The
NATIONAL BASKETBALL ASSOCIATION and NBA Properties, Inc., Plaintiff-
Counter-Defendant-Appellee-Cross-Appellant,
v.
MOTOROLA,
INC. doing business as SportsTrax, Defendant-Counter-Claimant-
Appellant-Cross-Appellee,
Sports
Team Analysis and Tracking Systems, Inc. doing business as Stats, Inc.,
Defendant-Appellant-Cross-Appellee.
105 F.3d 841 (2d Cir. 1997)
WINTER, Circuit Judge:
Motorola, Inc. and Sports Team Analysis and Tracking Systems
("STATS") appeal from a permanent injunction entered by Judge
Preska. The injunction concerns a
handheld pager sold by Motorola and marketed under the name
"SportsTrax," which displays updated information of professional
basketball games in progress. The
injunction prohibits appellants, absent authorization from the National
Basketball Association and NBA Properties, Inc. (collectively the "NBA"),
from transmitting scores or other data about NBA games in progress via the
pagers, STATS's site on America On-Line's computer dial-up service, or
"any equivalent means."
The crux of the dispute concerns the extent to which a state law
"hot-news" misappropriation claim based on International News
Service v. Associated Press, 248 U.S. 215
(1918) ("INS
"), survives preemption by the federal
Copyright Act and whether the NBA's claim fits within the surviving INS-type
claims. We hold that a narrow
"hot-news" exception does survive preemption. However, we also hold that appellants'
transmission of "real-time" NBA game scores and information tabulated
from television and radio broadcasts of games in progress does not constitute a
misappropriation of "hot news" that is the property of the NBA. . . .
I. BACKGROUND
The facts are largely undisputed.
Motorola manufactures and markets the SportsTrax paging device while
STATS supplies the game information that is transmitted to the pagers. The product became available to the public
in January 1996, at a retail price of about $200. SportsTrax's pager has an inch-and-a-half by
inch-and-a-half screen and operates in four basic modes: "current,"
"statistics," "final scores" and
"demonstration." It is the
"current" mode that gives rise to the present dispute. In that
mode, SportsTrax displays the following information on NBA games in
progress: (i) the teams playing; (ii) score
changes; (iii) the team in possession of
the ball; (iv) whether the team is in
the free-throw bonus; (v) the quarter of
the game; and (vi) time remaining in the
quarter. The information is updated every two to three
minutes, with more frequent updates near the end of the first half and the end
of the game. There is a lag of
approximately two or three minutes between events in the game itself and when
the information appears on the pager screen.
SportsTrax's operation relies on a "data feed" supplied by
STATS reporters who watch the games on television or listen to them on the
radio. The reporters
key into a personal computer changes in the score and other information such as
successful and missed shots, fouls, and
clock updates. The information is
relayed by modem to STATS's host computer, which compiles, analyzes, and
formats the data for retransmission.
The information is then sent to a common carrier, which then sends it
via satellite to various local FM radio networks that in turn emit the signal
received by the individual SportsTrax pagers.
Although the NBA's complaint concerned only the SportsTrax device, the NBA offered evidence at trial concerning STATS's America On-Line ("AOL") site. Starting in January, 1996, users who accessed STATS's AOL site, typically via a modem attached to a home computer, were provided with slightly more comprehensive and detailed real-time game information than is displayed on a SportsTrax pager. On the AOL site, game scores are updated every 15 seconds to a minute, and the player and team statistics are updated each minute. The district court's original decision and judgment, National Basketball Ass'n v. Sports Team Analysis and Tracking Sys. Inc.,
931 F.Supp. 1124 (S.D.N.Y.1996), did not address the AOL site, because "NBA's complaint and the evidence proffered at trial were devoted largely to SportsTrax." National Basketball Ass'n v. Sports Team Analysis and Tracking Sys. Inc., 939 F.Supp. 1071, 1074 n. 1 (S.D.N.Y.1996). Upon motion by the NBA, however, the district court amended its decision and judgment and enjoined use of the real-time game information on STATS's AOL site. Id. at 1075 n. 1. Because the record on appeal, the briefs of the parties, and oral argument primarily addressed the SportsTrax device, we similarly focus on that product. However, we regard the legal issues as identical with respect to both products, and our holding applies equally to SportsTrax and STATS's AOL site.The NBA's complaint asserted six claims for relief: (i) state law unfair competition by
misappropriation; (ii) false advertising
under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a);
(iii) false representation of origin under Section 43(a) of the Lanham
Act; (iv) state and common law unfair
competition by false advertising and false designation of origin; (v) federal copyright infringement; and (vi) unlawful interception of
communications under the Communications Act of 1934, 47 U.S.C. § 605.
