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Barclays vs. the Fly

Barclays vs. the Fly

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Published by: TheBusinessInsider on Mar 18, 2010
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02/19/2013

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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK--------------------------------------- BARCLAYS CAPITAL INC., MERRILL LYNCH,PIERCE, FENNER & SMITH INCORPORATED,AND MORGAN STANLEY & CO. INCORPORATED,Plaintiffs,-v-THEFLYONTHEWALL.COM,Defendant.---------------------------------------X:::::::::::::X06 Civ. 4908 (DLC)OPINION & ORDERAppearances:For Plaintiffs:R. Bruce RichBenjamin E. MarksJonathan BloomJackson WagenerWeil Gotshal & Manges LLP767 Fifth AvenueNew York, NY 10153For Defendant:Glenn F. OstragerJoshua S. BroitmanDennis M. FlahertyRoberto GomezOstrager Chong Flaherty & Broitman P.C.570 Lexington AvenueNew York, NY 10022DENISE COTE, District Judge:This litigation confronts the phenomenon of the rapid andwidespread dissemination of financial services firms’ equityresearch recommendations through unauthorized channels ofelectronic distribution. This dissemination frequently occurs
 
 
2before the firms have an opportunity to share theserecommendations with their clients -- for whom the research isintended -- and to encourage the clients to trade on thoserecommendations. The firms contend that their recommendationsare “hot news” and that the regular, systematic, and timelytaking and redistribution of their recommendations constitutesmisappropriation, which is a violation of the New York commonlaw of unfair competition.Barclays Capital Inc. (“Barclays Capital”), Merrill Lynch,Pierce, Fenner & Smith Inc. (“Merrill Lynch”), and MorganStanley & Co. Inc. (“Morgan Stanley”) (collectively, the“Firms”) have brought suit against defendantTheflyonthewall.com, Inc. (“Fly”). Fly is an internetsubscription news service that aggregates and publishes researchanalysts’ stock recommendations along with many other items ofvarying interest to investors. In addition to asserting hot-news misappropriation, the Firms accuse Fly of infringing thecopyrights of Barclays Capital and Morgan Stanley in seventeenresearch reports released in February and March 2005. For thereasons described below, judgment shall be entered for theplaintiffs on both claims.This action was originally filed on June 26, 2006 by Lehman
 
 
3Brothers Inc. (“Lehman Brothers”),
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Morgan Stanley, and MerrillLynch
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and assigned to the Honorable George B. Daniels. Flyanswered on August 16, 2006 and asserted counterclaims fordefamation, tortious interference with prospective businessrelations, and unfair competition under § 43(a) of the LanhamAct. Those counterclaims were dismissed on March 15, 2007.Following a lengthy period reserved for settlement negotiations,fact discovery closed on or about December 19, 2008.The case was reassigned to this Court on June 8, 2009. TheFirms and Fly each filed motions for summary judgment on May 18,2009, which became fully submitted on August 11, 2009.Thereafter, the Firms advised that they would voluntarily waivetheir claims for damages to the extent that such claims wouldentitle any party to a jury trial. On September 3, Flyacknowledged that the parties were not entitled to a jury trial.
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In 2008, Barclays Capital acquired Lehman Brothers’ NorthAmerican investment banking, capital markets, and equityresearch businesses and became vested with all of LehmanBrothers’ intellectual property interests in its preexistingequity research, and promptly re-launched Lehman Brothers’ U.S.trading and research operations under the Barclays Capital name.On November 19, 2008, Barclays Capital moved to substituteitself for Lehman Brothers as a plaintiff in this action, andthis motion was granted and the caption amended on March 19,2009.
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On January 1, 2009, Merrill Lynch was acquired by Bank ofAmerica Corporation. Since that date, all U.S. equity reportsgenerated by Merrill Lynch have been branded as “Banc of AmericaSecurities-Merrill Lynch” research or as “BofA Merrill Lynch”research.

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