United States: June 2019 Sports Industry News

Last Updated: July 5 2019
Article by Christopher R. Chase

What's Happening

Here's what's happening at the intersection of sports, marketing, and entertainment law as Summer rolls along.

Increasing Commercial Opportunities for Olympic Athletes

In a significant move, the International Olympic Committee this past week amended the controversial Bylaw 3 to Rule 40 of the Olympic Charter (commonly referred to as simply "Rule 40"). Rule 40 establishes a blackout period spanning the Olympic Games period during which participating athletes' names, likenesses, and performances cannot be used for commercial purposes without IOC or the applicable National Olympic Committee's (e.g., the USOC's) permission. However, the amended Rule 40 now states "Competitors, team officials and other team personnel who participate in the Olympic Games may allow their person, name, picture or sports performances to be used for advertising purposes during the Olympic Games in accordance with the principles determined by the IOC Executive Board." The previous version was a complete prohibition unless exceptions were made – which were only made for official sponsors.

Olympic athletes often criticized Rule 40 because it limited their endorsement income and general marketing exposure and penalized their longstanding sponsors, who were not able to use the athlete's name or picture during the most important marketing period. The IOC, perhaps responding to this criticism (or in response to Germany's Federal Cartel Office's ruling that Rule 40 was anti-competitive), stated that the amendment will "put athletes and other Olympic Games participants in a better position to work with their personal sponsors." This amendment will likely benefit Olympic athletes, but the full extent of the amendment will not be known until the IOC and applicable National Olympic Committees provide guidance as to how the amended bylaw will be implemented.

Dueling For Zion

Just prior to the NBA draft, number 1 draft pick Zion Williamson filed a lawsuit against Prime Sports, the marketing agency with whom he signed while in college, arguing that the "draconian" five year agreement with Prime Sports is "null and void because it wasn't in accordance" with North Carolina's Uniform Athlete-Agent Act. Williamson's suit claims that neither Prime Sports nor its principal "were registered agents" in the state or with the NBA Players Association, among other issues. But Prime Sports has fired back, suing Williamson and his current agency CAA Sports for breach of contract and tortious interference with contract. The heart of these disputes centers around the right to secure marketing deals for Williamson, who is arguably the most marketable NBA rookie since LeBron James. Such significance is shown by Prime Sports' claim for $100 million in damages.

You Bet

The American Gaming Association, the trade association for gambling companies in the US, issued its first voluntary marketing code for sports wagering. Entitled the "Responsible Marketing Code for Sports Wagering" and arriving on the first anniversary of Murphy v. NCAA (the Supreme Court decision that paved the way for the authorization and regulation of sports gambling), the code follows similar industry self-regulatory guidelines (such as the Beer Institute's Marketing Code and the DISCUS Code of Responsible Practices for Beverage Alcohol Advertising and Marketing) by prohibiting practices that may be seen as catering to those not of legal betting age, such as using cartoon mascots, using entertainers that appeal to those under betting age, and using sports wagering messages (including logos, trademarks, or brand names) on clothing, toys, or games intended for person under legal betting age. Like those other self-regulatory guidelines, the AGA's code also forbids ads in any media where 71.6% of the audience is not allowed to place bets. By policing itself, the AGA may be able to avoid direct Federal Trade Commission scrutiny, as the FTC recognizes the benefits that industry self-regulation brings to consumer protection.

A Touchdown for Beer Marketing

Following the recent decisions by the NBA and MLB, the NFL will also allow its current players to participate in beer advertising in uniform. As noted with a review of the NBA's and MLB's decision, team sports leagues have historically shunned the appearance of current players in beer advertising (likely due to network advertising guidelines and a 1995 Ruling by the Bureau of Alcohol, Tobacco, and Firearms that expressed concern with certain portrayals of athletes in alcoholic beverage marketing). Now three of the four major leagues have approved such marketing. But according to one major sponsor, the NFL has included several restrictions: the players appearing in ads must be in uniform, not street clothes; the players cannot make direct product endorsements; and the beer brands cannot conduct their own photo/film shoots of the athletes, but rather have to use live game footage/live game images from the Associated Press. Although this latter restriction will likely limit the beer sponsors' creativity, the move by the NFL is a welcome step in the right direction for league and team sponsors.

Holey Moley Indeed!

Australian recreational facility developer Fun Lab IP Co. has sued Eureka Productions and Steph Curry's Unanimous Media production company, which partnered up to produce a mini-golf competition series on ABC entitled "Holey Moley," for trademark infringement. Fun Lab, which operates mini-golf facilities in Australia catering to adults, owns a trademark registration for HOLEY MOLEY in the United States and claims that the ABC series is "likely to cause confusion, deception and mistake among consumers, as consumers will likely conclude that Fun Lab is affiliated with the production companies when Fun Lab opens Holey Moley venues in the United States." In addition to damages, Fun Lab seeks an injunction requiring the production companies to list in the series' credits that HOLEY MOLEY is a registered trademark of Fun Lab. Eureka faces a tough road ahead – not only having to face this federal lawsuit, but also having to address a US Patent and Trademark Office action denying its application to register HOLEY MOLEY due to Fun Lab's prior registrations.

Noted and Quoted

"Hot Sauce" Litigation

Take-Two Interactive Software, Inc. recently defeated a claim by streetballer Phillip "Hot Sauce" Champion, who alleged that Take-Two misappropriated his likeness in the NBA 2K basketball simulation games. New York state judge Frances Kahn ruled that "[t]he avatar in NBA2K18 plaintiff claims is an appropriation of his likeness bears no resemblance to plaintiff whatsoever. The only reasonable commonalities ... between plaintiff and the avatar are that both are male, African American in appearance and play basketball." A Frankfurt Kurnit team consisting of Sean Kane, Ned Rosenthal, and Lily Roos handled the suit for Take-Two. Coverage of the suit appears here.

Bar to Registering Immoral or Scandalous Trademarks Lifted

Following its reasoning from Matal v. Tam (the 2017 decision lifting the bar on registering disparaging trademarks), the Supreme Court held on June 25 that the "immoral or scandalous" bar in the Lanham Act is unconstitutional. Rachel Santori details the decision here.

Want to Learn More?

On August 7, Sean Kane speaks at "Inside the Game: Unlocking the Consumer Issues Surrounding Loot Boxes" hosted by the Federal Trade Commission in Washington, DC.

www.fkks.com

This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

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