ARTICLE

 

In the fall of 2005, an interesting debate unfolded on popular cable television sports programs and throughout the media. Executives for Major League Baseball (“MLB”) asserted ownership of the statistics generated by their players and their baseball games. On the other side of the debate, lawyers disputed MLB's claims, arguing that sports statistics are in the public domain and free for all to use, without license. The debate was set in the context of a familiar and popular form of public entertainment—fantasy sports

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This public debate became a lawsuit in the U.S. District Court for the Eastern District of Missouri—a lawsuit with important implications for the other professional sports leagues.[1] Initially, the main issues before the court were whether fantasy sports providers infringed any copyrights allegedly owned or controlled by MLB, whether fantasy sports providers violated sections of the Lanham Act for deceptive and unfair business practices, and whether fantasy sports providers violated rights of publicity owned or controlled by MLB.[2] The issues were later narrowed so as to abandon MLB's claim of ownership of its statistics. The trial court subsequently ruled in favor of the fantasy provider on a summary judgment motion and the Eighth Circuit Court of Appeals affirmed the judgment in October 2007, for the fantasy provider, though the latter relied on different reasoning.

The evolution of the fantasy sports dispute, the trial and appellate court decisions, and, in particular, the Eighth Circuit's analysis provide important lessons to lawyers practicing law in all aspects of the sports industry including intellectual property, First Amendment, and contract law.

BATTER UP: HOW IT ALL BEGAN

From 1995 through the end of 2004, C.B.C. Distribution and Marketing, Inc. (“CBC”) licensed from the MLB Players Association, by two separate agreements, the use of the names and information of each professional player to be used in association with its fantasy baseball products. After the second license agreement expired at the end of 2004, the Players Association struck a deal to exclusively license the rights to its players' names and information with respect to Internet fantasy baseball with MLB Advanced Media, the interactive media and Internet company for Major League Baseball. Opportunity to renew the license of these rights for its own fantasy games was not given to CBC. CBC then filed suit against MLB seeking a determination that its continued operation of fantasy games does not violate any rights claimed to be owned or controlled by MLB and its players, notwithstanding the expiration of CBC's license.

STRIKE ONE: RIGHTS OF PUBLICITY

MLB and the Players Association asserted that CBC's unlicensed use of the names and information in fantasy games violated the players' rights of publicity. The right of publicity is a state law cause of action, and Missouri state law controlled the issue. In Missouri, the elements of a right of publicity action include (1) that the defendant used the plaintiff's name as a symbol of his identity, (2) without consent, and (3) with the intent to obtain a commercial advantage.

The trial court struggled in its analysis of whether CBC used the players' names as a symbol of their identity at length. The Eighth Circuit, however, decided the cause of action quickly and decisively. Finding all of the elements satisfied as they apply to CBC's Internet fantasy games, the appeals court held:

Because we think that it is clear that CBC uses baseball players' identities in its fantasy baseball products for purposes of profit, we believe that their identities are being used for commercial advantage and that the players therefore offered sufficient evidence to make out a cause of action for violation of their rights of publicity under Missouri Law.[3]

Therefore, under Missouri state law, CBC's Internet fantasy sports games violate professional baseball players' rights of publicity.

STRIKE TWO: FIRST AMENDMENT

While Major League Baseball put itself in good position to score by proving its players had rights of publicity, and that those rights were being violated, it was not safe at home plate just yet. The Supreme Court has directed that state law rights of publicity must be balanced against First Amendment considerations.[4]

Balancing these rights, the Eighth Circuit found that CBC's uses of the names, nicknames, likenesses, signatures, pictures, playing records, and/or bio- graphical data of each player are expressive speech and that the public value of information about the game of baseball and its players commands a substantial public interest. Accordingly, it held that such speech is a form of expression that deserves substantial constitutional protection and that the noneconomic justifications for the rights of publicity, such as rewarding celebrity labor, were unpersuasive as compared with the interest in freedom of expression.

The call by the Eighth Circuit was clear: CBC's First Amendment rights to offer its fantasy baseball products superseded the players' rights of publicity.

STRIKE THREE: BREACH OF CONTRACT

Perhaps the most intriguing lessons from the dispute came out of the Eighth Circuit's analysis of MLB's breach of contract claim. The 2002 license agreement between CBC and the MLB Players Association gave CBC rights to “the names, nicknames, likenesses, signatures, pictures, playing records, and/or biographical data of each player to be used in association with CBC's fantasy baseball products.” [5] In addition, CBC agreed that, upon expiration or termination of the agreement, it would “refrain from further use of the Rights and/or the Trademarks or any further reference to them, either directly or indirectly.”[6] Further, the agreement provided: “It is understood and agreed that [the Players Association] is the sole and exclusive holder of all right, title and interest in and to the rights,”[7] and CBC agreed not to “dispute or attack the title or any rights of the Player's Association in and to the Rights and/or the Trademarks or the validity of the license granted” either during or after the expiration of the agreement.[8]

Based on CBC's agreement not to use the rights granted in the license agreement after its expiration, or challenge the validity of those rights, MLB claimed that CBC was in breach of the 2002 license agreement, and thus its lawsuit was fatal since it was now doing exactly what it agreed it would not do. The Eighth Circuit disagreed, finding the “no-use” and “no-challenge” provisions unenforceable. Interestingly, the Eighth Circuit decided this on the basis of a provision in the contract not cited by either party.

