Is it fair use to record and distribute a shareholder conference call? SWATCH v. BLOOMBERG

A copyright is a set of exclusive rights granted to the creator a new work of expression. Copyright law in the United States protects many different types of artistic works such as sound recordings, books and photographs. When an artist creates a new work, the artist is automatically granted a copyright to their work. A copyright gives the owner of the copyright the exclusive right to reproduce, distribute, perform, display, transmit and make derivative works based on the original work. If someone other than the copyright owner exercises one of these exclusive rights that can be considered copyright infringement.

The rights associated with a copyright are not unlimited. The purpose of copyright law is to promote the arts, so there are some limitations to the rights granted by copyright law. Fair use of a copyrighted work is not considered copyright infringement. In United States copyright law Section 107 of the Copyright Act provides the statutory framework for determining whether something is a fair use and identifies certain types of uses—such as criticism, comment, news reporting, teaching, scholarship, and research—as examples of activities that may qualify as fair use. Such uses can be done without permission from the copyright owner. There are four factors a court will evaluate when a fair use defense to copyright infringement is raised. Those factors are: (1) the purpose and character of the use, (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.

Courts evaluate fair use claims on a case-by-case basis, and the outcome of any given case depends on the facts of a specific case. This means that there is no formula to ensure that a predetermined percentage or amount of a work—or specific number of words, lines, pages, copies—may be used without permission.

Typically when a fair use defense is used in the context of new reporting, the courts give the defendant significant deference. This is because it is very difficult to report on a topic without showing the copyrighted work. However, news reporting does not grant a defendant immunity from liability for copyright infringement.

SWATCH GROUP v. BLOOMBERG L.P., 12-2412 (2nd Cir. 2014) is an instance when the distribution of a sound recording by a news agency was found to be protected by fair use.

Plaintiff is a publicly traded company. Defendant is a financial news and data reporting service. Plaintiff had a conference call with financial analysts to discuss its recently released earnings report. The conference call was recorded. After the conference call Defendant, obtained a sound recording of the call without authorization and disseminated it online to paid subscribers.

Plaintiff filed suit for copyright infringement claiming that Defendant’s actions infringed on Plaintiff’s copyright in the sound recording. The district court ruled Defendant’s actions were a fair use. Plaintiff appealed to the decision to the Court of Appeals for the Second Circuit.

The Second Circuit found Defendant’s use was not transformative, because the sound recording was distributed unedited, however that did not prevent a finding of fair use. The first statutory factor favored fair use because, Defendant’s use served the important public purpose of disseminating important financial information. The second factor favored fair use because Plaintiff controlled the first dissemination of its company’s expression, and its
copyright in the sound recording was “thin” at best. The third factor favored fair use because distributing the sound recording in its entirety was reasonably necessary in light of defendant’s purpose of disseminating financial information. Finally for the fourth fair use factor, the effect upon the market, the Second Circuit held that Defendant’s use would not significantly impair the value of earnings calls nor appreciably alter incentives for creation of such original expression.

Based on the strong finding of fair use the Second Circuit affirmed that decision of the District Court.

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