Motorola counterclaimed, alleging that the NBA unlawfully interfered
with Motorola's contractual relations with four individual NBA teams that had
agreed to sponsor and advertise SportsTrax.
The district court dismissed all of the NBA's claims except the first--
misappropriation under New York law.
The court also dismissed Motorola's counterclaim. Finding Motorola and STATS liable for
misappropriation, Judge Preska entered the permanent injunction, reserved the calculation of damages for
subsequent proceedings, and stayed execution of the injunction pending
appeal. . . . .
II. THE STATE LAW MISAPPROPRIATION CLAIM
A. Summary of Ruling
Because our disposition of the state law misappropriation claim rests
in large part on preemption by the Copyright Act, our discussion necessarily
goes beyond the elements of a misappropriation claim under New York law, and a
summary of our ruling here will perhaps render that discussion--or at least the
need for it--more understandable.
The issues before us are ones that have arisen in various forms over
the course of this century as technology has steadily increased the speed and
quantity of information transmission. Today, individuals at home, at work, or
elsewhere, can use a computer, pager, or other device to obtain highly
selective kinds of information virtually at will. International
News Service v. Associated Press, 248 U.S. 215 (1918) ( "INS
") was one of the first cases to address the issues raised by these technological advances, although the technology
involved in that case was primitive by contemporary standards. INS involved two wire services, the
Associated Press ("AP") and International News Service ("INS"), that transmitted newsstories by wire to member
newspapers. Id. INS would lift factual stories from AP
bulletins and send them by wire to INS papers.
Id. at 231. INS would also take factual stories from
east coast AP papers and wire them to INS papers on the west coast that had yet
to publish because of time differentials.
Id. at 238. The Supreme Court held that INS's conduct
was a common-law misappropriation of AP's property. Id. at 242.
With the advance of technology, radio stations began "live"
broadcasts of events such as baseball games and operas, and various
entrepreneurs began to use the transmissions of others in one way or another
for their own profit. In response, New York courts created a body of
misappropriation law, loosely based on INS, that sought to apply ethical
standards to the use by one party of another's transmissions of events.
Federal copyright law played little active role in this area until
1976. Before then, it appears to have
been the general understanding--there being no caselaw of consequence--that
live events such as baseball games were not copyrightable. Moreover, doubt existed even as to whether a
recorded broadcast or videotape of such an event was copyrightable. In 1976, however, Congress passed legislation expressly affording
copyright protection to simultaneously-recorded broadcasts of live performances
such as sports events. See 17
U.S.C. § 101. Such protection was not extended to the
underlying events.
The 1976 amendments also contained provisions preempting state law
claims that enforced rights "equivalent" to exclusive copyright
protections when the work to which the state claim was being applied fell
within the area of copyright protection.
See 17 U.S.C. §
301. Based on legislative
history of the 1976 amendments, it is generally agreed that a
"hot-news" INS-like claim survives preemption. H.R. No. 94-1476 at 132 (1976), reprinted
in 1976 U.S.C.C.A.N. 5659, 5748.
However, much of New York misappropriation law after INS goes
well beyond "hot-news" claims and is preempted.
We hold that the surviving "hot-news" INS-like claim
is limited to cases where: (i) a
plaintiff generates or gathers information at a cost; (ii) the information is time-sensitive; (iii) a defendant's use of the information
constitutes free riding on the plaintiff's efforts; (iv) the defendant is in direct competition
with a product or service offered by the plaintiffs; 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. We conclude that SportsTrax does not meet that
test.
B. Copyrights in Events or Broadcasts of Events
The NBA asserted copyright infringement claims with regard both to the
underlying games and to their broadcasts.
The district court dismissed these claims, and the NBA does not appeal
from their dismissal. Nevertheless,
discussion of the infringement claims is necessary to provide the framework for
analyzing the viability of the NBA's state law misappropriation claim in light
of the Copyright Act's preemptive effect.
1. Infringement of a Copyright in the Underlying Games
In our view, the underlying basketball games do not fall within the
subject matter of federal copyright protection because they do not constitute
"original works of authorship" under 17 U.S.C. § 102(a).
