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Monday, May 14, 2007
 
Should Fantasy League Operators Pay Licensing Fees?

Last August, U.S. District Court Judge Mary Ann Medler ruled that players have no right of publicity in their names and playing records when used by commercial fantasy league operators without a license. MLB and the MLBPA have filed an appeal to the Eighth Circuit Court of Appeals and oral argument is now scheduled for June 14th (exactly one month from today). Fantasy league operators, including Yahoo!, ESPN and CBS Sportsline, currently pay the union a license fee between two and three million dollars. According to Sports Business Journal, a license for FoxSports.com was negotiated last summer as part of Fox’s new TV deal with baseball, but the online outlet is waiting for the outcome of the case before electing whether to pay the fee. SBJ also reported that the MLBPA has recently sent cease-and-desist letters to a collection of smaller fantasy game operators. Needless to say, the outcome of this lawsuit has huge ramifications on right of publicity tort law, and not just specifically related to the fantasy league industry. On Friday morning, I will be moderating a panel on this topic at the Sports Lawyers Association 33rd Annual Conference that includes Judy Heeter, Director of Business Affairs and Licensing for the MLBPA, and Tonia Ouellette Klausner, counsel to the Fantasy Sports Trade Association.

In my recent law review article, The Use of Players' Identities in Fantasy Sports Leagues: Developing Workable Standards for Right of Publicity Claims, I critique the district court's ruling and discuss how right of publicity claims can be viewed on a spectrum of commercial advantage. On one end of the spectrum, there are certain uses of identities that do not constitute a violation of the right of publicity because (although the use may generate economic gain to the user) the use has social value that is protected by the First Amendment making the commercial gain aspect secondary; those uses being for news reporting purposes, literary purposes (i.e. book writing, magazine articles) and expression purposes (i.e. art, parody, etc.). On the other end, there are certain uses that nobody would dispute constitute a violation because the primary use is for commercial gain; those uses being for advertisement, endorsement and marketing purposes. There are uses that fall somewhere in between these two ends, and I refer to these as "quasi-commercial" uses -- fantasy leagues, sports trading cards and video games to name just a few.

Fantasy league use, like trading card use, without a license has been held to violate the players' right of publicity. For example, in Uhlaender v. Henricksen, 316 F.Supp. 1277 (D.Minn. 1970), the court held that the defendants, which manufactured and sold without a license fantasy sports league table games that employed the names and performance statistics of major league baseball players identified by team, uniform number, playing position and otherwise, violated the players’ right of publicity. The Uhlaender court properly rejected the "public domain" rationale, and also provided the policy rationale for why a right of publicity should be recognized in the context of fantasy league use:

A celebrity must be considered to have invested his years of practice and competition in a public personality which eventually may reach marketable status. That identity, embodied in his name, likeness, statistics and other personal characteristics, is the fruit of his labors and is a type of property. Defendants’ contention has no merit that by the publication in the news media and because of the ready availability to anyone of the names and statistical information concerning the players, such information is in the public domain and the players thus have waived their rights to relief in this case. Such argument may or may not have some weight against a right of privacy claim, but in an appropriation action such as in the case at bar the names and statistics are valuable only because of their past public disclosure,
publicity and circulation. A name is commercially valuable as an endorsement of a product or for use for financial gain only because the public recognizes it and attributes good will and feats of skill and accomplishments of one sort or another to that personality. To hold that such publicity destroys a right to sue for appropriation of a name or likeness would negate any and all causes of action, for only disclosure and public acceptance does the name of a celebrity have any value at all to make its unauthorized use enjoinable. (emphasis added). Id. at 1282, 1283.

However, last summer Judge Mary Ann Medler was convinced that the players don't have a right of publicity because their names and performance statistics are in the public domain. But saying it's in the public domain only begs the question as to whether there is a violation of the right of publicity, it doesn't answer it. In other words, professional athletes are, by definition, in the public domain by virtue of being professional athletes. That doesn't mean Nike can use Tiger Woods without a license.

