C.B.C. Distribution and Marketing Inc., v. Major League Baseball Advanced Media, L.P. and Major League Baseball Players’ Association, Case No. 4:05-cv-00252 (E.D.Mo.)
By Marc E. Ackerman and Patrick Eyers*
Introduction
Sports statistics, the lifeblood of the burgeoning fantasy sports industry, exist in the public domain and may be utilized by fantasy sports providers without licensing approval, a federal court judge in Missouri has found. In a clear victory for fantasy sports operators over Major League Baseball’s interactive media division and players’ union, Judge Medler of the U.S. District Court for the Eastern District of Missouri has ruled that Major League Baseball players do not have a right of publicity in their names and performance records as used in commercial fantasy games. With an appeal pending to the U.S. Court of Appeals for the Eighth Circuit, the decision has prompted a major re-think of the value of existing licenses covering the commercial use of player-generated statistics. The decision has significant ramifications for each of the professional sports leagues and players unions, which must now reassess how best to exploit such intangible assets in an increasingly interactive media environment.
Background
An estimated 15 million fantasy sports participants in the United States spend upwards of $150 million each year assembling rosters of real life players and competing against one another on the basis of the statistics generated by their chosen stars. CBC, operating under the trade name CDM Fantasy Sports, has for many years offered a variety of fantasy sports games on its website www.cdmsports.com. Like hundreds of other fantasy sports providers, CBC’s business is dependent on the use of players’ names and statistics. The company does not use photographs or likenesses of the players, or team logos, on its website or elsewhere.
For a decade, CBC had paid for the right to use this information. In 1995 the company signed a licensing agreement with the Major League Baseball Players’ Association (“MLBPA”) for use of “the names, likenesses, signatures, pictures, playing records, and/or biographical data of each player” (the Players’ Rights). The agreement, renewed in 2002, contained a no-challenge provision preventing CBC from disputing the rights conferred under the agreement, and a clause restricting CBC from making any use of those rights beyond the contract term. One month after the agreement expired in December 2004, the MLBPA signed an exclusive deal with Major League Baseball Advanced Media (“MLBAM”), the internet arm of Major League Baseball which runs the website www.mlb.com. Under that agreement, valued at $50 million over five years, MLBAM acquired an exclusive license to use and sublicense players’ group rights for the creation of online games, including fantasy baseball games. MLBAM then approached existing operators, offering to sublicense those rights on certain terms. Unable to reach a new agreement with MLBAM after it acquired the rights from MLBPA, CBC sought to establish that it did not need a license to continue to operate its business.
The Case
CBC filed a complaint seeking a declaratory judgment and injunctive relief against MLBAM, preventing it from asserting exclusive ownership in the names and statistical information used by CBC to provide fantasy baseball games to the consuming public. MLBAM, which was joined by MLBPA in the matter, countered by claiming that CBC’s use of the names and statistics not only breached the terms of the prior license agreement, but also violated the players’ right of publicity in this information. The MLBAM and MLBPA conceded that player statistics were public domain facts, but argued that the use of players’ names together with those statistics violated the players’ right of publicity. The question facing Judge Medler was whether the players had a right of publicity in their names and playing records as used in CBC’s fantasy sports games, and if so, whether this right is trumped by the First Amendment, or alternatively, is preempted by federal copyright law. The court also considered whether CBC had breached the terms of its prior licensing agreement with MLBPA.
Judge Medler granted summary judgment in favor of CBC on August 8, 2006. The court held that the players had no right of publicity in their names and statistics as used by CBC. A successful right of publicity claim requires proof of commercial appropriation of the plaintiff’s identity for the defendant’s advantage. The court held that CBC’s use of the names and statistics did not suggest a commercial affiliation or endorsement of its products, nor did it attract attention to the CBC website which hosts the games. CBC’s use was distinguished from previous cases in which the use of player likenesses were found to suggest an improper commercial affiliation; here, the use of names and statistics alone did not evoke the “character, personality, reputation, or physical appearance” of the players [18]. Furthermore, CBC’s use of public domain facts did not go to “the heart of the players’ ability to earn a living,” which comes not from licensing rights to their performance records, but through on-field activities and endorsements [20]. Moreover, the court observed that fantasy sports can actually enhance the marketability of baseball players by generating viewer interest, thus enhancing a player’s earning power.
Despite having found in favor of CBC regarding the right of publicity claim, the court nevertheless continued to consider First Amendment and copyright preemption issues as they relate to the right of publicity.
