We Took the Whole Thing, But it Was for Journalism!

I blogged about Swatch’s dispute with Bloomberg a couple of years ago. At the time, Bloomberg’s motion to dismiss had just been denied, but the trial court explicitly did not address fair use, mostly because it couldn’t at that early stage.


One of the lucky 333 analysts invited to the Swatch earnings call. Photo taken by Eric Danley under this Creative Commons license.

The Secret Pleasures of Earnings Calls

Swatch is a Swiss watch-maker. You may have heard of its products. More important (for our purposes), it’s a major, publicly-traded international corporation. And like most such companies, it routinely holds an “earnings call” (or “analyst call”) right after it files (with the SEC) and release (to the public) its earnings report. The earnings report is required of public companies so investors know certain basic information about the company. The earnings call is optional, but it gives the company a chance to explain the earnings report, while potentially opening itself up to awkward questions from some pretty sharp and skeptical folks.

As you might expect, Swatch doesn’t like the awkward questions, so it tries to limit the audience of the conference call to just its favorite 333 financial analysts. It pointedly didn’t invite the press.

Earning calls are informational. As entertainment, they are pretty dull. The most exciting thing that happens is that sometimes the company’s CEO calls an analysts a dirty name, or, more commonly, someone will crash the earnings call, or much more rarely, someone will get fired on-call. In terms of entertainment value, you’d be better off watching reality TV.

But earning calls are important. They are an opportunity for investors to find out more about what’s really going on with the company, and even find out what they really want to know. So it’s not just rattling off a bunch of facts and figures. It’s explaining, in a language investors can understand, how the company is doing, in a way that doesn’t tank the company’s stock price. The company, naturally, is motivated to spin information as positively as possible, though it absolutely cannot lie or mislead. If there’s any creativity to be had, that’s where to find it.

But it’s for Journalism!

Bloomberg is a very large financial-news company. You may have heard of it. Although it wasn’t invited to the party, it was able to obtain a copy of a recording (and written transcript) of Swatch’s earnings call.* It made the recording available online without any commentary. Swatch told Bloomberg to remove it. Bloomberg said no.

* In my last post on this subject, I thought Bloomberg had crashed the call and surreptitiously made the recording, because that’s what Swatch alleged at the time. In the current ruling (no link because it’d give away the answer), the court merely says that Bloomberg “obtained” a copy of the recording, that Bloomberg wasn’t invited to the call (without saying whether Bloomberg was actually on the call), and it notes that Swatch made its own recording of the call. This makes me think that a copy of this recording got into Bloomberg’s hands. Either way, it doesn’t affect the analysis much.

Swatch sued—but not about the transcript but about the recording. I think this was because Swatch made the transcript available publicly anyway, so it must have thought it would have difficulty with fair use. As I explained previously, the difference between the transcript and the recording is like the difference between a song and the performance of the song, only dialed way, way down. The words make up one copyright (a “literary work”); the way the words are spoken make up another copyright (a “sound recording”). Think of all the things a transcript can’t convey: inflection, tone, laughter (nervous and otherwise), shakiness, etc. Bloomberg moved to dismiss on grounds that the sound recording lacked enough creativity to be eligible for copyright, but the trial court disagreed.*

* This leads to the main point of my previous post: copyright protects the sublime and the banal. It protects both the greatest novel ever and last year’s marketing plan. And it protects both the greatest performance ever of the greatest song ever, and it protects the recording of an earnings call.

The trial court specifically held that it was too soon to consider Bloomberg’s fair use defense—but not by much, because soon after denying Bloomberg’s motion, it told the parties that, unless Swatch could explain otherwise, there really wasn’t much more it needed to know before ruling on fair use. Swatch protested that it needed to learn more to defeat Bloomberg’s fair use defense, but the judge wasn’t persuaded and—without any further briefing—granted summary judgment for Bloomberg on grounds that Bloomberg’s use of the earnings call recording was fair use.

Before You Guess: Two New Fair Use Concepts for You

Swatch appealed. How do you think the Second Circuit ruled on the issue of fair use?

Before you answer, be sure to review the four fair-use factors. But, even then, I don’t quite give you enough about factors 1 and 2 to analyze this problem. So, consider these two bits of fair-use law:

First, under factor 1 (“purpose and character of the use”), certain uses are traditionally though of as “more fair” than others, and these uses are set forth in the “preamble” of 17 U.S.C. § 107. Those uses are “criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, [and] research.”

Second, under factor 2 (“the nature of the copyrighted work”), unpublished works are considered more worthy of protection than published work. The idea is that the author of an unpublished work (1) hasn’t even had a chance to exploit the work, and (2) hasn’t even decided whether to make the manuscript public.*

* In the old days, copyright law drew a sharp distinction between published and unpublished works, but no more.

Ready? Make your guess and click here!

Rick Sanders

Rick is an intellectual-property litigator. He handles lawsuits, arbitrations, emergency injunctions and temporary restraining orders, opposition and cancellation proceedings, uniform dispute resolution proceedings (UDRPs), pre-litigation counseling, litigation avoidance, and other disputes, relating to copyrights, trademarks, trade secrets, domain names, technology and intellectual-property licenses, and various privacy rights. He has taught Copyright Law at Vanderbilt University Law School. He co-founded Aaron | Sanders with Tara Aaron-Stelluto in 2011.