Former Players’ Antitrust Claims over NFL’s Use of Their Images Dismissed

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Former professional football players failed to plausibly allege that the National Football League (NFL) and its member teams restrained trade in the market for the players’ images and likenesses by not allowing them the rights to films and images from the games in which they played, the federal district court in St. Paul, Minnesota, has ruled. The players failed to establish any concerted action that was illegal under the Sherman Act.

The players relied “heavily, almost exclusively,” on the Supreme Court's 2010 decision in American Needle, Inc. v. NFL, 2010-1 Trade Cases ¶77,019, 130 S. Ct. 2201, the court explained. However, the decision did not support their claims. In American Needle, the Supreme Court held that the NFL and its member teams were capable of conspiring to restrain trade for NFL-related merchandise that each team owned separately from the NFL.

The historical game footage at issue in the current matter was owned by the NFL either alone or in conjunction with the teams involved in the game being filmed. These entities had to cooperate to produce and sell these images; no one entity could do it alone, according to the court. The NFL and its teams were capable of conspiring to market each team’s individually-owned property, but not property the teams and the NFL could only collectively own.

Moreover, the former players did not explain what market might exist in game footage that featured only that footage to which any player can claim to be individually entitled—a single player’s image without any NFL logos or marks. Thus, even if there was concerted action to restrain trade in the former players' images, that agreement was "necessary to market the product" and was therefore not illegal.

If the NFL refused to pay the former players for the use of their images in its copyrighted material, then the former players might have a claim for a violation of their right of publicity. However, this was a royalties issue, not an antitrust issue. Therefore, the former players’ complaint was dismissed with prejudice.

The June 13 decision is Washington v. National Football League, 2012-1 Trade Cases ¶77,926.

High Court Allows Antitrust Claims over Exclusive Licensing to Proceed Against NFL

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

An arrangement among the 32 separately-owned member teams of the National Football League (NFL) to license their intellectual property collectively through their jointly-owned licensing affiliate—National Football League Properties (NFLP)—constituted concerted activity under Section 1 of the Sherman Act, a unanimous U.S. Supreme Court has decided.

The High Court today reversed a decision of the U.S. Court of Appeals in Chicago (2008-2 Trade Cases ¶76,259) holding that the NFL and its members did not engage in an illegal antitrust conspiracy by granting an exclusive trademark license to Reebok International for purposes of producing and selling trademarked headwear for all 32 teams.

Prior to granting an exclusive 10-year license to Reebok, the NFL had granted nonexclusive licenses to a number of vendors, including American Needle, Inc., permitting the companies to manufacture and sell apparel bearing team insignias.

After the NFL declined to renew American Needle’s nonexclusive license, the vendor brought antitrust claims challenging the exclusive licensing arrangement.

American Needle argued before the Court that under Nat'l Collegiate Athletic Assn. v. Bd. of Regents (1984-2 Trade Cases ¶66,139), agreements among sports teams about whether and how they will participate in the marketplace are subject to scrutiny under the Sherman Act, Section 1. The NFL asked the Court to establish a uniform rule recognizing the single-entity nature of the NFL as a highly integrated joint venture.

Functional Analysis

In an opinion authored by Justice John Paul Stevens, the Court explained that the issue of concerted action did not turn simply on whether the parties involved were legally distinct entities. The focus was on substance rather than legal form.

Under a ‘’functional analysis,’’ the key was whether the conduct joined together separate decisionmakers. If the agreement joins together separate decisionmakers, then the entities are capable of conspiring under Section 1, and the court must decide whether the restraint of trade is an unreasonable and therefore illegal one, the Court explained.

Applying this analysis, the Court concluded that the NFL teams did not possess the unitary decision-making quality or the single aggregation of economic power characteristic of independent action. Each of the teams was a substantial, independently owned, and independently managed business.

While the NFL teams might have been similar in some sense to a single enterprise that owned several pieces of intellectual property and licensed them jointly, they were not similar in the relevant functional sense. The teams' interests in licensing team trademarks were not necessarily aligned.

