Copyright Law: Analysts' Opinions Copyrightable, Not "Hot News"

Above - Tipstrader.com is no longer operating

Sometimes your case is a winner, but not for the reasons you thought.  That's why litigators, much to the frustration of judges, tend to toss the kitchen sink into a complaint.  Better to have a grouchy judge and have pleaded at least one winning alternative theory than to lose and have the court say you're too late and should have cooked up an alternative theory earlier.

Such was plaintiff's dilemma in Agora Financial LLC v. Samler, ---- F. Supp.2d ---- 2010 WL 2899036 (D. Md. June 17, 2010).

In Agora, a magistrate judge was called to report and recommend after a defendant had defaulted.  The facts: investment newsletter publisher sued website that culled all of its recommendations and published them on Tipstrader.com.   Claims?   "Hot news misappropriation" and Section 43(a) of the Lanham Act.

A nice, lean complaint, just like they tell us to file.  Right?  Wrong.

In an interesting decision that explained the "hot news" misappropriation claim, the court ruled that the defendants had not violated the "hot news" exception because the analyst recommendations were opinions, not facts, and thus were protectable under copyright law.  

"Hot news" misappropriation:

(i) the plaintiff generates or gathers 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 ...; and (v) the ability of other parties to free-ride on the efforts of the plaintiff or others would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened....


Since copyright law preempts equivalent state law claims, the "hot news" misappropriation claim was not available.   The Lanham Act claim failed as well.

The court, discussing the U.S. Supreme Court's Feist opinion, which rejected the "sweat of the brow" doctrine and required a modicum of originality to qualify for copyright, found the analyst's opinions to satisfiy the originality test and thus be covered by copyright.  So the plaintiff lost the application for a default, but was granted the gift of learning that its activities are protected by copyright law.

In Copyright Litigation Handbook, Chapter 7 "Drafting the Infringement Complaint" gives some thoughts on framing copyright pleadings.   Chapter 10: "Removal from State Court and Preemption" reviews problems raised by the preemption doctrine and gives guidance in navigating the differences between state and federal claims in the copyright context.

The 2010 Copyright Litigation Handbook just shipped, so now is a good time to get your copy.  This year I greatly expanded my treatment of applications for default judgments, which seems to be a growing area of copyright law.

Westlaw users can access Copyright Litigation Handbook through the COPYLITIG database.

More on preemption here.

More on hot news here.

More on default judgments here.

More on Feist here.

 Purchase the 2010 Copyright Litigation Handbook from West here  

Beware of Default Judgments: Captcha Gotcha Spammers Under Digital Millenium Copyright Act

Craigslist is a wildly popular service for posting free classified advertisements.  Over the years I have hired a number of employees through Craigslist - responding quickly to an ad shows tech savvy, computer literacy and some level of good judgment.

Over the years we have all entered fuzzy, annoying-looking numbers and words into Captcha fields probably without thinking too much about it.   Captcha is a free spam-proofing device used by many websites to ensure that a human being is entering a website and using it for legitimate purposes.  There are numerous providers of Captchas, check out here and here.

From Wikipedia:

A CAPTCHA or Captcha (pronounced /ˈkæptʃə/) is a type of challenge-response test used in computing to ensure that the response is not generated by a computer. The process usually involves one computer (a server) asking a user to complete a simple test which the computer is able to generate and grade. Because other computers are unable to solve the CAPTCHA, any user entering a correct solution is presumed to be human. Thus, it is sometimes described as a reverse Turing test, because it is administered by a machine and targeted to a human, in contrast to the standard Turing test that is typically administered by a human and targeted to a machine. A common type of CAPTCHA requires that the user type letters or digits from a distorted image that appears on the screen.

I found one 2007 case finding CAPTCHA to be a technological measure to protect copyrighted materials, the circumvention of which would be a violation of the Digital Millenium Copyright Act. Ticketmaster L.L.C. v. RMG Technologies, Inc., 507 F. Supp. 2d 1096 (C.D. Cal. 2007)

In Craigslist, Inc. v. Naturemarket, Inc., C 08-5065 PJH, 2010 WL 807446 (N.D. Cal. Mar. 5, 2010) Craigslist sued a spammer who offered software that did auto posting on Craigslist and sold telephone-verified Craigslist accounts to other spammers or marketers.  To develop the software, the spammer had to access Craigslist, obtain data, code and images, steal telephone-verified accounts, and distribute that information.

When we go on a website, we usually click "I accept" the terms of use ("TOU").  This creates a contract or license agreement (a k a "end user license agreement" or EULA) governing use of the information obtained through the website or database accessed.

In Craigslist, Inc. v. Naturemarket, Inc., Craigslist sought to pursue the spammer through the Digital Millenium Copyright Act and through the terms of the TOU (essentially contract claims).

Craiglist was told by the spammer that he'd sold about $40,000 worth of the autoposter software.  Craigslist pursued both  Digital Millennium Copyright Act, 17 U.S.C. §§ 1201 ("DMCA") and the TOU (Contract) claims.

The spammer did not hire a lawyer to defend the lawsuit and failed to respond to pleadings and court notices.

Craiglist obtained default judgments pursuant to Rule 55 of the Federal Rules of Civil Procedure under both the DMCA for statutory damages of $470,000 and under the TOU (Contract) for $840,000. The court found the liquidated damages clause of $200 per unauthorized post to be enforceable.   The court accepted Craigslist's lowest estimate of unauthorized posts.  The spammer, Igor Gasov was held personally liable.

 Craigslist alleged that Defendants violated § 1201(a)(2) and (b)(1) of the DMCA. “A plaintiff alleging a violation of § 1201(a)(2) must prove: (1) ownership of a valid copyright on a work, (2) effectively controlled by a technological measure, which has been circumvented, (3) that third parties can now access (4) without authorization, in a manner that (5) infringes or facilitates infringing a right protected by the Copyright Act, because of a product that (6) the defendant either (I) designed or produced primarily for circumvention; (ii) made available despite only limited commercial significance other than circumvention; or (iii) marketed for use in circumvention of the controlling technological measure.” Ticketmaster L.L. C., 507 F.Supp.2d at 1111 (quoting Chamberlain Group, Inc. v. Skylink Tech., Inc., 381 F.3d 1178, 1203 (Fed.Cir.2004)).

The court found defendant's "auto poster" software to be a product violating the DMCA because it permitted posters to circumvent Craigslist's Captcha and telephone verification controls.

Looking at Google, we can see that the spammers did not get the message that auto poster software and selling verified Craigslist accounts can lead to significant personal liability.  It appears that the market for spamming Craiglist is quite large.  It is very dangerous not to defend these cases.   Craigslist's lawyers were awarded $65,038.20 in legal fees and $1,712.07 in costs.