Associated Press v. KVOS

• Decision Date: 16 December 1935
• Docket Number: No. 7798.,7798.
• Citation: 80 F.2d 575
• Parties: ASSOCIATED PRESS v. KVOS, Inc.
• Court: U.S. Court of Appeals — Ninth Circuit

80 F.2d 575 (1935)

ASSOCIATED PRESS v. KVOS, Inc.

No. 7798.

Circuit Court of Appeals, Ninth Circuit.

December 16, 1935.

John W. Davis and Wm. C. Cannon, both of New York City, and C. W. Howard and J. W. Kindall, both of Bellingham, Wash., for appellant.

Clarence C. Dill, of Washington, D. C., Kenneth C. Davis, of Seattle, Wash., and Wm. H. Pemberton, of Olympia, Wash., for appellee.

Before WILBUR, DENMAN, and MATHEWS, Circuit Judges.

DENMAN, Circuit Judge.

This is an appeal from a decree dismissing with prejudice a bill in equity brought by the Associated Press, a New York membership corporation, engaged in the gathering and distribution of news and its publication, along with paid advertising matter, in newspapers throughout the United State, against KVOS, Inc., a Washington corporation, also engaged in the gathering of news and its publication with paid advertising matter by radio from Bellingham, Wash. The bill charges KVOS with unfair competition in the pirating of Associated Press news and its publication by KVOS radio in what it calls its "Newspaper of the Air," and seeks injunctive relief. The affidavits on the motion for preliminary injunction describe 180 such piratings in which appear 425 paragraphs identical with the Associated Press news articles.

The appeal presents the following questions, based upon the grounds assigned in the motion to dismiss and on the opposition to the motion for a temporary injunction: (a) Does the matter in controversy exceed the jurisdictional sum of $3,000, exclusive of interest and costs? (b) Is there jurisdictional diversity of citizenship? (c) Does the bill allege a sufficiency of facts to constitute a valid cause of action in equity; and, if so, (d) Should a preliminary injunction have been granted?

The bill's description of the business of the Associated Press is similar to its portrayal in the opinion of the Supreme Court in International News Service v. Associated Press, 248 U.S. 215, 229, 39 S.Ct. 68, 69, 63 L.Ed. 211, 2 A.L.R. 293. Complainant is a co-operative organization incorporated under the membership corporation laws of the state of New York; its members being either proprietors or representatives of about 1,200 newspapers published in all parts of the United States. Complainant gathers in all parts of the world, by means of various instrumentalities of its own, by exchange with its members, and by other appropriate means, news and intelligence of current and recent events of interest to newspaper readers and distributes it daily to its members for publication in their newspapers. The cost of the service, amounting approximately to many millions of dollars per annum, is assessed upon the members and becomes a part of their costs of operation, to be recouped, presumably with profit, through the publication of their several newspapers. Under complainant's by-laws, each member agrees upon assuming membership that news received through complainant's service is received exclusively for publication in a particular newspaper, language, and place specified in the certificate of membership, that no other use of it shall be permitted, and that no member shall furnish or permit any one in his employ or connected with his newspaper to furnish any of complainant's news in advance of publication to any person not a member. And each member is required to gather the local news of his district and supply it to the Associated Press, and to no one else.

Supplementing the bill is the court's judicial knowledge that, since the International News Service Case, radio broadcasting has been developed and a great business created in circulating advertising along with news and other features to attract its audiences to the advertising. Once this material is gathered its circulation is instantaneous as against from 2 to 24 hours for the press. Radio has added another celerity to news circulation, just as have the railroad and, later, telegraphic transmission. Impairment of radio's service would affect the blind; likewise, impairment of the press would injure the deaf.

So far as concerns soliciting for advertising income, the two processes are alike in that they appeal to the human mind by giving wide circulation through mechanical and physical processes to the advertising intermingled with interest arousing news, comedy and drama. It does not affect the fundamental identity of the two enterprises that the appeal of one is through the auditory and the other through the visual nerve system of the prospective customers of the advertisers whose trade is so solicited. Both businesses require large investments in plants constituting the power creation and the mechanism of circulation. Both necessarily employ large forces of trained experts for gathering their material and personnel in their circulating processes. The many units in each of the two businesses have nation-wide co-operative organizations for the gathering of their material and making it available to the units appealing to the smallest groups of population. Among these are the complainant, for the member papers it here represents, and for KVOS, as it admits, Radio News Association of New York. KVOS not only admits this, but also claims its news service is far superior to the Associated Press. Hence, without the latter's news, it is able to supply outlying districts with the essentials of the happenings of the day as efficiently as the dweller in cities.

The bill further alleges that many of the newspapers of its members are distributed throughout a circular broadcasting area of 100 miles radius over which the defendant corporation publishes its news and advertising, and that the Associated Press newspapers compete with KVOS in the business of seeking advertising to residents there. Practically all of KVOS' income from which it seeks profit is payment for the service of publishing advertising matter. Likewise, this constitutes a large part of the income of the papers. KVOS' income, mostly from advertising, supports its combined news and advertising circulation without charge to its public. The newspapers' circulation is supported by income which is a combination of charges from advertising and their readers' subscriptions.

Among the Association's many papers alleged to be circulated in the KVOS area are three from which it is charged the gathered news has been appropriated by KVOS. They are the "Bellingham Herald," "Seattle Post Intelligencer," and "Seattle Daily Times." They publish daily and Sunday editions of their papers covering in one or another the morning and evening news distribution.

The charge is that KVOS appropriated, from the editions of these three latter papers, the news distributed to the papers by the complainant, and which had been collected for them by complainant's news gathering and by similar activities on the part of all the Association's co-operative members. It is alleged that the appropriated news appearing in the editions of complainant's papers is published by the KVOS broadcast often verbatim, and sometimes slightly altered. The radio publication is completed before all the papers are distributed, and while the news is what the Supreme Court terms as "fresh" and the journalistic world as "hot." As to those delivered before the broadcast, their subscribers, if using radio, are certain soon after delivery to receive the same news free of charge. It is alleged that not less than 60 per cent. of the inhabitants of the area in which KVOS publishes its news and advertising own or have access to and use the radio. The damage caused the complainant by this alleged unfair competition is claimed to be in excess of the jurisdictional amount.

The Supreme Court in the International News Service Case described this appropriation and circulation of a competitor's fresh news as news "pirating," and held that such pirating practices inflict a substantial and irreparable injury to the business of collecting and distributing news and the collector's interest in such news when assembled, which injury, in the circumstances there considered, warranted injunctive relief. The bill here seeks similar relief, on behalf of the plaintiff and the large numbers of its members, from the alleged practices of KVOS. In view of our disposition of the jurisdictional contention in favor of appellant, the paramount question for our consideration is whether the instant case can be distinguished from International News Service v. Associated Press.

The claimed difference is that the pirated news instead of being published by a competing press is published by radio. The characteristics of the differences claimed are: (1) That KVOS seeks the attention of a listening public, paying nothing to the radio publishers, instead of a reading public, paying for its papers; and (2) that the pirated material and accompanying advertising reach the prospective customers almost instantaneously, while the press publication and distribution take from 2 to 24 hours.

These are urged as distinctions making KVOS' acts not competitive, although they may persuade the public not to purchase and read the advertising or the news of the papers upon which the piracy is committed, because, to some, the pirated news is stale by the time the newspapers are received and, as to others, the pirated matter is certain to be received by them, without paying for it, so soon after newspaper delivery. The charged unfair competition and piratical damage to the Associated newspapers' business and to their interest in the gathered news obviously may deprive them of a portion both of their subscription payments and their advertising income.

KVOS presents other arguments, based on its affidavits on the motion for a preliminary injunction, purporting to sustain the dismissal of the bill with prejudice. They are not pertinent to the dismissal, and are later considered in connection with the motion to which they were addressed.

In its final analysis the...