A
N E W
Y O R K
L A W
J O U R N A L
S P E C I A L
Intellectual Property
S E C T I O N
WWW. NYLJ.COM
MONDAY, JUNE 3, 2013
Numerical Valuations: Copyrightable
Expression Versus Discovered Fact
BY KRISTEN McCALLION
W
hen one thinks of the various
types of works that copyright
protects, music, books, and
movies immediately come to mind.
Numerical estimations, valuations, and
forecasts do not. While it has been a little
known fact that copyright protects things
like numerical valuations and estimates,
this knowledge is gradually increasing as
the law becomes more defined.
Since the early 1990s, through a
steadily growing body of case law,
courts have developed an analytical framework for determining when
numerical valuations and estimates
are protected by copyright. Copyright
protection for these types of works,
which are often “works made for hire”
under the Copyright Act, lasts for at
least 95 years. Companies that are
aware of how copyright can protect
their proprietary projections and forecasts, and use copyright law to do so,
can enforce their copyrights against
infringers and acquire an arsenal of
copyrighted content that its competiKRISTEN McCALLION is a principal of Fish & Richardson in
New York and cochair of the firm’s copyright group. She
can be reached at [email protected].
tors are barred from copying. Today,
the types of businesses claiming copyright protection for their numerical
estimates and projections range from
market research performance publishers like BanxCorp (which publishes
banking, mortgage, and loan data,
and filed a copyright infringement
suit that is currently pending in the
District Court of the Southern District
of New York), to hospital evaluators
and national football scouts.
A bedrock of copyright law is the
principle that copyright protects
“original works of authorship fixed in
any tangible medium of expression.”1
Copyright protection does not extend
to any idea, procedure, process, system, method of operation, concept,
principle, or discovery.2 Due to this
dichotomy, courts analyzing the
copyrightability of certain data want
to know whether that data is creative
and original, in which case it may be
protected by copyright law, or is simply a discovered fact, in which case
copyright protection would not apply.
The Courts Weigh In
One of the first courts to find that
numerical valuations are protected
by copyright was the U.S. Court of
Appeals for the Second Circuit in CCC
v. Maclean.3 Evaluating the copyrightability of estimated projections of used
car prices, the Second Circuit explained
that the valuation figures provided in
Maclean’s “Automobile Red Book” were
“predictions, based on a wide variety
of informational sources and…professional judgment, of expected values for
‘average’ vehicles for the upcoming six
weeks in a broad region.”4 Because
Maclean’s numerical valuations were
created through a methodology that
weighed over 15 different considerations, the court found them to be “original creations” protected by copyright.5
Just a few years later, in a case
brought by CDN, Inc., in 1999, the Ninth
MONDAY, JUNE 3, 2013
Circuit analyzed whether prices listed
in a wholesale coin price guide contained sufficient originality to merit
copyright protection.6 “The distinction between facts and non-facts,
and between discovery and creation,”
lay at the heart of the case, the Ninth
Circuit explained.7 CDN published the
“Coin Dealer Newsletter,” a weekly
report of wholesale prices for collectible coins.8 The prices published by
CDN in its newsletter were not mere
listings of actual coin prices that had
already been paid; rather, they were
CDN’s “best estimate” of the fair value
of collectible coins.9 The appeals court
evaluated the method employed by
CDN to arrive at its published wholesale prices, noting that it entailed CDN
to examine major coin publications to
find relevant retail price information;
weed out certain data and retain only
certain information it considered to be
the most accurate and important; look
at whether a particular coin had been
graded by a professional service and if
so, which one; review online networks
for bid and ask prices posted by coin
dealers; estimate prices for unreported
coin types and grades; consider the
impact of public auctions and private
sales; and analyze the effect of the
economy and foreign policies on the
price of coins.10 Because this multistep
methodology was not “mechanical or
routine,” and caused CDN to use its
considerable expertise and judgment
to create a price that CDN believed
represented the value of a coin as
closely as possible, the Ninth Circuit
found that CDN’s wholesale prices
were not facts discovered, but were
instead estimates created by CDN
that were entitled to copyright
protection.11
In New York Mercantile Ex-change v.