The Court also addressed the fact the NFLP was a separate corporation with its own management and that most of the revenues generated by NFLP were shared by the teams on an equal basis. It decided that that the NFLP’s actions also were subject to Section 1, at least with regards to its marketing of property owned by the separate teams, for the same reasons the teams’ conduct was covered by Section 1.

Rule of Reason Analysis

On remand, the challenged agreement was to be reviewed under a flexible rule of reason analysis, the Court ruled. While the interests of the teams in promoting NFL football did not justify treating them as a single entity for purposes of Section 1 of the Sherman Act when it came to the marketing of the teams’ individually owned intellectual property, it could justify a variety of collective decisions made by the teams.

Rule of reason analysis would enable the NFL to offer justifications for its collective decisions. “Football teams that need to cooperate are not trapped by antitrust law,” the Court noted.

Government Position

The Court did not pass upon the position taken by the federal antitrust agencies in their 2009 friend-of-the-court brief. In its brief, the government suggested that it was taking a middle ground between the parties' arguments.

The government contended that ‘’single-entity treatment for the teams and the league was appropriate if the teams and the league have effectively merged the relevant aspect of their operations, thereby eliminating actual and potential competition among the teams and between the teams and the league in that operational sphere . . . and the challenged restraint [does] not significantly affect actual or potential competition among the teams or between the teams and the league outside their merged operations.”

The May 24 decision in American Needle Inc. v. National Football League, No. 08-661, appears at 2010-1 Trade Cases ¶77,019.

Justices Needle Counsel in Oral Argument of NFL Licensing Antitrust Case

This posting was written by John W. Arden.

While NFL teams prepared to do battle in league divisional playoff games, lawyers clashed in the U.S. Supreme Court last Wednesday on whether the NFL and its 32 teams engaged in an illegal antitrust conspiracy by granting an exclusive trademark license to apparel manufacturer Reebok International.

On January 13, the Supreme Court heard arguments on behalf of the league, a complaining apparel manufacturer (American Needle, Inc.), and the Solicitor General.

Under review was a decision by the U.S. Court of Appeals in Chicago, rejecting American Needle’s Sherman Act Section 1 claim on the ground that the league and teams were acting as a single entity when collectively licensing their intellectual property through a jointly-owned licensing affiliate (American Needle, Inc. v. National Football League, 2008-2 Trade Cases ¶76,259).

In its petition for review, American Needle asked:

(1) Whether the league and its teams were a single entity exempt from rule of reason claims under Section 1 of the Sherman Act “simply because they cooperate in the joint production of NFL football games, without regard to their competing economic interests, their ability to control their own economic decisions, or their ability to compete with each other and the league” and

(2) Whether the league’s license agreement with Reebok—under which the teams agreed to refrain from competing with each other in the licensing and sale of apparel—was subject to a rule of reason claim.

The league and its teams also asked the Supreme Court to review the decision, on the grounds that the federal circuit courts were divided on the question and in order to secure a uniform rule recognizing the single-entity nature of the NFL as a highly integrated joint venture.

The FTC and Department of Justice Antitrust Division had filed an amicus brief, urging the Court to deny review.

American Needle’s Argument

Opening the argument was Glen D. Nager, representing American Needle, who stated that “there is a longstanding consensus, judicial and legislative, that agreements among sports teams about whether and how they will participate in the marketplace is subject to scrutiny under the Sherman Act, Section 1.”

He referred to NCAA v. Board of Regents of the University of Oklahoma (1984-2 Trade Cases ¶66,139) as most directly on point. “In that case, the Court held that a policy of the NCAA that restricted the ability of member institutions of the NCAA to sell TV rights violated Section 1. Just as with the NFL, the decisions of the NCAA were ultimately controlled by the vote of its members, and for that reason, the Court held that the NCAA was a horizontal restraint.”

Some of the justices questioned Nager about what kind of joint action by the league—such as scheduling games or prohibiting teams from playing outside the league—would not be subject to scrutiny under the rule of reason.

Justice Breyer went farther, arguing that there might not be competition between the teams in the market for licensed apparel, since fans of a particular team were not likely to purchase items identified with a rival team.

