In Swatch copyright opinion, 2nd Circuit boosts financial news cos.
Can corporations use copyright laws to block news organizations from publishing their own information about themselves? Not according to a ruling Monday from the 2nd Circuit Court of Appeals in an intriguing case called Swatch v. Bloomberg. The appeals court said that Bloomberg was entitled to publish an audiotape of an invitation-only analyst call with Swatch officials, even though Swatch held a U.S. copyright on the recording and told analysts who participated in the call that the audio could not be published or broadcast. The 2nd Circuit’s extremely broad view of the media’s fair use of copyrighted corporate information – which gives primacy to the investing public’s interest in financial reports and data – is good news indeed for financial news reporters and their employers. In combination with the appeals court’s 2011 holding in Barclays v. Theflyonthewall, the Swatch opinion makes it clear that when a corporation’s statements constitute news, the corporation doesn’t have the right to control how that news gets out.
Under Monday’s decision, that’s true even when a news organization uses the copyrighted material for commercial purposes – and even when the information isn’t transformed in any way before publication. The investing public’s right to know, according to the 2nd Circuit, can’t be trumped by corporate copyrights. “Whether one describes Bloomberg’s activities as ‘news reporting,’ ‘data delivery,’ or any other turn of phrase, there can be no doubt that Bloomberg’s purpose in obtaining and disseminating the recording at issue was to make important financial information about Swatch Group available to American investors and analysts,” wrote Chief Judge Robert Katzmann for a panel that also included Judges Amalya Kearse and Richard Wesley. “Bloomberg’s overriding purpose here was not to ‘scoop’ Swatch…but rather simply to deliver newsworthy financial information to American investors and analysts. That kind of activity, whose protection lies at the core of the First Amendment, would be crippled if the news media and similar organizations were limited to authorized sources of information.”
Pretty resounding language, and that’s despite good arguments by Swatch and its lawyers at Collen IP that Bloomberg’s publication of the audiotape didn’t amount to fair use. I’ve written before about the unusual facts of the case, but here’s a brief recap. Foreign-based companies like Swatch aren’t subject to the same disclosure requirements as U.S. corporations, so when Swatch released its 2010 earnings in February 2011, it organized an invitation-only call with analysts who track the stock. Reporters were not invited to participate, but very shortly after the conclusion of the 132-minute call, Bloomberg posted an audiotape and transcript to subscribers of its financial research service. When Swatch found out, it demanded that Bloomberg take down the materials; when the news organization refused, Swatch obtained a copyright on its executives’ statements during the earnings call and sued Bloomberg for infringement.
U.S. District Judge Alvin Hellerstein of Manhattan ruled in August 2011 that Swatch could proceed with its case, denying a motion to dismiss by Bloomberg’s lawyers at Willkie Farr & Gallagher. But in May 2012, after listening to the audiotape, Hellerstein changed his mind about Swatch’s infringement claims. The judge granted Bloomberg’s motion for judgment on the pleadings, ruling that the news company made fair use of the copyrighted material. “(Bloomberg’s) work as a prominent gatherer and publisher of business and financial information serves an important public interest, for the public is served by the full, timely and accurate dissemination of business and financial news,” Hellerstein said.
On appeal, Swatch argued (with not a little justification) that several of the considerations judges must weigh in fair use analysis actually tilted in its favor. Bloomberg wrongfully obtained the audiotape, Swatch asserted, and published it despite an admonition against distribution at the beginning of the call. There was no educational purpose for the publication; Bloomberg makes money from its research service. Nor could the audiotape be fairly described as reporting, according to Swatch, because Bloomberg posted the entire audiotape and transcript, without any transformative editing, additions or commentary. Swatch argued that at the very least, it should have been permitted to conduct discovery on Bloomberg’s profit motive.
The 2nd Circuit was not at all swayed. “A use of copyrighted material that serves (a) public purpose is very closely analogous to ‘news reporting,’ which is indicative of fair use,” the appeals court said. “We agree with the district court, moreover, that this important public purpose underlying Bloomberg’s use overcomes the countervailing weight we would otherwise give to Bloomberg’s clandestine methods and the commercial, nontransformative nature of its use.” (As an aside, this opinion deserves plaudits for its clarity and readability; even if you disagree with Katzmann’s conclusions, you have to admire his writing.)
The 2nd Circuit said it didn’t have jurisdiction to consider Bloomberg’s counterargument that corporate calls with analysts shouldn’t be entitled to copyright protection. But the judges clearly didn’t regard Swatch’s creative use of copyright as a viable model for shielding corporate information. “The through-and-through factual nature of the earnings call places it at the very edge of copyright’s protective purposes,” the court said, noting that, unlike ordinary copyright holders such as writers and musicians, Swatch had no commercial purpose of its own in protecting the recording. “At most, Bloomberg’s use had the effect of depriving Swatch Group of the ability to know and control precisely who heard the call,” the court said. “But whatever cognizable interest Swatch Group has in maintaining that ability, it is far outweighed by the public interest in the dissemination of important financial information.”
The opinion is particularly helpful as media companies transform themselves into one-stop information providers, offering subscribers data and source materials alongside news reporting. This ruling explicitly holds that when a news organization makes corporate data of any sort publicly available, it’s making fair use of the information. Just imagine if the decision had gone the other way: U.S. corporations are subject to disclosure rules set forth by the Securities and Exchange Commission, but what if foreign companies could control the release of their financial data by copyrighting annual reports?
So, cheers to the 2nd Circuit for refusing to get trapped in the thicket of fair use analysis. The news business has enough problems. The last thing we need to deal with is copyrighted conference calls and earning reports.
At oral argument, Swatch was represented by Joshua Paul of Collen, who declined to comment. Bloomberg was represented by John DiMatteo of Willkie, who referred me to a Bloomberg representative. In an email, he said, “We believe – as the court concluded – that the investing public benefits from knowing when a public company discloses financial performance to a select group of analysts. We’ll continue to provide transcripts and recordings from analyst calls to our audiences to bring more transparency and fairness to the markets.”
For more of my posts, please go to WestlawNext Practitioner Insights