National Basketball Association v. Motorola, Inc.
105 F.3d 841 (1997)
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Rule of Law:
A state law "hot-news" misappropriation claim survives preemption by the federal Copyright Act only if it is limited to cases where: (i) a plaintiff generates or gathers information at a cost; (ii) the information is time-sensitive; (iii) a defendant's use of the information constitutes free-riding on the plaintiff's efforts; (iv) the defendant is in direct competition with a product or service offered by the plaintiff; and (v) the ability of others to free-ride would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened.
Facts:
- Motorola, Inc. manufactured and marketed a handheld pager called SportsTrax.
- SportsTrax displayed real-time information about National Basketball Association (NBA) games in progress, including score changes, the team in possession, the quarter, and time remaining.
- The information on the pager was updated every two to three minutes and lagged behind the actual game by approximately two to three minutes.
- Sports Team Analysis and Tracking Systems (STATS) supplied the game information for the pagers.
- STATS reporters gathered the information by watching the games on television or listening to them on the radio.
- These reporters would key the factual data into a personal computer, which was then compiled, formatted, and transmitted to the SportsTrax pagers.
- STATS also provided similar, but more detailed, real-time game information on a site hosted by America On-Line (AOL).
- The NBA produces the basketball games and also offers its own statistical service called 'Gamestats' inside arenas, with plans to develop a competing pager product.
Procedural Posture:
- The National Basketball Association (NBA) sued Motorola, Inc. and Sports Team Analysis and Tracking Systems, Inc. (STATS) in the U.S. District Court for the Southern District of New York.
- The NBA's complaint included claims for state law misappropriation, copyright infringement, and violations of the Lanham Act.
- The district court dismissed the NBA's copyright and Lanham Act claims but found in favor of the NBA on its state law misappropriation claim.
- The district court entered a permanent injunction prohibiting Motorola and STATS from transmitting real-time game information.
- Motorola and STATS (as appellants) appealed the injunction to the U.S. Court of Appeals for the Second Circuit.
- The NBA (as cross-appellant) appealed the dismissal of its Lanham Act claim.
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Issue:
Does the transmission of real-time scores and statistics from National Basketball Association games via a pager constitute a misappropriation of the NBA's property under the 'hot-news' doctrine of New York common law that is not preempted by the federal Copyright Act?
Opinions:
Majority - Judge Winter
No. The transmission of real-time factual information about NBA games does not constitute a misappropriation of 'hot news' that survives preemption by the Copyright Act. First, the court addresses preemption. While the underlying games are not copyrightable, the broadcasts of the games are. The court rejects a 'partial preemption' theory, holding that when a state law claim is based on extracting information from a copyrightable work (the broadcast), the claim falls within the 'subject matter' of copyright for preemption analysis, even if the information extracted is uncopyrightable facts. Therefore, the NBA's claim is preempted unless it contains an 'extra element' that distinguishes it from a copyright claim. The court finds that a narrow 'hot-news' misappropriation claim, as established in International News Service v. Associated Press, survives preemption because it contains such extra elements. The court then establishes a five-part test for a valid 'hot-news' claim. The NBA's claim fails this test because it critically lacks the element of 'free-riding.' Motorola and STATS do not copy information from the NBA's own data service; they expend their own resources to hire reporters to watch the publicly available broadcasts and collect the factual data. Because Motorola and STATS bear their own costs of information gathering, they are not 'free-riding' on the NBA's efforts in the manner required to sustain a 'hot-news' misappropriation claim.
Analysis:
This decision significantly narrows the 'hot-news' misappropriation doctrine, clarifying that it is not a general-purpose claim against any form of commercial copying but a specific protection against a particular type of free-riding. By establishing a stringent five-part test, the court makes it much harder for plaintiffs to claim ownership over publicly disseminated, time-sensitive factual information. The ruling protects the creation of secondary information markets, confirming that as long as a competitor expends its own resources to gather facts from a public source (like a broadcast), it is not engaged in the kind of parasitic conduct the 'hot-news' doctrine was designed to prevent. This precedent is crucial in the digital age, as it limits the ability of event organizers to control all subsequent reporting and data dissemination related to their events.
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