Fixation by Legal Fiction: Did the Second Circuit’s Fair Use Ruling For Bloomberg Leave Open A Pandora’s Box for Copyright Law?

by Foley Hoag LLP - Trademark, Copyright & Unfair Competition

Swatch imageAbout ten years ago, I saw an attorney argue a hopeless criminal appeal. He began his remarks with: “Your Honors, I know I’m going to lose this case, but how I lose it is very important.”

Bloomberg News may feel the same way about its recent win in the Second Circuit. The Court ruled that Bloomberg’s unauthorized distribution of the recording of a Swatch Group investor conference call was fair use. However, the Second Circuit refused on technical grounds to review a District Court opinion that could have far broader implications for copyright law and the news industry. That unreviewed opinion concerns what Swatch and others have called the “legal fiction” of simultaneous transmission and fixation.

The Swatch Conference Call

On February 8, 2011, the Swatch Group hosted a telephone conference call for a few hundred investors and analysts to discuss its 2010 financial figures. The press was not invited. Swatch is governed by Swiss law, which allows for such semi-private events. Although Swatch made its own recording of the conference call, the invitees were instructed not to record the call for publication or broadcast. Simple instructions.

Of course, not everyone followed those instructions. Bloomberg crashed the party and made its own recording of the call, which it then promptly distributed it to its “Bloomberg Professional” subscribers. Swatch was not happy. According Bloomberg, Swatch was embarrassed because the recording contained some impolitic remarks by Swatch officers about a business partner. But according to Swatch, this was simply a case of copyright infringement.

The “Legal Fiction” of Simultaneous Transmission and Fixation

On March 3, 2011, Swatch registered the copyright for its recording of the call. Then, on March 31, 2011, it filed a complaint in the Southern District of New York alleging infringement of this copyright. Bloomberg filed a motion to dismiss on the grounds that it didn’t copy anything.

According to Bloomberg, the conference call was not a work of authorship, nor was it “fixed in a tangible medium of expression.” Rather, it was a live news event. Bloomberg didn’t copy Swatch’s recording of that event. It made its own recording. So, you might not like the way the Bloomberg got access to the event, but if it’s not copying, how can it be copyright infringement? As an example, say two parents separately film a live high school sporting event. The parents can’t sue each other for copyright infringement. And presumably neither could the school administrators. Or could they?

Yes they can, said Swatch. Swatch based its claim not on Bloomberg’s recording of the live event, but on the legal fiction that Bloomberg’s recording was the legal equivalent of a copy of Swatch’s recording. Under Section 101 of the Copyright Act, a live transmission is considered “fixed . . if a fixation of the work is being made simultaneously with its transmission.” Swatch argued that this language “creates a legal fiction” that Bloomberg’s recording was actually copied from Swatch’s recording, “notwithstanding that [Bloomberg] actually copied the live performance directly.” Swatch acknowledged that the relevant language in Section 101 was designed to protect live broadcasts of professional sporting events, but argued that it nevertheless applied here as well.

Judge Alvin Hellerstein was persuaded by Swatch’s argument and, in a published opinion, denied Bloomberg’s motion to dismiss. Bloomberg then answered the complaint and filed a counterclaim for invalidity based on the same arguments it had already made. After that, things went south for Swatch. On May 12, 2012, prior to any discovery, Judge Hellerstein granted summary judgment sua sponte in favor of Bloomberg on the grounds of fair use. Swatch appealed, and Bloomberg cross-appealed. With both parties on their way to the Second Circuit, Judge Hellerstein dismissed Bloomberg’s invalidity counterclaim as moot.

You Won, So Stop Complaining

Bloomberg’s briefing to the Second Circuit reprised its argument that Swatch’s conference call was not subject to copyright protection. However, the Court never reached that issue because it held that Bloomberg did not have standing to cross-appeal. If Bloomberg was appealing the denial of its motion to dismiss Swatch’s claim, that claim was ultimately dismissed on fair use grounds anyway, so Bloomberg was not an “aggrieved party” (i.e., you won, so stop complaining). If the appeal, on the other hand, was based on Judge Hellerstein’s subsequent dismissal of Bloomberg’s invalidity counterclaim, Bloomberg forgot to file a supplemental notice of appeal, so that issue was not before the court.

