Ampersand Publishing v. Santa Barbara Independent

In October 2006, Ampersand Publishing LLC, the company that owns the Santa Barbara News-Press, filed a lawsuit against Santa Barabara Independent, Inc., publisher of the Santa Barbara Independent, another local newspaper. The case arose out of Independent editor Nick Welsh's posting of a draft News-Press article in connection with a post on his "Angry Poodle" blog on the Independent's website. The facts are a bit complicated.

Welsh's post appeared on July 14, 2006, during the turmoil following the resignation of several of the News-Press's top editors and a leading columnist because of conflicts between the newspaper staff and Wendy McCaw, the local billionaire who controls Ampersand and essentially owns the News-Press. On July 6, 2006, News-Press reporter Scott Hadley wrote an article about the resignations, but the News-Press chose not to publish it, and instead published a "note to readers" written by McCaw, which discussed the resignations and the departing staff members' supposed motivations for leaving. Apparently in response to this decision, Scott Hadley also resigned from the News-Press. (Since then, over fifty more employees have either quit or been fired. The whole crazy drama is chronicled in the documentary film, Citizen McCaw.)

Welsh's July 14 post reported on Hadley's resignation and criticized the News-Press for publishing McCaw's "note to readers" instead of Hadley's article. Crucially, Welsh included a hyperlink in the blog post to a copy of Hadley's draft article, which an unknown person had sent to the Independent's office the day before. (The link in Welsh's post led to a scanned PDF of the article hosted on the Independent's site). Welsh and the Independent contend that Welsh posted the draft in order to expose and comment upon what he saw as the censorship of an unflattering article. In court documents, they also argue that Welsh's use of the draft "contrasted its fact-based account of the News-Press resignations with the defensive editorializing published by the News-Press." The link and the draft article remained online from July 14 to July 19, at which point the Independent removed them after Ampersand threatened legal action.

Ampersand sued the Independent in federal court in California, claiming that Welsh's posting of the draft article constituted copyright infringement. Ampersand also alleged that Welsh had misappropriated its trade secrets by acquiring and publishing the draft article and by acquiring another draft News-Press article relating to the paper's arbitration proceeding against a former editor. (Welsh and the Independent deny ever obtaining a copy of this latter arbitration article.) Ampersand argued that although the draft articles contained publicly available facts, they also embodied confidential processes and information because they reflected the reporters' labors and ideas of how to investigate and report on an issue. Ampersand also brought claims for unfair competition under California law, intentional interference with propsective economic advantage and contract, and negligent interference with prospective economic advantage and contract.

In September 2007, both parties moved for summary judgment. Among other things, the Independent argued that Welsh's publication of Hadley's draft article for purposes of commentary and criticism was a fair use, that the draft article was not a trade secret, and that it never acquired or published a copy of the arbitration article. Ampersand argued that it was entitled to judgment as a matter of law on its copyright infringement claim. In November 2007, the court granted Ampersand summary judgment on its copyright infringement claim, holding that Welsh's posting of Hadley's draft article was not fair use. The court dismissed Ampersand's trade secret claim based on the Hadley article, finding that the draft was not a trade secret. It reserved decision on the trade secret claim relating to the arbitration article, pending resolution of Ampersand's motion to compel Welsh to answer questions about his source of information about the article. (Welsh had refused to answer these questions, relying on the federal reporter's privilege.) The court also dismissed the unfair competition and tortious interference claims, finding that they were preempted by federal copyright law and the California Uniform Trade Secrets Act.

After this ruling, the only issues remaining were the amount of damages to be awarded to Ampersand on the copyright infringement claim and whether Ampersand had a valid trade secret claim based on Welsh's alleged acquisition of the arbitration article. Related to this latter issue, the parties fought bitterly over Ampersand's motion to compel Welsh to reveal the source of his information about the arbitration article, presenting a bizarre and unprecedented legal battle between two newspapers over application of the reporter's privilege. Before the court resolved the motion to compel or ruled on the final trade secret claim, the parties settled the case. As part of the settlement, the Independent agreed not to challenge the court's ruling that it had violated federal copyright law. The financial terms of the settlement are not public.