Yesterday morning, the Supreme Court granted certiorari in the case American Needle v. National Football League (pdf, p.3) for purposes of determining whether the NFL clubs’ collective licensing of individual club trademarks is exempt from antitrust scrutiny under the single entity defense. The Supreme Court’s decision to hear this case was likely influenced by the fact that it marks one of just a few times that both a plaintiff and defendant have requested the Court’s review.
Earlier this month, the United States Department of Justice and the Federal Trade Commission had filed an amicus brief recommending that the Supreme Court deny certiorari. The United States had argued the Seventh Circuit’s holding in American Needle did not conflict with existing case law–a view with which most sports-antitrust scholars disagree.
For those who have not been following the American Needle case, the original plaintiff, American Needle Inc., had for more than twenty years maintained a non-exclusive license to design and manufacture headgear bearing the NFL clubs’ names and logos. Then, nine years ago, the NFL clubs decided to offer an exclusive license to American Needle’s main rival, Reebok.
Upon being foreclosed from the ability to sell NFL headgear, American Needle sued the NFL clubs in the Northern District of Illinois, contending that the new NFL licensing arrangement violated Section 1 of the Sherman Act by illegally restraining trade in the market for purchasing rights to NFL logos. The NFL clubs, in turn, responded by not only alleging that their licensing arrangement was pro-competitive under antitrust law’s Rule of Reason, but also by contending that the NFL clubs combined to form a single-entity that was entirely exempt from antitrust scrutiny. Both the district court and the Seventh Circuit Court of Appeals granted summary judgment to the NFL clubs based on the single-entity theory.
But can all 32 NFL teams act as one? Analysis after the jump.
In filing a petition for certiorari, American Needle has requested the Court to recognize that the 32 NFL clubs cannot as a matter of law combine to form a single-entity. Meanwhile, the NFL clubs want the Court to not only affirm the Seventh Circuit’s decision, but also to craft an opinion in such a way that would grant the 32 member clubs broad protection from future antitrust challenges.
In terms of existing case law, the NFL clubs seem to rely on a very broad reading of the 1984 Supreme Court case Copperweld Corp. v. Independence Tube Corp., in which the high court had held that a tubing company and its wholly-owned subsidiary comprised just one entity for antitrust purposes. American Needle, meanwhile, does not believe the Supreme Court ever intended to extend the Copperweld holding to the sports league context. Indeed, leading up to the American Needle case, courts on seven occasions had denied the NFL clubs’ attempts to extend the single-entity defense to professional sports leagues.
Only Justice Stevens remains on the Supreme Court from the 1984 Copperweld decision. In that case, Stevens formed part of the Court’s dissent, which, at the time, had not even wanted to recognize a single-entity defense for a company and its wholly-owned subsidiary. Since 1984, however, the Court has moved far to the right on most antitrust matters. Based on the Court’s current composition, it is difficult to predict which way it will ultimately decide this case.
In my mind, this case should be resolved in favor of American Needle. The more traditional reading of Copperweld does not afford the NFL clubs access to the single-entity defense. In addition, by extending the single-entity defense to NFL clubs, the Supreme Court would only provide added antitrust protection to an already highly profitable industry.
For these two reasons, I believe the Supreme Court should remand this case back to district court for a full trial on the merits. If the court ultimately upholds the NFL clubs’ joint licensing arrangement, it should be because the arrangement is found pro-competitive, and not based on some technicality.
Marc Edelman is a Visiting Assistant Professor at Rutgers School of Law-Camden. He will be joining the faculty of Barry Law School in Fall 2009. His bio is available here, and his publications, here. Professor Edelman’s article, Why the ‘Single Entity’ Defense Can Never Apply to NFL Clubs: A Primer on Property Rights Theory in Professional Sports, was cited by American Needle Inc. in its most recent Supreme Court brief.