"Hot News": The Enduring Myth of Property in News

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"Hot News": The Enduring Myth of Property in News "Hot News": The Enduring Myth of Property in News

Shyamkrishna Balganesh

University of Pennsylvania Carey Law School

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COLUMBIA LAW REVIEW

VOL. 111 APRIL 2011 NO. 3

ARTICLES

“HOT NEWS”: THE ENDURING MYTH OF PROPERTY

IN NEWS

Shyamkrishna Balganesh*

The “hot news” doctrine refers to a cause of action for the misappropria-

tion of time-sensitive factual information that state laws afford purveyors of

news against free riding by a direct competitor. Entirely the offshoot of the

Supreme Court’s decision in International News Service v. Associated

Press, the doctrine enables an information gatherer to prevent a competitor

from free riding on its efforts at collecting and distributing timely informa-

tion. Over the last few years, newsgatherers of different kinds have begun

using the doctrine with increased frequency, believing it to create and protect

an ownership interest in news. This Article argues that this belief misappre-

hends the real basis for the hot news doctrine and its unique analytical struc-

ture. Originating in the synthesis of two different areas of the common law,

unfair competition and unjust enrichment, hot news is concerned principally

with solving a collective action problem in the market for newsgathering.

Given the enormous expenditures that newsgathering entails, its sus-

tainability as a practice depends on newspapers cooperating with each other

in different ways. In recognition of this, hot news operates as a mechanism

by which to preserve the incentives of individual competitors to enter into

cooperative newsgathering and sharing arrangements that raise their indi-

vidual and collective profitability, while simultaneously maintaining the

common pool (i.e., public domain) nature of factual news. It thus attempts

to maintain a competitive equilibrium among newsgatherers through a gain-

based liability framework and, in the process, emphasizes a very different

distributive baseline from that inherent in the idea of property in news. Ap-

preciating this difference and its significance is crucial to the doctrine’s con-

tinuing survival and sheds light on its inherent unsuitability as a new

source of revenue for the newspaper industry.

* Assistant Professor of Law, University of Pennsylvania Law School. Many thanks to

Michael Abramowicz, Stephanos Bibas, Michael Birnhack, Hanoch Dagan, Dave Fagundes,

Wendy Gordon, Seth Kreimer, Sophia Lee, Mark Lemley, Irene Lu, Jonathan Masur,

Katherine Moran, Neil Netanel, David Nimmer, Gideon Parchomovsky, Ed Rock, Jennifer

Rothman, Henry Smith, Christopher Yoo, and participants at a Penn Law Faculty

Workshop, the 2010 Intellectual Property Scholars Conference (IPSC), a Google Policy

Talk, the 2010 UCLA Media, Entertainment, and Intellectual Property Law Colloquium,

and the 2011 Chicago Intellectual Property Colloquium for helpful comments and

suggestions. Michael Drezner provided helpful research assistance. All errors are mine.

419

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420 COLUMBIA LAW REVIEW [Vol. 111:419

NTRODUCTION

.................................................. 421

I. D

ELUSIONS OF

RANDEUR

: H

EWS

ISAPPROPRIATION AS

ROPERTY

CTION

...................................... 429

A. An Ex Ante Licensing Market ........................ 431

B. An In Rem Interest .................................. 435

C. Automatic Injunctions ............................... 437

II. R

ECONSTRUCTING

EWS

ISAPPROPRIATION AS A

ONPROPRIETARY

NTEREST

................................ 438

A. Unfair Competition as the Functional Basis of

Misappropriation .................................... 440

1. Harm from Free Riding in the Market for Timely

News ............................................ 440

2. A Framework for Continuing Cooperation ........ 443

a. Two Mutually Reinforcing Norms ............. 444

b. Cooperating Through Tips ................... 446

c. Problems with Property ...................... 448

d. Remedying the Unfair Competitive

Advantage ................................... 452

B. Unjust Enrichment as the Structural Basis of

Misappropriation .................................... 456

1. Self-Interested Recovery and the Logic of

Collective Action ................................. 458

2. The Benefit and the Problem of Subjective

Devaluation ...................................... 462

3. The Substantive Identification of a Nonproprietary

Loss ............................................. 466

III. I

MPLICATIONS OF A

ONPROPRIETARY

PPROACH

............ 471

A. Making Sense of Doctrinal Anomalies ................ 472

1. Direct Competition as Interest Homogeneity...... 472

2. The Duty to Police and Incentive Effects ......... 476

B. Remedial Options.................................... 480

1. The Questionable Default of Injunctive Relief .... 480

2. Calculating Restitutionary Damages ............... 486

a. The Standard of Comparison Approach ...... 487

b. The Attributable Profits Approach ............ 488

C. Clues to the First Amendment Puzzle ................ 489

ONCLUSION

.................................................... 495

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2011] ENDURING MYTH OF PROPERTY IN NEWS 421

NTRODUCTION

The modern newspaper industry is in a state of crisis.

In the last

three years alone, its advertising revenues have shrunk by over 43%.

Be-

tween 1990 and 2008, the number of daily newspapers in the country

dropped by 12.6%.

However, almost immediately, newspapers pointed

to what they believed was the principal source of their financial

problems—the growth of the Internet, and with it the emergence of news

aggregators, bloggers, and other “parasitic” distribution mechanisms that

relay the substance of their news stories to readers around the world with-

out compensating them for their efforts. The solution to the problem

was obvious to newspapers: greater intellectual property protection.

What newspapers sought was thus a regime that propertized the news

once collected, by converting it into an artificially scarce resource, which

could in turn be licensed to online entities for an additional source of

revenue.

sciously excludes facts from the scope of its coverage, and newspapers’

principal concern was with entities that communicate the bare facts of a

news story to audiences via the Internet.

They sought their answer in-

stead in an early twentieth-century doctrine that had been developed by

the Supreme Court exclusively for the newspaper industry: the common

law doctrine of “hot news” misappropriation. Resurrecting this doctrine,

1. See Philip Meyer, The Vanishing Newspaper: Saving Journalism in the Information

Age 5 (2d ed. 2009) (noting decline of newspaper influence, profitability, and household

penetration); Frank Ahrens, The Accelerating Decline of Newspapers, Wash. Post, Oct. 27,

2009, at A15 (describing how today’s newspaper circulation numbers are lowest in history);

Eric Alterman, Out of Print: The Death and Life of the American Newspaper, New Yorker,

Mar. 31, 2008, at 48, 48–49 (discussing how newspapers in their current printed form are

unlikely to survive).

2. Newspaper Ass’n of Am., Advertising Expenditures, at http://www.naa.org/

TrendsandNumbers/Advertising-Expenditures.aspx (on file with the Columbia Law Review)

(last updated Mar. 2010).

3. Pew Research Ctr., Project for Excellence in Journalism, The State of the News

Media 2010, Number of U.S. Daily Newspapers: Weekday and Sunday Editions, Yearly

Increments, 1990–2008, at http://www.stateofthemedia.org/2010/chartland.php?msg=1&

id=1312&ct=line&dir=&sort=&c1=1&c2=1&c3=1&c4=1&c5=0&c6=0&c7=0&c8=0&c9=0&

c10=0&d3=0&dd3=1 (on file with the Columbia Law Review) (last visited Feb. 11, 2011).

4. See generally Steven Petersen & Ryan Sidlik, The Associated Press Intellectual

Prop. Initiative (2009), available at http://www.bivings.com/thelab/presentations/

AP_Intellectual_Property_Bivings.pdf (on file with the Columbia Law Review) (discussing

Associated Press initiative to “crack down on sites that it claims use its intellectual property

improperly”).

5. See Associated Press, Protect, Point, Pay—An Associated Press Plan for Reclaiming

News Content Online, available at http://www.niemanlab.org/pdfs/ProtectPointPay.pdf

(on file with the Columbia Law Review) (last visited Feb. 11, 2011) (describing licensing

market at heart of this idea).

6. See Feist Publ’ns Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 344–48 (1991)

(observing how mere facts are excluded from copyright law, absent original expression).

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422 COLUMBIA LAW REVIEW [Vol. 111:419

they now believed, would provide them with a badly needed ownership

interest in the news.

The story of hot news begins with International News Service v.

Associated Press.

In a largely concocted dispute between two rival news

cooperatives, the Court was presented with an opportunity to recognize a

time-bound property right in news.

Instead of taking the bait and hav-

ing to decide between a full-blown property right in news or no protec-

tion at all, the majority chose to steer a middle path and in the process

articulated a framework that has since remained as novel as it was contro-

versial. This was the quasi-property doctrine of misappropriation. The

Court consciously rejected the idea of a property right in news, expres-

sing concern over the public interest consequences of such a move, and

decided to frame its opinion in terms of unfair competition.

Starting

from the proposition that it was objectionable to reap without sowing, it

went on to recognize that a newsgatherer could bring an action against a

competitor for free riding on its efforts when the news in question was

time sensitive, and therefore of commercial value.

By moving the debate away from property and toward a liability

framework, the Court seemed to deny the newspaper industry a tradable

ex ante entitlement in news. Yet, its framework for this move seemed to

sit rather oddly with common law ideas and thinking at the time. Justice

Brandeis, in a strongly worded dissent in the case, thought the majority to

be masking its propertarian logic in nonproprietary terms and attempted

to call the majority’s bluff.

The Court’s novel category of quasi-

property was also met with little support, and eventually came to be char-

acterized as largely meaningless.

These developments, coupled with

the demise of federal general common law,

resulted in the misappropri-

ation doctrine falling into desuetude. In due course, however, several

state common law jurisdictions absorbed it into their unfair competition

laws.

Of these, New York’s hot news doctrine has since become the

most prominent, owing to the Second Circuit’s conscious decision to

7. See Owning the News: Copyrighting Facts as Well as Words, Economist, June 26,

2010, at 63 (discussing proposed heightened protections for newspapers and potential

impact on ability to copyright facts).

8. 248 U.S. 215 (1918).

9. See generally Douglas G. Baird, The Story of INS v. AP: Property, Natural

Monopoly, and the Uneasy Legacy of a Concocted Controversy, in Intellectual Property

Stories 9 (Jane C. Ginsburg & Rochelle Cooper Dreyfuss eds., 2006) [hereinafter Baird,

Uneasy Legacy] (discussing case background and ramifications).

10. International News, 248 U.S. at 236.

11. Id. at 239–40.

12. Id. at 258 (Brandeis, J., dissenting).

13. See Newman v. Sathyavaglswaran, 287 F.3d 786, 797 & n.13 (9th Cir. 2002)

(describing quasi-property as a “term with little meaningful legal significance”).

14. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938) (“There is no federal

general common law.”).

15. See, e.g., Standard & Poor’s Corp. v. Commodity Exch., Inc., 683 F.2d 704, 710–12

(2d Cir. 1982) (New York law); Bd. of Trade v. Dow Jones & Co., 439 N.E.2d 526, 537 (Ill.

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2011] ENDURING MYTH OF PROPERTY IN NEWS 423

make sense of the Court’s opinion in International News, and the indus-

try’s increased reliance on it of late.

The hot news doctrine, as formulated by the Second Circuit, takes

the International News framework as its starting point and disaggregates it

into five independent factors for analysis.

Under the doctrine, a plain-

tiff newsgatherer may recover from a defendant when: (1) the new-

sgathering/collection involves a significant expenditure, (2) the news/

information is time sensitive, (3) the defendant free rides on the material

collected by the plaintiff, (4) such free riding competes directly with the

plaintiff’s own market, and (5) it is likely to diminish the incentive to

gather/collect the news in a timely manner.

Despite its attempt to remain true to the original misappropriation

framework, the hot news variant that the Second Circuit formulated

deviates from the original framework in one crucial respect. Whereas

International News had been conscious in avoiding the use of property and

ownership rhetoric to frame its analysis of misappropriation, the Second

Circuit’s attempted reformulation superimposed on the misappropria-

tion framework distinctively propertarian rhetoric. Noting in no uncer-

tain terms that International News was “not about ethics” but “about the

protection of property rights,” the Second Circuit’s analysis seemed di-

rected entirely at establishing a primary market for newsgatherers to li-

cense their collections to competitors in traditional intellectual property

fashion.

In effect, the decision reinvigorated the debate about property

in news. International News had, until this point, been taken to be more

about unfair competition and less about property rights. The Second

Circuit’s logic seemed to unequivocally reverse this interpretation.

This distinction initially made little difference, even after the emer-

gence of the hot news doctrine, given the infrequency with which plain-

tiffs relied on it. When the newspaper industry began looking for an in-

tellectual property solution to their problems, however, they readily

seized on the propertarian approach to misappropriation.

In early 2009, the Associated Press (AP) announced that it had de-

cided to invest heavily in efforts to prevent the misappropriation of its

news on the Internet, in the belief that it needed to receive “appropriate

compensation” for its newsgathering efforts, noting that it would not con-

tinue to rely on “misguided legal theories.”

Later that year, the AP be-

gan to put together a digital news registry to tag and track every piece of

App. Ct. 1982) (Illinois law); Columbia Broad. Sys., Inc. v. Melody Recordings, Inc., 341

A.2d 348, 353 (N.J. Super. Ct. App. Div. 1975) (New Jersey law).

16. Nat’l Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 852–53 (2d Cir. 1997).

17. Id.

18. Id. at 853. What is ironic in all of this is that the Second Circuit ultimately denied

the plaintiff’s claim. Yet, its holding and analysis have spurred a robust body of case law,

especially in the Second Circuit.

19. Dean Singleton, Chairman, Associated Press, Remarks at the Associated Press

Annual Meeting (Apr. 6, 2009), at http://www.ap.org/pages/about/pressreleases/

pr_040609c.html (on file with the Columbia Law Review).

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424 COLUMBIA LAW REVIEW [Vol. 111:419

news that the AP and its members publish, with the idea of charging com-

mercial and noncommercial distributors and users of its news a licensing

fee.

Its efforts found encouragement in the successes it had in bringing

hot news actions against online news distributors who lifted facts from its

published news stories.

Other news and information gathering entities have also begun to

invoke the hot news doctrine against online competitors, in the similar

belief that doing so will result in the creation of a robust licensing market

for their information services—in turn, an additional source of reve-

nue.

Interestingly, it is not just the dominant or large industry incum-

bents who have begun to embark on this strategy. Several new, smaller,

and principally online newsgatherers view the hot news doctrine as creat-

ing and protecting a full-blown, albeit temporally limited, property right

in their news.

The effect of this has, in turn, been that courts interpret-

ing and applying the hot news doctrine have readily inferred the exis-

tence of an ownership norm among news collectors in applying the hot

news doctrine, without examining whether the norm has an independent

20. Press Release, Associated Press, Associated Press to Build News Registry to Protect

Content (July 23, 2009), available at http://www.ap.org/pages/about/pressreleases/

pr_072309a.html (on file with the Columbia Law Review). More recently, the U.S.

Department of Justice (DOJ) issued a letter supporting AP’s actions, creating the registry,

and noting that it was unlikely to run afoul of the antitrust laws. See Letter from Christine

A. Varney, Assistant Attorney Gen., U.S. Dep’t of Justice, Antitrust Div., to William J. Baer,

Esq., Arnold & Porter LLP (Mar. 31, 2010), available at http://www.justice.gov/atr/

public/busreview/257318.htm (on file with the Columbia Law Review) (“[T]he Department

has no present intention to challenge the AP’s Registry proposal . . . [as it] is not likely to

result in anticompetitive harm and . . . it may provide procompetitive benefits to

participating content owners and users.”). Of course, the DOJ’s support says nothing of

AP’s position on the ownership of news.

21. See, e.g., Associated Press v. All Headline News Corp., 608 F. Supp. 2d 454, 458–61

(S.D.N.Y. 2009) (“A cause of action for misappropriation of hot news remains viable under

New York law, and the Second Circuit has unambiguously held that it is not preempted by

federal law.”).

22. See, e.g., Barclays Capital Inc. v. Theflyonthewall.com, 700 F. Supp. 2d 310, 313

(S.D.N.Y. 2010) (“The [plaintiff financial services] firms contend that their

recommendations are ‘hot news’ and that the regular, systematic, and timely taking and

redistribution of their recommendations constitutes misappropriation . . . .”); Complaint

¶ 7, Dow Jones & Co., Inc. v. Briefing.com, Inc., No. 1:10-cv-03321 (S.D.N.Y. Apr. 20, 2010)

(“Briefing.com . . . unfairly competes with Dow Jones in the delivery of ‘hot news’ and

tortiously misappropriates Dow Jones’ headlines and articles from the DJN.”).

23. Theflyonthewall.com, a defendant in one of the cases previously cited, had in fact

commenced an action for hot news misappropriation against another small competitor,

Tradethenews.com, and settled the matter before a verdict. See Barclays Capital Inc., 700 F.

Supp. 2d at 327–28 (explaining allegations as including misappropriation of “Fly’s

valuable, time-sensitive, proprietary information by broadcasting content from Fly’s

newsfeed on its own website within seconds of the content being posted”). The court in

Barclays used the prior case to deny the defendant’s claim that there was a strong industry-

wide norm against owning news and information that was publicly distributed. Id. at 338

(“Fly’s argument that its practices are in accordance with prevailing industry norms—that,

in essence, no one ‘owns’ financial information once it is released—is further undermined

by Fly’s use of the hot-news misappropriation theory to sue one of its competitors, TTN.”).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 425

basis, or indeed the possibility that incumbents’ mistaken reliance on the

hot news doctrine may have itself influenced the development of the

norm. Property in news seems to be a de facto reality today under the hot

news doctrine.

The attempt to resurrect hot news misappropriation as a solution to

the problems faced by newspapers reached its culmination recently, when

the Federal Trade Commission (FTC) issued a discussion paper outlining

a few potential policy proposals aimed at reinventing journalism.

Fea-

turing rather prominently in this policy paper was the enactment of

“Federal Hot News Legislation” to help address newspapers’ revenue

problems.

Centered on the rhetoric of proprietary facts, the proposal

argues that federalizing the doctrine might provide newsgatherers with a

necessary financial incentive to invest in newsgathering.

It is certainly

too early to say whether this proposal will ever move forward, but it un-

questionably points to recent developments having effectively resusci-

tated the hot news doctrine.

This Article argues that these developments all rest on a flawed un-

derstanding of the misappropriation doctrine and its underlying theoreti-

cal basis.

Contrary to the Second Circuit’s facial rhetoric and the news-

paper industry’s beliefs, the misappropriation doctrine (including its hot

24. Fed. Trade Comm’n, Potential Policy Recommendations to Support the

Reinvention of Journalism 5–17 (Discussion Draft 2010) [hereinafter FTC Discussion

Draft], available at www.ftc.gov/opp/workshops/news/jun15/docs/new-staff-

discussion.pdf (on file with the Columbia Law Review).

25. Id. at 9–11.

26. Id. at 10.

27. For some criticisms of the FTC’s study in the newspaper media, see Jeremy W.

Peters, Government Takes on Journalism’s Next Chapter, N.Y. Times, June 14, 2010, at B7

(collecting criticisms of FTC paper from journalists, media watchdogs, and academics);

Editorial, FTC Floats Drudge Tax: Journalism Can Reinvent Itself Without Government

‘Help,’ Wash. Times, June 4, 2010, at http://www.washingtontimes.com/news/2010/jun/

4/ftc-floats-drudge-tax/ (on file with the Columbia Law Review) (“The Federal Trade

Commission . . . is seeking ways to ‘reinvent’ journalism, and that’s a cause for concern.”).

For the most substantive response to the proposals to date, see Google, Inc., Comments on

Federal Trade Commission’s News Media Workshop and Staff Discussion Draft on

“Potential Policy Recommendations to Support the Reinvention of Journalism” 2 (2010),

available at www.google.com/googleblogs/pdfs/google_ftc_news_media_comments.pdf

(on file with the Columbia Law Review) (“Regulatory proposals that undermine the

functioning of healthy marketplaces and stall the pace of change are not the solution.”).

28. References in this Article to “misappropriation” and “the misappropriation

doctrine” should be understood as referring to hot news misappropriation—i.e., the cause

of action that is traced back to International News and the unique quasi-property doctrine

that the Court formulated in that case. The two terms are used interchangeably

throughout. It very importantly does not include the more generic idea of

misappropriation, which extends beyond these situations and is often invoked in relation

to trade secrets, goodwill, and other intangibles. See Richard A. Posner, Misappropriation:

A Dirge, 40 Hous. L. Rev. 621, 626–41 (2003) (discussing misappropriation as stand-alone

doctrine that originated in International News); Leo J. Raskind, The Misappropriation

Doctrine as a Competitive Norm of Intellectual Property Law, 75 Minn. L. Rev. 875, 876

(1991) (referring to misappropriation as doctrine that originated in International News).

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426 COLUMBIA LAW REVIEW [Vol. 111:419

news variant) is incapable of creating a property interest, even in tradi-

tional intellectual property form, in news. While the doctrine is directed

at deterring free riding, it does so in the context of solving a collective

action problem that was and is unique to the newspaper industry, related

to the practice of cooperative newsgathering.

Newspapers competing in the market for time-sensitive news face a

problem. Collecting news on a regular basis in systematic fashion in-

volves an enormous expenditure of skill and resources. No single news-

paper can afford to do this by itself on a sustained basis. Since factual

news is by its very nature homogeneous (rather than unique to its collec-

tor) and publicly accessible, newspapers are best off individually and col-

lectively when they cooperate and pool their resources and efforts to-

gether to collect news. In this scenario, however, rampant free riding by

a few newspapers unwilling to cooperate (or to collect the news on their

own) is likely to diminish other newspapers’ willingness to cooperate,

thereby directly impacting the industry’s collective profitability. Newspa-

pers are thus best off when they all cooperate, but free riding by one or a

few of them affects their incentives to do so.

Newspapers recognized the need for cooperation amongst them-

selves very early on in their development, organizing themselves into for-

mal and informal collectives, and sharing journalistic leads and tips with

each other both within and outside these formations.

While these for-

mations were at first sustained by informal norms against free riding, the

formalization of cooperative efforts necessitated the institutionalization

of these norms. The misappropriation doctrine stepped in here, and

sought to raise the costs of free riding while simultaneously allowing co-

operative newsgathering and informational sharing among competitors

to continue. Free riding thus was not problematic for its own sake, but

only because of its effects on the dynamics of the group. An individual

property right granted to each news collector might deter free riding, but

could potentially affect the nature of cooperation in the market.

Given the prevalence of cooperation and sharing among competing

newspapers in the market, a property right in the nature of a first-

possession-based exclusive entitlement in the news would likely have im-

posed a new set of transaction and information costs on newspapers, de-

terred cost-effective sharing of tips and leads, and possibly also resulted in

duplicative races among competitors to be the first to collect and report

the news. The Court in International News seemed to recognize this as a

distinct possibility. Intellectual property rights have, for a long time,

29. See infra Part II.A.1 (discussing how free riding of some newspapers incentivizes

free riding by most participants in market, leading to slower collection and dissemination

of news).

30. See infra Part II.A.2.a–b (discussing evolution of formal and informal types of

cooperation among newspapers).

31. See infra Part II.A.2.c (describing problems that arise from granting individual

property right in news).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 427

been thought to be the law’s most obvious response to the problem of

informational free riding.

Their grant of exclusivity over the intangible

enables the limited internalization of positive externalities by rights hold-

ers, thereby inducing the very production of the intangible. Structurally

though, such individual exclusion rights make the most sense only when

the intangible is individually produced by, and therefore in some sense

unique to, the right holder. When the intangible in question is not in

any way unique to its purveyor, but rather produced through a collective

effort, the harm from free riding lies instead in its entrenching a collec-

tive action problem. Deterring such free riding through a liability mecha-

nism without simultaneously attaching the entitlement to the intangible,

by focusing, as a normative matter, on the unfair gain to the defendant

rather than on the loss to the plaintiffs, offers a more tailored, equally

effective, and less problematic solution than a property mechanism.

Keeping this in mind, the framework that the Court chose instead of

a property right was one of unjust enrichment, from which it created a

regime of gain-based liability for the unauthorized, competitive use of the

news collected by an individual or group of newspapers. Without con-

verting the news collected into an artificially scarce resource, a free rider

is held liable for the expenditure that it saves by free riding instead of

collecting or cooperating.

It is in this crucial respect that the misappro-

priation doctrine differs from the idea of property in news—by only al-

lowing for the incomplete or partial internalization of externalities.

Misappropriation is thus a framework for recovery that draws on un-

fair competition and unjust enrichment law, an interface that has other-

wise received little scholarly attention.

As a body of court-developed

rules, unfair competition uses ideas from different parts of the common

32. See Mark A. Lemley, Property, Intellectual Property, and Free Riding, 83 Tex. L.

Rev. 1031, 1033–46 (2005) (“Courts applying the property theory of intellectual property

are seeking out and eliminating uses of a right they perceive to be free riding.”).

33. See infra Part II.B (discussing interrelationship between unjust enrichment

principle and misappropriation doctrine).

34. Perhaps the only scholar to recognize this connection early on was Rudolf

Callmann. See Rudolf Callmann, He Who Reaps Where He Has Not Sown: Unjust

Enrichment in the Law of Unfair Competition, 55 Harv. L. Rev. 595, 596–97 (1942)

(noting that INS v. AP “in effect imported into the law of unfair competition the concept

of unjust enrichment”). Yet, Callmann’s analysis paid scant attention to the nuances of

unjust enrichment doctrine and its structural contribution to the debate about

misappropriation, focusing almost entirely on unfair competition, Callmann’s principal

area of interest at the time. Nearly half a century later, Wendy Gordon’s work on

intellectual property’s “restitutionary impulse” also examined this interface in some detail.

See Wendy J. Gordon, On Owning Information: Intellectual Property and the

Restitutionary Impulse, 78 Va. L. Rev. 149, 244 (1992) [hereinafter Gordon, Restitutionary

Impulse] (“[T]he restitutionary cause of action is a species of unfair competition; this

competition is deemed unfair because the law recognizes the restitutionary principle. This

relationship between the two doctrinal categories should not be surprising. After all . . .

International News Service . . . is a case of both unfair competition and unjust

enrichment.”). For a recent discussion of unjust enrichment law in the European context,

see Anselm Kamperman Sanders, Unfair Competition Law: The Protection of Intellectual

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428 COLUMBIA LAW REVIEW [Vol. 111:419

law to create private causes of action for behavior that is likely to harm

competition in the market.

It closely resembles antitrust law in many

respects, except that its origins are often independent of any statute, and

therefore largely a matter of state and federal common law. The law of

unjust enrichment is premised on the idea that there exist circumstances

where a plaintiff can recover from a defendant when the latter is en-

riched at the expense of the former, without there having to be any

wrongdoing, loss, or bargain between the parties.

In other words, it

forms a fourth “wheel” of the common law alongside tort, contract, and

property law.

Much like property law, the law of unjust enrichment

deals with the allocation of positive externalities that intentionally or un-

intentionally arise and flow to strangers.

Yet, their similarity ends there.

Whereas property law recognizes an ex ante, nonrelational interest in an

owner (i.e., the ownership interest) and makes it the normative baseline

around which actions are structured, the principle of unjust enrichment

recognizes no such similar interest. Instead, it operates entirely as a prin-

ciple of distributive justice that derives its normative basis in the incom-

patibility of the resulting situation with certain ideals of social morality.

and Industrial Creativity 121–34 (1997) (examining unjust enrichment doctrine in

Germany, France, the Netherlands, and the United Kingdom).

35. For early work trying to describe the area, see Charles Bunn, The National Law of

Unfair Competition, 62 Harv. L. Rev. 987, 987–88 (1949) (“[W]e have a national law of

unfair competition now. It is found in . . . the Federal Trade Commission Act of 1914, as

amended by the Act of 1938.”); Rudolf Callmann, What is Unfair Competition?, 28 Geo.

L.J. 585, 607 (1940) [hereinafter Callmann, What is Unfair?] (“Only if we free the life of

commercial competition from the role of a Cinderella . . . may the Law of Competition

develop freely and without restraint.”); Zechariah Chafee, Jr., Unfair Competition, 53

Harv. L. Rev. 1289, 1315 (1940) (explaining his theory of “Exploration” in which courts

cautiously expand concept of unfair competition to include “a few new kinds of

standardized wrongs”); Milton Handler, Unfair Competition, 21 Iowa L. Rev. 175, 259

(1936) (“[T]he definition of unfair competition by administrative legislation is

incomparably superior to definition by administrative decision.”); James Angell

McLaughlin, Legal Control of Competitive Methods, 21 Iowa L. Rev. 274, 274 (1936)

(“Judicial development of [unfair competition] into closely related fields has been

needlessly restricted by two leading cases.”); Ervin H. Pollack, A Projection for the

Revaluation of Unfair Competition, 13 Ohio St. L.J. 187, 235 (1952) (“The pattern of

legislative, judicial and administrative experience has been sufficiently outlined to sketch a

clear legislative picture of unfair competition but its details must be completed by

administrative action.”).

