United States: The Impact Of The O達annon 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 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致e 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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com痴 content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd痴 services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with 渡o disclosure in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user痴 hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend痴 name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user痴 personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user痴 personal data provided to us. This can usually be done at the 添our Profile page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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