The US Supreme Court may soon consider the novel issue of whether settlement prices for future contracts are capable of receiving copyright protection?  The New York Mercantile Exchange Inc. (NYMEX) recently filed a petition for writ of certiorari asking the court to evaluate this question after losing in the US Court of Appeals for the Second Circuit.  New York Mercantile Exchange Inc. v. Intercontinental Exchange Inc. (U.S., No. 07-938, review sought 1/16/08).  If successful, NYMEX will be the first company to own a copyright in the settlement prices of commodities futures contracts.  The granting of such a copyright would have an impact on whether other numbering schemes, such as part numbers, are also copyrightable. 

The case was initiated in 2002 when NYMEX filed suit in the US District Court for the Southern District of New York against Intercontinental Exchange, Inc. (ICE), an Internet-based trading market.  New York Mercantile Exch., Inc. v. Intercontinental Exchange, Inc., 323 F.Supp.2d 559, 562 (S.D.N.Y.2004), aff’d, 497 F.3d 109 (2d Cir. 2007). 

NYMEX is an exchange for trading futures and options contracts for energy commodities.  Futures commodities involve the delivery of a commodity at a specified price at a particular time in the future.  Each day that the commodity contract remains open, NYMEX’s Clearing House evaluates the change in value of the open contracts. Customer’s margins change based on the valuation.  The “settlement prices” are used to value open positions and are determined on a daily basis.  The settlement price may not be the final trade price. 

NYMEX provides the settlement prices to market data vendors, including the defendant, ICE.  ICE copies the settlement prices and forwards them to a London clearing house to clear ICE’s customer’s trades. 

NYMEX obtained a copyright registration for its database of the settlement prices, but not the settlement prices themselves.  NYMEX sued ICE for copyright infringement for copying its settlement prices.   

The district court disagreed with NYMEX.  The court found that the “settlement price” was, in essence, the proposed price on that day to settle a futures contract.  497 F.3d 109 at 111.  In order to determine the settlement price, the court found, NYMEX essentially evaluates the market each day and draws a reasoned conclusion about the price for a particular future contract.  NYMEX did not claim copyright protection in the method that it used for developing the price. 

Given that copyright protection is not accorded to ideas or factual data, NYMEX argued that its estimate of the settlement price was neither.  Rather, it was a judgment based on an analysis considering several factors, including the opinion and experience of the NYMEX committee for determining the prices.  The district court disagreed, finding that the settlement price was based on NYMEX’s analysis of factual data, and that the price was therefore a “real-world fact” that NYMEX merely “discovered”.  See id. at 112.  Thus, the lower court ruled for ICE and did not grant NYMEX copyright protection in the settlement prices. 

The Second Circuit affirmed.  It did not explicitly tackle the issue of whether the settlement prices are facts.  Instead, it found against NYMEX under the “merger doctrine.”  Essentially, the merger doctrine bars copyright protection when there is only one way to express an idea or a fact, and thus the idea and its articulation are merged into one singular expression.  Relying on this doctrine, the Second Circuit explained that NYMEX sought to protect a price that can only come in one form – a dollar amount.  There is no other way to describe the settlement price other than by stating the dollar amount.  Thus, the court found that the idea – the settlement price – has become so entwined with the expression that if the court were to grant NYMEX a copyright in the price, it would essentially be granting NYMEX ownership over the idea.  The appellate court indicated this would impede one of the fundamental purposes of copyright law – to increase the harvest of knowledge.  See id. at 118.  The court found, therefore, that even if the settlement prices were copyrightable, an issue that was not decided, NYMEX may not prevent others from using the settlement prices.

The Second Circuit distinguished this case from the CCC Information Services, Inc. v. Maclean Hunter Market Reports, Inc. case, which held that the Red Book, a compilation of estimated projections for used car prices, is copyrightable.  44 F.3d 61 (2d Cir.1994).  The primary distinction the court made was that the CCC Information Services case examined the protection of the compilation of car prices, i.e., the Red Book itself, and not the independent prices.  Compilations of facts are protectable so long as they are original and creative.  Further, the appellate court noted that the Red Book prices were based on hypothetical “average” cars, which did not exist, while “settlement prices” are treated as indisputable facts about actual market activity.  See id. at 115.  Thus, the court found that settlement prices were more likely to be grounded by actual events and more similar to factual data. 

In a concurring opinion, Judge Peter W. Hall suggested that the settlement prices could be original, and thus copyrightable.  But, since he agreed that the merger doctrine applied, this issue did not need to be decided. 

NYMEX filed the petition for writ of certiorari in an attempt to overturn the Second Circuit’s decision.  One of the primary arguments of the petition is based upon the Second Circuit’s use of the merger doctrine.  NYMEX argues that the doctrine is judicially created and has yet to be enforced or reviewed by the Supreme Court.  If the petition is granted, it will be the first time that the Supreme Court has opined on this issue and will likely clarify the applicability of the merger doctrine and potentially bear on the copyrightability of part numbers and other numbering schemes, which currently receive limited, if any, copyright protection.  Arent Fox will continue to monitor this case. 

For more information, please contact Elizabeth H. Cohen or Sarah Bruno.

Elizabeth H. Cohen
cohen.elizabeth@arentfox.com
202.857.6166

Sarah L. Bruno
bruno.sarah@arentfox.com
202.775.5760