2011), was a case decided in the United States Court of Appeals for the Second Circuit where the Second Circuit, reversing the decision[1] of the US District Court below it, found that the claims of three major financial investment firms (Barclays Investment Bank, Morgan Stanley, and Merrill Lynch) against an internet subscription stock news service (theflyonthewall.com) for "Hot-news" Misappropriation under state common law doctrine could not stand, as they were pre-empted by several sections of the Federal Copyright Act (17 U.S.C.

[5] According to some legal commentators, the decision would have the effect of making it more difficult for future plaintiffs to bring claims under the hot-news misappropriation doctrine, at least in the Second Circuit.

The defendant sold a service wherein subscribers could receive these recommendations prior to their release by the plaintiffs to the general public.

[7] On June 26, 2006, the plaintiffs filed a lawsuit seeking an injunction against Theflyonthewall.com ordering them to cease distributing portions of the exclusive research reports as well as the recommendations within them.

They argued that the District Court had erred in finding that the hot-news misappropriation claim had been established, that the claim (made under state law) was pre-empted and therefore barred by federal copyright legislation, and that the resulting injunction was improperly granted, was overbroad, and violated the defendant's free speech rights under the First Amendment.

"[13] This misappropriation doctrine was developed further with the aim to "protect costly efforts to gather commercially valuable, time-sensitive information that would otherwise be unprotected by law.

"[14] Significantly, the 'hot' news doctrine is concerned with "the copying and publication of information gathered by another before he has been able to utilize his competitive edge.

Moreover, the time-sensitivity was especially important as the plaintiffs expended resources to be the first to communicate these findings to the client and generate commissions revenue.

The court defined free-riding as where there is very little investment by the defendant to profit off of "information generated or collected by the plaintiff at great cost.

[22] The court found that the parties were in direct competition in that both were attempting to provide time-sensitive information to clientele, and the defendant's dissemination of that information prior to the plaintiffs being able to satisfy the demand for pre-market hours stock movement reports and trade recommendations.

The court further ordered a permanent injunction such that the defendant was disallowed from further infringement of "any portion of the copyrighted elements of any research reports" generated by those two plaintiffs.

On appeal, the Second Circuit court reversed the decision below and ruled in favor of the defendant, finding that the plaintiffs' hot-news misappropriation claim was "preempted by federal copyright law.

"[27] The Court recalled that in order to determine whether a state-law claim is preempted by the federal Copyright Act, 17 U.S.C.

The Electronic Frontier Foundation, Citizen Media Law Project, and Public Citizen, Inc. filed an amicus curiae brief urging the Second Circuit court to take into consideration the First Amendment as it related to the district court judgement's potential restraints on Americans' abilities to gather and comment on the news of the day.