By Joseph M. Hanna, of Goldberg Segalla
In 2010, the Supreme Court declared that the National Football League’s practice of league-wide licensing deals was not immune from antitrust scrutiny under Section One of the Sherman Act. On remand, a recent order by the U.S. District Court for the Northern District of Illinois denied the NFL’s motion to dismiss the case and set the stage for a trial.
The American Needle company, an entity that had acted as a vendor for the NFL for 20 years, initially sued the league, 30 of its 32 member teams, and Reebok after its licensing deal was not renewed. American Needle argued that the NFL’s exclusive hat licensing deal with Reebok violated the Sherman’s Act prohibition on any “contract, combination or conspiracy in restraint of trade.” Collectively, the NFL teams possess 100% market power for NFL headgear.
Judge Sharon Coleman was persuaded by American Needle’s expert testimony, which established that that, “shortly following the execution of the exclusive arrangement between Reebok and NFL Properties, wholesale prices of licensed hats rose by a significant degree while output of those items dropped, and that the higher prices and lower output continued for years, never returning to their pre-exclusivity levels.” Further, the NFL failed to produce any evidence indicating that American Needle’s licensing agreement wouldn’t have been renewed in the absence of the exclusive Reebok deal.
Accordingly, Coleman stated, “There is sufficient evidence to permit a jury to find that American Needle could have continued as a licensee under the traditional structure, and that its prospects were ended by defendants’ concerted decision to limit the number of their licensees . . . . The possibility that a less onerous restraint would have also ended those prospects does not negate the causal link between the alleged injuries and the restraint actually imposed.”
The NFL is made up of independently owned member teams that share costs and, to some extent, revenue. Though the individual teams “own” their respective IP rights, the NFL has control over team colors and mascots. A victory by American Needle at trial could set the stage for smaller apparel companies to execute licensing agreements with individual teams rather than the league as a whole through a competitive bidding process.
