United States: What Wearable Tech Could Mean For Sports As "Hot News": A Lesson From The Alliance Of American Football

Last Updated: May 31 2019
Article by Michael B. Greenberg

On April 2, 2019, in the middle of its inaugural season, the nascent Alliance of American Football (AAF) ceased all operations. Within weeks the AAF filed for Chapter 7 bankruptcy, leaving in its wake new technologies that might one day reshape the world of professional sports.

In the league's early days, the promise of the AAF's vaunted technology offerings arguably generated even more enthusiasm than the actual on-field product. Chief among those offerings was a gaming app that would allow fans to predict (and wager on) the next play of a game based on real-time data transmitted from wearable devices on each player, which would be analyzed and calculated to instantly produce predictive odds for different scenarios. Postmortem reports of the AAF's demise have continued to explore the potential for this technology, and the very real possibility that this technology may have been the primary motivation for the AAF's birth in the first place. 

To the gambling industry, the potential for this technology is obvious; not surprisingly, MGM Resorts was an early AAF investor. But given well-established legal precedent, the technology will not automatically benefit the actual source of all that valuable data — the professional leagues and their players —because the underlying data produced in real time during the game (i.e., the stats) are not protectable. We know this because the leagues and professional athletes have already waged, and lost, this battle in court.

Yet, with the AAF's technology, the leagues may finally have a way to directly commodify their players' statistics as property. To be sure, for the leagues to even have a chance to obtain and protect their cut of the action, they will likely have to directly partner with the proprietors of this wearable technology.  Better yet, the leagues could become the proprietors of the technology themselves. Doing so would not allow the leagues to make copyright or right of publicity claims in relation to the statistics, but it could allow them to make state-based "hot news" misappropriation claims.  To understand why, consider the Second Circuit Court of Appeals' decision in National Basketball Association v. Motorola, 105 F.3d 841 (2d Cir. 1997) (NBA).

The NBA case involved Motorola's SportsTrax pager device. SportsTrax pagers allowed subscribers to view basic information about in-progress NBA games, updated a few minutes after the events occurred. Id. at 844. Motorola's reporters would watch or listen to the games and enter game information into a computer that formatted the data for transmission to FM radio stations, which would then retransmit the information to the devices for display. Id. The NBA claimed Motorola and its SportsTrax pager service infringed its copyrights to both the underlying games and to the broadcasts of the games. Id.  The Second Circuit recognized the NBA's copyrights to the broadcasts, but it ruled that the league did not have copyrights to the underlying games, finding that sports events are factual news rather than "original works of authorship" entitled to copyright protection. Id. at 846-47. Accordingly, the court held that the SportsTrax pagers did not infringe the NBA's copyright interests because the information relating to the games themselves was not protectable, and the pagers' display of the facts gathered from the NBA's broadcasts did not amount to separate broadcasts of the games. Id.

In addition to its copyright claims, the NBA also alleged that Motorola was liable for "hot news" misappropriation under New York state law by taking, redistributing, and profiting from the facts generated by the NBA. Id. at 844.  The district court found Motorola liable for misappropriation, but the Second Circuit reversed, holding that the state law claim failed as preempted by the Copyright Act (and thus did not allege a harm to any interests outside of copyright). Id. at 847-52. Still, the Second Circuit opined that a hot news misappropriation claim may not be preempted, and therefore may be actionable, if the following five factors are met: 

  1. the plaintiff generates or collects information at some cost or expense;
  2. the value of the information is highly time-sensitive;
  3. the defendant's use of the information constitutes free-riding on the plaintiff's costly efforts to generate or collect it;
  4. the defendant's use of the information is in direct competition with a product or service offered by the plaintiff; and
  5. the ability of other parties to free-ride on the efforts of the plaintiff would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened.

Id. at 852; see generally Barclays Cap. Inc. v. Theflyonthewall.com, Inc., 650 F.3d 876, 898-06 (2d Cir. 2011) (affirming district court's application of the NBA test to hold that defendant  in business of reporting financial news was not liable for hot news misappropriation by summarizing and disseminating plaintiff firm's recommendations on buying or selling securities).

The NBA court found Motorola was not liable for hot news misappropriation because Motorola expended its own resources to collect and transmit the data, and because Motorola did not interfere with the NBA's primary products of live and broadcasted basketball games (even though the NBA also offered a real-time statistics service in its arenas). 105 F.3d at 853-54. Nevertheless, the court explained that, hypothetically, the NBA could have a non-preempted hot news misappropriation claim if it offered its own similar version of the pager device service and incurred the attendant costs of fact collection and transmission, and Motorola simply retransmitted to its pagers the same information gathered from the NBA pagers. Id. at 854. In that scenario, Motorola would be considered to be free-riding, as it would not have to invest in the transmission technology or pay reporters to observe the games. Id. Motorola could then offer its own pager service in direct competition with the NBA and at a lower price, reducing or "substantially deterr[ing]" the NBA's incentive to stay in the market. Id. This, according to the court, could satisfy the five factors to allow a hot news misappropriation claim to proceed. Id.

Now, more than 20 years later, the NBA opinion might have laid the legal framework to allow the leagues to finally protect their players' statistical performances through the use of AAF-like wearable tech and related information platforms. By using technology and offering services similar to what the AAF portended, a league could satisfy the five-factor NBA test for hot news misappropriation if another non-licensed company were to offer similar services, because the data would necessarily have to come from the wearable technology.

Conceivably, the test would be satisfied because:

  1. the league would generate and collect the information at considerable cost or expense;
  2. in-game wagering on the next play is highly time-sensitive;
  3. the non-licensed company would necessarily have to free-ride on the information collected and transmitted by the players' league-developed wearable technology;
  4. in-game wagering service offered by the non-licensed company would directly compete with the same or similar service offered by the league or its partners; and
  5. the competitive advantage of the free-riding company would substantially threaten the financial feasibility of continuing to invest in the technology on which the service relies.

Of course, as with any cause of action, the likelihood that such a claim would be successful depends on the extent to which the claim is recognized in the particular jurisdiction where the action is brought. Barclays Cap. Inc., 650 F.3d at 897-98 (noting that hot news misappropriation causes of action "may have different  legal significance from state to state — permitted, at least to some extent, in some; prohibited, at least to some extent, in others").

Unfortunately for the AAF (and for Steve Spurrier's 7-1, championship-bound Orlando Apollos), the league didn't survive long enough for this legal issue to arise. But while the AAF may have died, its technology survives, and with it, the likely legal battles to come.

Businesses big and small face an ever-shifting legal landscape at the intersection of intellectual property and technology. Inevitably, advancements in technology will give rise to new opportunities and challenges.

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
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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