Barclays Capital Inc. v. Theflyonthewall. Com, Inc.
650 F.3d 876
| 2d Cir. | 2011Background
- Barclays Capital Inc., Merrill Lynch, and Morgan Stanley (the Firms) sued Theflyonthewall.com (Fly) for copyright infringement and New York hot-news misappropriation premised on Fly’s pre-market distribution of the Firms’ Recommendations.
- Fly publishes a news feed that headlines and disseminates Recommendations from sixty-five firms, including the Firms, to subscribers and third-party platforms.
- Fly’s dissemination allegedly undercuts the Firms’ “informational advantage” and business model centered on trading commissions from timely, client-specific recommendations.
- The district court held the copyright claims, including excerpting, to be infringing and awarded damages; it also held Fly liable for hot-news misappropriation and entered a narrow injunction restricting reporting of Recommendations.
- On appeal, the Second Circuit held the hot-news misappropriation claim is preempted by federal copyright law; it reversed the district court’s ruling on the hot-news claim and remanded to dismiss, while affirming the copyright-related portions of Fly I.
- Judge Raggi, concurring, would affirm the preemption but would base it on NBA’s direct-competition analysis, emphasizing a lack of direct competition between Fly’s aggregate Newsfeed and the Firms’ own Recommendation distribution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether hot-news misappropriation is preempted by the Copyright Act. | Firms contend state law hot-news claim survives preemption. | Fly argues for continued INS-like protection. | Yes; hot-news misappropriation is preempted. |
| Whether NBA’s five-factor test governs the preemption inquiry in this case. | Firms rely on NBA factors to sustain a non-preempted claim. | NBA factors are not necessary or controlling here. | NBA framework governs; claim preempted under general-scope/subject-matter preemption. |
| Whether Fly’s conduct constitutes direct competition with the Firms, a key element for a non-preempted INS-like claim. | Firms assert direct competition via disseminating Recommendations. | Fly’s aggregate news product is not directly competing with Firms’ primary business model. | Direct competition not established under NBA; claim preempted. |
| Whether the district court properly enjoined Fly’s reporting of Recommendations given preemption. | Injunction needed to protect Firms’ business model. | Injunction would chill speech and is overbroad. | Remand to dismiss hot-news claim; injunction not upheld as to non-preempted claim. |
Key Cases Cited
- National Basketball Association v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997) (articulates the narrow, INS-like hot-news exception and NBA preemption test)
- International News Service v. Associated Press, 248 U.S. 215 (Supreme Court 1918) (INS framework for hot-news misappropriation (preemption context))
- Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539 (Supreme Court 1985) (copied expression vs. ideas; preemption analysis includes general scope)
- Altai, Inc. v. Computer Assocs. Int'l, Inc., 982 F.2d 693 (2d Cir. 1992) (three-factor extra-element test for preemption)
- Briarpatch Ltd. v. Phoenix Pictures, Inc., 373 F.3d 296 (2d Cir. 2004) (preemption scope; rights equivalent to copyright not expanded by state law)
- Financial Information, Inc. v. Moody's Investors Serv., Inc., 808 F.2d 204 (2d Cir. 1986) (recognizes non-preempted elements in misappropriation claims)
- Associated Press v. All Headline News Corp., 608 F. Supp. 2d 454 (S.D.N.Y. 2009) (insufficient direct competition/INS-like analysis under state law)