36. See generally Hanoch Dagan, Unjust Enrichment: A Study of Private Law and

Public Values 1–3 (1997) (noting components of unjust enrichment include “(i) a benefit

(or enrichment); (ii) which has been received by the defendant at the plaintiff’s expense; and

(iii) the retention of which is unjust”); Christopher T. Wonnell, Replacing the Unitary

Principle of Unjust Enrichment, 45 Emory L.J. 153, 155, 191–219 (1996) (discussing four

distinct principles underlying liability based on unjust enrichment).

37. Richard A. Epstein, The Ubiquity of the Benefit Principle, 67 S. Cal. L. Rev. 1369,

1370–71 (1994) (“[T]he common law coach runs not on three substantive wheels, but on

four.”).

38. See Ariel Porat, Private Production of Public Goods: Liability for Unrequested

Benefits, 108 Mich. L. Rev. 189, 190 (2009) (describing unjust enrichment law in terms of

externalities).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 429

In other words, it is almost always backward looking, and operates ex

post.

The doctrinal apparatus of hot news misappropriation bears the in-

delible imprint of the instrumental goals that motivated its creation.

Most of the doctrine’s elements remain meaningful only when under-

stood within the broader context of what it was trying to achieve. The

incentives needed for cooperative newsgathering, the practice that misap-

propriation was directed at preserving, remain quite different from those

demanded by newspapers in the digital environment. Disconnecting mis-

appropriation from its roots in cooperative newsgathering in order to

serve this alternative purpose would necessitate jettisoning key elements

of the doctrine and converting it into a property interest. This is, in turn,

likely to raise serious federal preemption and First Amendment concerns,

thereby calling into question its very utility and survival. If hot news mis-

appropriation is to survive as a viable doctrine, then rooting it in a theory

of competitive unjust enrichment directed at solving a collective action

problem seems unavoidable. Understanding that theory and its continu-

ing relevance for newsgathering, appreciating how it differs from the

traditional rationale for intellectual property, and analyzing the practical

consequences that flow from it are but logical first steps in that endeavor.

Hot news misappropriation did not and cannot create a property right in

news. Efforts to reinvigorate newspaper journalism ought to look else-

where for answers.

This Article offers a positive theory of the misappropriation doctrine

independent of property and ownership, and attempts to thereby dispel

the belief that it did create, or is indeed capable of creating, an owner-

ship interest in news. It explains the dynamics of competitive newsgather-

ing and shows how the doctrine uses the connection between unjust en-

richment and unfair competition to encourage cooperative efforts in that

market. Part I provides an overview of the property-based understanding

of the misappropriation doctrine, documenting the main causes and con-

sequences of this turn. Part II articulates an alternative theoretical frame-

work for misappropriation, drawing on the interface between unjust en-

richment as a structural principle and unfair competition as a set of

normative ideals in the common law. Part III then explains the signifi-

cance of this difference, highlighting the doctrinal, remedial, and First

Amendment consequences that are likely to flow from adopting one ap-

proach over the other.

I. D

ELUSIONS OF

RANDEUR

: H

EWS

ISAPPROPRIATION AS A

ROPERTY

CTION

Arguments for owning the news date back to the mid-nineteenth

century. Melville Stone, then head of the Chicago Daily News, and later

President of the AP, made it his primary objective to have the law recog-

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430 COLUMBIA LAW REVIEW [Vol. 111:419

nize the idea of a property right in the news.

A strong utilitarian, his

primary motivation for the idea arose from the acts of his competitors,

who flagrantly copied the news from his newspaper on a systematic ba-

sis.

At the time, a property right would have enabled the Daily News to

sue its competitors and presumably enjoin them preemptively from such

copying. Equitable relief, in the nature of injunctive relief, was the prin-

cipal result that early proponents of a property right in the news

sought.

This remedial conception of property as no more than a basis for

injunctive relief manifested itself in early decisions grappling with the is-

sue of property in news. In one well-known decision, the Seventh Circuit

extensively elaborated on the need to recognize a property interest in

news only for the purposes of providing injunctive relief.

When the

matter reached the Supreme Court in International News, the majority,

however, declined to decide the case on the basis of property.

Justice

Holmes too, in his cryptic concurrence, refused to recognize property as

forming the basis of any relief.

Despite this, the Court granted the

plaintiff injunctive relief based on a quasi-property theory of unfair com-

petition and unjust enrichment.

If injunctive relief was all that the early controversy about a property

right in the news was about, the Court’s decision in International News

might have ended the debate. It seemingly produced what the newspa-

per industry, led by Stone at the time, wanted: a right to have courts

enjoin competitive copying. Yet, when the doctrine came to be absorbed

by different state laws and resurrected as the hot news doctrine, it none-

theless came to be interpreted as actively producing a property right in

the news.

In the intervening period between 1918 and 1992, the body

of judicial and scholarly writing about intellectual property and its con-

nection to the general idea of property had grown exponentially.

As an

39. Baird, Uneasy Legacy, supra note 9, at 11 (“Melville Stone is the person most

responsible for developing the idea of a property right in news.”).

40. These were the McMullen brothers, who owned the Chicago Post and the Chicago

Mail. Id.; see also Melville E. Stone, Fifty Years a Journalist 355–56 (1921) (describing

practice of copying from newspapers without permission as “universal” and his desire to

find legal remedy in the form of a property right).

41. Stone, supra note 40, at 337–38 (quoting Frederic Jennings, then General

Counsel of the Associated Press).

42. Nat’l Tel. News Co. v. W. Union Tel. Co., 119 F. 294, 299–301 (7th Cir. 1902).

43. Int’l News Serv. v. Associated Press, 248 U.S. 215, 234–35 (1918).

44. Id. at 246–48 (Holmes, J., concurring).

45. Id. at 236 (majority opinion) (“Regarding the news, therefore, as but the material

out of which both parties are seeking to make profits at the same time and in the same

field, we hardly can fail to recognize that for this purpose, and as between them, it must be

regarded as quasi property, irrespective of the rights of either as against the public.”).

46. See, e.g., Nat’l Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 852–53 (2d Cir.

1997) (treating International News as establishing “hot-news” misappropriation claim).

47. See generally Douglas C. Baird, Common Law Intellectual Property and the

Legacy of International News Service v. Associated Press, 50 U. Chi. L. Rev. 411 (1983)

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action relating to an informational intangible (i.e., the news), it thus

seemed logical to treat misappropriation as just another intellectual prop-

erty doctrine, akin to copyright, trade secrets, or publicity rights. It is

here that the reintroduction of property ideas and rhetoric assumes sig-

nificance, but for seemingly different (or rather, additional) reasons.

Thus, when the Second Circuit concluded that hot news misappropria-

tion was not about ethics but rather about property rights, its focus was

not just on injunctive relief. Indeed, the court’s opinion did not even

deal with the issue of remedies, since it found for the defendant on the

substantive issue.

A property right in an informational good, along the lines of intellec-

tual property, now implied a different set of consequences. And surely

enough, courts interpreting and applying the misappropriation doctrine

took their cue from the Second Circuit’s proclamation, and began mov-

ing the law in this direction. Three such interrelated moves—all of which

derive from the identification of news as the basis of a property interest,

and indeed themselves contributed to it—are worth describing here: (1)

the recognition and validation of an ex ante licensing market for time-

sensitive news; (2) the increased emphasis on the in rem or nonrelational

nature of the entitlement in misappropriation; and (3) the use of injunc-

tive relief as the default remedy in hot news cases.

A. An Ex Ante Licensing Market

Central to all forms of intellectual property remains an owner’s abil-

ity to license others to use the subject matter of the right on exclusive or

nonexclusive terms.

An owner can, in other words, contractually alien-

ate his ability to exclude another from the object of the right on such

terms as he deems fit. Needless to say, this provides the owner or right

holder with an additional source of revenue of importance in the newspa-

per industry. All the same, the growth of a licensing market for the news

has both been fueled by, and in itself contributed to, a propertarian vi-

sion of hot news misappropriation.

[hereinafter Baird, Common Law] (describing development of misappropriation as form

of common law intellectual property); Frank H. Easterbrook, Intellectual Property Is Still

Property, 13 Harv. J.L. & Pub. Pol’y 108 (1990) (linking intellectual property to traditional

property); Richard A. Epstein, International News Service v. Associated Press: Custom and Law

as Sources of Property Rights in News, 78 Va. L. Rev. 85 (1992) [hereinafter Epstein,

Custom and Law] (discussing particular circumstances of International News and general

system of property rights surrounding it); Justin Hughes, The Philosophy of Intellectual

Property, 77 Geo. L.J. 287 (1988) (exploring philosophical justifications for granting

property rights to ideas).

48. Nat’l Basketball Ass’n, 105 F.3d at 853, 855.

49. See generally Mark A. Lemley, Beyond Preemption: The Law and Policy of

Intellectual Property Licensing, 87 Calif. L. Rev. 111 (1999) (discussing ability of parties to

contract over use of intellectual property while analyzing proposed change to Uniform

Commercial Code); Raymond T. Nimmer, Licensing in the Contemporary Information

Economy, 8 Wash. U. J.L. & Pol’y 99 (2002) (analyzing licensing of information).

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432 COLUMBIA LAW REVIEW [Vol. 111:419

For a licensing market to come into existence, it is crucial that the

licensor have an identifiable right or entitlement ex ante that can form

the subject matter of the license.

In other words, a potential licensee

will most often need to know the nature and extent of a licensor’s author-

ity under the entitlement before it is adjudicated by a court. The exis-

tence of a bright-line ex ante interest is thus crucial to the success of a

thick licensing market.

Here again, the fact that intellectual property

regimes are modeled on traditional property interests means that the law

recognizes an identifiable interest even before its holder attempts to en-

force it in a court of law during an infringement action. For instance, the

entitlement in copyright law is presumed to come into existence the mo-

ment an author creates an original work of authorship that is fixed in a

tangible medium, and in patent law it commences upon a formal grant by

the government. The owner’s attempt to exercise the exclusivity of the

right during an infringement action in court is thus merely an attempt to

enforce a preexisting right.

The existence and effectiveness of such a licensing market thus de-

pends to a large degree on the identification and demarcation of rights

by the parties involved. One obvious way of achieving this is by attaching

the rights directly to a discrete asset or resource, adopting what Henry

Smith describes as the exclusion regime of delineating an entitlement.

Attaching a right to an actual or notional resource and framing it in

terms of “simple on/off signals” involving the resource minimizes the va-

rious information and transaction costs involved, and consequently sim-

50. Robert Cooter & Thomas Ulen, Law and Economics 100 (1988) (noting “[o]ne

well-confirmed result in the literature on bargaining is that bargainers are more likely to

cooperate when their rights are clear,” which explains “why property law favors criteria for

determining ownership that are clear and simple”). But see Jason Scott Johnston,

Bargaining Under Rules Versus Standards, 11 J.L. Econ. & Org. 256, 257 (1995) (arguing,

against conventional wisdom, that judicial ex post balancing test may result in more

efficient bargaining than ex ante clearly defined rule, given existence of private

information about value and harm).

51. For an analogous argument in the patent law context, see Craig Allen Nard,

Certainty, Fence Building, and the Useful Arts, 74 Ind. L.J. 759, 759–60 (1999).

52. Henry E. Smith, Exclusion and Property Rules in the Law of Nuisance, 90 Va. L.

Rev. 965, 972–73, 75 (2004) [hereinafter Smith, Law of Nuisance] (“Under an exclusion

regime, the law uses a rough informational variable or signal—such as entry—to define the

right, and thus bunches together a range of uses that juries, judges, and other officials

need never measure directly.” (emphasis omitted)); Henry E. Smith, Exclusion Versus

Governance: Two Strategies for Delineating Property Rights, 31 J. Legal Stud. S453,

S454–55 (2002) [hereinafter Smith, Two Strategies] (“In exclusion, decisions about

resource use are delegated to an owner who, as gatekeeper, is responsible for deciding on

and monitoring specific activities with respect to the resource.”); Henry E. Smith, Property

and Property Rules, 79 N.Y.U. L. Rev. 1719, 1755–56 (2004) [hereinafter Smith, Property

Rules] (“In an exclusion strategy, the law sets up rough signals (informational variables,

proxies) defining the boundaries of the asset. Within this zone of protection, owners have

the choice of how to invest in or consume the asset.” (emphasis omitted)).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 433

plifies the process of licensing it to strangers.

This is especially so when

the right relates to nonrivalrous information. A potential licensee has no

way of evaluating the information/intangible until it is disclosed to him;

yet, upon such disclosure he has little reason to want to pay for it.

Known as Arrow’s information paradox, this reality is thought to lie at the

root of the tendency to propertize the entitlement being transacted in, by

attaching it to a discrete asset around which an exclusionary legal frame-

work then operates, independent of any contractual agreement between

the parties.

Robert Merges thus argues that property rights (in the na-

ture of intellectual property entitlements) allow parties to overcome

Arrow’s paradox by providing licensors with a basis for recourse, indepen-

dent of the actual license (which may never fructify), thereby providing

for a form of precontractual liability.

Propertizing information thus di-

rectly facilitates contractual transactions relating to such information.

Two things become central then to the effective functioning of a licens-

ing market: (1) the ex ante characterization of the entitlement as a prop-

erty right, and (2) the law’s attaching it to an identifiable res, albeit a

notional one.

It was only a matter of time before news purveyors sought to capital-

ize on the licensing opportunities that emerged from a propertarian (or

commodified) vision of news. If a collector of hot news could exclude a

competitor from free riding on its news (using the misappropriation doc-

trine), surely it could now seek to charge such competitors in return for

not suing them: the very premise of licensing. This change is seen in the

AP’s own rhetoric surrounding the hot news doctrine. Whereas in 1918,

it had categorically told the Court that it was “not asking [for] any exclu-

sive right”

to communicate the news, in 2009 it would declare that it was

merely seeking appropriate compensation that paid it fully and fairly for

its news.

Its reasons for this shift are obvious. As a historical matter, the

newspaper industry had relied entirely on advertising as its primary

53. Smith, Law of Nuisance, supra note 52, at 973; see, e.g., Henry E. Smith,

Institutions and Indirectness in Intellectual Property, 157 U. Pa. L. Rev. 2083, 2120 (2009)

(“The modular structure of exclusion-based intellectual property rights . . . makes . . .

contracting more tractable.”).

54. Kenneth J. Arrow, Economic Welfare and the Allocation of Resources for

Invention, in The Rate and Direction of Inventive Activity 609, 615 (Nat’l Bureau of Econ.

Research ed., 1962) (“[T]here is a fundamental paradox in the determination of demand

for information; its value for the purchaser is not known until he has the information, but

then he has in effect acquired it without cost.”).

55. Robert P. Merges, A Transactional View of Property Rights, 20 Berkeley Tech. L.J.

1477, 1490, 1499 (2005) [hereinafter Merges, Transactional View]. For an application to

trade secrets law, see Mark A. Lemley, The Surprising Virtues of Treating Trade Secrets as

IP Rights, 61 Stan. L. Rev. 311, 336–37 (2008).

56. Merges, Transactional View, supra note 55, at 1489–504.

57. See Victoria Smith Ekstrand, News Piracy and the Hot News Doctrine 72 (2005)

(citing Brief for Respondent at 10, Int’l News Serv. v. Associated Press, 248 U.S. 215 (1918)

(No. 221)).

58. Singleton, supra note 19.

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434 COLUMBIA LAW REVIEW [Vol. 111:419

source of revenue. As this source began to diminish, the industry began

to look for new revenue-earning opportunities, and the licensing market

emerged as an obvious candidate. For this to work effectively, though,

misappropriation had to be understood as an ex ante legal entitlement,

one with boundaries that could be identified prior to a dispute/litigation,

and which preferably revolved around a discrete asset—news.

Developing and reinforcing this licensing market has been central to

the newspaper industry’s use of the misappropriation doctrine in recent

years. In Associated Press v. All Headline News Corp., the plaintiff com-

menced a hot news misappropriation action against a defendant with

whom it had previously entered into a licensing agreement.

When the

defendant stopped paying the plaintiff its fees under the agreement but

nonetheless continued to make commercial use of its news service, the

plaintiff resorted to hot news misappropriation as an independent basis

of recovery. Around the same time, the AP also commenced a hot news

misappropriation action against news-aggregating defendants in

Associated Press v. Moreover Technologies, Inc.

In this action, the AP made

no secret of its attempted propertization of the news, repeatedly referring

to the subject matter of its hot news claim as proprietary.

Both actions

were ultimately settled, and the AP’s licensing market is today extremely

robust as a result.

The relationship between the development of a licensing market for

news and the metamorphosis of hot news misappropriation into a prop-

erty claim is also strongly reflexive. While a property-based understand-

ing of the doctrine certainly facilitates the growth of licensing, the ready

recourse to such licensing by competitors (and others) in their use of the

news has also facilitated an understanding of hot news misappropriation

as creating an ownership interest in the news. Referred to as the phe-

nomenon of doctrinal feedback, its prevalence is well documented in the

context of copyright and trademark law.

Courts interpreting the doctri-

nal scope of copyright (and trademark) law look to prevailing licensing

practices among market participants, and readily infer the existence of an

ex ante legal entitlement over a type of use/copying when licenses de-

scribe the entitlement in those terms. This, as scholars have noted, ig-

nores the reality that potential licensees tend to be risk averse, preferring

59. 608 F. Supp. 2d 454, 457 (S.D.N.Y. 2009); Complaint at 12–13, Associated Press v.

All Headline News Corp., No. 08 Civ. 00323 (S.D.N.Y. Jan. 14, 2008).

60. Complaint at 1–2, 4–14, Associated Press v. Moreover Techs., Inc., No. 07 Civ.

8699 (S.D.N.Y. Oct. 9, 2007).

61. Id. at 11–12.

62. In the former action, the court ruled in favor of the plaintiff on its claims of hot

news misappropriation and copyright infringement, and against the defendant’s motion to

dismiss. Associated Press, 608 F. Supp. 2d at 458–62. The AP has since asserted that the hot

news doctrine that developed in such actions “was important to [its] efforts to protect its

intellectual property.” FTC Discussion Draft, supra note 24, at 10.

63. See James Gibson, Risk Aversion and Rights Accretion in Intellectual Property

Law, 116 Yale L.J. 882, 884–85 (2007).

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to obtain a license even in situations where they remain unsure about the

precise contours of a licensor’s entitlement.

The continuing, unabated

growth of a licensing market for the factual news thus runs the obvious

risk of itself contributing to an expansive propertarian understanding of

hot news as creating an ownership interest in the news.

B. An In Rem Interest

One of the characteristic features of a property right is its structure

as an in rem right—operational against the world at large. This is in con-

trast to interests that are thought to operate against a specific individual

or set of individuals, classified as in personam rights or interests.

Yet,

the distinction between the two is not one of mere numerosity, a fact that

is often ignored. In other words, an in rem right is not merely a collec-

tion of in personam rights. Property rights are in rem interests because

the set of individuals against whom they operate remains indefinite at all

times, unlike in personam rights that operate against a definite set of

individuals.

The problem, however, is that between the two extremes of

definite and indefinite are a number of situations that are hard to fit into

one category or the other. It is here that misappropriation’s status as a

doctrine creating a property right becomes problematic.

In International News, Justice Pitney chose to characterize the right he

was creating as a form of quasi-property precisely because it elided the

standard in rem/in personam distinction used to identify property inter-

ests.

The exclusionary framework created would thus operate only be-

tween direct competitors in a market.

A quasi-property right holder

had an interest against a class of individuals that while definite in one

sense (i.e., being composed only of competitors), nonetheless remained

indefinite in another, since such competitors could be perfect strangers

with whom the plaintiff had had no prior interaction. The existence of

the right was thus largely conditional, since it depended to a large degree

on the preexisting identity of the defendant, something largely unheard

64. See, e.g., id. at 887 (observing how uncertainty exacerbates this risk aversion).

65. This distinction is usually traced back to the work of Wesley Hohfeld. See Wesley

Newcomb Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, 26

Yale L.J. 710, 718–19 (1917) [hereinafter Hohfeld, Fundamental Conceptions] (analyzing

use of legal conceptions such as “in personam” and “in rem”). For recent work explaining

the distinction in terms of information costs, see generally Thomas W. Merrill & Henry E.

Smith, The Property/Contract Interface, 101 Colum. L. Rev. 773 (2001).

66. Hohfeld, Fundamental Conceptions, supra note 65, at 718; Albert Kocourek,

Rights in Rem, 68 U. Pa. L. Rev. 322, 322 (1920).

67. Int’l News Serv. v. Associated Press, 248 U.S. 215, 236 (1918) (“[F]or this purpose,

and as between them, it must be regarded as quasi property, irrespective of the rights of

either as against the public.”).

68. Id. at 239 (“The fault in the reasoning lies in applying as a test the right of the

complainant as against the public, instead of considering the rights of complainant and

defendant, competitors in business, as between themselves.”).

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436 COLUMBIA LAW REVIEW [Vol. 111:419

of in standard intellectual property regimes at the time and now.

Among other things, it was this unique structural attribute of misappro-

priation that kept it from being just another form of property/intellec-

tual property.

In its most recent iteration, however, courts interpreting and apply-

ing the doctrine have paid insufficient attention to the identity require-

ment upon which International News placed much emphasis. In interpret-

ing the International News opinion, the Second Circuit in National

Basketball Ass’n shifted its focus and requirement from whether the plain-

tiffs and defendants were competitor firms to one of whether the defen-

dant’s actions compete with a product or service offered by the plain-

tiffs.

In doing so, however, the court failed to suggest any type of test to

be followed in applying this restriction. As courts invoked the doctrine

outside the realm of news and factual information, those courts began

paying increasingly less attention to this element, effectively distancing it

from its origins as an identity-based limitation on the applicability of the

doctrine.

This is not to imply that the identity-based restriction disfavors ex-

tending the doctrine to new subject matter. In contrast to the Second

Circuit, in the Third Circuit courts sought to preserve the identity-based

structure of the requirement in International News by drawing a distinction

between direct and indirect competition, even when dealing with subject

matter unrelated to news.

Direct competition is meant to represent an

identity-based limit, while indirect competition represents a product-

based approach. Yet, few courts have followed suit; the recent trend ap-

pears to be toward an approach that looks for some minimal level of sub-

stitutability between the products and services of the parties.

The effect of relaxing this restriction has thus been to move the in-

terest created by misappropriation in the direction of a traditional in rem

right, applicable against an indefinite class of individuals, the obvious

characteristic of a property right.

69. For a similar claim alluding to this distinction, see Gordon, Restitutionary

Impulse, supra note 34, at 211 (describing restitutionary interest as relational). Note that

the idea of a relational interest as used by Gordon bears no connection to the well-known

category made popular by tort scholar Leon Green. See Leon Green, Relational Interests,

29 Ill. L. Rev. 460, 460 (1934) (developing an independent category of relational interests

in the common law).

70. See Nat’l Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 852 (2d Cir. 1997)

(framing competition as competitive product or service rather than competitive firm).

71. See U.S. Golf Ass’n v. St. Andrews Sys., Data-Max, Inc., 749 F.2d 1028, 1037–38 (3d

Cir. 1984) (finding “absence of direct competition” dispositive in case).

72. See, e.g., Barclays Capital Inc. v. Theflyonthewall.com, 700 F. Supp. 2d 310,

336–39 (S.D.N.Y. 2010) (condemning Fly’s actions as using Barclay’s work as a substitute

for its own by “systematically gathering and selling the [f]irms’ [r]ecommendations to

investors”); X17, Inc. v. Lavandeira, 563 F. Supp. 2d 1102, 1107–09 (C.D. Cal. 2007)

(finding significant that defendant’s activities will “remove X17’s incentive to gather the

photographs and threaten the continued existence of X17’s business”).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 437

C. Automatic Injunctions

The idea of hot news misappropriation as creating a property right

in the news, which fuels and is fueled by the licensing of news, also im-

pacts courts’ conception of remedies. As noted earlier, the ability to en-

join free-riding competitors lays at the heart of the industry’s attempts to

have the law recognize a property right in the news.

Much of this

originated in the distinction that courts of equity insisted on drawing be-

tween proprietary and nonproprietary rights for the purposes of granting

equitable (i.e., injunctive) relief.

While originally an attempt to differ-

entiate interests in land from other kinds of interests, courts soon began

stretching the idea of proprietary rights in many instances with the exclu-

sive objective of granting plaintiffs equitable relief in accordance with this

age-old distinction.

International News, in some ways, broke with that

tradition by refusing to classify the interest as a property right, but none-

theless affirmed the lower court’s temporary injunction in the case as a

remedial matter. In the first instance then, injunctive relief motivated a

property-based understanding of the hot news doctrine.

Ever since International News, plaintiffs succeeding on the merits in

hot news cases have invariably obtained injunctive relief.

Indeed, an

automatic injunction rule appears to have emerged,

under which courts

do not even consider the adequacy of monetary damages before proceed-

ing to enjoin a defendant. Since at least the seminal work of Calabresi

and Melamed, the remedial conception of property rights as entitlements

obtaining property rule protection regardless of their normative content

has continued to dominate the legal landscape.

Property rights are

73. See supra notes 39–45 and accompanying text (discussing newspapers’ efforts to

use property right to enjoin free riders).

74. See generally Shyamkrishna Balganesh, Demystifying the Right to Exclude: Of

Property, Inviolability, and Automatic Injunctions, 31 Harv. J.L. & Pub. Pol’y 593, 642–43

(2008) [hereinafter Balganesh, Right to Exclude] (describing origins of this distinction in

equity and its implications for property doctrine).

75. See Green, supra note 69, at 461 (documenting this phenomenon among courts).

76. See, e.g., Associated Press v. KVOS, Inc., 80 F.2d 575, 582–83 (9th Cir. 1935)

(granting preliminary injunctive relief); Triangle Publ’ns, Inc. v. New Eng. Newspaper

Publ’g Co., 46 F. Supp. 198, 204 (D. Mass. 1942) (granting injunctive relief to plaintiff

despite defendant’s request for an exception); Dior v. Milton, 155 N.Y.S.2d 443, 463 (Sup.

Ct. 1956) (denying motion to dismiss complaint and injunctive relief). But see U.S.

Sporting Prods., Inc. v. Johnny Stewart Game Calls, Inc., 865 S.W.2d 214, 219 (Tex. App.

1993) (observing that injunctive relief was not only remedy available in hot news cases

under Texas law).

77. The Federal Circuit had developed a similar “automatic injunction” rule for

patent infringement, which the Supreme Court recently abrogated. See eBay Inc. v.

MercExchange, L.L.C., 547 U.S. 388, 393–94 (2006) (eliminating automatic injunction

rule and requiring courts to use traditional four-factor test in deciding whether to grant

injunctive relief).

78. Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and

Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089, 1089–93 (1972)

(explaining why entitlements should receive property rule protection); see also Balganesh,

Right to Exclude, supra note 74, at 649–57 (discussing remedial conception of property).

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438 COLUMBIA LAW REVIEW [Vol. 111:419

thus rights where courts are willing to grant plaintiffs injunctive relief.

With an automatic injunction rule for hot news cases firmly in place, the

tendency today is to readily assume that the doctrine is directed at creat-

ing and protecting a property right in the news.

* * *

An important caveat is in order here. One might argue that the de-

velopments this Part identified as propertarian do not necessarily flow

from the mere identification of hot news misappropriation as creating a

property interest in the news. In other words, the idea of property as

such might be seen as doing little to produce these consequences itself.

To the extent that they do derive from property thinking, they might be

seen as originating in a very particular conception of property—one that

is both absolutist and essentialist.

Whether or not this is true, and in-

deed whether the idea of property has one meaning or several, remains

somewhat orthogonal to the argument advanced here. The claim here is

that regardless of whether the hot news doctrine can be understood as a

propertarian doctrine, it should not be understood to entail the conse-

quences associated with an absolutist conception of property, which it

unquestionably has through a two-way reflexive relationship with the idea

of property. Rooting its normative basis in unjust enrichment instead of

property would serve to minimize this. This Part leaves for another time

and place the broader question of what the idea of property does and

should mean in the abstract.

II. R

ECONSTRUCTING

EWS

ISAPPROPRIATION AS A

ONPROPRIETARY

NTEREST

Having examined the gradual crystallization of misappropriation

into a doctrine creating a presumptive property interest in news, this Part

offers a theory of the doctrine that situates it at the interface of unjust

enrichment law and the common law of unfair competition. Specifically,

it describes how the synthesis of ideas and principles from both areas

generates a framework for solving the collective action problem of con-

cern in the market for newsgathering.

