Answer: YES, FAIR USE!

 

NOTE: If you haven’t read the question, you might want to click here.

In The Swatch Group Mgmt. Servs. Ltd. v. Bloomberg LP, the Second Circuit Court of Appeals held that Bloomberg’s use of a recording of Swatch’s earnings call was fair use. In reaching this decision, the court found:

  • Bloomberg was engaged in “news reporting,” even though all it did was make the recording available to the public without commentary. The court rejected Swatch’s semantic argument that there was a difference, somehow, between “news” and “data.”
  • An SEC’s regulation requiring American companies (but not foreign ones like Swatch) to immediately disseminate material nonpublic information helped Bloomberg’s case much more than it hurt. Swatch had argued that the foreign-company exemption meant that there was no public interest in the recording. But the issue wasn’t compliance with the regulation, per se (which is a different legal issue), but the value the regulation underlines, that material information affecting investor decision-making should be made public.
  • Bloomberg’s use of the recording was commercial, which normally counts against fair use, but mostly because Bloomberg is a commercial enterprise that benefits only indirectly from the use of the recording. The recording was available only to paying subscribers, but one could say the same thing about old-style magazines and newspapers. Thus, the court reduced the weight assigned to this sub-factor.
  • It was not “bad faith” for Bloomberg to obtain and disseminate the recording against Swatch’s express wishes. Of course Swatch does not wish for the recording to be disseminated without permission—that’s how all rights holders feel. One suspects that Swatch didn’t so much want to control dissemination as suppress it, so you can’t say Swatch got “scooped” (as happened in the Ford memoirs case). Thus, to find bad faith would undermine the free-speech underpinnings of fair use.
  • Bloomberg’s use of the recording wasn’t “transformative,” but that didn’t hurt its fair-use case very much because the information conveyed—not just what was said but how it was said—went beyond what Swatch was willing to disseminate. While transformative uses are nearly always fair uses, the reverse isn’t true.
  • The nature of Swatch’s work also weighed in favor of fair use. The copyright in the recording (as opposed to the transcript) was “thin” because it covered only things like vocal inflections, so it wasn’t very expressive. Further, the copyright in the underlying work was also fairly “thin” because it consisted in such large extent of unprotectable facts.
  • The court rejected Swatch’s argument that the recording was “unpublished” inasmuch as Swatch hadn’t made it publish before Bloomberg did. While the fixed recording might not be public, the performance itself hardly was, since Swatch had invited 333 of its favorite analysts to the call. The court simply didn’t believe that the fixation of the call as a recording made enough of a difference to treat the recording in the same way one might treat an unpublished manuscript.
  • The court found the third factor—amount and substantiality of the portion used—weighed neither for nor against fair use. Bloomberg took the entire recording, but then, it had to if the recording was going to be of any value.
  • The court also found the fourth factor—effect on the market for the work—to favor fair use. Swatch really couldn’t really describe a potential market for the recording, particularly for the copyrightable bits of the recording (i.e., the information you can’t find in the transcript). Swatch couldn’t seriously say that it recorded the earnings call so it could create a royalty stream. The court, bless its heart, warned against the “vice of circular reasoning” (to use Prof. Nimmer’s term), since every copyrighted work has some theoretical potential market for licensing.

Thanks for reading!