Swatch sued over Bloomberg’s 2011 posting of the recording of a conference call at which Swatch executives discussed the company’s recently released earnings report with invited investment analysts. “Swiss law permits public companies to hold this kind of earnings call with a limited group of analysts, provided that the company does not disclose non-public, significantly price-sensitive facts during the call.” About 132 of 333 invited financial analysts joined the call, and a vendor recorded the entire call, while an operator affiliated with the vendor welcomed the analysts to the call and told them, “This call must not be recorded for publication or broadcast.” The Swatch executives “provided commentary about the company’s financial performance and answered questions posed by fifteen of the analysts.” The call lasted 132 minutes, and the executives spoke for 106 of them.
Bloomberg, though not invited, obtained a sound recording and written transcript of the call and made them available online, without alteration or editorial commentary, to subscribers to its online financial research service, Bloomberg Professional. Bloomberg touts Bloomberg Professional as “[a] massive data stream” with “rich content” that is “unparalleled in scope and depth” and is “delivered to your desktop in real time,” as well as “access to all the news, analytics, communications, charts, liquidity, functionalities and execution services that you need to put knowledge into action.”
Swatch sued for infringement, then applied for registration for the sound recording of the earnings call; after discussion with the Copyright Office, registration was granted only for statements made by Swatch executives, not statements by the operator or questions from the analyst. Swatch’s infringement claim went only to the sound recording, not the transcript, pursuant to 17 U.S.C. § 114(b), under which only actual sounds fixed in the recording are protected by the sound recording copyright; Swatch apparently conceded that the transcript was outside its right to prepare derivative works (or to control reproductions).
The court of appeals upheld summary judgment for Bloomberg on fair use grounds. Factor one favored fair use because Bloomberg’s news reporting served an important public interest. Swatch argued that Bloomberg wasn’t engaged in news reporting, just conveying “data,” and that discovery was needed on the issue (as well as others about Bloomberg’s state of mind and whether Bloomberg’s subscribers actually listen to recordings or just read transcripts).
“[W]hether one describes Bloomberg’s activities as ‘news reporting,’ ‘data delivery,’ or any other turn of phrase, there can be no doubt that Bloomberg’s purpose in obtaining and disseminating the recording at issue was to make important financial information about Swatch Group available to American investors and analysts.” This information “is of critical importance to American securities markets.” The SEC mandates that, when American companies disclose this kind of material nonpublic information, they have to make it available to the public immediately. Though Swatch is exempt from the SEC’s rule, that doesn’t change the public interest in this information, which remains highly relevant to American markets. “At a minimum, a use of copyrighted material that serves this public purpose is very closely analogous to ‘news reporting,’ which is indicative of fair use.” This important public purpose overwhelmed the weight otherwise given to “Bloomberg’s clandestine methods and the commercial, nontransformative nature of its use.” (When a work fits the §107 preamble, there’s a strong presumption that factor one favors the defendant, but given the factual disputes, the court assumed that Bloomberg’s use wasn’t within the “core notion” of “news reporting,” so it didn’t apply the presumption.)
True, Bloomberg was a commercial enterprise, but so are many fair users, and the link between the copying and commercial gain was attenuated—Bloomberg Professional “is a multifaceted research service, of which disseminating sound recordings of earnings calls is but one small part. Moreover, it would strain credulity to suggest that providing access to Swatch Group’s earnings call more than trivially affected the value of that service.” So commerciality had reduced weight here.
So did Bloomberg’s lack of good faith, which in general contributes little to fair use analysis. Assuming, for summary judgment purposes, that Bloomberg was fully aware of Swatch’s directive, its overriding purpose was not to “scoop” Swatch or “supplant the copyright holder’s commercially valuable right of first publication,” “but rather simply to deliver newsworthy financial information to American investors and analysts. That kind of activity, whose protection lies at the core of the First Amendment, would be crippled if the news media and similar organizations were limited to authorized sources of information.” (Citing the Pentagon Papers case!)
Transformativeness is important, but not necessary; some core examples of fair use, like multiple copies for classroom use, “involve no transformation whatsoever.” (Yay! It’s nice to see “multiple copies for classroom use,” which is in the statute, be recognized as core fair use, rather than edited out, as has happened in other cases.) In the context of news reporting and similar activities, “the need to convey information to the public accurately may in some instances make it desirable and consonant with copyright law for a defendant to faithfully reproduce an original work rather than transform it.” In those kinds of cases, courts often find transformation in the altered purpose or context of the work, as shown by surrounding commentary or criticism. But additional commentary or analysis was absent here. Still, by disseminating the call, “Bloomberg was able to convey with precision not only what Swatch Group’s executives said, but also how they said it. This latter type of information may be just as valuable to investors and analysts as the former, since a speaker’s demeanor, tone, and cadence can often elucidate his or her true beliefs far beyond what a stale transcript or summary can show.” Courts have often noted that a “cold transcript” isn’t as good as a more physical presentation. Also, it doesn’t matter how many Bloomberg subscribers took advantage of this extra information; it remains independently valuable.