Was the Uhlaender case wrongly decided back in 1970? Or, does the fact that fantasy league games are now sold on the internet, as opposed to a tangible board game in a box, somehow change the outcome? If so, why? The only difference is that the internet has turned fantasy leagues into a $2 billion industry and, if anything, made it even more "commercial". Salaries of professional athletes have definitely increased over this 37 year period, but that doesn't provide any legal basis whatsoever, or even a policy rationale, for denying the players' claim.

Fantasy league operators, like trading card and video game manufacturers, sell a consumer product using players' names and statistics. Consumers are purchasing these products solely because they contain the players' names, likenesses and performance statistics. In other words, these products simply do not sell without their use. Shouldn't the players be compensated? If the Eighth Circuit affirms the district court ruling, would it mean that Topps and EA Sports could also produce their products without purchasing a license?





12 Comments:

To answer your question, "no."

Anonymous Anonymous -- 5/14/2007 6:02 PM  


I think I have to agree with the judge that the information being used by most fantasy leagues is in the public domain. Most leagues do not use the player's likeness or team logos. They simply use public information - the player's team, position and statistics. If the MLB can't copyright the facts of the games, it seems to follow that the players cannot claim their on-field performance (on which fantasy leagues are based) falls within their right of publicity.

Blogger F. Pants McFadden -- 5/16/2007 2:58 PM  


There has to be a limit to product and fantasy leagues are merely created on information, nothing more. The sports put out this information because its what sells their product. The judge got the decision right. This is different from trading cards because the inherent product is the likeness.

Blogger qtlaw24 -- 5/16/2007 8:14 PM  


To all three comments, you have not stated why the district court's ruling is right. What's the policy reason for why the players should lose? I quoted the language from the Uhlaender case that provides the rationale why the players should prevail.

Blogger Rick Karcher -- 5/16/2007 9:44 PM  


The players should lose because society is better off if they do not have a property right in their statistics. Contrary to your assertion, the fact that players make millions today indicates that society likely does not need to provide them with an additional property interest in order to coax them to perform. On the other hand, granting the property could have significant detrimental effects, i.e., the players would have a monopoly over who could offer fantasy sports products, which would bring all the negative associated with any other monopoly.

Anonymous Anonymous -- 5/22/2007 10:59 AM  


Anon,

That's just not a compelling argument to me. The fantasy league market is a $2 billion industry and it's currently working very well under free market forces -- i.e. fantasy league operators are paying licensing fees to the players at market rates (except for a few that are refusing to pay based upon the lower court's ruling), and there is no indication whatsoever that the players have monopolized, or will attempt to monopolize, this industry.

Why is it good policy to allow a for-profit company operating in a $2 billion industry to obtain for free the content that makes up the product/service of which it sells to the consuming public? It completely contradicts the rationale behind the right of publicity -- to prevent unjust enrichment.

Blogger Rick Karcher -- 5/22/2007 2:04 PM  


Prof. Karcher:

I dispute that the vague notion of "unjust enrichment" is the real driver of the right to publicity. Rather, I think there are two other forces are work.

First, the right of publicity is an incentive mechanism to spur the production of creative works. In Zacchini, for example, if the plaintiff's property interest in his act was not protected, he would cease to produce his act. Therefore, society is better off granting him the property right because it gains something that it otherwise would not have.

Second, the right of publicity protects against fraud. If anyone could use Jack Nicklaus's name to endorse golf clubs, then there's no way to know which club Nicklaus actually endorses.

But granting a property right like the right of publicity clearly has downsides because it allows one person a monopoly over certain information, images, etc. Under scenario one above, that downside is actually nonexistent because the information would never have been produced without the right already existed. Under the second scenario, the loss is also minimal because fraudulent advertising is generally considered a negative, not a positive.

