Lowry's Reports, Inc. v. Legg Mason, Inc.
| Citation | 271 F.Supp.2d 737 |
| Decision Date | 10 July 2003 |
| Docket Number | No. CIV.WDQ-01-3898.,CIV.WDQ-01-3898. |
| Parties | LOWRY'S REPORTS, INC., Plaintiff, v. LEGG MASON, INC., et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
Thomas W. Kirby, Bruce G. Joseph, Scott Eric Bain, Wiley Rein and Fielding LLP, Washington, DC, for Plaintiff.
Terence P. Ross, Thomas H. Dupree, Jr., Gibson Dunn and Crutcher LLP, Washington, DC, for Defendants.
The plaintiff, Lowry's Reports, Inc. ("Lowry's"), has sued the defendants, Legg Mason, Inc., and Legg Mason Wood Walker, Inc. (collectively, "Legg Mason"), for copyright infringement in violation of the Copyright Act of 1976, as amended (the "Copyright Act"), 17 U.S.C. §§ 101 et seq., common-law unfair competition, and breach of contract. The complaint focuses on Legg Mason's use of a financial newsletter, Lowry's New York Stock Exchange Market Trend Analysis (the "Reports"), which Lowry's publishes in both daily and weekly editions. Desmond Decl. ¶¶ 1-4. Lowry's is a Florida corporation, headquartered in Florida. Compl. ¶ 7. Legg Mason, Inc., a Maryland corporation headquartered in Maryland, is a global financial-services firm, whose business may be divided into three broad categories: asset management, securities brokerage, and investment banking. Defs.' Mot., Ex. 5. Legg Mason Walker Wood, Inc., its wholly owned subsidiary, likewise a Maryland corporation, primarily brokers securities. Yoo Decl., Ex. 32.
Legg Mason has filed a motion for summary judgment on all of Lowry's claims. Alternatively, it seeks partial summary judgment to foreclose two of Lowry's claims for damages under the Copyright Act: (1) any claim for Legg Mason's profits; and (2) any claim for enhanced statutory damages for willful infringement. Lowry's, in turn, has filed a cross motion for partial summary judgment on two issues: (1) Legg Mason's liability for copyright infringement; and (2) the unavailability of reduced statutory damages for "innocent" infringement.
Lowry's Reports provide original and proprietary technical analysis of the stock market. Each issue includes unique statistics, comparative graphs, charts, and commentary drafted by Lowry's president, Paul Desmond ("Mr.Desmond"). Desmond Decl. ¶¶ 1, 3 & Exs. A-B. The Reports do not typically recommend specific investments. Desmond Decl. ¶ 4; Cripps Dep. at 32-33. Rather, they indicate the relative strength of the stock market, suggesting when the market as a whole is "overbought" or "oversold." Desmond Dep. at 136; 3.10.03 Claassen Decl. ¶¶ 7, 12. The Reports, therefore, attempt to predict when assets should be invested in stocks generally, and when they should be moved to other financial instruments. Desmond Decl. ¶ 4; 3.10.03 Claassen Decl. ¶ 7.
The daily Reports reflect and analyze market conditions at the close of business the previous day. Desmond Decl. ¶ 4. Lowry's sends them to subscribers by facsimile or email within two or three hours after the market has closed. Id. All subscribers thus receive their copy before the market opens the next day. Id.; Yoo Decl., Ex. 2. The weekly edition analyzes trends apparent from the entire week's market activity. Desmond Decl. ¶ 4. Lowry's faxes or emails the weekly Reports to subscribers on Friday evenings, ensuring receipt prior to the opening of the next week's market. Id.; Yoo Decl., Ex. 3.
The "crown jewels" of the Reports are the three "Lowry's numbers": figures representing "buying power," "selling pressure," and "short term buying power." Desmond Decl. ¶ 4. The numbers vary from day to day. Lowry's calculates them by using its confidential algorithms. Id. In a numeric nutshell, they measure the current flow of money into and out of the stock market. Most significant to investment professionals is the short-term-buying-power figure. Id. ¶ 5; 3.10.03 Claassen Decl. ¶¶ 12-13. The predictive power — and so, the value — of the Lowry's numbers allegedly diminishes rapidly. Pl.'s Mot./Opp'n at 34. Numbers a few days old mean little. Id.
To protect against disclosure of still-valuable Lowry's numbers (and other contents of the Reports) to non-subscribers, Lowry's limits subscriptions to individuals. Desmond Decl. ¶ 7. It has never offered institutional subscriptions or group licenses. Id. Every subscriber, moreover, must execute a subscription agreement that strictly prohibits unauthorized copying or dissemination of the Reports or their contents, including the Lowry's numbers. Id. & Exs. D-F.
