Christian Turner Assistant Professor of Law

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Outline of INS v. AP

Three opinions: Pitney (majority); Holmes; Brandeis

In a nutshell:

Pitney: AP has relative title to news it gathers such that it can prevent competitors from free riding for some period after it is first reported. This is in order to keep alive the incentive to gather news.

Holmes: The harm here is only that INS is publishing news under its name that in fact was gathered by the AP - potentially misleading consumers about the source of the news. INS should be required to credit AP but no more.

Brandeis: Just because there is value in news does not mean that the initial gatherer should receive the legal right to exclude others from using and reporting that news. There is value in free riding, at least where, as here, the public isn’t confused about the source of news. The law does not protect creators of value in every case, only in certain areas (patent and copyright, for example). And in any event, establishing exclusion rights in news is a change that will affect the interests of the general public and getting the balance right will require careful review of the industry and, perhaps, administrative machinery that courts are not in the best position to provide. This issue should be left to the legislature.

Majority opinion

I. Background and posture of the case

Background on industry and organization of INS and AP.
Allegations: Injury exists in taking the advantage of freshness
Procedural history - we’re here on an an interlocutory appeal from the grant of a preliminary injunction.
Only issue is whether INS can use news published by AP, on bulletin boards or in papers, as the sole basis for its own stories.
This is a case raising only state law issues of unfair competition (the parties are diverse, coming from different states, thus giving fed courts jurisdiction) - not copyright. Copyright would only protect the expression, the literary quality or wording of news stories, not the facts that form the basis of the stories. And the facts are all that was taken here.

II. Positive Legal Analysis

News is valuable because it is, well, new. Those in the news business compete to report facts first, or at least timely.
As business competitors they are under a legal duty, when conflict between them is likely, to “conduct their business as not unnecessarily or unfairly to injure the of the other.” If there is a right to exclude here, it is only relative (RELATIVE TITLE). Each may have a right to exclude the other, but not the general public, who may do with the news what they wish.
So is there such a right?
Canvass precedent - two cases suggesting that finding relative title to news would fit with existing law.
Justification - news is valuable to those who gather it and to those who would appropriate it. HERE, The time difference between the East and West coast allows a competitor to appropriate that value, publishing nearly simultaneously with the gatherer on the West Coast.
Since news is expensive to gather, an interloper should not be allowed to reap what he has not sown. (Argument that property rights, at least as between competitors, should be awarded to protect labor. Contra Pierson v. Post.) That’s happened here, so liability.

III. Rebuttals to arguments against

News is not “abandoned” when published. There’s no intent to abandon, as is evidenced by the organizational structure of the AP. They couldn’t stay in business if they couldn’t profit from publication of the news. Their bylaws attempt to prevent transmission to competitors before publication.
The holding does not create a monopoly of gathering and distributing news, but only partially keeps out competitors who would “reproduce” AP’s news and only for long enough to give AP enough value to keep alive its incentive to gather news.
The harm here is not (only) in the fraud upon consumers, the reverse palming off of AP’s news as coming from INS. And so INS’s giving credit would not fix the problem.
AP uses other organizations’ news stories as leads or tips that are independently verified before publication. But this does not mean that AP is guilty of that of which they accuse INS (which guilt might establish the equitable defense of unclean hands).

Holmes

In general, the law does not prevent one from repeating what others have said. The news is not copyrighted and so is free to be used by others, including competitors. But here, using AP’s news and publishing it at the same time AP papers publish it, in the west, amounts to a kind of fraud. INS should be required to name the source.

Brandeis

Facts
Framing the question: Can AP enjoin a competitor from using AP-published news that the competitor lawfully acquires? No cases answer this question.
The background rule is that “a product of the mind,” even if it requires laborious effort to produce, is free to be ripped off by others. There are exceptions to this only where public policy requires it - as in patent, copyright, and certain cases where the relationship between the parties demands it.
This is not such a case (rebuts arguments one by one):

