News To Me: Judge Says Stock Tips Aren't 'Hot News'

A federal judge in Maryland said recently that stock recommendations should not be considered "hot news," but might deserve copyright protection. The decision, quietly issued several weeks ago, comes as the 2nd Circuit Court of Appeals is considering a nearly identical issue in a closely watched lawsuit by three investment banks against TheFlyOnTheWall.com.

The Maryland case, like the lawsuit involving The Fly, pitted publishers of financial research against the operator of the Web site Tipstraders.com. The research companies alleged that the site lists "hundreds" of financial analysts along with information about their investment recommendations, according to the report.

The research companies sued the site operator for misappropriating hot news, or rewriting their time-sensitive exclusives. The defendant didn't file an answer, and the research companies then moved for a default judgment.

U.S. Magistrate Judge Beth Gesner recommended rejecting the companies' request, ruling that the financial companies had not presented a valid "hot news" claim. Her reasoning, however, is already raising eyebrows.

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She wrote that stock recommendations are not "factual information," and therefore, cannot constitute hot news. Gesner went on to state that the recommendations are original, and therefore may be independently copyrightable.

"A recommendation to invest in a company is not a fact, but instead an 'original' work," she wrote, adding that it involves judgment and creativity by the analysts. "While plaintiffs may be able to protect their 'original' investment recommendations under federal copyright law, they cannot protect these recommendations under the 'hot news' misappropriation theory."

Santa Clara University law professor Eric Goldman, who today publicized the report, criticized Gesner's conclusions. "Even the plaintiff admitted that the recommendations were uncopyrightable facts," he wrote. "So now what? Does this now mean everyone who republishes the recommendations is a copyright infringer?"

Most courts have held that facts can't be copyrighted, but the expression of facts can be. That's why reposting an article or other report verbatim often is seen as violating copyright law, but rewriting and summarizing it is not.

But at least one other court has held that ratings are independently copyrightable, according to Goldman.

Meanwhile, the 2nd Circuit Court of Appeals heard arguments on Friday about whether a trial judge correctly banned The Fly from publishing banks' recommendations before 10 a.m. That case drew the attention of companies like Google and Twitter, who argue that hot news is obsolete in the Internet era, as well as The Associated Press and Reed Elsevier, who say that courts should continue to allow lawsuits for hot news misappropriation.

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