808 F.2d 204 (2nd Cir. 1986), 285, Financial Information, Inc. v. Moody's Investors Service, Inc.

Docket Nº285, Docket 86-7598.
Citation808 F.2d 204
Party Name26,040, 1 U.S.P.Q.2d 1279 FINANCIAL INFORMATION, INC., Plaintiff-Appellant, v. MOODY'S INVESTORS SERVICE, INC., Defendant-Appellee.
Case DateDecember 22, 1986
CourtUnited States Courts of Appeals, Court of Appeals for the Second Circuit

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808 F.2d 204 (2nd Cir. 1986)

26,040, 1 U.S.P.Q.2d 1279




No. 285, Docket 86-7598.

United States Court of Appeals, Second Circuit

December 22, 1986

Argued Nov. 5, 1986.

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

Robert M. Callagy, New York City (Mark A. Fowler, Satterlee & Stephens, New York City, of counsel), for defendant-appellee.

Before LUMBARD, OAKES and KEARSE, Circuit Judges.

LUMBARD, Circuit Judge:

In this case, before us for the second time, Financial Information, Inc. ("FII"), which publishes a financial reporting service, charged Moody's Investors Service, Inc. ("Moody's"), another financial publisher, with copyright infringement and unfair competition. After a bench trial, the District Court for the Southern District (Carter, J.) held for the defendants. It found that the material in question was copyrightable, but that Moody's made "fair use" of it under the copyright statute. In Financial Information, Inc. v. Moody's Investors Service, Inc., 751 F.2d 501 (2d Cir.1984) (Financial Information I ), we reversed and remanded for further factual findings to determine whether the material in question was copyrightable. On remand, Judge Carter found that FII's material was not copyrightable and also dismissed the plaintiff's pendent state claim. Because we agree that FII's service is not a copyrightable compilation and that the state claims were preempted by federal law, we affirm.


The relevant facts are set forth at length in Judge Oakes' opinion cited above. FII is a financial publisher. One of its works is called the "Financial Daily Card Service," from which it alleges Moody's stole copyrighted information. This service (hereafter "Daily Bond Cards") consists of packets of 4"' by 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 authority, the series of bonds being called, the date and price of the redemption, and the name of the trustee or paying agent.

The Daily Bond Cards seek to report all municipal redemptions. When a municipality or other government body calls a bond for redemption--and, consequently, stops paying interest--it publishes a notice of the call in one or more newspapers. Because these notices are not published in a single place, the "back offices" of financial institutions, which are ill-equipped to keep track of thousands of call notices each year, subscribe to called bond services such as FII's. FII's approximately 500 subscribers pay $279 per year for the daily reports, an annual cumulative volume and a filing cabinet.

The defendant Moody's offers a service called the Municipal and Government News Reports ("News Reports"), a bi-weekly supplement to a yearly publication called the

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Municipal and Government Manual. The Moody's publication provides substantially more information than FII's--including Moody's own rating of the quality of the bonds. In addition, unlike FII, Moody's does not seek to report on all municipal bond redemptions; it reports on only those bonds which the company also rates. The Moody's service costs $840 per year, which includes not only the bi-weekly news reports, but also the annual Municipal and Government Manual, which is a comprehensive work containing a great deal of financial information about municipalities. The Moody's publication serves a far wider audience than the Daily Bond Cards, including libraries and government agencies as well as financial institutions.

According to FII, it noticed in 1980 a "coincidence of Moody's errata publishing after FII," and suspected that Moody's was copying FII's data. In December of that year, FII began planting some false information in its Daily Bond Cards. Moody's reproduced seven of FII's ten common errors in 1980, and eight of eight errors in 1981. FII's expert witness stated that it was more than 95% certain that Moody's had copied 40-50% of FII's information in 1980 and 1981. Moody's, in response, presented substantial evidence of what it called the "independent creation" of its News Reports. It presented evidence that its research cost $700,000 to $1,000,000 per year.

The crucial issue on remand involved FII's efforts to produce its Bond Cards--which the district court described as a "simple clerical task." The cards contain only five basic facts about the bonds: the name of the issuer and a description of the bond (e.g. water, sewage, etc.); the redemption date; the redemption agent; the identification of the specific bonds being called, and the redemption price. Indeed, FII's advertising for its bond service called attention to the simplicity and conciseness of the cards, describing them as appearing in "outline form" without any "superfluous matter." As the district court found, "all [FII] does is provide its subscribers with the requisite bond redemption data in simplified form for easy and ready reference."

FII's procedure for collecting the information for its cards was as rudimentary as the cards themselves. The FII clerks usually did nothing more than look through newspapers and write down the redemption information from the "tombstone" advertisements. When the "tombstone" contained additional or unusually complex information, the clerks would simply attach a photocopy of the "tombstone" to the FII card. Occasionally, the FII clerks would telephone the issuers or agents to verify or clarify information.

Theresa Moore, a former FII researcher, testified at the initial trial that she and her colleagues were clerks with no special skills who exercised no discretion in their jobs. According to the district court, "[s]he used no subjective analysis, but 'just took the information from what I saw in the tombstones and the articles in the paper.' " Also at the first trial, the FII managing editor, George Sheekey, described the researchers' duties much as Moore did: he said their jobs consisted essentially of doing a simple, repetitive task by rote.

Following remand, the district court afforded FII another opportunity to describe its editorial processes. FII called only one witness, Frances Zawilski, an FII assistant editor who formerly supervised Theresa Moore. The district court found that Zawilski "gave a far more inflated version of [Moore's] training process as an FII researcher." The district court questioned the credibility of Zawilski's testimony, stating that "the court is now convinced that the testimony on remand was an attempt to enlarge and embellish a straight forward, simple but time consuming operation that had been fully and adequately explicated at the initial trial." Judge Carter concluded that "FII's researchers perform a simple clerical task. They go through the various publications, cut out the tombstones or redemption notices, extract from the notices the raw data--name of issuer, description of issue, redemption price, date, agent and serial number of bonds being called....

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The only selectivity involved is principally one of format.... With this data, there is no room for selection or choices or...

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