• by Wendy Davis  @wendyndavis, May 12, 2010

A federal judge has rejected Theflyonthewall.com's request to resume publishing banks' stock recommendations early in the morning. U.S. District Court Judge Denise Cote in New York ruled that the site had not shown that it was likely to suffer "irreparable harm" as a result of her earlier injunction banning publication of summaries of banks' reports before 10 a.m.

The Fly had asked Cote to lift the order, arguing that the ban had resulted in two subscriber cancellations within a few days. But Cote said that the company's preliminary drop-off in subscribers was relatively minor. "Fly is a service with many thousands of subscribers; the loss of two represents, at most, a $100 decline in monthly revenue," she ruled, adding that the "modest" loss didn't show a likelihood of irreparable harm.

In March, Cote ruled that The Fly misappropriated hot news of Barclays, Bank of America's Merrill Lynch and Morgan Stanley by posting summaries of their time-sensitive research and recommendations before their clients had received them.

Fly had argued that much of the material was already public because other news organizations had published it by the time Fly sent it out. But Cote indicated that all of those publishers might be misappropriating the banks' work. At the time, she said she would be willing to revisit the injunction in one year and would consider lifting it unless the banks also took steps to stop its research from being summarized by other publishers.

Last month, Fly asked Cote to lift the injunction on a variety of grounds. In addition to arguing that it was being hurt by the order, the Web site argued that the ban on publication violates its free speech rights.

Some outside experts agreed that the ban was problematic. Sam Bayard, assistant director at the Citizen Media Law Project, told Online Media Daily in March that Cote's order didn't appear to take into account the First Amendment implications of banning a company from summarizing news that has been publicly reported on other sites.

"It's regulation of speech to say, 'You must delay your publication of this news that's in the public domain, that's been publicly reported by others,'" Bayard said.

But Cote found that Fly "abandoned" its First Amendment argument by failing to pursue it at trial.

Fly's lawyer, Glenn Ostrager, says the company has asked the Second Circuit to stay Cote's injunction and also is appealing the original finding that the company violated the hot news doctrine.