Distinguish precedent - not like cases where the appropriation involved a breach of contract or trust. No such relationship here.
Distinguish adverse precedent based on a kind of common law copyright by using a Feist rationale - to have such a cause of action, the expression must evince at least some originality, not a bare recitation of facts.
There was a general publication here, and so once published, the news is not protectable literary property (don’t worry about this).
Rebuts the bare argument that it’s unfair competition to free-ride. But unfair competition doesn’t protect against free-riding, only against fraud or force or other legal violations used to gain a competitive edge. No such unfair means were used here (papers were bought in the open market). And the law generally sanctions and even encourages free riders, those who follow pioneers. Also, Brandeis disagrees that a failure to attribute is misleading. Doesn’t think people assume the publisher is the source of all the news it publishes.
(LEGAL PROCESS) Technological change and the “vastness of our territory” do threaten to erode the incentive to engage in the worthwhile endeavor of news gathering and dissemination. But we’d need to develop new law to deal with this, and doing so would affect the public at large, perhaps adversely. Courts won’t do a good job, and so should leave this for the legislature (which can take broader evidence about the problem and produce more finely tuned rules enforceable by administrative machinery).

Cheney Bros. V. Doris Silk Corporation, 35 F.2d 279 (SDNY, 1929)

Harry D. Nims, of New York City (Minturn DeS. Verdi and Wallace H. Martin, both of New York City, on the brief), for appellant.

Epstein & Bros., of New York City (Arthur J. Brothers, of New York City, of counsel), for appellee.

Before MANTON, L. HAND, and SWAN, Circuit Judges.

L. Hand, Circuit Judge

The plaintiff, a corporation, is a manufacturer of silks, which puts out each season many new patterns, designed to attract purchasers by their novelty and beauty. Most of these fail in that purpose, so that no much more than a fifth catch the public fancy. Moreover, they have only a short life, for the most part no more than a single season of eight or nine months. It is in practice impossible, and it would be very onerous if it were not, to secure design patents upon all of these; it would also be impossible to know in advance which would sell well, and patent only those. Besides, it is probable that for the most part they have no such originality as would support a design patent. Again, it is impossible to copyright them under the Copyright Act (17 USCA s 1 et seq.), or at least so the authorities of the Copyright Office hold. So it is easy for any one to copy such as prove successful, and the plaintiff, which is put to much ingenuity and expense in fabricating them, finds itself without protection of any sort for its pains.

Taking advantage of this situation, the defendant copied one of the popular designs in the season beginning in October, 1928, and undercut the plaintiff’s price. This is the injury of which it complains. The defendant, though it duplicated the design in question, denies that it knew it to be the plaintiff’s, and there thus arises an issue which might be an answer to the motion. However, the parties wish a decision upon the equity of the bill, and, since it is within our power to dismiss it, we shall accept its allegation, and charge the defendant with knowledge.

The plaintiff asks for protection only during the season, and needs no more, for the designs are all ephemeral. It seeks in this way to disguise the extent of the proposed innovation, and to persuade us that, if we interfere only a little, the solecism, if there be one, may be pardonable. But the reasoning which would justify any interposition at all demands that it cover the whole extent of the injury. A man whose designs come to harvest in two years, or in five, has prima facie as good right to protection as one who deals only in annuals. Nor could we consistently stop at designs; processes, machines, and secrets have an equal claim. The upshot must be that, whenever any one has contrived any of these, others may be forbidden to copy it. That is not the law. In the absence of some recognized right at common law, or under the statutes- and the plaintiff claims neither- a man’s property is limited to the chattels which embody his invention. Others may imitate these at their pleasure. Flagg Mfg. Co. v. Holway, 178 Mass. 83, 59 N.E. 667; Keystone Co. v. Portland Publishing Co., 186 F. 690 (C.C.A. 1); Heide v. Wallace, 135 F. 346 (C.C.A. 3); Upjohn Co. v. Merrell Co., 269 F. 209 (C.C.A. 6); Hudson Co. v. Apco Co. (D.C.) 288 F. 871; Crescent Tool Co. v. Kilborn & Bishop Co., 247 F. 299 (C.C.A. 2); Hamilton Co. v. Tubbs Co. (D.C.) 216 F. 401; Montegut v. Hickson, 178 App.Div. 94, 164 N.Y.S. 858.

This is confirmed by the doctrine of ‘non-functional’ features, under which it is held that to imitate these is to impute to the copy the same authorship as the original. Enterprise Co. v. Landers, 131 F. 240 (C.C.A. 2); Yale & Towne Co. v. Adler, 154 F. 37 (C.C.A. 2); Rushmore v. Manhattan Co., 163 F. 939, 19 L.R.A.(N.S.) 269 (C.C.A. 2); Rushmore v. Badger Co., 198 F. 379 (C.C.A. 2); Fox v. Glynn, 191 Mass. 344, 78 N.E. 89, 9 L.R.A.(N.S.) 1096, 114 Am.St.Rep. 619. These decisions imply that, except as to these elements, any one may copy the original at will. Unless, therefore, there has been some controlling authority to the contrary, the bill at bar stands upon no legal right and must fail.

