751 F.2d 501 (2nd Cir. 1984), 1321, Financial Information, Inc. v. Moody's Investors Service, Inc.

Docket Nº1321, Docket 84-7110.
Citation751 F.2d 501
Party Name744 FINANCIAL INFORMATION, INC., Appellant, v. MOODY'S INVESTORS SERVICE, INC., Appellee.
Case DateDecember 18, 1984
CourtUnited States Courts of Appeals, Court of Appeals for the Second Circuit

Page 501

751 F.2d 501 (2nd Cir. 1984)

744

FINANCIAL INFORMATION, INC., Appellant,

v.

MOODY'S INVESTORS SERVICE, INC., Appellee.

No. 1321, Docket 84-7110.

United States Court of Appeals, Second Circuit

December 18, 1984

Argued June 4, 1984.

David A. Kalow, New York City (Arthur M. Lieberman, Lieberman, Rudolph & Nowak, New York City, of counsel), for appellant.

Robert M. Callagy, New York City (Barbara L. Wartelle, Daniel G. Gurfein, Satterlee & Stephens, New York City, of counsel), for appellee.

Page 502

Before OAKES and NEWMAN, Circuit Judges, and MISHLER, District judge. [*]

OAKES, Circuit Judge:

This is an appeal from a judgment of the United States District Court for the Southern District of New York, Robert L. Carter, Judge, dismissing after a bench trial plaintiff-appellant Financial Information Inc.'s complaint charging defendant-appellee Moody's Investors Service, Inc. with copyright infringement and unfair competition. The court first found that the information gathered was copyrightable under the "compilation" provision of the copyright law, 17 U.S.C. Sec. 101 (1982). Then, in dismissing the action, the district court found that the fair use doctrine, codified in 17 U.S.C. Sec. 107 (1982), shielded Moody's from liability on the federal copyright infringement allegations, and that there could be no unfair competition under state law since the parties were not competitors and because plaintiff could show no injury.

One week after the judgment below was entered, the Supreme Court decided Sony Corp. of America v. Universal City Studios, Inc., --- U.S. ----, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984), which now represents the leading exposition of the fair use doctrine. In light of Sony, and in view of other considerations discussed below, we reverse and hold that Moody's copying was not protected by the fair use doctrine. This holding on the federal cause of action necessarily entails a correlative holding that the state cause of action is preempted under 17 U.S.C. Sec. 301 (1982). But it also entails an examination of the copyrightability issue, as to which we wish further elaboration on the facts and reconsideration. We remand to the district court for such elaboration and reconsideration and a determination of damages, if that issue is reached.

FACTS

Financial Information Inc. ("FII") is a publisher of financial information. It produces five separate works, including its "Financial Daily Called Bond Service," from which it alleges Moody's stole copyrighted material.

FII's Financial Daily Called Bond Service ("Daily Bond Cards") consists literally of packets of 4"' X 6"' index cards on which are printed information regarding municipal bonds which the issuer has elected to redeem, or "call." The information typically includes the identity of the issuing (and, of course, calling) municipal authority, the series of bonds being called, the date and price of the redemption, and the name of the trustee or paying agent to whom the bond should be presented for payment. FII obtains this information principally by having its employees read newspapers from all over the country, looking for and clipping the paid notices of calls that issuers place in the local press. Occasionally, FII employees telephone issuers for information, and sometimes other commercial bond redemption services--such as Moody's--are consulted. There is apparently little, if any, editorial skill or creative discretion involved; the cards are essentially a compilation of financial facts collected from various sources, the key facts being those selected for publication.

The Daily Bond Cards seek to report all United States municipal redemptions. The packets are mailed each day to roughly 500 subscribers, who are generally large financial institutions who own numerous municipal bonds and who would find it difficult to monitor all relevant redemptions. The cost of the service is $279 per year, which includes an annual cumulative volume and a filing cabinet.

Defendant-appellee Moody's Investors Service, Inc. ("Moody's") is also in the business of selling financial information. Among its products is its Municipal and Government News Reports ("News Reports"), a bi-weekly supplement to a yearly publication called the Municipal and Government Manual.

Like FII's Daily Bond Cards, Moody's News Reports provide institutional subscribers

Page 503

with the essential data connected with bond redemptions, including the date and price of the call and the name of the trustee or agent. Despite the apparent overlap, the publications differ in at least two ways. First, while FII endeavors to report all municipal redemptions, Moody's coverage is restricted to those securities it also rates, which, we are told, are roughly 90% of the total class of municipal bonds. Secondly, Moody's News Reports provide a significant amount of information not offered by FII's cards, such as Moody's own ratings of the debt securities and notices of securities recently offered. Moody's total package costs $840 per year and includes, in addition to the bi-weekly News Reports, the Municipal and Government Manual, a comprehensive work which contains a substantial amount of financial information about governmental entities, and which serves as a reference source for libraries and government agencies, as well as for financial institutions.

