Category: Entertainment Law

USCIS Issues New Policy Guidance for O-1B Visas

United States Citizenship and Immigration Services (“USCIS”) recently issued policy guidance to clarify how to determine the appropriate visa classification for persons of extraordinary ability in the arts. Given the massive changes in the entertainment industry in the past year, including the increasing popularity of internet and streaming services, this guidance provides essential insight for those seeking to understand the nuances of O-1B nonimmigrant visas and determine which visa applies to their unique circumstances.

O-1 Visa Program for Individuals with Extraordinary Ability or Achievement

The O-1 nonimmigrant visa program provides nonimmigrant visas for individuals who possess extraordinary ability in the sciences, arts, education, business, or athletics, or who have demonstrated extraordinary achievement in the motion picture or television industry and been recognized nationally or internationally for those achievements.

The O-1 nonimmigrant visa program is broken down into the following classifications:

  • O-1A: Individuals with an extraordinary ability in the sciences, education, business, or athletics (not including the arts, motion pictures or television industry);
  • O-1B (Arts): Individuals with an extraordinary ability in the arts;
  • O-1B (MPTV): Individuals with extraordinary achievement in the motion picture or television industry.

Generally, to qualify for an O-1 visa, a beneficiary must demonstrate “sustained national or international acclaim” in their respective field. To prove this, applicants must provide evidence of their credentials, including national or international awards or prizes, membership in professional organizations in their respective field, published articles in notable trade publications, high salary for their services, as well as other relevant evidence of exceptional expertise.

Under the O-1B category, as noted above, individuals in the entertainment industry can demonstrate either extraordinary ability in the arts or extraordinary achievement in the motion picture and television industry. With the recent shifts in the entertainment industry, including the prevalence of household names from YouTube, TikTok, Instagram, etc., it has become increasingly common for applicants to possess qualities that fall under both the O-1B (Arts) and the O-1B (MPTV) categories.

Determining the Relevant Standard for Artists with Some Connection to MPTV

The USCIS Policy Manual acknowledges the difficulties associated with petitions that have elements of both O-1B (Arts) and O-1B (MPTV) classifications. According to the newly issued guidance, inclusion in the motion picture or television industry is not limited to whether artistic content will air on television or movie screens, noting that “USCIS considers streaming movies, web series, commercials, and other programs with formats that correspond to more traditional motion picture and television productions to generally fall within the MPTV industry’s purview.” Indeed, USCIS gives weight to whether an individual”s work aligns with industry organizations such as the Academy of Television Arts and Sciences.

However, under USCIS guidance, not all television stars are considered equal for the purpose of visa qualification. For instance, reality television poses an interesting problem because many of the “stars” are non-actors involved in a competition of some sort that takes place on television. According to USCIS, contestants on reality television programs fall outside of the MPTV industry, but judges, hosts, and those employed by the production company generally fall within industry parameters.

Video blogging, a staple of the increasingly popular YouTube and TikTok platforms, poses similar questions. However, USCIS makes clear that static web content, like video blogs, generally falls outside the O-1B (MPTV) classification and is more appropriate for O-1B (Arts) petitions. USCIS notes that if an artist’s work or appearance on an MPTV production is incidental to their non-MPTV work as an artist, the MPTV classification may not be appropriate.

Guidance for O-1B Visas

The newly-issued guidance provides some clarification of the nuances that distinguish O-1B (Arts) beneficiaries from O-1B (MPTV) beneficiaries. Potential beneficiaries and practitioners can continue to consult the USCIS Policy Manual for up-to-date guidance in this quickly changing industry.

Article By Raymond G. Lahoud of Norris McLaughlin P.A.

For more immigration legal news, visit the National Law Review.

©2022 Norris McLaughlin P.A., All Rights Reserved

Court Rejects Netflix’s Challenge to Poaching Injunction

In the latest blow against Netflix’s aggressive recruiting practices, a California appellate court has affirmed a trial court’s injunction against Netflix and in favor of Twentieth Century Fox Film Corporation (“Fox”), thus permanently barring the streaming giant from poaching Fox executives by inducing them to breach their fixed-term employment contracts.

Netflix challenged the injunction, which was issued two years ago under California’s Unfair Competition Law (“UCL”), on two grounds. Netflix argued that there are triable issues of fact as to whether: (1) Fox had suffered damages; and (2) Fox’s employment contracts were void as against public policy. The Court of Appeal rejected both arguments, finding that the extent of damages to Fox was not relevant to its UCL claim. The Court also rejected Netflix’s public policy arguments, noting that there is well-settled law that fixed-term contracts are beneficial to both employers and employees and that, in any event, the challenged contractual provisions can be severed, even if they are in any sense unenforceable or unlawful.

The Court of Appeal also rejected Netflix’s challenges to the trial court’s permanent injunction, which barred Netflix from soliciting employees who are subject to fixed-term employment contracts with Fox or inducing such employees to breach their fixed-term employment contracts. Specifically, the Court rejected the argument that the injunction was vague or overbroad because Netflix had failed to explain the basis for the objection at the summary judgment hearing, despite having been given ample opportunity to do so. The Court also rejected Netflix’s argument that the injunction resulted in specific performance of personal services contracts, pointing out that the injunction only applied to Netflix’s tortious conduct—and did not bind any current or former Fox executives.

