International News Service v. Associated Press
International News Service v. Associated Press, 248 U.S. 215, also known as INS v. AP or simply the INS case, is a 1918 decision of the United States Supreme Court that enunciated the misappropriation doctrine of federal intellectual property common law: a "quasi-property right" may be created against others by one's investment of effort and money in an intangible thing, such as information or a design. The doctrine is highly controversial and criticized by many legal scholars, but it has its supporters.
The INS decision recognized the doctrine of U.S. copyright law that there is no copyright in facts, which the Supreme Court later greatly elaborated in the Feist case in 1991, but INS nonetheless extended the prior law of unfair competition to cover an additional type of interference with business expectations: "misappropriation" of the product of "sweat of the brow." The case was decided when a body of federal common law existed for business practices and torts, which the Supreme Court had power to declare or create, but two decades later, the Supreme Court abolished that body of substantive law and held that state law must govern the field henceforth. Accordingly, the INS case no longer has precedential force although state courts are free to follow its reasoning if they so choose.
Background
Two competing United States news services were in the business of reporting in the U.S. on World War I. Their businesses hinged on getting fast and accurate reports published. After reporting that was perceived by the Allied Powers as unduly favorable to the Central Powers by William Randolph Hearst's INS, the Allies barred INS from using Allied telegraph lines to report news, which effectively shut down INS's war reporting.To continue publishing news about the war, INS gained access to AP news by examination of AP news bulletin boards and early editions of newspapers affiliated with AP. INS members would rewrite the news and publish it as their own without attribution to AP. Although INS newspapers had to wait for AP to post news before they went to press, INS newspapers in the West had no such disadvantage relative to their AP counterparts. The AP brought an action seeking to enjoin INS from copying AP-gathered news.
Ruling
Power to rule on issues
In 1918, the federal courts, particularly the Supreme Court, had the power to declare and create binding law in commercial matters such as bills and notes and torts such as negligence and business interference. This was under the doctrine of Swift v. Tyson, 41 U.S. 1, which had held that the federal courts, when deciding matters not specifically addressed by the state legislature, had the authority to develop a federal common law. In 1938, in Erie Railroad Co. v. Tompkins, 304 U.S. 64, the Supreme Court overruled Swift v. Tyson. As Justice Brandeis wrote:Congress has no power to declare substantive rules of common law applicable in a state whether they be local in their nature or "general," be they commercial law or a part of the law of torts. And no clause in the Constitution purports to confer such a power upon the federal courts.
However, because the INS case had been decided in 1918, the Supreme Court could declare or create applicable tort law to govern the controversy between INS and AP.
Previous state of unfair competition law
Before the INS case, unfair competition was generally considered to be limited to cases of "palming off" in which the defendant deceived customers by causing them erroneously to believe that the defendant's product emanated from the plaintiff and as a result diverted trade from the plaintiff to the defendant.Majority opinion
The Court held in favor of AP, with Justice Pitney writing the majority opinion. Justices Holmes and Brandeis wrote dissenting opinions.The majority opinion recognized that the information found in the AP news was not copyrightable as "the information respecting current events contained in the literary production is not the creation of a writer but is a report of matters that ordinarily are publici juris; it is the history of the day." Instead, Pitney approached the issue from the perspective of unfair competition. He found that there was a quasi-property right in the news as it is "stock in trade to be gathered at the cost of enterprise, organization, skill, labor and money, and to be distributed and sold to those who will pay money for it." Because of the "economic value" of the news, a company can "therefore" have a limited property interest in it against a competitor but not the general public that attempted to take advantage of the information.
The Court characterized INS's behavior as misappropriation. The tenuous value of "hot" news made Pitney narrow the period for which the proprietary right would apply: the doctrine "postpones participation by complainant's competitor in the processes of distribution and reproduction of news that it has not gathered, and only to the extent necessary to prevent that competitor from reaping the fruits of complainant's efforts and expenditure."
