Quick Summary
In NBA v. Motorola, the plaintiff NBA contended that defendants Motorola and STATS infringed upon its property rights by transmitting basketball game statistics through a device called SportsTrax. The dispute revolved around whether such actions constituted unlawful misappropriation of ‘hot news.’
The appellate court ruled that the defendants did not engage in misappropriation as they did not free-ride on the NBA’s efforts, nor did they affect its primary products. Consequently, the initial injunction was lifted, and the misappropriation claim dismissed.
Facts of the Case
The National Basketball Association (NBA) (plaintiff) initiated legal action against Motorola, Inc. and Sports Team Analysis and Tracking Systems (STATS) (defendants), over a device called ‘SportsTrax.’ This handheld pager, developed by Motorola, displayed statistical updates from ongoing professional basketball games, which STATS provided.
The NBA had not authorized the transmission of this game data and claimed that this action violated various copyright and trademark laws, as well as New York’s misappropriation law. Despite negotiations, the NBA declined to grant Motorola and STATS a license to transmit NBA game statistics.
Consequently, Motorola and STATS independently started to disseminate NBA game data during the 1995-96 season. The NBA then brought suit, leading to an injunction that barred the defendants from transmitting statistics related to NBA games in progress without the league’s authorization.
Procedural Posture and History
- The NBA sued Motorola and STATS for transmitting game data without authorization.
- The district court ruled in favor of the NBA and issued an injunction against Motorola and STATS.
- Motorola and STATS appealed the decision to the United States Court of Appeals for the Second Circuit.
I.R.A.C. Format
Issue
Whether Motorola and STATS unlawfully misappropriated the NBA’s property rights by transmitting game data via SportsTrax without the NBA’s consent.
Rule of Law
The court considered the extent to which a state ‘hot-news’ misappropriation claim, based on International News Service v. Associated Press, survives preemption by the federal Copyright Act.
Reasoning and Analysis
The Court of Appeals found that while a narrow ‘hot-news’ exception to copyright preemption exists under federal law, the defendants’ transmission of real-time NBA game scores and information did not constitute a misappropriation of ‘hot news’ that is considered property of the NBA.
The court outlined specific elements central to a ‘hot-news’ claim and concluded that Motorola and STATS did not meet these criteria because they were not free-riding on the NBA’s efforts but were instead incurring their own costs to generate factual game data.
Furthermore, the court determined that there was no evidence that SportsTrax was a substitute for attending games or watching them on television, meaning there was no demonstrated competitive effect on the NBA’s primary products. As such, the NBA did not show any damage from free-riding by Motorola and STATS on its Gamestats product.
The Court also dismissed the NBA’s false advertising claim under Section 43(a) of the Lanham Act because the statements made by Motorola were not material or likely to influence consumers’ purchasing decisions.
Conclusion
The injunction against Motorola and STATS was vacated, and the NBA’s claim for misappropriation under New York law was dismissed. The dismissal of the NBA’s Lanham Act false-advertising claim was affirmed.
Key Takeaways
- A narrow ‘hot-news’ misappropriation claim can survive copyright preemption under federal law if certain criteria are met.
- The transmission of real-time game information by Motorola and STATS was not considered free-riding on the NBA’s efforts and therefore did not constitute unlawful misappropriation.
- Statements made by Motorola in advertising were deemed not material to a false advertising claim under the Lanham Act.
Relevant FAQs of this case
What factors must be present for a 'hot-news' misappropriation claim to succeed?
To establish a ‘hot-news’ misappropriation claim, the plaintiff must demonstrate that the information in question is time-sensitive, the plaintiff invested effort and resources in gathering it, the defendant’s use of the information constitutes free riding on the plaintiff’s efforts, there is direct competition between the parties, and the ability of other parties to free-ride on the efforts of the plaintiff would reduce the incentive to produce or disseminate the information.
- For example: A news agency that gathers and produces breaking news invests substantial resources in reporting. If another entity broadcasts that news without permission, potentially undermining the originator’s investment and incentivization to report, this may constitute ‘hot-news’ misappropriation.
Under what circumstances does copyright preemption not apply to a state law claim?
Copyright preemption does not apply when a state law claim involves extra elements that change the nature of action so that it is qualitatively different from a copyright claim under federal law. This requires more than just reproduction or distribution, such as breach of a fiduciary duty, contractual obligations, or other elements outside standard copyright issues.
- For example: A contract between two businesses may include a clause that prevents one party from sharing trade secrets. A breach of this contract, involving copyright materials but also encompassing trade secret misappropriation, would not be preempted by federal copyright law.
What evidence is needed to demonstrate that a product is a market substitute and harming the original product's sales?
Evidence needed includes data showing significant overlap in consumer base, direct competition in terms of time and use, marked decline in sales or viewership correlated with the introduction of the substitute product, and consumer surveys indicating replacement of the original product with the substitute.
- For example:If a new budget streaming service begins offering movies currently exclusive to a premium service, and subsequently the premium service sees a decline in subscriptions specifically referring to this overlap in offerings, it could be strong evidence of market substitution.
References
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