In International News, Justice Pitney made a somewhat conscious ef-

fort to avoid framing misappropriation in property terms. Given what the

plaintiffs were seeking in the case and Justice Brandeis’s dissent concern-

79. See Smith, Property Rules, supra note 52, at 1724 (discussing and critiquing this

connection).

80. See Shyamkrishna Balganesh, Debunking Blackstonian Copyright, 118 Yale L.J.

1126, 1133 (2009) (describing property absolutism and essentialism). For criticism of

unidimensional property thinking along these lines, see generally Hanoch Dagan, The

Craft of Property, 91 Calif. L. Rev. 1517 (2003) (criticizing Court’s opinion in United States

v. Craft for doing this in relation to marital property); Hanoch Dagan, Property and the

Public Domain, 18 Yale J.L. & Human. 84 (2006) (applying this critique to intellectual

property scholarship’s relationship to property ideas and concepts).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 439

ing the inability of judges to create new property interests,

Justice

Pitney chose to name the interest he was recognizing as a form of quasi-

property, observing that it would not create a right against the world at

large (i.e., in rem) like traditional property interests.

Later courts and

scholars have since dismissed the term quasi-property as meaningless.

Yet, Justice Pitney may have had a purpose in using it—especially since

the term quasi-contract was for long thought to be connected to the gen-

eral principle of unjust enrichment.

Justice Pitney, interestingly enough, was well aware of unjust enrich-

ment as an independent basis of liability in the common law. Indeed, in

an opinion he wrote around the same time as International News, he made

express reference to the idea.

By framing his discussion in terms of the

principle of reaping without sowing rather than theft, he was perhaps

alluding to unjust enrichment as the structural basis of misappropriation,

a reality that scholars have noted in the past.

Additionally, in describ-

ing the functioning of the entitlement, he made express reference to the

norms of “unfair competition in business.”

Quasi-property was thus

meant to be an entitlement that sounded in unjust enrichment and un-

fair competition, both at once. Nonetheless, by failing to explicate his

choice of structural vehicle for the doctrine, Justice Pitney left the extent

to which it remains distinct from property (other than in nomenclature)

uncertain. This Part attempts to resolve this uncertainty.

It is worth noting an important caveat before proceeding. Justice

Pitney’s opinion, on the face of things, lends itself to multiple theoretical

justifications for the doctrine of misappropriation he developed. All the

same, observations in the opinion nonetheless cut against every one of

those theories—including that of unjust enrichment. The theoretical frame-

81. Int’l News Serv. v. Associated Press, 248 U.S. 215, 267 (1918) (Brandeis, J.,

dissenting) (“Courts are ill-equipped to make the investigations which should precede a

determination of the limitations which should be set upon any property right in news.”).

82. Id. at 236 (majority opinion).

83. See, e.g., Newman v. Sathyavaglswaran, 287 F.3d 786, 797 (9th Cir. 2002) (noting

that quasi-property nomenclature has “little meaningful legal significance”); Thomas W.

Merrill & Henry E. Smith, Optimal Standardization in the Law of Property: The Numerus

Clausus Principle, 110 Yale L.J. 1, 19–20 (2000) [hereinafter Merrill & Smith, Optimal

Standardization] (criticizing doctrine of misappropriation for having “taken on a life of its

own”).

84. See Gordon, Restitutionary Impulse, supra note 34, at 267 (arguing that Court

may have borrowed the idea of quasi-property from quasi-contract); see also Peter Birks,

An Introduction to the Law of Restitution 29–39 (1985) [hereinafter Birks, Restitution]

(explaining development of term “quasi-contract” and its connection to unjust enrichment

in common law).

85. Schall v. Camors, 251 U.S. 239, 254 (1920) (Pitney, J.) (commenting that

principle of “reaping without sowing” adds an element of unjust enrichment).

86. See, e.g., Callmann, What is Unfair?, supra note 35, at 606–07 & n.56; John P.

Dawson, The Self-Serving Intermeddler, 87 Harv. L. Rev. 1409, 1415–17 (1974) (discussing

International News in context of restitution law’s rules against recovery by a self-serving

intermeddler).

87. International News, 248 U.S. at 240.

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440 COLUMBIA LAW REVIEW [Vol. 111:419

work offered here is thus not an attempt to discern Justice Pitney’s true

intent, or to argue that this is the only way of making sense of the opin-

ion. Instead, it attempts to situate the opinion within the broader context

of the newspaper industry (for whom it was developed) to argue that this

context left a clear impact on the structure of the doctrine that has con-

tinued in the decades since. Thus, while it looks to the opinion in

International News, it does so in both positive and reconstructive terms.

In analyzing the common law doctrine of misappropriation, this Part

begins with the functional and then moves to the structural. First, it

shows how the hot news misappropriation doctrine originates in the idea

of unfair competition and is directed at preventing a market-based harm

different from that ordinarily associated with traditional intellectual prop-

erty. Douglas Baird’s illuminating account of the background to the

International News opinion provides an important window into the various

considerations that might have influenced the Court in its choice of

framework.

Second, it argues that the framework that the doctrine of

misappropriation adopts is more closely aligned with the structural

precepts of unjust enrichment, rather than property, and sets out the

core elements of this difference and its manifestation.

A. Unfair Competition as the Functional Basis of Misappropriation

Just as Justice Pitney was familiar with unjust enrichment as a struc-

tural idea, he was also well acquainted with the principle of unfair compe-

tition. In International News, he observed that his opinion did not origi-

nate in property ideas, but instead “turn[ed] upon the question” of

unfair competition, and found that the defendant’s misappropriation of

the news collected by the plaintiff constituted an act of unfair competi-

tion opposed to “good conscience.”

His use of the idea of unfair com-

petition was not coincidental, for he had just authored several opinions

addressing the idea right before International News, and in many of them

had even spent some effort developing a taxonomy of the concept.

Mis-

appropriation thus originated in the Court’s use of unjust enrichment as

a structural vehicle in service of the goals of unfair competition.

1. Harm from Free Riding in the Market for Timely News. — Analyzing

the form of market-based harm that the misappropriation doctrine is di-

88. See Baird, Uneasy Legacy, supra note 9 (discussing International News and

historical background to it).

89. International News, 248 U.S. at 235, 240.

90. See United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97 (1918) (“The law

of trade-marks is but a part of the broader law of unfair competition.”); Hitchman Coal &

Coke Co. v. Mitchell, 245 U.S. 229, 259 (1917) (describing facts as meriting “an injunction

to restrain . . . unfair competition”); G. & C. Merriam Co. v. Saalfield & Ogilvie, 241 U.S.

22, 24 (1916) (noting that case involves “unfair competition in the business of publishing

and selling dictionaries”); Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 413 (1916)

(observing how common law of trademarks was part of broader area of unfair

competition); Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240 U.S. 251, 256 (1916)

(describing case as “one of unfair competition without trade-mark infringement”).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 441

rected at requires understanding the structure of the market for new-

sgathering. Newspaper content consists of two independent components

from a legal point of view. The first is the actual expressive content of

news stories, which forms the subject matter of copyright protection.

Here, news stories obtain protection in exactly the same way as do other

forms of literary works. Yet, copyright law consciously excludes both

ideas and facts from its coverage, based in large part on free speech and

First Amendment concerns.

Thus, while copyright protects the expres-

sion in news stories, it does not protect the underlying factual content

which is meant to remain in the public domain, freely accessible to any-

one to use or disseminate.

Just because factual information is deemed ineligible for copyright

protection does not mean that it is without economic value. For newspa-

pers, facts, rather than literary expression, are often their core contribu-

tion.

In other words, the news is characteristically associated less with

literary expression than with the communication of the bare facts of

events that transpired in the immediate past. Additionally, and perhaps

most importantly, these facts are valuable because of their time sensitivity.

Since newspapers focus on the delivery of factual information via their

news stories, their delivery needs to be as proximate as possible in time to

the actual event. And if the collection of factual information entails some

cost, its collection in a timely manner in order to render it newsworthy

adds another huge component to that cost.

Newsworthy facts are valuable principally because of their timeliness;

the commercial value of news diminishes over time. Audiences are

clearly willing to pay more for information of recent occurrences than

they are for information about events that transpired in the distant past.

The principal investment that newspapers make in newsgathering is thus

directed at capturing the time value of news.

As a nonexcludable resource, factual information about public

events is hard to contain. This is especially true with the advent of new

communication technologies. Thus, if a major political event transpires

91. See 1 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 2.11 (2010)

(providing overview of protection for factual works such as news).

92. See Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1371–72 (5th Cir. 1981)

(denying copyright protection to factual content of news stories).

93. Though ironically, a vastly greater percentage of their advertising revenue comes

from the non-news parts of newspapers, which they use to cross-subsidize news collection.

The more targeted forms of advertising that these other, special interest sections allow for

explains this reality. See Hal Varian, Newspaper Economics: Online and Offline, Google

Public Policy Blog (Mar. 9, 2010, 9:00 AM), at http://googlepublicpolicy.blogspot.com/

2010/03/newspaper-economics-online-and-offline.html (on file with the Columbia Law

Review) (noting most advertising revenue for newspapers comes primarily from “special

interest sections” rather than from news).

94. For an excellent overview of the idea of time value in newsgathering and its

emergence as a major source of competition among newspapers in the nineteenth century,

see Menahem Blondheim, News over the Wires: The Telegraph and the Flow of Public

Information in America, 1844–1897, at 11–29 (1994).

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442 COLUMBIA LAW REVIEW [Vol. 111:419

in a distant country and no newspaper reports it, the fact of its occur-

rence will nonetheless be communicated in due course, through the sim-

ple exchange and flow of information between individuals. While this

would have occurred even before the arrival of digital communication, its

advent has only made such dissemination immediate and multimodal.

What newspapers bring to the picture then is systematic collection in a

timely and accurate manner, which makes the market for news about

more than just information aggregation and dissemination.

Now consider a situation of free riding in this market. One partici-

pant in the market (i.e., a newspaper) may decide to cut costs by choos-

ing not to collect factual information independently, but instead to pick

up (and report) such facts from a competitor’s stories right after they are

published. For this strategy to work, obviously the news needs to retain

economic value for a period of time longer than the lag between the two

independent instances of publication. If this were to happen, the free

rider saves on the cost of collecting the information as such, which in-

cludes the added costs of collecting it when it retains time-dependent

economic value. The reason for differentiating between the two, while

largely conceptual, derives in turn from the effects of the free rider’s ac-

tions on the collector’s incentives.

If the free rider performed his actions after the factual elements had

lost their time value, its effect on the collector’s ex ante incentive would

be very different. Its effect would be greatly diminished, since the major

(or principal) value in news reporting derives from its timeliness. Since

news collectors derive their incentive to invest in the act of collecting

from the economic value inherent in the timeliness of the collection,

when the free riding impacts that value it impairs the entire process of

collection. The concern, from a competition point of view, is that al-

lowing a free rider’s actions to continue unabated might diminish a col-

lector’s incentive to the point where the timeliness of the news collection

is compromised. If a newsgatherer invests heavily in making sure that its

journalists collect news stories within minutes of their development but

begins to see competitors saving enormous costs (and thus earning

greater profits) by deciding to wait and free ride on the newsgatherer’s

efforts, the newsgatherer’s most likely rational response will be to wait

too, without some assurance that its efforts are not going to be taken

advantage of by a competitor, or indeed several of them.

Therefore, extensive free riding by competitors is likely to result in

the delay of the collection and dissemination of news, with most partici-

pants choosing to free ride or wait. Its effects will likely impact the mar-

ket for the timely collection and dissemination of news as a whole. Dem-

ocratic discourse and political accountability—functions historically

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served by a vibrant newspaper industry—are likely to suffer in the process

as the collection and dissemination of news become less timely.

Understanding that the harm from free riding in the market for

news collection derives from the time value of news was central to the

Court’s reasoning in International News. In his dissent, Justice Brandeis

worried that the majority’s approach effectively penalized all forms of

free riding as a general rule.

Justice Pitney’s opinion for the majority,

though, possibly in response to the dissent, recognized the peculiar char-

acteristics of the market for news, and focused its attention on the preser-

vation of the time value inherent in news. Justice Pitney’s opinion re-

ferred extensively to the economic value of “promptness”

in news

collection and delivery, beginning from the premise that the “peculiar

value of news is in the spreading of it while it is fresh.”

The market-

based harm that formed the basis of the misappropriation doctrine he

formulated was the harm to a news collector’s economic incentive to par-

ticipate in the market—a harm that derived exclusively from a competi-

tor’s free riding when the news retained time sensitive economic value.

The defendant’s free riding, the opinion emphasized, was problematic

not because it sought to reap without sowing in the abstract, but because

it did so “at the point where the profit is to be reaped”

—a clear reference

to the time-sensitivity that made the free riding competitively harmful.

Justice Pitney’s solution to the problem largely reflected this conception

of harm.

2. A Framework for Continuing Cooperation. — The misappropriation

doctrine needs to be understood against the backdrop of newsgathering

practices dominant at the time of International News. This section argues

that even though Justice Pitney’s opinion merely alluded to these prac-

tices and their centrality to newspapers, in reality they had a major effect

on the choice of framework around which the doctrine came to be struc-

tured. It begins by looking at two sets of such practices: collective new-

sgathering

100

and sharing tips among competing newspapers.

101

It then

proceeds to analyze the problems that the Court might have seen in cre-

ating a simple property interest in the news,

102

and concludes by drawing

95. Borrowing a phrase from Richard Epstein, this may be characterized as the

“externality of . . . ignorance.” Epstein, Custom and Law, supra note 47, at 113.

96. Int’l News Serv. v. Associated Press, 248 U.S. 215, 250 (1918) (Brandeis, J.,

dissenting) (“The general rule of law is, that the noblest of human productions—

knowledge, truths ascertained, conceptions, and ideas—become, after voluntary

communication to others, free as the air to common use.”)

97. Id. at 230 (majority opinion) (noting that value of news “depends upon the

promptness of transmission”).

98. Id. at 235.

99. Id. at 240 (emphasis added).

100. See infra Part II.A.2.a.

101. See infra Part II.A.2.b.

102. See infra Part II.A.2.c.

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444 COLUMBIA LAW REVIEW [Vol. 111:419

attention to the Court’s focus on annulling a defendant’s unfair advan-

tage in its formulation of misappropriation.

103

a. Two Mutually Reinforcing Norms. — The misappropriation doctrine

originated in the need to develop a solution to the free rider problem in

the market for time sensitive news. The answer needed to provide news

collectors with a sufficient incentive to continue to invest in the process

of collecting news and information with promptness. All the same, it

needed to recognize and deal with the fact that news was a common pool

resource, whose ultimate social value lay in its widest possible dissemina-

tion to the public.

It certainly was not the case that prior to the advent of the misappro-

priation doctrine, newspapers routinely adopted the strategy of free rid-

ing or waiting for others rather than collecting the news. Unlike in the

standard prisoner’s dilemma where parties cannot communicate (and

therefore cannot cooperate), the possibility of communication, repeat in-

teractions, and observable behavior in news collection resulted in the de-

velopment of industry-wide norms among newspapers.

104

Among the

first of these to develop was, most importantly, a norm against free rid-

ing.

105

Relying entirely on the efforts of a competitor without its consent

was considered unethical and highly objectionable behavior. Free riding

of this sort was considered especially problematic when done without

crediting the original. All the same, crediting the source when the free

riding was substantial entailed huge reputational consequences for a free

rider, which made it rare. The norm against free riding was enforced

largely through reputational sanctions. In one well-known incident in

the 1830s, a national daily, whose stories were being copied without credit

by a local competitor, decided to produce a version with a completely

fabricated story as a hoax.

106

The free riding competitor picked up the

false story and carried it, but the original newspaper immediately pulled

the story and ran a denial, exposing its competitor to the public as a free

rider.

107

103. See infra Part II.A.2.d.

104. For a discussion of this phenomenon, converting a prisoner’s dilemma situation

into a coordination game in other contexts, see generally Dennis Chong, Collective Action

and the Civil Rights Movement 103–07 (1991); Jon Elster, Ulysses and the Sirens: Studies

in Rationality and Irrationality 146 (1979); Daniel H. Cole & Peter Z. Grossman,

Institutions Matter! Why the Herder Problem Is Not a Prisoner’s Dilemma, 69 Theory &

Decision 219 (2008); Barry R. Weingast, The Political Foundations of Democracy and the

Rule of Law, 91 Am. Pol. Sci. Rev. 245, 249 (1997).

105. For an excellent overview of how these developments occurred very shortly after

the emergence of newsgathering as a commercial activity, see Victor Rosewater, History of

operative News-Gathering in the United States 14–20 (1930) (“[T]he Courier and

Enquirer [were] bent on exposing those appropriating its news without credit . . . .”).

106. Id. at 18–19.

107. Isaac Clarke Pray, Memoirs of James Gordon Bennett and His Times 135 (1855).

Pray describes this incident as follows:

The Courier and Enquirer a few days after the announcement of the fall of

Warsaw, in the Polish War, in order to expose those who were guilty of

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2011] ENDURING MYTH OF PROPERTY IN NEWS 445

The norm against free riding was not, however, the only norm that

the newspaper industry came to develop—a reality that previous discus-

sions of the misappropriation doctrine have ignored.

108

Alongside the

norm against free riding, very early on newspapers developed mecha-

nisms of cooperation in the newsgathering exercise.

109

Much of this

stemmed from the realization that competitive news collection, where

each newspaper would send its own agents to collect the news, was highly

duplicative and cost-ineffective. Indeed, newspapers realized this fact

even when the only form of news collection entailed sending small boats

(schooners and clippers) to collect the news from foreign ships that had

anchored off the coast. Realizing that competing to build better and

faster boats was a wasteful race, several of them decided to pool their

resources into building a single, larger ship.

110

Cooperative newsgather-

ing soon emerged as an industry-wide practice among newspapers, ini-

tially in largely informal ways. This practice drew reinforcement from the

anti-free riding norm that developed alongside it.

In due course, cooperative newsgathering grew to be a formal prac-

tice among competitors. With the creation of the AP in the mid-nine-

teenth century and other large newsgathering cooperatives thereafter, co-

operative newsgathering came to be institutionalized. By the time of

International News, the AP had approximately 950 members,

111

and the

International News Service (INS) had 400 members of its own.

112

They

each had formal rules about news collection and sharing among mem-

appropriating news without credit, prepared a denial of the original account, and

printed a small edition, prepared expressly to reach the offices of the morning

journals [i.e., the free riders]. The statement purported to be gleaned from

papers brought by the ship Ajax. There was no such arrival. The article was

copied by several papers, and [one free riding local newspaper] sent it forth in

the country edition as news which had been obtained originally by its own

enterprise. . . . Other papers announced the news without giving any credit to the

source of it. The hoax created much excitement among journalists; and the

public, or that small portion of society, to which newspapers were familiar,

enjoyed the joke.

Id. For an additional account of this event, see Frederic Hudson, Journalism in the United

States, from 1690–1872, at 347 (New York, Harper Bros. 1873).

108. See, e.g., Epstein, Custom and Law, supra note 47, at 97 (describing

misappropriation as having affirmed industry norm against free riding).

109. See Rosewater, supra note 105, at 14–20 (discussing cooperation in gathering

“ship news in advance of docking”); Richard A. Schwarzlose, Cooperative News Gathering,

in American Journalism: History, Principles, Practices 153, 153–62 (W. David Sloan & Lisa

Mullikin Parcell eds., 2002) (examining typical forms of cooperative newsgathering). For a

comprehensive history of this development, see generally id. (detailing cooperative

newsgathering from its beginnings through rise of the AP). In discussing conditions in the

industry around the early nineteenth century, Rosewater noted: “Because of the relative

costliness of newsgathering and the extravagance of duplication, it was equally inevitable

that this should lead to the initial steps for a union of effort.” Rosewater, supra note 105,

at 11.

110. Rosewater, supra note 105, at 19–20.

111. Associated Press v. Int’l News Serv., 245 F. 244, 245 (2d. Cir. 1917).

112. Int’l News Serv. v. Associated Press, 248 U.S. 215, 221 (1918).

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446 COLUMBIA LAW REVIEW [Vol. 111:419

bers. Yet, the norm against free riding by nonmembers remained infor-

mal, and reputational sanctions began to prove ineffective on their

own.

113

Entities began to develop business models entirely around free

riding on the efforts of others.

114

The worry thus became that rampant,

systematic free riding could have the effect of interfering with the incen-

tive to join these cooperative arrangements for existing newspapers, but

especially among new entrants.

115

Since these arrangements allowed for

a more comprehensive coverage of the news, a free rider now would have

access not just to the efforts of one competitor, but also to the collective

efforts of an entire set of competitors who had pooled their efforts

together.

b. Cooperating Through Tips. — Collective newsgathering thus drew

support from the norms that evolved among newspapers against non-

cooperative free riding on each others’ efforts. Yet the problem was

more complex. Even though unimpeded free riding was viewed as prob-

lematic to the cooperative exercise, a good amount of free riding was

nonetheless considered integral to the very manner in which newspapers

obtained their news. This included using news stories and communica-

tions of a competitor as the starting point for a newspaper’s own story—

i.e., as “tips.”

116

Sharing through tips thus became a second form of co-

operation that evolved alongside formalized collective newsgathering.

Only a very specific kind of free riding was likely to impact coopera-

tive newsgathering. Cooperation would not be harmed by the mere com-

mercial or competitive use of factual news collected by a competitor, but

rather by a competitor doing so without any independent effort of its own

and, by implication, without incurring any costs of its own. In addition, it

was unclear what amount of effort might be sufficient to legitimize one

newspaper’s use of another’s stories as tips. Members of the AP were

themselves engaged in a practice known as double-checking, which en-

tailed verifying the story obtained via a tip with their own independent

113. Melville Stone notes that early in his tenure at the Chicago Daily News, he would

lay traps to catch and expose such free riding. On one such occasion, he recalls that a

competitor engaging in such free riding was “laughed to death” on exposure, and that

within two years of the hoax/trap, it went out of business. Stone, supra note 40, at 63–64.

Stone also notes that in due course, such traps and hoaxes, while amusing to the public,

came to have little deterrent effect. Id. at 355. For a discussion of how the INS, too, was

the target of such a hoax, see Baird, Uneasy Legacy, supra note 9, at 27 & n.44.

114. Stone, supra note 40, at 355 (describing practices of the Chicago Courier and

American Press Association).

115. Recently, Wendy Gordon has argued that the Court in International News may

have been sensitive to this concern. See Wendy J. Gordon, Harmless Use: Gleaning from

Fields of Copyrighted Works, 77 Fordham L. Rev. 2411, 2422–23 (2009) (observing how

Court in International News may have been motivated by desire to avoid harm to “each

organization’s internal structure” and by “thought that if it refused to enjoin the

defendant’s copying, no entity could collect enough fees from the small newspapers to

afford to send out national and overseas correspondents”).

116. See Baird, Uneasy Legacy, supra note 9, at 24 (“AP routinely monitored the

bulletins of other wire services and used them as a starting point for its own stories.”).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 447

sources.

117

When confirmed as accurate, double-checking did little to al-

ter the content of what a newspaper lifted from a competitor. Members

of the INS, on the other hand, were notorious for using competitors’

stories as tips and embellishing them with their own, often-fabricated ad-

ditions, such as nonexistent independent correspondents and other crea-

tive variations.

118

From a functional point of view, then, differentiating

the use of a competitor’s stories as tips from its use directly in a news story

was fraught with difficulty.

At the same time, failing to maintain this distinction ran the risk of

interfering with the ubiquity of what was an otherwise efficient coopera-

tive practice. If a good number of newspapers made their profits by

merely reproducing the news stories of others on the pretext of using

them as tips, the industry as a whole might become more reluctant to

engage in such sharing of tips, which would in turn raise the costs of

journalistic investigation within the industry as a whole.

119

Systematic

free riding thus threatened not only formalized cooperation but coopera-

tive sharing through the exchange of tips.

In International News, the district court encountered the issue of tips

rather directly. At trial, the plaintiffs (AP) openly conceded that they

used their competitors’ stories as tips in creating their own stories, but

argued that their use of independent investigative techniques rendered

the practice legitimate.

120

Judge Hand was quick to recognize the irony

of this position and observed that any test of independent investigation or

verification would remain necessarily subjective, especially given the

ready availability of modern communication devices.

121

He was addition-

ally concerned that forcing such independent verification (by a newspa-

per) for its own sake might often be wasteful, duplicative, and therefore

grotesque.

122

The only available solution was, thus, to render all free rid-

ing, whether systematically undertaken or done as part of a tip, actiona-

ble at law. Judge Hand resisted this, and denied the plaintiff’s claim for

an injunction.

The Second Circuit, however, believed that the distinction (and po-

licing it) was unproblematic. Observing that there was no difficulty in

117. Id. at 25.

118. Id. at 27; see also Oliver Carlson & Ernest Sutherland Bates, Hearst: Lord of San

Simeon 54–55 (1936) (observing how William Hearst, owner of INS, had effectively

invented the process of creating news to report it).

119. See Epstein, Custom and Law, supra note 47, at 102 (noting that “using tips

across the board allows all the papers to lower their cost of collecting information, without

destroying the initial incentive to produce information in the first place” provided that

“there is independent investigation of the tip” and “information printed in the story is

obtained through that investigation”).

120. Associated Press v. Int’l News Serv., 240 F. 983, 991 (S.D.N.Y. 1917) (A. Hand, J.).

121. See id. (“In many cases the verification with modern telephonic communication

would be so rapid that the time required for it would in no sense protect the original

gatherer of the news.”).

122. Id.

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448 COLUMBIA LAW REVIEW [Vol. 111:419

distinguishing tips from the “bodily appropriation” of news, it concluded

that:

As a matter of law or rule, it is impossible to say in advance what

measure of investigation or verification must satisfy the censor,

and the law does not seek to compel the vain or impossible.

Doubtless there have been, and will be again, instances where

the asserted or pretended investigation is but an excuse for ap-

propriation, where no reasonable man would believe that any

effort had been made, except to conceal the absence of original

work, but no such case is before us.

123

Believing that applying the distinction to the case at hand would pose few

problems, the court concluded that, while copying through tips was “in-

curably journalistic,” when it entailed the bodily taking of news from a

competitor it remained problematic.

124

Yet, as Douglas Baird points out,

this was hardly what existed in the case at hand, where the defendants

were quite “content to take the essential facts of an AP story and make up

the rest.”

125

There was no such bodily taking to speak of, rendering the

court’s standard inapplicable to the defendant’s very actions.

c. Problems with Property. — When presented with the free rider prob-

lem, the Court in International News could have simply chosen to create a

property right in the news. Such a right would have undoubtedly had the

effect of deterring harmful free riding. Yet, it would have also very likely

done more.

If it were structured as a regular in rem interest, good against the

world at large, the right would have generated huge social costs. Since

such a right might operate to preclude any transmission or communica-

tion of factual news by members of the public, it would stifle free speech

and the everyday dissemination of news and information. The potential

social costs of monopoly that might accompany such a move clearly cau-

tioned against its ready acceptance.

This problem could have been easily solved by relaxing the assump-

tion about the in rem nature of the entitlement. If the property right

were rendered operational only against competitors, the social costs of

the regime would be alleviated to a large extent while preserving its deter-

rent effects on free riding. The traditional understanding of International

News is that this is indeed the only move that Justice Pitney made when he

created the idea of quasi-property.

126

In this understanding, misappro-

priation created a relational property interest, but a property interest

nonetheless. Misappropriation, however, did more than this, a reality

123. Associated Press v. Int’l News Serv., 245 F. 244, 247–48 (2d Cir. 1917).

124. Id. at 247, 253.

125. Baird, Uneasy Legacy, supra note 9, at 27.

126. See Epstein, Custom and Law, supra note 47, at 113–14 (“Pitney describes the

defendant’s interest in its news as ‘quasi property,’ which is good only for a short period of

time (less than a day) and then only against the direct competitor of the plaintiff . . . .”).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 449

that lies at the heart of the unfair competition analysis, which is all too

often overlooked.

In the Court’s understanding, free riding was problematic because it

allowed a competitor to lower its costs and compete on unfair terms with

a collector of the news. All the same, forcing each newspaper to collect

the news individually on its own was recognized to be wasteful, duplica-

tive, and prohibitively expensive, for all but the largest incumbents. The

cooperative practice of newsgathering that had evolved in the industry

thus needed to be preserved. Justice Pitney’s observation at the very be-

ginning of his discussion is telling:

[B]y reason of the enormous expense incident to the gathering

and distribution of such news, the only practical way in which a

proprietor of a newspaper can obtain the same is, either

through co-operation with a considerable number of other

newspaper proprietors in the work of collecting and distributing

such news, and the equitable division with them of the expenses

thereof, or by the purchase of such news from some existing

agency engaged in that business.