Section 102(a) lists eight categories of "works of authorship"
covered by the act, including such categories as "literary works,"
"musical works," and "dramatic works." The list
does not include athletic events, and, although the list is concededly
non-exclusive, such events are neither similar nor analogous to any of the
listed categories.
Sports events are not "authored" in any common sense of the
word. There is, of course, at least at
the professional level, considerable preparation for a game. However, the preparation is as much an
expression of hope or faith as a determination of what will actually
happen. Unlike movies, plays,
television programs, or operas, athletic events are competitive and have no
underlying script. Preparation may even
cause mistakes to succeed, like the broken play in football that gains yardage
because the opposition could not expect it. Athletic events may also result in
wholly unanticipated occurrences, the most notable recent event being in a
championship baseball game in which interference with a fly ball caused an
umpire to signal erroneously a home run.
What
"authorship" there is in a sports event, moreover, must be open to
copying by competitors if fans are to be attracted. If the inventor of the T- formation in
football had been able to copyright it, the sport might have come to an end
instead of prospering. Even where
athletic preparation most resembles authorship--figure skating, gymnastics,
and, some would uncharitably say, professional wrestling--a performer who
conceives and executes a particularly graceful and difficult--or, in the case
of wrestling, seemingly painful--acrobatic feat cannot copyright it without
impairing the underlying competition in the future. A claim of being the only athlete to perform
a feat doesn't mean much if no one else is allowed to try.
For many of these reasons, Nimmer on Copyright concludes that
the "[f]ar more reasonable" position is that athletic events are not
copyrightable. 1 M. Nimmer & D.
Nimmer, Nimmer on Copyright § 2.09[F] at 2-170.1 (1996). Nimmer notes that,
among other problems, the number of joint copyright owners would arguably
include the league, the teams, the athletes, umpires, stadium workers and even
fans, who all contribute to the "work."
Concededly, caselaw is scarce on the issue of whether organized events
themselves are copyrightable, but what there is indicates that they are not. See
Production Contractors, Inc. v. WGN Continental Broadcasting Co., 622 F.Supp. 1500 (N.D.Ill.1985) (Christmas parade is not a work of authorship entitled to
copyright protection). In
claiming a copyright in the underlying games,
the NBA relied in part on a footnote in Baltimore Orioles, Inc. v. Major
League Baseball Players Assn., 805 F.2d
663, 669 n. 7 (7th Cir.1986), cert. denied, 480 U.S. 941 (1987),
which stated that the "[p]layers' performances" contain the
"modest creativity required for copyright ability." However, the court went on to state,
"Moreover, even if the [p]layers' performances were not sufficiently
creative, the [p]layers agree that the cameramen and director contribute
creative labor to the telecasts." Id. This last sentence indicates that the court
was considering the copyright ability of telecasts--not the underlying games,
which obviously can be played without cameras.
We believe that the lack of caselaw is attributable to a general
understanding that athletic events were, and are, uncopyrightable. Indeed, prior to 1976, there was even doubt
that broadcasts describing or depicting such events, which have a far stronger
case for copyrightability than the events themselves, were entitled to
copyright protection. Indeed, as
described in the next subsection of this opinion, Congress found it necessary
to extend such protection to recorded broadcasts of live events. The fact that Congress did not extend such
protection to the events themselves confirms our view that the district court
correctly held that appellants were not infringing a copyright in the NBA
games.
2. Infringement of a Copyright in the Broadcasts of NBA Games
As noted,
recorded broadcasts of NBA games--as opposed to the games themselves--are now
entitled to copyright protection. The
Copyright Act was amended in 1976 specifically to insure that
simultaneously-recorded transmissions of live performances and sporting events
would meet the Act's requirement that the original work of authorship be
"fixed in any tangible medium of expression." 17 U.S.C. § 102(a). Accordingly, Section 101 of the Act,
containing definitions, was amended to read:
A work consisting of sounds, images, or both, that are
being transmitted, is "fixed" for purposes of this title if a
fixation of the work is being made simultaneously with its transmission.
17 U.S.C. § 101. Congress specifically had sporting events in
mind:
[T]he
bill seeks to resolve, through the definition of "fixation" in
section 101, the status of live broadcasts--sports, news coverage, live
performances of music, etc.--that are reaching the public in unfixed form but
that are simultaneously being recorded.