This decision follows a similar ruling late last year, when a trial court ruled in favor of our client Viacom in its anti-poaching lawsuit against Netflix.

A holding the other way for Netflix could have upended the way California employers solicit and retain employees, especially in the entertainment industry, where fixed-term employment agreements are relatively commonplace. Although the recent Court of Appeal decision is unpublished, it presumably sends a strong message to those who would poach the employees of a competitor who are subject to fixed-term employment agreements.

Article By Anthony J Oncidi, Philippe A. Lebel, and Dixie M. Morrison of Proskauer Rose LLP

For more labor and employment legal news, click here to visit the National Law Review.

© 2021 Proskauer Rose LLP.

SCOTUS Shelves Request to Review 11th Circuit Dark Tower Decision, Ending Copyright Saga

The Supreme Court’s refusal to review the Eleventh Circuit’s decision in DuBay v. King marks an end to a 4-year copyright battle concerning the lead character of Stephen King’s acclaimed series, The Dark Tower.  The Eleventh Circuit’s decision affirmed that the King’s anti-hero, Roland Deschain, is not substantially similar to William DuBay’s The Rook comic book character, Restin Dane. The decision illustrates the complexity of literary copyright infringement disputes, where a claim is brought based on a mix of original and stock character elements.

In 2017 William DuBay’s heir, Benjamin DuBay, sued novelist Stephen King, Marvel Entertainment, Sony Entertainment, and others for various counts of copyright infringement, alleging that King copied DuBay’s artistic expression based on purported similarity between lead characters of The Rook (Restin Dane) and The Dark Tower (Roland Deschain). The district court granted summary judgment to King, determining (1) that any similarities between the characters comprise unprotectable general ideas and scènes à faire elements; and (2) that the protectable original character elements in dispute are different, such that “no reasonable jury…could find the works substantially similar.” DuBay appealed.

The principal issue on appeal was whether the district court erred in assessing substantial similarity.  DuBay argued that the characters were substantially similar based on several shared characteristics, including: (1) similar names; (2) interaction with time-travel related towers; (3) having a bird as a companion; (4) having knightly characteristics; (5) wearing Western-style clothing; (6) surviving a fictionalized interpretation of The Alamo; (7) the use of knives; and (8) traveling back in time to save a young boy who becomes a gunslinger. DuBay also argued that the unique combination of these elements made Dane a distinctive character, and that Deschain is a copy of DuBay’s artistic expression in that character.

The Eleventh Circuit addressed DuBay’s contentions in two parts.

First, the court assessed whether each of the claimed character elements merit copyright protection. The court affirmed the district court’s holding that “character names do not merit copyright protection,” since mere words and short phrases cannot be protected under copyright law.  The court reiterated that only original elements of a copyrighted work can be afforded protection, and that certain claimed elements (i.e., “knightly heritage,” time travel to “different times and parallel worlds,” “western attire,” “fictionalized Alamo histories,” and “knife wielding”) are merely general ideas or scènes à faire that are “too general to merit copyright protection.”  The court then reviewed the remaining elements to determine whether the shared characteristics rendered the characters substantially similar.  Although both characters may be broadly similar in having bird companions, a relationship to towers and tower imagery, and past time travel experiences involving the rescue of a young boy, the court found that the depiction of these elements was different in each work.  For example, whereas Dane lives in and travels via tower shaped structures shaped like the namesake chess piece, Deschain embarks on an endless mission to find an elusive Gothic tower that connects parallel worlds and time periods.  Because the portrayals of each original element are distinguishable, the court determined that no reasonable jury could have concluded that the works were similar.

Second, the court examined whether the characters are substantially similar based on each character’s combination of the claimed elements (or the “look and feel” of the characters).  The Court recognized of the potential dangers of comparing works based on individual similarities alone because an original combination of unoriginal elements can potentially sustain a claim of copyright infringement.  However, the court found that any similarities of combined elements were “superficial” at best, and that the “look and feel” analysis actually hurt, rather than helped, DuBay’s case by highlighting differences in expression of shared original character elements.

Takeaway:

The Supreme Court’s refusal to hear Dubay reinforces the basic tenet of copyright law that general ideas or scènes à faire cannot be protected by copyright.  It also reminds litigants that although a combination of original and non-original elements can be protected under copyright law, broad similarities are usually insufficient to sustain a copyright infringement claim.

The case is DuBay v. King, 844 Fed. Appx. 257 (11thCir. 2019), cert. denied, 142 S. Ct. 490 (2021).

Article By Spencer K. Beall and Margaret A. Esquenet of Finnegan

For more intellectual property legal news, click here to visit the National Law Review.

© 2021 Finnegan, Henderson, Farabow, Garrett & Dunner, LLP

Ohio Votes to Legalize Sports Betting

Ohio lawmakers have reached an agreement that will legalize sports betting for those 21 and older. House Bill 29, which was passed by the Ohio House of Representatives and Senate on December 8 and is expected to be signed into law by Governor DeWine in the coming days, will allow licensed gaming operations to begin accepting wagers as soon as April 1, 2022.

