropriation would not be satisfied and would not be actionable as unfair competition (but may well be actionable under other causes).

If this case makes it to trial, it will be interesting to see how the court approaches the definition of free-riding, especially as might be applied to internet aggregation services.