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New York Law School 5th Annual Sports Law Symposium

By [Monday, January 27th, 2014]

NCAA Athletes Continue the Battle to Reclaim and Profit from their Publicity Rights

By [Monday, December 16th, 2013]

ncaa_money_mgnBY KIERSTEN MCKOY, NYLS ’14

Imagine if there was a billion dollar industry in which consumers bought products based off of characters that were designed to look and move like you. Imagine that these characters were built like you–same height, weight, skin tone, hairstyles, hair color– wore your clothes, and had your mannerisms. Imagine people lining up each year to buy the products because they expected to see you or even better, they wanted to pretend to be you. Imagine all of this was created without your permission. A whole empire built on your image worth $1.3 billion. Now imagine you have not received a dime.

E.A. Sports, a division of Electronic Arts, Inc. that develops and sells video games mimicking some of the world’s most popular athletic competitions and their athletes, has settled all of the class action lawsuits brought against the company by former and current athletes over the unauthorized use of the players’ images and likenesses in the video games and other merchandise. The lawsuits include those brought by former UCLA basketball star Ed O’Bannon, former Rutgers quarterback Ryan Hart, former Arizona State quarterback Sam Keller, and former West Virginia running back Shawne Alston. Each suit alleged that current and former players deserved a share in the billion dollar video game industry that profited off of their images without their permission. Both former and current players (estimated to be between 200,000 and 300,000) will get their share of $40 million dollars that E.A. Sports will have to pay as a result of the settlement. While the payoff does not amount to much, this is the first time that current college athletes can be paid for their appearance in the video games (though the effect on their NCAA eligibility will be in question).

However, several issues remain. First, the settlement with E.A. Sports does not create any legal precedent. The athletes may be entitled to a few hundred dollars each, depending upon how many players have chosen to join the class action suit. However, this does not prevent E.A. Sports, the NCAA, or others from continuing to use the players’ images without their permission in the future. Before athletic participation begins each year, college athletes are required to sign a Student-Athlete Statement confirming that they are amateurs and forfeiting any rights, including the right to compensation and to their images and likeness, in perpetuity. While the athletes have alleged that E.A. Sports’ use of their images is unauthorized, the court has not yet ruled on the matter and E.A. Sports has not admitted any wrongdoing as part of the settlement. This leaves a lot of uncertainty about what will happen in the future.

Second, the NCAA was not a part of the settlement, which means that battle over the use of a player’s likeness is far from over. In a November 8th ruling, Unites States District Judge Claudia Wilken certified the class of current and former college athletes solely for injunctive relief. That means if the plaintiffs prevail in the suit, they can prevent the NCAA from using their images (and profiting from them) without their permission in the future, but cannot collect damages.  Correspondingly, now that the NCAA is no longer at risk of a huge damages award, the organization is unlikely to settle and will continue to require college athletes to waive their publicity rights every year, and to enforce those waivers.

Third, if any current player named as a plaintiff in the lawsuit accepts money—whether from a damages judgment or a settlement—the player’s remaining eligibility could come into question under the NCAA’s strict amateurism policy.  Thus, it is unclear if current players will be able to negotiate their own licenses with companies like E.A. Sports, without affecting their amateur status with NCAA.

Last, the consumers and the schools have lost. E.A. Sports has chosen not to manufacture NCAA College Football starting at the beginning of next year after the NCAA and major athletic conferences like the Pacific-12, Big Ten and Southeastern have bailed, refusing to allow E.A. Sports to use its logos for their upcoming video games. Millions of video gamers will not be opening NCAA Football ‘15 under the tree next year, a disappointment for the games avid fans and players. For top tier schools, the NCAA Football game is worth more than $75,000.00 per year—which is almost double the average national salary for U.S. workers in 2012. Schools will no longer receive these checks with the loss of the video game.

Currently, the resolution of these issues remains a question, but it is clear that both current and former athletes are demanding an overhaul of an organization that has strictly governed their lives during their four years on campus and has profited off their backs.

Are Investors in Fantasy Sports Gambling on Their Legality?

By [Friday, December 6th, 2013]

BY PROFESSOR JODI BALSAM AND ALEX KOZHEVNIKOV NYLS ’14

As we head into the final weeks of the NFL season, many fans’ focus is on their own fantasy football league playoffs. Fantasy sports are a phenomenon that is gripping the nation. Nearly 30 million people participate in this obsession creating a multi-billion dollar industry. Fantasy sports have evolved as they has become more accessible with nearly universal access to the Internet and companies willing to pay to create sites to host fantasy leagues and track teams, players, and stats. In fantasy sports, participants create a dream team of real athletes and score points based on the results of their players’ in-game performances as they match up in a league against their peers. Fantasy sports have also created a huge betting and gambling industry. Most fantasy league participants throw money into a cash-prize pool that the winner or winners will get at the end of the sports season. But managing a dream team of real players could get some of these betting fans in hot water with authorities as the legality of what may be a form of internet gambling remains murky.

fantasy sportsThe federal law that regulates online gambling is the Unlawful Internet Gambling Enforcement Act of 2006. The act defines fantasy sports as a game of skill rather than chance and specifically exempts them. While the act protects fantasy leagues, players are supposed to report their winnings to the IRS. Although federal law defines fantasy sports as games of skill, many states still want nothing to do with them and state legislation on this topic is noticeably inconsistent. In most states, a game of skill is defined as one where skill is the predominant factor in determining the winner. Arizona, Iowa, Louisiana, Vermont, and Montana are amongst the “chance states that consider luck to be the determining factor for fantasy game winners, rather than skill, making those games a form of gambling. Florida’s Attorney General even issued a legal opinion that fantasy sports violate state gambling laws.  Residents of the Sunshine State caught betting money on fantasy leagues could be slapped with misdemeanors under current legislation.