Finally, Justice Scalia asked whether the only issue was whether the lower court was wrong to dismiss the suit on the ground of unitary operation by the league. When Nager answered in the affirmative, Justice Scalia asked “Well, why am I worrying about this other stuff?” Nager replied “Because Counsel has an obligation to respond to questions.”

On the issue of unitary operation, Nager answered that the exclusive license constituted concerted activity because it was “between separately owned and controlled businesses.”

Solicitor General’s Perspective

Malcolm Stewart argued on behalf of the United States as amicus curiae, supporting neither party’s theory.

He focused on “a rather mundane aspect of the NFL commissioner’s powers”—that is, the power to incur expenses to carry on the ordinary business of the league. This might include renting office space, hiring employees, and procuring supplies. If the commissioner decides from which company to procure supplies, “our view is that that’s the conduct of a single entity,” he observed.

It was the delegation of authority to the commissioner that would be subject to a Section 1 challenge, rather than the commissioner’s decision to grant a license to a single licensee or multiple licensees, Stewart indicated. It would be “highly unlikely that such a challenge would prevail.” Chief Justice Roberts wondered why that would be so.

NFL’s Position

Gregg H. Levy, arguing on behalf of the NFL, stated that the formation of a sports league—like the formation of any joint venture—may be subject to scrutiny under Sherman Act Sction 1. However, in this case, there was no challenge to venture formation.

“There is no dispute that the NFL, including its licensing arm, NFL Properties, is a lawful venture. If venture formation is not an issue, then decisions by the venture about the ventures’s product are unilateral venture decisions, unilateral venture actions. They are not concerted actions of the—of the venuture’s members.”

Justice Kennedy then asked a series of questions regarding whether the sales of NFL apparel was considered at the time the league was formed and even whether that was a relevant inquiry.

Levy said that the decision to use licenses of league intellectual property as a promotional tool goes back to the 1960s. Upon questioning by Justice Sotomayor, he said that there was some exploitation of intellectual property by franchises prior to the creation of NFL Properties in 1963.

Levy explained that the purpose of licensing was to promote the game and that NFL teams were not independent sources of economic power in generating the game. However, Justice Scalia observed that the purpose of the licensing could be to make money.

“But—but don’t tell me that . . . absent this agreement, there would not be an independent, individual incentive for each of the teams to sell as many of its own . . . shirts or helmets as possible.”

According to Levy, the purpose of the licensing is “to promote the attractiveness of the game product, to get more people interested in watching the games on television, to get more people interested in buying tickets to the game.”

Justice Scalia disagreed and said that could be a triable issue.

Justice Sotomayor later summarized:

“I’m very swayed by your arguments, but I can see a counterargument that promoting T-shirts is only to make money. It doesn’t really promote the game. It promotes the making of money. And once you fix prices for making money, that is a Sherman Act violation.”

Text of the 65-page transcript in American Needle, Inc. v. National Football League appears here on the U.S. Supreme Court website.

Federal Antitrust Agencies Advise High Court to Vacate NFL Licensing Decision

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The federal antitrust agencies filed a joint amicus curiae brief in the U.S. Supreme Court, recommending that the Court vacate a decision of the U.S. Court of Appeals in Chicago (2008-2 Trade Cases ¶76,259), holding that the National Football League and its 32 members did not engage in an illegal antitrust conspiracy by granting an exclusive trademark license to apparel manufacturer Reebok International.

The appellate court had rejected a complaining apparel manufacturer's Sherman Act Section 1 claim on the ground that the league and teams were acting as a single entity when collectively licensing their intellectual property through a jointly-owned licensing affiliate.

The government initially had urged the Court to reject the petition for review. However, on June 29, 2009, the Court granted the petition, which asked:

(1) whether the league and the teams were a single entity exempt from rule of reason claims under Section 1 of the Sherman Act and

(2) whether the license agreement between the league and its members and Reebok International—under which the teams agreed to refrain from competing with each other in the licensing and sale of apparel and to refrain from granting licenses for a period of ten years—was subject to a rule of reason claim.