The court relied upon the agreement's provision that its interpretation would be governed by New York law. In New York, “a contractual warranty is defined as ‘an assurance by one party to a contract of the existence of a fact upon which the other party may rely.”[9] The court then noted that the agreement provided that the Players Association “is the sole and exclusive holder of all right, title and interest” in and to the names and playing statistics of virtually all Major League Baseball players. Though not expressed, titled, or designated as such, the court found this provision to be a representation or warranty that the Players Association in fact owned the state law publicity rights of its players.[10]

This warranty of title now posed a major problem for the Players Association, due to the court's earlier finding that the players had no right of publicity because the First Amendment trumped. Therefore, because the First Amendment superseded, the court found the Players Association's express warranty of title in and to the players' information a material breach of contract. Consequently, CBC was relieved of its obligations under the agreement and the Players Association could no longer enforce the no-use and no-challenge provisions of the 2002 license agreement.

EXTRA INNINGS

The dissenting opinion detailed perhaps the biggest lessons of the fantasy sports dispute. The dissent disagreed with the court's conclusion that the no-use and no-contest provisions were unenforceable because the Players Association breached a warranty of the agreement. As the dissent pointed out, those provisions appeared under the heading “Ownership of Rights” and merely provided that the parties “understood and agreed that MLBPA is the sole and exclusive holder of all right, title and interest in and to” the rights granted to CBC.[11] Although the court found this provision to be a warranty, the provision merely stated that the parties “agreed” that MLBPA was the sole and exclusive rights holder. As the dissent put it, “CBC surely can ‘agree,' as a matter of good business judgment, to bargain away any uncertain First Amendment rights that it may have in exchange for the certainty of what it considers to be an advantageous contractual arrangement.”[12]

The dissent had a point—at the time of making the agreement, how could the Players Association predict that its rights would be held inferior to CBC's First Amendment rights in the fantasy baseball context? And because it couldn't make this prediction, didn't the parties have contractual freedom to allocate that risk? That CBC later decided it did not need a license, and was judicially backed by that decision, was a fortuitous save of game by the Eighth Circuit in relief of CBC's contractual obligations.

Matt Massari is an associate at Downey Brand LLP in Sacramento, Calif. During law school he interned with Fox Sports Net and NIKE, Inc., where his primary responsibilities included contract drafting. His e-mail is mmassari@downeybrand.com.
[1] On February 22, 2008, MLB Advanced Media and the MLB Players Association, filed a Petition for Writ of Certiorari to the United States Supreme Court seeking to overturn the District Court and Court of Appeals decisions discussed in this article. The 41 page Petition argues, inter alia, that conflict and confusion arose in the federal courts of appeals and the highest courts of several states in the years since the Supreme Court's 1977 decision in Zacchini v. Scripps-Howard Broad Co. 433 U.S. 562 (1977) over the correct legal test for weighing states' interest in enforcing publicity rights against the interests protected by the First Amendment. MLBAM highlights the various balancing tests currently applied across the jurisdictions and seeks a uniform test from the Supreme Court. MLBAM claims that in practice, the choice of balancing test has proved outcome determinative, and that “[t]he same use of a famous person's identity will be unlawful or constitutionally protected depending upon which jurisdiction first addresses that use, an outcome that is fundamentally unfair, particularly to national businesses.” MLBAM argues that the decision in this case “disrupted extant business and reliance interests in the billions of dollars...” by misapplying the First Amendment to the players' rights of publicity, and by invalidating MLBPA's representation that it owned the players' rights of publicity and excusing CBC from compliance with its contractual obligations based on the First Amendment. CBC has the option of responding to the Petition, and has until March 27, 2008, to do so.
[2] See Matthew G. Massari, Note, When Fantasy Meets Reality: The Clash Between On-line Fantasy Sports Providers and Intellectual Property Rights, 19:2 HARv. J. L. & TECH. 443 (2006).
[3] C.B.C. Distrib. & Mktg., Inc. v. Major League Baseball Advanced Media, L.P., 505 F.3d 818, 823-24 (2007).
[4] See Zacchini v. Scripps-Howard Broad., 433 U.S. 562 (1977).
[5] See C.B.C. Distrib. & Mktg., Inc. v. Major League Baseball Advanced Media, L.P., 443 F. Supp. 2d 1077 (2006) (reciting the terms of the license agreement).
[6] Id.
[7] C.B.C. Distrib. & Mktg., 505 F.3d 818.
[8] Id.
[9] Id. (citing CBS Inc. v. Ziff-Davis Publ'g Co., 75 N.Y.2d 496, 503 (1990)).
[10] Id.
[11] Id.
[12] Id.
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