H.R. No. 94-1476 at
52, reprinted in 1976 U.S.C.C.A.N. at 5665. The House Report also makes clear that it is
the broadcast, not the underlying game, that is the
subject of copyright protection. In
explaining how game broadcasts meet the Act's requirement that the subject
matter be an "original work[ ] of
authorship," 17 U.S.C. § 102(a),
the House Report stated:
When
a football game is being covered by four television cameras, with a director guiding the activities of the four
cameramen and choosing which of their electronic images are sent out to the
public and in what order, there is little doubt that what the cameramen and the
director are doing constitutes "authorship."
H.R. No. 94-1476 at 52, reprinted in
1976 U.S.C.C.A.N. at 5665.
Although the broadcasts are protected under copyright law, the district
court correctly held that Motorola and STATS did not infringe NBA's copyright
because they reproduced only facts from the broadcasts, not the expression or
description of the game that constitutes the broadcast. The "fact/expression dichotomy" is
a bedrock principle of copyright law that "limits severely the scope of
protection in fact-based works." Feist Publications, Inc. v. Rural Tel. Service Co., 499 U.S.
340, 350 (1991). " 'No author may copyright facts or ideas. The copyright is limited to those aspects of
the work--termed 'expression'--that display the stamp of the author's originality.'
" Id.
(quoting Harper & Row, Publishers, Inc. v. Nation Enter., 471 U.S.
539, 547 (1985)).
We agree with the district court that the "[d]efendants provide
purely factual information which any patron of an NBA game could acquire from
the arena without any involvement from the director, cameramen, or others who
contribute to the originality of a broadcast." 939 F.Supp. at 1094. Because the SportsTrax
device and AOL site reproduce only factual information culled from the
broadcasts and none of the copyrightable expression of the games, appellants
did not infringe the copyright of the broadcasts.
C. The State-Law
Misappropriation Claim
The district court's injunction was based on its conclusion that, under
New York law, defendants had unlawfully misappropriated the NBA's property
rights in its games. The district court
reached this conclusion by holding: (i) that the NBA's misappropriation claim
relating to the underlying games was not preempted by Section 301 of the
Copyright Act; and
(ii) that, under New York common law, defendants had engaged in unlawful
misappropriation. Id.
at 1094-1107. We disagree.
1. Preemption Under the Copyright Act
a) Summary
When Congress amended the Copyright Act in 1976, it provided for the
preemption of state law claims that are interrelated with copyright claims in
certain ways. Under 17 U.S.C. § 301, a state law claim is preempted
when: (i) the state law claim seeks to
vindicate "legal or equitable rights that are equivalent" to one of
the bundle of exclusive rights already protected by copyright law under 17
U.S.C. § 106--styled the "general
scope requirement"; and (ii) the
particular work to which the state law claim is being applied falls within the
type of works protected by the Copyright Act under
Sections 102 and 103--styled the "subject matter requirement."4
The district court concluded that the NBA's misappropriation claim was
not preempted because, with respect to the underlying games, as opposed to the
broadcasts, the subject matter requirement was not met. 939 F.Supp. at 1097. The court dubbed as "partial
preemption" its separate analysis of misappropriation claims relating to
the underlying games and misappropriation claims relating to broadcasts of
those games. Id. at 1098, n. 24. The district court then relied on a series
of older New York misappropriation cases involving radio broadcasts that
considerably broadened INS. We
hold that where the challenged copying or misappropriation relates in part to
the copyrighted broadcasts of the games, the subject matter requirement is met
as to both the broadcasts and the games.
We therefore reject the partial preemption doctrine and its anomalous
consequence that "it is possible for a plaintiff to assert claims both for
infringement of its copyright in a broadcast and misappropriation of its rights
in the underlying event." Id.
We do find that a properly-narrowed INS "hot-news"
misappropriation claim survives preemption because it fails the general scope
requirement, but that the broader theory of the radio broadcast cases relied
upon by the district court were preempted when Congress extended copyright
protection to simultaneously-recorded broadcasts.
b)
"Partial Preemption" and the Subject Matter Requirement
The subject matter requirement is met when the work of authorship being
copied or misappropriated "fall[s] within the ambit of copyright
protection." Harper & Row,
Publishers, Inc. v. Nation Enter., 723 F.2d
195, 200 (1983), rev'd on other grounds, 471 U.S. 539
(1985). We believe that the subject
matter requirement is met in the instant matter and that the concept of
"partial preemption" is not consistent with Section 301 of the
Copyright Act. Although game broadcasts
are copyrightable while the underlying games are not, the Copyright Act should
not be read to distinguish between the two when analyzing the preemption of a
misappropriation claim based on copying or taking from the copyrightable
work. We believe that:
[O]nce
a performance is reduced to tangible form, there is no distinction between the
performance and the recording of the performance for the purposes of preemption
under § 301(a). Thus, if a baseball game
were not broadcast or were telecast without being recorded, the Players'
performances similarly would not be fixed in tangible form and their rights of
publicity would not be subject to preemption.