Of the cases on which the plaintiff relies, the chief is International News Service v. Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211, 2 A.L.R. 293. Although that concerned another subject-matter- printed news dispatches- we agree that, if it meant to lay down a general doctrine, it would cover this case; at least, the language of the majority opinion goes so far. We do not believe that it did. While it is of course true that law ordinarily speaks in general terms, there are cases where the occasion is at once the justification for, and the limit of, what is decided. This appears to us such an instance; we think that no more was covered than situations substantially similar to those then at bar. The difficulties of understanding it otherwise are insuperable. We are to suppose that the court meant to create a sort of common-law patent or copyright for reasons of justice. Either would flagrantly conflict with the scheme which Congress has for more than a century devised to cover the subject-matter.

Qua patent, we should at least have to decide, as tabula rasa, whether the design or machine was new and required invention; further, we must ignore the Patent Office whose action has always been a condition upon the creation of this kind of property. Qua copyright, although it would be simpler to decide upon the merits, we should equally be obliged to dispense with the conditions imposed upon the creation of the right. Nor, if we went so far, should we know whether the property so recognized should be limited to the periods prescribed in the statutes, or should extend as long as the author’s grievance. It appears to us incredible that the Supreme Court should have had in mind any such consequences. To exclude others from the enjoyment of a chattel is one thing; to prevent any imitation of it, to set up a monopoly in the plan of its structure, gives the author a power over his fellows vastly greater, a power which the Constitution allows only Congress to create.

The other cases are easily distinguishable. Board of Trade v. Christie, 198 U.S. 236, 25 S.Ct. 637, 49 L.Ed. 1031, went upon the fact that the defendants had procured their information through a breach of contract between the plaintiff and its subscribers, or some surreptitious and dishonest conduct. Hunt v. N.Y. Cotton Exchange, 205 U.S. 322, 27 S.Ct. 529, 51 L.Ed. 821, was another instance of the same kind. There is, indeed, language in National Tel. News Co. v. West Un. Tel. Co., 119 F. 294, 60 L.R.A. 805 (C.C.A. 7), which goes further, but we take it that the authoritative statement of the doctrine must be found in Board of Trade v. Christie 221 F. 305 (C.C.A. 2). Though the limitations there imposed have indeed been extended in International News Service v. Associated Press, they still comprise no more than cases involving news and perhaps market quotations. Prest-O-Lite v. Bogen (C.C.) 209 F. 915, and Prest-O-Lite v. Davis (D.C.) 209 F. 917, were cases of passing off. In Kiernan v. Manhattan Co., 50 How.Prac.(N.Y.) 194, Dodge v. Construction Co., 183 Mass. 63, 66 N.E. 204, 60 L.R.A. 810, 97 Am.St.Rep. 412; Exchange Co. v. Gregory, L.R. (1896) 1 Q.B. 147 (C.A.) and Exchange Co. v. Central News, L.R. (1897) 2 Ch. 48, again, either there was a breach of contract between the plaintiff and its subscriber, or the defendant had dishonestly procured the information. They are like Board of Trade v. Christie.

True, it would seem as though the plaintiff had suffered a grievance for which there should be a remedy, perhaps by an amendment of the Copyright Law, assuming that this does not already cover the case, which is not urged here. It seems a lame answer in such a case to turn the injured party out of court, but there are larger issues at stake than his redress. Judges have only a limited power to amend the law; when the subject has been confided to a Legislature, they must stand aside, even though there be an hiatus in completed justice. An omission in such cases must be taken to have been as deliberate as though it were express, certainly after long-standing action on the subject-matter. Indeed, we are not in any position to pass upon the questions involved, as Brandeis, J., observed in International News Service v. Associated Press. We must judge upon records prepared by litigations, which do not contain all that may be relevant to the issues, for they cannot disclose the conditions of this industry, or of the others which may be involved. Congress might see its way to create some sort of temporary right, or it might not. Its decision would certainly be preceded by some examination of the result upon the other interests affected. Whether these would prove paramount we have no means of saying; it is not for us to decide. Our vision is inevitably contracted, and the whole horizon may contain much which will compose a very different picture.

