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Tuesday, June 29, 2010

New York Times v. Google, Twitter in TheFlyonTheWall.com "hot news" case

Google and Twitter taking on the NYTimes
While Arthur O. Sulzberger, Chairman and Publisher of The New York Times, holds that Google is the NYTimes "friend" and they have a good working relationship - even to the point of hounding SFGate.com regarding this blogger's claims to the contrary - a recent Amici or "friend of the court" brief filed by the New York Times and other large news organizations openly attacks the work of online news aggregators like Google News.

If the New York Times likes Google so much, why would it attach itself to the friend of the court brief?

The backstory is the Barclay's Capital v. TheFlyOnTheWall.com case. In that case, New Jersey-based TheFlyOnTheWall.com was accused of taking information on bank upgrades and downgrades of stocks that was originally produced by Barclays and the other banks involved in the copyright infringement lawsuit lawsuit.

Barclays holds that TheFlyOnTheWall.com website “systematically and impermissibly accesses” its proprietary equity research and does none of its own. Barclays and the banks enjoined in the lawsuit, Merrill Lynch and Morgan Stanley & Co. Inc., contend their information is "hot news" and "that the regular, systematic, and timely taking and redistribution of their recommendations constitutes misappropriation, which is a violation of the New York common law of unfair competition," as the case reads.

Case was bounced around before

The Barclay's Capital v. TheFlyOnTheWall.com case originally started in June 26, 2006 and then reassigned to the court of U.S. District Judge Denise Cote on June 8, 2009, according to the case document presented in the link above. It never became a jury trial because Barclays and it's banking partners elected to waive a damages claim, and perhaps they reasoned a jury trial could go against them. Summary judgment motions that would have ended the case by tossing it out of court were denied on November 6, 2009; the case was set for a March 8th 2010 bench trial.

Copywrite claims and "Hot-News"

As part of the process of the original 2006 lawsuit against TheFlyOnTheWall.com (or "Fly") that company signed a confidentiality agreement and claimed the information on Barclay's and Merill's recommendations were coming from analyst and broker sources inside those banks's research departments which created the information. Barclay's claimed to end that pipeline of information and settlement talks started over statutory damages, which are much less that any a trial jury would be asked to evaluate. Fly agrees that it committed copyright infringement but that it is not liable for what is called a "Hot-News" misappropriation.

The basis for the "Hot-News" concept is a 1918 case called International News Service v. Associated Press. In that case, the AP reported World War 1 stories from Europe at its own expense and that the International News Service got from the AP by "copying AP’s stories from bulletin boards and early editions of newspapers printed by AP’s eastern affiliates" according to the Barclay's case text.

The International News Service then sent those stories to The West Coast where it sold the news stories paraphrased as its own story. The Associated Press got a permanent injunction blocking the International News Service from the Court of Appeals, after losing the original case decision.

The Supreme Court supported the Court of Appeals ruling under the view that the AP spent money and worked to make the story that the INS then used as the basis for its own news sales. In other words, INS made money off the AP's initial work, even though it was not a direct copy, and did no original work of its own.

You can see where this can apply to the modern Internet news debate. It's the reason The New York Times and Gannett (which owns USA Today) jumped in and filed "friend of the court" briefs. If they can successfully reintroduce the hot-news legal argument it will allow them to sue Internet companies with glee.

But standing in the way of such a modern application is Justice Brandeis minority Supreme Court view of that time: “the general rule of law is, that the noblest of human productions -- knowledge, truths ascertained, conceptions, and ideas -- become, after voluntary communication to others, free as the air to common use.”

While the INS hot-news legal view was challenge by the Second Circuit court's Judge Learned Hand as not intended to establish a general doctrine, it still became part of state common law in several states, including New York. The most famous recent "hot-news" case was National Basketball Association v. Motorola, Inc. in 1997.

In National Basketball Association v. Motorola, Inc., the hand-held pager displayed NBA game action news as the games were in progress. The information that was sold by Motorola via its SportsTrax device and for profit triggered the hot-news argument. The NBA won.

The NBA "Hot-News" view is pre-Twitter

The major problem with the Hot-News view is that it comes from a time before Twitter and smart phones. Now, a person can sent a tweet about an NBA game in progress that is then picked up by Twitter and can be used as a news feed on a blog that gains revenue from ads placed on it. The fan-generated information was not produced by the NBA itself. No sports stats sheet needs to be obtained.

But arguably the person who created the "Hot-News" is the fan, and not the NBA. The NBA can't control what its fans see its players do on the court and report to others. Adding a "no-tweet" ticket disclaimer would be impossible to legally justify if challenged. That's like asking a person not to talk about a game it saw. There's a numbers issue: the NBA game itself is so large and reaches so many people that it becomes a public event, thus the information from it is public.

Now you can see why Twitter jumped into this issue with Google. Indeed, the problem in the Barclay's case is that the "size of the impact of information" was not considered. In other words, in the view of this space, information that can be agreed to impact a large number of people should be considered public and thus more easy to distribute, even if it's for profit. The profit-takers will eventually have such a large market they will reduce the price for the information. In fact, one can claim that's what the Internet is causing to happen.

U.S. District Judge Denise Cote's March 2010 Decision

In March 2010, U.S. District Judge Denise Cote established a creative injunction in the Barclay's v. TheFlyOnTheWall.com case that blocks TheFlyOnTheWall.com and other similar firms from releasing information from a research report not before four hours after the release of that report. TheFlyOnTheWall.com asked the appeals court to delay Judge Denise Cote's order while it files an appeal. This is where Google and Twitter are battling The New York Times, The Washington Post, Gannett, McClatchy, Belo, Scripps, Time, and the Newspaper Association of America, all of which filed a "friend of the court" brief that counters Google and Twitter.

The central problem with the Amici brief filed by The New York Times, et al, it is a direct attack on Google News. Page 25 of the brief reads:

One of the greatest concerns among news originators is inexpensive technology that allows easy aggregation of news. Aggregation can take many forms, including the indexing of fresh news content from one or more websites, by engines of various kinds. News stories are traditionally written to compress the key facts of a story into the opening paragraph. The output of indexing engines can reproduce the headlines, opening paragraph or sentences from originator news stories, and thereby convey the essence of the original news item. Even where an aggregator website or news application contains a hyperlink to the news item on the originator’s website, the risk remains that readers will find that reading the aggregator’s output keeps them sufficiently informed of the latest news. As a result, they may never click through to the originator’s website. If a significant number of readers find the news reproduced by the aggregator to be an acceptable substitute for reading the original story, courts should conclude that the two products compete in the INS/Motorola sense even though the two parties are not in identical businesses.

That is a direct attack on Google News and on the same process that Arthur O. Sulzberger himself has said gives a significant amount of traffic to The New York Times. I will go a step beyond that and say that Google does The New York Times a favor by in effect presenting it in Google News, and perhaps on more occasions that it had a right to have. Even if there is no click through to the website, the NY Times still has the benefit of being seen as the news producer.

Here's the full Amici brief from the news organizations:


According to Bloomberg, Google and Twitter's counter is that...

"In our brief, we're not taking sides or focusing on the details of this particular dispute between the parties," Chris Gaither, a spokesman for Mountain View, California-based Google, said today in an e-mailed statement. "But we believe that the case raises important issues of law that could affect the free flow of important factual information online."

It's clear we're at ground zero of what will be an important legal battle that impacts the future of news online. In this, we can now see true colors of the The New York Times : it has an issue with Google, otherwise it would not have joined the Amici brief in the Barclay's case that attacks news aggregators.  Perhaps the NYTimes thought it was making a sneak attack; not any more.

Stay tuned.

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