Hot News to Meltwater

February 21, 2012 News

A battle is brewing in the media world. The protagonist is an established news organization, and the antagonist is an ambitious young Internet company. Oh wait, you’ve heard this one before?

As even casual observers of the media industry know, this is not exactly a novel type of conflict. Ever since the rise of the Internet, traditional television and newspaper outlets have scrambled to adapt.

But last week, the 170-year-old Associated Press picked a legal fight with one of the youthful news aggregating websites that are upending traditional business models. AP is suing Meltwater, an 11-year-old company that offers a paid news clipping service. As a “news clipping service,” clients pay Meltwater to aggregate information about a particular topic, keyword or phrase. Clients can receive synthesized daily reports, without having to go through the trouble of separately reading hundreds of news websites. Such media monitoring services are hardly new. But in a world where fewer people are willing to pay for their news and information, traditional news services resent losing consumers to companies like Meltwater (which generally don’t do any original reporting of their own).

Filed in the United States District Court in the Southern District of New York, the 135-page complaint seeks an injunction and monetary damages. There are essentially two sets of claims: the first is a traditional copyright infringement argument, and the second is a more specific copyright claim for misappropriation of “hot news.” The second claim is actually the more interesting of the two, so let’s review the first quickly:

Basically AP asserts that Meltwater “routinely [copies] verbatim the heart of the AP’s and other publishers’ news stories and selling that content to its subscribers for a profit.” Moreover, “Meltwater has built its business on the willful exploitation and copying of the AP’s and other publishers’ news articles for profit.” The complaint notes that Meltwater stores full-text versions of AP articles, available for clients to review at any time. AP asserts that, through its storage, excerpts, full text, and translation services, Meltwater engages in 1) direct, 2) contributory, and 3) vicarious copyright infringement.

The complaint is not shy about tying this infringement to the overall decline of traditional media. “AP bears all the costs associated with creating its content, while Meltwater bears only the minimal costs of distribution in the Internet age, and thus can undercut AP with lower subscription rates.” That single sentence eloquently summarizes the paralyzing fear of aggregation sites like the Huffington Post and Google News, which do little more than compile other companies’ original content. The complaint mentions that employment in broadcast television and newspaper newsrooms has declined 26% in the past two decades, and attributes that decline to “parasitic” aggregators like Meltwater. Nothing like a suit with some name-calling.

As for the second claim, AP also asserts that Meltwater infringes on its “hot news” rights. This is an evolving area of law that could be dramatically affected by the outcome of this case. The “hot news” doctrine actually originated out of a (much earlier) case also involving the Associated Press, International News Service v. Associated Press, 248 U.S. 215 (1918). There, the Supreme Court considered two competing news services, AP and INS. Both aimed to collect and disseminate news as quickly as possible, particularly in the context of the First World War. INS writers were found to be rewriting and publishing the original reports of AP under their own bylines. INS tried to argue that AP had no copyright since the reports were merely factual accounts of transpiring events. The Court agreed that mere news items—the factual accounts of a given day—were not copyrightable. However, the Court also recognized the unique economic interests of news services in doing fast reporting. In its majority opinion, the Justices acknowledged what they called a “quasi-property” right in such immediate news, even if the news was reworded by others to avoid copyright infringement.

This type of doctrine made a great deal of sense in a world where there were only a handful of newsgathering companies. But imagine the “hot news” idea in the world of Twitter, where reporters from the New York Times all “follow” reporters from the Washington Post (and vice versa) to get breaking updates. How is the “hot news” doctrine applied to a situation where one reporter tweets a news item, and then reporters around the world suddenly tweet the same information (instead of retweeting it)? Anyone who has ever used Twitter knows that this happens every hour of every day, as it does on countless other media-sharing websites. In that context, the current applicability of the “hot news” doctrine is unsettled.

Nevertheless, AP asserts that “the news stories [it] gathers are highly time-sensitive… [and] Defendant’s use of AP’s stories constitutes free-riding on AP’s significant, costly efforts to generate” its content.

What does Meltwater have to say for itself regarding AP’s two claims? The company has not yet filed its reply brief, but it did post a short statement on its website. Not surprisingly, they deny infringement and also criticize AP for not entering into negotiation before filing suit. “It is unfortunate that the AP did not seek to discuss this with us prior to taking this wholly unnecessary step,” Meltwater wrote. “We invite the AP to enter a dialogue so that we can better understand their concerns and so they can accurately understand how our service works.”

The probable result, in this case, is not so clear. For a little personal disclosure, I admit that I have a bias for “traditional” news services. In college, I was editor of Vassar’s weekly newspaper. The paper was founded in 1866, exactly two decades after the AP. After our editors worked tirelessly on a story for a week, I remember becoming furious when a freshman’s blog would summarize our article, without citing us, and proceed to get more web traffic from students, faculty, and alumni. The college community would be discussing that thieving blog, rather than acknowledging our paper’s hard work in gathering facts, conducting interviews, and laying out the paper. So I empathize with the AP’s justifiable anger.

Their direct infringement claims appear relatively strong, especially if Meltwater is really storing entire articles and essentially reselling them to clients. AP claims that it has lost clients like the Department of Homeland Security and Lexis Nexis to Meltwater, which is a compelling case for damages.

But their “hot news” claim seems less certain. As mentioned above, the doctrine seems a bit antiquated in the 21st century. Tech companies like Google and Twitter have argued that the principle is no longer valid, given the speed with which news travels online. Very few “consumers” can identify who first reported a story—whether it was NBC, The New York Times, or the AP doesn’t really seem to matter. As soon as one of them covers the story, the news is everywhere within seconds.

Courts have taken notice of the declining influence of the idea of “hot news.” The doctrine was given a significant setback in June 2011, when the Second Circuit Court of Appeals ruled that the concept did not apply to another online news gatherer. In that case,
Barclays Capital Inc. v., Inc., 650 F.3d 876, 878 (2d Cir. 2011), the defendant operates a financial news service that gathered stock recommendations from investment banking firms like Merrill Lynch and Lehman Brothers. These firms together claimed that the information was “hot news” and that the website was misappropriating the recommendations. While the trial court agreed, ordering the site to delay reporting of the financial recommendations for two hours the Second Circuit reversed. The Court stressed that, although there seemed to be both a financial and moral harm to the investment companies, the website had the right to collect and publish factual information.

If that 2011 ruling is any guidance, AP seems unlikely to prevail against Meltwater, at least on the “hot news” claim. But given that AP apparently did not even attempt to contact or negotiate with Meltwater before filing suit, it seems that the company is mostly interested in taking a stand—a strong position on the relationship between “traditional” news sources and the many websites that take advantage of them. Ultimately, this will be a very useful case in clarifying the boundaries of the “hot news” doctrine—a doctrine that, like many in intellectual property, must change with the times.

Brian Farkas