For more than a decade, Legg Mason has paid for and received a single copy of the daily and weekly Reports. Defs.' Statement of Undisputed Facts ¶ 6. Since 1994, that copy has been sent to Linda Olszewski ("Ms.Olszewski"), an employee in Legg Mason's research department at its Baltimore headquarters. Id. Beginning in September 2000, she received her copy from Lowry's by email. Olszewski Dep. at 71. Richard Cripps ("Mr.Cripps"), at all relevant times the director of the research department, formulates and recommends overall investment strategy for Legg Mason brokers. Cripps Dep. at 62; Yoo Decl., Ex. 22. Employees in the department perform three essential tasks: they assist Mr. Cripps in formulating strategy, disseminate internal and outside market research to brokers, and respond to brokers' inquiries about that research. Malis Dep. at 105-06; Olszewski Dep. at 108-09; Cripps Dep. at 55, 109.
Each business day, around 9:15 am, shortly before the New York stock market opens, Mr. Cripps or another employee of the research department places a "morning call" to all Legg Mason brokers throughout the United States. 3.10.03 Claassen Decl. ¶ 12; Overstreet Dep. at 92, 133; Olszewski Dep. at 53-55, 135-38, 154-55. The call is broadcast by intercom or similar device. Cripps Dep. at 21-23, 126; 3.10.03 Claassen Decl. ¶ 12. It provides brokers various up-to-date information about the stock market. Perhaps for as long as Legg Mason received the Reports, it included the Lowry's numbers. Cripps Dep. at 126; Yoo Decl., Ex. 17; 3.10.03 Claassen Decl. ¶ 12; 3.10.03 Parent Decl. ¶ 11. Frequently, brokers also telephoned the research department directly to get the numbers. Olszewski Dep. at 152; Thayer Dep. at 109-10.
From 1994 until July 1999, the research department regularly faxed copies of the complete Reports to branch offices, where employees further duplicated and distributed them. 3.10.03 Claassen Decl. ¶ 5; 3.10.03 Parent Decl. ¶ 6; Olszewski Dep. at 123-24. In July 1999, the department began posting every issue of the Reports on Legg-Mason's firm-wide intranet. Defs.' Suppl. Answer to Interrog. No. 2. The intranet posting continued into early August 2001. Id. From late 1999, additional copies were distributed to every member of the research department — including Mr. Cripps — first on paper, later via email. Id. The recipients of these copies used them to prepare for the "morning call" and to respond to brokers' questions by telephone. Olszewski Dep. at 84; Thayer Dep. at 96-97, 109-10.
On June 15, 2000, Lowry's received a telephone call from Joe Beasley ("Mr.Beasley"), a broker in a Florida branch office of Legg Mason. Desmond Decl. ¶ 22. Mr. Beasley told a Lowry's employee that he had seen "Lowry's Report on Legg Mason's int[ra] company system." Id.; Defs.' Mot., Ex. 14. On December 1, 2000, Matthew Claassen ("Mr.Claassen"), a former Legg Mason broker, telephoned Lowry's and reported that Legg Mason was posting the Reports on its "intranet for all the brokers to see and use." Desmond Decl. ¶ 25. Mr. Desmond, who had not taken the call, told his employees to ask Mr. Claassen, if he telephoned again, to provide more detail in writing. Id. Lowry's soon received a letter from Mr. Claassen, dated December 22, 2000, reiterating and elaborating his allegation of a "significant copyright violation" by Legg Mason. Yoo Decl., Ex. 28.
On July 30, 2001, Mr. Desmond telephoned Ms. Olszewski. Desmond Decl. ¶¶ 27-28; Desmond Dep. at 72. During that call, she told him that the daily and weekly Reports were being posted on Legg Mason's intranet, and had been for some time. Desmond Decl. ¶ 28; Desmond Dep. at 72. Mr. Desmond protested, warning her that he considered such posting an infringement of Lowry's copyrights. Defs.' Mot., Ex. 17. Ms. Olszewski apologized and promised to remove the Reports from the intranet immediately. Id.; Desmond Dep. at 158. Later that afternoon Lowry's sent a "cease and desist" letter to Legg Mason. Desmond Decl., Ex. J. The letter asked Legg Mason to "immediately cease all unauthorized copying of [the Reports]." Id. By early August 2001, the Reports no longer appeared on Legg Mason's intranet. Defs.' Supp. Answer to Interrog. No. 2.
Nevertheless, through June 19, 2002, Ms. Olszewski continued to email copies of all the Reports to the members of the research department. Id. Thereafter, and well into July 2002, she emailed them exclusively to Todd Thayer ("Mr.Thayer"), a subordinate employee in the research department. Yoo Decl., Ex. 43.
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when there is no genuine issue as to any material fact, and the moving party is entitled to summary judgment as a matter of law. In considering a motion for summary judgment, "the judge's function is not ... to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
A fact issue is material if it must be decided to resolve the plaintiff's substantive claim. Id. at 248, 106 S.Ct. 2505. The "materiality determination rests on the substantive law, [and] it is the substantive law's identification of which facts are critical and which facts are irrelevant that governs." Id.
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