Since the Supreme Court of the United States struck down federal law prohibiting state-sponsored sports betting in 2018, 33 states and Washington D.C. have passed legislation establishing regulated markets for wagering on sports. Ohio now becomes the 34th as it hopes to curb the flow of its residents’ entertainment and tourism dollars into neighboring Michigan, Pennsylvania, Indiana and West Virginia, all of whom have already legalized sports betting.

Oversight. The Ohio Casino Control Commission (“OCCC”) will be responsible for regulating and monitoring all sports gambling activity in the state. Once the bill is signed into law, the OCCC is required to establish a licensing process, consumer protections, advertising guidelines, and financial requirements for licensees. As an enforcement agency, it will also be given the authority to create other administrative rules it deems necessary to carry out its oversight duties.

Licenses. The OCCC will being accepting license applications on January 1, 2022 and can begin issuing a limited number of licenses on April 1, 2022. The law provides guidance as to how the OCCC will evaluate applicants, and establishes three classes of licenses: (1) Type A licenses for casinos, racinos and sportsbooks operating online and via mobile app; (2) Type B licenses for brick-and-mortar sportsbooks, which will be distributed throughout the state based on county population; and (3) Type C licenses for betting terminals to be placed in restaurants, bars and the like that possess D-1, D-2, or D-5 liquor permits.

Taxes.  A 10% tax will be placed on the new industry’s revenues. Combined with the fees and fines collected by the OCCC, most of this money will be earmarked for distribution by the Ohio General Assembly to public and nonpublic K-12 education programs and a state-sponsored Problem Sports Gaming and Addiction Fund. The bill also creates certain tax incentives for licensed operators beginning in 2027.

Be Ready. Businesses affected by legalization, whether pursuing a license, contracting with a license-holder or being indirectly impacted, need to stay vigilant as Ohio’s sports betting regulatory framework develops. From financial reporting to employment practices, failure to understand and implement processes to comply with the forthcoming regulations could result in significant fines or even criminal penalties.

©2021 Roetzel & Andress

In the Coming ‘Metaverse’, There May Be Excitement but There Certainly Will Be Legal Issues

The concept of the “metaverse” has garnered much press coverage of late, addressing such topics as the new appetite for metaverse investment opportunities, a recent virtual land boom, or just the promise of it all, where “crypto, gaming and capitalism collide.”  The term “metaverse,” which comes from Neal Stephenson’s 1992 science fiction novel “Snow Crash,” is generally used to refer to the development of virtual reality (VR) and augmented reality (AR) technologies, featuring a mashup of massive multiplayer gaming, virtual worlds, virtual workspaces, and remote education to create a decentralized wonderland and collaborative space. The grand concept is that the metaverse will be the next iteration of the mobile internet and a major part of both digital and real life.

Don’t feel like going out tonight in the real world? Why not stay “in” and catch a show or meet people/avatars/smart bots in the metaverse?

As currently conceived, the metaverse, “Web 3.0,” would feature a synchronous environment giving users a seamless experience across different realms, even if such discrete areas of the virtual world are operated by different developers. It would boast its own economy where users and their avatars interact socially and use digital assets based in both virtual and actual reality, a place where commerce would presumably be heavily based in decentralized finance, DeFi. No single company or platform would operate the metaverse, but rather, it would be administered by many entities in a decentralized manner (presumably on some open source metaverse OS) and work across multiple computing platforms. At the outset, the metaverse would look like a virtual world featuring enhanced experiences interfaced via VR headsets, mobile devices, gaming consoles and haptic gear that makes you “feel” virtual things. Later, the contours of the metaverse would be shaped by user preferences, monetary opportunities and incremental innovations by developers building on what came before.

In short, the vision is that multiple companies, developers and creators will come together to create one metaverse (as opposed to proprietary, closed platforms) and have it evolve into an embodied mobile internet, one that is open and interoperable and would include many facets of life (i.e., work, social interactions, entertainment) in one hybrid space.

In order for the metaverse to become a reality, that is, successfully link current gaming and communications platforms with other new technologies into a massive new online destination – many obstacles will have to be overcome, even beyond the hardware, software and integration issues. The legal issues stand out, front and center. Indeed, the concept of the metaverse presents a law school final exam’s worth of legal questions to sort out.  Meanwhile, we are still trying to resolve the myriad of legal issues presented by “Web 2.0,” the Internet we know it today. Adding the metaverse to the picture will certainly make things even more complicated.

At the heart of it is the question of what legal underpinnings we need for the metaverse infrastructure – an infrastructure that will allow disparate developers and studios, e-commerce marketplaces, platforms and service providers to all coexist within one virtual world.  To make it even more interesting, it is envisioned to be an interoperable, seamless experience for shoppers, gamers, social media users or just curious internet-goers armed with wallets full of crypto to spend and virtual assets to flaunt.  Currently, we have some well-established web platforms that are closed digital communities and some emerging ones that are open, each with varying business models that will have to be adapted, in some way, to the metaverse. Simply put, the greater the immersive experience and features and interactions, the more complex the related legal issues will be.

