Prison Phone Justice

Case 1:11-cv-01006-AKH Document 53

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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Filed 05/17/12 Page 1 of 12

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THE SWATCH GROUP MANAGEMENT
SERVICES LTD.,
OPINION AND ORDER
GRANTING DEFENDANT
SUMMARY JUDGMENT

Plaintiff,
-against­

11 Civ. 1006 (AKH)
BLOOMBERG L.P.,
Defendant.
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ALVIN K. HELLERSTEIN, U.S.D.J.:
Plaintiff sued Defendant for infringement of a recorded telephone conference call
between senior executives of Plaintiffs parent company and invited securities analysts.
Defendant, although not invited to participate, obtained a recording of the call and made it
available to the paid subscribers of its online business newscasting service. For the reasons
described below, I hold that Defendant's publication of the recording was fair use and, on the
basis of this defense to infringement, grant summary judgment to Defendant.
I.

Facts
Plaintiff, a Swiss corporation, controls the intellectual property of many well-

known watch brands. Its parent company, The Swatch Group Ltd. ("Swatch Group"), which
produces, among other things, watches and watch components, is a public company whose stock
trades on the Swiss Exchange. Defendant, a Delaware corporation, is a leading provider of
business and financial information.
On February 8, 2011, Swatch Group hosted a telephone conference call with
invited securities analysts to discuss its financial results for the recently-closed accounting period

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(the "Earnings Call"). All participants were advised that the call was being recorded by Swatch
Group and that others should not record the call for publication or broadcast. During the call,
Swatch Group senior executives made brief remarks and responded to the securities analysts'
questions.
Plaintiff contends that the remarks and responses of the senior executives
constitute an original work of authorship, that Swatch Group's recording of the Earnings Call
(the "Copyrighted Work") fixed that work in a tangible medium, qualifying it for copyright
protection, and that Plaintiff, Swatch Group's assignee, duly registered that work with the U.S.
Copyright Office.
Defendant was not invited to participate in the Earnings Call. A "third party
transcript service" accessed and made a recording of the Earnings Call and provided the
recording to Defendant. Defendant then made the recoding (the "Infringing Work") available
online to its paid subscribers, thus infringing Plaintiffs Copyrighted Work.
For purposes of this decision, I assume, without deciding, that Plaintiffs
allegations are true, that Plaintiffs copyright is valid and that, absent a defense offair use,
Defendant infringed.

II.

The Procedural Background
At the outset and before it filed an answer, Defendant moved to dismiss Plaintiffs

Second Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6), claiming, among other things,
that its use was fair use and that, therefore, it had not infringed. I denied the motion, holding in
part that a determination of fair use was fact-intensive and not one that I could make prior to
discovery. Order Denying Motion to Dismiss, The Swatch Grp. Mgmt. Servs. v. Bloomberg

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L.P., Doc. No. 27 (Aug. 30,2011). Defendant then filed its Answer that, among other things,
alleged fair use as an affirmative defense.
Still prior to discovery, Plaintiff moved for judgment on the pleadings, requesting,
among other things, that I strike Defendant's fair use affirmati ve defense. The parties presented
the record of the Copyright Office, a copy ofthe Copyrighted Work and a copy of the Infringing
Work, as well as a transcript thereof.
As I noted in denying Defendant's motion to dismiss and discuss below, the
determination of fair use is fact-intensive. However, from the parties' submissions with respect
to Plaintiff s motion for judgment on the pleadings, it appeared that all relevant and material
facts might be in the record and that fair use was not only an appropriate but also a compelling
defense. I then notified the parties that I was considering granting Defendant judgment on that
basis and gave Plaintiff leave to show that "triable issues of material fact [exist] with respect to
Defendant's fair use affirmative defense." Summary Order, The Swatch Gm. Mgmt. Servs. v.
Bloomberg L.P., Doc. No. 43 (Dec. 12,2011).

III.

The Standard of Review
With all submissions in hand, [ now consider whether summary judgment can be

granted to Defendant on the basis of Defendant's fair use affirmative defense. While fair use is
often unsuitable for summary judgment, "the court may resolve issues of fair use at the summary
judgment stage where there are no genuine issues of material fact ...." Bill Graham Archives v.
Dorling Kinderslev Ltd., 448 FJd 605, 608 (2d Cir. 2006).
Plaintiffs motion for judgment on the pleadings and its response to my invitation
for an additional submission afforded Plaintiff a full and fair opportunity to oppose summary
judgment on the basis of Defendant's fair use affirmative defense and to present all that was

