Each year, major financial firms spend hundreds of millions of dollars producing research reports on publicly traded companies. Those reports—which often include specific purchase or sale recommendations—are provided to limited numbers of customers, whom the firms solicit for trades before the reports become public knowledge. Trading commissions earned by the firms in turn fund the research. Reports from respected analysts can move the market, and regulators and federal courts have often noted the crucial role analysts play in policing securities markets.
Invoking the unfair competition doctrine of “hot news” misappropriation, a group of large financial firms obtained a district court injunction last year against Theflyonthewall.com (“Fly”), a website that featured unauthorized announcements of the firms’ nonpublic trading recommendations. Last month, in Barclay’s Capital Inc. v. Theflyonthewall.com Inc., 2011 WL 2437554 (2d Cir. June 20, 2011), the U.S. Court of Appeals for the Second Circuit reversed, finding the firms’ claims preempted under the Copyright Act.
Origins and Evolution
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