National Basketball Ass'n v. Motorola, Inc.

Citation41 USPQ2d 1585,105 F.3d 841
Decision Date30 January 1997
Docket Number824,D,Nos. 822,s. 822
Parties, 1997-1 Trade Cases P 71,705, 1997 Copr.L.Dec. P 27,591, 41 U.S.P.Q.2d 1585, 25 Media L. Rep. 1385 The NATIONAL BASKETBALL ASSOCIATION and NBA Properties, Inc., Plaintiff-Counter-Defendant-Appellee-Cross-Appellant, v. MOTOROLA, INC. doing business as SportsTrax, Defendant-Counter-Claimant-Appellant-Cross-Appellee, Sports Team Analysis and Tracking Systems, Inc. doing business as Stats, Inc., Defendant-Appellant-Cross-Appellee. ockets 96-7975, 96-7983 (CON) and 96-9123 (XAP).
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Jeffrey A. Mishkin, The National Basketball Association and NBA Properties, Inc., New York City (Kathryn L. Barrett, Richard W. Buchanan, of counsel; Roger L. Zissu, Mark D. Engelmann, Raphael Winick, Weiss Dawid Fross Zelnick & Lehrman, of counsel), for Plaintiff-Counter-Defendant-Appellee-Cross-Appellant.

Herbert F. Schwartz, Fish & Neave, New York City (Patricia A. Martone, Vincent N. Palladino, of counsel; Roger H. Dusberger, Motorola, Inc., of counsel), for Defendant-Counter-Claimant-Appellant-Cross-Appellee.

Andrew L. Deutsch, Piper & Marbury, New York City (Edward F. Malaf, of counsel; Paul M. Levy, Alan D. Leib, Deutsch Levy & Engel Chartered, Chicago, IL, of counsel), for Defendant-Appellant-Cross-Appellee.

Bruce P. Keller, Debevoise & Plimpton, New York City (Lorin L. Reisner, of counsel), for Amici Curiae National Football League, Office of the Commissioner of Baseball and National Hockey League.

Floyd Abrams, Cahill Gordon & Reindel, New York City, for Amicus Curiae Interactive Services Association.

George Freeman, The New York Times Company, New York City, for Amicus Curiae The New York Times Company.

Susan E. Weiner, National Broadcasting Company, Inc., New York City (Michael K. Kellogg, Austin C. Schlick, Kellogg, Huber, Hansen, Todd & Evans, Washington, DC, of counsel), for Amicus Curiae National Broadcasting Company, Inc.

Lee A. Freeman, Jr., Freeman, Freeman & Salzman, Chicago, IL (Jerrold E. Salzman, Chris C. Gair, of counsel), for Amicus Curiae Chicago Mercantile Exchange.

Before: VAN GRAAFEILAND, WINTER, and ALTIMARI, Circuit Judges.

WINTER, Circuit Judge:

Motorola, Inc. and Sports Team Analysis and Tracking Systems ("STATS") appeal from a permanent injunction entered by Judge Preska. The injunction concerns a handheld pager sold by Motorola and marketed under the name "SportsTrax," which displays updated information of professional basketball games in progress. The injunction prohibits appellants, absent authorization from the National Basketball Association and NBA Properties, Inc. (collectively the "NBA"), from transmitting scores or other data about NBA games in progress via the pagers, STATS's site on America On-Line's computer dial-up service, or "any equivalent means."

The crux of the dispute concerns the extent to which a state law "hot-news" misappropriation claim based on International News Service v. Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918) ("INS "), survives preemption by the federal Copyright Act and whether the NBA's claim fits within the surviving INS-type claims. We hold that a narrow "hot-news" exception does survive preemption. However, we also hold that appellants' transmission of "real-time" NBA game scores and information tabulated from television and radio broadcasts of games in progress does not constitute a misappropriation of "hot news" that is the property of the NBA.

The NBA cross-appeals from the dismissal of its Lanham Act claim. We hold that any misstatements by Motorola in advertising its pager were not material and affirm.

I. BACKGROUND

The facts are largely undisputed. Motorola manufactures and markets the SportsTrax paging device while STATS supplies the game information that is transmitted to the pagers. The product became available to the public in January 1996, at a retail price of about $200. SportsTrax's pager has an inch-and-a-half by inch-and-a-half screen and operates in four basic modes: "current," "statistics," "final scores" and "demonstration." It is the "current" mode that gives rise to the present dispute. 1 In that mode, SportsTrax displays the following information on NBA games in progress: (i) the teams playing; (ii) score changes; (iii) the team in possession of the ball; (iv) whether the team is in the free-throw bonus; (v) the quarter of the game; and (vi) time remaining in the quarter. The information is updated every two to three minutes, with more frequent updates near the end of the first half and the end of the game. There is a lag of approximately two or three minutes between events in the game itself and when the information appears on the pager screen.

SportsTrax's operation relies on a "data feed" supplied by STATS reporters who watch the games on television or listen to them on the radio. The reporters key into a personal computer changes in the score and other information such as successful and missed shots, fouls, and clock updates. The information is relayed by modem to STATS's host computer, which compiles, analyzes, and formats the data for retransmission. The information is then sent to a common carrier, which then sends it via satellite to various local FM radio networks that in turn emit the signal received by the individual SportsTrax pagers.

Although the NBA's complaint concerned only the SportsTrax device, the NBA offered evidence at trial concerning STATS's America On-Line ("AOL") site. Starting in January, 1996, users who accessed STATS's AOL site, typically via a modem attached to a home computer, were provided with slightly more comprehensive and detailed real-time game information than is displayed on a SportsTrax pager. On the AOL site, game scores are updated every 15 seconds to a minute, and the player and team statistics are updated each minute. The district court's original decision and judgment, National Basketball Ass'n v. Sports Team Analysis and Tracking Sys. Inc., 931 F.Supp. 1124 (S.D.N.Y.1996), did not address the AOL site, because "NBA's complaint and the evidence proffered at trial were devoted largely to SportsTrax." National Basketball Ass'n v. Sports Team Analysis and Tracking Sys. Inc., 939 F.Supp. 1071, 1074 n. 1 (S.D.N.Y.1996). Upon motion by the NBA, however, the district court amended its decision and judgment and enjoined use of the real-time game information on STATS's AOL site. Id. at 1075 n. 1. Because the record on appeal, the briefs of the parties, and oral argument primarily addressed the SportsTrax device, we similarly focus on that product. However, we regard the legal issues as identical with respect to both products, and our holding applies equally to SportsTrax and STATS's AOL site.

The NBA's complaint asserted six claims for relief: (i) state law unfair competition by misappropriation; (ii) false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (iii) false representation of origin under Section 43(a) of the Lanham Act; (iv) state and common law unfair competition by false advertising and false designation of origin; (v) federal copyright infringement; and (vi) unlawful interception of communications under the Communications Act of 1934, 47 U.S.C. § 605. Motorola counterclaimed, alleging that the NBA unlawfully interfered with Motorola's contractual relations with four individual NBA teams that had agreed to sponsor and advertise SportsTrax.

The district court dismissed all of the NBA's claims except the first--misappropriation under New York law. The court also dismissed Motorola's counterclaim. Finding Motorola and STATS liable for misappropriation, Judge Preska entered the permanent injunction, 2 reserved the calculation of damages for subsequent proceedings, and stayed execution of the injunction pending appeal. Motorola and STATS appeal from the injunction, while NBA cross-appeals from the district court's dismissal of its Lanham Act false-advertising claim. The issues before us, therefore, are the state law misappropriation and Lanham Act claims.

II. THE STATE LAW MISAPPROPRIATION CLAIM
A. Summary of Ruling

Because our disposition of the state law misappropriation claim rests in large part on preemption by the Copyright Act, our discussion necessarily goes beyond the elements of a misappropriation claim under New York law, and a summary of our ruling here will perhaps render that discussion--or at least the need for it--more understandable.

The issues before us are ones that have arisen in various forms over the course of this century as technology has steadily increased the speed and quantity of information transmission. Today, individuals at home, at work, or elsewhere, can use a computer, pager, or other device to obtain highly selective kinds of information virtually at will. International News Service v. Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918) ("INS ") was one of the first cases to address the issues raised by these technological advances, although the technology involved in that case was primitive by contemporary standards. INS involved two wire services, the Associated Press ("AP") and International News Service ("INS"), that transmitted newsstories by wire to member newspapers. Id. INS would lift factual stories from AP bulletins and send them by wire to INS papers. Id. at 231, 39 S.Ct. at 69-70. INS would also take factual stories from east coast AP papers and wire them to INS papers on the west coast that had yet to publish because of time differentials. Id. at 238, 39 S.Ct. at 72. The Supreme Court held that INS's conduct was a common-law misappropriation of AP's property. Id. at 242, 39 S.Ct. at 73-74.

With the advance of technology, radio stations began "live" broadcasts of events such as baseball games and operas, and various entrepreneurs began to use the transmissions of others in one way or another for their own profit. In response, New York...

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