Lawyer to appeals court: Uphold NYC ruling limiting when website can release stock reports

Lawyer: Finance firms’ suit not free-speech attack

NEW YORK — A ruling forcing a website to delay releasing the research findings of financial firms is not an attack on free speech and would not lead to widespread attacks on the media, a lawyer for financial companies that sued the website told federal appeals court judges Friday.

Attorney Bruce Rich told a three-judge panel of the 2nd U.S. Circuit Court of Appeals that several financial services firms sued Theflyonthewall.com because the company made a business of widely releasing their expensive-to-produce research findings before their clients could act on the information, weakening the value of the reports.

He said the firms, including Barclays Capital Inc., Bank of America Corp.’s Merrill Lynch & Co. and Morgan Stanley Inc., did not see a similar threat to their business from news outlets such as CNBC.

“The difference is that Fly does it for a living,” he said. “CNBC delivers a broad spectrum of news reporting.”

Rich spoke during two hours of arguments as Theflyonthewall.com challenged a judge’s March ruling requiring it to delay disseminating stock recommendations until 30 minutes after the stock market opens.

The financial companies in 2006 sued the Summit, N.J.-based corporation for copyright infringement and misappropriation, citing Theflyonthewall.com as the most systematic and egregious of the unauthorized redistributors of their reports.

Rich said the lawsuit was not “speech directed” or an attack on the First Amendment.

At one point, Judge Reena Raggi asked him why the financial firms were not damaged if CNBC or The New York Times released the same information as Theflyonthewall.com.

“Our clients are pragmatic,” he said. Rich called Theflyonthewall.com a “business that focuses on beating our own clients to the punch.”

Attorney Glenn F. Ostrager argued for Theflyonthewall.com that the judge’s ruling should be overturned, saying the company was merely relaying information that was already publicly available.

He said the company employed “conventional journalism practices to gather information from the marketplace.”

Before releasing information on reports by financial firms, Theflyonthewall.com verifies its information from multiple sources, he said.

Ostrager’s position was supported by Google and Twitter, according to Kathleen Sullivan, who represented the companies at the hearing.

Sullivan said news moves too fast to try to control it once it has been publicly disclosed.

“Times have changed. Technology has changed,” she said. “Hot news becomes cold in a nanosecond in the new world. … Once it’s publicly disclosed, it’s public.”

She said it was the responsibility of the financial firms to make sure their employees and their clients did not let the reports slip out if they wanted to prevent news coverage.

Sullivan said upholding the lower court ruling would create a situation in which “all of us can be sued for misappropriation in the future.”

Attorney Andrew Deutsch, who represented a dozen media outlets including The Associated Press at the hearing, said Sullivan had misinterpreted the law by insisting there was not more protection for the original distributors of information.

“The position taken by Google is absolutely wrong,” he said.

The media outlets were not asking the court to rule one way or the other. They were asking the judges to leave intact the legal standards that currently govern when “hot news” has been misappropriated. The “hot news” doctrine was established in a 1918 Supreme Court case involving the AP. The principle holds that while facts cannot be copyrighted, media organizations can sue when competitors copy time-sensitive news.

The appeals court did not immediately rule.

Theflyonthewall.com, an online subscription newsfeed, boasts that it provides “the most comprehensive database of analyst trading calls, events, and syndicate information on the Web.”

Since the March ruling by Judge Denise Cote in Manhattan, the company’s president has notified the judge that her ruling may put it out of business.