LexisNexis Publisher Backs Banks In 'Hot News' Reposting Case
Chiming in on a high-profile dispute, the business-to-business publishing company Reed Elsevier is asking a federal appeals court to uphold a finding that TheFlyOnTheWall.com misappropriates banks' "hot news" by reposting their stock recommendations.
Reed Elsevier says in a recent court filing that it could face "devastating economic effects" if it lost the ability to prevent other publishers from summarizing its time-sensitive material. The company runs news services like The Pink Sheet Daily, which offers updated news about the biopharmaceutical industry, and ICIS.com, a news service about the chemical industry. It also owns the LexisNexis databases.
"Reed Elsevier has invested and continues to invest billions of dollars in the collection, organization, and verification of the information provided through these services in print, email, and via the internet," the company says in its legal papers, adding that laws preventing misappropriation prevent "economically destructive conduct by those who wish to reap where they have not sown."
The current legal debate about hot news stems from a lawsuit by Barclays, Bank of America's Merrill Lynch and Morgan Stanley, alleging that the site TheFlyOnTheWall.com unlawfully posted summaries of the banks' time-sensitive research before their clients received the information.
U.S. District Court Judge Denise Cote in New York in March ruled in favor of the banks and ordered the TheFlyOnTheWall.com to refrain from publishing summaries of much of the banks' research until 10 a.m. on trading days -- even where other publishers had already posted the same material.
The Web site appealed and the Second Circuit lifted the injunction while it considers the matter.
Cote based her decision on a 1918 U.S. Supreme Court decision holding that rewriting another publication's scoops is actionable as a misappropriation of hot news.
That ruling has drawn much outside interest, with companies like Google and Twitter as well as digital rights groups backing TheFlyOnTheWall.com, while Reed Elsevier and others back the banks.
Google and Twitter argue that the concept that news can be time-sensitive no longer makes sense. "In a world of modern communications technology, where anyone with a cell phone may disseminate news throughout the world even as it is occurring, the notion that a single media outlet should have a monopoly on time-sensitive facts is not only contrary to law, it is, as a practical matter, futile," they argued.
Reed Elsevier specifically urges the court to reject Google and Twitter's argument, writing that the companies' position "represents a complete dismissal of the business reality that ... fact-laden information sources do not appear out of thin air, but instead require the maintenance of incentives so that their producers may continue to make them available to the public."