American Needle v. NFL: U.S. Professional Clubs are Separate Economic Threads When Jointly Marketing Intellectual Property

Abstract

One of the most difficult issues regarding the legal regulation of the United States sports industry is whether (and, if so, how) §1 of the Sherman Act, a provision of the U.S. antitrust laws prohibiting concerted action unreasonably restraining trade, applies to professional sports league rules and internal governance decisions (for example, the centralization and exclusive licensing and sale of its member clubs’ intellectual property rights). In American Needle, Inc. v. National Football League, the U.S. Supreme Court recently that the National Football League (NFL) clubs’ grant of an exclusive trademark license to a headwear manufacturer through National Football Club Properties (NFLP), their jointly owned intellectual property marketing and licensing agent, is not immune from judicial scrutiny under §1. The Court resolved a relatively narrow issue, but its ruling suggests that other aspects of a U.S. professional sports league’s cooperative operations and internal governance also are subject to §1. This article initially will briefly describe how the four major U.S. professional sports leagues are structured and internally governed as well as their underlying business models, including revenue sharing among their respective clubs. Next it will provide a historical overview of U.S. professional sports league centralized licensing and internal regulation of intellectual property rights along with antitrust challenges thereto, which set the stage for American Needle. The article then will consider the parties’ arguments and the Supreme Court’s ruling in American Needle and briefly describe the author’s reasons for concluding this case was decided correctly.