By virtue of being videotaped, however, the Players' performances are
fixed in tangible form, and any rights of publicity in their performances that
are equivalent to the rights contained in the copyright of the telecast are
preempted.
Baltimore Orioles, 805 F.2d at
675 (citation omitted).
Copyrightable material often contains uncopyrightable elements within
it, but Section 301 preemption bars state law misappropriation claims with
respect to uncopyrightable as well as copyrightable elements. In Harper & Row, for example, we
held that state law claims based on the copying of excerpts from President
Ford's memoirs were preempted even with respect to information that was purely
factual and not copyrightable. We
stated:
[T]he
[Copyright] Act clearly embraces "works of authorship," including
"literary works," as within its subject matter. The fact that portions of the Ford memoirs
may consist of uncopyrightable material ... does not take the work as a whole
outside the subject matter protected by the Act. Were this not so, states would be free to
expand the perimeters of copyright protection to their own liking, on the
theory that preemption would be no bar to state protection of material not
meeting federal statutory standards.
723 F.2d at 200 (citation
omitted). The legislative
history supports this understanding of Section 301(a)'s subject matter
requirement. The House Report stated:
As
long as a work fits within one of the general subject matter categories of
sections 102 and 103, the bill prevents the States from protecting it even if
it fails to achieve Federal statutory copyright because it is too minimal or
lacking in originality to qualify, or because it has fallen into the public domain.
H.R. No. 94-1476 at 131, reprinted in
1976 U.S.C.C.A.N. at 5747. See also
Baltimore Orioles, 805 F.2d at
676 (citing excerpts of House Report 94- 1476).
Adoption of a partial preemption doctrine--preemption of claims based
on misappropriation of broadcasts but no preemption of claims based on
misappropriation of underlying facts--would expand significantly the reach of
state law claims and render the preemption intended by Congress unworkable. It
is often difficult or impossible to separate the fixed copyrightable work from
the underlying uncopyrightable events or facts. Moreover, Congress, in extending copyright
protection only to the broadcasts and not to the underlying events, intended that
the latter be in the public domain.
Partial preemption turns that intent on its head by allowing state law
to vest exclusive rights in material that Congress intended to be in the public
domain and to make unlawful conduct that Congress intended to allow. This concern was recently expressed in ProCD,
Inc. v. Zeidenberg, 86 F.3d 1447
(7th Cir.1996), a case in which the defendants reproduced non-copyrightable
facts (telephone listings) from plaintiffs' copyrighted software. In discussing preemption under Section
301(a), Judge Easterbrook held that the subject matter requirement was met and
noted:
ProCD's software and data are "fixed in a tangible medium of expression", and the district judge held that they are "within the subject matter of copyright". The latter conclusion is plainly right for the copyrighted application program, and the judge thought that the data likewise are "within the subject matter of copyright" even if, after Feist, they are not sufficiently original to be copyrighted. [ProCD, Inc. v. Zeidenberg,] 908 F.Supp. [640] at 656-57 [(W.D.Wis. 1996)].
Baltimore Orioles, Inc. v. Major League Baseball Players Ass'n, 805 F.2d 663, 676 (7th Cir.1986), supports that conclusion, with which commentators agree.... One function of § 301(a) is to prevent states from giving special protection to works of authorship that Congress has decided should be in the public domain, which it can accomplish only if "subject matter of copyright" includes all works of a type covered by sections 102 and 103, even if federal law does not afford protection to them. ProCD, 86 F.3d at
1453 (citation omitted).