The order is affirmed, and, as the bill cannot in any event succeed, it may be dismissed, if the defendant so desires.

National Basketball Association v. Motorola, Inc., 105 F.3d 841

Before: VAN GRAAFEILAND, WINTER, and ALTIMARI, Circuit Judges.

Winter, Circuit Judge:

… .

I. BACKGROUND

The facts are largely undisputed. Motorola manufactures and markets the SportsTrax paging device while STATS supplies the game information that is transmitted to the pagers. The product became available to the public in January 1996, at a retail price of about $200. SportsTrax’s pager has an inch-and-a-half by inch-and-a-half screen and operates in four basic modes: “current,” “statistics,” “final scores” and “demonstration.” It is the “current” mode that gives rise to the present dispute. In that mode, SportsTrax displays the following information on NBA games in progress: (i) the teams playing; (ii) score changes; (iii) the team in possession of the ball; (iv) whether the team is in the free-throw bonus; (v) the quarter of the game; and (vi) time remaining in the quarter. The information is updated every two to three minutes, with more frequent updates near the end of the first half and the end of the game. There is a lag of approximately two or three minutes between events in the game itself and when the information appears on the pager screen.

SportsTrax’s operation relies on a “data feed” supplied by STATS reporters who watch the games on television or listen to them on the radio. The reporters key into a personal computer changes in the score and other information such as successful and missed shots, fouls, and clock updates. The information is relayed by modem to STATS’s host computer, which compiles, analyzes, and formats the data for retransmission. The information is then sent to a common carrier, which then sends it via satellite to various local FM radio networks that in turn emit the signal received by the individual SportsTrax pagers.

Although the NBA’s complaint concerned only the SportsTrax device, the NBA offered evidence at trial concerning STATS’s America On-Line (“AOL”) site. Starting in January, 1996, users who accessed STATS’s AOL site, typically via a modem attached to a home computer, were provided with slightly more comprehensive and detailed real-time game information than is displayed on a SportsTrax pager. On the AOL site, game scores are updated every 15 seconds to a minute, and the player and team statistics are updated each minute. The district court’s original decision and judgment, National Basketball Ass’n v. Sports Team Analysis and Tracking Sys. Inc., 931 F. Supp. 1124 (S.D.N.Y. 1996), did not address the AOL site, because “NBA’s complaint and the evidence proffered at trial were devoted largely to SportsTrax.” National Basketball Ass’n v. Sports Team Analysis and Tracking Sys. Inc., 939 F.Supp. 1071, 1074 n. 1 (S.D.N.Y. 1996). Upon motion by the NBA, however, the district court amended its decision and judgment and enjoined use of the real-time game information on STATS’s AOL site. Id. at 1075 n. 1. Because the record on appeal, the briefs of the parties, and oral argument primarily addressed the SportsTrax device, we similarly focus on that product. However, we regard the legal issues as identical with respect to both products, and our holding applies equally to SportsTrax and STATS’s AOL site.

The NBA’s complaint asserted six claims for relief: (i) state law unfair competition by misappropriation; (ii) false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (iii) false representation of origin under Section 43(a) of the Lanham Act; (iv) state and common law unfair competition by false advertising and false designation of origin; (v) federal copyright infringement; and (vi) unlawful interception of communications under the Communications Act of 1934, 47 U.S.C. § 605. Motorola counterclaimed, alleging that the NBA unlawfully interfered with Motorola’s contractual relations with four individual NBA teams that had agreed to sponsor and advertise SportsTrax.

The district court dismissed all of the NBA’s claims except the first-misappropriation under New York law. The court also dismissed Motorola’s counterclaim. Finding Motorola and STATS liable for misappropriation, Judge Preska entered the permanent injunction, reserved the calculation of damages for subsequent proceedings, and stayed execution of the injunction pending appeal. Motorola and STATS appeal from the injunction … .

… .

C. The State-Law Misappropriation Claim

… .

In our view, the elements central to an INS claim are: (i) the plaintiff generates or collects information at some cost or expense; (ii) the value of the information is highly time-sensitive; (iii) the defendant’s use of the information constitutes free-riding on the plaintiff’s costly efforts to generate or collect it; (iv) the defendant’s use of the information is in direct competition with a product or service offered by the plaintiff; (v) the ability of other parties to free-ride on the efforts of the plaintiff would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened.¹⁵⁰

INS is not about ethics; it is about the protection of property rights in time-sensitive information so that the information will be made available to the public by profit seeking entrepreneurs. If services like AP were not assured of property rights in the news they pay to collect, they would cease to collect it. The ability of their competitors to appropriate their product at only nominal cost and thereby to disseminate a competing product at a lower price would destroy the incentive to collect news in the first place. The newspaper-reading public would suffer because no one would have an incentive to collect “hot news.”