127

Equally important to the Court was preserving the practice of coop-

erative sharing independent of collective newsgathering, i.e., the use of

tips. The Court readily accepted the argument that such sharing (of tips)

was ubiquitous within the world of journalism. In this scenario, a prop-

erty right against competitors that originated in mere first possession

(i.e., vested in the first to acquire the news) would have presented intrac-

table problems of determining in whom the rights were vested. Distin-

guishing between the first to collect and report a piece of news, and a

competitor who scrapes the former’s news instead of collecting it inde-

pendently, would have been a near-impossible task given the collective

newsgathering processes that were already in place. The determination

would have been further complicated by the widespread practice of shar-

ing tips.

128

A first-possession-based property right would have had to dif-

ferentiate between independent collection, collection based on a tip, and

factual scraping, with only the last being the basis for any liability. It

might have, thus, resulted in potentially endless controversy and confu-

sion within the industry itself, where the line between cooperation and

exclusivity was (and is) somewhat unclear.

Another way of understanding the effects of such a property right is

in terms of the information costs it might have generated for participants.

A possessory right of this form would have raised the costs of measuring

the existence and scope of such rights for any newsgatherer who might

come to acquire newsworthy information. Since the holder of the right is

unlikely to bear these costs itself, such costs would operate as negative

information externalities, the basis for the common law’s reluctance to

127. Int’l News Serv. v. Associated Press, 248 U.S. 215, 231 (1918).

128. Id. at 243–44 (discussing industry practice of using tips).

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450 COLUMBIA LAW REVIEW [Vol. 111:419

create altogether new property rights where none existed before, under

the numerus clausus principle.

129

Additionally, one detects in the Court’s opinion a deep concern with

the effects of superimposing a regime of individual ownership on an in-

dustry that had until then governed news collection as a common pool

resource. Referring to the news as a form of common property

130

among

newspapers, as an item of publici juris,

131

and as stock in trade little sus-

ceptible to absolute ownership,

132

the misappropriation strategy seemed

consciously directed at retaining the public domain nature of factual

news. The traditional Demsetzian understanding of the evolution of

property no doubt posits that such rights emerge from situations where a

resource is initially held as a commons, but the possibility of internalizing

greater benefits results in a gradual abandonment of this feature.

133

Elinor Ostrom, by contrast, argues that in numerous situations partici-

pants do not readily abandon holding a resource in common pool while

attempting to extract value from it, but instead choose to develop govern-

ance structures to regulate and deter free riders and ensure an efficient

allocation of the resource among participants.

134

In the intangible (i.e.,

intellectual property) context, such common pool arrangements can in-

volve participants pooling their property rights together to minimize

transaction costs and achieve organizational efficiency.

135

Alternatively,

participants can pool their efforts—prior to any legal recognition of

property rights in their individual contributions—to achieve an efficient

outcome.

136

The latter type of pooling arrangement emerged as the

common practice in the newspaper industry. The cooperation among

participants that had emerged was directed at collectively producing the

129. See Merrill & Smith, Optimal Standardization, supra note 83, at 26–34 (arguing

that concern with information cost externalities lies at root of numerus clausus principle).

Merrill and Smith argue that the Court in International News violated the numerus clausus

principle by choosing to create what was in effect a property right. Id. at 19. Yet if the

roots of the misappropriation doctrine are thought to lie in unjust enrichment instead, the

Court did in fact adhere to the common law’s numerus clausus.

130. International News, 248 U.S. at 235.

131. Id. at 234.

132. Id. at 236.

133. For the classic articulation of this argument, see generally Harold Demsetz,

Toward a Theory of Property Rights, 57 Am. Econ. Rev. 347 (1967).

134. See Elinor Ostrom, Governing the Commons: The Evolution of Institutions for

Collective Action 12–18 (1990) (describing governance as alternative to property-based

privatization).

135. For a detailed discussion of this type of pool arrangement in the intellectual

property context, described as a “private liability rule organization,” see Robert P. Merges,

Contracting into Liability Rules: Intellectual Property Rights and Collective Rights

Organizations, 84 Calif. L. Rev. 1293, 1303 (1996) (internal quotation marks omitted).

136. See Yochai Benkler, The Wealth of Networks 338–44 (2006) (discussing these

approaches and identifying examples); Michael J. Madison et al., Constructing Commons

in the Cultural Environment, 95 Cornell L. Rev. 657, 691–92 (2010) (identifying these

types of common pool arrangements of intellectual property as “solutions to collective

action, coordination, or transaction cost problems”).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 451

very resource in question—timely, comprehensive news—rather than

pooling together preexisting rights in an intangible resource and ad-

ministering them collectively.

A driving force behind this cooperation had until this point in time

been the nonexcludability of factual news, coupled with newspapers’ rec-

ognition that comprehensiveness (in addition to timeliness) in coverage

produced additional revenue. Cooperation was also predicated in some

ways on the value of participants’ individual contributions never being

measured and compared inter se. A possession-based ex ante property

right ran the risk of altering this practice, and with it the intricate govern-

ance mechanisms that the industry had come to develop around undiffer-

entiated news. A property regime would impose a new set of transaction

costs, which might have altered, at the very least, the structure of the

cooperative arrangement among industry participants.

Finally, there was a rather obvious reason why the Court might have

chosen not to adopt a first-possession-based property regime. The parties

to the dispute were both news cooperatives that did not necessarily them-

selves collect the news that they supplied to their members.

137

They re-

lied on news collected by individual members, which they then retrans-

mitted to the remaining members. Strictly speaking, a possessory right

might not have benefited the plaintiff in the case at all, even if it were

recognized, unless a differentiation could be made between news stories

(copied by the defendant) that it had collected on its own, rather than

merely retransmitted.

138

The Court’s approach in International News was thus far from di-

rected at reaffirming the norm against free riding by granting a property

right. It did not answer the question of property in news in the affirma-

tive, as Richard Epstein argues it did.

139

Instead, the Court chose to by-

pass the issue in favor of an alternative framework, which allowed the

Court to situate free riding within the broader context of newsgathering

and the governance regimes that newspapers had come to develop in that

context as well.

137. See By-Laws of the Associated Press of New York, art. VIII, § 4, reprinted in

Rosewater, supra note 105, app. II at 403 (“[I]n places where the Corporation has no

correspondent the members shall supply the news required to be furnished by them in

such a manner as may be required by the Board of Directors.”).

138. For an early identification of this problem, see Comment, The Associated Press

Case, 28 Yale L.J. 387, 389 n.9 (1919).

139. Epstein, Custom and Law, supra note 47, at 112–13. Epstein’s reading of

International News is somewhat perplexing. At the very beginning of the majority opinion,

Justice Pitney made the following observation: “We need spend no time . . . upon the . . .

question of property in news matter at common law . . . . [Unfair competition] does not

depend upon any general right of property analogous to the common-law right of the

proprietor of an unpublished work to prevent its publication without his consent . . . .”

Int’l News Serv. v. Associated Press, 248 U.S. 215, 234–35 (1918). Justice Pitney thus clearly

sought to avoid deciding the question of property in news, since his theory did not

necessitate an answer to this question.

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452 COLUMBIA LAW REVIEW [Vol. 111:419

d. Remedying the Unfair Competitive Advantage. — At the substantive

level, the Court in International News rejected a property and ownership

approach to the idea of unfair competition. Yet when it moved to reme-

dying the unfair competition, the Court rather summarily affirmed the

remedy chosen by the lower court, i.e., an injunction.

140

Nowhere did it

discuss the reasons for this remedy or why ordinary relief, i.e., damages,

might be inadequate. Courts using the misappropriation doctrine since

have presumed that no measure of damages will suffice to remedy the

unfair competition, on the assumption that the Court in International

News made a considered decision in affirming the injunction.

However, there are good reasons to believe that the Court’s choice

of remedy was selected without any consideration at all. As Douglas Baird

has convincingly shown, the injunction that the Court affirmed had no

applicability to the parties before it.

141

The injunction on appeal (albeit

a preliminary injunction) merely prohibited the defendant from “bodily

taking . . . the words or substance of [the] plaintiff‘s news,” when in fact

the defendant had never engaged in such taking to begin with.

142

Even

though the parties eventually settled, the settlement had little effect on

the defendant’s practices, which it presumably viewed as the mere use of

its competitors’ news as tips.

143

Just as the injunction had little effect on

the defendant’s actions, so too would it have been of little value in deter-

ring anyone other than uncreative newspapers who lifted their news from

their competitors and did absolutely nothing to it before printing. To be

effective against a competitor who purported to (even fictitiously) use it

as no more than a tip, the injunction would have had to be developed

into a framework by which to police this practice, which would have, in

turn, extensively interfered with the industry-wide practice.

144

Discerning

what remedy the Court might have chosen if it had taken its own theory

seriously thus involves reconstructing a remedial framework derived di-

rectly from the Court’s own logic.

If the basis of liability in misappropriation was not a property inter-

est, but instead the principle of unfair competition, its measure of recov-

ery should ideally be reflective of that principle as well. In some ways, this

measure seems implicit in the Court’s observation that the “special advan-

140. International News, 248 U.S. at 245–46.

141. Baird, Uneasy Legacy, supra note 9, at 29 & n.50. Baird also notes that Justice

Pitney’s opinion for the majority used a hypothetical to describe a case that bore no

resemblance to the facts of the actual dispute. Id. at 29.

142. Associated Press v. Int’l News Serv., 245 F. 244, 253 (2d Cir. 1917).

143. Baird, Uneasy Legacy, supra note 9, at 30. For a discussion of the defendant’s

continuing free riding after the decision, see Ferdinand Lundberg, Imperial Hearst: A

Social Biography 209 (1936).

144. One could argue that the Court was aware of this problem. Toward the end of

the opinion, it conceded that the injunction might suffer from certain infirmities,

including the possibility of overbreadth. Yet, it affirmed the injunction on the assumption

that the lower court would determine this question on remand. International News, 248

U.S. at 245–46.

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tage to the defendant in the competition [is] because of the fact that it is

not burdened with any part of the expense of gathering the news” and

therefore a court should “not . . . hesitate long in characterizing it as

unfair competition in business.”

145

The unfair competition rationale of

misappropriation connects a plaintiff’s recovery to the amount needed to

restore a competitive equilibrium (i.e., remedy the disadvantage). A de-

fendant’s liability would in this formulation be the disgorgement of any

unfair cost savings it had obtained by its act of free riding. This result

would achieve several things—each of which, in fact, ultimately came to

pass.

First, it would deter systematic free riding by new entrants. By intro-

ducing a legal basis for recovery over and above reputational sanctions, it

would impose new costs on free riders. The extent of this liability would

now depend on the expenditures incurred in collecting the news copied,

which would in most instances be enormous. A potential free rider would

thus have every incentive to join a preexisting cooperative, where mem-

bership and the delivery of news entailed significantly lower costs.

One might argue that if deterring free riding was indeed one of the

doctrine’s primary purposes, limiting liability to the disgorgement of a

defendant’s cost savings is likely to prove inadequate. While this may be

true in the abstract, the common law has long been known to be structur-

ally imperfect when it comes to achieving deterrence, principally because

of its emphasis on connecting any recovery to the actual loss or gain in a

case.

146

Accident law, for instance, while attempting to deter careless be-

havior, is forced to tie any recovery to a plaintiff’s actual injury rather

than a level needed to deter a defendant, despite its commitment, at least

in part, to the latter.

147

In some instances, the recovery will operate to

deter future careless behavior, but in others it will not, operating in these

situations as a price rather than a sanction.

148

The same is equally true

with misappropriation. Concededly then, in situations where a newspa-

per’s business model is built entirely around free riding on the news col-

lected by others, the measure of recovery will prove to be sufficiently de-

terrent. At other times, the recovery will be reduced based on the

magnitude of the defendant’s own investment into the news collection

process, thus calling into question its specific, rather than general, deter-

rent effect on free riding. In these latter situations, introducing an attrib-

utable profits-based measure of recovery, or allowing for the possibility of

145. Id. at 240.

146. Gary T. Schwartz, Mixed Theories of Tort Law: Affirming Both Deterrence and

Corrective Justice, 75 Tex. L. Rev. 1801, 1818 & nn.128–129 (1997) (describing structural

tensions in tort doctrine).

147. This limitation is often referred to as the common law’s (or tort law’s) bipolarity

constraint. See Jules L. Coleman, Risks and Wrongs 376–82 (1992) (noting disjunction

between economic theories of deterrence and structure of tort law).

148. See Robert Cooter, Prices and Sanctions, 84 Colum. L. Rev. 1523, 1523 (1984)

(“[E]conomists tend to view law as a set of official prices.”).

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454 COLUMBIA LAW REVIEW [Vol. 111:419

punitive damages, might serve to alleviate the concern with under-

deterrence.

Second, a framework that connected liability to cost savings would

also give the informal process of sharing news tips some definition. It

would enable a defendant to assert at trial that there was indeed no (or

little) cost savings in its copying because it had expended resources of its

own to independently verify the news it copied, i.e., the tips. Any frame-

work not linked to actual cost savings would run the risk of deterring this

beneficial industry practice as well.

Third, this liability framework would allow existing forms of coopera-

tion to continue. Since no specific exclusivity would attach to an individ-

ual piece of news, newspapers would still continue to join collective gath-

ering exercises, a practice that was beginning to become the norm within

the industry.

149

To the extent that they needed to compete with each

other, this liability framework would force newspapers to differentiate

their content in the marketplace in order to use the copyright system for

genuine exclusionary protection.

150

* * *

In functional terms, misappropriation helped solve a collective ac-

tion problem in the newspaper industry. It added a deterrent for harm-

ful free riding and, at the same time, sought to preserve preexisting coop-

erative practices in the newspaper industry. The standard account of the

collective action problem posits that in the absence of external incentives,

self-interested wealth-maximizing actors will not find it in their interest to

contribute to the production of goods that benefit the group (or society)

as a whole, but will instead free ride on the contributions and efforts of

others.

151

Free riding in the news collection market generates a negative

externality: harm to newsgathering, a collective rather than individual

harm. Misappropriation attempted to remedy that harm by negating its

effects, represented in the defendant’s gain. This account is different

from the traditional intellectual property response to a public goods

problem—that intellectual property, as an exclusionary entitlement, pro-

vides actors with an individualized incentive to create a unique public

149. This intuition also tracks arguments about when liability rules are likely to be

better than property rules at inducing a bargain between parties. See Ian Ayres & Eric

Talley, Solomonic Bargaining: Dividing a Legal Entitlement to Facilitate Coasean Trade,

104 Yale L.J. 1027, 1065 (1995) (observing untailored damages have information-forcing

quality that makes them best suited to incentivizing bargaining); Louis Kaplow & Steven

Shavell, Property Rules Versus Liability Rules: An Economic Analysis, 109 Harv. L. Rev.

713, 719–20 (1996) (observing that when courts are uncertain about exact magnitude of

harm but impose damages based on their “best estimate” that are “correct on average,”

liability rules are superior to property rules in forcing a bargain).

150. Indeed, after the Court’s decision in International News, the AP changed its

practices to differentiate its content from those of its competitors. See Baird, Uneasy

Legacy, supra note 9, at 31.

151. Mancur Olson, The Logic of Collective Action 1–3 (1965).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 455

good. In traditional intellectual property (i.e., patent and copyright), the

law’s ability to attach the entitlement to a uniquely identifiable resource

provides this individual incentive. In news collection, by contrast, the in-

centive is not an individual one, but a collective one. Additionally, the

nature of the resource makes it nearly impossible to assign unique entitle-

ments to it. A property right would thus result in a full-blown monopoly,

with enormous social costs.

152

This account of news collection is, by and large, just as true today as

it was at the turn of the twentieth century. If anything, its significance has

grown. Membership of daily newspapers in the AP, the country’s leading

cooperative, illustrates this. In 1918, the AP’s membership consisted of

about 38% of all the daily newspapers published in the country.

153

1945, this had increased to 68%, but by 2005 it rose to about 99–100%.

154

These numbers are no doubt partially due to the collapse of the AP’s

competitors,

155

yet they nonetheless point to the continuing importance

of cooperative efforts in the industry.

The doctrine of misappropriation is thus rooted in the realities of

the newspaper industry and arose in an effort to preserve the practices of

cooperation and sharing that were characteristic of the newsgathering

process. Rather than create a property right in the news, its focus was on

eliminating the unfair competitive advantage a free riding newspaper ob-

tained by lifting news stories from a competitor without incurring any

expense of its own. Its structural vehicle for this task was the common law

of unjust enrichment, which it used to treat a defendant’s gain as a useful

proxy for the harm incurred.

152. For example, if individuals had to pay newspapers for every use of factual

information, the net effect would be to deter the free dissemination of information among

individuals, producing enormous inefficiencies. Though sympathetic to property rights in

news, even Epstein characterizes such a result as “grotesque.” Epstein, Custom and Law,

supra note 47, at 113.

153. See Int’l News Serv. v. Associated Press, 248 U.S. 215, 229 (1918) (indicating AP

consisted of about 950 daily newspapers in 1918); id. at 248 & n.1 (Brandeis, J., dissenting)

(noting in 1918 there were 2,500 papers published in the United States).

154. See Associated Press v. United States, 326 U.S. 1, 3–4 (1945) (stating AP had over

1,200 newspapers as members in 1945); Associated Press, FAQs, at http://www.ap.org/

pages/about/faq.html#2 (on file with the Columbia Law Review) (last visited Feb. 11, 2011)

(indicating AP “serves 1,700 newspapers”); Pew Research Ctr., Project for Excellence in

Journalism, Number of U.S. Daily Newspapers, 5 Year Increments, 1940–2005 (2007), at

http://www.journalism.org/node/1134 (on file with the Columbia Law Review) (noting

there were 1,749 daily newspapers in 1945 and 1,452 in 2005). In addition to the general

growth of cooperative newsgathering, these numbers also reflect the growing importance

of AP vis-

a-vis other news cooperatives that have since ceased to exist, such as the INS and

the United Press International (UPI).

155. See Schwarzlose, supra note 109, at 158–61 (describing how INS and UPI, AP’s

main competitors, eventually merged and then collapsed).

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B. Unjust Enrichment as the Structural Basis of Misappropriation

Outside of tort, property, and contract law, the common law has long

recognized a fourth category of entitlements that originated independent

of fault, ownership, and consent. Structured around the principle of un-

just enrichment, these entitlements allow a plaintiff to recover in situa-

tions where a defendant benefits at the plaintiff’s expense without suffi-

cient justification.

156

To be sure, scholars continue to debate the precise

contours of the principle and its coherence as an independent organiz-

ing idea.

157

Nonetheless, the general consensus today appears to be that

at the very least, it presents the common law with a basis for identifying

an independent set of normative principles revolving around the idea of

gain-based liability.

158

Most notably, the American Law Institute’s adop-

tion of the Restatement (Third) of Restitution and Unjust Enrichment

seems to indicate the growing legitimacy of unjust enrichment as a viable

and independent common law framework for certain entitlements.

159

Unjust enrichment is commonly associated with the paradigm case

of recovery for the mistaken payment of a nonexistent debt.

160

Charac-

terized by strict liability, without any inquiry into the motives or intent of

either party, the law remains concerned principally, if not exclusively,

with remedying the distributive implications of the defendant’s actions.

Restitution of the benefit obtained is deemed the default corrective rem-

edy, but as Birks emphasizes, restitution represents a remedial response,

156. In England, the principle of unjust enrichment is usually traced back to the

opinion of Lord Mansfield in Moses v. Macferlan, (1760) 97 Eng. Rep. 676 (K.B.), though

as an idea many trace it back to Roman law. See D.J. Ibbetson, A Historical Introduction to

the Law of Obligations 264 (1999) (tracing foundations of unjust enrichment to Roman

law); Andrew Kull, James Barr Ames and the Early Modern History of Unjust Enrichment,

25 Oxford J. Legal Stud. 297, 310–11 (2005) (describing Moses v. Macferlan).

157. See, e.g., Hanoch Dagan, The Law and Ethics of Restitution 11–12 (2004)

[hereinafter Dagan, Law and Ethics] (critiquing dominant role of unjust enrichment in

American restitution law); Steve Hedley, Restitution: Its Division and Ordering 200 (2001)

(describing “rise[ ] and fall[ ]” of unjust enrichment theory in American law); G.H.L.

Fridman, Unjust Enrichment (Dis)Contented, in Understanding Unjust Enrichment 35,

35 (Jason W. Neyers et al. eds., 2004) (“[I]t is open to question whether the concept of

unjust enrichment is indeed a venerable equitable principle.” (internal quotation marks

omitted)); Dennis Klimchuk, The Normative Foundations of Unjust Enrichment, in

Philosophical Foundations of the Law of Unjust Enrichment 81, 81 (Robert Chambers et

al. eds., 2009) (describing possible justifications for unjust enrichment).

158. See Dagan, Law and Ethics, supra note 157, at 26 (discussing extensive criticism

of unjust enrichment and suggesting “viewing unjust enrichment as a loose framework as

well as an invitation for a normative inquiry”).

159. See Restatement (Third) of Restitution and Unjust Enrichment § 1 cmt. b

(Tentative Draft No. 7, 2010) (“The law of restitution is the law of unjust

enrichment . . . .”).

160. Peter Birks, Unjust Enrichment 3 (2d ed. 2005) [hereinafter Birks, Unjust

Enrichment] (“The law of unjust enrichment is the law of all events materially identical to

the mistaken payment of a non-existent debt.”).

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rather than the basis of liability.

161

Indeed, the Restatement appears to

accept this position in large measure.

162

Liability for unjust enrichment in the common law originates from:

(1) the defendant obtaining a benefit that is (2) at the plaintiff’s expense

and (3) that is recognized to be unjust.

163

While it is the third of these

elements that presents the concept of unjust enrichment with its biggest

normative problems in the common law, this is of little concern for our

discussion of misappropriation, since the unjust nature of a misappropri-

ation originates in the law’s identification of a market harm, described

earlier.

164

What makes the enrichment unjust in misappropriation thus

originates in the law’s attempt to correct a form of economic harm pecu-

liar to the market for news, rather than the common law’s internal crite-

ria of enrichment and loss.

165

It is also crucial at this juncture to distinguish between instances of

unjust enrichment and wrongful enrichment. Wrongful enrichment, as

the phrase indicates, refers to an enrichment that a defendant obtains

from an act that constitutes a wrong independent of the enrichment.

166

economic gain from an independently tortious act, such as a conversion

or a fraud, is an instance of a wrongful enrichment. Wrongful enrich-

ment is thus a subcategory within the law of torts and is hardly indepen-

dent of it. Whereas the causative event that triggers liability in a wrongful

enrichment remains a wrong (i.e., a tort) that then gives rise to a gain, an

unjust enrichment, on the other hand, is never triggered by a wrong but

arises independent of it. In other words, the very enrichment of the de-

fendant, as opposed to a wrongful action resulting in such enrichment,

triggers recovery.

167

Discussions of unjust enrichment and restitution law

161. Id. at 16.

162. See Restatement (Third) of Restitution and Unjust Enrichment § 1 cmt. a

(Tentative Draft No. 7) (“The use of the word ‘restitution’ to describe the cause of action

as well as the remedy is likewise inherited from the original Restatement, despite the

problems this usage entails.”).

163. Birks, Unjust Enrichment, supra note 160, at 39. Birks identifies two more

questions, relating to the nature of the remedial right that the plaintiff acquires and

possible defenses that a defendant could invoke. Id. I omit these from the analysis for

now, since they go less to liability and more to the issue of response.

164. See supra Part II.A.1 (describing market harm resulting from free riding). See

generally Mitchell McInnes, Resisting Temptations to Justice, in Philosophical Foundations

of the Law of Unjust Enrichment, supra note 157, at 100, 101 (“American courts regularly

have manipulated the principle of unjust enrichment in the service of ‘higher’ ends . . . .”).

165. Indeed, even Peter Birks, an ardent defender of the internal logic of the

common law’s requirement that the benefit be unjust, concedes that certain instances of

restitution are policy-motivated insofar as they deviate from the traditional approach to

identifying an enrichment as unjust. The traditional approach bases restitution on criteria

internal to the plaintiff-defendant relationship. Birks, Restitution, supra note 84, at 294.

166. See Peter Birks, Unjust Enrichment and Wrongful Enrichment, 79 Tex. L. Rev.

1767, 1783 (2001) (arguing for need to distinguish the two ideas).

167. Id. at 1789 (“Liability in unjust enrichment has in principle nothing whatsoever

to do with fault.”).

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458 COLUMBIA LAW REVIEW [Vol. 111:419

often fail to make this distinction. However, it remains rather important

to appreciate this distinction in relation to hot news misappropriation.

The misappropriation doctrine can be understood as built around

the structural principle of unjust enrichment. This section explains the

central elements of this unappreciated reality. It first examines how mis-

appropriation overcomes the common law’s traditional refusal to allow

recovery for a self-interested conferral of benefits on others.

168

It then

proceeds to analyze how the identification of a benefit

169

and a corre-

sponding loss,

170

both elements of the law of unjust enrichment, apply to

misappropriation.

1. Self-Interested Recovery and the Logic of Collective Action. — Some may

object that the misappropriation doctrine does not originate in the com-

mon law rules of unjust enrichment because the common law has long

recognized an exception to recovery in cases that involve a self-serving

conferral of a benefit. Where one party undertakes an activity in his or

her own self-interest and in the process confers an incidental benefit on

another, the law disallows recovery.

171

Referred to as the rule against

volunteers, officiousness, self-serving, or incidental benefits, its rationale

is twofold.

172

The first aspect of the rationale is that the benefit provider

is always in a position to bargain with the beneficiary ex ante, and his

failure to do so ought to inure to the beneficiary’s benefit rather than to

the benefit provider, in order to maintain the long-term market for such

benefits. Under this so-called market encouragement explanation, the

rule is thought to facilitate the creation of thick markets, composed of

multiple active participants.

173

Allowing a provider to recover encour-

ages participants to avoid bargaining ex ante, resulting in supercompeti-

tive prices and, in turn, producing an inefficient allocation of re-

sources.

174

The second aspect of the rationale is the theory of free

choice—the idea that a defendant should be in control of his own affairs,

168. See infra Part II.B.1.

169. See infra Part II.B.2.

170. See infra Part II.B.3.

171. See 2 George E. Palmer, The Law of Restitution § 10.1 (1978) (“[T]he fuller

meaning of the word [volunteer] can be understood only against the background of a

long-standing judicial reluctance to encourage one person to intervene in the affairs of

another . . . .”); Dawson, supra note 86, at 1409 (“The antipathy . . . in our law of restitution

toward intermeddlers who confer unsolicited benefits . . . is addressed almost equally to

altruists and self-seekers.”); John D. McCamus, The Self-Serving Intermeddler and the Law

of Restitution, 16 Osgoode Hall L.J. 515, 518–19 (1978) (“[T]he restitutionary entitlement

of the self-interested intermeddler has only received sporadic and precarious

recognition.”).

172. McCamus, supra note 171, at 518–19. Indeed, the Restatement now mentions

the rule. See Restatement (Third) of Restitution and Unjust Enrichment § 23 (Tentative

Draft No. 2, 2002).

173. Saul Levmore, Explaining Restitution, 71 Va. L. Rev. 65, 79–80 (1985).

174. Id.

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and that forcing him to pay for a benefit that he did not have the chance

to refuse impinges on his autonomy.

175

Commercial newsgathering clearly fits the description of a self-

serving activity that incidentally benefits competitors. A newspaper, in

gathering the news, is indeed trying to benefit its own bottom line

through sales and advertising revenue, but in so doing confers a benefit

on competitors. Thus, it appears that unjust enrichment in the common

law and misappropriation seem to be at odds with each other. Wendy

Gordon argues that the logic underlying the common law’s exception to

recovery for such behavior has limited application to intellectual prop-

erty.

176

According to her, the market encouragement thesis is actually

better served by a rule of positive liability rather than one of no liability

for self-serving benefits, when it comes to intangibles.

177

In intellectual

property situations, she argues, defendants are in a better situation than

plaintiffs to commence an ex ante bargain, which they would have little

incentive to do in a system of no liability.

178

In such situations, a regime

that allows recovery even though the benefit may be self-serving may thus

facilitate thick markets, by giving differentiated defendants the incentive

to negotiate with a benefit provider for uses.

179

The original market encouragement explanation however remains

premised on an important assumption. This is the belief that encourag-

ing an ex ante market for the benefit being produced and the allocation

that it results in, is unlikely to generate any independent distortionary

effects and social costs that might possibly outweigh the benefits of the

market-based allocation. In situations where the possibility of such distor-

tions remains real, encouraging a market for the benefit being produced

ceases to remain independently desirable. An ex ante market might thus

be a poor fit for an area of activity to begin with, in which case the market

encouragement idea loses much of its explanatory appeal. The Court in

International News too seemed to be aware of this, when it decided against

recognizing a first-possession-based tradable property right in the

news.

