The “hot news” doctrine and business journalism

The Economist‘s science and technology blog Babbage writes about the legal doctrine of “hot news” in the wake of recent litigation against theflyonthewall.com, a financial news site.

The blogger J.B. writes, “Its business was republishing share tips made by investment banks. The banks sued, and in the summer of 2010 they won. A court ruled that Theflyonthewall was unfairly appropriating some of the value created by the banks in researching and writing the reports, and required the site to wait for at least two hours before republishing them. Theflyonthewall, in turn, has had its case taken up by some of the Internet’s big guns—including Google, Twitter and the Electronic Frontier Foundation (EFF), an internet lobby group. They supported the website’s appeal to the Second Circuit Court, and made arguments on its behalf to the court. Now they are anxiously awaiting the results of that appeal, which could appear anytime in the next few weeks.

“The Second Circuit is authoritative in intellectual property. It set the stage for the suit against Theflyonthewall in a 1997 decision which overturned an injunction granted to the National Basketball Association, preventing Motorola, a maker of telecoms gear, from broadcasting game scores over its pagers. In that case the Second Circuit ruled that specific criteria had to be met for the hot-news doctrine to apply. The information in question must be expensive to gather and time sensitive. One party must be free-riding directly on another’s expenditure, and the two must be in direct competition. Finally, the free-riding must significantly reduce the incentive to gather information, and so threaten its quality or existence. The NBA failed those tests, but Theflyonthewall passed.

“At the appeal, the Second Circuit was asked to reconsider whether Theflyonthewall should have triggered the hot-news rules – and, in particular, whether a information website could really be considered to be in direct competition with an investment bank. But, more interestingly, it was also asked to look again at the criteria for applying the hot-news doctrine in light of the new questions thrown up the internet. Are bloggers, for example, in direct competition with newspapers? Does Google free-ride or provide free marketing and distribution? How do you define the value of information, and what restrictions, if any, would enable a supplier to capture that value? Is there a public interest in the news being as widely disseminated as possible, and would that interest differ between, say, a share recommendation and the news that Port au Prince has been flattened by an earthquake?”

Read more here. And if you know the full name of J.B., please let me know.