The 8th U.S. Circuit Court of Appeals has upheld a lower court’s ruling, concluding that C.B.C. Distribution (recognized as CDM Fantasy Sports) did not need a license from Major League Baseball Advanced Media to use MLB player names and statistics with its fantasy games.
MLBAM had argued that the commercial use of such data without a license was a breach of its rights, which it obtained in 2005 from the MLB Players Association.
In examining the events leading up to the ruling, the court noted that CBC, from 1995 through the end of 2004, licensed its use of the names of and information about major league players from the Players Association pursuant to license agreements that it entered into with the association in 1995 and 2002. The 2002 agreement, which superseded in its entirety the 1995 agreement, licensed to CBC “the names, nicknames, likenesses, signatures, pictures, playing records, and/or biographical data of each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.
In 2005, after the 2002 agreement expired, the Players Association licensed to
Advanced Media, with some exceptions, the exclusive right to use baseball players’ names and performance information “for exploitation via all interactive media.” Advanced Media began providing fantasy baseball games on its website, MLB.com, the official website of major league baseball. It offered CBC, in exchange for a commission, a license to promote the MLB.com fantasy baseball games on CBC’s website but did not offer CBC a license to continue to offer its own fantasy baseball products. This led to CBC’s decision to file a lawsuit, alleging that it had “a reasonable apprehension that it will be sued by Advanced Media if it continues to operate its fantasy baseball games.”
The district court granted summary judgment to CBC, holding that CBC was not infringing any state-law rights of publicity that belonged to MLB players. The court reasoned that CBC’s fantasy baseball products did not use the names of MLB players as symbols of their identities and with an intent to obtain a commercial advantage, as required to establish an infringement of a publicity right under Missouri law. The district court further held that even if CBC were infringing the players’ rights of publicity, the First Amendment preempted those rights.
That court rejected, however, CBC’s argument that federal copyright law preempted the rights of publicity claim. Finally, the district court held that CBC was not in violation of the no-use and no-contest provisions of its 2002 agreement with the Players Association because “the strong federal policy favoring the full and free use of ideas in the public domain as manifested in the laws of intellectual property prevails over [those] contractual Provisions.”
On appeal, the panel first examined if the action based on the defendants’ contention that the players’ right of publicity, a state-law claim, was violated.
The panel agreed noting that because 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. … (T)he players therefore offered sufficient evidence to make out a cause of action for violation of their rights of publicity under Missouri law.
CBC argues that the First Amendment nonetheless trumps the right-of-publicity action that Missouri law provides. Though this dispute is between private parties, the state action necessary for First Amendment protections exists because the right-of-publicity claim exists only insofar as the courts enforce state-created obligations that were ‘never explicitly assumed’ by CBC. See Cohen v. Cowles Media Co., 501 U.S. 663, 668 (1991).
“The Supreme Court has directed that state law rights of publicity must be balanced against First Amendment considerations, see Zacchini v. Scripps-Howard Broad., 433 U.S. 562 (1977), and here we conclude that the former must give way to the latter. First, the information used in CBC’s fantasy baseball games is all readily available in the public domain, and it would be strange law that a person would not have a first amendment right to use information that is available to everyone. It is true that CBC’s use of the information is meant to provide entertainment, but ‘[s]peech that entertains, like speech that informs, is protected by the First Amendment because ‘[t]he line between the informing and the entertaining is too elusive for the protection of that basic right.’ Cardtoons, L.C. v. Major League Baseball Players Ass’n, 95 F.3d 959, 969 (10th Cir. 1996) (quoting Winters v. New York, 333 U.S. 507, 510 (1948)); see also Zacchini, 433 U.S. at 578.
“We also find no merit in the argument that CBC’s use of players’ names and information in its fantasy baseball games is not speech at all. We have held that ‘the pictures, graphic design, concept art, sounds, music, stories, and narrative present in video games’ is speech entitled to First Amendment protection. See Interactive Digital Software Ass’n v. St. Louis County, Mo., 329 F.3d 954, 957 (8th Cir. 2003). Similarly, here CBC uses the ‘names, nicknames, likenesses, signatures, pictures, playing records, and/or biographical data of each player’ in an interactive form in connection with its fantasy baseball products.”
