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Barclays Capital, Inc. v. Theflyonthewall.com - 700 F. Supp. 2d 310 (S.D.N.Y. 2010)


A plaintiff asserting a hot-news misappropriation claim must show that the value of the information generated or collected by the plaintiff is highly time-sensitive. The hot-news misappropriation tort encompasses only those situations where the defendant has published time-sensitive information before the plaintiff has been able to utilize his competitive edge. 


Barclays Capital Inc. ("Barclays Capital"), Merrill Lynch, Pierce, Fenner & Smith Inc. ("Merrill Lynch"), and Morgan Stanley & Co. Inc. ("Morgan Stanley")(collectively, the plaintiffs) have brought suit against defendant Theflyonthewall.com, Inc. ("Fly"). Fly is an internet subscription news service that aggregates and publishes research analysts' stock recommendations along with many other items of varying interest to investors. In addition to asserting hot-news misappropriation, the plaintiffs accuse defendant of infringing the copyrights of Barclays Capital and Morgan Stanley in seventeen research reports released in February and March 2005.


Should the defendant be held liable for its alleged hot-news misappropriation and copyright infringement?




The Court held that defendant was liable for hot-news misappropriation because plaintiffs incurred substantial expense in generating their research reports and recommendations and that plaintiffs' recommendations were time-sensitive. The Court explained that the defendant's core business was its free-riding off the sustained, costly efforts by plaintiffs and other investment institutions to generate equity research that was highly valued by investors. Moreover, the Court posited that plaintiffs and defendant were in direct competition in disseminating recommendations to investors for their use in making investment decisions, and the continued conduct of defendant and other similar parties would have substantially threatened the viability of plaintiffs' research business. 

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