We therefore find the extra elements-those in addition to the elements of copyright infringement-that allow a “hotnews” claim to survive preemption are: (i) the time-sensitive value of factual information, (ii) the free-riding by a defendant, and (iii) the threat to the very existence of the product or service provided by the plaintiff.

2 . The Legality of SportsTrax

We conclude that Motorola and STATS have not engaged in unlawful misappropriation under the “hot-news” test set out above. To be sure, some of the elements of a “hot-news” INS claim are met. The information transmitted to SportsTrax is not precisely contemporaneous, but it is nevertheless time-sensitive. Also, the NBA does provide, or will shortly do so, information like that available through SportsTrax. It now offers a service called “Gamestats” that provides official play-by-play game sheets and half-time and final box scores within each arena. It also provides such information to the media in each arena. In the future, the NBA plans to enhance Gamestats so that it will be networked between the various arenas and will support a pager product analogous to SportsTrax. SportsTrax will of course directly compete with an enhanced Gamestats.

However, there are critical elements missing in the NBA’s attempt to assert a “hot-news” INS-type claim. As framed by the NBA, their claim compresses and confuses three different informational products. The first product is generating the information by playing the games; the second product is transmitting live, full descriptions of those games; and the third product is collecting and retransmitting strictly factual information about the games. The first and second products are the NBA’s primary business: producing basketball games for live attendance and licensing copyrighted broadcasts of those games. The collection and retransmission of strictly factual material about the games is a different product: e.g., box-scores in newspapers, summaries of statistics on television sports news, and real-time facts to be transmitted to pagers. In our view, the NBA has failed to show any competitive effect whatsoever from SportsTrax on the first and second products and a lack of any free-riding by SportsTrax on the third.

With regard to the NBA’s primary products-producing basketball games with live attendance and licensing copyrighted broadcasts of those games-there is no evidence that anyone regards SportsTrax or the AOL site as a substitute for attending NBA games or watching them on television. In fact, Motorola markets SportsTrax as being designed “for those times when you cannot be at the arena, watch the game on TV, or listen to the radio …”

The NBA argues that the pager market is also relevant to a “hot-news” INS-type claim and that SportsTrax’s future competition with Gamestats satisfies any missing element. We agree that there is a separate market for the real-time transmission of factual information to pagers or similar devices, such as STATS’s AOL site. However, we disagree that SportsTrax is in any sense free-riding off Gamestats.

An indispensable element of an INS “hot-news” claim is free riding by a defendant on a plaintiff’s product, enabling the defendant to produce a directly competitive product for less money because it has lower costs. SportsTrax is not such a product. The use of pagers to transmit real-time information about NBA games requires: (i) the collecting of facts about the games; (ii) the transmission of these facts on a network; (iii) the assembling of them by the particular service; and (iv) the transmission of them to pagers or an on-line computer site. Appellants are in no way free-riding on Gamestats. Motorola and STATS expend their own resources to collect purely factual information generated in NBA games to transmit to SportsTrax pagers. They have their own network and assemble and transmit data themselves.

To be sure, if appellants in the future were to collect facts from an enhanced Gamestats pager to retransmit them to SportsTrax pagers, that would constitute free-riding and might well cause Gamestats to be unprofitable because it had to bear costs to collect facts that SportsTrax did not. If the appropriation of facts from one pager to another pager service were allowed, transmission of current information on NBA games to pagers or similar devices would be substantially deterred because any potential transmitter would know that the first entrant would quickly encounter a lower cost competitor free-riding on the originator’s transmissions.¹⁵¹

However, that is not the case in the instant matter. SportsTrax and Gamestats are each bearing their own costs of collecting factual information on NBA games, and, if one produces a product that is cheaper or otherwise superior to the other, that producer will prevail in the marketplace. This is obviously not the situation against which INS was intended to prevent: the potential lack of any such product or service because of the anticipation of free-riding.

For the foregoing reasons, the NBA has not shown any damage to any of its products based on free-riding by Motorola and STATS, and the NBA’s misappropriation claim based on New York law is preempted.

… .

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