Swatch store at 666 5th Avenue
Swatch store at 666 5th Avenue (NYLJ/Rick Kopstein)

Bloomberg L.P. violated no copyright laws when it posted an unauthorized recording of a conference call about the Swatch watch company’s earnings report on a data service for financial investors, a federal appeals panel ruled Monday.

“Fair use” exemptions protect Bloomberg from having violated federal copyright laws for posting the recording on the Bloomberg Professional service within minutes of the call’s completion in February 2011, a panel of the U.S. Court of Appeals for the Second Circuit decided unanimously.

The judges concluded in Swatch Group Management Services v. Bloomberg, 12-2412-cv and 12-2645-cv, that the factors they must consider when evaluating whether a possible copyright infringement took place weigh in Bloomberg’s favor.

Adapting the language of the Second Circuit’s ruling in Castle Rock Entm’t v. Carol Publi’g Grp, 150 F.3d 132 (1998), the court concluded that “promoting the Progress of Science and useful Arts would be better served by allowing [Bloomberg's] use than by preventing it.”

“Bloomberg’s use is fair use,” Chief Judge Robert Katzmann (See Profile) wrote for the court. Judges Amalya Kearse (See Profile) and Richard Wesley (See Profile) joined in the ruling.

The recording of the 132-minute conference call involving Swatch executives and financial analysts appeared on Bloomberg Professional soon after the call originating from Switzerland ended on Feb. 8, 2011.

In it, executives of the Swiss watchmaker discussed a seven-page financial report they also released for 2010. The Second Circuit said company officials did not reveal any “non-public, significantly price-sensitive facts during the call” that were not in the written materials the company released at the same time, nor in a 26-minute question-and-answer session with analysts at the end of the call.

At the beginning of the call, participants were told by the company’s audio vendor that, “This call must not be recorded for publication or broadcast,” the court noted Monday.

Neither Bloomberg nor other news organizations were invited to take part in the call.

Of the more than 300 financial analysts invited to take part, 132 joined in, according to the court.

When Bloomberg ignored a cease-and-desist order demanding the removal of the recording two days after the conference call, Swatch filed an application with the U.S. Copyright Office to register a copyright of the sound recording. It was granted on April 27, 2011, minus the analysts’ questions at the end of the call.

The court declined to adopt the distinction Swatch tried to make between Bloomberg engaging in “data delivery,” rather than “news reporting,” when it posted the recording.

“To begin with, whether one describes Bloomberg’s activities as ‘news reporting,’ ‘data delivery,’ or any other turn of phrase, there can be no doubt that Bloomberg’s purpose in obtaining and disseminating the recording at issue was to make important financial information about Swatch Group available to American investors and analysts,” Katzmann wrote. “That kind of information is of critical importance to American securities markets.”

At a minimum, the use of copyright material that serves the public purpose of contributing to the knowledge available to an informed investing public “is very closely analogous to ‘news reporting’” and “indicative of fair use,” Katzmann wrote.

Under federal copyright law, 17 U.S.C. §107, factors for fair use include: the commercial use of the material, how much of the work in total is appropriated for unauthorized use and the effect of the use on a potential commercial market for the copyrighted material.

Katzmann said the Second Circuit agreed with a ruling by Southern District of New York Judge Alvin Hellerstein that Bloomberg’s work “as a prominent gatherer and publisher of business and financial information serves an important public interest.”

Katzmann said that important purpose of disseminating accurate information to investors “overcomes” the “clandestine methods” that Bloomberg apparently used to gain access to the tape of the conference call. The ruling does not make clear how Bloomberg obtained the recording.

Katzmann said another factor for the court’s consideration is the value to investors of the information in the conference call, which publicly traded companies in the United States are required to disclose by the U.S. Securities and Exchange Commission but which foreign companies are not.

“Where a financial research service obtains and disseminates important financial information about a foreign company in order to make the information available to American investors and analysts, that purpose supports a finding of fair use,” he wrote.

The appeals court also noted that Swatch had not tried to market the conference call itself, and it suggested that there was little actual commercial value in the recording.

John DiMatteo of Wilkie Farr & Gallagher of Manhattan argued for Bloomberg.

Joshua Paul of Collen IP in Ossining, who represented Swatch, declined to comment on the ruling.

Lewis Clayton, a litigation partner at Paul, Weiss, Rifkind, Wharton & Garrison who writes on intellectual property matters for the New York Law Journal and is not involved in the Bloomberg case, said the decision indicates that the Second Circuit “will continue to look skeptically at copyright infringement claims that seek to limit the use of factual information that is important to investors.”

Clayton noted that the court characterized Swatch’s copyright on the conference call recording as a “thin” one, meaning that the uniqueness of the information contained in it was compromised when the company itself issued the written earnings report for 2010.

“It [the copyright] is not interesting because of the beauty it expresses,” said Clayton. “It is not poetry. It is factual information, and the copyright in that kind of statement is very narrow.”