The court added that the “facts in this case barely, if at all, implicate the interests that states typically intend to vindicate by providing rights of publicity to individuals. Economic interests that states seek to promote include the right of an individual to reap the rewards of his or her endeavors and an individual’s right to earn a living. Other motives for creating a publicity right are the desire to provide incentives to encourage a person’s productive activities and to protect consumers from misleading advertising. See Zacchini, 433 U.S. at 573, 576; Cardtoons, 95 F.3d at 973. But MLB players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements. Nor is there any danger here that consumers will be misled, because the fantasy baseball games depend on the inclusion of all players and thus cannot create a false impression that some particular player with ‘star power’ is endorsing CBC’s products.”
Next, the court turned to the breach of contract issue, recounting the language in the 2002 contract between the parties: “’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.’ CBC undertook not to ‘dispute or attack the title or any rights of Players’ 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 (the no challenge provision). CBC also agreed that, upon expiration or termination of the contract, it would ‘refrain from further use of the Rights and/or the Trademarks or any further reference to them, either directly or indirectly’ (the no-use provision). The Players Association maintains that the no-challenge and no-use provisions of the 2002 agreement are fatal to CBC’s claim. We disagree.
“In holding the no-use and no-challenge provisions unenforceable as against public policy, the district court applied a Supreme Court decision dealing with patents. In that case, the Supreme Court held that the doctrine of licensee estoppel (under which a licensee is estopped from contesting the validity of its license, see Idaho Potato Comm’n v. M&M Produce Farm & Sales, 335 F.3d 130, 135 (2d Cir. 2003), cert. denied, 541 U.S. 1027 (2004)), must give way when the ‘strong federal policy favoring the full and free use of ideas in the public domain’ contained in federal patent law outweighs the ‘competing demands … of contract law.’ Lear, Inc. v. Adkins, 395 U.S. 653, 674, 675 (1969). The Lear balancing approach has been applied to other areas of federal intellectual property law, see Idaho Potato, 335 F.3d at 137-39 (certification marks); Beer Nuts, Inc. v. King Nut Co., 477 F.2d 326, 328-29 (6th Cir. 1973), cert. denied, 414 U.S. 858 (1973) (trademarks); see also Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191, 1200-01 (7th Cir. 1987) (copyright). The district court’s application of the Lear principles to a state law right-of- publicity action, however, was unique so far as we can determine. We do not reach the issue of whether Lear is applicable here, though, because we believe that the contested contract terms are unenforceable for a different reason.
“We first note that in its brief, CBC argued that it should be relieved of its no-use and no-challenge obligations because the Players Association breached a warranty contained in § 1(b) of the 2002 agreement. Section 1(b) of the agreement provides that ‘[the Players Association] represents and warrants that it has the authority to grant the rights licensed herein.’ CBC argued that this was a warranty of title in the players’ publicity rights and that the Players Association breached this warranty, either because the players did not have publicity rights or because CBC’s first amendment rights superseded any such publicity rights. We find this argument meritless: Section 1(b) is not a warranty of title, it is merely a warranty that the Players Association is the agent of the players. That warranty was not breached.”
Jeff Thomas, president of the Fantasy Sports Trade Association (FSTA), issued the following statement after the ruling:
“This decision is a landmark win for the fantasy sports industry, the fantasy sports player and the average sports fan. It confirms that we’ve been taking the right approach for more than a decade. We believe fantasy sports are a major marketing vehicle for the leagues and players and our discussions should be about leveraging that marketing opportunity, not about paying a licensing fee.
“Fantasy companies will now be able to continue to develop their products and grow their businesses without the risk of licensing fees consuming all of their profits or licensing issues jeopardizing their basic existence,” Thomas added. “This strong follow-up statement by the courts will help drive new investment in fantasy sports, accelerate growth and open new opportunities for everyone from small businesses to major corporations.”
The FSTA filed an amicus brief on behalf of C.B.C. Distribution in both cases, arguing that the case was a watershed decision that would have a widespread impact, potentially reshaping the industry to just a few players with monopolistic power.
“Today’s decision from the 8th Circuit Court of Appeals is a major victory for the fantasy sports industry, fantasy sports players, and most importantly, the protection of free speech and expression,” said Glenn Colton, who represented the FSTA by filing the association’s amicus brief. “In the final analysis, the decision drives another nail in the coffin of Major League Baseball and its players association’s attempt to wrest control of the fantasy sports industry from the pioneers that worked long and hard to build and create the thriving national hobby millions enjoy today.”
C.B.C. Distribution and Marketing, Inc. v. Major League Baseball Advanced Media, L.P. et al.; 8th Cir.; Nos. 06-3357/3358; 10/16/07