IntercontinentalExchange, the Second
Circuit was again asked to find that
numerical valuations were copyrightable subject matter.12 This time, the
court was presented with the question of whether the settlement prices
for futures contracts published by
The New York Mercantile Exchange
(NYMEX), an exchange for the trading of futures and options contracts
for energy commodities, were protected by copyright.13 NYMEX determined the settlement prices for its
futures contracts, which require the
delivery of a particular commodity,
such as crude oil and natural gas, at
a specified price at a specified future
time that is many months and even
years in advance.14 NYMEX based its
calculations on a set of rules that distinguished between months with sufficient trading and open interest and
months without. For the prior, settlement prices were based on a formula,
which was described as the “weighted
average of all trades done within the
closing range.” 15 The district court
resolved the copyright question without determining the degree of creativity involved in NYMEX’s methodology
of setting its settlement prices, finding
that its prices were “real-world facts,”
unprotected due to the “merger” doctrine, and “non-copyrightable words
or short phrases.”16 The question on
appeal, as considered by the Second
Circuit, was “one of characterization:
Does [NYMEX] create the settlement
prices, or is it more accurate to view…
[its] task as like that of a census taker, copying the market’s valuation
of futures contracts?”17 The appeals
court opined that NYMEX appeared
more like a census taker collecting
uncopyrightable facts rather than an
author creating original copyrightable
content because its settlement prices
could “be seen as ‘pre-existing facts’
about the outside world which are
discovered from actual market activity.” 18 However, the court declined
to hold that the settlement prices
were unoriginal as a matter of law,
explaining that it was unnecessary to
resolve that question because, “even
if NYMEX creates [rather than discovers] the settlement prices, NYMEX’s
claim fails due to the application of the
merger doctrine.”19 The holding was,
in part, based on the Second Circuit’s
understanding that any dissension
from NYMEX’s settlement prices was
exceptionally narrow, and the range
of possible variations that could be
offered as an alternative appeared
virtually nonexistent.20
More recently, courts outside of
New York and California have had
to analyze similar copyright claims.
In 2009, Health Grades, a publisher
of quality and safety “1-3-5 Star” ratings of hospitals, physicians and other health care providers, asserted a
copyright infringement claim against
the Robert Wood Johnson University
Hospital (RWJ) in Colorado based on
RWJ’s use and publication of Health
Grades’ ratings and awards for RWJ’s
health care services.21 RWJ moved to
dismiss Health Grades’ complaint on
the ground that these ratings were
uncopyrightable facts.22 According to
its complaint, Health Grades’ health
care ratings were a product of its collection of data and information from a
variety of sources, which it analyzed
and weighed using proprietary methodologies to produce a Health Grades’
rating of 1, 3 or 5 stars.23 Based on this
allegation, the court held that Health
Grades’ sufficiently alleged that its
ratings were not facts discovered, but
were instead expressions created.24
In a case filed in the Western District
of Washington in 2011, National Football Scouting (National) claimed copyright ownership in its “Player Grades,”
which it described as “numerical
expression[s] representing National’s
opinion” of a college football player’s
likelihood of success in the National
Football League.25 Each Player Grade
was published in National’s “Scouting Report,” which is compiled on a
yearly basis for 21 National Football
League clubs to use during the football draft.26 National sued Rob Rang,
a sportswriter, for copyright infringement after Rang published a series of
articles discussing the Player Grades
for 18 college football players.27 On a
motion for summary judgment, Rang
defended his use of the Player Grades
MONDAY, JUNE 3, 2013
by alleging that they were not protected by copyright. In response, the
court immediately acknowledged that
“a numeric expression of a professional opinion can be copyrightable” and
found that National’s Player Grades,
unlike telephone numbers, were not
facts, represented National’s opinion
based on data and expertise, and were
determined through a “weighing of
subjective factors, such as personal
character, leadership, and poise”
through a process that was not “so
mechanical or routine as to require
no creativity whatsoever.”28 Because
National’s method of converting raw
data into a final value was an original
(but not necessarily novel) process
that is neither widely accepted as
objective, nor an industry standard,
the court found National’s Player
Grades copyrightable.29
Putting Decisions to the Test
A similar copyright dispute is currently pending here in New York, in
the District Court for the Southern
District of New York in White Plains.
