American Needle, Inc. v. National Football League et al.: Should the NFL Be Considered a Single Entity?

Adriana S. de Armas, Managing Editor For Tech. & Dev., Albany Government Law Review Member

            On January 13, 2010, the United States Supreme Court heard oral arguments in the American Needle v. National Football League case.[1]  The two questions presented to the Supreme Court were:[2]

(1) Are the NFL and its member teams a single entity that is exempt from rule of reason claims under [§ 1] of the Sherman Act[3] [hereinafter § 1] simply because they cooperate in the joint production of NFL football games, without regard to their competing economic interests, their ability to control their own economic decisions, or their ability to compete with each other and the league? 

(2) Is the agreement of the NFL teams among themselves and with Reebok International, pursuant to which the teams agreed not to compete with each other in the licensing and sale of consumer headwear and clothing decorated with the teams’ respective logos and trademarks, and not to permit any licenses to be granted to Reebok’s competitors for a period of ten years, subject to a rule of reason claim under [§ 1] of the Sherman Act, where the teams own and control the use of their separate logos and trademarks and, but for their agreement not to, could compete with each other in the licensing and sale of Team Products?[4]

The 7th Circuit affirmed the district court’s grant of summary judgment to the NFL.[5]  The court held that the NFL and its member teams are a single entity for purposes of intellectual property licensing, and thus they were exempt from § 1.[6]  The court stated that the NFL had a “vital economic interest in collectively promoting NFL football . . . .[since it] competes with other forms of entertainment” targeting a finite audience; the court also cited to previous cases regarding professional sports leagues and the ability of individual teams economically competing independently from the league.[7]  The 7th Circuit further mentioned that the NFL’s member teams, in particular, had allocated licensing power as to their intellectual property since 1963.[8]  Since the NFL was not in violation of § 1 because § 1 “[does not] prohibit[] the NFL teams from cooperating so the league can compete against other entertainment providers,” the court held that American Needle’s § 2 monopolization claim failed as well.[9]  Thus, because the NFL is deemed a single-entity—for licensing purposes—they are able to license “on an exclusive basis.”[10]

            The NFL argued that Copperweld Corp. v. Independence Tube Corp [11] and subsequent cases were applicable in this case because the NFL, acting as a single-entity in licensing the teams’ intellectual property, was immune to § 1 liability.[12]  The 7th Circuit agreed with this argument, but it did not extend the single-entity reasoning beyond licensing intellectual property.  In Copperweld, the Supreme Court held that a “parent corporation and its wholly owned subsidiary [were] a single entity for antitrust purposes.”[13]  The Court in Copperweld additionally stated that single-entity argument was applicable to parent-subsidiary relationships because the relationship was “guided” by one “corporate consciousness[].”[14]  Here, the 7th Circuit used almost identical language to explain the relationship between the NFL and the thirty-two individual teams.[15]  The NFL, according to the Court, is a single entity based on the premise that the NFL does not exist with one team; rather, it exists only when two teams play against one another since “only one source of economic power controls the promotion of NFL football.”[16]

            The NFL has been regarded as an unincorporated association comprised of (now) thirty-two football teams, which are separately owned and controlled by a “for-profit entity.”[17]  The NFL’s history dates back to 1920—the first professional football league.[18]  By 1963, the League was an absolute success, and the teams realized that the collective promotion of the NFL Brand was in their best interests.[19]  The teams went on to create NFL Properties (hereinafter NFLP), a “separate corporate entity” with the sole purpose of licensing the teams’ intellectual property, and “‘conduct[ing] and engage[ing] in advertising campaigns and promotional ventures on behalf of the [NFL] and [its] member [teams].’”[20]  However, the teams still retained ownership of their respective intellectual property.[21]  By 1982, several teams created the NFL Trust (hereinafter Trust), – working with the NFLP –which would give it “near-exclusive licensing rights” to the trust, while the member teams “retain[ed] only the rights to use their marks to advertise locally and in the teams’ own publications.”[22]  Not all the teams joined the Trust because of the power the Trust had over the team’s licensing.[23] 

            Despite the differences over the Trust, the teams once again came together to discuss their options as to declining product sales that resulted in an exclusive licensing agreement with Reebok in 2001.[24]  Once the licensing agreement was approved, other vendors—such as American Needle, which had a licensing agreement for headwear with NFLP for over twenty years—were no longer able to sell NFL-licensed merchandise.[25]  American Needle filed suit against the NFL, the member teams, and NFLP alleging that the NFL was in violation of §§ 1 and 2 of the Sherman Act.[26]

            The NFL has consisted of thirty-two teams that are separately owned and operated, coming together to create schedules and “rules of the game.”[27]  This format, similar in make-up to other sports leagues, “sets sports teams apart from other businesses, where agreements among competitors can run afoul of antitrust laws if trade is retrained and consumers are hurt.”[28]  Both American Needle and the NFL, questioned the 7th Circuit’s opinion, and sought review by the Supreme Court—American Needle arguing that the NFL is not a single-entity, and the NFL arguing for a broader exemption from § 1.[29] 

            The implications of both arguments can have a definitive change on how the NFL operates.  On one hand, if the Supreme Court rules that the NFL is not a single entity, the NFL may have a more difficult time “handl[ing] . . . issues . . . [such as] market[ing] [and] broadcasting rights.”[30]  However, a ruling for the NFL may have serious implications as to players’ contracts, product pricing, and so on, and the holding will assuredly be used by other leagues to also be exempted from any antitrust violations.[31]  For example, as to players’ contracts, the NFL, if deemed a single-entity and thus exempt from § 1, can “restrict free agency;” at the same time, the NFL could wield more control over coaches’ salaries.[32]  The NFL will also be able to determine what prices will be appropriate for ticket sales and merchandising,[33] These examples are areas that would have previously been under the sole control of the individual teams but for a Supreme Court ruling the NFL as a single entity and exempting the NFL from § 1.

