On Wall Street, the ability to trade on information quickly can be the difference between making money and making nothing. On Friday, a federal appeals court in New York considered how fast is too fast.

The court heard arguments over whether to let Bank of America Corp's Merrill Lynch unit, Barclays Plc and Morgan Stanley stop financial news service Theflyonthewall.com Inc from quickly reporting hot news about their analysts' research.

The banks have argued that Theflyonthewall.com had been getting a free ride by systematically misappropriating research, including upgrades and downgrades on stocks.

Even knowledge that a company someone rates buy or sell, without more details, can instantly move stock prices.

The business model was intended to strip away, to take the competitive edge away from our clients, R. Bruce Rich, a partner at Weil Gotshal & Manges LLP representing the banks, told the U.S. Second Circuit Court of Appeals.

Fly was first, foremost, the most systematic, the most egregious in publishing research that was a product of deep and extensive analysis, judgment, opinions, Rich said.

Theflyonthewall.com countered that it has a First Amendment right to publish before the news goes stale. It has said it typically gets information from public sources, or learns about it by talking with traders or others in the marketplace.

The company got support from Google Inc and Twitter Inc, which also urged the three-judge appeals court panel to overturn U.S. District Judge Denise Cote's injunction restricting publication.

Times have changed. Technology has changed, said Kathleen Sullivan, a Stanford University law professor and partner at Quinn Emanuel Urquhart & Sullivan LLP who represents Google. There is no such thing as 'hot news.' Hot news becomes cold in a nanosecond.


In March, Cote ordered Theflyonthewall.com to wait until 10 a.m. ET to report research issued before the U.S. stock market opens, and at least two hours for research issued later.

The Summit, New Jersey-based company said these limits cost it subscribers and threatened its survival. The Second Circuit put the injunction on hold while Theflyonthewall.com appealed.

We're not trying to attack (the banks') right to have a proprietary interest, said Glenn Ostrager, a partner at Ostrager Chong Flaherty & Broitman PC, representing the company.

Our client was providing a news feed which was relevant to people in the market, he said. It's just a bullet-point conclusion, which is widely disseminated.

Theflyonthewall.com has said it employs 30 people, and charges $50 a month, or $480 annually, for its services.

The appeals court judges asked dozens of questions on what information qualifies as fact rather than opinion, and at what point the creator of that information loses a right to control how it is disseminated.

Judge Robert Sack asked Sullivan whether The New York Times could have sued NBC News for reporting on a Saturday night that it planned on Sunday to endorse John F. Kennedy's presidential candidacy, if doing so cost the newspaper 30,000 sales.

Sullivan said no. There is no property right in the fact of that information once it has been disclosed, she said.

Dow Jones & Co, a unit of Rupert Murdoch's News Corp , in April filed a similar lawsuit against financial news service Briefing.com, accusing it of republishing its news without permission or journalistic effort.

The appeals court typically takes several weeks or months to issue a ruling.

The case is Theflyonthewall.com Inc v. Barclays Capital Inc et al, U.S. Second Circuit Court of Appeals, No. 10-1372.

(Reporting by Jonathan Stempel in New York. Editing by Martha Graybow and Robert MacMillan)