We agree with Judge Easterbrook and reject the separate analysis of the
underlying games and broadcasts of those games for purposes of preemption.
c) The General Scope
Requirement
Under the general scope requirement, Section 301 "preempts only
those state law rights that 'may be abridged by an act which, in and of itself,
would infringe one of the exclusive rights' provided by federal copyright
law." Computer
Assoc. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 716 (2d Cir.1992)
(quoting Harper & Row, 723 F.2d at
200). However, certain forms
of commercial misappropriation otherwise within the general scope requirement
will survive preemption if an "extra-element" test is met. As stated in Altai:
But
if an "extra element" is "required instead of or in addition to
the acts of reproduction, performance, distribution or display, in order to
constitute a state-created cause of action, then the right does not lie 'within
the general scope of copyright,' and there is no preemption."
Id. (quoting 1 Nimmer on Copyright
§ 1.01[B] at
1-15).
ProCD
was in part an application of the extra-element test. Having held the misappropriation claims to
be preempted, Judge Easterbrook went on to hold that the plaintiffs could bring
a state law contract claim. The court
held that the defendants were bound by the software's shrink-wrap licenses as a
matter of contract law and that the private contract rights were not preempted
because they were not equivalent to the exclusive rights granted by copyright
law. In other words, the contract right
claims were not preempted because the general scope requirement was not
met. ProCD, 86 F.3d at 1455.
We turn, therefore, to the question of the extent to which a
"hot-news" misappropriation claim based on INS
involves extra elements and is not the equivalent of
exclusive rights under a copyright.
Courts are generally agreed that some form of such a claim survives
preemption. Financial Information, Inc. v.
Moody's Investors Service, Inc., 808 F.2d
204, 208 (2d Cir.1986), cert. denied, 484 U.S. 820 (1987)
("FII "). This
conclusion is based in part on the legislative history of the 1976 amendments.
The House Report stated:
"Misappropriation"
is not necessarily synonymous with copyright infringement, and thus a cause of
action labeled as "misappropriation" is not preempted if it is in fact
based neither on a right within the general scope of copyright as specified by section 106
nor on a right equivalent thereto. For
example, state law should have the flexibility to afford a remedy (under
traditional principles of equity) against a consistent pattern of unauthorized
appropriation by a competitor of the facts (i.e., not the literary expression)
constituting "hot" news, whether in the traditional mold of International
News Service v. Associated Press, 248 U.S. 215 (1918), or in the newer form of data updates
from scientific, business, or financial data bases.
H.R. No. 94-1476 at
132, reprinted in 1976 U.S.C.C.A.N. at 5748 (footnote omitted), see also FII,
808 F.2d at 209 (" 'misappropriation' of 'hot' news, under International
News Service, [is] a branch of the unfair competition doctrine not
preempted by the Copyright Act according to the House Report" (citation
omitted)). The crucial question,
therefore, is the breadth of the "hot-news" claim that
survives preemption.
In INS, the plaintiff AP and defendant INS were "wire
services" that sold news items to client newspapers. AP brought suit to prevent INS from selling
facts and information lifted from AP sources to INS-affiliated newspapers. One method by which INS was able to use AP's
news was to lift facts from AP news bulletins.
INS, 248 U.S. at
231, 39 S.Ct. at 69-70. Another method was to sell facts taken from
just-published east coast AP newspapers to west coast INS newspapers whose
editions had yet to appear. Id. at 238. The Supreme Court held (prior to Erie R. Co.
v. Tompkins, 304 U.S. 64 (1938)), that INS's use of AP's information
was unlawful under federal common law.
It characterized INS's conduct as
amount[ing]
to an unauthorized interference with the normal operation of complainant's
legitimate business precisely at the point where the profit is to be reaped, in
order to divert a material portion of the profit from those who have earned it to those who have not; with special
advantage to defendant in the competition because of the fact that it is not
burdened with any part of the expense of gathering the news.
INS,
248 U.S. at 240.
The theory of the New York misappropriation cases relied upon by the
district court is considerably broader than that of INS. For example, the district court quoted at
length from Metropolitan
Opera Ass'n v. Wagner-Nichols Recorder Corp., 199 Misc. 786, 101
N.Y.S.2d 483 (N.Y.Sup.Ct.1950), aff'd, 279 A.D. 632, 107 N.Y.S.2d 795
(1st Dep't 1951). Metropolitan Opera
described New York misappropriation law as standing for the "broader
principle that property rights of commercial value are to be and will be
protected from any form of commercial immorality"; that misappropriation law developed
"to deal with business malpractices offensive to the ethics of [ ]
society"; and that the doctrine is
"broad and flexible." 939 F.Supp. at 1098-1110 (quoting Metropolitan
Opera, 101 N.Y.S.2d
at 492, 488-89).