Contemplating the metaverse, these are just a few of the legal issues that come to mind:

  • Personal Data, Privacy and Cybersecurity – Privacy and data security lawyers are already challenged with addressing the global concerns presented by varying international approaches to privacy and growing threats to data security. If the metaverse fulfills the hype and develops into a 3D web-based hub for our day-to-day lives, the volume of data that will be collected will be exponentially greater than the reams of data already collected, and the threats to that data will expand as well. Questions to consider will include:
    • Data and privacy – What’s collected? How sensitive is it? Who owns or controls it? The sharing of data will be the cornerstone of a seamless, interoperable environment where users and their digital personas and assets will be usable and tradeable across the different arenas of the metaverse.  How will the collection, sharing and use of such data be regulated?  What laws will govern the collection of data across the metaverse? The laws of a particular state?  Applicable federal privacy laws? The GDPR or other international regulations? Will there be a single overarching “privacy policy” governing the metaverse under a user and merchant agreement, or will there be varying policies depending on which realm of the metaverse you are in? Could some developers create a more “privacy-focused” experience or would the personal data of avatars necessarily flow freely in every realm? How will children’s privacy be handled and will there be “roped off,” adults-only spaces that require further authentication to enter? Will the concepts that we talk about today – “personal information” or “personally identifiable information” – carry over to a world where the scope of available information expands exponentially as activities are tracked across the metaverse?
    • Cybersecurity: How will cybersecurity be managed in the metaverse? What requirements will apply with respect to keeping data secure? How will regulation or site policies evolve to address deep fakes, avatar impersonation, trolling, stolen biometric data, digital wallet hacks and all of the other cyberthreats that we already face today and are likely to be exacerbated in the metaverse? What laws will apply and how will the various players collaborate in addressing this issue?
  • Technology Infrastructure: The metaverse will be a robust computing-intensive experience, highlighting the importance of strong contractual agreements concerning cloud computing, IoT, web hosting, and APIs, as well as software licenses and hardware agreements, and technology service agreements with developers, providers and platform operators involved in the metaverse stack. Performance commitments and service levels will take on heightened importance in light of the real-time interactions that users will expect. What is a meaningful remedy for a service level failure when the metaverse (or a part of the metaverse) freezes? A credit or other traditional remedy?  Lawyers and technologists will have to think creatively to find appropriate and practical approaches to this issue.  And while SaaS and other “as a service” arrangements will grow in importance, perhaps the entire process will spawn MaaS, or “Metaverse as a Service.”
  • Open Source – Open source, already ubiquitous, promises to play a huge role in metaverse development by allowing developers to improve on what has come before. Whether or not the obligations of common open source licenses will be triggered will depend on the technical details of implementation. It is also possible that new open source licenses will be created to contemplate development for the metaverse.
  • Quantum Computing – Quantum computing has dramatically increased the capabilities of computers and is likely to continue to do over the coming years. It will certainly be one of the technologies deployed to provide the computing speed to allow the metaverse to function. However, with the awesome power of quantum computing comes threats to certain legacy protections we use today. Passwords and traditional security protocols may be meaningless (requiring the development of post-quantum cryptography that is secure against both quantum and traditional computers). With raw, unchecked quantum computing power, the metaverse may be subject to manipulation and misuse. Regulation of quantum computing, as applied to the metaverse and elsewhere, may be needed.
  • Antitrust: Collaboration is a key to the success of the metaverse, as it is, by definition, a multi-tenant environment. Of course collaboration amongst competitors may invoke antitrust concerns. Also, to the extent that larger technology companies may be perceived as leveraging their position to assert unfair control in any virtual world, there may be additional concerns.
  • Intellectual Property Issues: A host of IP issues will certainly arise, including infringement, licensing (and breaches thereof), IP protection and anti-piracy efforts, patent issues, joint ownership concerns, safe harbors, potential formation of patent cross-licensing organizations (which also may invoke antitrust concerns), trademark and advertising issues, and entertaining new brand licensing opportunities. The scope of content and technology licenses will have to be delicately negotiated with forethought to the potential breadth of the metaverse (e.g., it’s easy to limit a licensee’s rights based on territory, for example, but what about for a virtual world with no borders or some borders that haven’t been drawn yet?). Rightsholders must also determine their particular tolerance level for unauthorized digital goods or creations. One can envision a need for a DMCA-like safe harbor and takedown process for the metaverse. Also, akin to the litigation that sprouted from the use of athletes’ or celebrities’ likenesses (and their tattoos) in videogames, it’s likely that IP issues and rights of publicity disputes will go way up as people’s virtual avatars take on commercial value in ways that their real human selves never did.
  • Content Moderation. Section 230 of the Communications Decency Act (CDA) has been the target of bipartisan criticism for several years now, yet it remains in effect despite its application in some distasteful ways. How will the CDA be applied to the metaverse, where the exchange of third party content is likely to be even more robust than what we see today on social media?  How will “bad actors” be treated, and what does an account termination look like in the metaverse? Much like the legal issues surrounding offensive content present on today’s social media platforms, and barring a change in the law, the same kinds of issues surrounding user-generated content will persist and the same defenses under Section 230 of the Communications Decency Act will be raised.
  • Blockchain, DAOs, Smart Contract and Digital Assets: Since the metaverse is planned as a single forum with disparate operators and users, the use of a blockchain (or blockchains) would seem to be one solution to act as a trusted, immutable ledger of virtual goods, in-world currencies and identity authentication, particularly when interactions may be somewhat anonymous or between individuals who may or may not trust each other and in the absence of a centralized clearinghouse or administrator for transactions. The use of smart contracts may be pervasive in the metaverse.  Investors or developers may also decide that DAOs (decentralized autonomous organizations) can be useful to crowdsource and fund opportunities within that environment as well.  Overall, a decentralized metaverse with its own discrete economy would feature the creation, sale and holding of sovereign digital assets (and their free use, display and exchange using blockchain-based payment networks within the metaverse). This would presumably give NFTs a role beyond mere digital collectibles and investment opportunities as well as a role for other forms of digital currency (e.g., cryptocurrency, utility tokens, stablecoins, e-money, virtual “in game” money as found in some videogames, or a system of micropayments for virtual goods, services or experiences).  How else will our avatars be able to build a new virtual wardrobe for what is to come?

