In American Needle, Inc. v. National Football League, the U.S. Supreme Court held that the National Football League was subject to suit under the Sherman Antitrust Act regarding its practices in licensing team trademarks to merchandisers. Between 1963 and 2000, the IP licensing entity set up by the league, NFL Properties, had “granted nonexclusive licenses to a number of vendors,” including American Needle, “permitting them to manufacture and sell apparel bearing team insignias.” In 2000, however, an exclusive license was granted to Reebok. American Needle, having lost out on the deal, responded with an antitrust suit in the Northern District of Illinois, which made it to the Supreme Court eight years later.
The question posed in the case was whether the NFL teams are separate decision-making entities for purposes of this analysis, or whether NFL Properties should be viewed as a single entity. If the latter, there can be no potential liability for antitrust violations, as it takes two to tango and a single entity cannot “conspire with itself.” Disagreeing with both the district court judge and the Seventh Circuit Court of Appeals, the Supreme Court held unanimously that NFL Properties should not be treated as a single entity, but merely as a joint venture of separately managed competitors, each owning its own intellectual property rights and fully capable of conspiring to violate the antitrust laws. Thus, summary judgment in favor of the NFL was reversed, and the suit allowed to proceed.
Are sports franchises really independent actors with regard to their trademark rights? On the one hand, it’s certainly true that each individual team owns its marks, as searching the Patent and Trademark Office database of trademark registrations will show. Yet those with experience in the sports business know that virtually all intellectual property issues of the various leagues are centrally managed – from collection and ownership of copyrighted historical footage, to enforcement against unauthorized merchandisers, to promotion of web sites and internet broadcasting rights. One well-publicized example involves the dispute earlier this year concerning the “Who Dat” slogan of the NFL champion New Orleans Saints: the controversial cease and desist action against manufacturers of T-Shirts bearing the popular slogan came not from the team, but from the league.
It’s interesting to contrast the Supreme Court’s vision of teams as independent owners of trademark rights with the picture that emerges from a different suit filed in 2007 and settled last year. In Madison Square Garden, L.P. v. National Hockey League, the owners of the New York Rangers sued the National Hockey League to gain control of their own website, newyorkrangers.com, after the league voted (over the objection of Rangers owners) to run all team websites on a league-controlled format through a league server. The complaint accused the NHL of “seizing the Rangers website” and stated, “The NHL began as a legitimate joint venture producing a product – major league men’s professional ice hockey competition – that no one club can produce alone . . . But by seeking to control the competitive activities of independent businesses . . . the NHL has become an illegal cartel.”
The NHL counterclaimed that the Rangers were violating the league’s constitution and by-laws by even bringing the suit, and pointed out, as noted by the district court judge, that in 1994 “the Member Clubs, with the Rangers’ vote, granted the League exclusive worldwide rights to use or license team trademarks for various marketing purposes, such as advertising and the sale and distribution of ‘products and services . . . of any nature.’” The district court found that the Rangers failed to show a likelihood of success on the merits given this broad assignment of rights. The suit was later settled and dismissed.
Thus, the Rangers, though nominal owners of the registered mark, not only lacked the ability to run their own website utilizing their mark, but had arguably contracted away their right to even go to court to contest the issue. In light of this, can we truly say that sports franchises are independent actors pursuing their own interests in their marks? Perhaps the further development of the American Needle case on remand will shed more light on the issue.