The Associated Press is suing a digital news distributor, claiming it infringed on AP copyrights.
The complaint, filed Tuesday in New York federal court, alleges that Meltwater U.S. Holding Inc. and its Meltwater News Service have been illegally selling content created by the AP, a 166-year-old news cooperative that sells its services to newspapers, broadcasters and websites around the world.
Meltwater News, based in San Francisco, is an 11-year-old electronic news clipping service that helps its clients monitor how they are covered in the press.
The suit alleges that Meltwater News has been pilfering current and past material from the AP and other news providers.
"Meltwater News is a parasitic distribution service that competes directly with traditional news sources without paying license fees to cover the costs of creating those stories," Tom Curley, AP `s president and CEO, said in a statement. "It has a significant negative impact on the ability of AP to continue providing the high-quality news reports on which the public relies."
In a statement, Meltwater CEO Jorn Lyseggen said AP never sought licensing fees before filing the lawsuit. "This is the first we have heard of the AP's concerns and we are surprised," Lyseggen said. "From their press release, it appears that the AP misunderstands how our service works in many key respects. It is unfortunate that the AP did not seek to discuss this with us prior to taking this wholly unnecessary step."
The AP declined to comment on Lyseggen's statement.
The AP filed its complaint on the same day that a copyright tribunal in the United Kingdom ruled that Meltwater should pay licensing fees for distributing content in that nation, although the panel reduced the rates sought by the London-based Newspaper Licensing Agency.
In the case filed by the AP, the court's decision is likely to hinge on whether Meltwater's activities constituted so-called fair use of original content, which is permitted under U.S. copyright law.
The AP has complained for years about websites and search engines improperly lifting its content. In 2009, the not-for-profit cooperative threatened to take legal action against Google Inc., whose dominant Internet search engine provides a news section featuring stories from thousands of websites.
The AP now has licensing agreements with Google and many other websites, including Yahoo, AOL and Microsoft's MSN.
In its lawsuit, the AP seeks to separate Meltwater from other online services, or "aggregators," that cull headlines and story snippets from various news outlets. Meltwater is different, the AP alleges, because its services are only available for a fee and because it has set up a system that stores AP articles dating back to 2007 without permission. Many of the older stories can no longer be found on the Internet because AP requires its paying customers to remove the content from websites within a specified time period, typically a few weeks.
The AP alleges Meltwater can charge lower fees for its service, largely because it doesn't have to finance a huge news gathering operation.
Meltwater's service allows businesses to track media coverage of their products or activities, according to the company's marketing material, and can help companies analyze the effectiveness of their marketing and public relations campaigns. The company allows customers to reprint the AP's older stories in newsletters that can be widely distributed, the AP alleged.
Lyseggen, though, insists Meltwater is very similar to Google and other search engines that find relevant information and send users to the websites posting the content. "We are confident that our service is compliant with U.S. copyright law, with the U.S. courts having repeatedly held that Internet search is legal," Lyseggen said in his statement.
Meltwater's strategy has helped it grow steadily. Its website boasts that the company now has more than 18,000 customers.
Some of Meltwater's customers have defected from the AP. The complaint cites the U.S. Department of Homeland Security as a former AP subscriber that recently switched to Meltwater.
More than 100 other government agencies in the U.S. and other countries still subscribe to the AP.
The AP contends that Meltwater has an unfair advantage because it has avoided most licensing fees. Meltwater has endured recent legal battles in the U.K. and Norway, where a court ordered the company to pay $717,000 for copyright infringement in that country, according to the lawsuit.
The AP is seeking unspecified damages and court orders prohibiting Meltwater from future copyright infringement.
Meltwater began in 2001 in Oslo, Norway, according to its website. As a privately held company, Meltwater isn't required to disclose its financial results. But in a recently published interview with VentureBeat, Lyseggen said the company employs about 900 people and had revenue of $114 million last year.
The AP, which is based in New York, was started by a group of newspapers in 1846 as a way to share news coverage. It now operates news bureaus 116 countries and employs about 3,700 people.
The AP's revenue has dropped from a peak of $748 million in 2008 to $631 million in 2010. In 2010, the AP's employee salaries, benefits and news coverage expenses totaled nearly $447 million, which devoured about 71 percent of the cooperative's revenue.
The AP hasn't released its financial results for last year.
"Meltwater free-rides on AP's significant investments in gathering and reporting news," AP acting general counsel Laura Malone said in a statement.
As its revenue shrinks, the AP has sought to wring more money from the Internet and mobile devices.
To identify copyright offenders, the AP helped develop a service called NewsRight that tracks the use of stories on websites, blogs and other Internet forums. NewsRight was spun off from the AP last July. It's now backed by the AP and 28 other news organizations, including The New York Times Co. and The Washington Post Co.