With this shift to blockchain-based economic structures comes the potential regulatory issues behind digital currencies. How will securities laws view digital assets that retain and form value in the metaverse?  Also, as in life today, visitors to the metaverse must be wary of digital currency schemes and meme coin scams, with regulators not too far behind policing the fraudsters and unlawful actors that will seek opportunities in the metaverse. While regulators and lawmakers are struggling to keep up with the current crop of issues, and despite any progress they may make in that regard, many open issues will remain and new issues will be of concern as digital tokens and currency (and the contracts underlying them) take on new relevance in a virtual world.

Big ideas are always exciting. Watching the metaverse come together is no different, particularly as it all is happening alongside additional innovations surrounding the web, blockchain and cryptocurrency (and, more than likely, updated laws and regulations). However, it’s still early. And we’ll have to see if the current vision of the metaverse will translate into long-term, concrete commercial and civic-minded opportunities for businesses, service providers, developers and individual artists and creators.  Ultimately, these parties will need to sort through many legal issues, both novel and commonplace, before creating and participating in a new virtual world concept that goes beyond the massive multi-user videogame platforms and virtual worlds we have today.

Article By Jeffrey D. Neuburger of Proskauer Rose LLP. Co-authored by  Jonathan Mollod.

For more legal news regarding data privacy and cybersecurity, click here to visit the National Law Review.

© 2021 Proskauer Rose LLP.

Multi-Level Marketing Gets Multi-Level Attention

Multi-level marketing has touched us all – whether it be purchasing beauty products, essential oils, or health supplements from a friend through social media, or receiving an invitation to join a team of seemingly successful people working their “side hustle.”  But multi-level marketing is now getting some additional multi-level attention, both in the media and in the court room.

With interest in documentaries on the rise throughout the pandemic, Amazon recently delivered with its four-part docu-series “LuLaRich.”  It follows the multi-level marketing company, LuLaRoe, which is known for its colorfully patterned clothing, messages of empowering women, and nearly $2 billion in purported sales in a single year.  But the docu-series also offers a glimpse at the dividing line between a multi-level marketing platform and a pyramid scheme, with the latter running afoul of the law.

Throughout its short existence, LuLaRoe has been no stranger to litigation.  Several class actions have been filed against it, including one with allegations that LuLaRoe’s leggings ripped as easily as wet toilet paper.  But most notable is a recent class action that was certified just last month by a Federal Court in Alaska. See, e.g., Katie Van et al. v. LLR Inc. dba LuLaRoe et al., No. 3:18-cv-00197, in the United States District Court for the District of Alaska.  The claims in Van allege that LuLaRoe charged sales tax on purchases to customers located in tax-free jurisdictions.  This was, allegedly, the result of a customized point-of-sale system that did not allow sales tax to be assessed based on the location to where the “retailer” (sales person) shipped the merchandise.  LuLaRoe addressed this by creating a “toggle switch” that allowed retailers to “turn off” the automatic tax charges and charge a different amount, including 0%.  However, some retailers used the toggle switch to override the collection of sales taxes on taxable transactions while others did not use the toggle switch to override sales taxes on transactions that were not taxable.  When LuLaRoe became aware of this, it allegedly disabled the toggle switch and asked retailers to leave the system’s sales tax box “checked,” while LuLaRoe developed a system that would compute and collect sales tax based on the address where the product was purchased and received.  The outcome: consumers in jurisdictions without sales tax (or no sales tax on clothing) were improperly billed for sales tax on their purchases, based on the taxes imposed by the retailer’s location, rather than the consumer’s location.  The certified class claim alleges LuLaRoe engaged in an unfair trade practice with the imposition of this non-existent sales tax.  And, while attempts at similar class actions against LuLaRoe have been made in the past, this class, with more than 10,000 potential class members, has now been certified.