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relevant or could be relevant. See Priestlv v, Headminder, Inc" 647 F.3d 497,504 (2d CiL 2011)
(explaining that a district court has discretion to grant summary judgment sua sponte where "the
party against whom summary judgment is rendered has had a full and fair opportunity to meet
the proposition that there is no genuine issue of material fact to be tried"),
"Where it appears clearly upon the record that all of the evidentiary materials that
a party might submit in response to a motion for summary judgment are before the court, a sua
sponte grant of summary judgment against that party may be appropriate if those materials show
that no material dispute offact exists and that the other party is entitled to judgment as a matter
oflaw," Ramsey v, Coughlin, 94 F.3d 71, 74 (2d Cif. 1996), "Before granting summary
judgment sua sponte, the district court must assure itself that following the procedures set out in
Rule 56 would not alter the outcome, Discovery must either have been completed, or it must be
clear that further discovery would be of no benefit. The record must, therefore, reflect the losing
party's inability to enhance the evidence supporting its position and the winning party's
entitlement to judgment." Id, In its submission, Plaintiff contends that discovery is necessary
and that triable issues of material fact exist. I address Plaintiffs contentions below,

IV,

Discussion
Section 107 of the Copyright Act of 1976 provides that "the fair use of a

copyTighted work, , , is not an infringement of copyright." 17

u,s,c. § 107,

In determining

whether a particular use is fair, the factors to be considered include: "(1) the purpose and
character of the use, including whether such use is of a commercial nature or is for nonprotlt
educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of
the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon
the potential market for or value of the copyrighted work," ld,

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Defendant has the burden of proving that its use was fair. NXIVM Corp. v. The
Ross Inst., 364 F.3d 471, 476 (2d Cir. 2004). Proof offair use, however, does not require
Defendant to prevail with respect to each of these four factors.

l.sl at 477.

The factors should not

be considered in isolation but "explored and weighed together, in light of copyright's purpose ...
:' Campbell v. Acuff-Rose Music. Inc., 510 U.S. 569, 578 (1994). The analysis is not to be
"simplified," nor are "bright-line rules" to be used; rather. the analysis is to be "open-ended and
context-sensitive." Blaneh v. Koons, 467 F.3d 244, 251 (2d Cir. 2006). The ultimate focus is
the goal of copyright itself, whether "promoting the Progress of Science and useful Arts would
be betler served by allowing the use than by preventing it" C;:!sIieRock Entertainment. Inc. v.
Carol Plihiishing(irQup, Inc., 150 F.3d 132, 141 (2d Cir. 1998) (citations and internal quotation
marks omitted); U.S. Cons!., art. 1, § 8. cl. 8.

a. The Purpose and Character oCthe t:se
Defendanfs work as a prominent gatherer and publisher of business and financial
information serves an important public interest, for the public is served by the full, timely and
accurate dissemination of business and financial news. Swatch Group is a foreign issuer, but its
products are sold in the United States and its securities, including ADRs, are bought and sold by
American investors. It is not a coincidence that American securities analysts were among those
invited to participate in the Earnings Call.
Defendant is a for-profit corporation and its subscribers pay for their access to
Defendant's online business newscasting service. Although many fair use cases involve use by
not-for-profit users and this statutory factor explicitly asks whether the use is of a "commercial
nature" or for "nonprofit educational purposes," 17 U.S.c. § 107(1), the presence or absence of a
profit-making motive is not dispositive as to this factor or the overall fair use analysis.

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Campbell, 510 U.S. at 584. Indeed, news reporting. generally conducted by for-profit entities, is
specifically identified in the preamble paragraph of § 107 as a category of potentially fair use.
Another consideration is whether the particular use is "transformational," that is
whether it "adds something new," of a "different character," or "new expression, meaning or
message," Campbell, 510 U.S. at 578-79 (citations and internal quotation marks omitted). for "an
untransformed copy is likely to be used simply for the same intrinsic purpose as thc original.
thereby providing limited justification for a finding of fair use." Am. Geophvsical Union v.
~="'-"""".

60 F.3d 913,923 (2d Cir. 1995).
Again, however, nothing follmvs inevitably. and a "transformative use is not

absolutely necessary for a finding of fair use ...." Campbell, 510 U.S. at 579; see BJam:.h- 467
F.3d at 252 n.3 ("Nor is transformativeness necessarily the only important factoL"). Indeed.
news reporting requires accuracy, which may be undermined by transformation.
Plaintiff contends that fair use should not be found because Defendant lacked
good faith in acquiring the recording of the Earnings Call and distributing the Infringing Work.
See NXIVM Corp., 364 FJd at 478. As with the other criteria, fair use does not depend on a
finding of good faith. Id. at 479. Indeed, news-gathering orgarlizations frequently publish
information obtained clandestinely and in breach of conditions of confidentiality. The robust
quality of the First Amendment would be compromised if the news media were confined to
authorized sources for its reporting.

