Is The Battle Over USFL Intellectual Property Much Ado About Nothing?

Jul 29, 2022

By Gary Chester, Senior Writer

When last seen in court, the United States Football League was licking its wounds over a meritorious 1986 antitrust case against the NFL that netted it a whopping $1 in damages, trebled to $3, plus $5.5 million in attorney’s fees and costs. Failing to obtain the billions it sought from the NFL, the USFL promptly folded after completing just three seasons.

Fast forward to June 3, 2021, when businesses known as The Spring League (TSL) and USFL Enterprises announced the launch of a revamped USFL with eight teams that would play primarily in Birmingham, Alabama, to limit costs. The new USFL is clearly a made-for-TV venture that Fox Sports owns and operates. Fox and NBC covered the league’s inaugural ten-week schedule and three postseason games.

Nine months after the initial announcement, nine former USFL team owners and devisees formed a new company called The Real USFL. The purpose of the entity is to hold and enforce the original USFL trademarks. The U.S. District Court for the Central District of California evaluated their trademark claims in Real USFL, LLC v. Fox Sports, Inc., et al., 2022 WL 1134487 (April 14, 2022).

The Facts

After the original USFL disbanded, the owners elected Steve Ehrhart to chair the USFL Executive Committee to preserve the name and legacy of the league. Ehrhart, the league’s executive director, entered into licensing agreements for apparel, books, and films, and in February 2022 assigned all rights to The Real USFL.

Despite not owning the original USFL league and team names and logos, the new USFL used the original league name and team names such as the New Jersey Generals, Birmingham Stallions, and Tampa Bay Bandits. TSL and USFL Enterprises used former USFL players to promote the new USFL to establish a connection with the past.

In preparation for the debut of the new USFL, the league’s investors spent tens of millions of dollars on player contracts, stadium leases, apparel deals, and other essential items. The City of Birmingham also invested substantial resources in the new league.

The Litigation

The Real USFL commenced a legal action to enforce its intellectual property rights on February 28, 2022. The plaintiff filed the operative First Amended Complaint and a motion seeking injunctive relief against the new USFL using its trademarks and logos on March 17, 2022. The Real USFL alleges the defendants, Fox Sports and TSL, are liable for trademark infringement, false advertising, false association, unfair competition, and tortious interference with contract.

U.S. District Judge John F. Walter decided the motion based on the parties’ written briefs, without oral argument.

The Legal Standard

To obtain the extraordinary remedy of a preliminary injunction, the moving party must establish: (1) a likelihood of success on the merits; (2) that it will likely suffer irreparable harm absent a preliminary injunction; (3) that the balance of equities tips in its favor; and (4) that an injunction serves a public interest.

The court concluded that the Real USFL is likely to prevail on its trademark infringement claim because it has a protectable ownership interest in the trademarks and the defendants’ use of the marks is likely to cause customer confusion.

The defendants argued that the original USFL had abandoned its trademarks, that a third party registered the trademarks with the U.S. Patent and Trademark Office in 2011, and that the marks were assigned to TSL on April 9, 2021. The plaintiff conceded that the original USFL trademarks lapsed in 1986 when the league ceased operations, but that the plaintiff started to use the marks again in 2006 when Ehrhart contracted with an apparel company to produce nostalgic USFL clothing.

The court found that The Real USFL would likely prevail on the merits. This was based on California Cedar Products Co. v. Pine Mountain Corp., 724 F. 2d 827, 830 (9th Cir. 1984), which held that the “first party to use an abandoned trademark in a commercially meaningful way after its abandonment, is entitled to exclusive ownership and use of that trademark.”

Having satisfied the first prong, could The Real USFL meet the additional requirements for a preliminary injunction?

The Court Denies the Injunction

Although the plaintiff could establish a likelihood of success on the merits, the court ruled that it was unable to meet the three remaining requirements. The Real USFL contended that use of the marks by the defendants would impair its ability to preserve the USFL’s legacy and reputation and cause irreparable harm. But the court recognized that The Real USFL’s use of the marks since the demise of the league was minimal.

“For the past four decades” the court wrote, “Plaintiff’s members use of the Marks and efforts on behalf of the USFL were virtually nonexistent. In fact, Defendants have undoubtedly generated more goodwill for the USFL since announcing the launch of the New League eight months ago than Plaintiff’s members have accomplished in the past forty years.”

After determining that denying the injunction would not cause irreparable harm, the court considered the balance of equities. The court observed that The Real USFL is not seeking to use the marks to promote a competing football league, but the defendants have made substantial investments in intellectual property rights and contracts to start the new USFL. The court found that the equities favor the defendants, stating: “An injunction would effectively stop all of the New League’s activities while Defendants rebranded both the league and the teams, jeopardizing Defendants’ investments and threatening the existence of the New League itself.”

Finally, the court considered whether granting an injunction would serve a public interest. Judge Walter found that the risk of public confusion was limited to a few small apparel sales, as opposed to the new league’s players, business partners and others suffering substantial losses if the court issued an injunction.

Laches was a Factor

Although the court did not specifically apply the equitable concept of unjust delay, or laches, The Real USFL’s delay in filing the lawsuit was a factor in the ruling.

Had the plaintiff filed suit before the defendants entered into contracts and took on other obligations, the court stated, the analysis of public interest factors might have favored the plaintiff. The court wrote: “Because of the delay, however, there is an unacceptable level of economic harm, and this factor weighs strongly against granting Plaintiff’s Motion.”

The Takeaway

Do the USFL’s intellectual property rights have any substantial value? Here are some facts:

  • Telecasts of the new USFL’s regular season games averaged 715,000 viewers, according to the Sports Business Journal.
  • The USFL championship game between the Philadelphia Stars and the Birmingham Stallions averaged a 0.9 rating and 1.52 million viewers on Fox, placing it 46th out of the 63 primetime shows on the four major networks, according to sportsmediawatch.com.
  • The new league plans to conduct its second season in 2023, but the lawsuit presents an overhang to its investors because Judge Walter found that The Real USFL possesses intellectual property rights and is likely to prevail, based on Ehrhart’s revival of USFL trademarks in 2006. Either an injunction or substantial damages for infringement would strike at the heart of the defendants’ business plan.

This appears to be a case where a licensing agreement may be the best outcome for all parties. Fees would likely be modest, as the value of the marks would seemingly pale in comparison to NFL and NCAA trade names and logos.

Lastly, the lack of success of prior spring football leagues such as the XFL and the original USFL makes it interesting to see if the new USFL outlasts this litigation.