However, we believe that Metropolitan Opera 's
broad misappropriation doctrine based on amorphous concepts such as
"commercial immorality" or society's "ethics" is
preempted. Such concepts are virtually
synonymous for wrongful copying and are in no meaningful fashion
distinguishable from infringement of a copyright. The broad misappropriation doctrine relied
upon by the district court is, therefore, the equivalent of exclusive rights in
copyright law. . . .
Our conclusion, therefore, is that only a narrow "hot-news"
misappropriation claim survives preemption for actions concerning material
within the realm of copyright. See also 1
McCarthy on Trademarks and Unfair Competition (4th ed. 1996), § 10:69, at 10-134 (discussing National
Exhibition Co. v. Fass, 133 N.Y.S.2d
379 (Sup.Ct.1954), Muzak,
30 N.Y.S.2d 419, and other cases relied upon by NBA that pre-date the 1976
amendment to the Copyright Act and concluding that after the amendment,
"state misappropriation law would be unnecessary and would be
preempted: protection is solely under
federal copyright").7
In our view, the elements central to an INS claim are: (i) the plaintiff generates or collects
information at some cost or expense, see FII,
808 F.2d at 206; INS,
248 U.S. at 240; (ii) the value of the
information is highly time-sensitive, see FII,
808 F.2d at 209; INS,
248 U.S. at 231; Restatement (Third)
Unfair Competition, § 38
cmt. c.; (iii) the defendant's use of
the information constitutes free- riding on the plaintiff's costly efforts to
generate or collect it, see FII,
808 F.2d at 207; INS,
248 U.S. at 239-40; Restatement
§ 38 at cmt. c.; McCarthy, § 10:73 at 10-139; (iv) the defendant's use of the information
is in direct competition with a product or service offered by the plaintiff, FII,
808 F.2d at 209, INS,
248 U.S. at 240; (v) the ability of
other parties to free-ride on the efforts of the plaintiff would so reduce the
incentive to produce the product or service that its existence or quality would
be substantially threatened, FII,
808 F.2d at 209; Restatement,
§ 38 at cmt. c.; INS,
248 U.S. at 241 ("[INS's conduct] would render [AP's] publication
profitless, or so little profitable as in effect to cut off the service by
rendering the cost prohibitive in comparison with the return.")
INS is not about ethics; it is about the
protection of property rights in time-sensitive information so that the
information will be made available to the public by profit seeking
entrepreneurs. If services like AP were
not assured of property rights in the news they pay to collect, they would
cease to collect it. The ability of
their competitors to appropriate their product
at only nominal cost and thereby to disseminate a competing product at a lower
price would destroy the incentive to collect news in the first place. The
newspaper-reading public would suffer because no one would have an incentive to
collect "hot news."
We therefore find the extra elements--those in addition to the elements
of copyright infringement--that allow a "hotnews" claim to survive
preemption are: (i) the time-sensitive
value of factual information, (ii) the free-riding by a defendant, and (iii)
the threat to the very existence of the product or service provided by the
plaintiff.
2. The Legality of SportsTrax
We conclude that Motorola and STATS have not engaged
in unlawful misappropriation under the "hot-news" test set out
above. To be sure, some of the elements
of a "hot-news" INS claim are met. The information transmitted to SportsTrax is
not precisely contemporaneous, but it is nevertheless time-sensitive. Also, the NBA does provide, or will shortly
do so, information like that available through SportsTrax. It now offers a service called "Gamestats"
that provides official play-by-play game sheets and half-time and final box
scores within each arena. It also
provides such information to the media in each arena. In the future, the NBA plans to enhance
Gamestats so that it will be networked between the various arenas and will
support a pager product analogous to SportsTrax. SportsTrax will of course directly compete with an enhanced
Gamestats.
However, there are critical elements missing in the NBA's attempt to
assert a "hot-news"
INS-type claim. As framed by the
NBA, their claim compresses and confuses three different informational
products. The first product is
generating the information by playing the games; the second product is transmitting
live, full descriptions of those games;
and the third product is collecting and retransmitting strictly factual
information about the games. The first and second products are the NBA's
primary business: producing basketball
games for live attendance and licensing copyrighted broadcasts of those
games. The collection and
retransmission of strictly factual material about the games is a different
product: e.g., box-scores in newspapers,
summaries of statistics on television sports news, and real-time facts to be
transmitted to pagers. In our view, the
NBA has failed to show any competitive effect whatsoever from SportsTrax on the
first and second products and a lack of any free-riding by SportsTrax on the third.