New York TimesCQ,,,,J,Jnited States, 403 U.S. 713

(1971).
In sum, the purpose and character of Defendant's usc advanced the public interest
offurthering full, prompt and accurate dissemination of business and tinancial news.

b. The Nature of the Copyrighted Work

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Although Plaintiff claims, and presumably has the right to claim, copyright on the
original expressions of Swatch Group' s senior executives, there is very little of the Earnings Call
that could qualify as such, See Ex. B Decl. Golden Supp. Mot. Dismiss, lbe Swatch Gm. Mgmt.
Servs. v,BloomiLerg LP., Doc. "10. 9 (Mar. 31.2011) (the Copyrighted Work). The comments
and questions of the securities analysts are not copyrightable by Swatch Group and, in fact, were
disclaimed by Plaintiff. Feist Publ'ns. Ine.y. Rural Tel, Servo Co .. Inc., 499 U.S. 340, 348

(1991) ("The mere fact that a work is copyrighted does not mean that evcry element orthe work
may be protected. Originality remains the sine qua non of copyright; accordingly, copyright
protection may extend only to those components of a work that are original to the author.").
Furthermore, the factual content of the remarks and responses made by the Swatch Group senior
executives is not copyrightable. ld. at 347. (""10 one may claim originality as to facts. This is
because facts do not owe their origin to an act of authorship") (citation and internal quotation
marks omitted).
What we have left is at best a "thin" copyright. Id. at 349. The whole purpose of
the Earnings Call was to present Swatch's financial condition and business performance in its
recently-completed financial period to a selected group of securities analysts. The "manifestly
factual character" of the Earnings Call means that it is not "within the core of the copyright's
protective purposes." AI1l . Geophysical, 60 F.3d at 925 (citations and internal quotation marks
omitted). Little, if anything, is consistent \\lth the core and purpose of copyright protection, for
little, if anything, "display[sJ the stamp of the author's originality."
11).(;.

V.

Harp~r

&_Row, Publishers.

J\ationEntemrises, 471 U.S. 539, 547 (1985).
In analyzing the nature of a copyrighted work, courts consider "(I) whether the

work is expressive or creative, such as a work of fiction, or more factual, with a greater leeway

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being allowed to claim tor fair use where the work is factual or informational, and (2) whether
the work is published or unpublished, with the scope offair use involving unpublished works
being considerably narrower," Blanch, 467 FJd at 256 (internal quotation marks omitted),
Generally, the scope of fair use is greater with respect to factual than non-factual works because
there is "a greater need to disseminate factual works than works of fiction or HlIltasy. Even
within the field offact works, there are gradations as to the relative proportion of fact and fancy,
One may move from sparsely embellished maps and directories to elegantly written biography.
The extent to which one must permit expressive language to be copied, in order to assure
dissemination of the underlying facls, will thus vary from case to case." Harper

~Row.

471

U.S. at 563 (citations and internal quotation marks omitted).
furthem10re, the scope of fair use is gencrally narrower with respcct to an
unpublished work because "[u]nder ordinary circumstances, the author's right to control the first
public appearance of his undisseminated expression will outweigh a claim for fair use." [d. at
555, Here, however, the first publication of Swatch Group's expression occurred prior to
Defendant's publication of the Infringing Work.

c. The Amount and Substantiality of the Portion Used
The third statutory fair usc factor is "the amount and substantiality of the portion
used in relation to the copyrighted work as a whole." 17 U.S.c. § 107(3). This tactor "asks
whether the amount and substantiality of the portion used in relation to the copyrighted work as a
whole, .. are reasonable in relation to the purpose of the copying ..Campbell. 510 U.S. at 586
(citations and internal quotation marks omitted); see InfinityJ3road. Corp. v. Kirkwood, 150 F.3d
104, 109 (2d Cir. 1998) ("The third factor ... recognizes that the more of a copyrighted work

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that is taken, the less likely the use is to be fair, and that even a less substantial taking may be
unfair if it captures the essence of the copyrighted work.").
Defendant used the entire Copyrighted Work. While this generally weighs
against fair use, it does not preclude a finding of fair use. See.

Sonv Corp. gf America y,

Universal Studios,Jllc., 464 U.S. 417, 449-50 (1984); Infinitv, 150 F.3d at 109. Furthermore,
insomuch as a public interest is served by Defendant's dissemination orthe information
contained in the Copyrighted Work, that interest is better served by the dissemination of that
information in its entirety, including the incidents of oral speech that do not translate onto the
page but color the purely factual content.
d, The Effect of the Use Upon the Potential Market for or Value of the Copyrighted

Work
This factor "requires courts to consider not only the extent of market harm caused
by the particular actions of the alleged infringer, but also whether unrestricted and widespread
conduct of the sort engaged in by the defendant would result in a substantially adverse impact on
the potential market for the original. The enquiry must take account not only of harm to the
original work but also of harm to the market for derivative works." Campbell, 510 C.S. at 590
(citations and internal quotation marks omitted). PlaintifI would have the Court analyze the
market elIect of Defendant's publication of the entire Infringing Work. However, the relevant
market efTect is that which stems from Defendant's use of the original expression of Swatch
Group's senior officers, not that which stems from Defendant'S \\iork as a whole. Arica Insl.,
Inc. v. Palmer, 970 F.2d 1067. 1078 (2d Cir. 1992). Nothing in the record suggests any possible
market elIect stemming from Defendant's use of such a limited ponion of the recording ofthc
Earnings Call. Nor docs common sense.

