We recently had the opportunity to sit down with Marc Edelman, a professor of sports and antitrust law at Barry University’s Dwayne O. Andreas School of Law.
He shared his thoughts with us regarding the recent American Needle vs. The National Football League verdict, and its potential impact on the EA Sports exclusive NFL licencing deal, which currently prevents other video game creators from producing an NFL branded game of their own.
Alright, we’ve wasted enough of your valuable time. Have at the full interview below, and please make sure to share your thoughts on it in our comments section.
Ripten: First and foremost Professor Edelman, thank you for taking some time to talk about the American Needle vs. The National Football League case with Ripten, and share your opinions on it. If you could please tell our readers a little about yourself and your background that would be great.
Professor Edelman: I am a professor of sports and antitrust law at Barry University’s Dwayne O. Andreas School of Law, and am teaching sports law this summer at Fordham Law School, Seton Hall Law School and Rutgers School of Law-Camden. I have written extensively on sports and antitrust law, and my articles have been cited in three briefs to the Supreme Court in the case American Needle v. National Football League.
Ripten: And from what we can see here, your most recent article regarding the case ruling was published on May 24th for an online publication called “Above The Law.”
Professor Edelman: That is correct. I have been asked by several publications to write about the case, including Above the Law, which hits a mainstream legal audience, and Sports Business Journal, which targets a sports business audience.
Ripten: Now, our cursory understanding of the situation, based on the literature we’ve read, is that the ruling (issued in favor of American Needle Inc) will prevent the NFL from acting as a single entity when it comes to the issue of NFL apparel sales. Would that assessment be correct?
Professor Edelman: I would read it more broadly, and say that according to the Court the National Football League is not a single entity, and therefore any decision that is reached by the 32 NFL teams collectively is subject to a full review by the courts on its competitive merits. To limit the ruling simply to apparel sales seems way too narrow based upon the language of the Court.
Extremely enhanced E3 cinematic promoting Madden 2006 shown above.
Ripten: A few years back, Electronic Arts and the National Football League struck an exclusive licensing deal, turning the Madden franchise into the only Officially Licensed NFL video game on the market. This left all other publishers and developers hoping to create an NFL licensed product on the outside looking in. Is that a decision that you feel could possibly be revisited as a result of this ruling being handed down?
Professor Edelman: Maybe. After the American Needle case, a video game maker who has been excluded from the right to purchase the trademark of any individual NFL team by NFL Properties, or all the NFL teams overall, would step into similar shoes as American Needle However, that does not mean that a company that is excluded from the video game market would have the immediate legal right to license these trademarks. Rather, much like American Needle, the Supreme Court’s recent ruling would merely allow them to sue for this right and get beyond the point of the case’s dismissal on single entity grounds, and to the point where the conduct could actually be reviewed on the merits to determine whether it’s more pro-competitive or anti-competitive.
Ripten: There are a handful of video game related websites out there who have already started to concoct theories and possible scenarios as workarounds for the current exclusive licensing deal between the NFL and EA Sports. One of which involves publishers and/or developers approaching each team separately on a case by case basis to secure individual licensing agreements. In fact, I exchanged emails regarding this very topic with a fellow colleague of mine, who writes for another well known gaming site, just last night. He jokingly suggested that a realistic end result, based on the recent ruling, would be something along the lines of an “Indianapolis Colts’ Touchdown Blast!” video game as opposed to the gaming world gaining access to another full-fledged NFL game. What are your thoughts on this, and which scenario seems more likely to you?
Professor Edelman: Well as of today, I don’t think that would happen. All the American Needle case thus far has achieved is that it will allow a potential licensor to argue on the merits that the NFL’s collective licensing of its trademarks is net anti-competitive. If a video game maker were to seek to license say the Colts trademarks for a video game, and nothing else, the Colts would still probably say “no we can’t do it – it’s a league wide issue.” The video game maker would then need to sue each of the individual NFL clubs, arguing that their decision to only allow collective licensing of trademarks for video games through NFL Properties is an illegal restraint to trade. A court would then need to determine whether the league-wide rules with respect to licensing trademarks for video games are more pro-competitive or anti-competitive. That is a question I cannot answer definitively, at least not without all of the facts of the marketplace.
Professor Edelman: What I can tell you, however, is that such a lawsuit would still be an uphill battle. Of the past 222 antitrust cases to go to final determination by a judge under the Rule of Reason, 221 of those cases have come back in favor of the defendants — upholding the collective conduct. That information is based on a law review article recently written by Professor Michael Carrier of Rutgers School of Law. It was published in George Mason Law Review. Now, the second part of your question is, if you’re able to succeed on that uphill battle, what is more likely? Is it more likely that a court would require a change in the NFL policy to require each team to make their own individual decisions with respect to trademarks for video games, or is it more likely that a compulsory license would be put into place? Clearly, the answer to that is the first. The individual teams, if anything, would be allowed to, or mandated to, make their own independent business decisions. That would be the proper antitrust solution.