With so many sales happening through social media controlled by individual retailers, multi-level marketing entities must address unique challenges, including the calculation and imposition of sales tax, especially when customers are located in different states (or even different countries) than their sales person, as was the case in Van.  Having the requisite resources – whether that be through staffing or usable technology and software – can be challenging when trying to keep up with the quick growth that often comes with multi-level marketing.  Additionally, a multi-level marketing entity’s approach to organizational structure, recruiting, compensation, and manufacturing warrants detailed attention and familiarity with state and federal law.

LuLaRoe’s story, while colorful and seemingly worthy of a hit docu-series, highlights the need to carefully navigate legal issues when operating or becoming involved with a multi-level marketing entity.  The potential for legal snags may be hidden in the seams.  And it’s never worth becoming too big for your (brightly patterned) britches when it comes to the law.

Copyright © 2021, Hunton Andrews Kurth LLP. All Rights Reserved.
For more class actions, visit the NLR Litigation section.

Game On: Are New Opportunities Opening Up for Brands to Use Student Athletes’ Name, Image and Likeness Rights?

The debate over the extent to which student athletes should be compensated is hardly new, but antitrust challenges brought against the NCAA, and new state legislation allowing athletes to receive compensation for the use of their name, image or likeness (commonly abbreviated as “NIL”) has shone a fresh light on the issue. This state legislation, along with a call for national action, may drastically change the world of collegiate athletics as we know it. Will this change be for the better or worse? Views differ, and time will tell.

New legislation in several states, such as the Fair Pay to Play Act in California, will not limit the academic institutions’ ability to use an athlete’s name, image and likeness to generate revenue, marketing and sponsorship deals, but it will allow for sponsors and brands to contract directly with a student athlete for deals concerning their NIL. These laws are contrary to current NCAA rules.

Pre-Game Background and the O’Bannon Decision

The NCAA is the governing body behind college athletics. Although it is a nonprofit organization, college sports is big business, and the NCAA’s massive television contracts, global media power, and strict policies have a direct effect on the sports industry and the student athletes that are its lifeblood. Significant revenues are generated in connection with college sports, and, for the most part, student athletes do not share in the wealth.

Historically, the NCAA has ensured that student athletes (also known as “amateur athletes”) were prohibited from receiving pay for their NIL rights through Article 12 of the NCAA Bylaws (the Bylaws), which provides that “only an amateur student athlete is eligible for intercollegiate participation in a particular sport” (emphasis added).1 While the NCAA does not explicitly define “amateurism” in the Bylaws, it does define a “professional athlete” as “one who receives any kind of payment, directly or indirectly, for athletics participation except as permitted by the governing legislation of the Association.”2 Student athletes lose eligibility if they, among other things, get an agent, enter a professional draft after enrollment, or accept pay in any form in their sport.3 The requirement that student athletes maintain their “amateur status” has created a hurdle for student athletes with any hope of seeing a cut of profits from use of their NIL.

In 2008, UCLA basketball standout Edward O’Bannon saw himself in avatar form in a videogame.4 The character looked like him, played for the same team, and wore his jersey number. He had not consented to this use of his NIL and received no compensation for it. In O’Bannon v. NCAA, O’Bannon was drafted as the lead plaintiff in a federal lawsuit against the NCAA.5 He claimed that the NCAA’s restriction on Division I Men’s basketball and football players’ ability to receive pay for use of their NIL was an unlawful restraint on trade prohibited by the Sherman Antitrust Act.6

The trial court agreed, holding that NCAA rules are not immune from the antitrust laws and that, when challenged, they must be tested by the Rule of Reason, a three-step, burden-shifting process applied in antitrust challenges, where the court considers (1) the anti-competitive effects of the alleged restraint in a given market, (2) the pro-competitive effects, and (3) whether less restrictive alternatives could achieve the same legitimate objectives.7 The court held that the NCAA prohibition on paying athletes for NIL use was anti-competitive in the relevant market; that maintaining “amateurism” in college sports was a legitimate pro-competitive objective because it increased consumer demand for college sports and integrated academics and athletics; and that the plaintiffs had shown less restrictive alternatives for achieving that objective, namely, allowing schools

  1. to provide scholarships to athletes up to the full “cost of attendance” and
  2. to pay cash compensation of up to $5,000 per year to be held in trust until after graduation.8 The US Court of Appeals for the Ninth Circuit largely agreed and affirmed on appeal, though it limited the injunction only to the first of the proffered alternatives. As to the $5,000 per year trust payment, the appellate court determined that allowing a student to be a “poorly-paid professional athlete” would not be virtually as effective as retaining full amateur (non-professional) status.9 Thus, the court held that a rule prohibiting cash payments unrelated to education was not an antitrust violation.10 This case was perhaps a win for student athletes, but it can hardly be called an upset — compensation for NIL use could be capped at whatever remained for the cost of attending the school.

Student Athletes Get a Rematch

Since August 2015, the Bylaws have allowed many exclusions to their no-pay rules, authorizing a wide range of above-cost-of-attendance payments, both related and unrelated to education, including athletic participation awards, disbursements for tutoring, study abroad expenses, car repair, insurance policies, mandatory medical care, per diem charges, and many other expenses.11 But, the general prohibition on receiving pay remains. In In re NCAA, three classes of athletes comprising FBS football players, Division I men basketball players, and Division I women basketball players, again, challenged the NCAA’s amateurism rules as unlawful restraints of trade.12 Their argument was similar in nature to O’Bannon, but the relaxed rules on permissible compensation allowed the plaintiffs to target additional gaps in the NCAA’s pro-competitive defense, more broadly attacking the interwoven set of NCAA rules that restrict the amount of compensation students may receive in exchange for their athletic-related services.

