How the “hot news” doctrine was applied

Steve Russolillo of Dow Jones Newswires writes about the federal appeals court ruling on Monday that allows financial news services to immediately publish information about Wall Street bank ratings on stocks and what it means to news operations.

Russolillo writes, “Wall Street firms have objected to the systematic publication of their recommendations and have taken steps in recent years to limit access to their research beyond their clients. They have also asked their clients not to distribute their research reports to others in an effort to prevent ‘leaks.’

“Eugene Volokh, a University of California-Los Angeles law professor, said a narrow area of the law known as the ‘hot news’ tort, which relates to a party ‘free riding’ on the time-sensitive work of others, wasn’t enough to help the banks win this case.

“‘Reporting on other people’s recommendations or actions is allowed and cannot be stopped under this hot news theory,’ he said. ‘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.’

“Volokh described the ruling as a ‘significant loss’ for the banks.”

Read more here.