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What the Latest "Hot News" Ruling Means for Financial Web Sites - And Maybe Your Blog

hot news

The hot news doctrine, created a century ago to prevent telegraphy from spoiling the prospects of East Coast newspapers, is having a resurgence in the digital era. It's just been used to squash publications by financial news aggregator Web sites.

There's a fascinating piece explaining this news over at MediaShift—centering on the federal district ruling from May 18th, Barclays Capital Inc. versus, that forbids the financial news aggregator Web site from broadcasting daily stock recommendations made by the financial firms analysts. It's one of the first and biggest tests of the "hot news" doctrine in the Internet era, and there's a possibility it may help define how news aggregators operate in the future.

What exactly is "hot news"? It's pretty much what you think, though there's a very precise legal meaning to this phrase. The term stems from a 1918 ruling by the Supreme Court to protect the specific intellectual property in news created by the Associated Press from a form of high tech thievery by the International News Service. The suit centered on a trend enabled by the telegraph: News that was sourced, researched, and published by the AP in East Coast newspapers was being appropriated by West Coast publications who scanned the news, re-wrote it to defend against copyright violation allegations, and then telegraphed it to the West coast to be quickly sold there, sometimes before AP's own publications made the journey. The judge in the case ruled that the "peculiar value" of news is that it be shared out quickly while still "fresh," and that it was in the public's interest that the AP's business of investigating and covering news items continue unthreatened by this new business model. The "hot news" notion conferred specific value on the actual news items themselves, in the early moments of their existence—above any copyright implications—and forbade the re-writing practice.

Nowadays the Net has changed how news is shared, and its influence has altered the TV and paper-based news publishing industries. The most vocal opposition to the new trends is from media tycoon Rupert Murdoch, who's famously bad-mouthed Google as a news content thief. Google is endangering his newspaper business with its history of traditional journalistic writing practices by aggregating the news items in one place so the consumer is less inclined to pay for the original source publication's efforts, or so he argues. But the financial firms ruling is the first big test of how "hot news" can apply in the Net era when the consumer (in whose interest the hot news doctrine is supposed to act) is increasingly used to an instantly available news stream.

The judge in this case determined that the early morning reports of financial firms like Barclays or Morgan Stanley have an intrinsic hot news value of their own. The publications go to their biggest and most fiscally rewarding clients as advice on whether to buy, sell, or hold specific stock in the upcoming day's city trading. They are based on up-to-the-moment research and expertise, and can represent significant (not "casual," as the judge noted) value to both the source firm and its clients. The value in the reports is very timely, and by disseminating them to the greater public over the Web the news aggregator site TheFlyOnTheWall was actively devaluing them, by diluting their potency as other stock market players could choose to act on the information. As such, it's very much a parallel to the original "hot news" items the AP was seeking to protect.

Judge Cote ruled that the reports could not be shared by the FlyOnTheWall for an hour after their publication—protecting them for their most potent minutes. But Cote was also sensitive to the fact that the Internet has changed the game, and the injunction will expire if, upon revisiting the matter in a year, the court finds that the financial firms haven't pursued other news aggregators for the same practice. We'll have to see what greater implications the case may have for the Internet news industry as a whole ... has the game just changed?

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