According to FII, in 1980 it noticed a "coincidence of Moody's errata publishing after FII," and began to suspect that Moody's was simply copying information from its cards. In December of that year, in an attempt to confirm its suspicions, FII fabricated and planted an error "redeeming" some bonds that had, in fact, been called a year earlier. The fake redemption was picked up and published by Moody's. While FII did not plant any more errors--it was, after all, in jeopardy of sacrificing its reputation with its customers for credibility and reliability--FII did compare Moody's reports with its own in cases where FII had made unintentional errors. It was ultimately determined--and Moody's does not contest--that in 1980 seven of ten FII errors were reproduced by Moody's, while in 1981, all eight FII errors were copied by Moody's. 1 FII then instituted this action for copyright infringement and unfair competition under the Copyright Act, 17 U.S.C. Secs. 101-810 (1982), and for unfair competition under New York law.

At trial, FII's expert witness, Professor Herbert Robbins, Professor of Mathematical Statistics at Columbia University, testified that based on the incidence of FII errors which appeared in Moody's News Reports it was more than 95% certain that Moody's had copied at least 40-50% of FII's information in the years 1980 and 1981. Professor Robbins further testified that in 1981, where eight of eight FII errors appeared in the News Reports, the probabilities were 51% that Moody's copied 91% of FII's Daily Bond Cards. At a "confidence level," i.e., probability, of 95%, Professor Robbins put the percentage of Moody's copying in 1981 at 68%.

Moody's presented evidence at trial of what it calls its "independent creation" of its News Reports. According to the testimony of Moody's employees, the research effort that went into the News Reports included the reading of over two dozen newspapers and the monitoring of four wire services. Moody's maintained that nine employees were directly, though not necessarily exclusively, involved in the production of the News Reports, and that the "total accrued annual costs allocable" to the News Reports, including research effort costs, varied from between $700,000 to $1,000,000. In addition, Moody's sought to counter the expert testimony of Professor Robbins by showing through reference to publication deadlines and schedules that more than half of its bond redemption notices simply could not have been copied from FII's cards.

THE DECISION BELOW

In the post-trial opinion dismissing the complaint, the district court found, as a preliminary matter, that FII's Daily Bond Cards were copyrightable, thus confirming the substance of the decision on appellee's prior motion for summary judgment. 2 599

Page 504

F.Supp. 994. The district court then expressly found that Moody's had "copied from plaintiff's cards from time-to-time." It noted, however, that such copying did not "end the matter," since Moody's had "asserted the fair use doctrine as a defense to its use [of] plaintiff's materials." Conceptualizing the test for the applicability of the fair use doctrine as four hurdles for Moody's to "overcome," the district court made four key findings in Moody's "behalf."

After stating that the fact of a commercial use of copyrighted material does not in and of itself defeat a fair use defense, the district court noted that in some instances, Moody's publication served as legal notice of a bond's redemption and that many institutions were "eager" to have this information. The court then found that Moody's was performing a "public function" by "making available this needed financial information." Thus, the fulfillment of this public function brought Moody's "clearly ... within the ambit of the first requirement for fair use protection."

The district court then focused on what it called "the simplest hurdle for Moody's to overcome," namely the nature of the copyrighted work. The court stated that since FII's cards represented a mere compliation of factual material, the scope of permissible fair use was greater than it would be with respect to a "truly creative work," and held that Moody's thus met "the second yardstick."

The third factor analyzed was the "amount and substantiality of the portions copied." Despite Professor Robbin's testimony, the court held that FII "failed to establish substantial use of its work" by...