The district court entered a permanent injunction, implementing less restrictive alternatives to the NCAA rules, namely (1) allowing the NCAA to continue limits on grants in aid at no less than the cost of attendance, (2) allowing the NCAA to continue to limit compensation and benefits unrelated to education, and (3) enjoining limits on most compensation and benefits related to education but allowing certain limitations.13 The NCAA appealed.

On appeal, the Ninth Circuit emphasized the district court’s conclusion that “not paid” and “amateurism” are not synonymous, as shown, in part, by the numerous carve-outs allowing money to go to student athletes unrelated to education expenses.14 The Ninth Circuit affirmed and reiterated that the crux of the problem comes from the actual price-fixing of student athlete compensation.15 The NCAA echoed its pro-competitive argument from O’Bannon, but the Ninth Circuit found that only some of the challenged rules were pro-competitive. Preventing the receipt of “unlimited cash payments akin to professional salaries” was justified, but rules restricting “non-cash education-related benefits” did not foster or preserve demand for college athletics.16

The relaxation of payment to student athletes since O’Bannon affirmed that “non-education-related cash payments in excess of cost of attendance are no longer a ‘quantum leap’ from current NCAA practice,” as they were once described in O’Bannon (emphasis added).17 The Ninth Circuit affirmed, holding that “NCAA limits on education-related benefits do not ‘play by the Sherman Act’s rules.’”18 The Supreme Court granted certiorari on December 16, 2020, and arguments are currently scheduled for March 31.

Full Court Press: The Rulebook is Changing

In the wake of O’Bannon and In re NCAA, states around the country quickly began passing legislation allowing athletes to receive payment for their NIL rights. California’s Fair Pay to Play Act (the California FPPA) was the first of its kind and paved the way for other states to follow suit. The California FPPA blatantly went against the rules of the NCAA. Effective January 1, 2023, the California FPPA not only allows athletes to receive compensation for NIL rights, it also bars the NCAA from retaliating against players or teams for pursuing such compensation. Florida, Colorado, Nebraska, and New Jersey have passed similar legislation, with Florida’s new law on Intercollegiate Athlete Compensation and Rights (SB 646) taking effect July 1, 2021.19 All states so far have included prohibitions against a student athlete entering into a contract involving NIL rights where a provision of that contract would conflict with a provision in the team’s contract.20 For example, if UCLA has an endorsement deal with Under Armour, a player on that team may not enter into a conflicting contract with Nike to use his likeness in advertising.

With multiple state laws poised to go into effect and grant NIL rights to student athletes, the federal government and the NCAA are now considering a uniform body of laws regulating NIL rights compensation. In addition to benefiting college athletes, uniform regulations would benefit the NCAA, allowing it to regulate compensation for NIL rights in a uniform fashion, rather than on a state-by-state basis. In turn, the NCAA could help maintain competitive fairness in college athletics. Companies would have the opportunity to sponsor players across the country — not just in those states that passed NIL rights legislation — allowing them to maximize profits generated through student-athlete endorsement deals. There is, of course, another side: if student athletes are poised to see more revenue, that money has to come from somewhere. There is a risk that the line between college and professional athletics is further blurred.

The NCAA has called on Congress to pass federal legislation regulating NIL compensation and has even presented Congress with its own version of legislation: The Intercollegiate Amateur Sports Act of 2020. Although the NCAA’s proposal was not introduced, multiple bills have been. There’s US Senator Roger Wicker’s Collegiate Athlete and Compensatory Rights Act, US Senator Marco Rubio’s Fairness in Collegiate Athletics Act, US Representatives Anthony Gonzalez’s and Emanuel Cleaver’s Student Athlete Level Playing Field Act, and US Senators Cory Booker’s and Richard Blumenthal’s College Athletes Bill of Rights, all of which were introduced during the last session of Congress. One issue that differs in the various proposals is whether a new law would protect the NCAA from future antitrust challenges. All of the proposals would permit student athletes the right to earn compensation for use of their NIL.

Power Forward

Thus far, the current session of Congress has not taken up any of the bills introduced last session or introduced any new bills concerning NIL rights for student athletes. And, the NCAA, despite voting unanimously last year to permit student athletes to benefit from the use of the NIL and directing

updates to the Bylaws, announced on January 11 that it was tabling the proposal, citing “external factors, including recent correspondence with the U.S. Department of Justice.”21 Electronic Arts (EA), a videogame producer who was involved in the O’Bannon case but settled and has refrained from releasing any college football videogames since 2013, just announced that it plans to bring the game back, but it will be different. Pursuant to a deal reached with the NCAA’s licensing company, the game will feature real teams, uniforms and logos, but it will not include any player-specific NIL.22

But Florida’s law is set to go into effect this summer, ahead of the start of the next college football and basketball seasons. While the NCAA and Congress may continue to struggle with the task of compensating student athletes while preserving the amateur nature of college athletics, it is reasonable to expect that some form of NIL rights compensation regulation is coming on a larger scale. With athletes able to receive NIL rights compensation, brands should be prepared for new endorsements or sponsorship deals. The world of college sports remains an interesting area to watch.

