United States: The Impact Of The O’Bannon Ruling On The Collegiate Athletics Commercial Market And Fantasy Sports

Last Updated: November 22 2014
Article by David O. Klein

On August 8th, 2014, California Federal District Court Judge Claudia Wilken handed down her decision in Ed O'Bannon's antitrust case against the National Collegiate Athletic Association ("NCAA").  Mr. O'Bannon is a former UCLA men's basketball star and NCAA National Championship Most Valuable Player that played two seasons in the NBA before finishing his basketball career overseas.  Several years later, O'Bannon decided to pursue the antitrust lawsuit in question after seeing his own unlicensed likeness in an NCAA licensed video game.

In the wake of the O'Bannon decision, there has been abundant commentary on the case's potential impact on the NCAA.  Conspicuously absent has been a meaningful discussion of the effects that the case will likely have on the broader collegiate athletics commercial market.  This article focuses on the O'Bannon case's impact on one of the most debated commercial contexts: fantasy sports.

The Basics of the O'Bannon Case

The O'Bannon antitrust lawsuit was filed as a class action against the NCAA nearly five years ago, alleging that the NCAA had restricted trade by licensing the name, image and likeness ("NIL") of collegiate men's football and basketball players without providing the players any compensation or actual choice in the matter.

Under current NCAA policy, student-athletes are presented with a set of release forms from the NCAA every year, which they are required to sign in order to maintain eligibility to participate in intercollegiate athletics.  In addition to the customary informational documents and liability releases, the NCAA has historically included an all-encompassing NIL release.  The NIL release allows the NCAA to use student-athletes' NIL for institutional, charitable, educational or promotional purposes in compliance with NCAA bylaw article 12.5.1.  However, the NIL release does not authorize the NCAA to utilize the student-athletes' NIL for third-party commercial ventures, such as video games, fantasy sports tournaments or apparel sales.  To further dissuade student-athletes from licensing their NIL, the NCAA maintains another strictly enforced bylaw that allows it to ban any school from NCAA competition for two (2) years if it is determined that the school allowed one of its students to license his/her NIL.[1]

O'Bannon's lawsuit was brought under the Sherman Antitrust Act to strike down those NCAA bylaws that bar student-athletes from licensing their NIL and collecting associated revenue. The case was tried before Judge Claudia Wilken in the Northern District of California District Court over the course of three (3) weeks in June 2014.

The Court's Decision

On August 9th, 2014, Judge Wilken handed down her verdict.  Her 99-page opinion ruled conclusively in O'Bannon's favor, finding that the "NCAA rules unreasonably restrain trade in the market for certain educational and athletic opportunities offered by NCAA Division 1 schools."  The Court acknowledged the NCAA's interest in preserving educational values and amateurism[2] in intercollegiate athletic activities, but found that those interests may be achieved by less restrictive means, while simultaneously affording student-athletes more control over their NIL.

Although the Court decisively ruled that the NCAA's NIL policies violated the publicity rights held by the applicable class of student-athletes named in the case, it encountered difficulties in establishing a clear licensing fee structure.  Ultimately, the Court imposed a somewhat arbitrary $5,000 minimum annual cap on the amount of compensation available to student-athletes from the licensing of their NIL by the NCAA, which will be dispersed upon graduation or the fulfillment of eligibility, as applicable.  While commentators have estimated that the aggregate sum of the Court's NIL compensation fees equates to several million dollars per year, this is a somewhat paltry sum when compared to the billions of dollars in revenue generated every year by the NCAA and other commercial collegiate sports-based enterprises.  Please note that the compensation provisions of the Court's ruling, if upheld on appeal, will not go into effect until 2016 and will only be applicable to "prospective and current student-athletes for the 2016-2017 season and beyond."

While the named plaintiff initially stated that he would appeal the $5,000 minimum annual cap set forth by the Court, O'Bannon has recently made clear that this is no longer his intention.  Conversely, the NCAA has already filed its notice of appeal with the Ninth Circuit.  Some commentators have suggested that the NCAA should be satisfied with the $5,000 minimum annual cap mandated by the Court.  However, the NCAA's appeal is not surprising when considering the fact that there are multiple related lawsuits that are still pending against it.  This situation requires that attorneys for the NCAA preserve every antitrust defense and claim available to it.

