For Use of Data, Panel Rules for Fantasy Service Providers Over MLB

The Eighth Circuit Court of Appeals panel in St. Louis ruled for C.B.C. Distribution (CBC) and against Major League Baseball (MLB) in a case revolving around the use of player performance statistics. CBC runs fantasy leagues, most notably for USA Today. The appeals court ruling declares that fantasy companies have a First Amendment right to use statistics for free.

In January of 2005, MLB purchased the rights for five years to use player names, photographs and statistics from the players' union (MLBPA) for $50 million. MLB sought to recoup this money (and more) from license fees to those who wished to run fantasy games. CBC sued MLB just two weeks after MLB sent CBC a letter telling it to stop promoting its fantasy game for which it did not have a license. CBC did previously have a license with the MLBPA but its license had expired.

However you may feel about fantasy sports, the idea that companies have to pay some kind of royalty fee to use statistics has precedent. CBC itself has paid for this right in the past. However, it balked at paying what was at least rumored, if not authenticated, to be a huge increase in these fees. Rather than negotiate a mutually agreeable price, they sued MLB and looked for the courts to provide a solution.

The courts had previously ruled, in NBA v. Motorola and STATS, Inc, that statistics are not copyrightable and that fantasy providers would be "unburdened by the need to pay excessive licensing fees to the major leagues."

There are two factors at work here. First are individuals' rights to publicity, which protects an individual from someone else profiting from your name or any other symbol of your identity without your permission. Basically, if I sell widgets for a living, I cannot say - Manny Ramirez loves widgets and says you will to - without compensating Mr. Ramirez. Rights of publicity vary from state to state but the courts have upheld these rights except in cases of news reporting or entertainment media.

Publicity rights and sports first intersected in the Haelan Laboratories, Inc. v. Topps Chewing Gum, Inc. case in 1953, which recognized players' rights in having their photographs used on trading cards. Because of this, card manufacturers have to pay a fee to the MLBPA (and other player organizations) to sell trading cards.

The second issue relates to the First Amendment and the right to use information that is freely available in the public domain.

In this case, the Eighth Circuit Court of Appeals panel ruled 2-1 that CBC's First Amendment rights "supersede the players' rights of publicity."

This is great news for fantasy players, as there will be no noticeable dropoff in the number of companies offering fantasy games and services.

But it is less than great news if you believe in honesty, fair play and the neutrality of our legal system.

Some people like to point to the long-established practice of newspapers printing box scores with statistics and claim that fantasy leagues offering similar stats should enjoy similar protections.

The newspaper printing a boxscore with Manny Ramirez' (and every other player's) lines is listing information. This seems to me the proper case to invoke First Amendment rights.

But when we use those same stats for the purpose of a fantasy game (which we charge customers to play) it becomes another matter entirely. Those who run fantasy games for pay are selling services, not conveying information.

Motorola upheld the rights of newspapers, online encyclopedias and a host of other entities to print statistics. This case dealt specifically with CBC violating the right to publicity of MLB players by using their statistics, a symbol of their identity, for CBC's commercial advantage.

CBC and the fantasy companies are profiting from both the names and the identity of athletes without their permission if they do not pay for a license from the MLBPA. Trading cards and video games pay for a license from the use of names and likenesses of athletes. Why should it be different for fantasy leagues?

A three-person panel of the Eighth Circuit Court of Appeals heard this case, on appeal by MLB for the summary judgment awarded CBC in district court. MLB does not have a guaranteed right for a future appeal. However, it can petition for an additional appeal, either before the entire Eighth Circuit Court or the U.S. Supreme Court. Neither of these courts has to hear the case. The fact that the panel issued a 2-1 split decision may prompt the Eighth Circuit to hear the case again but it is extremely unlikely that the U.S. Supreme Court will hear the case.

What does all this mean for MLB? The best-case scenario is that they win the war after losing every battle. Fantasy players have helped drive interest in the sport, which just recognized its fourth consecutive season of record attendance. By not gouging fantasy providers, who in turn would pass that cost on to fantasy players, MLB may very well see continued expansion of interest in its product. So the short-term loss in revenue most likely will be made up with interest in the long run.

If nothing else, it further calls into question the competency of the MLB lawyers. After decades of losing battles to the superior lawyers in the MLBPA, they are now expanding their culture of losing into other areas. Because it is not only the lost revenue from fantasy games, it is the $50 million they paid for rights from the MLBPA that may now be worth nothing.

Sources:
Bloomberg.com: No Fantasy; Major League Baseball Loses Data Ruling
AOL Legal Department: NBA v. Motorola and STATS, Inc.
Wikipedia: Personality Rights
MLBPA Press Release: MLB Advanced Media and Major League Baseball Players Association reach exclusive agreement