Baseball statistics, however, are another matter. There is no dispute that baseball was played before fantasy leagues and would continue without them. To be sure, the added income players would receive from fantasy league licensing agreements would create a tiny increase in their incentives to reach the major leagues, thereby increasing the quality of sports product produced, the benefits here are miniscule. The downside, of course, is that, under your theory, the players could eliminate fantasy leagues entirely. Or more likely, they will use their monopoly position to engage in rent-seeking behavior. Indeed, in over time, it's likely that there would be only one fantasy league controlled by the players (or their designees). The fact that this has not happened yet does not mean it will not occur. Further, the very possibility that the players have no right at all to such fees is very likely part of the reason that they have not been overly aggressive in asserting their monopoly power.

In the face of these arguments, your unjust enrichment theory appears to be pure question begging. Who, after all, is being unjustly enriched? It is the fantasy league operators that have really created the product by organizing leagues in which fans want to compete. Arguably then, its the players who are attempting to unjustly enrich themselves on the ingenuity of others. To simply say the fantasy league operators would be unjustly enriched is to assume that players ought to be granted the property right in question, rather than a justification of that property right.

Another question: Why are casinos allowed to take bets on boxing matches without violating a boxer's right of publicity?

Anonymous Anonymous -- 5/22/2007 3:31 PM  


The reason Tiger Woods gets paid by Nike is not to protect against fraud. The reason is because Tiger has created commercial value in his name as well as his performances. The use of that name by a third party to sell or a product or service gives that third party commercial value that it should not get for free. Why doesn't Nike use your name to sell clubs? It's the same reason fantasy league operators don't use the lawyers softball league players -- because then the product wouldn't sell!!!

To answer your last question, maybe it is a violation.

Blogger Rick Karcher -- 5/22/2007 6:17 PM  


As to the casino comments, I believe that selling bets on boxers likely does violate the right of publicity, as does more specific sports book options in Vegas such as "will Kobe Bryant score over/under 35 points." Simply put, nobody has challenged their use yet (to my knowledge at least).

The District Court's conclusion that fantasy use does not implicate a player's right to publicity is ridiculous. Service providers unquestionably 1) appropriate a player's identity (through name and performance), 2) for a commercial benefit, 3) without their consent. The court measures commercial advantage as compared to other fantasy providers when it should examine the concept of a fantasy service that does not use a celebrity player's name and stats.

But the relevant inquiry lies in weighing the players' rights in this scenario against First Amendment considerations. With regard to unjust enrichment, in NBA v Motorola the court pointed out the numerous costs and hurdles Motorola faced in offering its product, including collecting, storing, transmitting, transforming, and projecting the statistics. I believe one should look at the severity of the publicity right infringement here, which amounts to appropriating a player's name in a manner that doesn't significantly detract from their incentive to develop a commercially valuable identity. Despite the obvious (to me) accordance with the doctrinal elements of publicity rights violations, fantasy use minimally implicates the policy reasons for the right.

In contrast, fantasy sports incorporate important First Amendment elements. They certainly further society's interest in news and fact dissemination; contrary to your assertion Professor Karcher I participate in fantasy baseball much more to stay abreast of the sport than to compete with my peers. Fantasy makes an enormous league of hundreds of athletes more manageable to understand. I also disagree with your hasty dismissal of "non-traditional media" as a news source. Fantasy quite possibly represents the next internet headline or podcast as an evolving method of fact communication. It unquestionably heightens awareness of the sport, though the court's statement that "MLB SHOULD allow free fantasy" comes off as overly paternalistic to me. Also, fantasy sports constantly update performance information online, which to a degree distinguishes Uhlaender and Palmer.