The American Antitrust Institute and the Consumer Federation of America also filed an amicus curiae brief urging the Court to reverse the Seventh Circuit’s ruling. The brief maintains that the appeals court radically expanded the Copperweld doctrine.

The petition is American Needle, Inc. v. National Football League, Dkt. 08-661.

Text of the amicus brief appears here at the Department of Justice website.

Supreme Court to Review Ruling that NFL Licensing Pact Was Not Antitrust Conspiracy

This posting was written by John W. Arden.

Contrary to the recommendation of the FTC and the Department of Justice Antitrust Division, the U.S. Supreme Court today granted review of a Seventh Circuit ruling that the National Football League and its 32 members did not engage in an illegal antitrust conspiracy by granting an exclusive trademark license to apparel manufacturer Reebok International.

The U.S. Court of Appeals in Chicago had rejected a complaining apparel manufacturer’s Sherman Act Section 1 claim on the ground that the league and teams were acting as a single entity when collectively licensing their intellectual property through a jointly-owned licensing affiliate (American Needle Inc. v. National Football League, 2008-2 Trade Cases ¶76,259).

Intraenterprise Conspiracy

Acting as a single entity, the league and its members were incapable of conspiring among themselves under the intraenterprise conspiracy doctrine espoused in Copperweld Corp. v. Independence Tube Corp. (1984-2 Trade Cases ¶66,065), the appeals court held.

An assertion by the complaining manufacturer that the 32 teams could not be considered a single entity—because they each controlled their own intellectual property and their actions deprived the market of independent sources of economic power—was rejected by the appeals court. The teams could function only as one source of economic power when collectively producing NFL football, the court explained.

Questions for Review

In its petition for review, the complaining manufacturer asked:

(1) Whether the league and the teams were a single entity exempt from rule of reason claims under Section 1 of the Sherman Act “simply because they cooperate in the joint production of NFL football games, without regard to their competing economic interests, their ability to control their own economic decisions, or their ability to compete with each other and the league” and

(2) Whether the license agreement between the league and its members and Reebok International—under which the teams agreed to refrain from competing with each other in the licensing and sale of apparel and to refrain from granting licenses for a period of ten years—was subject to a rule of reason claim “where the teams own and control the use of their separate logos and trademarks and, but for their agreement not to, could compete with each other in the licensing and sale of Team Products.”

(American Needle, Inc. v. National Football League, Petition for a Writ of Certiorari, Docket No. 08-661, filed November 17, 2008)

Respondents’ Brief

In an unusual move, the league and its teams urged the Supreme Court to review the decision. Although the result reached by the appeals court was correct, the respondents explained, the courts of appeals were divided on the question. This division “opens the door to repeated, costly antitrust suits that burden not only the joint venture participants, but also the federal courts.”

Thus, the respondents supported the grant of certiorari “in an effort to secure a uniform rule that (i) recognizes the single-entity nature of highly integrated joint venture and (ii) obviates the uncertainty, chilling effects, and forum shopping that inevitably results from the current conflict among the circuits.”

(American Needle, Inc. v. National Football League, Brief for the NFL Respondents, No. 08-661, filed January 21, 2009).

"Friend of the Court" Brief

Subsequently, the FTC and Department of Justice Antitrust Division filed an amicus brief, urging the Supreme Court to deny review of the decision. Contrary to the respondents’ views, the joint brief concluded that the Seventh Circuit decision did not conflict with any decision of another court of appeals. Furthermore, the agencies argued that neither the petitioner nor the NFL respondents presented a question warranting review.

The respondents’ claim that “the principle implicated by the question presented is not limited to professional sports leagues” and “has important implications throughout the economy” was rebuffed by the agencies.

“[T]he somewhat idiosyncratic nature of the relationship between individual NFL teams and the league as a whole makes this case an unsuitable vehicle for resolving broader questions of the kind the NFL respondents identify,” the amicus brief concluded.

(American Needle, Inc. v. National Football League, Brief for the United States as Amicus Curiae, No. 08-661, filed May 28, 2009).