In a narrow, fact-bound decision, the Second Circuit today held that a group of investment firms' claims against a news-aggregation company were preempted by federal copyright law. (PDF of the opinion here.) The court stopped well short of reaching any larger 1st Amendment issues, however.

The case, Barclays Capital Inc. v. TheFlyOnTheWall.com, dealt with the latter company's republishing the i-banks' stock recommendations as news; the crux was whether republishing of non-copyrightable stock recommendations constituted so-called "hot news" misappropriation, and whether the i-banks' claim was preempted by federal law. We've written about the case before; see Sam Bayard's treatment of the district court result and the case's possible 1st Amendment issues here. For further, even more-thorough details, check out the amicus brief to which CMLP contributed, laying out the 1st Amendment implications. The quick takeaway from today's decision is twofold:

First, TheFlyOnTheWall is in the clear because they didn't meet the Second Circuit's "free-riding" requirement. (Or, to get technical: the "free-riding" requirement the Second Circuit reads into New York law.) Instead, FOTW puts in work of its own to collect news (in this case, the fact that investment firms are recommending a particular security) and to disseminate it, so the banks lose their "hot news" claim. Notably, the court found that the i-banks were not themselves collecting or reporting news, they were creating it -- that is, the fact of their recommendations was the news, which FOTW was breaking. Because the "free-riding" requirement was not met, the Second Circuit found that an additional element was missing that would prevent the i-banks' claim from being preempted by the Copyright Act.

Second, and more important to us observers: the court doesn't touch any of those important 1st Amendment issues. The opinion is certainly a blow to companies looking to flex some hot-news muscle, but the whole thing is tied up in the specifics of the various business models and parties' conduct; indeed, the court explicitly declines to repudiate the entire existence of the hot-news misappropriation tort and washes its hands of any bigger questions.

So, that's where we stand: TheFlyOnTheWall lives on, while we wait for another court to tackle the big 1st Amendment news-aggregation questions.

John Sharkey is a CMLP blogger fresh off his first year at Harvard Law School. Since his last post, the Twins have moved out of the basement.