I think the transformative effect factor promulgated in comedy iii and jireh gets forgotten in much of the present analysis. Fantasy services begin with raw data and provide a derivative product. This doctrine from what I can tell remains in infancy and must be developed, but I think one should at least consider it when scrutinizing fantasy sport and conducting any 1st amendment v publiciyt right balancing test. For instance, I find important similiarites between fantasy sports and Bill James' publishing his "new" statistics (see also kenpom.com and John Hollinger's PER ratings on ESPN). All gather raw data in its originally published form and present it to the consumer in a modified fashion. Fantasy's is less functionally informative (I admit 12 fantasy points does not tell as much as a 8.9 plus/minus rating) but much more entertaining. I have a paper that more clearly (but not as polished yet as I would like) fleshes these issues out if you're interested.

Blogger Paul -- 5/24/2007 3:07 PM  


Paul,

Thanks for your comments and they are all excellent points.

You analogize this situation to the Motorola case, and I've thought a lot about that analogy myself. However, I come to the conclusion that copyright and right of publicity, while similar in that they both protect intangible property rights, are distinguishable in one key respect. Copyright protects original works of authorship, and thus there has evolved the "expression/fact dichotomy" in which expressions are copyrightable and facts are not. In my opinion, when the district court heavily relied on the "public domain" rationale to preclude the right of publicity claim, it essentially used the expression/fact concept without expressly stating it was using it. [I think it would be strange for the court to draw from copyright law after it concluded that copyright doesn't preempt right of publicity claims and that a person's identity is not protected by copyright law.] This is the first right of publicity decision I am aware of to use public domain as a rationale to reject the claim. The problem I have with the public domain rationale is that the more famous a person is, the more they are in the public domain so it just isn't a workable standard (unless you want to completely preclude ALL right of publicity claims including cards, video games and advertisements). If the public domain standard is to be used, then you start carving out exceptions for certain uses. For example, the district court said trading cards are just different because they use pictures/images--Well, what makes it any different? The court failed to explain what makes it different from a policy standpoint.

Right of publicity is heavily focused upon "commercial value" whereas copyright isn't. To me the best workable standard is to focus on this aspect. People buy cards, video games and fantasy league games BECAUSE OF the players. The players are the essence of the product. If we can say that nobody would buy these products if they contained the lawyers league softball players, then there is obviously a huge commercial value being extracted in using professional players. The public doesn't have a "right to professional sports" or the players that play them. Casinos and Jeopardy still exist without using players, so the commercial value element is much weaker in those contexts -- i.e. people don't watch Jeopardy because they are waiting to hear a possible question that might be asked about some player in some sport, and people will still go to casinos to play cards, slot machines, roulette wheels, etc. etc.

As far as the First Amendment balancing, the purpose of fantasy leagues is simply not news reporting. I also don't believe that news reporting should be interepreted so broadly to mean the "flow of information" -- and it most definitely should not be interpreted that broadly in the context of balancing the FA against the right of publicity. Even if it is interpreted to be that broad, the primary purpose of fantasy leagues is simply to play a game and the secondary purpose might be to "heighten awareness". To me, the fact that it contains "up to date" information is simply a by-product of advanced technology, and if anything, it strengthens the argument that the game is being played and sold solely because of the players' performances.

Who do you want to keep the money? -- that's the question at the end of the day. I fail to understand why players shouldn't get a very very small percentage from producers of a product being sold in a multi-billion dollar industry in which the players provide ALL of the content of the product being sold. Monopolization arguments are not convincing to me at all -- let's let the antitrust laws deal with that if and when it happens.

I slso don't find the "incentive" rationale to be a workable standard. Players don't make a living doing endorsements either, but the district court is willing to draw a distinction with advertisements/endorsements. More importantly, courts should not go down the path of determining when somebody is worthy of being compensated for work performed or investments made.

Blogger Rick Karcher -- 5/25/2007 8:08 AM  


Horse Racing
The players do make millions of dollars, not just playing the game but also in the public market. How much do they want. They get enough now to play the game they are suppose to luv.

Anonymous Anonymous -- 6/04/2007 10:29 PM  


I agree with this completely, thanks for the post.

Anonymous Sue -- 6/13/2007 3:12 AM  


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