180

The solution to the common law’s puzzle of denying recovery

175. Restatement (Third) of Restitution and Unjust Enrichment § 23 cmt. a

(Tentative Draft No. 2) (describing this idea in terms of “transactional autonomy”); Birks,

Restitution, supra note 84, at 115.

176. Wendy J. Gordon, Of Harms and Benefits: Torts, Restitution, and Intellectual

Property, 21 J. Legal Stud. 449, 471–77 (1992) [hereinafter Gordon, Harms and Benefits].

Gordon builds this argument around Levmore’s market encouragement idea. See id. at

453 n.12 (“[T]his article builds on, rather than repudiates, Levmore’s analysis.”).

177. Id. at 472 (“[I]n the intellectual-property setting, giving creators restitutionary

rights tends to encourage consensual markets.”).

178. Id. at 473.

179. Id. at 477.

180. Int’l News Serv. v. Associated Press, 248 U.S. 215, 234 (1918) (“It is not to be

supposed that the framers of the Constitution, when they empowered Congress ‘to

promote the progress of science and useful arts, by securing for limited times to authors

and inventors the exclusive right to their respective writings and discoveries’ (U.S. Const.

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460 COLUMBIA LAW REVIEW [Vol. 111:419

for a self-serving conferral of a benefit, as it relates to hot news misappro-

priation must therefore be found elsewhere.

The answer to this puzzle lies instead in looking a little deeper into

the structure of the common law rule and the exceptions that have long

accompanied it. One of the few exceptions commonly invoked against

the general rule is the principle of shared or collective interests. A party

who protects or preserves a shared interest and incurs expenses necessary

to that end, without the prior consent of the others with whom the inter-

est is shared, is nonetheless allowed to recover from them.

181

Although

the exception originated in scenarios of co-ownership and co-tenancies, it

has since been extended to other situations where a community of inter-

ests manifests itself in analogous fashion—such as the relationship be-

tween shareholders in a corporation or bondholders in a mutual fund,

and situations involving other common funds.

182

The logic underlying the exception derives from a collective action

problem. John Dawson recognized this early on, and connected the ex-

ception to the idea of free riders and the law’s recognition of the need

for coercion to solve the problem of collective action.

183

In some situa-

tions, preserving a community of interests among individuals by ensuring

their concerted action requires nullifying the possibility of free riders.

Thus an individual in a situation of co-ownership needs to weigh the cost

of an action that is likely to benefit all the owners not just against his

personal benefit but also against that of the entire collective. Enabling

art. 1, § 8, cl. 8), intended to confer upon one who might happen to be the first to report a

historic event the exclusive right for any period to spread the knowledge of it.”).

181. See Restatement (Third) of Restitution and Unjust Enrichment § 24 (Tentative

Draft No. 2, 2002); Dagan, Law and Ethics, supra note 157, at 125–26 (explaining

justification for Restatement rule); Daniel Friedmann, Unjust Enrichment, Pursuance of

Self-Interest, and the Limits of Free Riding, 36 Loy. L.A. L. Rev. 831, 855–57 (2003)

[hereinafter Friedmann, Unjust Enrichment] (explaining “community of interests”

concept, where plaintiff’s reimbursement “is predicated [on] the existence of a plaintiff’s

interest and a reasonable expenditure he made in order to protect his interest in

circumstances where the expenditure must also necessarily protect the interest of

others. . . . There must also be a sufficient proximity between the interests involved”).

182. See, e.g., Sprague v. Ticonic Nat’l Bank, 307 U.S. 161, 163 (1939) (finding it

within power of court of equity to order bondholders to reimburse litigant who brought a

claim against a collapsing bank that permitted her fellow bondholders to subsequently

bring their claims as well); Trustees v. Greenough, 105 U.S. 527, 532–33 (1881) (“[W]here

one of many parties having a common interest in a trust fund, at his own expense takes

proper proceedings to save it from destruction and to restore it to the purposes of the

trust, he is entitled to reimbursement . . . .”); United Carolina Bank v. Caroprop, Ltd., 446

S.E.2d 415, 416–17 (S.C. 1994) (holding plaintiff who made mortgage payments and paid

“past-due real estate taxes” on behalf of cotenant was entitled to reimbursements);

Wallersteiner v. Moir (No. 2), (1975) 1 Q.B. 373, 391 (Lord Denning M.R.) (Eng.) (stating

minority shareholder in derivative action entitled “to be indemnified by the company

against all costs and expenses reasonably incurred by him” while acting on company’s

behalf). For a discussion of this extension and its logic, see Friedmann, Unjust

Enrichment, supra note 181, at 857–58.

183. See Dawson, supra note 86, at 1414 (linking shared interest exception to Mancur

Olson’s writings on collective action problem).

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him to divide up these costs on an equitable basis among all the co-

owners ex post is thought to incentivize his collectively beneficial action

ex ante.

184

Indeed, the Restatement too recognizes this collective action

logic in similar terms, but refuses to extrapolate it into a generic principle

when the interest is not shared, strictly speaking, but is nonetheless re-

lated.

185

In a situation of shared interests (i.e., a community of interests),

the interconnectedness of self-interest and the conferral of benefits is also

thought to be unlikely to result in a double incentive problem. Thus, it is

not just the possibility of free riding that the rule addresses, but the in-

centives to maintain the equilibrium that preexists the expenditure.

186

In other words, when the collective benefit is threatened by free riding,

the law allows recovery to ensure its continued production.

187

As a

framework to overcome the collective action problem in newsgathering

described earlier, misappropriation finds its basis to overcome the com-

mon law’s reluctance to allow a recovery for self-interested conferral of

benefits upon others.

The starting point for the analysis was the recognition that informa-

tion (e.g., news) gathered by a party is at all times a part of the public

domain—the information commons. This proposition was taken as a

given by the Court in International News.

188

Nonetheless, structurally it

remains a collective resource in the sense that newspapers depend en-

tirely on it for their business. Newsgatherers thus have a community of

interests amongst themselves, not in the formal ownership sense, but

rather in the sense that they collectively depend on the timely and accu-

rate collection of news, and they all have immediate access to it once it is

collected and disseminated. It forms their collective stock in trade.

189

While news may be in the commons, its continuing existence and vitality

as a valuable resource depends on its being gathered appropriately by

184. Consider the situation of four equal co-owners of a piece of land. Each of them

earns an annual rent of $4,000 from the land. Now, assume that a situation arises where

the entirety of the rental income (the total $16,000) comes under threat (for example,

because of failure to fulfill a regulatory requirement), which requires one of them to act in

a timely manner to save the income in its entirety for a given year. Assume that this action

costs an individual co-owner $5,000. If a co-owner believes that his expenditure of this

amount (the cost) is to be weighed only against his own benefit, he would have little

incentive to pay that amount. On the other hand, if he knows that he can spend this

money upfront and then eventually recover it from his co-owners on an equal basis, the

benefits (the rental income of $4,000) exceed the prorated cost ($1,250). This incentive

makes it likely that he will spend the $5,000 in order to preserve the group’s total rental

income of $16,000.

185. Restatement (Third) of Restitution and Unjust Enrichment § 23 cmt. b

(Tentative Draft No. 2).

186. For a discussion of this phenomenon in similar incentive terms, see Dagan, Law

and Ethics, supra note 157, at 131–36.

187. Id. at 133–35.

188. See supra notes 130–132 and accompanying text (noting that Court in

International News recognized news as “common property”).

189. See supra notes 130–132 and accompanying text (quoting Int’l News Serv. v.

Associated Press, 248 U.S. 215, 236 (1918)).

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462 COLUMBIA LAW REVIEW [Vol. 111:419

those who rely on it for their commercial sustenance. Newspapers’ self-

interest is thus inextricably linked to their collective interest.

The proximity, or community of interests, between market partici-

pants to produce a public domain collective good—the collection of

news—is thus the solution to the puzzle. It might at first seem odd to

characterize the interests of marketplace competitors (i.e., newspapers)

as proximate or as forming a community. Yet, if one adopts a functional

approach to these categories, and recognizes that they originate in the

idea of the interests being intertwined—either by legal or factual neces-

sity—an appropriate analogy begins to emerge.

190

The inseparability of

the intrinsic and incidental benefits from the process defines the func-

tional approach, and news collection, where the resource (i.e., the news)

lacks a priori exclusionary entitlement, admits rather well of this

categorization.

191

It bears emphasizing that connecting the misappropriation doctrine

to the common law’s logic of solving a collective action problem reveals

that liability (and recovery) is triggered not by any wrongdoing, but by

the very act of enriching the defendant. In other words, free riding in

situations where the law seeks to solve a collective action problem

through recovery is not treated by the law as an independent wrong; but

rather as a distributive consequence that merits correcting ex post.

2. The Benefit and the Problem of Subjective Devaluation. — At first

glance, the idea of a benefit seems largely self-explanatory. Situations

that increase the net wealth of a defendant, or, put more abstractly, that

enhance the defendant’s overall welfare, may be considered situations

190. It is worth noting that some jurisdictions adopt a strictly formalist approach to

the idea of a community of interests, requiring that the obligations be interconnected by

necessity of law rather than fact. Lord Goff of Chieveley & Gareth Jones, The Law of

Restitution 381 (2002) (observing that there must be “compulsion of law” for collective

interests exception to apply). Even under such a regime, one might argue that the

collective good element of news collection is indirectly demanded by law because the law

denies private ownership of the resource and forces it to be placed in the public domain.

191. Indeed, numerous U.S. courts, unlike other common law jurisdictions, seem to

have adopted this functionalist approach to the collective interests exception. See Ford v.

United States, 88 F. Supp. 263, 264 (Ct. Cl. 1950) (holding U.S. entitled to reimbursement

from army private for paying off money he stole from Englishman because U.S. was not

“acting as a volunteer” but had “assumed liability for certain acts” of members of military in

part to “preserve the safety and effectiveness of [American] forces”); Love v. Robinson, 137

So. 499, 499–500 (Miss. 1931) (holding bank superintendent entitled to reimbursement

from stockholders where he advanced depositors amount owed by insolvent bank without

waiting for “slow process of the collection of the stockholders’ liability” because, although

he was not legally required to pay, he had “active interest or concern in the nature of a

definite managerial responsibility” in relation to bank’s debts); Boney v. Cent. Mut. Ins.

Co., 197 S.E. 122, 126 (N.C. 1938) (holding insurance broker entitled to reimbursement

by insurance company where broker settled tort claim of client after insurance company

wrongly claimed client’s policy did not cover suit, because “payment made under a moral

obligation . . . or under an erroneous impression of one’s legal duty, is not a voluntary

payment”); see also 2 Palmer, supra note 171, § 10.5 (discussing functionalist approach

taken by Ford, Love, and Boney).

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where a defendant obtains a benefit. All the same, identifying a benefit

necessitates choosing an appropriate baseline.

192

This is especially prob-

lematic in the context of intangibles, where the benefits are nonrivalrous

(i.e., they can be utilized by an unlimited number of users at the same

time) and nonexcludable (i.e., users cannot be prevented from utilizing

the resource). In these situations, the tendency of the law, driven by an

economic approach to property, has been to characterize the failure to

singularly internalize all such benefits as a harm worth remedying using a

tort-like rule.

193

Unjust enrichment, by contrast, insists that the law focus

not on the failure of such complete internalization by the plaintiff, but

instead on the consequences of its internalization by the defendant.

The baseline problem is thus one of determining the right valua-

tional perspective to adopt for the analysis.

194

In other words, whose per-

spective should the law adopt in determining whether a plaintiff’s actions

resulted in a benefit to the defendant? One obvious approach is an ob-

jective, reasonable person standard.

195

However, on occasion, a defen-

dant may deny that the plaintiff’s actions resulted in any independent

benefit. Rather than being strategic, such a denial might legitimately

originate in the defendant having adopted a different baseline from that

of the plaintiff in making the assessment. This phenomenon is referred

192. For an early identification of this problem, see Gordon, Harms and Benefits,

supra note 176, at 451.

193. See, e.g., Brett M. Frischmann, Evaluating the Demsetzian Trend in Copyright

Law, 3 Rev. L. & Econ. 649, 650–51 (2007) (noting copyright law confirms Demsetz’s thesis

that “private property rights . . . emerge to enable the internalization of externalities”);

Brett M. Frischmann & Mark A. Lemley, Spillovers, 107 Colum. L. Rev. 257, 257 (2007)

(“Economists since Demsetz have viewed property rights as a way to internalize the

external costs and benefits one party’s action confers on another . . . [because] if a party

didn’t capture the full social value of her actions she wouldn’t have optimal incentives to

engage in those actions.”).

194. Traditionally, unjust enrichment and restitution law have treated this problem as

going to the very basis of liability. Intriguingly, the new Restatement treats it largely as a

matter of measurement. Since the focus of this Article is largely on the justificatory

structure of misappropriation, rather than on unjust enrichment doctrine as such, this

right-remedy distinction is of little significance here. See Restatement (Third) of

Restitution and Unjust Enrichment § 49 cmt. d (Tentative Draft No. 5, 2007) (noting

although restitution formula sometimes phrased as “‘subjective value to the

recipient[,]’ . . . [t]he word ‘subjective’ is potentially misleading . . . because subjective

values are often values that are incapable of measurement . . . [and] [r]estitution does

not . . . impose a liability in money for any enrichment that cannot be valued in money

with reasonable confidence”).

Echoes of the other elements discussed in this section—namely the concepts of free

acceptance, incontrovertible benefit, and the like—are found in other parts of the

Restatement, focusing on specific types of unjust enrichment. See, e.g., Restatement

(Third) of Restitution and Unjust Enrichment § 9 (Discussion Draft 2000) (discussing

conferral of nonmonetary benefits by mistake).

195. See Birks, Unjust Enrichment, supra note 160, at 50 (“The courts have no choice

but to deal in market value . . . .”); Graham Virgo, The Principles of the Law of Restitution

64–65 (2d ed. 2006) (giving four reasons objective test should be considered first).

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464 COLUMBIA LAW REVIEW [Vol. 111:419

to as a subjective devaluation.

196

The rationale for allowing this is that in

some situations the defendant may not have even recognized that he was

getting a benefit from the plaintiff. Since unjust enrichment is premised

on the actual, identifiable receipt of a benefit, in situations where a de-

fendant neither requested nor had the opportunity to refuse such a bene-

fit, the common law avoids imposing liability to safeguard a defendant’s

individual autonomy.

197

In a misappropriation claim, a defendant may

thus legitimately assert that he had no reason to believe that the informa-

tion (i.e., news) being used was a benefit that originated with the plain-

tiff, as opposed to information that made its way into the public domain

in the ordinary course of things.

As originally understood, the subjective devaluation problem arose

out of concern for a defendant’s autonomy. Peter Birks’s description of

the problem captures this well, when he notes that “[w]hat matters is [the

defendant’s] choice. The fact that there is a market in the good which is

in question, or in other words that other people habitually choose to have

it and thus create a demand for it, is irrelevant to the case of any one

particular individual.”

198

The problem can be expressed in efficiency

terms as well. In situations where the value of a good (i.e., the putative

benefit) to a defendant is unknown, that defendant may face a potential

loss if the imposition of liability grossly outweighs the potential benefit to

a plaintiff vested with the entitlement.

199

The imposition of liability in

such a scenario would be inefficient.

To overcome the problem posed by a potential subjective devalua-

tion, the common law of unjust enrichment has over the years come to

rely on a fairly well-known technique, often referred to as the incontro-

vertible benefit.

200

These are situations where a benefit to the defendant

196. See Birks, Restitution, supra note 84, at 109 (“[Subjective devaluation is] based

on the premis[e] that benefits in kind have value to a particular individual only so far as he

chooses to give them value.”); Birks, Unjust Enrichment, supra note 160, at 50 (noting

“subjectivity of the value of non-money benefits”); Virgo, supra note 195, at 67 (noting

principle of subjective devaluation exists “because different people value different things

according to their own tastes and priorities” (citation and internal quotation marks

omitted)); Andrew G. Spence, In Defence of Subjective Devaluation, 43 McGill L.J. 889,

891–93 (1998) (describing and ultimately defending subjective devaluation).

197. See Falcke v. Scottish Imperial Ins. Co., (1886) 34 Ch.D. 234 at 248 (Eng.) (“The

general principle is . . . that work or labour done or money expended by one man to

preserve or benefit the property of another do not . . . create any obligation to repay the

expenditure.”); see also Virgo, supra note 195, at 68 (discussing Falcke).

198. Birks, Restitution, supra note 84, at 109.

199. Dagan, Law and Ethics, supra note 157, at 140 (“Utility most clearly objects to

restitution where the utility loss to the defendant had she been forced to make restitution

outweighs the gain to the plaintiff from the action which restitution could have

facilitated.”).

200. Birks, Restitution, supra note 84, at 116 (defining incontrovertible benefit as

situation where “no reasonable man would say that the defendant was not enriched”);

Virgo, supra note 195, at 74 (defining incontrovertible benefit as an “unquestionable

benefit, a benefit which is demonstrably apparent and not subject to debate or conjecture”

(citing Reg’l Municipality of Peel v. Queen, [1992] 3 S.C.R. 762, 795 (Can.))).

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is clear and manifest from the circumstances such that it can be pre-

sumed that the defendant would not have refused it even when presented

with the choice.

201

Saul Levmore argues that the incontrovertible benefit

exception reflects, at base, nothing more than the ease with which the

benefit in question can be translated into wealth.

202

In other words, it

offers no more than a test of objective fungibility. The most common

situation of an incontrovertible benefit is that of the necessary expendi-

ture: situations where what the defendant obtains saves him from incur-

ring an expenditure, which by the operation of law or facts, he necessarily

would have had to incur anyway.

203

Emergency services rendered by a plaintiff, or the supply of necessi-

ties, are typical of this category. Much does of course turn on classifying

what the defendant receives as necessary or essential.

204

The easiest cases

of necessity involve those where a defendant is under a legal duty (e.g., a

debt, or a duty to abate a nuisance), and the plaintiff mistakenly dis-

charges that duty. Courts have also, however, been more than willing to

look beyond the existence of a formal legal duty, especially in situations

where a benefit is thought essential to the defendant’s very enterprise.

205

For instance, the act of bringing the coal to the surface for a coal mine is

typically considered necessary to the operation of the mine, and can form

the basis of a recovery for a necessary expenditure saved on.

206

Situations covered by the hot news misappropriation doctrine lend

themselves to the distinct possibility of a subjective devaluation. In other

words, an enterprise relying on information collected by another, but

placed in the public domain and made publicly available, may legiti-

mately claim that it had no reason to recognize that it was receiving a

benefit from the information gatherer, rather than using publicly availa-

ble information in its own communications. Indeed, in International

News, the defendant raised the issue of a subjective devaluation, arguing

that the news became the common possession of all once it was published

and made accessible to the public; effectively claiming that no unique

benefit as such had accrued to it, other than that which flowed to the

201. Reg’l Municipality of Peel, [1992] 3 S.C.R. at 795.

202. Levmore, supra note 173, at 77–79 (“[T]he wealth-dependency problem

disappears and restitution need not be denied where the nonbargained benefit is easily

translated into wealth.”).

203. Virgo, supra note 195, at 75–77 (noting circumstances of necessity may arise “by

operation of law” or may be “factually necessary”). The Restatement also recognizes this as

an independent category of recovery. Restatement (Third) of Restitution and Unjust

Enrichment § 9(1)(d) (Discussion Draft 2000) (allowing recovery when plaintiff’s actions

have spared defendant “an otherwise necessary expense”).

204. See Birks, Restitution, supra note 84, at 120–21 (“Since the necessity for the

expenditure need not be absolute there is room to choose between either a strict or a

liberal interpretation of the test.”).

205. See Andrew Burrows et al., Cases and Materials on the Law of Restitution 91 (2d

ed. 2007) (“Cases on the wrongful use of the property of another also satisfy the ‘negative’

enrichment aspect if the use of the property is necessary to the defendant’s enterprise.”).

206. Id. at 91 n.1.

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466 COLUMBIA LAW REVIEW [Vol. 111:419

general public.

207

The Court responded to this argument by identifying

the defendant’s gain as an incontrovertible benefit. It proceeded to char-

acterize the activity of newsgathering, and its accompanying costs, as nec-

essary to the enterprise of newspaper publishing.

208

Consequently, the

plaintiff’s actions allowed the defendant to save on an expense necessary

to its enterprise, effectively rendering it an incontrovertible benefit. The

Second Circuit’s formulation of misappropriation as five independent el-

ements follows a similar pattern. Its explicit recognition that the defen-

dant’s acts of free riding on the plaintiff’s efforts had the effect of lower-

ing the defendant’s necessary costs similarly relied on the idea of an

incontrovertible benefit.

209

The process of identifying the defendant’s benefit is also manifest in

the requirement that the value of the information in question derive

from its time-sensitive nature.

210

By insisting that the value of the news

(or other protectable information) derive not just from its communica-

tive function but also from its timeliness, the doctrine rather explicitly

identifies the real benefit that a defendant needs to have been enriched

by for the free riding to be actionable. In other words, when a defendant

free rides on a plaintiff’s newsgathering, the defendant’s enrichment

originates not just in its avoidance of the cost of collecting the news on its

own, but also in its saving on the added expenditure necessary for the

information to remain timely, and therefore valuable.

211

3. The Substantive Identification of a Nonproprietary Loss. — In addition

to there being a benefit that enriches the defendant, the benefit needs to

be at the plaintiff’s expense.

212

This requirement performs two func-

tions. First, it operates as a rule of standing, enabling a party impacted by

the enrichment to effect its rectification. Second, it situates the principle

207. Int’l News Serv. v. Associated Press, 248 U.S. 215, 239 (1918).

208. Id. at 238–39 (noting how material used by defendant had “been acquired by

complainant as the result of organization and the expenditure of labor, skill, and money”

and observing that “novelty and freshness” were central to enterprise of news reporting).

209. Nat’l Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 854 (2d Cir. 1997) (“An

indispensable element of an INS ‘hot-news’ claim is free riding by a defendant on a

plaintiff’s product, enabling the defendant to produce a directly competitive product for

less money because it has lower costs.”).

210. Id. at 852 (noting one of central elements to hot news claim is that “the value of

the information is highly time-sensitive”).

211. By specifying this requirement explicitly, the doctrine thus also hints at the

appropriate time frame to be used in assessing the market value of the benefit—namely at

or shortly after its collection, given the inverse relationship between the information’s

value and the elapse of time thereafter.

212. See Restatement (Third) of Restitution and Unjust Enrichment § 2 cmt. a

(Discussion Draft 2000) (describing it as necessary but not sufficient condition for

recovery); Birks, Restitution, supra note 84, at 132 (“[This requirement] signifies only that

the plus to the defendant is a minus to the plaintiff.”); Birks, Unjust Enrichment, supra

note 160, at 73–74 (“[T]he real question is . . . what constitutes a sufficient connection

between the would-be claimant and the enrichment he wants to claim.”); Virgo, supra note

195, at 105 (noting this requires claimant to “establish a connection between the receipt

on an enrichment by the defendant and the claimant’s loss”).

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of unjust enrichment around the idea of corrective justice by connecting

the plaintiff and defendant in a bilateral private law setting premised on

the correlativity of normative gain and loss.

213

Very importantly, though,

the identification of a loss as a substantive element of the unjust enrich-

ment analysis is different from the calculation of restitutionary damages,

an issue addressed later.

214

In other words, unjust enrichment demands

the identification of a loss to establish a claim, but does not necessarily

connect the consequences of such a claim to that loss, once identified.

While the identification of a loss as a substantive matter may seem

simple, its importance cannot be overemphasized, since it is at this junc-

ture that the distinction between a proprietary claim and one originating

in unjust enrichment begin to bleed into one another. Keeping them

distinct is an exercise that has thus far troubled both scholars of unjust

enrichment and property.

Generally, there are two approaches to identifying when a benefit is

at the expense of a plaintiff. The first, known as the correspondence ap-

proach, favors recognizing a direct correlation between a defendant’s

benefit and a plaintiff’s loss in order to satisfy the requirement.

215

other words, the recovery is contingent on the plaintiff showing a mate-

rial loss either equivalent to or greater than the recovery being sought.

216

A second approach, by contrast, asks merely whether the benefit in ques-

tion came from or originated with the plaintiff for the requirement to be

satisfied.

217

It is this approach that most readily falls back on ownership

ideas for normative traction. Birks, its leading proponent, argues that

since unjust enrichment is more concerned with remedying a defen-

dant’s benefit than it is with a plaintiff’s impoverishment, it suffices for

the plaintiff to establish that the benefit bears some causal connection to

plaintiff’s actions, even if that connection is not direct or quantifiably

213. For a discussion of the corrective justice basis of unjust enrichment, see Ernest J.

Weinrib, Correctively Unjust Enrichment, in Philosophical Foundations of the Law of

Unjust Enrichment, supra note 157, at 31, 33 (arguing “the parties to liability in unjust

enrichment . . . establish the correlative right and duty through the interaction in which

they both participate”); Ernest J. Weinrib, The Gains and Losses of Corrective Justice, 44

Duke L.J. 277, 294–97 (1994) (applying framework of correlativity to understand

normative structure of unjust enrichment law).

214. See infra Part III.B.2 (arguing ideal solution in calculating restitutionary

damages would focus on annulling effects of defendant’s unfair cost savings).

215. See R.B. Grantham & C.E.F. Rickett, Disgorgement for Unjust Enrichment?, 62

Cambridge L.J. 159, 166 (2003) (describing correspondence idea).

216. See, e.g., Mitchell McInnes, “At the Plaintiff’s Expense”: Quantifying

Restitutionary Relief, 57 Cambridge L.J. 472, 473 (1998) (“As a matter of policy, it makes

perfectly good sense to preclude the plaintiff in a subtractive enrichment case from

recovering more than she lost . . . .”); Mitchell McInnes, The Measure of Restitution, U.

Toronto L.J., Spring 2002, at 163, 172–74 (“In Canadian law, the court must be satisfied

not only that the defendant received an enrichment but also that the plaintiff suffered a

corresponding deprivation.”).

217. Birks, Unjust Enrichment, supra note 160, at 75–78 (discussing sufficiency of

“interceptive subtractions,” where asset moving from third party to claimant is intercepted

by defendant).

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468 COLUMBIA LAW REVIEW [Vol. 111:419

equal to the benefit.

218

On closer examination, though, Birks falls back

on the idea of ownership to justify this position. He thus explains cases

that allow a recovery where a defendant obtains a benefit by using some-

one else’s property without depriving that person of its possession—e.g.,

a stowaway in a ship’s cargo hold—by arguing that they can be under-

stood as relying on the simple logic of “from my property, therefore suffi-

ciently from me,” to establish that the benefit was at the plaintiff’s

expense.

219

This noncorrespondence logic thus builds on the normative struc-

ture of property law for its answers. Since property law generally

presumes that any interference with an ownership interest is actionable

even without a showing of actual harm (injuria sine damno) because of its

injury to the right,

220

so too does Birks’s argument for noncor-

respondence. Absent this logic, his argument has little independent ba-

sis. Outsourcing the identification of a loss to property law is hardly

unique to Birks though. The most recent version of the Restatement too

adopts this logic in principle. In explaining why some conferrals of bene-

fits are recoverable and others are not (i.e., why some are at the expense

of the plaintiff), it notes that “[r]estitution subserves property rights” and

that the benefit in question “must be something as to which the law rec-

ognizes rights of ownership, meaning something the law will protect

against appropriation by others.”

221

Yet, when it comes to explaining sit-

uations where it is ambiguous whether the law recognizes an ownership

claim at all, it notes that “[i]n such cases, the availability vel non of the

claim in restitution is a function of applicable property law,” effectively

outsourcing the normative work to the law of property.

222

Hanoch Dagan picks up on this point and notes how this outsourc-

ing pays little attention to the contestability of property as a normative

idea and fails to engage the question of whether an ownership interest in

a particular resource ought to be accorded to an individual to begin

218. Peter Birks, “At the Expense of the Claimant”: Direct and Indirect Enrichment

in English Law, in Unjustified Enrichment 493, 525 (David Johnston & Reinhard

Zimmermann eds., 2002) (“[I]t is not true to say that the defendant’s enrichment must be

directly from the plaintiff, whether interceptively or otherwise.”).

