HOT NEWS VS NEW MEDIA

BY: http://www.economist.com/blogs/babbage/2011/02/internet_and_media_law?fsrc=scn/fb/wl/bl/hotnewsvnewmedia

EVERY journalist loves a scoop. Lawyers are starting to love them too. They are hoping to use a 1918 decision from America's Supreme Court, stemming from an argument over war coverage between William Randolph Hearst (pictured above), a press baron, and the Associated Press, to protect the business models of traditional publishers against internet-based rivals. The case gives legal protection to "hot news", ostensibly to encourage news gathering. Although the facts of the original case concern telegraphs, the issues go to the heart of today's internet news business, the efficiency of markets and freedom of speech. 

During the closing stages of the first world war Mr Hearst's International News Service (INS) was banned from Allied-controlled telegraph lines for what was seen as over-excited reporting of British losses ("Zeppelins set London ablaze!"). Unable to transmit its own news back from the front, INS started rewriting Associated Press (AP) dispatches instead. AP sued, and INS responded that AP had no case under copyright because it had rewritten the dispatches. Facts are not protected by copyright—only the expression of them in a specific piece of text. 

Eventually a majority of the Supreme Court came to agree with AP. Justice Mahlon Pitney, writing the majority opinion, rejected the idea that there might be any intellectual-property protection for news itself. "It is not to be supposed that the framers of the Constitution...intended to confer upon one who might happen to be the first to report a historic event the exclusive right for any period to spread the knowledge of it," he argued. But he couldn't let go his conviction that INS wasn't playing fair, and that the rules of fair competition needed to be upheld. So he argued that the gathering of news did create a "quasi property right", and although that right should not constrain the newspaper-buying public, it should prevent a commercial competitor from using AP's news for its own gain. 

In dissent, Justice Louis Brandeis argued that Justice Pitney should have just swallowed his moral indignation. "To appropriate and use for profit, knowledge and ideas produced by other men, without making compensation or even acknowledgment, may be inconsistent with a finer sense of propriety; but, with the exceptions indicated above, the law has heretofore sanctioned the practice," he argued. To create a new property right would just make a mess unless it could be clearly defined and enforced—and Justice Pitney's quasi-right for news seemed to do neither. Nearly a hundred years later, the courts are starting to test Justice Brandeis's point.

The case now reviving interest in this antique dispute concerns a tiny website called Theflyonthewall.com. 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?

Even in the realm of more-or-less traditional news outlets, there would seem to be a lot of information sharing that would have to be carefully parsed if the hot-news doctrine were to be consistently applied. Jonathan Stray, an Associated Press journalist working with Harvard's Nieman Foundation, analysed the 121 unique articles thrown up by Google News concerning a school of Chinese hackers that penetrated Google, for example. His best reckoning was that only 13 contained original reporting. 

Google's representative at the Theflyonthewall appeal argued that the internet makes the whole concept of hot news outdated. Breaking news goes from being unknown to widely known so quickly that there is no longer any chance to misappropriate its value. The EFF argued that more and faster information flow was generally a good thing. In the numerous collisions between intellectual-property law and the First Amendment since the hot-news doctrine was created, free speech has usually trumped property. So the EFF particularly urges the Second Circuit to test the hot-news criteria against this evolved body of First Amendment law.

At the end of the day the real test of the hot-news doctrine will be that posed sceptically by Justice Brandeis. Whatever the Second Circuit decides in its forthcoming ruling, can it be enforced simply and efficiently?