In 2009, BanxCorp, doing business as
BanxQuote, sued Costco and Capital
One Bank for, among other things,
copyright infringement of its “database compilations and market research
performance ind[ices] known as BanxQuote National Average Money Market
and CD rates.”30 BanxQuote described
its indices as “systematic compilations
of selected banking, mortgage, and
loan data that ‘are frequently used as
original benchmarks to measure the
rates and performance of the U.S. banking and mortgage markets.’”31 The district court explained that BanxQuote’s
indices are comprised of three different categories: the “raw data” from
which the BanxQuote Indices are
created, the product of the raw data,
referred to as the “final value,” which
is the actual average listed in the BanxQuote Indices, and the arrangement
and presentation of the final values.32
Defendants moved to dismiss, arguing that BankQuote’s raw data and
final values are facts, which are not
protectable by copyright.33 Interestingly, the defendants conceded that
if BanxQuote’s valuations were “predictions or estimates,” they would be
copyrightable subject matter.34
Considering the Second Circuit’s
decision in NYMEX and other cases discussed above, the court set forth a test
of copyrightability, advising that in order
to demonstrate that the final values were
protectable by copyright, BanxQuote
must demonstrate either that
(1) the raw data used to create the
final value were protectable; or (2)
the method of converting the raw
data into a final value was an original
(but not necessarily novel) process
that is neither widely accepted as
objective, nor an industry standard;
or (3) the final value did not attempt
to measure an empirical reality.35
The court explained that this test
“captures the Supreme Court’s focus on
‘minimal’ originality” and “the Second
Circuit’s observation that ‘the exercise
of judgment in choosing facts’ is sufficient to warrant protection under the
Copyright Act.”36 The court declined to
dismiss BanxQuote’s copyright infringement claim, determining instead that
BanxCorp sufficiently alleged the originality of its method of converting raw
data to its final values because this
methodology was developed independently, neither widely used nor
an industry standard, which could be
original because it caused BanxCorp
to select and consider thousands of
variable interest rates.37 Summary judgment motions are currently pending
on the precise issue of copyrightability
so the court will have to make a further determination, on a more robust
record, as to whether BanxQuote’s valuations are copyrightable.
No matter what the outcome of the
BanxQuote case, companies that create numerical valuations, estimates,
or forecasts as part of their business
should evaluate the copyright feasibility of their projection methodologies.
Companies that are keenly aware of the
parameters of copyright law can proactively protect their proprietary projections and forecasts through registration
with the U.S. Copyright Office, licensing
regimes, and enforcement. In the end,
that can add up to bigger numbers in
the profit margin and a stronger forecast
for success.
••••••••••••••••
•••••••••••••
1. 17 U.S.C. §102(a).
2. Id. at §102(b).
3. CCC Info. Servs. v. MacLean Hunter Mkt. Reports, 44 F.3d
61 (2d Cir. 1994).
4. Id. at 63.
5. Id. at 67.
6. CDN v. Kapes, 197 F.3d 1256 (9th Cir. 1999).
7. Id. at 1259.
8. Id. at 1257.
9. Id. at 1260.
10. Id.
11. Id. at 1260-61.
12. N.Y. Mercantile Exch. v. IntercontinentalExchange, 497
F.3d 109 (2d Cir. 2007).
13. Id.
14. Id. at 110-11.
15. Id. at 111.
16. N.Y. Mercantile Exch. v. IntercontinentalExchange, 389
F. Supp. 2d 527, 530, 542-547 (S.D.N.Y. 2005). With respect to
merger, the district court held that “because…the only way
to express the idea of a settlement price,” is a single number,
the idea “cannot be distinguished from its expression, [and]
the merger doctrine applies.” Id. at 542-43.
17. N.Y. Mercantile Exch., 497 F.3d at 114.
18. Id. at 115 n.5.
19. Id. at 116.
20. Id. at 118.
21. Health Grades v. Robert Wood Johnson Univ. Hosp., 634
F. Supp. 2d 1226 (D. Colo. 2009).
22. Id. at 1232.
23. Id. at 1234.
24. Id.
25. Nat’l Football Scouting v. Rang, 2012 U.S. Dist. LEXIS
176905, at *1 (W.D. Wash. Dec. 13, 2012).
26. Id.
27. Id.
28. Id. at *8 (citing CDN v. Kapes, 197 F.3d 1256, 1260 (9th
Cir. 1999) (“What CDN has done is use its own judgment and
expertise in arriving at [the value of the coin] for the dealers.
This process imbues the prices listed with sufficient creativity
and originality to make them copyrightable”) and CCC Information Services v. Maclean Hunter Market Reports, 44 F.3d 61,
67 (2d Cir. 1994) (concluding that valuations and predictions
based on a multitude of data sources were original creations)).
29. Id.
30. BanxCorp v. Costco Wholesale, 723 F. Supp. 2d 596, 599
(S.D.N.Y. 2010).
31. Id. at 599.
32. Id. at 602.
33. Id.
34. Id.
35. Id. at 605.
36. Id. at 606.
37. Id. at 607.
Reprinted with permission from the June 3, 2013 edition of the NEW YORK LAW
JOURNAL © 2013 ALM Media Properties, LLC. All rights reserved. Further
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