219. Birks, Unjust Enrichment, supra note 160, at 82.

220. See, e.g., Jacque v. Steenberg Homes, Inc., 563 N.W.2d 154, 160 (Wis. 1997)

(“Because a legal right is involved, the law recognizes that actual harm occurs in every

trespass. . . . The law infers some damage from every direct entry upon the land of

another.” (citation omitted)). A notable exception to this rule is the law of trespass to

chattels in the United States. See Shyamkrishna Balganesh, Property Along the Tort

Spectrum: Trespass to Chattels and the Anglo-American Doctrinal Divergence, 35

Common L. World Rev. 135, 142 (2006) (noting that unlike under English law, “under

American law some actual damage to the chattel is necessary before the action can be

maintained”).

221. Restatement (Third) of Restitution and Unjust Enrichment § 2 cmt. e (Tentative

Draft No. 7, 2010).

222. Id.

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2011] ENDURING MYTH OF PROPERTY IN NEWS 469

with.

223

It thus posits an obvious circularity by claiming that the resource

ought to be recognized as a property interest in order to avoid an unjust

enrichment, the very existence of which depends on the property interest

to begin with.

224

Dagan’s point is an excellent explanation for the crystal-

lization of propertarian logic in the misappropriation setting, and the

move from quasi-property in International News to property in hot news.

So, if the noncorrespondence approach depends on proprietary

logic to determine a plaintiff’s detriment, this leaves us with the corre-

spondence approach, which looks for some actual (i.e., quantifiable) loss

to the plaintiff to satisfy the requirement. Gordon argues that in the mis-

appropriation doctrine, this requirement is satisfied by looking for a

“competitive nexus” between the parties and asking whether the defen-

dant’s copying is in a market that the plaintiff is or will be serving

shortly.

225

A loss of potential sales, manifested in this nexus requirement,

is thus taken to satisfy the loss requirement, not because it represents the

harm sustained by the plaintiff,

226

but because it connects the plaintiff’s

entitlement to the defendant’s actions, making the defendant’s gain di-

rectly “at the expense of” the plaintiff’s revenue.

227

While this formula-

tion no doubt follows the correspondence approach, it at the same time

doesn’t identify a rigid temporal baseline for the quantification of the

plaintiff’s expense/loss, since it effectively allows unrealized future expec-

tancies into the calibration of the entitlement. This allowance for expec-

tancies, in turn, renders the entitlement susceptible to being seen as per-

fectly compatible with an economically oriented conception of property

rights in intangibles,

228

despite Gordon’s conscious efforts to move the

analysis away from the idea of property.

229

223. See Dagan, Law and Ethics, supra note 157, at 20–21 (noting “property is an

essentially contested concept” and “there is no reason to presuppose that any gains derived

from property are necessarily within the entitlement of the property’s owner”).

224. See id. (“[I]t is circular to base a right of restitution on the ground that the

invaded resource is a property interest, where the basis for regarding the resource as

property is that otherwise unjustified enrichment would be permitted.” (citation

omitted)); Daniel Friedmann, Restitution of Benefit Obtained Through the Appropriation

of Property or the Commission of a Wrong, 80 Colum. L. Rev. 504, 511 n.36 (1980) (“[I]t

may be argued that there is a certain circularity in reasoning in finding a right of

restitution on the ground that the right . . . is a property interest . . . .”).

225. Gordon, Restitutionary Impulse, supra note 34, at 238–39.

226. Id. at 244 (“The competition requirement might seem to make the restitutionary

right equivalent to a right against harm. That is not so.”).

227. Id. at 239 (“The competition requirement works to assure that defendant’s gain

is at plaintiff’s expense.”).

228. For discussions of this conception, see Lemley, supra note 32, at 1037–40

(identifying development of property rhetoric in intellectual property and observing how it

originates in logic of internalizing positive externalities that may arise in future and

avoiding harmful free riding).

229. Gordon, Restitutionary Impulse, supra note 34, at 245–46 (discussing

conceptions of property). Gordon defines “property” rather narrowly for the purposes of

her argument. See id. at 166 n.60 (“Note that although much of the theoretical literature

employs the term ‘property right in information’ to embrace any legal right to sue, I use

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470 COLUMBIA LAW REVIEW [Vol. 111:419

A more acceptable solution to the problem once again originates in

the identification of newsgathering as a collective good. In situations

where unjust enrichment allows a plaintiff to recover from a defendant in

order to solve a collective action problem, its core concern is that without

enabling such a recovery, future plaintiffs would be reluctant to produce

the collective good, thereby reducing overall social welfare. The gain to a

defendant is thus the cost saved by not participating in the production of

the good. The plaintiff’s loss, which needs to correspond causally to this

gain when the enrichment occurs as a substantive rather than remedial

principle, is thus simply the cost incurred in producing the collective

good—no more, no less.

Thus, when a participant X in a collective fund worth $50,000 spends

$1,000 to safeguard the collective’s interest, and the fund eventually

grows to be worth $500,000—the loss to X that unjust enrichment con-

cerns itself with as a matter of substantive standing has no connection to

the fund’s appreciation, but is restricted to his actual expenditure, i.e.,

the $1,000. To allow otherwise would render the very existence of the

claim (as opposed to its remedial consequences) subject to market vagar-

ies. In other words, if X’s loss is identified as $500,000 when the fund

grows, one should see no reason to allow the claim if the fund were to

depreciate in value to $0 eventually.

230

Yet, doing so would undermine

the recognition that X did in fact incur an expenditure (and therefore a

net loss) that at one point in time enriched the members of the collec-

tive. The common law of unjust enrichment thus insists rather dogmati-

cally that the substantive loss be determined at the point that the defen-

dant is enriched, not before or after, and that it be determined

independent of market fluctuations that are causally linked to it.

231

For misappropriation, the inclusion of lost sales or profits in the very

identification of a loss has the effect of including an unrealized expecta-

tion in the baseline, rendering the recovery substantively contingent. In

focusing on the upside of such an inclusion (i.e., an appreciation in

value), scholars tend to ignore the obvious possibility of its downside, ef-

fectively defeating the entire claim. Unjust enrichment resists this, con-

sciously distinguishing itself from cases of wrongful enrichment.

232

Iden-

tifying the plaintiff’s expense in terms of lost sales or profits also has the

effect of unintentionally vindicating a preexisting interest, thereby effec-

tively converting the claim into a proprietary one. In other words, restitu-

tion for lost profits (i.e., disgorgement) cannot be coherently justified

the term ‘property’ here to embrace the particular set of rights associated in the common

law with ownership, particularly of real property.”).

230. For a fuller discussion, see Grantham & Rickett, supra note 215, at 175.

231. Id. at 165 (“The claimant’s wealth entitlement is thus defined at the point of

receipt.”).

232. See Friedmann, Unjust Enrichment, supra note 181, at 844 (noting how

exceptions have nonetheless emerged where liability for unjust enrichment is imposed for

misappropriation of “something to which another person had a mere expectancy”).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 471

without an a priori basis for allocating the profits to the plaintiff. In most

instances, a property right or some other control-driven interest performs

this function.

233

But when a preexisting interest is absent, the idea of

damages for lost profits has little basis.

Once again, on closer analysis the structure of misappropriation fol-

lows the logic of the common law, consciously deviating from a proprie-

tary conception of loss. As the court in National Basketball Ass’n observed,

the very first element of the doctrine requires a showing that the plaintiff

collects the information “at some cost or expense.”

234

Were the basis of

the action proprietary, clearly no proof of quantifiable loss would be re-

quired, especially given plaintiffs’ recurrent focus on equitable relief.

What accounts for this element then is the doctrine’s unjust enrichment

framework. As noted previously, the core concern motivating misappro-

priation is the fact that a defendant enhances profitability by saving on

this cost or expense—which represents enrichment.

235

Since at the point

of enrichment (i.e., the use of the information by the defendant) this cost

or expense is the only loss actually sustained by the plaintiff, misappropri-

ation requires courts to identify it as a first step in their substantive analy-

sis. And courts applying the doctrine do indeed take this requirement

seriously.

III. I

MPLICATIONS OF A

ONPROPRIETARY

PPROACH

The distinction between a property-based approach to misappropria-

tion and one rooted in unjust enrichment and unfair competition is

more than just academic, and has several important consequences for the

interpretation, application, and extension of the doctrine. This Part ad-

dresses these implications. The nonproprietary approach (1) allows for a

better appreciation of the doctrine’s unique elements, some of which

have thus far been viewed as mere formalities, (2) reins in courts’ discre-

tion in choosing between remedies once the substantive elements of the

doctrine are satisfied, and (3) cabins the doctrine’s potential speech-lim-

iting features under the First Amendment.

233. See Lionel D. Smith, Disgorgement of the Profits of Breach of Contract:

Property, Contract, and “Efficient Breach,” 24 Can. Bus. L.J. 121, 121–22 (1994) (noting

availability of disgorgement for various wrongs, including breach of fiduciary obligation,

breach of confidence, conversion, and trespass to land). For discussion of the argument

that an interest need not be characterized as “property” for a profits baseline to be

awarded under unjust enrichment, as long as the law seeks to emphasize the plaintiff’s

control over the revenue stream from the resource, see Dagan, Law and Ethics, supra note

157, at 242. Dagan’s argument interfaces with the issue of appropriate remedial response,

an issue that is discussed infra Part III.B.

234. Nat’l Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 852 (2d Cir. 1997).

235. See supra Part II.A.1.

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472 COLUMBIA LAW REVIEW [Vol. 111:419

A. Making Sense of Doctrinal Anomalies

A large part of the reason why misappropriation has survived federal

preemption under the copyright laws to this day is because of its use of

doctrinal requirements that supposedly cause it to function differently

from traditional copyright law.

236

In identifying and emphasizing the ex-

tra elements needed for it to withstand a copyright preemption chal-

lenge, however, few have paid close attention to the structural bases of

these elements and their connection to misappropriation’s underlying

theoretical framework.

237

Most of these elements have little connection

to the dominant property-based theory, making them appear as mere for-

malities to overcome a preemption challenge. A theory of competitive

unjust enrichment provides a better explanation for them. This section

considers two such elements: the requirement of direct competition that

is traced back to International News, and the duty to police that recent

interpretations of hot news misappropriation have added to the mix.

1. Direct Competition as Interest Homogeneity. — Of the five elements

needed to satisfy a claim for misappropriation, the one that courts con-

tinue to disagree on is direct competition. Courts expect a plaintiff in a

misappropriation suit to establish that a defendant’s actions put the de-

fendant “in direct competition with a product or service offered by the

plaintiff.”

238

Some also interpret this requirement as necessitating that

the parties compete directly in a primary market.

239

Absent such a show-

ing, courts have routinely denied plaintiffs’ recovery altogether.

240

Despite its avowed importance, no court has to date offered a mean-

ingful test or approach to applying the requirement. The dominant ap-

236. Indeed, when the preemption provision of the Copyright Act was enacted,

misappropriation was explicitly recognized to be exempt from its coverage. See H.R. Rep.

No. 94-1476, at 132 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5748

(“‘Misappropriation’ is not necessarily synonymous with copyright infringement, and thus

a cause of action labeled as ‘misappropriation’ is not preempted if it is in fact based

neither on a right within the general scope of copyright as specified by section 106 nor on

a right equivalent thereto.”).

237. Nat’l Basketball Ass’n, 105 F.3d at 850–53 (discussing extra elements requirement

in relation to hot news misappropriation).

238. Id. at 852; see also Int’l News Serv. v. Associated Press, 248 U.S. 215, 240 (1918)

(discussing why process at issue amounted to “unfair competition”).

239. See Restatement (Third) of Unfair Competition § 38 cmt. c (1995) (“[I]n

most . . . cases in which the misappropriation doctrine has been determinative, the

defendant’s appropriation . . . resulted in direct competition in the plaintiff’s primary

market. . . . Appeals to the misappropriation doctrine are almost always rejected when the

appropriation does not intrude upon the plaintiff’s primary market.”).

240. See, e.g., U.S. Golf Ass’n v. St. Andrews Sys., Data-Max, Inc., 749 F.2d 1028, 1041

(3d Cir. 1984) (holding plaintiff had no legally protectable interest and denying injunction

where there was no “direct competition”); Universal City Studios, Inc. v. Ideal Publ’g

Corp., 195 U.S.P.Q. (BNA) 761, 761–62 (S.D.N.Y. 1977) (finding no actionable

misappropriation where defendant produced “collateral product”); Nat’l Football League

v. Governor of Del., 435 F. Supp. 1372, 1378 (D. Del. 1977) (finding no misappropriation

where defendant uses information to profit from “demands for collateral services”).

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proach appears to involve courts adopting a largely intuitive understand-

ing of both direct competition and the primary market that the parties

operate in.

241

Most courts focus entirely on the parties’ products or ser-

vices being offered, and upon recognizing a minimal degree of sub-

stitutability between them, find the requirement to be satisfied. When

courts use the element to deny recovery too, their analysis is largely intui-

tive on both the competition and market fronts.

This extensive reliance on bare intuition to analyze this requirement

is somewhat perplexing, since the ideas of direct competition and pri-

mary market both bear a very strong resemblance to the market defini-

tion exercise routinely undertaken by federal courts in the antitrust con-

text.

242

In determining whether a defendant has market power in a

relevant market, courts in antitrust cases first set out the relevant market.

Since the identification of market power remains their primary purpose,

the tests that they employ to define the market tend to be informed in

large measure by that purpose. The inquiry commonly begins by measur-

ing the cross-elasticity of demand between the parties’ products available

on the market, and then adjusts for the possibilities of preexisting mo-

nopoly profits, price discrimination, and other situation-specific

factors.

243

Trademark law too, at one point, required a clear showing of direct

competition between the parties and their products for a claim of in-

fringement to be sustained.

244

In due course, however, it came to aban-

don this emphasis, as it began to expand the category of uses that would

constitute an act of infringement.

245

At least part of the reason for this

241. See, e.g., Nat’l Basketball Ass’n, 105 F.3d at 854 (discussing products and market

in concluding no unlawful misappropriation).

242. See United States v. Grinell Corp., 384 U.S. 563, 570–76 (1966) (defining

relevant market before determining whether illegal monopoly existed); Brown Shoe Co. v.

United States, 370 U.S. 294, 334–39 (1962) (defining relevant market before determining

whether potential merger would lessen competition); United States v. E.I. du Pont de

Nemours & Co., 351 U.S. 377, 394–404 (1956) (defining relevant market before

determining whether illegal monopoly existed).

243. See, e.g., Robert G. Harris & Thomas M. Jorde, Antitrust Market Definition: An

Integrated Approach, 72 Calif. L. Rev. 1, 4–6 (1984) (discussing range of indicators of

market power and complexities involved in analyzing them). For a more recent criticism

of the relevant market determination in antitrust law, see generally Louis Kaplow, Why

(Ever) Define Markets?, 124 Harv. L. Rev. 437 (2010) (explaining trademark law has “long

been regarded as a species of the broader law of unfair competition”).

244. See Mark P. McKenna, The Normative Foundations of Trademark Law, 82 Notre

Dame L. Rev. 1839, 1888–89, 1899–904 (2007) (describing growth and decline of unfair

competition ideas in trademark law).

245. Id. at 1900; see also Prof’l Golfers Ass’n of Am. v. Bankers Life & Cas. Co., 514

F.2d 665, 669 (5th Cir. 1975) (“Direct competition is not the sine qua non of trademark

infringement . . . .”); Ball v. Am. Trial Lawyers Ass’n, 92 Cal. Rptr. 228, 237 (Ct. App. 1971)

(“[D]irect competition between the parties is not a prerequisite to relief.”); 74 Am. Jur. 2d

Trademarks and Tradenames § 83 (2010) (“Direct competition between the parties is not

a prerequisite to a trademark infringement action, nor is it necessary that the products

involved be in direct competition.”).

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474 COLUMBIA LAW REVIEW [Vol. 111:419

development, one might argue, derives from trademark law’s unique sta-

tus as a doctrine at the interface of unfair competition and property law.

The absence of a self-contained explanatory theory for trademark law

thus allowed it to expand in new directions, necessitating its abandon-

ment of the direct competition rule (or at least its erosion as a strict pre-

requisite to infringement). Recent developments seem to suggest that a

similar fate awaits the direct competition requirement in hot news misap-

propriation as well.

246

Rooting misappropriation in the principles of un-

just enrichment may, however, guard against this eventuality.

The direct competition requirement of hot news misappropriation is

not a mere formality; it is misappropriation’s very essence. Its existence is

best accounted for by the theory of competitive unjust enrichment, which

views misappropriation as a solution to a collective action problem in an

information collection or dissemination market. Since the doctrine was

aimed at encouraging the creation and preservation of collective or coop-

erative efforts, the viability of such cooperation depends entirely on the

parties in question having a common interest in a resource of value (i.e.,

news collection). In other words, if the parties depend on the resource to

varying degrees in the production of their goods and services, or in struc-

turally different ways, such cooperation is extremely unlikely, thereby di-

luting misappropriation of its very basis. An example is the difference in

competition between two daily newspapers (e.g., New York Times and

Washington Post) and between a daily newspaper and a weekly news maga-

zine (e.g., The Economist). In the latter scenario, while they both rely on

news stories for their content, the nature and extent of their reliance

varies in great measure, rendering the possibility of their entering into a

collective effort to cooperate in the newsgathering exercise less likely.

Direct competition should thus be understood as a measure of par-

ties’ likelihood of cooperating to lower input costs. Rather than eyebal-

ling the simple substitutability of parties’ final products, courts should

look to the competitive input that parties rely on in producing their prod-

uct or service. Factors to consider would include: (1) the nature and

extent to which the parties rely on the same input to compete; (2) the

manner in which they use the input to produce a product or service in

the market; (3) the prevalence and likelihood of cooperative arrange-

ments between competitors for the competitive effort in question; and

(4) if the plaintiff is a member of such an arrangement, the possibility of

the defendant’s entry into the collective. Each of these factors goes to

measuring the homogeneity of parties’ interests in the valuable intangi-

ble that is the subject of controversy.

Using the idea of interest homogeneity to understand the direct

competition element will result in the doctrine being invoked with less

frequency against defendants that have little to gain from a cooperative

246. See infra notes 247–254 and accompanying text (describing how requirement

was misapplied in recent case).

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arrangement with plaintiffs. Rather than introducing an altogether new

norm of no free riding in such circumstances, the analysis would recog-

nize that there is in fact no market-based harm being corrected for, since

the defendant’s cost savings alone (from such free riding) has no effect

on the plaintiff’s profitability, the core concern in hot news misappropria-

tion. The functioning of this approach is best illustrated by applying it to

the facts of a recent decision.

In Barclays Capital, Inc. v. Theflyonthewall.com, the plaintiffs were firms

engaged in the business of producing equity research recommendations,

which they disseminated to subscribers for a fee.

247

The defendant was

an online subscription newsfeed that collected and published financial

news, rumors, and other market-related information exclusively on its

website.

248

Among other news, the defendant website posted the finan-

cial recommendations of the plaintiff firms, principally in the form of

their factual content, while crediting the firms for them.

249

The plaintiffs

alleged hot news misappropriation, and the trial court agreed with them.

In applying the direct competition requirement, the court undertook a

detailed comparison of the parties’ business models, products, and distri-

bution channels, and deemed irrelevant the fact that the defendant

merely reported news about the plaintiffs’ recommendations rather than

the recommendations themselves.

250

This last point was crucial, for it

goes to the core of what the direct competition requirement in the com-

petitive unjust enrichment model is trying to achieve.

Focusing on an analysis of parties’ homogeneity of interests as part of

the direct competition analysis would have resulted in a very different

outcome. First, the parties in the case clearly rely on different inputs as

part of their competitive process. The plaintiffs produce their own rec-

ommendations, which is not the same as the defendant’s communication

of those conclusions as factual news. In other words, the plaintiffs actively

make the news that the defendants report. The analogy is thus to a news-

paper summarizing a presidential speech. The President makes the news,

while the newspaper merely disseminates it. Second, since their inputs

are very different, it is likely that their outputs are too. Whereas the

plaintiff firms derive their market from the contents of what they produce

as recommendations, the defendant does so from being a conduit carry-

ing the factual elements of what multiple firms (such as the plaintiffs) say.

Timeliness is crucial to both the plaintiffs and the defendant, but this

does not necessarily cut in favor of their being essentially the same prod-

uct. The defendant does not merely pass the plaintiffs’ recommenda-

tions off as its own, but consciously credits them as those of the plaintiffs,

which is their principal source of value, as far as the defendant is con-

247. 700 F. Supp. 2d 310, 315–19 (S.D.N.Y. 2010).

248. Id. at 322–27.

249. Id. at 323.

250. Id. at 339–41.

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476 COLUMBIA LAW REVIEW [Vol. 111:419

cerned.

251

The parties’ products are thus hardly identical, and very dif-

ferent from that seen among newspapers competing in the same market.

Third, the plaintiff firms and the defendant are very unlikely to enter into

a cooperative arrangement to defray the costs of their activities, since

their expenditures derive from very different activities. For the plaintiffs,

expenditures derive primarily from hiring skilled, knowledgeable analysts

to generate recommendations, while for the defendant, expenditures de-

rive mainly from hiring skilled reporters to summarize and organize these

recommendations with accuracy and efficiency.

252

Had the court at-

tempted to analyze direct competition through the lens of the hot news

doctrine’s structural purposes and the theory of competitive enrichment

that it is premised on, it would have been forced to conclude that this

core element was completely missing.

An interest-homogeneity approach would also caution against the

ready extension of the doctrine to new uses of information, a move that

would effectively convert hot news into a property interest in the news.

The attempted extension of the doctrine to cover bloggers is a good ex-

ample here.

253

Merely because an individual uses information collected

by another, even if for commercial purposes, hardly renders him a direct

competitor in the collective action sense in which the requirement

emerged. In other words, a blogger is unlikely to be incentivized (by the

misappropriation doctrine) to enter the enterprise of news collection—

the doctrine’s core objective. An action against a blogger is unlikely to

result in the blogger independently collecting the news, or indeed in

joining a cooperative effort for this purpose. To equate direct competi-

tion with the mere use of the same product, or indeed its effects on a

collector’s sales would dilute the requirement of its core significance. A

competitor thus needs to be seeking profits “at the same time and in the

same field,” constraints that should be recognized in applying this

requirement.

254

2. The Duty to Police and Incentive Effects. — A second doctrinal anom-

aly of the hot news doctrine that property- and intellectual property-based

theories have been hard pressed to account for is the requirement—

251. The court’s own observation highlights this point:

In contrast, there is no evidence that a Recommendation by [the defendant] itself

to buy, sell, or hold a particular stock would be given any weight whatsoever by

any investor. Thus, it is essential to [the defendant’s] misappropriation of the

[plaintiffs’] research capital that it connect each Recommendation to its source.

Id. at 337.

252. Id. at 336–37.

253. See Nate Anderson, Is Permission Needed to Retweet Hot News?, ARS Technica,

at http://arstechnica.com/tech-policy/news/2010/04/is-permission-needed-to-retween-

hot-news.ars (on file with the Columbia Law Review) (last visited Feb. 11, 2011) (discussing

application of hot news doctrine to aggregators and “those that simply rewrite the facts

contained in the story and publish a new account in their own words”).

254. Int’l News Serv. v. Associated Press, 248 U.S. 215, 236 (1918).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 477

made explicit by a recent court opinion

255

—that a defendant might be

able to avoid liability by showing that the plaintiff has failed to make rea-

sonable efforts to rein in the systematic free riding activities of other com-

petitors (i.e., beyond the plaintiff and the defendant) in the market.

While some claim that the requirement is a recent development in the

law of hot news, traces of it are evident in at least one prior decision.

256

At first blush, especially from a property point of view, the require-

ment may seem anomalous. No other intellectual property regime allows

a defendant to avoid or reduce his liability by showing that another com-

petitor, i.e., a third party, committed a similar action.

257

A copyright de-

fendant can thus hardly claim as a defense that others continue to copy a

plaintiff’s protected work on a regular basis. The same is equally true, of

course, in property law, where a plaintiff is given the absolute discretion

to pick and choose from among multiple trespassers in commencing an

action. Evidentiary and other strategic considerations are thought to

favor vesting a plaintiff with this discretion.

The oddity, though, originates entirely from viewing copying (free

riding) in the hot news context as a freestanding wrong. It is in this cru-

cial respect, however, that hot news as a nonproprietary doctrine differs

most significantly from other property and intellectual property interests,

where the mere boundary crossing (i.e., trespass, use, or copying) by a

defendant is made actionable.

258

Since the normative significance of free

riding in misappropriation differs quite significantly from traditional in-

255. See Barclays Capital Inc., 700 F. Supp. 2d at 347–48 (holding injunction will be

lifted if plaintiff does not “take[ ] reasonable steps to restrain the systematic, unauthorized

misappropriation of their [services]” by market participants other than defendant).

256. See Andrew L. Deutsch et al., Publishers Increasingly Invoke “Hot News”

Doctrine, Nat’l L.J., May 17, 2010, at 27 (describing requirement as “novel”). For a

previous use of this requirement, see, e.g., Silver v. Lavandeira, No. 08 Civ. 6522(JSR)(DF),

2009 WL 513031, at *6 (S.D.N.Y. Feb. 26, 2009) (noting how widespread availability of

information sought to be protected contradicted a claim for its exclusivity under hot

news).

257. See, e.g., Wallpaper Mfrs., Ltd. v. Crown Wallcovering Corp., 680 F.2d 755, 766

(C.C.P.A. 1982) (“[A]n owner is not required to act immediately against every possibly

infringing use to avoid a holding of abandonment.”). Trademark law comes closest to

recognizing something similar, by imposing on trademark holders an affirmative duty to

control the use of their mark. It thus disallows what is known as “naked licensing”—i.e.,

allowing a licensee to use the mark without any quality control over such use. See J.

Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 18:48 (4th ed.

2010). Such naked licensing results in a trademark owner losing the exclusive right to use

the mark, with it being treated as an abandonment of sorts. Id. The logic underlying this

duty of control derives largely from the communicative function of the trademark, very

different from the duty imposed in relation to time-sensitive information in hot news

misappropriation. See Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358, 367 (2d

Cir. 1959) (“Clearly the only effective way to protect the public where a trademark is used

by licensees is to place on the licensor the affirmative duty of policing in a reasonable

manner the activities of his licensees.”).

258. See generally Henry E. Smith, Intellectual Property as Property: Delineating

Entitlements in Information, 116 Yale L.J. 1742, 1795 (2007) [hereinafter Smith,

Intellectual Property] (discussing “exclusion rights” given by patents).

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478 COLUMBIA LAW REVIEW [Vol. 111:419

tellectual property, it is tested individually in each case.

259

In other

words, copyright and patent laws are presumed to be about providing

authors and inventors with efficient incentives to create or invent. Yet

this incentive is thought to operate at the systemic level and is never

tested in individual cases to see if it actually holds true, i.e., if the copy-

right or patent systems actually induced the creative or inventive activity

in question.

260

In misappropriation, on the other hand, the effects of the

free riding in question are scrutinized in each individual case, to see if

the free riding is likely to impair the incentive to continue producing the

same good or service in the market, not just for the plaintiff, but for

others as well. Rather than allowing these effects to be presumed from

the mere fact of copying or free riding, misappropriation demands that

courts undertake this scrutiny upon being presented with actual

evidence.

261

In the competitive enrichment understanding of hot news, the in-

centives that matter the most are the ones likely to further entrench a

collective action problem. In other words, it is only when free riding in

the market is so prevalent that new entrants are unlikely to either cooper-

ate or collect on their own—putting the entire enterprise of news collec-

tion at risk—that the law cares to intervene.

262

Understood from this

perspective, the duty to police imposed on plaintiffs begins to make

sense. A finding that the practice of systematic free riding in the market

has continued unabated for a significant period of time would thus reveal

that the defendant’s free riding being complained of is unlikely to ad-

versely impact collection efforts currently in place in that very market.

This could, of course, come about because of a variety of factors, includ-

ing the possibility that the structure of norms underlying the collection

efforts has changed over time. The duty to police thus operates princi-

pally as evidence that the defendant’s free riding is indeed likely to im-

pact the plaintiff’s and other information collectors’ incentives.

263

259. See Posner, supra note 28, at 638–39 (describing and critiquing this

requirement).

260. See Shyamkrishna Balganesh, Foreseeability and Copyright Incentives, 122 Harv.

L. Rev. 1569, 1588–89 (2009) (making this point in relation to copyright law); Stewart E.

Sterk, Rhetoric and Reality in Copyright Law, 94 Mich. L. Rev. 1197, 1207–08, 1213–14

(1996) (discussing relationship between copyrights and incentives and noting “few efforts

[have been made] to limit copyright protection to those areas in which incentives are likely

to have an effect on the level of creative activity”).

261. But see Posner, supra note 28, at 632 (observing how this requirement is proxy

for first four elements of hot news doctrine).

