FANTASY SPORTS LEAGUES AND PLAYERS’ RIGHTS

Ivan Hoffman, B.A., J.D


            File this one under “A written agreement is not always what it appears to be” department.

            Fantasy sports leagues are big business online.  Sooner or later the rights of professional sports players and their teams and leagues were going to butt up against the fantasy sports players.

            Recently, the United States Supreme Court refused to hear an appeal from the Eighth Circuit Court of Appeals on this issue and thus, the ruling in that Eighth Circuit case is currently the law.

            In C.B.C. Distribution and Marketing, Inc. vs. Major League Baseball Advanced Media, L.P. et. al., the defendants were various player associations and leagues (NHL, NFL, NBA etc.).  Plaintiffs brought suit, in the words of the Eighth Circuit Court:

to establish its right to use, without license, the names of and information about major league baseball players in connection with its fantasy baseball products. Advanced Media counterclaimed, maintaining that CBC's fantasy baseball products violated rights of publicity belonging to major league baseball players and that the players, through their association, had licensed those rights to Advanced Media, the interactive media and
Internet company of major league baseball.
            This is a summation of the facts as described by the Court:
CBC sells fantasy sports products via its Internet website, e-mail, mail, and the telephone. Its fantasy baseball products incorporate the names along with
performance and biographical data of actual major league baseball players. Before the commencement of the major league baseball season each spring, participants form their fantasy baseball teams by "drafting" players from various major league baseball teams. Participants compete against other fantasy baseball "owners" who have also drafted their own teams. A participant's success, and his or her team's success, depends on the actual performance of the fantasy team's players on their respective actual teams during the course of the major league baseball season. Participants in CBC's fantasy baseball games pay fees to play and additional fees to trade players during the course of the season.

From 1995 through the end of 2004, CBC licensed its use of the names of and information about major league players from the Players Association pursuant to
license agreements that it entered into with the association in 1995 and 2002. The 2002 agreement, which superseded in its entirety the 1995 agreement, licensed to CBC "the names, nicknames, likenesses, signatures, pictures, playing records, and/or biographical data of each player" (the "Rights") to be used in association with CBC's fantasy baseball products.

In 2005, after the 2002 agreement expired, the Players Association licensed to Advanced Media, with some exceptions, the exclusive right to use baseball players' names and performance information "for exploitation via all interactive media."

Advanced Media began providing fantasy baseball games on its website, MLB.com, the official website of major league baseball. It offered CBC, in exchange for a commission, a license to promote the MLB.com fantasy baseball games on CBC's website but did not offer CBC a license to continue to offer its own fantasy baseball products.

The district court granted summary judgment to CBC. It held that CBC was not infringing any state-law rights of publicity that belonged to major league baseball
players. C.B.C., 443 F. Supp.2d at 1106-07. The court reasoned that CBCs fantasy baseball products did not use the names of major league baseball players as symbols of their identities and with an intent to obtain a commercial advantage, as required to establish an infringement of a publicity right under Missouri law (which all parties concede applies here). Id. at 1085-89. The district court further held that even if CBC were infringing the players' rights of publicity, the first amendment preempted those rights. Id. at 1091-1100. The court rejected, however, CBC's argument that federal copyright law preempted the rights of publicity claim. Id. at 1100-03. Finally, the district court held that CBC was not in violation of the no-use and no-contest provisions of its 2002 agreement with the Players Association because "the strong federal policy favoring the full and free use of ideas in the public domain as manifested in the laws of intellectual property prevails over [those] contractual provisions" (internal quotations omitted). Id. at 1106-07.

            The Court disagreed with part of the trial court’s reasoning above and stated that under Missouri state law governing right of publicity claims, the use of the player’s names for commercial purposes was prohibited.  However, the plaintiff argued that notwithstanding the said state statute, the First Amendment prohibited the enforcement of that statute in this instance.

            A word of explanation is in order here.  The First Amendment requires for its applicability, “state action.”  This means that somehow the complained of actions have to be that of a governmental entity.  On the surface, this matter would appear to be a civil dispute between private parties without governmental involvement.  However, the Eighth Circuit Court found such governmental involvement by the enforcement of a “state-created” obligation “never expressly assumed” by C.B.C.

            The Court stated:

The Supreme Court has directed that state law rights of publicity must be balanced against first amendment considerations, see Zacchini v. Scripps-Howard Broad., 433 U.S. 562 (1977), and here we conclude that the former must give way to the latter. First, the information used in CBC's fantasy baseball games is all readily available in the public domain, and it would be strange law that a person would not have a first amendment right to use information that is available to everyone. It is true that CBC's use of the information is meant to provide entertainment, but "[s]peech that entertains, like speech that informs, is protected by the First Amendment because '[t]he line between the informing and the entertaining is too elusive for the protection of that basic right.' " Cardtoons, L.C. v. Major League Baseball Players Ass'n, 95 F.3d 959, 969 (10th Cir. 1996) (quoting Winters v. New York, 333 U.S. 507, 510 (1948)); see also Zacchini, 433 U.S. at 578. We also find no merit in the argument that CBC's use of players' names and information in its fantasy baseball games is not speech at all. We have held that "the pictures, graphic design, concept art, sounds, music, stories, and narrative present in video games" is speech entitled to first amendment protection. See Interactive Digital Software Ass'n v. St. Louis County, Mo., 329 F.3d 954, 957 (8th Cir. 2003). Similarly, here CBC uses the "names, nicknames, likenesses, signatures, pictures, playing records, and/or biographical data of each player" in an interactive form in connection with its fantasy baseball products. This use is no less expressive than the use that was at issue in Interactive Digital.