The Court justified its creation of a "quasi-property right" in these terms:
is taking material that has been acquired by AP as the result of organization and the expenditure of labor, skill, and money, and which is salable by AP for money, and that INS in appropriating it and selling it as its own is endeavoring to reap where it has not sown, and by disposing of it to newspapers that are competitors of AP's members is appropriating to itself the harvest of those who have sown.
Stripped of all disguises, the process amounts to an unauthorized interference with the normal operation of AP's legitimate business precisely at the point where the profit is to be reaped, in order to divert a material portion of the profit from those who have earned it to those who have not; with special advantage to INS in the competition because it is not burdened with any part of the expense of gathering the news. The transaction speaks for itself and a court of equity ought not to hesitate long in characterizing it as unfair competition in business.
The underlying principle is much the same as that which lies at the base of the equitable theory of consideration in the law of trusts—that he who has fairly paid the price should have the beneficial use of the property. It is no answer to say that AP spends its money for that which is too fugitive or evanescent to be the subject of property. That might, and for the purposes of the discussion we are assuming that it would furnish an answer in a common-law controversy. But in a court of equity, where the question is one of unfair competition, if that which AP has acquired fairly at substantial cost may be sold fairly at substantial profit, a competitor who is misappropriating it for the purpose of disposing of it to his own profit and to the disadvantage of AP cannot be heard to say that it is too fugitive or evanescent to be regarded as property. It has all the attributes of property necessary for determining that '''a misappropriation of it by a competitor is unfair competition because contrary to good conscience.'''
Holmes's dissent
Justice Holmes began by challenging the Court's concept of property, or "quasi-property," as the majority opinion termed it:Property, a creation of law, does not arise from value, although exchangeable—a matter of fact. Many exchangeable values may be destroyed intentionally without compensation. Property depends upon exclusion by law from interference, and a person is not excluded from using any combination of words merely because some one has used it before, even if it took labor and genius to make it. If a given person is to be prohibited from making the use of words that his neighbors are free to make some other ground must be found.
Holmes then turned to the law of unfair competition, which the majority claimed was the basis of the ruling. He said that the law of unfair competition requires a misrepresentation. If the misrepresentation was that some people may think AP copied the news from INS, the proper remedy would be only to prohibit INS for a limited time from copying from AP unless it provided a notice that it had copied from AP.
Brandeis's dissent
Justice Brandeis objected, first, to the creation of a new property right even if it was called "quasi-property:"The knowledge for which protection is sought in the case at bar is not of a kind upon which the law has heretofore conferred the attributes of property; nor is the manner of its acquisition or use nor the purpose to which it is applied, such as has heretofore been recognized as entitling a plaintiff to relief."
Next, he denied that "reaping where another sowed" is an actionable tort:
To appropriate and use for profit, knowledge and ideas produced by other men, without making compensation or even acknowledgment, may be inconsistent with a finer sense of propriety; but, with the exceptions indicated above , the law has heretofore sanctioned the practice. Thus it was held that one may ordinarily make and sell anything in any form, may copy with exactness that which another has produced, or may otherwise use his ideas without his consent and without the payment of compensation, and yet not inflict a legal injury; and that ordinarily one is at perfect liberty to find out, if he can by lawful means, trade secrets of another, however valuable, and then use the knowledge so acquired gainfully, although it cost the original owner much in effort and in money to collect or produce.
He objected to the majority's saying that "INS cannot be heard to say" such and such "in a court of equity, where the question is one of unfair competition." He said that there was no basis to invoke equity:
The case presents no elements of equitable title or of breach of trust. The only possible reason for resort to a court of equity in a case like this is that the remedy which the law gives is inadequate. If the plaintiff has no legal cause of action, the suit necessarily fails. There is nothing in the situation of the parties which can estop from saying so.
Brandeis closed his dissent with an argument that the Court was ill-suited to act as a legislature and that the matter should be left to the wisdom of Congress: