Associated Press v. All Headline News Corp.

• Citation: 608 F.Supp.2d 454
• Decision Date: 17 February 2009
• Docket Number: No. 08 Civ. 323 (PKC).,08 Civ. 323 (PKC).
• Parties: The ASSOCIATED PRESS, Plaintiff, v. ALL HEADLINE NEWS CORP., Ahn Media Corp., W. Jeffrey Brown and Danielle George, Defendants.
• Court: U.S. District Court — Southern District of New York

608 F.Supp.2d 454

The ASSOCIATED PRESS, Plaintiff, v. ALL HEADLINE NEWS CORP., Ahn Media Corp., W. Jeffrey Brown and Danielle George, Defendants.

No. 08 Civ. 323 (PKC).

United States District Court, S.D. New York.

February 17, 2009.

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Andrew Lawrence Deutsch, Christine M. Jaskiewicz, DLA Piper US LLP, New York Ciyt, for Plaintiff.

Brian D. Caplan, Jonathan James Ross, Caplan & Ross, LLP, Eric A. Prager, Atul R. Singh, Robert L. Jacobson, Steven Edward Lipman, Darby & Darby, P.C., New York City, for Defendants.

MEMORANDUM AND ORDER

P. KEVIN CASTEL, District Judge:

This action arises out of the activities of All Headline News Corp. ("AHN"), an online venture that disseminates news reports to customer web sites, including reports of breaking news. The Associated Press ("AP"), which describes itself as "one of the world's oldest and largest news organizations" and "the `gold standard' of objective journalism" (Amended Complaint ("AC") ¶ 2), brings this action alleging that the defendants have engaged in "free riding" on the AP's news articles. Specifically, it alleges that defendants have unlawfully copied and altered AP news stories in violation of the federal Copyright Act, 17 U.S.C. §§ 106, the Digital Millennium Copyright Act, 17 U.S.C. § 1202, the Lanham Act, 15 U.S.C. §§ 1114 & 1125(a), and New York common law.

Pursuant to Rule 12(b)(6), Fed.R.Civ.P., the defendants move to dismiss all claims except Count Two, which alleges copyright infringement. For the reasons explained below, the defendants' motion is granted in part and denied in part.

BACKGROUND

For the purposes of the motion, the allegations of the Amended Complaint are accepted as true, and all reasonable inferences are drawn in favor of plaintiff Associated Press as the non-movant. United States v. City of New York, 359 F.3d 83, 91 (2d Cir.2004), cert. denied, 543 U.S. 1146, 125 S.Ct. 1295, 161 L.Ed.2d 106 (2005).

The Associated Press, through its employees, affiliates and subsidiaries, engages in effort and great expense "to get access to news and to gather, report, package and transmit news stories from every country in the world." (AC ¶¶ 2, 22-26, 34.) It employs a large number of reporters throughout the United States and internationally, and retains editors who conform stories to the organization's reporting and writing standards. (AC ¶¶ 38-40.) The AP is particularly focused on providing reports of timely, breaking news. (AC ¶¶ 28, 37.) It makes its news available to a variety of subscribing publications and licenses its stories to clients with internet web sites. (AC ¶¶ 2-3, 27.) It offers various licensing options for its clients, who pay a subscription fee and agree to terms and limitations on their use of AP stories. (AC ¶¶ 30-31, 33, 35-36.) Each story contains copyright information and identifies the Associated Press as author and/or owner of the story. (AC ¶ 32.) The AP holds registered copyrights relating to its news stories and photographs, as well as registered trademarks pertaining to its goods and services. (AC ¶¶ 42-43.)

By contrast, defendant AHN does not undertake any original reporting. (AC ¶ 4.) It hires "poorly paid individuals" to find news stories on the internet and prepare them for republication under the AHN banner, either rewriting the text or copying the stories in full. (AC ¶ 5.) Defendants W. Jeffrey Brown and Danielle George, who oversee AHN's day-to-day operations, instruct AHN writers to locate breaking news stories and revise them for AHN use. (AC ¶¶ 4-5, 57.) Many of AHN's stories are based on the original work of the AP, but they are marketed as originating with AHN. (AC ¶¶ 6-7.) Brown and George instructed reporters to remove or alter the identification of the AP as author or copyright holder of the articles. (AC ¶¶ 57, 61.) Once completed, AHN distributes its articles to paying clients—web sites to which AHN markets itself as a news provider. (AC ¶¶ 5, 54-55, 59-60.) As noted, the AP characterizes AHN's conduct as "free riding" on the original reporting of others. (AC ¶ 8.)

The AP identifies six specific instances of alleged copyright infringement by AHN. (AC ¶ 65.) It alleges that AHN copied the text of stories legitimately licensed to subscribers, including the AP writers' original expressions. (AC ¶¶ 66-67.) The AP also alleges that it has lost customers because of AHN's "free riding." (AC ¶¶ 70-72.)

MOTION TO DISMISS STANDARD

Rule 8(a)(2), Fed.R.Civ.P., requires only "a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007) (quotation omitted, ellipsis in original). To survive dismissal under Rule 12(b)(6), plaintiff must provide the grounds upon which the claims rest, through factual allegations sufficient to raise a right to relief above the speculative level. ATSI Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007) (quoting Twombly, 127 S.Ct. at 1965). The Amended Complaint is measured against a "flexible `plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir.2007) (emphasis in original), cert. granted, ___ U.S. ___, 128 S.Ct. 2931, 171 L.Ed.2d 863 (2008). This "does not require heightened fact pleading of specifics, [but] it does require enough facts to `nudge [plaintiff's] claims across the line from conceivable to plausible.'" In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir.2007) (quoting Twombly, 127 S.Ct. at 1974) (second alteration in original); see also Erickson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007).

"[C]onclusory allegations or legal conclusions masquerading as factual conclusions" are not sufficient to defeat the motion. Smith v. Local 819 I.B.T. Pension Plan, 291 F.3d 236, 240 (2d Cir.2002) (internal quotations omitted) (quoting Gebhardt v. Allspect, Inc., 96 F.Supp.2d 331, 333 (S.D.N.Y.2000)). Although the Court is limited to facts as stated in the complaint, it may consider exhibits or documents incorporated by reference without converting the motion into one for summary judgment. See Int'l Audiotext Network, Inc. v. Am. Telephone & Telegraph Co., 62 F.3d 69, 72 (2d Cir.1995).

ANALYSIS

I. The Motion to Dismiss Count One is Denied.

The cause of action for misappropriation of "hot news" has its origins in International News Service v. Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918), a decision arising under federal common law and one that pre-dates Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The defendants move to dismiss this claim on two grounds. First, they contend that choice of law requires that plaintiff's claim of misappropriation of hot news be considered under the law of Florida, which, defendants contend, has rejected such a cause of action. Second, they contend that a claim for misappropriation of hot news is preempted by the federal Copyright Act.

International News Service held that breaking news (sometimes described as "hot news") was the "quasi property" of a news-gathering organization, 248 U.S. at 236, 39 S.Ct. 68, and thus subject to protection against a competitor's interference. The Supreme Court held that allowing one news agency to appropriate and profit from the work of another would "render publication profitless, or so little profitable as in effect to cut off the service by rendering the cost prohibitive in comparison with the return." Id. at 241, 39 S.Ct. 68. Newsgathering carries with it "the expenditure of labor, skill, and money," and the Supreme Court held that its appropriation by another "is endeavoring to reap what it has not sown." Id. at 239-40, 39 S.Ct. 68. Although Erie would render the federal common law origins of International News Service non-binding in the federal courts, the cause of action is still recognized under the laws of various states, including the state of New York. See generally Nat'l Basketball Ass'n v. Motorola, Inc., 105 F.3d 841, 845 (2d Cir.1997) (claim for misappropriation of hot news is valid under New York law and not preempted by the federal Copyright Act); see also Electrolux Corp. v. Val-Worth, Inc., 6 N.Y.2d 556, 567-68, 190 N.Y.S.2d 977, 161 N.E.2d 197 (1959); Bond Buyer v. Dealers Digest Publishing Co., 25 A.D.2d 158, 159-60, 267 N.Y.S.2d 944 (1st Dep't 1966); Capitol Records, Inc. v. Naxos of America, Inc., 262 F.Supp.2d 204, 209-10 (S.D.N.Y.2003).

Defendants assert that the action is governed by the law of the state of Florida, not New York. They argue that Florida has the most significant interest in this claim. The Amended Complaint alleges defendant AHN to be a privately held corporation with its principal place of business in Florida and organized under the laws of that state. (AC ¶ 13.) The individual defendants are alleged to reside in Florida. (AC ¶¶ 14-15.) The Amended Complaint also alleges that AHN maintains an office and/or a bureau in New York. (AC ¶ 16.)

Under Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), I must apply the choice-of-law rules of New York, the forum state. Pursuant to New York law, "[t]he first step in any case presenting a potential choice of law issue is to determine whether there is an actual conflict between the laws of the jurisdictions involved." In re Allstate Insurance Co., 81 N.Y.2d 219, 223, 597 N.Y.S.2d 904, 613 N.E.2d 936 (1993).

The plaintiff argues that no conflict exists between the laws of New York and Florida, and that a claim for hot news misappropriation "would" be recognized under Florida law. As evidence for this prediction, plaintiff ci...