NFL’s Exclusive Trademark License Was Not an Illegal Conspiracy

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

The National Football League and its 32 member teams did not engage in an illegal antitrust conspiracy in violation of Section 1 of the Sherman Act by granting, through their jointly-owned licensing affiliate, an exclusive trademark license to a complaining apparel manufacturer’s competitor, the U.S. Court of Appeals in Chicago has decided. The league and its teams did not create an unlawful monopoly by awarding the license to the competitor.

Thus, grants of summary judgment in the defendants’ favor on the antitrust claims (2007-2 Trade Cases ¶75,813 and 2007-2 Trade Cases ¶75,973) were proper and were each affirmed.

Intraenterprise Conspiracy Doctrine

The league and the teams were acting as a single entity when collectively licensing their intellectual property. They therefore were incapable of conspiring amongst themselves to violate Section 1 with respect to that aspect of league operations, under the intraenterprise conspiracy doctrine espoused in Copperweld Corp. v. Independence Tube Corp. (1984-2 Trade Cases ¶66.065).

An assertion by the complaining manufacturer that the teams could not be considered a single entity—because they each actually controlled their own intellectual property and their actions deprived the market of independent sources of economic power—was rejected by the appellate court. The teams could function only as one source of economic power when collectively producing NFL football, owing to the very nature of the competitive venture, the court explained.

Single Source of Economic Power

Likewise, it followed that only one source of economic power controlled the promotion of NFL football, the court observed. The league and the teams introduced uncontroverted evidence that the teams shared a vital economic interest in collectively promoting NFL football.

The record “amply established” that since 1963, the teams have acted as one source of economic power, under the auspices of NFL Properties, to license their intellectual property collectively and to promote NFL football. Nothing in the Section 1 prohibited the teams from cooperating so the league could compete against other entertainment providers, the court noted.

Monopolization

Moreover, the failure of the apparel manufacturer’s Section 1 claim necessarily doomed its monopolization claim, the court stated. As a single entity for the purposes of licensing, the teams were free under Section 2 of the Sherman Act to license their intellectual property on an exclusive basis.

The August 18 decision in American Needle, Inc. v. National Football League appears at 2008-2 Trade Cases ¶76,259.