Back in 2011, we were worried about the implications of a lawsuit between the Swatch Group and Bloomberg, concerning the recording and distribution
of an earnings call by Swatch. In short, Swatch claimed a copyright on its own earnings call. Bloomberg, which obtained a copy of the recording done by someone else, made that recording available to its customers. Not only did this have interesting fair use questions, it also opened up the possibility that bizarre copyright claims could be used as an alternative to wiretapping laws to block perfectly legitimate recordings of phone calls.
Thankfully, the 2nd Circuit appeals court has issued a clear ruling noting that this use is fair use
-- and that's true even though
Bloomberg (1) used the whole thing (2) did so for commercial reasons and (3) did not add any commentary. This is important, because we regularly hear from copyright maximalist types who assume that if you do any of the above, it automatically loses the ability to be considered fair use. Here, however, the court clearly shows why that's not true, which should set a useful precedent for other fair use cases (at least within the 2nd circuit), especially when it comes in the context of "reporting."
The Court makes a few very useful statements in explaining why all of this is fair use. Take, for example, the issue of it being "commercial" in nature. While that may make it a higher bar to prove fair use, it clearly does not preclude fair use:
It is undisputed here that Bloomberg is a commercial enterprise and that Bloomberg Professional is a subscription service available to paying users. At the same time, we have recognized that “[a]lmost all newspapers, books and magazines are published by commercial enterprises that seek a profit,” Consumers Union of U.S., Inc. v. Gen. Signal Corp., 724 F.2d 1044, 1049 (2d Cir. 1983), and have discounted this consideration where “the link between [the defendant]’s commercial gain and its copying is . . . attenuated” such that it would be misleading to characterize the use as “commercial exploitation.” Am. Geophysical Union, 60 F.3d at 922. Here, Swatch does not contest that 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 while we will not ignore the commercial nature of Bloomberg’s use, we assign it somewhat reduced weight.
What about the lack of "transformation" as well as the lack of "commentary"? The Court explains why that doesn't preclude fair use, given the context.
In the context of news reporting and analogous activities, moreover, 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 such cases, courts often find transformation by emphasizing the altered purpose or context of the work, as evidenced by surrounding commentary or criticism. See, e.g., Bill Graham Archives, 448 F.3d at 609–610; Nunez v. Caribbean Int'l News Corp., 235 F.3d 18, 22–23 (1st Cir. 2000). Here, Bloomberg provided no additional commentary or analysis of Swatch Group’s earnings call. But by disseminating not just a written transcript or article but an actual sound recording, 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. As courts have long recognized in the context of witness testimony, “’a cold transcript contains only the dead body of the evidence, without its spirit,’” and “cannot reveal . . . ‘[the speaker’s] hesitation, his doubts, his variations of language, his confidence or precipitancy, his calmness or consideration.’”....
There is also an interesting discussion on whether or not the work was "published." Generally, it's much harder to win a fair use claim if the work was "unpublished" and Swatch insists this "work" was unpublished. The court agrees that it's unpublished, but also notes that Swatch invited over 300 analysts to the call and over 100 attended, so the fact that the recording wasn't "published" carries a lot less weight. In fact, the Court explicitly notes that something unpublished can certainly still be fair use -- and in fact, the law is fairly clear that if a work is unpublished, that doesn't
preclude a fair use finding.
On the "amount and substantiality" of the work, the Court notes obviously that the entire work is being used, but again that does not preclude fair use. In fact, the Court notes, as the district court did, that this factor comes out somewhat "neutral" and is clearly outweighed by the wider benefit and good reasons to post the whole thing.
It is undisputed here that Bloomberg used the entire work. The district court acknowledged that “this generally weighs against fair use,” but found that the public interest in the information contained in the recording “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.”
[....] For the reasons already explained in our discussion of the first fair use factor, we agree with the district court that Bloomberg’s use of the entire recording was reasonable in light of its purpose of disseminating important financial information to American investors and analysts. The recording has independent informational value over and above the value of a written transcript or article, regardless of how many Bloomberg subscribers took advantage of that value in this instance. Like the district court, we accordingly weigh this factor in neither party’s favor.
Swatch also tried to claim that, on the fourth factor -- the impact on the commercial market -- the fact that it didn't try to sell the recording shouldn't matter, since it's the potential
market that matters. The court is not persuaded, noting the risk of such a ruling would be creating a ridiculous rule.
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. As Professor Nimmer has observed, “it is a given in every fair use case that plaintiff suffers a loss of a potential market if that potential is defined as the theoretical market for licensing the very use at bar.” 4 Nimmer on Copyright § 13.05[A]. To guard against this “vice of circular reasoning,” our case law limits our consideration to a use’s “impact on potential licensing revenues for traditional, reasonable, or likely to be developed markets.” Am. Geophysical Union, 60 F.3d at 930–31. The hypothesized market for audio recordings of earnings calls convened by foreign companies that are exempt from Regulation FD cannot meet this standard.
All in all, a nice clear win for fair use even
when the full work is used for commercial reasons.