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Supreme Court Takes Up NFL Licensing Case

At issue is right of NFL to sign exclusive licensing agreements with manufacturers, such as Reebok, and whether these deals violate antitrust laws.

WASHINGTON — The Supreme Court agreed Monday to take up a case that could affect exclusive licensing deals between major sports leagues and manufacturers such as Reebok International that have made millions of dollars through licensing deals for apparel and accessories bearing team trademarks.

This story first appeared in the June 30, 2009 issue of WWD.  Subscribe Today.

The Supreme Court granted a writ of certiorari to American Needle Inc., a manufacturer based in Buffalo Grove, Ill., which sued the National Football League, National Football League Properties, its 32 teams and Reebok in 2004 alleging a violation of antitrust laws when the NFL entered into an exclusive, 10-year licensing deal with Reebok in 2001.

At the center of the case is whether the league is a single entity that collectively enters into exclusive licensing deals without having an anticompetitive effect on the market or whether its 32 teams operate independently.

American Needle, which manufactured apparel and footwear for the NFL for 20 years, argued that “because each of the individual teams separately owned their team logos and trademarks, their collective agreement” with Reebok was “a conspiracy to restrict other vendors’ ability to obtain licenses for the team’s intellectual property,” court documents said.

In essence, American Needle charged the NFL, NFL Properties, the teams and Reebok with intending “to create a monopoly.” However, American Needle lost its case last year in the Seventh Circuit Court of Appeals in Chicago, which ruled in favor of the NFL.

The league, citing a 1984 Supreme Court decision that a “parent-subsidiary relationship did not yield anticompetitive risks,” argued that it functioned as a single entity when “collectively promoting NFL football by licensing the NFL teams’ intellectual property and were thus immune from liability,” an argument the appeals court upheld. The NFL and other professional sports leagues also act as one entity in negotiating players’ union collective bargaining agreements.

“We are pleased that the Supreme Court has agreed to hear the case,” an NFL spokesman said. “We look forward to the opportunity to explain why the court should confirm and extend on a nationwide basis the favorable rulings of the Court of Appeals on the application of the antitrust laws to the unique structure of a sports league.”

The National Basketball Association and National Hockey League filed “friend of the court” briefs in support of the NFL.

Reebok declined to comment on the case and referred all media inquiries to the NFL.

American Needle is hoping to persuade the high court that the NFL teams are independently owned businesses, not a single entity, and thus subject to antitrust law.

“The issue in this case is less about exclusive licenses than it is about when and what circumstances an independently owned business can agree not to compete and not be subject to antitrust law,” said Glen Nager, an attorney representing American Needle. “What the teams have done here through the league is agreed not to compete with each other. That creates antitrust problems.”