Dow Jones chooses weak weapon in suit vs news aggregator Ransquawk

January 10, 2014

Like most creators of news content – those of us who used to be known as “reporters” – I worry a lot about the value of information. Unless information consumers – those of you who used to be called “readers” – won’t pay for the content we provide, news organizations can’t make enough money to keep our owners happy. The journalism business is now in the slow and painful process of figuring out how to convince readers that news is worth paying for.

Our foes, of course, are businesses that undermine the value of content by free-riding on the hard work of journalists. You know what I’m talking about: data scrapers and aggregators that gobble up and regurgitate news stories produced by reporters employed elsewhere. These free-riders can charge less for content than journalism outfits because aggregators don’t have to bother with the expense of actually finding things out or crafting and editing stories. As the Associated Press wrote last year in a summary judgment brief in its copyright and misappropriation case against the news aggregator Meltwater, content piracy has sent the news industry into “a period of crisis, with numerous news publications folding or struggling with significantly reduced staffs.”

So you’d think it would be in the best interests of a news organization to throw everything it’s got at a data scraper it believes to be profiting from the hijacking of its work, right? That’s why I can’t figure out why Dow Jones, publisher of The Wall Street Journal, is only asserting “hot news” misappropriation and tortious interference – and not also copyright infringement – in its newly filed complaint against the financial news aggregator Real Time Analysis & News, better known as Ransquawk.

According to the complaint, filed in federal court in Manhattan by Dow Jones’s lawyers at Patterson Belknap Webb & Tyler, Ransquawk has successfully marketed itself to the financial industry as the provider of real-time news culled from more than 100 sites. “How does Ransquawk provide such a popular service?” the suit asks rhetorically. “Its business model is as simple as it is illegal: Ransquawk’s audio and text services are based on the systematic unauthorized reproduction and redistribution of news content published by Dow Jones, and, undoubtedly, other news content providers as well.” Dow Jones goes on to chronicle how its investigation of Ransquawk showed the site to be republishing within five seconds breaking-news headlines reported exclusively on Dow Jones’s DJX premium subscriber service. According to the suit, Ransquawk doesn’t even attribute the misappropriated news headlines to Dow Jones, but simply credits “newswires.”

Ransquawk has informed Dow Jones, as the suit recounts, that it is not copying its alerts from the proprietary DJX wire but is acquiring breaking news from a variety of third parties that presumably got word from Dow Jones and passed it along through Twitter, instant messages or other real-time news sources. Dow Jones argues in response that there’s no conceivable way such thirdhand transmissions could take place within the five-second window of time between its DJX alerts and the appearance of the exact same headlines on Ransquawk’s audio and text services.

The complaint is replete with references to Ransquawk’s “copying” and “verbatim” recitation of Dow Jones headlines. What is missing, however, is any claim by Dow Jones under the federal Copyright Act. The suit instead requests relief under the New York state tort of hot news misappropriation (in addition to wrongful interference with a contractual relationship, based on the DJX user agreement). I understand why Dow Jones would have a tough time proving copyright infringement from Ransquawk’s alleged lifting of its breaking-news headlines, since copyrights protect expression and not information and ideas. The value in a Wall Street Journal breaking-news scoop is the information conveyed in the headline, not the actual words the headline writer has chosen. That said, the law on hot news misappropriation is so ill defined and the tort is so rarely asserted that, as far as I can tell, no defendant in modern history has been found liable for hot news misappropriation.

There’s no doubt that the tort – originally codified by the U.S. Supreme Court in the 1918 case of International News Service v. Associated Press – exists in New York. Rulings by the 2nd Circuit Court of Appeals in 1997 in National Basketball Association v. Motorola and in 2011 in Barclays v. confirmed that hot news misappropriation claims are not entirely preempted by the federal Copyright Act. Under certain circumstances, the 2nd Circuit has said, plaintiffs can sue over the misuse of valuable and timely information they’ve gone to the trouble and expense of collecting and publishing.

But those circumstances have proved incredibly hard even to define, let alone satisfy. The NBA case, which involved the league’s assertion that a Motorola pager service violated the NBA’s exclusive right to transmit basketball statistics, attempted to establish a multipart test for the tort, restricting the cause of action to instances in which the plaintiff has invested in gathering time-sensitive information and in which a defendant in direct competition with free-rides on its rival’s efforts. The NBA test also required a plaintiff to show that free-riding would deter it from continuing to spend time and money on information-gathering. Those were already murky requirements, but then the entire NBA standard was thrown into doubt in the 2nd Circuit’s more recent Barclays decision. The appeals court in that case said the NBA test was internally contradicted dicta, and hot news misappropriation could only be decided on a case-by-case basis.

Like the NBA court, the 2nd Circuit panel that decided the Barclays case emphasized that hot news misappropriation is an extremely narrow exception to federal preemption under the Copyright Act. And even though both courts agreed that some cases can squeeze out from under the Copyright Act, neither ruling found the defendant liable for misusing hot news. In the NBA case, the appeals court said Motorola wasn’t free-riding on the NBA’s efforts when it distributed sports stats. In Barclays, the court found that Flyonthewall was engaged in news reporting, not hot news misappropriation, when it informed subscribers of analyst stock recommendations.

In previous cases in which Dow Jones has gone after aggregators, the company has asserted the Copyright Act, according to a blog post about the Ransquawk suit by Dow Jones deputy general counsel Jason Conti. Its case against Cision claimed only copyright infringement; its suit against included copyright and hot news misappropriation claims. That was an effective tactic: admitted to both hot news misappropriation and infringement in its settlement with Dow Jones in 2010, according to a Dow Jones report.

AP also used both hot news misappropriation and infringement as weapons in its litigation last year against the aggregator Meltwater. Meltwater’s lawyers at Wilson Sonsini Goodrich & Rosati did an excellent job in describing all of the problems with the hot news misappropriation standard in their summary judgment brief on the issue, but in the end the case turned on copyright. AP’s counsel at Davis Wright Tremaine won the news service’s summary judgment motion for copyright infringement, and the case settled before U.S. District Judge Denise Cote of Manhattan reached a decision on hot news.

I contacted Dow Jones deputy GC Conti and outside counsel Robert LoBue of Patterson to ask why the company has decided to forego copyright infringement claims against Ransquawk. A Dow Jones representative emailed to let me know that the company has no comment.

I’m sure Dow Jones has made a strategic choice. After all, if there is any set of facts that satisfies the definition of hot news misappropriation, these alleged circumstances would seem to be it. The question, however, is whether this tort exists in reality. According to media lawyer Charles Sims of Proskauer Rose, the 2nd Circuit has, at best, “a cramped, narrow view” of hot news misuse. Ransquawk’s first defense, Sims said, will be an argument that Dow Jones’s suit is preempted by the Copyright Act. If that succeeds, Dow Jones doesn’t have the fallback of infringement claims. On the other hand, Sims said, this company knows what it is doing. “Dow Jones is very litigious, very aggressive,” he said. “I’ve never seen them voluntarily pass up a cause of action.”

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