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In more general tenns, this factor requires "a balancing of the benefit the public
will derive if the use is pennitted and the personal gain the copyright owner will receive if the
llge is denied," Bill Graham, 448 FJd at 613 (internal quotation marks omitted), Swatch Group
used the Earnings Call to disseminate the infonnation of its choosing in the fashion of its
choosing to create a perception of its financials and business performance that Swatch Group
believed to be advantageous, For Swatch Group, this was the value of the Earnings Call and
Defendant's usc was not at odds with Swatch Group maximizing this value, Furthennore, as
discussed above, Defendant's usc conterrcd substantial benefit on the public and if Defendant's
use was denied, little if any personal gain would accrue to Swatch Group as a result, even if
Swatch Group sought to use the recording of the Earnings Call in the manner employed by
Defendant

e. There arc No Triable Issues of Fact and No Need for Discovery
PlaintitT contends that with respect to Defendant'S fair use aftinnative defense,
discovery is necessary and triable issues of material fact exist First, Plaintiff argues that
discovery is necessary with respect to Defendant's "reasons for acquiring and publishing the
unauthorized recording," specifically whether Defendant "acquired and distributed the
copyrighted material pursuant to a 'news reporting' function, as opposed to an aspect of
[Defendant'S] business which is not 'news reporting'" The Swatch Gm, MgmL Scrvs, v,
BloonJb<oTg1"I'" Doc. No, 52 at 12 (Jan, 27, 2012) ("PL's Mem, Law"), However, any such
issues of fact are irrelevant to my analysis of Defendant's use, I agree that Defendant's use was
commercial, but I lind it crucial that Defendant's use served an important public interest in
disseminating business-related information promptly and fully with respect to Swatch Group,

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Second, Plaintiff argues that discovery is necessary with respect to Defendant's "state
of mind" and "good faith in acquiring and distributing the unauthorized recording of Swatch
Group's earnings call." PI.'s Mem, Law at 13-15. Howevcr, any such issues of fact are
irrelevant to my analysis of Defendant's use as I credited Plaintiffs allegations that Defendant
was not authorized to access the Earnings Call and that Defendant's publication of the Infringing
Work violated the directive regarding publication ofa recording orthe Earnings Call.
Third, Plainti IT argues that discovery is necessary with respect to whether
Defendant's use was transformative. PI.'s Mem. Law at 15-16. However, any such issues of
fact are irrelevant to my analysis of Defendant's use for I accepted that Defendant's use was not
transformative.
Fourth, Plaintiff argues that material issues of fact exist with respect to why Plaintiff
brought this action. PI. 's Mem. Law at 17. However, this issue is irrelevant to my analysis of
Defendant's use.
Fifth, Plaintiff argues that material issues of fact exist with respect to "whether
Plaintiff s work of authorship includes incidents of oral speech that do not translate onto the
page, such as accent, meter, pacing, and the like." P1.'s Mem. Law at 17. I accept that Plaintiffs
work of authorship includes such incidents of oral speech. Indeed, the nonverbal "winks and
nods" and inflections and emphasis of the Swatch Group senior executives' speech directly bears
on the reliability and credibility of their remarks and responses to the securities analysts'
questions.
Sixth, Plaintiff argues that discovery is necessary with respect to the fourth statutory
factor because Defendant, not Plaintiff, has information regarding the existence of a potential

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market for recordings of earnings calls. PL' s Mem. Law at 19-20. However. any such issues of
fact are irrelevant in light of my conclusions above.
V.

Discussion
The parties have presented a full record enabling me to rule on the single,

dispositive issue of the case, whether Defendant's use of Plaintitrs Copyrighted Work qualities
as fair use. I-laving considered the statutory fair use factors and weighed them together in light
orthe purposes of copyright, I conclude that copyright law's goals are better served by allowing
Defendant's use ofPlaintin's work than preventing it and I hold that Defendanfs use qualities as
fair use. Furthermore, I hold that there arc no material factual issues to be tried, and that
discovery would not produce any such issues. Accordingly, since Defendant's use qualities as
fair use, Detendant has not infringed, and Plaintiffs Second Amended Complaint should be
dismissed.
The clerk shall enter judgment in favor of Defendant.

SO ORDERED.
Dated:

May( 12012
""cw 'irk. ""cw York
United States District Judge

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