Pattishall IP Blog

July 17, 2009

Supreme Court To Review: Does a Multi-Team Sports League Act as a Single Entity & Avoid Antitrust Liability When Licensing Individual Team Trademarks?

Filed under: Antitrust — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 2:58 pm

by Sanjiv Sarwate, Trademark Attorney

On June 30, 2009, the Supreme Court agreed to review the Seventh Circuit’s decision in American Needle, Inc. v. National Football League, a case illustrating the intersection of trademark law and antitrust law.  American Needle manufactures headwear, and held a license from NFL Properties to manufacture, sell, and promote headwear bearing NFL team logos, names, and other indicia of origin.  NFL Properties initially licensed multiple parties to manufacture headwear bearing team logos.  However, in 2000, the NFL teams directed NFL Properties to solicit bids for an exclusive headwear license, which was eventually won by Reebok.  NFL Properties allowed licenses granted to other entities, including American Needle, to expire.  American Needle then brought suit, alleging that the exclusive license violated Section 1 of the Sherman Act, which forbids any “contract, combination, or conspiracy in restraint of trade.”

American Needle argued that because each NFL team owned its trademarks separately, the exclusive contract between NFL Properties and Reebok restrained other manufacturers’ abilities to obtain licenses from the teams.  Thus, the exclusive license between NFL Properties and Reebok restrained trade in violation of the Sherman Act.  The NFL argued that it is a “single entity” for purposes of licensing team trademarks, and therefore immune from liability under Section 1 of the Sherman Act.  The district court granted summary judgment to the NFL on the “single entity” defense and American Needle appealed.

On appeal, the Seventh Circuit acknowledged that American Needle’s arguments led “into murky waters” because sports leagues have some characteristics of a joint venture between independently owned teams and other characteristics that make them more like a single entity.  For example, from the perspective of a player or prospective player, a sports league seems more like a collection of individual clubs, since they compete for the player’s services.  On the other hand, fans see the league as a single source of a product, even though the teams are different.  For this reason, the Court of Appeals emphasized that the question of whether the league was a single entity should be addressed “not only one league at a time, but also one facet of a league at a time.”

With this in mind, the Court of Appeals held that the NFL should be considered a single entity when it comes to advertising and promoting professional football, which competes against other forms of entertainment.  Because the manufacture of branded merchandise is part of the advertising and promotion of the sport, the Court held that the NFL teams should properly be considered a single entity for purposes of licensing their trademarks, and that it could therefore rely on the “single entity” defense to defeat American Needle’s claim.

The Supreme Court granted certioriari despite a brief from the Solicitor General arguing against granting review.

American Needle, Inc. v. National Football League, 07-4006 (7th Cir. 2008)

Sanjiv Sarwate is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, an intellectual property law firm with a global litigation, counseling and transactional practice, located in Chicago, Illinois.  Pattishall has been recognized for many years as the preeminent trial and appellate firm in trademark and copyright law.  Pattishall counsels clients in a broad range of intellectual property fields – including trademark, copyright, trade secret, advertising, design patent protection, and right of publicity law.  Pattishall provides representation in litigation; strategic planning for brand protection; counseling on internet business development; due diligence research into the sale or acquisition of trademarks, copyrights, design patents and trade secrets; and design and implementation of international trademark acquisition and brand development strategies.  Mr. Sarwate’s practice focuses on domestic and international trademark, trade dress and copyright law.

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