With regard to the NBA's primary products--producing basketball games
with live attendance and licensing copyrighted broadcasts of those games--there
is no evidence that
anyone regards SportsTrax or the AOL site as a substitute for attending NBA
games or watching them on television.
In fact, Motorola markets SportsTrax as being designed "for those
times when you cannot be at the arena, watch the game on TV, or listen to the
radio ..."
The NBA argues that the pager
market is also relevant to a "hot-news" INS-type claim and that
SportsTrax's future competition with Gamestats satisfies any missing
element. We agree that there is a
separate market for the real-time transmission of factual information to pagers
or similar devices, such as STATS's AOL site.
However, we disagree that SportsTrax is in any sense free-riding off
Gamestats.
An indispensable element of an INS "hot-news" claim is
free riding by a defendant on a plaintiff's product, enabling the defendant to
produce a directly competitive product for less money because it has lower
costs. SportsTrax is not such a product.
The use of pagers to transmit real-time information about NBA games
requires: (i) the collecting of facts
about the games; (ii)
the transmission of these facts on a network;
(iii) the assembling of them by the particular service; and (iv) the transmission of them to pagers
or an on-line computer site. Appellants
are in no way free- riding on Gamestats.
Motorola and STATS expend their own resources to collect purely factual
information generated in NBA games to transmit to SportsTrax pagers. They have their own network and assemble and
transmit data themselves.
To be sure, if appellants in the future were to collect facts from an
enhanced Gamestats pager to retransmit them to SportsTrax pagers, that would
constitute free-riding and might well cause Gamestats to be unprofitable
because it had to bear costs to collect
facts that SportsTrax did not. If the
appropriation of facts from one pager to another pager service were allowed,
transmission of current information on NBA games to pagers or similar devices
would be substantially deterred because any potential transmitter would know
that the first entrant would quickly encounter a lower cost competitor
free-riding on the originator's transmissions.
However, that is not the case in the instant matter. SportsTrax and Gamestats are each bearing
their own costs of collecting factual information on NBA games,
and, if one produces a product that is cheaper or otherwise superior to the
other, that producer will prevail in the marketplace. This is obviously not the situation against
which INS was intended to prevent:
the potential lack of any such
product or service because of the anticipation of free-riding.
For the foregoing reasons, the
NBA has not shown any damage to any of its products based on free-riding by
Motorola and STATS, and the NBA's misappropriation claim based on New York law
is preempted.
. . . .
We vacate the
injunction entered by the district court and order that the NBA's claim for
misappropriation be dismissed.
4 The relevant portions of the statute, 17 U.S.C. § 301, read:
§ 301. Preemption with respect to other laws
(a) On and after
January 1, 1978, all legal or equitable rights that are equivalent to any of
the exclusive rights within the general scope of copyright as specified by
section 106 in works of authorship that are fixed in a tangible medium of
expression and come within the subject matter of copyright as specified by
sections 102 and 103, whether created before or after that date and whether
published or unpublished, are governed exclusively by this title. Thereafter, no person is entitled to any
such right or equivalent right in any such work under the common law or
statutes of any State.
(b) Nothing in this
title annuls or limits any rights or remedies under the common law or statutes
of any State with respect to--
(1) subject matter
that does not come within the subject matter of copyright as specified by
sections 102 and 103, including works of authorship not fixed in any tangible
medium of expression; or ...
(3) activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106.
7 Quite apart from Copyright Act preemption, INS has long been regarded with skepticism
by many courts and scholars and often confined strictly to its facts. In particular, Judge Learned Hand was
notably hostile to a broad reading of the case. He wrote:
[W]e
think that no more was covered than situations substantially similar to those
then at bar. The difficulties of understanding
it otherwise are insuperable. We are to
suppose that the court meant to create a sort of common-law patent or copyright
for reasons of justice. Either would
flagrantly conflict with the scheme which Congress has for more than a century
devised to cover the subject-matter.
Cheney Bros. v. Doris Silk Corp., 35 F.2d 279, 280 (2d Cir.1929), cert. denied, 281 U.S. 728 (1930).