            In May 2010, a unanimous Court reversed and remanded the case, with Justice Stevens writing the opinion.[34]  The Court held that the NFL was not a single entity and that the thirty-two teams under the auspices of the NFLP were not a single entity for the purposes of marketing and selling their intellectual property.  The Court explained that to understand the § 1 implications on transactions coordinated by more than one person (in the business sense), one must look at the “‘identity of the persons who act, rather than the label of their hats.’”[35]  Additionally, in Copperweld, the Court stated that “‘substance, not form, should determine whether a[n] . . . entity is capable of conspiring under § 1.’”[36]  Here, the Court asserted that to determine if there was concerted action, then it must be determined if there is a “‘contract, combination . . . , or conspiracy’” amongst persons whereby such agreement would stifle “actual or potential competition.”[37]

            The Court explained that despite their agreement to market their intellectual property through the NFLP, the NFL teams could still market their own intellectual property.[38]  Moreover, even though two teams must play against one another to produce an NFL game, it does not mean, “all aspects of elaborate interleague cooperation are necessary to produce a game.”[39]   With the narrow question presented to the Court, it does not necessarily follow that cooperation between the teams is necessary for the marketing and sale of intellectual property; therefore the NFL teams under the auspices of the NFLP were acting in violation of § 1 when they agreed to an exclusive contract with Reebok.


[1] ABA, Merit Briefs for January Supreme Court Cases, Term 2009–2010, http://www.abanet.org/publiced/preview/briefs/jan2010.shtml#08661 (last visited June 22, 2010).

[2] See Supreme Court Briefs, American Needle v. Nat’l Football League: Questions Presented, http://www.supremecourt.gov/qp/08-00661qp.pdf (last visited June 22, 2010).

[3] 15 U.S.C. § 1 (2010) (§ 1 of the Sherman Act applies, in part, to “[e]very contract, combination in the form of trust or otherwise…in restraint of trade …is declared to be illegal”).

[4] Supreme Court Briefs, supra note 2.

[5] American Needle Inc. v. Nat’l Football League et al., 538 F.3d 736, 744 (7th Cir. 2008).

[6] Id.

[7] Id. at 743.

[8] Id. at 744.

[9] Id.

[10] Id.

[11] Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984).

[12] American Needle, 538 F.3d at 741–42.

[13] Id. at 738 (citing Copperweld¸467 U.S. at 771).

[14] Id. (quoting Copperweld, 467 U.S. at 771).

[15] See id. at 742.

[16] See id. at 743.

[17] Brief for Petitioner at 2, American Needle v. Nat’l Football League et al., No. 08-661 (U.S. 2010), available at http://www.abanet.org/publiced/preview/briefs/pdfs/07-08/08-661_Petitioner.pdf.

[18] Nat’l Football League, NFL History by Decade, http://www.nfl.com/history/chronology/1911-1920 (last visited May 29, 2010); Nat’l Football League, NFL History by Decade, http://www.nfl.com/history/chronology/1921-1930 (last visited June 22, 2010) (the NFL was originally named the American Professional Football Association, but in 1922, its name changed to the National Football League). 

[19] American Needle, 538 F.3d at 737.

[20] Id.

[21] Brief for Petitioner, supra note 17, at 4.

[22] Id. at 5 (the trust was to dissolve in 2004).

[23] Id.

[24] Id. at 6–7.

[25] Id. at 7–8.

[26] Id. at 8.

[27] Brent Kendall, Justices Look Tough in NFL Antitrust Case, Wall St. J., Jan. 14, 2010, at B4.

[28] Id.

[29] Marc Edelman, Sports and the Law: Oral Arguments Begin Tomorrow in American Needle v. NFL, Above the Law (Jan. 12, 2010), http://abovethelaw.com/2010/01/sports-and-the-law-oral-arguments-begin-tomorrow-in-american-needle-v–nfl/.

[30] See Michael McCann, American Needle v. NFL: An Opportunity to Reshape Sports Law, 119 Yale L. J. 726, 731–33 (2010); see also Ashby Jones, Threading ‘American Needle’: Could It Destroy Free Agency in the NFL?,  Wall St. J. Law Blog (Jan. 12, 2010), http://blogs.wsj.com/law/2010/01/12/threading-american-needle-could-it-destroy-free-agency-in-the-nfl/. 

[31] See McCann, supra note 30, at 729; see also Kendall, supra note 27 (many amicus curiae briefs were written on behalf of both parties, but the other sports leagues wrote amicus curiae briefs on behalf of the NFL – while the respective players’ associations wrote briefs on behalf of American Needle); see also Drew Brees, Saints’ Quarterback Drew Brees Weighs in on NFL’s Supreme Court Case, Wash. Post, Jan. 10, 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/01/07/AR2010010702947.html (last visited June 22, 2010).

[32] Brees, supra note 31.

[33] Id.

[34] See American Needle Inc. v. Nat’l Football League et al., No. 08-661, 2010 WL 2025207, at *1 (U.S. May 24, 2010), available at http://www.supremecourt.gov/opinions/09pdf/08-661.pdf.

[35] Id. at *7 (citing United States v. Sealy, 388 U.S. 350, 353 (1967)).

[36] Id. at *10 (citing Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 773 n. 21 (1984)).

[37] Id.

[38] Id.at *15–16

[39] Id. at *15 n. 7.

About these ads

1 Comment

Filed under Intellectual Property, Sports Law

One response to “American Needle, Inc. v. National Football League et al.: Should the NFL Be Considered a Single Entity?

  1. I will ocntinue watching this anyway. The only site where possible to watch NFL online… Thanks!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s