Copyrighted newsletter infringed by posting on corporate intranet

Information Outlook, May, 2004 by Laura Gasaway

In mid-2003 the federal district court in Maryland decided a very important copyright case, Lowry's Reports v. Legg Mason. A jury found Legg Mason liable to Lowry's for breach of contract and willful copyright infringement and awarded $19,725,270 in damages. Most observers assumed that the damage award would be reduced, but instead, it was upheld by the court in February 2004. The case will have tremendous impact on corporate libraries.

Lowry is a small Florida publisher with five employees. Legg Mason is a global financial services firm headquartered in Maryland whose business is management, securities brokerage, and investment banking. Lowry claimed that defendant Legg Mason infringed its copyrights in its financial newsletter, each issue of which contains a notice of copyright. The complaint focuses on Legg Mason's use of Lowry's New York Stock Exchange Market Trend Analysis (The Reports), which Lowry publishes in both daily and weekly editions. The Reports provide "original and proprietary technical analysis of the stock market. Each issue includes unique statistics, comparative graphs, charts, and commentary drafted by Lowry's president." The analysis attempts "to predict when assets should be invested in stocks generally, and when they should be moved to other financial instruments." The daily editions of The Reports reflect and analyze market conditions at the close of business the previous day. The newsletter is sent to subscribers by facsimile or e-mail within two or three hours after the market has closed. The weekly edition analyzes trends based on the week's market activity. The weekly Reports are faxed or e-mailed to subscribers on Friday evenings to ensure receipt prior to the opening of the next week's market. Apparently, the most valuable part of The Reports is the "three 'Lowry's numbers': representing buying power, selling pressure, and short term buying power." The latter is most significant to investment professionals.

Legg Mason subscribed to a single copy of the daily newsletter for more than 10 years, and the copy was sent to an individual in the research department, originally by mail and then by e-mail beginning in 2000. Each morning before the opening of the market, a call from the research department went out to all Legg Mason brokers and the Lowry numbers were distributed. From 1994 to 1999, Legg Mason faxed complete copies of the Lowry Reports to its branch offices, where they were further duplicated and distributed. In 2000 a former Legg Mason broker reported to Lowry's that the defendant was posting The Reports on its "intranet for all the brokers to see and use." The president of Lowry's called the research department and complained about the posting, and he followed up with a letter asking the defendant to cease and desist all unauthorized copying. By mid-2001, the intranet posting had ceased, but the subscribing research department employee continued to e-mail copies of all of The Reports to other members in the department.

The court noted that Legg Mason subscribed to only one copy of The Reports, the issues of which were further copied and distributed by various means, including on the corporate intranet. The defendant argued that this posting and other distribution were contrary to corporate policy. Nonetheless, the court found Legg Mason vicariously liable for the actions of its employees, since intent to infringe is not a necessary element to prove copyright infringement.

The court applied the four fair use factors to evaluate Legg Mason's fair use claim. The commercial nature of the defendant's business leans against a finding of fair use. The nature of the newsletter is that of a factual work containing very useful information developed by the publisher; often each issue was only four pages in length, and subscriptions cost $700 annually. The amount and substantiality factor goes against Legg Mason since it reproduced each issue in its entirety. The effect on the market also weighs against the defendant, since the plaintiff is a small publisher with one product and it limits subscriptions to individual subscribers. Thus, the court found there was no fair use.

Lowry's also sued for breach of contract because of the behavior of the research department employee who signed a subscription agreement in 1994, in which she agreed "not to disseminate or furnish to others, including associates, branch offices, or affiliates, the information contained in any reports issued by Lowry's Reports, Inc., without consent."

While it is likely that Legg Mason will appeal this verdict, other companies and their libraries should take note: reproducing copies of copyrighted articles and reports in print or distributing them by e-mail without permission can lead to significant damages for copyright infringement. Posting material on a corporate intranet without permission is particularly risky, according to this court decision.