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35 practice notes
  • 804 F.Supp. 950 (W.D.Mich. 1992), 190-CV-1015, Hi-Tech Video Productions, Inc. v. Capital Cities/ABC, Inc.
    • United States
    • Federal Cases United States District Courts 6th Circuit Western District of Michigan
    • May 18, 1992
    ...constitutes sufficient harm for purposes of evaluating this factor. See Financial Information, Inc. v. Moody's Investors Service, Inc., 751 F.2d 501, 510 (2d Cir. 1984) (citing cases), cert. denied, 484 U.S. 820, 108 S.Ct. 79, 98 L.Ed.2d 42 Thus, the Court also finds that the fourth factor ......
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    • Federal Cases United States District Courts 6th Circuit Northern District of Ohio
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    ...left out in creating his Tables--is an important factor. For example, in Financial Information, Inc. v. Moody's Investors Service, Inc., 751 F.2d 501, 507 (2d Cir.1984), the court stated that in determining the degree of selectivity exhibited by a particular compilation, the trial court sho......
  • 860 F.2d 250 (7th Cir. 1988), 87-1404, Skelton v. General Motors Corp.
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    • Federal Cases United States Courts of Appeals Court of Appeals for the Seventh Circuit
    • October 14, 1988
    ...principles to determine attorneys' fees when resolution of disputes results in the creation of common funds. See, e.g., In re Fine Paper, 751 F.2d 502; City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir.1974). The Second Circuit, in an antitrust class action that resulted in a $10 mill......
  • An empirical study of U.S. copyright fair use opinions, 1978-2005.
    • United States
    • University of Pennsylvania Law Review Vol. 156 Nbr. 3, January 2008
    • January 1, 2008
    ...guides into inflexible rules, but with a review of the underlying equities."); Fin. Info., Inc. v. Moody's Investors Serv., Inc., 751 F.2d 501, 508 (2d Cir. 1984) ("The four factors ... are equitable considerations to be assessed and weighed by the court; they are not simply hurdl......
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31 cases
  • 804 F.Supp. 950 (W.D.Mich. 1992), 190-CV-1015, Hi-Tech Video Productions, Inc. v. Capital Cities/ABC, Inc.
    • United States
    • Federal Cases United States District Courts 6th Circuit Western District of Michigan
    • May 18, 1992
    ...constitutes sufficient harm for purposes of evaluating this factor. See Financial Information, Inc. v. Moody's Investors Service, Inc., 751 F.2d 501, 510 (2d Cir. 1984) (citing cases), cert. denied, 484 U.S. 820, 108 S.Ct. 79, 98 L.Ed.2d 42 Thus, the Court also finds that the fourth factor ......
  • 784 F.Supp. 1320 (N.D.Ohio 1992), 1 91CV0885, Budish v. Gordon
    • United States
    • Federal Cases United States District Courts 6th Circuit Northern District of Ohio
    • February 4, 1992
    ...left out in creating his Tables--is an important factor. For example, in Financial Information, Inc. v. Moody's Investors Service, Inc., 751 F.2d 501, 507 (2d Cir.1984), the court stated that in determining the degree of selectivity exhibited by a particular compilation, the trial court sho......
  • 860 F.2d 250 (7th Cir. 1988), 87-1404, Skelton v. General Motors Corp.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Seventh Circuit
    • October 14, 1988
    ...principles to determine attorneys' fees when resolution of disputes results in the creation of common funds. See, e.g., In re Fine Paper, 751 F.2d 502; City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir.1974). The Second Circuit, in an antitrust class action that resulted in a $10 mill......
  • 662 F.Supp. 1347 (S.D.N.Y. 1987), 86 Civ. 6689, Dolori Fabrics, Inc. v. Limited, Inc.
    • United States
    • Federal Cases United States District Courts 2nd Circuit Southern District of New York
    • June 10, 1987
    ...contribution to the floral design and thus should be held accountable. See Financial Information, Inc. v. Moody's Investors Service, Inc., 751 F.2d 501, 510-11 (2d Cir. 1984) (Newman, J., concurring). In other words, even W-232's derivative nature does not forgive exact copying. C. Intent T......
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4 books & journal articles
  • An empirical study of U.S. copyright fair use opinions, 1978-2005.
    • United States
    • University of Pennsylvania Law Review Vol. 156 Nbr. 3, January 2008
    • January 1, 2008
    ...guides into inflexible rules, but with a review of the underlying equities."); Fin. Info., Inc. v. Moody's Investors Serv., Inc., 751 F.2d 501, 508 (2d Cir. 1984) ("The four factors ... are equitable considerations to be assessed and weighed by the court; they are not simply hurdl......
  • Protecting computer programs as compilations.
    • United States
    • Yale Law Journal Vol. 104 Nbr. 2, November - November 1994
    • November 1, 1994
    ...(67.) Sem-Torq, Inc. v. K Mart Corp., 936 F.2d 851, 855 (6th Cir. 1991) (quoting Financial Info., Inc. v. Moody's Investors Serv., Inc., 751 F.2d 501, 505 (2d Cir. 1984), cert. denied, 484 U.S. 820 (1987)). (68.) 936 F.2d at 851. (69.) Id. at 855-56. (70.) Compilations consisting of materia......
  • Imitation is the sincerest form of ... infringement? Guitar tabs, fair use, and the Internet.
    • United States
    • William and Mary Law Review Vol. 49 Nbr. 6, May 2008
    • May 1, 2008
    ...the results weighed together, in light of the purposes of copyright."). (77.) See Fin. Info., Inc. v. Moody's Investors Serv., Inc., 751 F.2d 501 (2d Cir. 1984) (reversing the district court's finding of fair use, as well as rejecting all four factors relied upon by the district court ......
  • A pattern-oriented approach to fair use.
    • United States
    • William and Mary Law Review Vol. 45 Nbr. 4, March 2004
    • March 1, 2004
    ...in fact a proper route to promoting creative expression. (593.) 150 F.3d 104 (2d Cir. 1998). (594.) 786 F.2d 1400 (9th Cir. 1986). (595.) 751 F.2d 501 (2d Cir. 1984). (596.) 342 F.3d 191 (3d Cir. 2003). (597.) 348 F.3d 666 (7th Cir. 2003). (598.) The Slater opinion is particularly clear in ......