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Jan. 27, 2009, 8:25 a.m.

Wrap-up: GateHouse/NYT Co. Q&A

As the dust settles on yesterday’s settlement in GateHouse Media v. The New York Times Co., I’ve spoken with a few more experts and key players in the case. (Here’s everything we’ve written so far, but if you’re new to the case, start with this post.) What follows are some unresolved questions and everyone’s best stabs at an answer.

Q: What are the implications of this settlement for other news aggregators?

Because the case was settled, it does not set a legal precedent, but as Josh discussed earlier, GateHouse v. NYT Co. will undoubtedly weigh on future legal disputes over linking and news aggregation on the web. David Ardia, director of Citizen Media Law Project, said the case could have what he called “persuasive power” for both media companies and courts. “Other news organizations have paid attention to this, and depending on which side they’re on in a future dispute, will look to this agreement for guidance,” he said. Litigants, for example, could argue that because NYT Co. settled this case, its arguments did not have merit.

In addition, courts are likely to look at this case as a yardstick for similar disputes, Ardia said. Judges faced with intellectual-property cases like this often consider what the “common practice” is. And this settlement, as it plays out, could begin to establish such a practice for the broader Internet community.

However, Bob Kempf, vice president of product development at the Globe’s Boston.com, pushed back against any broader reading of the case in a phone interview late yesterday afternoon. “All this agreement really does is reaffirm our longstanding practice of respecting technological barriers that are set up by websites that want to limit our ability to aggregate content from them,” he said. He called that an ethical issue, not a legal one. (Kempf, for what it’s worth, was vice president of interactive media for GateHouse until joining the NYT Co. in 2006. Thanks to commenter Bill Simpson for pointing that out.)

Q: Why was GateHouse’s argument stronger than it may have seemed?

Boston media blogger Dan Kennedy was way out in front of everyone else in recognizing the strength of GateHouse’s arguments in this case. (He also explained early on why a settlement would be preferable for both sides.) When we spoke yesterday, he argued that the Globe’s Your Town sites were engaging in a style and extent of aggregation “that pushed farther than anything I’ve ever seen on the web.”

Kennedy pointed me to an expert opinion that GateHouse filed in the case, written by UCLA law professor Douglas Lichtman. (GateHouse paid him $750 an hour to produce the report, though experts are commonly paid hefty fees in legal cases.) Much of Lichtman’s analysis may be moot as this point, but he makes a painstaking yet strong case for why the Globe’s aggregation isn’t covered by the fair-use doctrine. He says there are two crucial considerations:

— “the degree to which the practice at issue seems likely to undermine the incentives copyright law endeavors to create”; and

— “the degree to which the unauthorized copying makes possible some output that is particularly new, worthwhile, or hard to achieve.”

Lichtman argues that the Your Town sites have been undermining GateHouse’s incentive to produce unique content by copying it in a way that isn’t “transformative.” If you’re a skeptic of GateHouse’s arguments — I certainly have been — then give the report a read. (And here’s a response to it that NYT Co. filed on Friday.)

Q: What was NYT Co.’s legal strategy in settling this case?

That being said, NYT Co. also had strong arguments that many observers of the case thought were likely to prevail. As Ardia put it, “It’s not like they had a weak case.” So why settle? Ardia noted NYT Co. could have had several factors in mind that well go beyond the simple merits of the case. He explained:

I think The Times has basically put their hands up and said, this fight isn’t worth it because we aren’t going to continue to make use of GateHouse content. Perhaps it isn’t that valuable to them. Clearly if they saw some real value in this information, I imagine they wouldn’t have agreed to this settlement on the eve of the trial.

Another factor is ironic but makes a lot of sense. Ardia said:

It could be that The Times is also thinking down the road for themselves, of another site attempting to use New York Times content similar to the way they used GateHouse content. And they want to be able to use this strategy themselves.

I posed both points to Kempf, who said, understandably, “I wouldn’t want to speculate on legal strategy.”

Q: Will this settlement kill the Globe’s hyperlocal news aggregation strategy?

Not at all, Kempf told me. “GateHouse content is not central to our mission,” he said, and the Your Town sites will continue to aggregate as they have been from other local news sources and bloggers. He also noted that the sites include wikis and event calendars that don’t depend at all on GateHouse publications. “We remain very, very enthusiastic about the initiative,” Kempf said, and they still plan to roll out more Your Town sites in other Massachusetts communities.

Q: What might this all really be about?

The unmentioned Exhibits A and B in this case were the sloping stock charts of both troubled media companies. GateHouse traded above $20 a share less than two years ago, but it has been in free fall ever since, burdened by more than a billion dollars in debt and a passel of community newspapers with sagging ad revenues. The company was kicked off the New York Stock Exchange in July and now trades on the inglorious penny-stock market known — ominously, in an industry beset by layoffs — as Pink Sheets. When news of the settlement came out yesterday morning, GateHouse was trading at five cents — or the change I declined after buying a coffee and the Globe outside the courthouse.

The New York Times Co. only looks good when preceded by a graf like that. It’s trading below $6 these days, having fallen from a high of $52.20 in 2002. Amid a cacophony of death knells, Moody’s on Friday downgraded the company’s debt to “junk” status and said it expected “ongoing deterioration in newspaper advertising revenues.” At the Globe, which is in far worse shape than the flagship Times, a new round of layoffs announced this month will trim the newsroom by 12 percent. And though NYT Co. is constantly rumored to be seeking a buyer for a Globe, it’s not clear who that buyer would be.

So both companies are in dire straits, which might help explain both why this went so quickly into litigation (no room to give an inch) and why it did not go to trial (ditto). Or as Steve Yelvington put it on Twitter, “looks like both parties agreed to withdraw to prewar boundaries.”

Q: What’s next?

The document released yesterday is actually a “letter agreement,” not the formal terms of the settlement. Those are likely to be hashed out in the coming weeks, but yesterday’s letter states the “definitive agreement” should be complete by Friday and will be made public at some undefined point thereafter.

POSTED     Jan. 27, 2009, 8:25 a.m.
PART OF A SERIES     GateHouse v. NYT Co.
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