Thus, although Bloomberg won the fair use battle, it arguably lost the validity war because the Second Circuit’s ruling leaves intact Judge Hellerstein’s opinion on the legal fiction of simultaneous transmission. This is notable for a couple of reasons. First, the only case on which Judge Hellerstein and Swatch relied for the “legal fiction” argument, United States v. Moghadam, was about the constitutionality of a criminal statue banning bootlegged tapes of live music concerts. The Moghadam court’s discussion of simultaneous transmission was dicta based on the theoretical musings of Professor Nimmer. Thus, Judge Hellerstein’s application of this doctrine in this or any similar context appears to be novel.

Second, the potential implications of Judge Hellerstein’s opinion, if applied broadly, could change the landscape of modern journalism. Take for example, Governor Mitt Romney’s infamous “47%” speech, secretly recorded by a bartender at a fundraising event. What if the Governor had been making his own recording of the speech and simultaneously transmitting that signal to other donors over the internet? Could he have sued the bartender for copyright infringement, under the legal fiction that the bartender’s recording was a derivative work? Taken to another extreme, could Governor Romney have sought to enjoin distribution of the bartender’s recording in advance of its distribution to the media, just as a professional sports league can do for unauthorized transmissions under 17 USC 411(c)?

I know what you are thinking and you are probably right. If newsworthy, such recordings likely would be protected by fair use, just as they were in this case, so stop complaining. But fair use is a messy and expensive defense, dependent on the individualized circumstances of each case and rarely resolved before discovery. Thus, this fair use win may be cold comfort to Bloomberg and its ilk, especially considering that Judge Hellerstein’s ruling may have blessed, by legal fiction, a whole new class of lawsuits.

The Second Circuit’s Fair Use Analysis

Although the Second Circuit ignored the simultaneous transmission issue, its thoughtful discussion of the fair use factors, which confirmed Judge Hellerstein’s analysis, is interesting in its own right.

Purpose and Character of the Use. Swatch argued that Bloomberg was not engaged in “news reporting,” a favored fair use activity, because transmission of the recording was mere “data delivery” for a fee. The Court held that Bloomberg’s purpose was to deliver important financial information to American investors, and that this was at least analogous to news reporting, despite its commercial nature. In fact, the Court held that this purpose was so important that it outweighed the clandestine nature of the recording and Bloomberg’s “lack of good faith.”

Swatch also argued that simply reproducing the conference call was not transformative — for example, it lacked any commentary or analysis by Bloomberg. However, the Court held that when the purpose at issue is news reporting, whether the use is transformative is less important, in part because news reporting by its nature often makes it desirable to “faithfully reproduce an original work rather than transform it.”

Nature of the Copyrighted Work. Swatch argued that even though the conference call was factual in nature, this factor nevertheless weighed against fair use because the call was “unpublished.” When a work is “unpublished,” the rights of an author to control its first public appearance often outweigh and negate a fair use defense. For example, the court had previously ruled that the unauthorized publication of J.D. Salinger’s private letters was not fair use because of their unpublished nature.

The Court agreed with Swatch that the call was “unpublished” under the definition set forth in Section 101, which defines publication as the distribution of recordings to the public. However, the court refused to limit its fair use analysis to this statutory definition. Even though the recording may have been unpublished, its contents were shared — or performed — during the conference call, and thus “the publication status of the work favors fair use.”

Amount and Substantiality of the Portion Used. The Court held that this factor favored neither side. A defendant’s distribution of an entire work usually weighs against fair use. However, the Court held that “copying the entirety of a work is sometimes necessary to make a fair use,” and this was such a case in light of Bloomberg’s news reporting purpose.

Effect Upon the Market for or Value of the Original. The last fair use factor considers the effect of the infringing use on the potential market for the copyrighted work. Swatch conceded that there is not usually a market for conference call recordings, because their unrestricted distribution is encouraged — if not required — by U.S. securities laws. However, because Swatch did not have to comply with those laws, in theory there is a potential market for the sale of its conference call recordings. The Court disagreed and held that this was not a “traditional, reasonable, or likely to be developed market,” and therefore this factor too favored fair use.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Foley Hoag LLP - Trademark, Copyright & Unfair Competition | Attorney Advertising

Written by:

Foley Hoag LLP - Trademark, Copyright & Unfair Competition

Foley Hoag LLP - Trademark, Copyright & Unfair Competition on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.