The Impact of the O'Bannon Decision on the Collegiate Athletics Commercial Market and Fantasy Sports

Although the impact of Judge Wilken's opinion is abundantly clear insofar as the NCAA is concerned, the ripple effect of the Court's decision on commercial markets is not readily apparent.  Despite ESPN's recent statements that the outcome of the O'Bannon case will not lead to any significant issues with respect to future broadcasts of intercollegiate athletics, there is at least one industry that may be directly impacted by the O'Bannon decision: fantasy sports.

Fantasy sports tournaments have proliferated in recent years, with many major television networks, such as CBS and ESPN, maintaining their own fantasy sports websites and leagues.  With the popularity, and the associated monetary stakes, of fantasy sports on the rise, professional and collegiate athletes have started questioning whether the unauthorized and unlicensed use of their NIL and statistics for monetary gain violates their respective rights of publicity.[3]  The seminal case[4] on this topic was decided in 2008 and involved professional baseball players.

In that case, the Federal Appeals Court for the Eighth Circuit ruled that professional baseball players' rights of publicity may be infringed by fantasy sports websites, but that the First Amendment rights of fantasy sports websites outweigh the professional baseball players' rights of publicity with respect to the use of their NIL.  Based on this reasoning, the Eighth Circuit found that fantasy sports websites could continue to use the names and statistics of professional baseball players without obtaining their permission or license. In reaching this decision, the Eighth Circuit relied heavily on the fact that professional baseball players are well compensated by their respective teams and can earn additional large sums of money from endorsements and sponsorship arrangements.

Against this backdrop, the nature of intercollegiate athletics creates a strong incentive for future courts to rule that fantasy sports leagues must secure a license to use the NIL and statistics of collegiate student-athletes.  It has become an all too common occurrence for promising collegiate athletes to forego professional sports due to injuries sustained while playing at the college level.  Oftentimes, this leaves collegiate athletes with few options to make the type of money that is available to professional athletes.  Moreover, the commercial value of the NIL of collegiate athletes is diminished exponentially if they are not able to play at the professional level.  Some have argued that the Eighth Circuit's reasoning implies that it is inequitable to allow fantasy sports leagues to profit from the use of collegiate athletes' NIL when there is no guarantee that they will ever play professional sports or recoup the monetary benefits associated with their NIL.  However, even if fantasy sports leagues were willing to pay licensing fees to use collegiate athletes' NIL, there still exists the problem of determining how collegiate athletes would recoup those potential license fees, while maintaining their eligibility.

Current NCAA rules prohibit enrolled collegiate athletes from independently licensing their individual NIL to third parties for commercial purposes.  Specifically, NCAA bylaws state that:

If a student-athlete's name or picture appears on commercial items (e.g., T-shirts, sweatshirts, serving trays, playing cards, posters) or is used to promote a commercial product sold by an individual or agency without the student-athlete's knowledge or permission, the student-athlete (or the institution acting on behalf of the student-athlete) is required to take steps to stop such an activity in order to retain his or her eligibility for intercollegiate athletics.[5]

While the O'Bannon decision clearly recognized that collegiate athletes have rights to their NIL, it did not go so far as to establish that players could independently license their NIL to third party commercial entities.  However, it is important to note that there is nothing in the O'Bannon decision that limits the NCAA from licensing the NIL of collegiate players on a team-based level to fantasy sports leagues.  Therefore, based on the Court's decision in O'Bannon, it is possible that the NCAA may choose to amend its bylaws to recoup NIL licensing fees directly from fantasy sports providers or other commercial ventures.  Historically, most fantasy sports sites have shied away from offering college sports-based leagues.  Were an NCAA-approved licensing arrangement to transpire, we could see the collegiate fantasy sports world explode and become a viable contender to that of professional fantasy sports.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each marketing situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced marketing attorney.

This article was originally published in World Sports Law Report Volume 12 Issue 10, October 2014.


[1] NCAA Bylaws Art. 19.5.2.3.2

[2] NCAA Constitution, Art. 2.9 states that "Student-athletes shall be amateurs in an intercollegiate sport, and their participation should be motivated primarily by education and by the physical, mental and social benefits to be derived. Student participation in intercollegiate athletics is an avocation, and student-athletes should be protected from exploitation by professional and commercial enterprises."

[3] The right of publicity is defined as the right to control the use of one's own name, picture or likeness and to prevent another from using it for commercial benefit without consent.

[4] C.B.C. Distrib. & Mktg. v. Major League Baseball Advanced Media, L.P., 443 F. Supp. 2d (E.D. Mo. 2006).

[5] NCAA Bylaws Art. 12.5.2.2

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
David O. Klein
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions