Wednesday, November 28, 2012

Balganesh - The "Hot News" Myth

What role does property law occupy in hot news misappropriation claims? In ‘Hot News’: The Enduring Myth of Property in News, Shyamkrishna Balganesh (Penn Law) identifies a shift in the rhetoric and underlying principles advanced by courts when confronted with hot news misappropriation claims. Rather than focus on unfair competition, courts have begun to analyze hot news misappropriation claims through the lens of property rights. Balganesh laments this shift and the corresponding "enduring myth" that the hot news misappropriation doctrine is founded on a property right in the news. He instead encourages courts to understand this doctrine as concerned with unfair competition and resulting unjust enrichment between direct competitors and differentiates the rationale supporting the doctrine from the rationale supporting intellectual property rights. In the process, he addresses the fundamental challenges to the continued existence of the doctrine if courts continue to view it as advancing property interests.

The hot news misappropriation doctrine, born in International News Service v. Associated Press, 248 U.S. 215 (1918), discourages free-riding in the news industry among direct competitors. According to Balganesh, in creating the doctrine, the Supreme Court declined to create a property right in the news and instead focused on unfair competition among news gatherers. Nevertheless, courts have recently interpreted the misappropriation doctrine as creating property interests in news given a recent attempt by the newspaper industry to resurrect the doctrine as a cure to the ills suffered by modern newspapers.

Technology’s evolution towards readily accessible information has compromised the traditional structure of the news industry. Balganesh points out that news agencies customarily function through collective market input by resource sharing, a strategy severely destabilized by the intrusion of free-riding. Free-riding reduces incentives to enter the news market while simultaneously discouraging participants from continuing meaningful market contributions. Although free-riding poses serious problems for the news industry, Balganesh contends that the market structure needs some amount of collective cooperation to avoid redundant independent news gathering techniques. Because newspapers' value derives from communicating time sensitive facts, and copyright protections extend to newspapers' creative content but not facts upon which news stories are based, news agencies have sought a resolution to the free-riding challenge through the misappropriation doctrine rather than copyright law. But at the same time these news agencies have called upon courts to refashion the misappropriation doctrine based on a conceptual framework drawn from property law, and courts increasingly have answered the call. According to Balganesh, interpreting misappropriation through the lens of property law, however, fails to address free-riding in a way best suited to preserve the collaborative structure of the news industry.

In Balganesh's view, courts should focus on unjust enrichment between direct competitors instead of property law for several reasons. First, Balganesh cautions that a property-based approach to misappropriation creates an expectation of an ex ante interest in the news that disregards whether direct competition exists between the parties, an essential element to misappropriation claims. Instead, unjust enrichment permits recovery where the defendant benefits unfairly from the plaintiff’s news gathering expenses. Second, Balganesh reproves a property-based approach favoring automatic injunctions because such an approach overlooks First Amendment protections and, moreover, jeopardizes the cooperation essential to market sustainability in the news industry. Viewing misappropriation from the perspective of unjust enrichment addresses these concerns by favoring recovery in the form of restitution rather than injunctive relief. Third, Balganesh portends the misappropriation doctrine’s death if courts continue to construe the doctrine as advancing property law principles because of preemption and First Amendment concerns. Interpreted through unjust enrichment, the doctrine would survive. Finally, Balganesh advises courts to evaluate misappropriation claims individually to determine whether a defendant’s free-riding would stall inducements of continued market contributions. Under this methodological approach, courts should provide remedies only where free-riding is likely to inhibit the collective nature of the market. Balganesh points out that this approach effectively imposes a duty on news agencies to regulate free-riding, as any delays in confronting cooperative abuse would suggest an absence of a collective action problem. In short, Balganesh contends that the market effect of considering misappropriation through unjust enrichment advances the interests of the news industry more effectively than evaluating misappropriation claims through a property lens.

Balganesh's view regarding the myth of property in the news, while not universally held, has generated further scholarly analysis and raised significant questions beyond the misappropriation doctrine. Richard Epstein, in his article The Protection of “Hot News”: Putting Balganesh’s “Enduring Myth” About International News Service v. Associated Press in Perspective, 111 Colum. L. Rev. 79 (2011), disputes Balganesh’s claim that property law is a source of confusion in interpreting hot news misappropriation claims. Balganesh, however, in a subsequent article, The Uncertain Future of “Hot News” Misappropriation After Barclays Capital v., 112 Colum. L. Rev. 134 (2012), highlights a case that, in his view, represents continued misunderstanding of the misappropriation doctrine. Balganesh's continued effort to develop an accurate understanding of the basis and motivation of the misappropriation doctrine provides fundamental insights into its prospective application and its ability to redress the troubles faced by the news industry today. Moreover, in questioning the role of property law in the misappropriation doctrine, Balganesh's arguments may also call for reconsideration of the application of property law in other areas of the law, including Lanham Act actions.

Drafted by Andria Minyard (, research assistant to Professor Sarah Tran (Southern Methodist University). While Professor Tran is on leave, Professor David Taylor (Southern Methodist University) is supervising her research assistants. Andria is a 2015 Juris Doctor candidate at SMU Dedman School of Law. She received her B.S. in Biology from the University of Texas, Austin. Prior to law school, Andria worked as a Clinical Research Technician at RCTS Labs, Inc.

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