Even if the players could establish a right of publicity in their names and statistics as used by CBC, the court found that any proprietary interest of the players would be overruled by the First Amendment’s concern for the free dissemination of information. Focusing on the public interest served by disseminating “mere bits of baseball’s history” already in the public domain, the court found that the use complained of did not meaningfully interfere with the players’ ability to reap financial reward from their endeavors, but rather informs and entertains the public about baseball (citing Gionfriddo v. Major League Baseball, (2001) 94 Cal. App. 4th 400) [23].
The court went on to consider whether the players’ claimed right of publicity would be preempted by federal copyright law. Although compilations of facts are arguably within the subject matter of copyright law, CBC’s use of underlying factual data otherwise available in the public domain is not copyrightable. According to Judge Medler, sports statistics are akin to census data, news of the day, or information in a telephone book, and as such would not qualify for copyright protection.
The court finally considered whether CBC had breached the no-challenge provision or post-termination restriction contained in the prior licensing agreement between CBC and MLBPA. Having established that the players lacked an enforceable right of publicity covering the use of their names and statistics in the first place, the court found that the public policy in encouraging the free exchange of information outweighed the parties’ prior contractual agreement.
Business Ramifications
The decision has prompted professional sports leagues and fantasy sports providers alike to re-evaluate existing agreements covering the use of ‘players’ rights’, including names and performance records. In professional baseball, the most prominent agreement in this regard is the MLBAM deal itself, valued at $50 million. In addition, each of MLBAM’s current sublicensing agreements with fantasy providers such as Yahoo!, ESPN, CBS SportsLine.com, ProTrade and Fox Sports.com may be sent back to the boardroom. These deals are purported to be worth approximately $2 million per year.
Significantly, the court’s ruling is explicitly limited to the use of names and statistics. Fantasy sports providers must still negotiate with the appropriate players and/or leagues for the rights to additional features such as player photographs, team logos or video footage. This leaves the door open to the development of ‘premium’ fantasy games, in which operators license a more extensive package of rights and in turn offer games which incorporate a range of special features. The interactive possibilities of such developments may be well-suited to the more established industry players, who look to use the growth of fantasy sports as a driver of ratings or advertising revenue.
Issues on Appeal
As noted above, the MLBAM and MLBPA have filed a joint appeal to the U.S. Court of Appeals for the Eighth Circuit. Given the margin of victory in the ruling at hand, this will be an uphill battle. However the appellants, who have yet to release a statement of issues, may benefit from focusing on a number of potential vulnerabilities in Judge Medler’s ruling.
Appellants may argue that the court improperly exercised its supplemental jurisdiction in deciding to hear the matter at all. The parties agreed by stipulation to the dismissal of the federal trademark and copyright claims (and other state claims) originally brought by CBC. As a result, the only count remaining in CBC’s complaint was its right of publicity claim, which as mentioned above, is a matter of state and common law. On the basis of judicial economy, however, the court proceeded to rule on the matter. The Court of Appeals may find that the matter should instead have been transferred to an appropriate Missouri state court.
In addition, the decision makes relatively light work of the notion of ‘commercial speech’ as it effects the strength of protection for CBC’s challenged use. Although it is no doubt true that speech is not transformed into commercial speech merely because the product at issue is sold for profit, it is not entirely clear the CBC’s use of this information is not “expression related solely to the economic interests of the speaker and its audience” (citing Cent. Hudson Gas & Electric Corp. v. Pub. Serv. Comm’n, 447 U.S. 557) [26]. CBC’s use does not have the same public service quality that characterized MLB’s use of similar information when it took the opposite side of this argument in the 2001 case of Gionfriddo, 94 Cal. App. 4th 400. In that case, the California Court of Appeal held that MLB’s use of famous (and long-since retired) players’ names and statistics on its website and in various historical lists or games was integral to the public understanding of baseball’s history. Another court might find the use at issue here to be more purely commercial and as such less worthy of protection.
Appellants might also argue that Judge Medler should not have ruled at all on the First Amendment arguments under the doctrine of constitutional avoidance, which instructs that a court should endeavor to resolve a case on nonconstitutional grounds if at all possible. Given that the court had already found in favor of CBC before reaching the constitutional arguments, the Court of Appeals might find that discussion to have been improper.
Conclusion
Sports fans, fantasy sports providers and major league representatives alike will eagerly await the outcome of the Eighth Circuit appeal. In the meantime, the business of negotiating rights to the use of sports statistics will be altered significantly by Judge Medler’s decision, although to what extent is unclear. What is more clear is that fantasy sports will continue to grow, and the battle for control of the revenues they generate will intensify.
*Ackerman is a trial and appellate litigator at White & Case LLP, who concentrates on intellectual property and commercial disputes. He has handled a broad array of intellectual property disputes, including matters involving trademark, copyright, unfair competition, trade dress, trade secrets, rights of privacy/publicity, libel and First Amendment. He regularly practices before the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office. Eyers is an associate at the firm.
