Federal appeals court finds a right to recap info

Monday, June 20, 2011

A federal appeals court ruling in favor of an online news service that collects and republishes stock recommendations could also be a big win for news and information aggregators across the web.

The 2nd U.S. Circuit Court of Appeals ruled unanimously that theflyonthewall.com was not guilty of misappropriation when it published quick recaps of recommendations made by Merrill Lynch, Barclays Capital and Morgan Stanley.

Each of those firms sells exclusive research recommending stock purchases. Flyonthewall.com collected and condensed those recommendations into single-line items, giving its own subscribers a summary of bank recommendations. The service skimmed the reports and did not publish the extensive research provided by the banks.

The banks sued theflyonthewall.com, alleging that in recapping the recommendations, it illegally took the banks’ content and was hurting their business. The appeals court dismissed the banks’ misappropriation claim, finding that federal copyright law preempted New York state law.

But the broader point made by the court — and the aspect of the decision that could have the greatest impact — was that the making of a recommendation by a prominent firm is in and of itself a news event and that theflyonthewall.com had a right to report it.

“It is collecting, collating and disseminating factual information — the facts that firms and others in the securities business have made recommendations with respect to the value of and the wisdom of purchasing or selling securities — and attributing the information to its source,” wrote Judge Robert Sack.

The decision does not open the door for the wholesale taking of content. The specific language of the reports is still protected under copyright law.

The case does, however, seem to signal significant latitude for news and information aggregators to recap quickly and repackage information prepared, compiled and presented by others.

“We conclude that in this case, a firm’s ability to make news — by issuing a recommendation that is likely to affect the market price of a security — does not give rise to a right for it to control who breaks that news and how,” Sack wrote for the court.

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