Does the federal definition of fantasy sports as a game of skill make sense? Legal precedent suggests that it does. A 2007 New Jersey federal court discussed the distinction between skill and chance in connection with fantasy sports games in Humphrey v. Viacom. There a Colorado lawyer sued three pay-for-play online fantasy sites, alleging that the sites were engaging in gambling and must disgorge all entry fees paid by players. The court disagreed, but based its ruling primarily on a narrow construction of a New Jersey statute that sometimes allows third parties to recover losses from the winners in illegal gambling operations.  The court did, however, make two observations that suggest illegal gambling claims against traditional fantasy websites are not viable.  First, the court noted that fantasy website “entry fees do not constitute bets or wagers where they are paid unconditionally for the privilege of participating in a contest, and the prize is for an amount certain that is guaranteed to be won by one of the contestants.”  Second, the courtdescribed fantasy sports as games of skill, not chance, because players actively manage their teams, employing their sports knowledge and making strategic decisions.

A similar case was brought in Illinois, under its statute allowing recovery of gambling losses from the “winners”—Langone v. Kaiser and Fan Duel. Although dismissed principally on jurisdictional grounds, the court observed that a fantasy website cannot be characterized as the “winner” in a gambling contest because it risks nothing.  Rather, if fantasy games are a form of gambling, then fantasy websites merely serve as the “house,” by charging an entry fee and “act[ing] as the conduit for transmission of the prize to the winner” in a given league.

Between federal law explicitly providing that fantasy sports are not illegal gambling, and state judicial decisions that fantasy websites cannot be sued for gambling losses, traditional fantasy sports industry can probably rest easy for the moment. However, the new breed of fantasy websites—allowing users to wager high stakes on an athlete’s daily performance—continues to invite challenge as comparable to now-banned online poker. At least one major sports league—the NHL—has announced its opposition to daily fantasy sites, while the others have yet to comment.

Aside from the gambling legal issues that arise from fantasy sports, fantasy websites have had to contend with intellectual property (IP) issues in connection with the information they provide to the fantasy sport participant. Because tracking various players’ stats is essential to fantasy sports, many websites have sprung up to provide this data to the fantasy team owners. These websites provide services such as game data, player stats, hosting platforms, suggestions on players, projections, biographical information of players, and sports news, along with other information that might interest the casual sports fan. Websites such as Yahoo, ESPN, and CBSSports, all have large sections devoted to fantasy sports. Sports league websites—including the NFL, NHL, and the NBA–have  all created their own fantasy sports sections.

The sports leagues for the most part have no enforceable IP rights here—any use of their marks and logos is incidental to the news reporting function of the fantasy data site and so falls under the First Amendment “fair use” defense to a trademark infringement claim. For a time the players (and their unions) belived they had strong intellectual property claims based on the players’ rights of publicity.  Suits were brought claiming that fantasy sports providers were misappropriating player names and likenesses to gain a commercial advantage. However, fantasy news and stats suppliers have won all suits brought to date, essentially on the same First Amendment grounds that deterred the leagues from suing in the first place.

In a ground-breaking case, the Eighth Circuit Court of Appeals in CBC Distribution and Marketing v. Major League Baseball Advanced Media ruled that the information provided to baseball fantasy sports participants is information in the public domain and constitutes informative speech entitled to protection under the fair use doctrine.  The court also observed that fantasy sites’ use of player names and likenesses presents no danger that consumers will be misled to believe any particular player is endorsing the site. A Minnesota district court extended thisruling to football in CBS Interactive v. National Football League Players Association. The court described the manner in which fantasy sites present player information as “akin to newspapers and magazines, which routinely display pictures and information about . . . professional athletes.” While these rulings have deterred lawsuits by other sports, as fantasy websites evolve, and embed more advertising and other forms of commerce, players may renew their publicity rights claims that their names and images are being appropriated for an unauthorized endorsement.

All though legal battles continue to wage and the legality of fantasy sports in some contexts is murky, the industry continues to thrive. With the disappearance of online real-money poker contests (which arguably more than fantasy sports were based on skill than chance),  legislators may now set their sites on online betting on fantasy sports. However, the vast popularity of fantasy sport may just keep them legally alive. Fantasy sports have increased fan interest and  excitement in the actual sporting contests. The leagues and the players have thrived with the rise of fantasy sports, as previously uninteresting match-ups get renewed hype when they feature certain fantasy players. Fans tune into games across the nation that normally would generate little interest to follow their favorite (and most hated) fantasy players. The increased revenue for all involved in sports may ultimately trump concerns about gambling or player publicity rights.