It looks like Theflyonthewall.com is one of the few out there today enjoying a legal victory over the big banks. The Second Circuit Court of Appeals ruled in favor of Theflyonthewall.com in a case that involved a "hot news" tort.
According to the Wall Street Journal, TheFly republished news headlines from various other sources, including Wall Street banks. The banks claimed that their intellectual property rights were being infringed upon.
Three banks, Barclays, Morgan Stanley and Bank of America, all claimed that theflyonthewall.com was getting a “free ride” on their research by republishing it.
The district court held in favor of the banks, saying that TheFly had distributed time-sensitive information, sometimes even before the banks had a chance to distribute the information to their clients. The ruling also ordered the website not to publish new pre-market recommendations until 30 minutes after the U.S. markets opened, reports the Wall Street Journal. The court furthermore ordered the website to wait two hours to publish any new recommendations during the trading day.
This hurt Theflyonthewall.com’s business and as a result, the company appealed.
The Second Circuit Court of Appeals ruled that the financial news service was not misappropriating research when it published ratings changes online. The claim, as ruled by the Second Circuit, was preempted by federal copyright law. As a result of the preemption, the district court ruling was reversed.
The Second Circuit held that the ability of the Wall Street firms to make news did not give the right to control how that news was disseminated.
The “hot news” tort is not commonly known and involves the “free riding” use of time-sensitive work of others. Says UCLA law professor Eugene Volokh, as quoted in The Journal:
“This is no different than one newspaper reporting on another newspaper’s political recommendations or the score of a basketball game. You’re allowed to report the news as quickly as you learn it.”