In a victory for financial news media, a U.S. appeals court said Bloomberg LP acted lawfully when it secretly obtained a recording of a conference call between Swatch Group SA and securities analysts and published a transcript.
The 2nd U.S. Circuit Court of Appeals in New York on Monday said Bloomberg’s handling of a Feb. 8, 2011, call discussing the financial performance and prospects of the world’s largest watchmaker constituted “fair use” under U.S. copyright law, and deserved the U.S. Constitution’s First Amendment protection of press freedom.
Upholding a lower court dismissal of a lawsuit by Swatch against Bloomberg, the 2nd Circuit said Bloomberg’s methods, while “clandestine” and reflecting a “lack of good faith,” helped ensure that companies do not selectively disclose material information.
Eliminating selective disclosures had been a goal of the U.S. Securities & Exchange Commission when in 2000 it adopted Regulation FD, or fair disclosure. The 2nd Circuit said it did not matter that Swatch, as a foreign issuer, was not subject to the regulation.
“Although Bloomberg obtained the recording without authorization and put it to commercial use without transforming it, Bloomberg’s use served the important public purpose, also reflected in Regulation FD, of ensuring the wide dissemination of important financial information,” Chief Judge John Katzmann wrote for a three-judge panel of the 2nd Circuit.
The appeals court also dismissed Bloomberg’s request for a finding that the recording deserved no copyright protection in the first place, saying the news service lacked standing and the court lacked jurisdiction.
Joshua Paul, an attorney representing Swatch, declined to comment. Bloomberg spokesman Ty Trippet said the company was pleased with the dismissal of Swatch’s claims.
“The investing public benefits from knowing when a public company discloses financial performance to a select group of analysts,” he said in a statement. “We’ll continue to provide transcripts and recordings from analyst calls to our audiences to bring more transparency and fairness to the markets.”
Swatch complained that Bloomberg gave online subscribers a same-day transcript of the call, which 132 analysts joined, despite Swatch’s instructions that participants not record it for publication or broadcast what was said.
Katzmann, however cited the 1971 U.S. Supreme Court decision in the “Pentagon Papers” case in concluding that Bloomberg’s main purpose was not to “scoop” Swatch or infringe a copyright, but rather to deliver news.
“That kind of activity, whose protection lies at the core of the First Amendment, would be crippled if the news media and similar organizations were limited to authorized sources of information,” he said.
Monday’s decision upheld a May 2012 ruling by U.S. District Judge Alvin Hellerstein in Manhattan.
Swatch is based in Bienne, Switzerland, and is known for colorful plastic namesake watches. It also owns higher-end brands, including Breguet, Longines, Omega and Harry Winston.
Thomson Reuters StreetEvents competes with Bloomberg in providing transcripts of corporate teleconferences.
The First Amendment of the U.S. Constitution provides protections for press, speech, religion and peaceful assembly.
The case is Swatch Group Management Services Ltd v. Bloomberg LP, 2nd U.S. Circuit Court of Appeals, Nos. 12-2412, 12-2645.