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From Antitrust Law Daily, October 28, 2013

College athletes can proceed with antitrust claims against NCAA over use of their names, images, and likenesses

By Tobias J. Gillett, J.D., LL.M.

Claims by current and former college athletes that the National Collegiate Athletic Association (NCAA) violated the Sherman Act by restraining competition in the market for the licensing of the athletes’ names, images, and likenesses for use in game broadcasts and videogames withstood the NCAA’s motion to dismiss, the federal district court in Oakland, California has ruled (In re NCAA Student-Athlete Name & Likeness Licensing Litigation, October 25, 2013, Wilken, C.). The claims were not barred by the exemption provided for the NCAA’s “rules on amateurism,” by the California Civil Code, or by the First Amendment, and were not preempted by the Copyright Act.

The players alleged two sets of claims: (1) that the NCAA violated their common law and statutory rights of publicity by misappropriating their names, images, and likenesses and (2) that the NCAA had violated federal antitrust law by conspiring with Collegiate Licensing Company (CLC) and Electronic Arts Inc. (EA) to restrain competition in the market for the use of their names, images, and likenesses. The antitrust plaintiffs asserted that the NCAA required student-athletes to sign release forms as a condition of their eligibility to compete in which the athletes “relinquish[ed] all rights in perpetuity to the commercial use of their images.” The NCAA then sold or licensed the athletes’ names, images, and likenesses to third parties. EA used these assets in NCAA-branded video games, and CLC represented the NCAA in licensing agreements with EA and other producers of NCAA-branded merchandise.

The players alleged that the arrangement amounted to “a price-fixing conspiracy and a group boycott/refusal to deal” that unlawfully prevented the players from receiving compensation for the use of their images, likenesses, and/or names. They later narrowed their allegations to focus on the use of their names, images, and likenesses in game footage and videogames, and defined the markets as (1) the Division I college market where universities compete to recruit student-athletes, and (2) the “market for the acquisition of group licensing rights for the use of student-athletes’ names, images and likenesses in the broadcasts or rebroadcasts of Division I basketball and football games and in videogames featuring Division I basketball and football.” EA, CLC, and the NCAA moved to dismiss, but the plaintiffs later settled with EA and CLC. The present decision addressed the NCAA’s motion to dismiss the antitrust claims.

Rules on amateurism. The court rejected the NCAA’s argument that the players’ claims should be dismissed pursuant to NCAA v. Board of Regents, 468 U.S. 85 (1984), as “a challenge to the NCAA’s rules on amateurism.” In Board of Regents, the Supreme Court recognized that the NCAA had to be allowed to impose certain horizontal restraints in order to offer its “particular brand” of amateur athletic competition at all. The opinion included the statement: “In order to preserve the character and quality of the NCAA’s product, athletes must not be paid, must be required to attend class, and the like.”

However, the court observed that the Supreme Court did not actually analyze the NCAA’s ban on athlete compensation under the rule of reason, or determine whether it “had a procompetitive effect on the college sports market.” The court noted that cases following Board of Regents had narrowly interpreted the dicta from the case, and had found that NCAA rules restricting scholarships and financial aid could be challenged under the Sherman Act, even though they related to student-athlete compensation. Here, the players alleged that college sports programs offered nonmonetary incentives to student-athletes during recruiting, but that the NCAA’s rules prevented the programs from offering monetary compensation for the athletes’ labor or for their names, images, or likenesses, resulting in lower compensation for the players than would prevail in a competitive market. These allegations were sufficient to state a Sherman Act claim, according to the court.

The court cited the Seventh Circuit’s decision in Agnew v. NCAA, 683 F.3d 328 (2012), finding that the relationship between NCAA schools and their athletes was “commercial in nature,” and therefore took place in a relevant market for Sherman Act purposes. The court observed that the Agnew court distinguishedBoard of Regents on the ground that “Board of Regents did not address the impact of the NCAA’s horizontal restraints on student-athletes.” Although the NCAA’s prohibition on student-athlete compensation might serve some pro-competitive purpose, the players’ “plausible allegations to the contrary must be accepted as true at the pleasing stage,” according to the court.

Publicity rights. The court also rejected the NCAA’s argument that the California Civil Code and the First Amendment barred the plaintiffs from asserting any rights of publicity in their names, images, and likenesses, and hence that the plaintiffs’ antitrust claims based on a market in which the players would be able to sell those rights should be dismissed. Even if the California Civil Code, which provided that individuals had no right of publicity in the use of their “name, voice, signature, photograph, or likeness” in connection with a “sports broadcast or account,” barred the plaintiffs from selling their publicity rights in California, the plaintiffs had alleged harm to a nationwide market. Therefore, the NCAA would have to show that the plaintiffs were barred from asserting their claims in every state to obtain dismissal at the pleading stage.

The court observed that the Supreme Court and the federal courts of appeal had not “squarely addressed whether the First Amendment bars athletes from asserting a right of publicity in the use of their names, images, or likenesses during sports broadcasts,” but determined that lower court cases had developed a framework under which “the central question in determining whether the First Amendment bars an athlete’s right-of-publicity claim is whether the defendant’s use of the athlete’s name, image, or likeness is primarily ‘commercial.’” The court noted that courts were frequently reluctant to make this “highly fact specific analysis” at the pleading stage. Here, the court found it was “plausible that at least some of the broadcast footage described in the complaint—particularly the promotional highlight films and the ‘stock footage’ sold to advertisers—was used primarily for commercial purposes.” Therefore, the First Amendment did not require dismissal of the players’ claims at the pleading stage.

Copyright Act preemption. Finally, the court concluded that the Copyright Act did not preempt the players’ claims. The players did not seek to protect their copyrights in the game footage, but instead sought “the right to license the commercial use of their names, images, and likenesses in certain broadcast footage.” A right of publicity was not “a ‘writing’ of an ‘author’ within the meaning of the Copyright Clause of the Constitution.” Moreover, the plaintiffs based their claims on an injury to competition, not merely on the NCAA’s misappropriation, and “[i]ntellectual property rights do not confer a privilege to violate the antitrust laws.”

The case is No. C 09-1967 CW.

Attorneys: Shana E. Scarlett (Hagens Berman Sobol Shapiro LLP) for Samuel Michael Keller. Robert James Slaughter (Keker & Van Nest LLP) for Electronic Arts Inc. Juan Carlos Araneda (Meckler Bulger Tilson Marick & Pearson LLP) for National Collegiate Athletic Association and Collegiate Licensing Company.

Companies: National Collegiate Athletic Association

MainStory: TopStory Antitrust CaliforniaNews

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