III. Original securities analyses should be works in the meaning of copyright
A securities analysis is a written document in which a securities company or a securities consultant, by taking an independent and objective position, studies the value of securities and related products, or the factors that may influence this value in the market, and then gives a value analysis or an investment rating, etc. As to whether a securities analysis forms a work in the meaning of copyright, the opinions are divided: one view is that a securities analysis, which involves mostly disclosed facts and uses relatively fixed expressions with less originality, does not satisfy the requirements of the copyright law. If protection were given to such reports, this may lead to an excessive transaction cost that hinders market competition. The other view is that such reports are the results that analysts achieve through intellectual efforts. They are original and should be protected by copyright.
A securities analysis mainly consists of the basic facts of a public company, the financial indicators, the stock performance, possible events that may influence the stock price, and an earnings forecast and a rating. It can be said that part of the information is obtained from the annual reports or publications of the public company or media coverage. Such information is publicly available, rather than is created by analysts. If an analyst, on the basis of his understanding of the investment, filters, sorts out, analyzes, and selects and arranges the publicly available information in a personal way to reflect his intellectual achievements, the selection and arrangement are original in certain aspects. As to the expression, despite the relatively fixed overall structure of securities analysis reports, it still leaves room for the selection and arrangement of the contents, which cannot be done mechanically by following any given rule. A securities analysis report cannot be deemed as the only expression or one of a finite number of expressions of an idea. In practice, it is very unlikely that for a single investment topic, different analysis reports will contain identical or substantially similar expressions that are general in nature. But a securities analysis report will also contain such part as the “investment value case study” or the “earnings forecast and rating,” which directly reflects the understanding of the analyst. Such parts are more creative than the arrangement or filtering of publicly available information.
The protection of securities analysis reports by copyright would accord with the originality requirements of the copyright law and encourage the creation and utilization of such reports. As plagiarism of research reports is serious in the securities consultation sector, the copyright protection of securities analysis reports would help other related sectors to grow, encourage research institutions to develop more quality reports, and finally protect the interests of investors and the healthy development of the capital market.
IV. Special considerations in determining the infringement and the amount of damages
1. More caution to be exercised in infringement determination
Under US Law, works are divided into “works of fact” and “works of art.” A work of fact is a work that reflects a fact or an objective thing, such as a map, a sketch, a life drawing, a historical work, or a biography. A work of art, alias a fictional work, means a work that contains fictional parts or is shaped in an artistic way, such as a fine art work other than a life drawing, or a work of “pure literature.” With respect to the type of creation, a securities analysis report is more of a work of fact. For works of art, it is very unlikely, if not impossible, that for the same topic, different authors would coincide with each other in the expression of their achieved results. For securities analysis reports, however, things are different. It is fully possible that for the same public company or industry, different research institutions provide substantially the same expression with respect to the basic investment-related data, such as the fundamental financial data, or other essential publicly available information, such as essential resolutions of the board of directors, because such data or information is what a general investor must refer to before the investment. Thus, in infringement determination, the court should be stricter with securities analysis reports than with literary works in general. During the infringement comparison, any selection or compilation of fundamental data or information that is not creative should be removed to prevent the scope of protection from being enlarged improperly. In the case discussed here, the four analysis reports, which were direct transcriptions of the publicly available information of public companies and did not involve any creative efforts from the plaintiffs, should not be protected by copyright.
2. Degree of publicity and time sensitiveness in damages determination
Due to the ever changing capital market, securities analysis reports are different from general works in that their value is very timesensitive. On one side, for the same securities analysis report, as long as no insider information is involved and customers are equally treated, investors who receive the report earlier will gain an advantage over those who receive the same information later, so that the earlier investors can quickly make decisions beneficial to them and are more likely to have the time arbitrage. If a report is published fully to the market through the Internet or other media so that investors in general can get it through public channels, the report will certainly become less valuable than before the publication. On the other side, a securities analysis report has a time limit in and by itself, which, in general, is concerned with a certain period after it is issued. The value of it is inversely proportionate to the time lapse of the issuance. A report that guides investors on how to operate on the market within a half or a full year naturally loses its investment-related value after the half or full year has passed. Thus, in determining the amount of damages, consideration should be given to the degree of publicity of a report and the time lapse as of the issuance at the time of the infringing action. When the infringement occurs, the report is less public in a shorter period of time since the issuance. It has higher investment-related value and any infringement of its content will lead to a larger loss to the right owner and a higher amount of damages. The same logic applies conversely. In the case discussed here, the reports involved could be accessed and browsed from third-party websites, but the search provided only a few of the previous reports of the plaintiffs, other than any current reports of the day. Often a securities analysis report has the highest value on the day that it is published, and devalues much on the second day and afterwards. In the case discussed here, as the defendants used the works of the plaintiffs after the date that such works were published, it led to a smaller loss of the value of the works to the plaintiffs than on the date of their publication. Thus, a smaller amount of damages may be determined by the court at its discretion.
It should be noted, however, that due to the ever changing capital market, the value of these reports still decreases progressively after their publication, even if the party protects them as trade secrets. Their use as trade secrets will become almost worthless after the period of the advice expires. In this respect, generally trade secrets are not consistently sensitive to time, as some technical or operational information remains stable after a long period of time. Therefore, even if a securities analysis report satisfies the constituent requirements of a trade secret, time-sensitive factors should be still considered in the damages determination.
(Translated by Ren Qingtao)