262. On this point, it is telling that in National Basketball Ass’n the court chose to

couch this requirement in terms that extended beyond both the plaintiff and the

defendant. See Nat’l Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 845 (2d Cir. 1997)

(“[T]he ability of other parties to free-ride on the efforts of the plaintiff or others would so

reduce the incentive to produce the product or service that its existence or quality would

be substantially threatened.”).

263. One might argue that the duty to police imposes an undue burden on

information gatherers to actually commence a legal action against every possible free rider

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2011] ENDURING MYTH OF PROPERTY IN NEWS 479

The policing requirement, above all else, points to misappropria-

tion’s nonproprietary origins. In the traditional property-based intellec-

tual property context, the reason such a requirement would have no basis

is because a plaintiff’s interest is thought to come into existence com-

pletely independent of the defendant’s actions—i.e., upon creation or

invention (subject, of course, to administrative requirements). Licensing

away uses of the intangible, thereby creating an ex ante market, is thus

considered an integral part of the regime’s utility in the first place. In

this context, rampant, uncompensated copying could hardly be said to

cut against recognizing an entitlement in the plaintiff. In misappropria-

tion, by contrast, there exists no ex ante legal entitlement until the defen-

dant is competitively enriched at the plaintiff’s expense. Being entirely

relational then, a preexisting market for licenses is hardly among the re-

gime’s objectives.

264

Additionally, a showing of rampant, systematic free riding by others

in the market would also seriously undermine the idea that the defen-

dant’s actions are unfair in the competitive sense. Recall that the basis of

the entitlement in misappropriation is that the defendant is able to save

large costs (and thereby enhance its profitability) vis-

a-vis others in the

merely to preserve their future claims, and that this is likely to ignore the various economic

and strategic reasons why they might have consciously chosen not to sue. To alleviate this

concern, the duty ought to be considered discharged, and the claim sufficiently preserved,

whenever a plaintiff can establish some minimal amount of diligence on its part to detect

and deter harmful free riding. Cease and desist letters, or other forms of self-help should

be deemed sufficient in this regard.

264. One might argue that this requirement tracks the well-known trespass/nuisance

distinction in tort and real property law. While the law of trespass is thought to protect

property’s “right to exclude,” the core ownership interest inherent in the exclusivity of

possession, the law of nuisance is said to concern itself with an individual’s right to use and

enjoy the property, independent of any exclusivity as such. See Thomas W. Merrill &

Henry E. Smith, Property: Principles and Policies 22–23 (2007) (describing nuisances as

“interferences with the use and enjoyment of land caused by some activity on neighboring

land”). In evaluating the very existence of a plaintiff’s entitlement in nuisance, the law

often imposes a requirement of unreasonableness that is only ever determined relationally,

by undertaking a relative cost-benefit analysis of the parties’ actions. Restatement

(Second) of Torts § 826 (1979) (applying utility test to determine nuisance). Nuisance law

thus hardly attempts to create a tradable entitlement up front, independent of the

resource itself, whereas trespass law, one might argue, especially when viewed through the

market for leases and licenses to enter real property, is consciously directed at facilitating

just such a market. For scholarly work examining this divide in more detail, see Thomas

W. Merrill, Trespass, Nuisance, and the Costs of Determining Property Rights, 14 J. Legal

Stud. 13, 20–26 (1985) (discussing how disparity between trespass as “mechanical

entitlement-determination rule” and nuisance as “judgmental entitlement-determination

rule” leads these doctrines to be applied to situations of differing transaction cost levels);

Smith, Law of Nuisance, supra note 52, at 975–90 (noting “property rules . . . forc[e]

anyone who wants to engage in a use to bargain with the present owner,” while liability

rules, associated with nuisance, “are used to fine-tune basic exclusionary regimes in high-

stakes contexts”). The comparison to nuisance nonetheless breaks down somewhat

because of the law of servitudes and easements, which allows landowners to buy and sell

their use and enjoyment privileges, the very subject matter of nuisance claims.

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480 COLUMBIA LAW REVIEW [Vol. 111:419

market. In a situation where others in the market are engaged in the

same practice as the defendant, its unfair competitive advantage is dimin-

ished significantly. Indeed, in such a scenario, to grant a plaintiff relief

would be to place the defendant under an obvious competitive

disadvantage.

B. Remedial Options

Grounding hot news misappropriation in a theory of competitive un-

just enrichment is also likely to have major implications for the remedial

response that a court may adopt once the substantive requirements of the

doctrine are satisfied. First, it calls into question courts’ thus far under-

scrutinized practice of awarding injunctive relief in hot news misappro-

priation cases as a matter of course. Second, it sheds light on what an alter-

native, restitutionary award of damages might look like.

1. The Questionable Default of Injunctive Relief. — In almost every suc-

cessful hot news misappropriation case since International News, courts

have awarded a remedy in the nature of an injunction.

265

The injunction

usually prohibits the defendant from free riding on the plaintiff’s infor-

mation for a specified period of time after its publication. What is strik-

ing about this reality is that it is usually accompanied by very little discus-

sion of why injunctive relief ought to be the obvious remedial choice for

courts.

In International News, the majority made the move from substance to

remedy without much reasoning at all. The logic behind the misappro-

priation doctrine (then and now) hardly comports with the exclusive use

of injunctions as a remedial response. The basis of misappropriation lies

in a defendant’s obtaining an unfair competitive advantage by relying on

the plaintiff’s cost and time intensive information-gathering efforts. Its

unfairness thus arises from the unjust enrichment provided to the defen-

dant through cost savings. What is crucial to understand is that until this

enrichment (i.e., cost savings) occurs, the plaintiff itself is vested with no

primary right and correlatively, the defendant is under no primary

duty.

266

Indeed, what makes unjust enrichment an independent basis of

265. To be sure, such claims are often accompanied by ones for copyright

infringement or other unfair competition causes. Yet, in cases where hot news

misappropriation is the successful cause of action, the tendency is overwhelmingly in favor

of granting injunctive relief. See, e.g., Int’l News Serv. v. Associated Press, 248 U.S. 215,

245–46 (1918) (upholding district court’s injunction); Standard & Poor’s Corp. v.

Commodity Exch., Inc., 683 F.2d 704, 712 (2d Cir. 1982) (upholding preliminary

injunction in case of alleged misappropriation of stock index in sale of futures contracts);

Barclays Capital Inc. v. Theflyonthewall.com, 700 F. Supp. 2d 310, 343–47 (S.D.N.Y. 2010)

(issuing injunction for misappropriation); Bd. of Trade v. Dow Jones & Co., 456 N.E.2d 84,

90–91 (Ill. 1983) (prohibiting Chicago Board of Trade from using “Dow Jones Industrial

Average as a basis of stock index futures contracts”).

266. Here and elsewhere, the idea that the misappropriation doctrine (and indeed

unjust enrichment more generally) does not create an ex ante entitlement should not be

taken to imply that it lacks a framework for recovery from which entitlements can be

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2011] ENDURING MYTH OF PROPERTY IN NEWS 481

recovery in the common law is its creation of a primary obligation (of

restitution) based on the defendant’s actions.

267

A primary right is one

whose existence is not dependent on the breach of a preexisting right or

duty, unlike a secondary right that comes into existence only upon such a

breach.

268

The tort of negligence, for instance, operates to create a sec-

ondary right (to compensation) for the breach of a primary duty (of

care), imposed on individuals, that the defendant breached. In a similar

vein, the tort of trespass creates a secondary right for the breach of a

primary duty (of inviolability) that correlates with a property owner’s

right to exclude. In situations of unjust enrichment, however, the law

does not just create a secondary right to vindicate a primary right along

the lines of tort and property law, but rather recognizes a defendant’s

actions to create an altogether new primary duty appropriate to the cir-

cumstances. Unjust enrichment involves the legal creation of a primary

obligation to restore the benefit obtained in a certain context; and this distin-

guishes it from other areas of the common law.

269

The right created by unjust enrichment, unlike other primary rights,

is also highly specified in content, thereby obviating the need for an inde-

pendent secondary right.

270

Unjust enrichment thus vests a plaintiff with

a right to restoration as an enforceable primary right. Now consider the

choice of remedy to enforce this right. Injunctive relief is by its very na-

ture forward looking and directed at preventing the occurrence of an

action that is likely to bring about a breach of duty or the interference

with a party’s right. This is in contrast to damages, which are principally

backward looking. On the face of things, forward looking injunctive re-

lief might seem to make sense in cases of unjust enrichment. Why not

prevent the problematic transfer (i.e., the enrichment and corresponding

loss) rather than wait for it to happen and then correct it through restora-

discerned ex ante. Being able to discern an entitlement ex ante and plan for or around its

existence and enforcement is vastly different from the law’s ex ante recognition of a legally

enforceable entitlement. The legal basis of the entitlement, for unjust enrichment, comes

into existence only after the event of enrichment has actually occurred. I thus agree with

the idea, offered by some scholars, that unjust enrichment law is capable of signaling

entitlements ex ante. See, e.g., Hanoch Dagan, Restitution’s Realism, in Philosophical

Foundations of the Law of Unjust Enrichment, supra note 157, at 54, 68–69 (arguing “it is

important to set up the ex ante entitlements for [mistaken payment cases] in a way that

properly addresses the autonomy and the welfare concerns of both [parties]”). I would

emphasize, however, that the law does not enforce them in their ex ante status without

connecting it to some other interest.

267. See Birks, Unjust Enrichment, supra note 160, at 3 (noting that law of unjust

enrichment is based on “restitution [which] is a right to a gain received by the

defendant”).

268. See Wesley Newcomb Hohfeld, Fundamental Legal Conceptions as Applied in

Judicial Reasoning and Other Legal Essays 101–02 (Walter Wheeler Cook ed., 1919)

(discussing difference between in rem primary rights and in personam secondary rights).

269. See Grantham & Rickett, supra note 215, at 163 (describing right to restoration

as primary right).

270. Id. (noting unjust enrichment “requires no secondary right to found the grant of

restoration”).

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tion? The answer derives entirely from the fact that prior to the transfer

(i.e., the enrichment), the plaintiff has no primary interest at all that the

law can come to support and enforce. This is where the divergence of

unjust enrichment from other parts of the common law assumes func-

tional significance. Tort, property, and contract law each create secon-

dary rights and duties that operate above a set of primary ones, and in-

junctive relief (or its equivalent, e.g., specific performance) can be

understood as enforcing these primary obligations; unjust enrichment,

on the other hand, has no similar equivalent. Consequently, unless in-

junctive relief purports to have no connection to the underlying substan-

tive right, it remains unviable as an immediate option.

One might, however, argue that unjust enrichment in reality creates

a secondary right—for the remedial enforcement of the primary obliga-

tion of restoration that the defendant has failed to discharge.

271

In other

words, unjust enrichment does not just create a primary right, but instead

imposes liability for the nonperformance of an obligation that the cir-

cumstances created.

272

Even if this view were accepted, it hardly cuts in

favor of injunctive relief as a remedy. The effect of this secondary right

approach to unjust enrichment is to blur the distinction between unjust

enrichment and the law of torts, since it renders the nonfulfillment of the

primary obligation (of restoration) an actionable wrong. All the same, it

does little to change the internal content of the obligation itself, which

remains restorative. Restoration, however, remains an affirmative duty,

which sets it apart from other tort law duties that are largely negative in

structure. As a preventive remedy, injunctive relief then has little connec-

tion to restoration except when tied to a preexisting interest around

which to operationalize the affirmative duty (e.g., a property right). In

the absence of a pre-primary interest of this kind in unjust enrichment,

injunctive relief can do little by way of furthering the restorative content

of the obligation in unjust enrichment, be it primary or secondary in

structure.

Consider this logic in the context of hot news misappropriation. Let

us start from the basic proposition that factual news is a public domain

271. For an extensive discussion of this line of reasoning, see Kit Barker, Rescuing

Remedialism in Unjust Enrichment Law: Why Remedies Are Right, 57 Cambridge L.J. 301,

319–27 (1998) (discussing rights and remedies in context of unjust enrichment law and

advocating development of “more fully integrated remedial scheme”); Peter Birks, Rights,

Wrongs, and Remedies, 20 Oxford J. Legal Stud. 1, 6–25 (2000) (advocating for language

of rights, rather than remedies, for law’s response to wrongs); Stephen A. Smith, The

Structure of Unjust Enrichment Law: Is Restitution a Right or a Remedy?, 36 Loy. L.A. L.

Rev. 1037, 1040 (2003) [hereinafter Smith, Structure of Unjust Enrichment] (concluding

“restitutionary orders can rightly be regarded as either remedial orders or as direct

enforcement orders”).

272. See Smith, Structure of Unjust Enrichment, supra note 271, at 1040–41

(discussing this distinction in terms of “direct enforcement” orders and “remedial”

orders). Very interestingly, Smith expressly excludes injunctions from the scope of this

analysis, perhaps in recognition of their inherent incompatibility with unjust enrichment.

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2011] ENDURING MYTH OF PROPERTY IN NEWS 483

resource—unowned, in the commons, and freely accessible by all. This

implies that even upon its cost and time intensive collection, no one, not

even its collector, has an exclusionary legal entitlement over it in the ab-

stract. It is, to use Justice Brandeis’s language, “free as the air to common

use.”

273

Now when a competitor enters the picture and gains lawful ac-

cess to this public domain resource but uses it to obtain a competitive

cost advantage, the law of misappropriation seeks to nullify that advan-

tage, which it deems an act of unfair competition. Its method of doing so

entails restoring to the plaintiff the cost advantage obtained by the defen-

dant, thereby purporting to put them on a level playing field. The defen-

dant’s competitive actions thus create a duty of restoration (and a correla-

tive right), which like traditional unjust enrichment law originates in the

circumstances and context involved. Misappropriation can be under-

stood to generate this obligation (a primary right), or to enforce the right

that the circumstances created (a secondary right). Regardless of struc-

ture, though, the obligation is one of nullifying the unfair competitive

advantage. Since injunctive relief is by its very nature forward looking, it

would have to be granted before the defendant’s actions have occurred,

and thus prior to an obligation of any kind being imposed on the defen-

dant. Yet prior to the emergence of this obligation, the plaintiff has no

individual entitlement that the injunction can vindicate, given the collec-

tive, public domain nature of the information. Thus, to speak of a duty

not to misappropriate hot news (analogous to a duty not to be unjustly

enriched) makes little sense, since its correlative right is never vested in

an individual competitor, but is in the nature of a group or collective

right that is incapable of being individually enforced.

274

Some of this logic also resonates with tort law’s general reluctance to

award injunctive relief except when an identifiable property right, operat-

ing as a preexisting interest, is involved.

275

Rarely do courts award in-

junctions in tort claims that involve an interest identified in the abstract

273. Int’l News Serv. v. Associated Press, 248 U.S. 215, 250 (1918) (Brandeis, J.,

dissenting).

274. Additionally, injunctions framed in such terms raise serious constitutional issues

owing to their lack of specificity, overbreadth, and the distinct possibility of contempt

proceedings for noncompliance. Often referred to as “obey the law” injunctions, courts

have increasingly exhibited a general reluctance to allow their issuance, despite their

having been the norm for decades in some areas of the law. See SEC v. Wash. Inv.

Network, 475 F.3d 392, 407 (D.C. Cir. 2007) (finding injunction enjoining future violations

of Investment Advisers Act insufficiently specific to uphold); SEC v. Smyth, 420 F.3d 1225,

1233 n.14 (11th Cir. 2005) (refusing to enforce “‘obey-the-law’ injunction” because an

“injunction must be framed so that those enjoined know exactly what conduct the court

has prohibited” (quoting Fla. Ass’n of Rehab. Facilities, Inc. v. Fla. Dep’t of Health &

Rehabilitative Servs., 225 F.3d 1208, 1223 (11th Cir. 2000))); SEC v. Savoy Indus., Inc., 665

F.2d 1310, 1318–19 (D.C. Cir. 1981) (declining to enforce part of injunction that forbade

engaging “in any act, practice, or course of business which operates or would operate as a

fraud or deceit”).

275. See John Murphy, Rethinking Injunctions in Tort Law, 27 Oxford J. Legal Stud.

509, 509–11 (2007) (arguing for expansion of availability of injunctions in tort law).

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484 COLUMBIA LAW REVIEW [Vol. 111:419

(e.g., a right not to be negligently injured). They remain willing to do so

only when the interest is a property or property-like interest. The pur-

ported reason behind this is the fact that most tort claims, with the excep-

tion of property-related ones, are contingent on specific consequences

accruing from a defendant’s actions.

276

Thus, negligence is actionable

only upon a showing of harm that was a reasonably foreseeable conse-

quence of the defendant’s actions. To intervene before these conse-

quences develop would convert the action into a vastly different one.

Analytical reasons apart, the costs of uncertainty also favor avoiding

injunctive relief in hot news cases, at least as the default remedy.

277

In-

junctive relief for entitlements in information may generate costs beyond

those traditionally seen in tangible property. Often, such relief is incapa-

ble of being tailored with precision in advance, so as to avoid including

perfectly legitimate activities within its scope.

278

As a result, plaintiffs try

to leverage their entitlements for amounts well in excess of what the enti-

tlements are valued at ex post, producing inefficient results in the mar-

ket.

279

Mark Lemley and Phil Weiser refer to this real or threatened use

of litigation as the holdup strategy in intellectual property.

280

In hot

news misappropriation cases, the uncertainty surrounding a plaintiff’s en-

titlement is unavoidable. A defendant’s act of lifting the factual content

from a competitor’s news story is rendered actionable by misappropria-

tion, while the act of accessing and reading that content and using it as a

tip to obtain the exact same information is deemed perfectly acceptable,

and indeed necessary in the industry.

281

Yet the line between lifting facts

from a competitor’s story and using it as a tip for a newspaper’s own story

is perilously narrow and incapable of being policed within the remedial

framework. In this scenario, relying on injunctive relief as a default rem-

edy runs the risk of impairing the beneficial (and efficient) practice of

using factual tips, resulting in a grossly inefficient duplication of efforts,

276. For a critique of this logic, albeit in simplistic terms, see id. at 524–30.

277. For an identification of this problem and its elaboration, see Stewart E. Sterk,

Property Rules, Liability Rules, and Uncertainty About Property Rights, 106 Mich. L. Rev.

1285, 1329 (2008) (“When removal costs are high, property-rule protection—awarding

injunctive relief to the copy-right holder—is likely to encourage inefficient search and

punish users who act efficiently.”).

278. See Mark A. Lemley & Philip J. Weiser, Should Property or Liability Rules

Govern Information?, 85 Tex. L. Rev. 783, 793–95 (2007) (arguing rights that cannot be

clearly defined, such as patent and copyright, mean that “injunctive relief is a remedy with

significant error costs”).

279. Mark A. Lemley & Carl Shapiro, Patent Holdup and Royalty Stacking, 85 Tex. L.

Rev. 1991, 1994–2010 (2007) (studying this phenomenon in relation to patents); Lemley &

Weiser, supra note 278, at 795 (“[B]ecause rights holders know that they can obtain an

injunction that disadvantages the defendant more than it benefits them, they use that

knowledge to drive settlement rates well above the ‘benchmark’ rate . . . .”).

280. Lemley & Weiser, supra note 278, at 795.

281. See Int’l News Serv. v. Associated Press, 248 U.S. 215, 243–44 (1918) (“[B]oth

parties avowedly recognize the practice of taking tips, and neither party alleges it to be

unlawful or to amount to unfair competition in business.”).

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or alternatively, in the creation of an effective monopoly for information

gatherers with a competitive advantage. Indeed, if the ability to obtain

injunctive relief of this form had been the norm when news collection

and dissemination first emerged, it is doubtful whether cooperative new-

sgathering among competitors of different sizes would be as prevalent as

it is today.

There is also a perhaps more straightforward explanation for making

damages the default remedy in hot news misappropriation cases. In eBay

Inc. v. MercExchange, L.L.C., the Supreme Court concluded that in choos-

ing between remedial options to protect a substantive right, courts had to

follow equity’s traditional four-factor test to rule out the suitability of

monetary damages before granting injunctive relief.

282

This process is

mandated regardless of substantive area, and even when the substantive

right involved is the right to exclude, i.e., a property right.

283

Courts in

hot news misappropriation cases are thus now mandated to begin with

the default of monetary relief once a substantive claim is made out, and

then only upon a showing of its unsuitability can they move toward grant-

ing injunctive relief. Should courts come to recognize the central pur-

pose of the doctrine as being about remedying an unfair cost saving by a

defendant, damages will likely be deemed sufficient in an overwhelming

majority of cases.

Very rarely, courts seem willing to award plaintiffs injunctive relief in

unjust enrichment cases even prior to the occurrence of an actual enrich-

ment.

284

These are usually situations where the defendant’s enrichment

is imminent, with the injunctions aptly referred to as “quia timet injunc-

tions.”

285

Quia timet injunctions are not, strictly speaking, restitutionary

remedies, since no enrichment has yet occurred that would require resti-

tution. All the same, these injunctions derive from the exact same logic

that underlies ordinary restitutionary relief,

286

except that they are cou-

pled with an attempt to avoid multiple lawsuits and the transaction costs

likely to accompany the enrichment and its annulment. Relief of this

282. 547 U.S. 388, 390 (2006). See generally John M. Golden, Principles for Patent

Remedies, 88 Tex. L. Rev. 505, 577–79 (2010) (observing how four-factor rule originated

in relation to preliminary injunctions, and made its way into analysis of permanent

injunctions through use of presumptions).

283. See eBay, 547 U.S. at 392 (“[T]he creation of a right is distinct from the provision

of remedies for violations of that right.”).

284. See Charles Mitchell, The Law of Contribution and Reimbursement 49–50

(2003) (“In some circumstances English law gives a claimant a remedy the purpose of

which is not to reverse a defendant’s unjust enrichment . . . but to prevent the . . . unjust

enrichment . . . from arising in the first place.”); Charlie Webb, What Is Unjust

Enrichment?, 29 Oxford J. Legal Stud. 215, 234–35 (2009) (discussing instances in which a

claimant demands that the “defendant . . . pay his fair share to the creditor at the outset”).

285. Mitchell, supra note 284, at 50; see also Black’s Law Dictionary 855 (9th ed.

2009) (defining quia timet injunction as “[a]n injunction granted to prevent an action that

has been threatened but has not yet violated the plaintiff’s rights”).

286. Webb, supra note 284, at 234 (noting how “the law is doing the same thing here

and for the same reasons”).

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486 COLUMBIA LAW REVIEW [Vol. 111:419

nature is only ever granted in a narrow set of unjust enrichment cases

usually involving multiple parties.

287

In a similar vein, courts adjudicating hot news misappropriation

cases should view their discretion to grant injunctive relief as limited to

the extremely narrow set of cases where a defendant’s enrichment is im-

minent, and the injunction does no more than minimize the administra-

tive costs of allowing the enrichment to occur and then undoing it. Most

importantly, in such cases, the availability of injunctive relief should not

be seen as altering the normative basis or structure of the claim, which

will remain restitutionary.

2. Calculating Restitutionary Damages. — Rejecting injunctive relief as

the default remedy in hot news cases brings us to the question of comput-

ing appropriate damages. As noted earlier, remedies for misappropria-

tion were directed at annulling gains derived by a defendant from system-

atic reliance on the plaintiff’s efforts, whereby a defendant obtains an

unfair advantage by lowering its own collection costs.

288

This formula-

tion is crucial, since the gain is not simply the defendant’s profitability,

which may have come about owing to other factors, but rather its en-

hanced profitability due to its unfair cost savings. The ideal solution is

therefore one that focuses on annulling this cost savings and its effects on

the defendant.

There are two possible ways by which this solution can be achieved.

In the first, called the standard of comparison approach, a defendant’s

actual cost savings is thought to be large enough so as to form the sole

basis of damages and is directly measured. In situations where the defen-

dant has not made a large enough profit, or where the profit is small

relative to the monetary value of the advantage the defendant obtained

from its acts of free riding, a plaintiff might choose to adopt this ap-

proach for computing restitutionary damages. This measure is likely to

be used against defendants whose business models are built entirely

around free riding.

A second alternative, the attributable profits approach, attempts to

calculate a defendant’s cost savings through its profits earned, and attrib-

utable to, its free riding. Here, the defendant is forced to disgorge all

earnings that are causally attributable to its free riding, which are taken to

represent its unfair advantage. This approach is most meaningful against

a defendant who is a profitable competitor in the market, who decided to

free ride to cut its own collection costs. By determining what proportion

of its profits derives from its own efforts rather than its free riding, and

disgorging the latter, any cost savings and related benefits can be

annulled.

287. See, e.g., Stimpson v. Smith, [1999] Ch. 340, 350 (Eng.) (finding right of

contribution between co-sureties where “there is no problem in ascertaining the amount of

the contribution”).

288. See supra Part II.A.2.d (discussing remedy where plaintiff’s recovery is linked to

defendant’s disgorgement of unfair cost savings derived from its free riding).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 487

a. The Standard of Comparison Approach. — The standard of compari-

son measure is commonly used in trade secrets cases where a defendant’s

benefit consists primarily in the cost savings that it realizes from its ac-

tions.

289

This approach determines a defendant’s gain by comparing the

defendant’s actual costs with the costs it would have incurred if it had not

undertaken the misappropriation.

290

Originating in patent law, this mea-

sure attempts to determine the “fruits of the advantage which [the defen-

dant] derived from the use of that invention, over what he would have

had in using other means then open to the public and adequate to en-

able him to obtain an equally beneficial result.”

291

The cost savings mea-

sured is in turn viewed as the equivalent of any profits that the defendant

might have earned from its actions.

292

Translating this approach into the hot news context would entail de-

termining the newsgathering costs that a free riding defendant saves

through its actions. Since the focus in hot news misappropriation cases is

on systematic (as opposed to one-off) free riding over a period of time,

this is unlikely to be hard to determine. Variables are likely to include a

plaintiff’s costs of hiring and maintaining correspondents for a specific

geographic area, the costs of sending them to independently investigate a

story, and the costs involved in transmitting this information back to the

editorial office on a timely basis.

293

These costs are likely to vary directly

with the extent of a defendant’s free riding—i.e., whether it free rides on

the efforts of just one newspaper or a group of them.

This measure of damages is likely to work best in situations where the

defendant’s business model is built entirely around free riding, or where

its profits from its actions as such are not large enough to operate as a

deterrent when disgorged to the plaintiff.

289. See Salsbury Labs., Inc. v. Merieux Labs., Inc., 908 F.2d 706, 714–15 (11th Cir.

1990) (approving of lower court’s use of only costs saved by defendant in calculating

damages); Telex Corp. v. IBM Corp., 510 F.2d 894, 930–32 (10th Cir. 1975) (approving use

of standard of comparison measure because “[n]ot to have allowed such would have been

a denial to IBM of a substantial portion of the damage sustained by it”); Int’l Indus. v.

Warren Petroleum Corp., 248 F.2d 696, 699 (3d Cir. 1957) (describing standard of

comparison measure as “the comparison of the cost . . . by means of the use of the trade

secret with a method of accomplishing the same result which would have been open to

defendant had he not appropriated the trade secret”); Restatement (Third) of Unfair

Competition § 45 cmt. f (1995) (“The traditional form of restitutionary relief in an action

for the appropriation of a trade secret is an accounting of the defendant’s profits on sales

attributable to the use of the trade secret.”); 1 Palmer, supra note 171, § 2.8, at 111–12

(describing goal of standard of comparison measure as “depriv[ing] the defendant of the

expense saved by the wrongful use of the trade secret”).

290. 1 Melvin F. Jager, Trade Secrets Law § 7:23, at 7-127 to 7-128 (2003).

291. Tilghman v. Proctor, 125 U.S. 136, 146 (1888).

292. See International Indus., 248 F.2d at 702 (noting how in this process “the profits

are simply measured by the savings determined” (emphasis omitted)).

293. In the district court case that preceded the Supreme Court’s decision in

International News, the plaintiff claimed that this exercise cost $3,500,000. Associated Press

v. Int’l News Serv., 240 F. 983, 984 (S.D.N.Y. 1917).

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b. The Attributable Profits Approach. — Another common measure of

restitutionary damages involves ascertaining the defendant’s net profits

and then determining what portion of it is attributable to its acts of free

riding.

294

This represents the effects of its cost savings on its profitability,

which can then be disgorged to the plaintiff. Copyright and trade secrets

law routinely allow the use of this measure, as does trademark law.

295

enables a plaintiff to recover the defendant’s profits after deducting for

the defendant’s own expenses and other factors that might have been

causally responsible for the profits.

296

This approach, however, focuses on a defendant’s actual rather than

hypothetical profits.