News reporting can’t excuse all copying. “But here, in light of the independent informational value inherent in a faithful recording of the earnings call, the fact that Bloomberg did not transform Swatch’s work through additional commentary or analysis does not preclude a finding that the ‘purpose and character’ of Bloomberg’s use favors fair use.” Other news cases finding no fair use were not to the contrary. Translating from one language to another; reporting the conclusions from research reports; and copying information compiled by a competing financial publisher were all different. In those cases, the defendants “appropriated works in which the copyright owner had transformed raw financial information by compiling it from multiple sources or by mixing it with their own commentary and analysis.” Here, though, the sound recording—including the executives’ modes of expression—“were themselves pieces of financial information.” The other cases were about secondary sources; this case is about a primary source, and that makes a difference. (This is sounding a lot like Barclays Capital v. Theflyonthewall.com, 650 F.3d 876 (2d Cir.2011).) Swatch’s desired discovery couldn’t change any of this.
Nature of the work: there’s a thin copyright, because the conference call was “manifestly factual,” even with quirks of expression by the executives. “[W]hile we assume without deciding in this appeal that the call contained sufficient original expression—in the form of the executives’ tone, cadence, accents, and particular choice of words—to be copyrightable, the purpose of the call was not in any sense to showcase those forms of expression. Rather, the call’s sole purpose was to convey financial information about the company to investors and analysts.” This placed it “at the very edge” of copyright’s protections.
Also, the work was published before Bloomberg’s use. Publication, for fair use purposes, is not “publication” as specifically defined by the Copyright Act in §101; statutory publication didn’t occur here. That technical definition serves many channeling purposes (e.g., triggering the deposit requirement), but it doesn’t serve the purposes of fair use. The common-law nature of fair use justifies a different, more functional understanding of publication. The court would not “blind [itself] to the fact that Swatch Group invited over three hundred investment analysts from around the globe to the earnings call, out of which over a hundred actually attended.” Swatch wasn’t deprived of the ability to control the first public appearance of its expression. Courts “commonly look past the statutory definition when considering this issue,” and even in Harper & Row the Supreme Court suggested that “even substantial quotations might qualify as fair use in a review of a published work or a news account of a speech that had been delivered to the public or disseminated to the press.”
Amount used: this factor can’t favor Bloomberg, but it is neutral. Given the public interest in the information, copying the whole call was reasonable in light of Bloomberg’s purpose, regardles of how many Bloomberg subscribers took advantage of the value added by the recording over the transcript.
Market effect: None. The relevant effect is that caused by Bloomberg’s use of the expressive elements of the work, and there was no evidence of any possible market effect. Swatch didn’t presently seek to profit from publication of earnings calls. What about a potential market? “While the loss of a potential yet untapped market can be cognizable under the fourth fair use factor, the potential market here is defined so narrowly that it begins to partake of circular reasoning…. The hypothesized market for audio recordings of earnings calls convened by foreign companies that are exempt from [SEC publication requirements]” was not traditional, reasonable, or likely to be developed.
And, even if a financial news or research organization might be willing to pay for access, copyright’s ultimate aim is to stimulate creativity for the general good. “Here, the possibility of receiving licensing royalties played no role in stimulating the creation of the earnings call.” Swatch actually argued that it didn’t even know whether there was a potential market for this kind of recording. The call’s purpose was to let Swatch executives disseminate information about the company in a way they believed would be favorable—that’s the incentive for earnings calls, not copyright. “By making the recording available to analysts who did not or could not participate in the call initially, Bloomberg simply widened the audience of the call, which is consistent with Swatch Group’s initial purpose.” Swatch’s interest in “know[ing] and control[ling] precisely who heard the call” wasn’t weighty enough compared to the public interest in the dissemination of important financial information. (And here is the Barclays cite.)
Balancing the factors led to a fair use finding.
The court denied Bloomberg’s cross-appeal on the copyrightability of the sound recording as not properly before it; Bloomberg wasn’t aggrieved by the ruling, given its victory on other grounds, and it didn’t jump through the right procedural hoops for a separate appeal.