Courts have also recognized the public value of information about the game of baseball and its players, referring to baseball as "the national pastime." Cardtoons, 95 F.3d at 972. A California court, in a case where Major League Baseball was itself defending its use of players' names, likenesses, and information against the players' asserted rights of publicity, observed, "Major league baseball is followed by millions of people across this country on a daily basis ... The public has an enduring fascination in the records set by former players and in memorable moments from previous games... The records and statistics remain of interest to the public because they provide context that allows fans to better appreciate (or deprecate) today's performances." Gionfriddo v. Major League Baseball, 94 Cal. App. 4th 400, 411 (2001). The Court in Gionfriddo concluded that the "recitation and discussion of factual data concerning the athletic performance of [players on Major League Baseball's website] command a substantial public interest, and, therefore, is a form of expression due substantial constitutional protection." Id. We find these views persuasive.

            The First Amendment always involves a balancing of interests.  Thus, the Court went on to state that the state interest sought to be protected by the law was not sufficient to outweigh the Constitution.
In addition, the facts in this case barely, if at all, implicate the interests that states typically intend to vindicate by providing rights of publicity to individuals.
Economic interests that states seek to promote include the right of an individual to reap the rewards of his or her endeavors and an individual's right to earn a living. Other motives for creating a publicity right are the desire to provide incentives to encourage a person's productive activities and to protect consumers from misleading advertising. See Zacchini, 433 U.S. at 573, 576; Cardtoons, 95 F.3d at 973. But major league baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements. Nor is there any danger here that consumers will be misled, because the fantasy baseball games depend on the inclusion of all players and thus cannot create a false impression that some particular player with "star power" is endorsing CBC's products.
The Contract Provisions

            However, the underlying agreement between the parties contained a restrictive covenant as summarized by the Court:

"It is understood and agreed that [the Players Association] is the sole and exclusive holder of all right, title and interest in and to the Rights." CBC undertook not to "dispute or attack the title or any rights of Players' Association in and to the Rights and/or the Trademarks or the validity of the license granted," either during or after the expiration of the agreement (the no challenge provision). CBC also agreed that, upon expiration or termination of the contract, it would "refrain from further use of the Rights and/or the Trademarks or any further reference to them, either directly or indirectly" (the no-use provision).
        That would, on the surface, appear to end the claim on the part of C.B.C. but, in the law what often appears to be a “slam dunk” frequently is not.

        The Court analyzed cases that stated that even contract provisions can fail when they are superseded by the First Amendment.  But the Court did not rule on this basis.  Instead, the Court found that the Players Association had breached a warranty of title also contained in the agreement.  A warranty of title is a representation by a given party that it actually owns the rights purportedly transferred or licensed to the other party.  

Section 8(a) of the agreement provides that the Players Association "is the sole and exclusive holder of all right, title and interest" in and to the names and playing statistics of virtually all major league baseball players. This is quite obviously a representation or warranty that the Players Association did in fact own the state law publicity rights at issue here. For the reasons given above, the Players Association did not have exclusive "right, title and interest" in the use of such information, and it therefore breached a material obligation that it undertook in the contract. CBC is thus relieved of the obligations that it undertook, and the Players Association cannot enforce the contract's no-use and no-challenge provisions against CBC.
        It is worth pointing out that there was a dissenting opinion in this case. The judge agreed with the first amendment argument vis-à-vis the state statute.  However, the judge disagreed with the application of the first amendment argument to the contractual provision discussed above.

        The dissenting judge stated:

Given the court’s resolution of issues concerning the right of publicity and the First Amendment, section 8(a) wins the day for CBC only if it is a warranty by MLBPA that CBC does not have rights under the First Amendment to use the players’ names and statistics in its fantasy baseball games. Assuming that section 8(a) does address CBC’s constitutional rights (as opposed merely to the players’ state-law rights of publicity, which are accurately represented), and assuming that one party’s prediction about the constitutional rights of another party is the sort of “fact” that can be warranted under New York law, section 8(a) does not purport to make such a warranty. The provision states that the parties “agree” that MLPBA is the sole and exclusive holder of all right, title and interest in and to the Rights. CBC surely can “agree,” as a matter of good business judgment, to bargain away any uncertain First Amendment rights that it may have in exchange for the certainty of what it considers to be an advantageous contractual arrangement. See Paragould Cablevision v. City of Paragould, 930 F.2d 1310, 1315 (8th Cir. 1991). That CBC later decided it did not need a license, and that it preferred instead to litigate the point, does not relieve the company of its contractual obligation. See Heath v. Dick Co., 253 F.2d 30, 34-35 (7th Cir. 1958).
Conclusion

        In the law business, as in the magic business and, I imagine, in life in general, things are often not what they appear to be.  I believe that the facts that led to this decision are to be narrowly construed and the reader ought not to read too much into this decision.  It is always hard to know the reason the Supreme Court declined to hear the case but it may be that it does not present broad federal questions or for other reasons but it does not necessarily mean that the Supreme Court agrees with the decision.

Copyright © 2008 Ivan Hoffman.  All Rights Reserved.

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This article is not legal advice and is not intended as legal advice.  This article is intended to provide only general, non-specific legal information.  This article is not intended to cover all the issues related to the topic discussed.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  This article is based on United States law.  You should consult with an attorney familiar with the issues and the laws of your country.  This article does not create any attorney client relationship and is not a solicitation.

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