297

Consequently, it only makes sense in situations

where the defendant has made a profit that is in large measure causally

linked to its free riding. In apportioning the profits on this causal basis,

courts eliminate parts that reveal little connection between the free rid-

ing and the defendant’s earnings, and where it is unclear if the defendant

earned anything at all specifically from the free riding.

298

294. 1 Palmer, supra note 171, § 2.12, at 161–62.

295. See 17 U.S.C. § 504(b) (2006) (“The copyright owner is entitled to recover . . .

any profits of the infringer that are attributable to the infringement and are not taken into

account in computing the actual damages.”); Restatement (Third) of Unfair Competition

§ 45 cmt. c (1995) (describing compensatory damages and restitution available for

appropriation of trade secrets); id. § 37 cmts. g–h (discussing calculation of damages for

trademark infringement); see also Clark v. Bunker, 453 F.2d 1006, 1011 (9th Cir. 1972)

(holding that plaintiff had right to recover all profits of defendant from trade secret

appropriation, regardless of whether it caused loss for plaintiff); Schreyer v. Casco Prods.

Corp., 190 F.2d 921, 924 (2d Cir. 1951) (upholding trial court’s award of damages based

on accounting of profits defendant made from unfair competition practices).

296. See 4 Nimmer & Nimmer, supra note 91, § 14.03 (discussing this process in

297. Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 536 (5th Cir.

1974) (“[T]he defendant is normally not assessed damages on wholly speculative

expectations of profits.”); Associated Residential Design, LLC v. Molotky, 226 F. Supp. 2d

1251, 1255 (D. Nev. 2002) (“[T]he Ninth Circuit has limited the recovery of indirect

profits to those that are non-speculative and directly attributable to the infringement.”

(citing Mackie v. Reiser, 296 F.3d 909, 914 (9th Cir. 2002))); 4 Nimmer & Nimmer, supra

note 91, § 14.03[A] (quoting Judge Posner for proposition that damages in copyright cases

cannot be based on “imagine[d] fantastic success”).

298. Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 520 (4th Cir. 2003)

(“Once the copyright owner has established the amount of the infringer’s gross revenues,

the burden shifts to the infringer to prove either that part or all of those revenues are

‘deductible expenses’ (i.e., are not profits), or that they are ‘attributable to factors other

than the copyrighted work.’”); Mackie, 296 F.3d at 915 (“[A] district court must conduct a

threshold inquiry into whether there is a legally sufficient causal link between the

[copyright] infringement and subsequent indirect profits.”); USM Corp. v. Marson

Fastener Corp., 467 N.E.2d 1271, 1276 (Mass. 1984) (“Once a plaintiff demonstrates that a

defendant made a profit from the sale of products produced by improper use of a trade

secret, the burden shifts to the defendant to demonstrate those costs [were] offset

against . . . the portion of its profit attributable to factors other than the trade secret.”

(citing Jet Spray Cooler, Inc. v. Crampton, 385 N.E.2d 1349, 1358 n.14 (Mass. 1979))); 4

Nimmer & Nimmer, supra note 91, § 14.03[B][2] (“The copyright owner is entitled to

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2011] ENDURING MYTH OF PROPERTY IN NEWS 489

In the hot news misappropriation context, this would commence

with a court ascertaining if the defendant made any profit at all, and if so,

how much it amounts to in gross. It would then allow the defendant to

deduct any expenses of its own that it incurred, such as overhead, admin-

istrative, and other recurring expenses. This is likely to be significant if

the defendant is an entity that collects information on its own, or through

other (nonmisappropriation-based) strategies. Salient among these costs

might also be the expenses incurred by a defendant in independently

investigating any tips it legitimately obtained from competitors. A court

would then move to determining how much of the defendant’s profits

can be causally linked to the information the defendant obtained

through free riding.

Disgorging the defendant’s gain, represented in its cost savings,

would thus firmly root hot news misappropriation in the idea of competi-

tive unjust enrichment. It would ensure that the remedial corrective

courts offer comports with the reasons for the action and is neither

under- nor overinclusive in coverage. Depending on the circumstances

of the case and the peculiarities of the defendant’s enterprise and free

riding, one approach to disgorging a defendant’s gain might be prefera-

ble to another, and either plaintiffs or courts should have the option of

deciding between them. Most importantly, it would at the very least en-

sure that in hot news misappropriation cases, courts begin to engage with

the question of appropriate damages—something that they have failed to

do since International News.

C. Clues to the First Amendment Puzzle

Perhaps more intriguing than courts’ refusal to develop a method of

calculating damages in hot news misappropriation cases is the fact that, to

date, no court has examined the extent to which the action remains com-

patible with the constitutional guarantees of free speech under the First

Amendment. In International News, Justice Brandeis’s dissent alluded to

the doctrine’s potential speech-limiting effects.

299

Given the lack of a ro-

bust First Amendment jurisprudence at the time, however, his analysis

remained principally in the realm of rhetoric. No decision since has ad-

dressed the First Amendment implications of the hot news doctrine di-

rectly.

300

While a detailed discussion of the interaction between the First

recover only those profits of the infringer that are attributable to the infringement.”

(internal quotation marks omitted)).

299. Int’l News Serv. v. Associated Press, 248 U.S. 215, 266 (1918) (Brandeis, J.,

dissenting).

300. In National Basketball Ass’n v. Motorola, Inc., the Second Circuit refused to reach

the First Amendment issue, since it ultimately found for the defendant. 105 F.3d 841, 854

n.10 (2d Cir. 1997). The district court in National Basketball Ass’n considered and rejected

the First Amendment claim. See Nat’l Basketball Ass’n v. Sports Team Analysis & Tracking

Sys., Inc., 931 F. Supp. 1124, 1138–40 (S.D.N.Y. 1996) (rejecting defendant’s claim that

“First Amendment . . . prohibits this Court from enjoining their dissemination of real-time

information about the NBA because such an injunction would constitute an

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490 COLUMBIA LAW REVIEW [Vol. 111:419

Amendment and the common law is beyond the scope of this Article, this

section illustrates how rooting hot news misappropriation in a theory of

competitive unjust enrichment is likely to go some distance in rendering

it compatible with the free speech protections of the First Amendment.

On the face of things, the misappropriation doctrine raises at least three

potential First Amendment issues.

First, the hot news doctrine deals with speech that is inherently news-

worthy.

301

Given that it is only time-sensitive information that qualifies

for protection, newsworthiness is in many ways central to hot news. Yet as

a historical matter, liability for newsworthy information—information im-

bued with a public interest in its dissemination—has received very close

scrutiny under the First Amendment.

302

This is especially so when such

information is truthful in nature, and lawfully obtained.

303

In these in-

stances, the Supreme Court has continued to require that the restriction

serve a substantial purpose of the highest order for it to pass muster

under the First Amendment.

304

While it remains unclear whether this

implies that courts need to be applying strict scrutiny in such cases (as

opposed to the more deferential intermediate scrutiny), at the very least

it demands a cogent identification of the law’s purpose, and the extent to

unconstitutional prior restraint”), aff’d in part and vacated in part sub nom. Nat’l Basketball

Ass’n, 105 F.3d 841.

301. Speech is taken to be newsworthy as a category when it deals with material that is

of a “public concern.” Bartnicki v. Vopper, 532 U.S. 514, 525 (2001).

302. See, e.g., Zacchini v. Scripps-Howard Broad. Co., 433 U.S. 562, 574 (1977)

(citing cases emphasizing “protection extended to the press by the First Amendment in

defamation cases”); Shulman v. Grp. W Prods., Inc., 955 P.2d 469, 479 (Cal. 1998)

(“[N]ewsworthiness is . . . a constitutional defense to, or privilege against, liability for

publication of truthful information.”); Battaglieri v. Mackinac Ctr. for Pub. Policy, 680

N.W.2d 915, 919 (Mich. Ct. App. 2004) (agreeing with defendant that “use of Battaglieri’s

name and statement [in a fundraising letter] is protected under the First Amendment

because the letter concerned a matter of legitimate public concern”). Some

commentators are split on whether to afford the media broad First Amendment protection

from breach of privacy torts for what they publish. Compare Anthony L. Fargo & Laurence

B. Alexander, Testing the Boundaries of the First Amendment Press Clause: A Proposal

for Protecting the Media from Newsgathering Torts, 32 Harv. J.L. & Pub. Pol’y 1093,

1141–53 (2009) (arguing for broad liability protection for the media on First Amendment

grounds), with Rodney A. Smolla, Privacy and the First Amendment Right to Gather News,

67 Geo. Wash. L. Rev. 1097, 1138 (1999) (arguing against liability protection and

concluding that “strong First Amendment doctrines stand in the way of many of the most

meaningful privacy reforms”).

303. See Fla. Star v. B.J.F., 491 U.S. 524, 541 (1989) (“[W]here a newspaper publishes

truthful information which it has lawfully obtained, punishment may lawfully be imposed,

if at all, only when narrowly tailored to a state interest of the highest order.”); Smith v.

Daily Mail Publ’g Co., 443 U.S. 97, 103 (1979) (“[I]f a newspaper lawfully obtains truthful

information about a matter of public significance then state officials may not

constitutionally punish publication of the information, absent a need to further a state

interest of the highest order.”).

304. See cases cited supra note 303.

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which the legal mechanism employed is best positioned to realize that

purpose.

305

Second, the prior restraint rule under the First Amendment cautions

against the ready grant of future-looking injunctive relief in cases where

courts have not undertaken a substantive examination of the speech in

question.

306

Prior restraints are treated by courts with extreme suspicion

under the First Amendment, since they preclude a defendant from rais-

ing a successful defense that its actions are protected against liability by

the First Amendment.

307

This is especially so when the defendant is a

newspaper, since the potential chilling effects that flow from the restraint

are thought to pose additional burdens on the nature and scope of demo-

cratic dialogue.

308

The rule certainly does not extend to situations where

a court has examined a defendant’s actions (i.e., speech) and found

them to fall outside the scope of the First Amendment.

309

But an injunc-

tion that operates even before the defendant undertakes its act of publi-

305. This distinction turns on whether the free speech burden is content based or

content neutral. Content-based regulation generally differentiates between speech on the

basis of its message or viewpoint, whereas content-neutral burdens implicate free speech

interests incidentally, and do so independent of any underlying viewpoint or perspective.

Within the intellectual property context, scholars continue to disagree on whether the

law’s effects on speech are content based or content neutral. Compare C. Edwin Baker,

First Amendment Limits on Copyright, 55 Vand. L. Rev. 891, 922–33 (2002) (arguing that

First Amendment Skein, 54 Stan. L. Rev. 1, 47–54 (2001) (arguing that it is content

neutral).

306. For an overview of the prior restraint rule, see generally Stephen R. Barnett, The

Puzzle of Prior Restraint, 29 Stan. L. Rev. 539 (1977); Thomas I. Emerson, The Doctrine of

Prior Restraint, 20 Law & Contemp. Probs. 648 (1955); John Calvin Jeffries, Jr., Rethinking

Prior Restraint, 92 Yale L.J. 409 (1983); William T. Mayton, Toward a Theory of First

Amendment Process: Injunctions of Speech, Subsequent Punishment, and the Costs of the

Prior Restraint Doctrine, 67 Cornell L. Rev. 245 (1982); Martin H. Redish, The Proper

Role of the Prior Restraint Doctrine in First Amendment Theory, 70 Va. L. Rev. 53 (1984).

307. See, e.g., Fort Wayne Books, Inc. v. Indiana, 489 U.S. 46, 66–67 (1989)

(condemning seizure of “obscene” materials under Indiana’s RICO law and emphasizing

that “State cannot escape the constitutional safeguards of our prior [First Amendment]

cases by merely recategorizing a pattern of obscenity violations as ‘racketeering’”); Vance

v. Universal Amusement Co., 445 U.S. 308, 316–17 (1980) (“[P]rior restraints would be

more onerous and more objectionable than the threat of criminal sanctions after a film

has been exhibited, since nonobscenity would be a defense to any criminal prosecution.”).

308. See Neb. Press Ass’n v. Stuart, 427 U.S. 539, 559 (1976) (noting “damage can be

particularly great when the prior restraint falls upon the communication of news and

commentary on current events”).

309. See Pittsburgh Press Co. v. Pittsburgh Comm’n on Human Relations, 413 U.S.

376, 390 (1973) (noting prior restraint doctrine requires suppression of speech before

determining whether it is unprotected, but holding order in question is acceptable

because it will not go into effect until after final determination that actions were

unprotected); Mark A. Lemley & Eugene Volokh, Freedom of Speech and Injunctions in

Intellectual Property Cases, 48 Duke L.J. 147, 169–72 (1998) (indicating permanent

injunctions issued after speech is determined to be unprotected are not constitutionally

problematic).

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492 COLUMBIA LAW REVIEW [Vol. 111:419

cation—where the content of such publication remains uncertain—is

thought to implicate the prior restraint rule.

Injunctive awards in misappropriation cases combine both backward-

and forward-looking elements. On the one hand, they enjoin a defen-

dant’s actions based on past activities that are actually scrutinized by a

court. This tracks the usual practice of courts in traditional intellectual

property cases.

310

At the same time, however, hot news injunctions also

enjoin a defendant’s future publication (albeit of a similar nature) with-

out the court undertaking a substantive examination of the speech di-

rectly, by focusing instead on an abstract statement of the law that would

render the defendant potentially liable. In the obscenity context, some

refer to these injunctions as standards injunctions, since they enjoin be-

havior based entirely on an abstract standard, rather than any concrete,

actual behavior.

311

The injunction in International News is illustrative—

the court enjoined the defendant from “any taking or gainfully using of

the complainant’s news, either bodily or in substance, from bulletins is-

sued by the complainant or any of its members, or from editions of their

newspapers, until its commercial value as news to the complainant and all

of its members has passed away.”

312

While this applied to news already

published by the defendant, it clearly also extended to news yet to be

collected, published, and taken, thereby likely implicating the prior re-

straint rule.

Third, in contrast to other forms of intellectual property rights, the

misappropriation doctrine—in its current propertarian version—con-

tains no internal device that allows free speech interests to be balanced

against the control they afford plaintiffs. In copyright law, the fair use

doctrine and idea/expression dichotomy are thought to perform this

function, and other regimes contain similar mechanisms, often referred

to as First Amendment safety valves.

313

Some have thus argued that the

310. One sees this, for instance, in copyright cases involving a defendant’s continued

copying and dissemination of a plaintiff’s (particular) protected work. See Tiffany D.

Trunko, Note, Remedies for Copyright Infringement: Respecting the First Amendment,

89 Colum. L. Rev. 1940, 1943–44 (1989) (explaining copyright plaintiff can receive

permanent injunction against future infringement after “show[ing] past acts of

infringement and a substantial likelihood of further infringement”).

311. See Doug Rendleman, Civilizing Pornography: The Case for an Exclusive

Obscenity Nuisance Statute, 44 U. Chi. L. Rev. 509, 555 (1977) (referring to injunctions

against dissemination of obscenity as “standards orders”); Steven T. Catlett, Note,

Enjoining Obscenity as a Public Nuisance and the Prior Restraint Doctrine, 84 Colum. L.

Rev. 1616, 1619 (1984) (referring to injunction against any future dissemination of

obscene materials as “blanket or ‘standards’ injunction”).

312. Int’l News Serv. v. Associated Press, 248 U.S. 215, 245 (1918) (emphasis omitted)

(internal quotation marks omitted).

313. See, e.g., Neil Weinstock Netanel, Copyright’s Paradox 63 (2008) [hereinafter

Netanel, Copyright’s Paradox] (“[C]ourts consistently hold that fair use provides a free

speech safety valve within copyright law that obviates any need for external, First

Amendment constraint on copyright holders’ entitlements.”). For a recent elaboration by

the Court on the importance of these safety valves in copyright law, see Eldred v. Ashcroft,

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absence of such safety valves in the misappropriation context renders mis-

appropriation additionally problematic under the First Amendment, at

least facially.

314

Each of these problems may be overcome to some extent by situating

hot news misappropriation in a theory of competitive unjust enrichment

rather than property rights, a distinction that, as I have shown, is purpo-

sive, structural, and functional. To begin with, it would jettison the com-

mon myth that the misappropriation doctrine attempts to create just an-

other form of intellectual property, premised on granting actors

incentives to collect and disseminate public domain information. While

the rhetoric surrounding the doctrine today mistakenly portrays misap-

propriation precisely along these lines, even Justice Pitney explicitly re-

jected this idea when originally formulating the doctrine.

315

Misappro-

priation’s purpose and thus the interest behind its creation must instead

be found in the actual newsgathering practices of newspapers, and the

collective action problem that participants face when they are dealing

with an undifferentiated common property resource in that setting. The

multiple references to this problem in International News point to its being

the core concern that motivated the creation of the doctrine.

316

Indeed

the identification of the collective action problem inherent in the news-

paper industry was hardly unique to the Court. Since then, the federal

government has come to provide newspapers with numerous other im-

portant subsidies and immunities when they are engaged in the practice

of cooperative newsgathering.

317

Cooperation as a solution to the prob-

537 U.S. 186, 219 (2003) (stating “copyright law contains built-in First Amendment

accommodations,” such as the distinction between ideas and expression and the defense of

fair use).

314. See, e.g., Brief Amici Curiae of Citizen Media Law Project et al. in Support of

Neither Party at 18, Barclays Capital Inc. v. Theflyonthewall.com, Inc., No. 10-1372 (2d Cir.

June 21, 2010) (arguing that “[h]ot news misappropriation, if it is allowed to survive, must

incorporate the same First Amendment safeguards as other forms of intellectual property

and ‘quasi-intellectual property’”).

315. International News, 248 U.S. at 234 (“It is not to be supposed that the framers of

the Constitution, when they empowered Congress [under the Intellectual Property Clause

of the Constitution], intended to confer upon one who might happen to be the first to

report a historic event the exclusive right for any period to spread the knowledge of it.”).

316. Id. at 231 (pointing out cost of gathering and promptly distributing news, and

necessity of cooperation with other competitors). For references to this problem in the

lower courts’ opinions, see Associated Press v. Int’l News Serv., 245 F. 244, 245 (2d Cir.

1917) (“[T]he very great expense of such acquisition and transmission of information is

borne by ratable levy or assessment upon its ‘members.’”); Associated Press v. Int’l News

Serv., 240 F. 983, 984 (S.D.N.Y. 1917) (“[I]t is hardly necessary to say that no modern daily

newspaper can afford to be without the facilities offered by a well-equipped news agency.”).

317. These include the Newspaper Preservation Act of 1970 and other similar

antitrust immunities. See, e.g., 15 U.S.C. § 1801 (2006) (declaring it “to be the public

policy of the United States to preserve the publication of newspapers . . . where a joint

operating arrangement has been . . . entered into because of economic distress”). For an

elaborate discussion of the background to this Act, see generally H.R. Rep. No. 91-1193

(1970), reprinted in 1970 U.S.S.C.A.N. 3547; S. Rep. No. 91-535 (1969). For additional

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494 COLUMBIA LAW REVIEW [Vol. 111:419

lem is thus recognized to be of central importance to the survival and

profitability of the newspaper industry. Accepting this purpose as the pri-

mary reason for the doctrine is thus likely to render misappropriation’s

speech burden content neutral rather than content based, given its focus

on preserving competition within the specific industry.

318

This leads us to the second part of the competitive unjust enrich-

ment framework: the liability framework. Here, the unjust enrichment

rationale allows a plaintiff to recover without creating an abstract ex ante

entitlement in the material collected. By focusing instead on the compet-

itive relationship between the parties, it consciously avoids attaching an

exclusionary framework to the content of the speech. One might thus

argue that in so doing, its burden on free speech is narrowly tailored and

indeed no greater than necessary to achieve its purpose. A property-

based approach, which would by contrast focus on creating a market for

the information collected by attaching an exclusionary entitlement di-

rectly to it, independent of the parties and their relationship, is likely to

be far more restrictive in this regard.

Moving misappropriation’s remedial framework toward one of resti-

tutionary damages is also likely to avoid any significant conflict with the

First Amendment’s restriction on prior restraints. Instead of censoring

the publication of truthful, newsworthy material, the regime would now

do no more than enable a plaintiff to insist that the defendant disgorge

its cost savings, and compete on an equitable basis. While this would cer-

tainly place a price on a defendant’s speech within a specific setting (al-

beit commercial speech), it certainly would not curtail the production of

such speech altogether.

319

Lastly, relying on unjust enrichment instead of property as the basis

for the misappropriation doctrine obviates the need for an independent

safety valve along the lines seen in traditional intellectual property re-

gimes. Since traditional intellectual property regimes are premised on an

analogy to real property rights, they operate by attaching an exclusionary

entitlement to a fictional, yet identifiable res (e.g., the original expres-

sion, or an individual’s persona). Consequently, from a free speech point

options being considered in this vein, see Randall Mikkelsen, U.S. Law Chief Open to

Antitrust Aid for Newspapers, Reuters.com (Mar. 18, 2009, 5:49 PM EDT), at

http://www.reuters.com/article/idUSN1835208520090318 (on file with the Columbia Law

Review) (describing U.S. Attorney General Eric Holder’s comments regarding his

commitment to modify antitrust laws if necessary to maintain U.S. print newspaper

industry).

318. Such a purpose is likely to track the Court’s opinion in Turner Broadcasting System,

Inc. v. FCC, where it found the FCC’s must-carry rules to be content-neutral free speech

regulation, since they were directed at preventing “unfair competition” in the

communications industry, and their speech effects were incidental. See 512 U.S. 622, 652

(1994) (“[T]he must-carry provisions are not designed to favor or disadvantage speech of

any particular content.”).

319. See Netanel, Copyright’s Paradox, supra note 313, at 116 (noting that free

speech does not necessarily mean costless speech).

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2011] ENDURING MYTH OF PROPERTY IN NEWS 495

of view, it becomes necessary to ensure that the entitlement covers no

more than is absolutely necessary to further the purpose of the regime.

Thus a device like fair use or the idea/expression dichotomy in copyright

law ensures that the right attaches merely to original expression when

used by a defendant in a manner that impacts a creator’s market. The

necessity for the safety valve then derives from the unique exclusion-

based property strategy that the regime employs.

320

Since it creates an ex

ante entitlement in the abstract, balancing it with an ex ante carve-out

becomes essential. With an unjust enrichment framework, however, the

very existence of the legal entitlement is determined ex post, relationally,

and upon a consideration of multiple factors. Since the entitlement is

never determined in the abstract, an equally abstract safety valve becomes

less essential. Thus, relationally determined variables such as direct com-

petition, free riding, and an examination of the systemic incentive effects

of the defendant’s actions allow courts to modulate and balance the enti-

tlement against free speech and other concerns.

To be sure, the competitive unjust enrichment framework is unlikely

to affirmatively shield hot news misappropriation from the reach of the

First Amendment, and the conclusions offered here ought to be consid-

ered tentative, especially since no court has to date weighed in on the

issue. Yet, comparatively speaking, an unjust enrichment framework is

almost certainly more compatible with free speech interests than a prop-

erty-based framework that simulates an exclusionary or monopoly interest

in the news, however narrowly tailored in time or coverage.

ONCLUSION

Speaking of the hot news misappropriation doctrine and its origins

in International News, Judge Learned Hand observed that despite the com-

mon law’s attempt to speak in generalities, at times “there are cases where

the occasion is at once the justification for, and the limit of, what is de-

cided.”

321

An otherwise outspoken champion of the common law

method of rule development, his unwillingness to extend and apply the

misappropriation doctrine to new situations has formed the subject of

some criticism.

322

On closer analysis, though, there may have indeed

been a good reason for his attempt to limit misappropriation to its origins

320. See Smith, Two Strategies, supra note 52, at S464–78 (discussing costs associated

with exclusion and governance regimes). For an application of this difference to

intangibles, see Smith, Intellectual Property, supra note 258, at 1817–19.

321. Cheney Bros. v. Doris Silk Corp., 35 F.2d 279, 280 (2d Cir. 1929). What is often

ignored is that Judge Learned Hand remained willing to extend the doctrine and apply it

to situations that were “substantially similar” to International News, in explicit recognition of

the doctrine’s structural constraints. Id.

322. See, e.g., U.S. Golf Ass’n v. St. Andrews Sys., Data-Max, Inc., 749 F.2d 1028, 1036

(3d Cir. 1984) (noting conflicting cases); Baird, Common Law, supra note 47, at 419

(discussing Judge Hand’s reasoning).

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496 COLUMBIA LAW REVIEW [Vol. 111:419

in the newspaper industry; for it is only upon so doing that its theoretical

and structural bases become abundantly clear.

As the hot news doctrine came to be detached from the newspaper

industry and extended to new contexts, the reasons behind its creation—

many of which are embodied in its unique requirements—came to be

lost. Coupled with the general decline of interest in the idea of unjust

enrichment that occurred in the intervening period,

323

the Court’s at-

tempt to avoid creating a property right in the news by instead develop-

ing a framework of competitive unjust enrichment has continued to re-

ceive little serious attention. And yet, the doctrine continues to thrive

and is among the solutions thought likely to solve the revenue problems

of the newspaper industry.

Ironic as it may seem in light of common misconceptions about the

doctrine, hot news misappropriation was developed as an attempt to

avoid creating an exclusionary interest in factual news. It was aimed in-

stead at preserving the common property nature of such news, while al-

lowing industry participants to compete on equitable terms in drawing

economic value from it. Recognizing that the maintenance and sharing

of this common property resource required sustaining the self-organized

cooperative framework that newspapers had developed, hot news misap-

propriation sought to raise the costs of free riding through a private law-

based liability regime. At the same time, it recognized that a regime re-

sembling the functioning of a property-based one might have the effect

of distorting the existing cooperative structures that existed at the time.

It sought to rely, therefore, on the idea of unjust enrichment, which al-

lowed a plaintiff to nullify a defendant’s unfair competitive advantage

without having to recognize an interest vested in the plaintiff until the

defendant actually obtained such an advantage. Justice Pitney’s little un-

derstood idea of quasi-property was thus more than a mere trope, and of

deep practical significance.

The maintenance and upkeep of a common pool resource has long

been recognized to present a collective action problem among users of

that resource. Typical attempts to solve the problem look to either gov-

ernment regulation for coercion, or private ownership to force any exter-

nalities to be fully internalized by a user.

324

In her pioneering work in

this area, Ostrom added to those solutions by showing how homogeneous

communities often solved collective action problems through mecha-

323. See James Gordley, The Common Law in the Twentieth Century: Some

Unfinished Business, 88 Calif. L. Rev. 1815, 1870 (2000) (“[A] sustained effort to

systematize the . . . law of restitution has begun only in the last few decades.”); Chaim

Saman, Restitution in America: Why the U.S. Refuses to Join the Global Restitution Party,

28 Oxford J. Legal Stud. 99, 102 (2008) (“The idea, that restitution is its own body of law

with policies and principles distinct from contract and tort, has not maintained its vitality

in American jurisprudence.”).

324. See Garrett Hardin, The Tragedy of the Commons, 162 Science 1243, 1244–46

(1968) (analyzing resource management strategies in light of population control and

suggesting ownership or government regulation as solutions).

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nisms of self-governance.

325

The newspaper industry’s extensive reliance

on cooperative efforts to gather the news and maintain its timeliness rep-

resents one such mechanism. Hot news misappropriation was built

around this reality. Creating an ownership interest in the news, the pre-

mise of arguments for a property right, might have been one way of solv-

ing the collective action problem. Beyond the obvious social costs that

would have accompanied such an approach, though, a solution based on

private ownership would have almost certainly also upset the dynamics of

cooperation and sharing in news collection that the newspaper industry

has relied on since its very beginning. The competitive unjust enrich-

ment model that hot news misappropriation came to be modeled on was

deeply sensitive to these concerns in more ways than one.

The common law is certainly a malleable beast, and no doubt capa-

ble of being adapted to new contexts, circumstances, and necessities. Yet,

this adaptation must pay close attention to the logic and rationale under-

lying a particular rule, most of which is often masked by the generality

with which the rule itself comes to be framed and structured.

326

It is

indeed this reality that explains Judge Hand’s reluctance to extend the

doctrine—he recognized it to be a structural solution unique to the pecu-

liarities of one industry. To the extent that the industry continues to rely

on cooperative newsgathering efforts and the sharing of leads and tips

amongst competitors to sustain its news-collecting operations, the hot

news doctrine will continue to provide a useful legal backbone with which

to deter free riding and encourage cooperation among homogeneous in-

terests. Should the focus move away from such cooperation, however,

and in the direction of propertizing the news to deter new business mod-

els and uses for the news, the utility of the doctrine will rather ironically

lie in serving as a useful reminder of the common law’s reasons for re-

jecting private ownership as a solution to the problem.

325. Ostrom, supra note 134, at 18–21.

326. Oliver Wendell Holmes, The Common Law 5 (1963).