Ripten: So, are you saying that some of the “victory rallies”, for lack of a better term, are a bit premature? And that nothing has actually changed yet. Would that be a correct assessment?
Professor Edelman: That is close to right. All that American Needle did is put the law of the Seventh Circuit back in line with most other circuits. At this point, all we know is that a sports league, such as the NFL, will not be treated as a single entity under antitrust law but rather as a joint venture. However, even a joint venture can engage in collective behaviors such as joint licensing when deemed economically reasonable.
Professor Edelman: Now, the way that collective conduct by joint ventures is reviewed by a court for reasonableness is under a test known as the Rule of Reason. Under this test, a court will only find antitrust liability where the collectively acting parties have market power, engage in net anti-competitive conduct (when you balance the anti-competitive effects and the pro-competitive benefits), and harm consumers. The argument that the 32 NFL teams are going to continue to make, both in the area of apparel licencing and licencing of their trademarks for video games, is that the collective licencing is pro-competitive. American Needle is going to have to argue in the District Courts that it’s not pro-competitive, and that it harms competition. And if a video game maker wants to challenge being denied a license, they would have to do the same thing. They would have to file suit against the 32 individual NFL teams and argue that the collective conduct is net harmful to competition on the merits.
Ripten: If you had to look five years down the road, based on your legal experience and understanding of the recent ruling, do you believe that video game makers interested in gaining access to the NFL license will go the route of American Needle? And if so, do you think we could be looking at a possible return of multiple NFL based or licensed video games?
Professor Edelman: I certainly think a lawsuit is possible, but it is very premature to predict results. As I explained before, one of the elements of a Rule of Reason analysis would involve showing that the parties acting jointly exercise collective market power. So, one important factor would turn upon how a court would define the relevant market in such a lawsuit. Specifically, is there a relevant market for football video games that use NFL club trademarks? Or, do these video games compete against other football games that do not use these logos? Or, even perhaps against baseball and other sports video games? The broader a court defines the relevant market, the less likely a plaintiff video game manufacturer would be able to challenge the EA licensing agreement.
All-Pro Football 2k8 gameplay shown above.
Ripten: Well, that would come down to how one defines the word “compete”. Not long after the exclusive deal between EA Sports and the NFL went into place, 2K Sports (who had a long history of successful NFL branded football games) put out a non NFL licensed football game titled “All-Pro Football 2K8“. The game featured Hall of Fame players like John Elway, Barry Sanders, and Jerry Rice. Despite their best efforts to promote the title, it failed to achieve meaningful enough sales numbers when compared to those of the NFL licensed Madden 2008, and 2K has not published another football game since.
Other non NFL branded releases during that time period included Midway Games’ arcade style “Blitz: The League” (formerly titled “NFL Blitz”), but it too suffered from poor sales numbers and was eventually shelved. There is another non NFL licensed football game due to be released next week called “Backbreaker“, and though it looks and plays very well, many game reviewers believe that it too will unfortunately suffer the same fate as those who came before it without an NFL license. As a whole though, looking at the current selection of football related games on the market, it’s pretty clear that most video game creators have spoken — and they simply aren’t interested in publishing non NFL licensed alternatives.
Backbreaker gameplay shown above.
Professor Edelman: That is all very interesting. Nevertheless, the reality is that, under antitrust law’s Rule of Reason, first impressions by consumers, even by those who are experts in the field, are not necessarily going to be enough to win the day. Both sides, the video game manufacturer who is being excluded and the 32 NFL teams, will certainly turn to the aid of experts economists who will look at the market based on actual purchaser data from over an extended period of time. It will be this economic testimony, and not general market impressions, that will likely determine a court’s outcome.
Ripten: Are saying that this is not as simple as a video game maker walking into a court room and saying “this is a monopoly.” And that they’ve got to present additional information that outlines specifically how their financial interests are being adversely effected?
Professor Edelman: That is exactly right. A plaintiff is going to have to show three things: (1) that the NFL clubs collectively exercise market power in a some relevant market related to video games, (2) that the NFL’s exclusive licensing practices overall are anti-competitive in this market, and (3) that as a result of the NFL’s exclusive licensing practices consumers have been harmed through either higher prices or a reduction of output within that relevant market.
Ripten: Alright. Well, once again, thank you for taking the time to chat with us today Marc. I’m sure our readers will agree when I say that you have provided a wealth of much appreciated insight, and we look forward to speaking with you again.
Professor Edelman: You’re very welcome. It’s always my pleasure. And readers should feel free to contact me with any questions at my personal email, Marc [at] MarcEdelman [dot] com.