This article is based, in large part, on an article written by Jennifer Vliet and Quincy Wolff during their time participating in Katten’s 2020 Summer Associate Program. The project was supervised by Chicago Intellectual Property partner Jeffrey Wakolbinger and New York Litigation associate Zachary Beal. The content has been updated to reflect ongoing developments. Jennifer and Quincy will be joining Katten as new associates upon their graduation from law school.

(1) NCAA Bylaws, Article 12.01.1 (2020) available at https://www.ncaapublications.com/productdownloads/D110.pdf.

(2) Id. § 12.02.11

(3) Id. § 12.1.2.

(4) O’Bannon v. Nat’l Collegiate Athletic Ass’n, 802 F.3d 1049, 1055 (9th Cir. 2015).

(5) Id.

(6) Id.

(7) Id. at 1057, 1070.

(8) Id. at 1052–53.

(9) Id. at 1076–77.

(10) Id. at 1079.

(11) In re Nat’l Collegiate Athletic Ass’n Athletic Grant-in-Aid Cap Antitrust Litig. 958 F.3d 1239, 1244–45 (9th Cir. 2020).

(12) Id. at 1247.

(13) Id. at 1251–52.

(14) Id at 1258–59.

(15) Id at 1254.

(16) Id. at 1257–58.

(17) Id. at 1255.

(18) Id at 1265–66 (quoting O’Bannon, 802 F.3d at 1079).

(19) Fla. Stat. § 1006.74.

(20) See, e.g., Id. § 1006.74(2)(h); Cal. Educ. Code § 67456(e)(1).

(21) See Division 1 Council tables proposals on name, image, likeness and transfers, Jan. 11, 2021, available at https:// www.ncaa.org/about/resources/media-center/news/ division-i-council-tables-proposals-name-image-likeness-and-transfers.

(22) Sarah E. Needleman & Laine Higgins, EA to Return to College Football Arena, Wall St. J., Feb. 2, 2021, at B8

©2020 Katten Muchin Rosenman LLP
For more, visit the NLR Entertainment, Art & Sports section.

Esports: What We Should Expect in 2021

The esports ecosystem experienced transcendental growth in 2020 due at least in part to the Covid-19 pandemic, and is poised to act as a spring board for even further growth this year. With traditional sports largely sidelined last year, stadiums closed to fans, and people starving for personal interaction, gamers and spectators alike have turned to esports in record numbers.  According to Newzoo, a prominent esports analytics company, 22% of the internet population participates in esports, and global gaming revenue is expected to hit $159 billion by the end of 2020.[1] Streamers and streaming platforms have exploded in popularity, allowing streamers to earn income from broadcasting their live gameplay, interact with fans and engage with other players.

Building on the tremendous growth in 2020, here are some trends that some prominent members of the esports community are forecasting for 2021.

Significant Shift in Brand Advertising.

Enthusiast Gaming, a North American gaming platform went entirely virtual in 2020 and sponsored a four-day free EGLX tournament in November, 2020 that was watched by over 12 million people around the world.[2]  SpiderTech, and G Fuel were among the key sponsors of the event, which featured musical performances by Zhu and Goldlink and virtual appearances by athletes Richard Sherman and Darius Slay.[3]  With the enormous success of events such as EGLX, and esports audiences continuing to skyrocket, Enthusiast Gaming forecasts that mainstream brands will significantly increase their advertising spend to sponsor esports tournaments and events as a necessary means to engage with that tough-to-reach Gen-Z audience.[4]

Convergence of esports with Mainstream sports.

Other industry experts have predicted that the world will see also greater convergence between traditional sports and esports, with professional football teams launching their own esports teams.[5]  For example, in December 2020, the Philadelphia Eagles named Esports Entertainment Group (“EEG”) as their official esports tournament provider.[6]  As part of a multi-year deal, EEG will operate bi-annual Madden esports tournaments for the Eagles.[7]  EEG will collaborate with Eagles players to create videos to promote the tournaments and will feature Eagles players in increased digital marketing efforts.  First-movers such as the Philadelphia Eagles are likely to spawn increasing connectiveness between esports and traditional sports teams.

Growth of Esports in Popular Culture.

On April 24, 2020, more than 12 million people attended rapper Travis Scott’s virtual concert in Fortnite.[8]  Last year, FaZe Clan, one of the world’s most popular and successful professional gaming teams, entered the film industry and formed FaZe Studios, which plans to create feature films and a scripted television series.[9]  In June, 2020, FaZe Clan also announced its co-ownership of CTRL, a food supplement company.[10]  Earlier this year, the NBA sponsored the first-ever players-only esports tournament in which sixteen NBA stars competed in an NBA2K20 tournament on Xbox, won by Devin Booker, who earned $100,000 to donate to the charity of his choice.[11]  Based on the success of events such as these, 2021 is likely going to experience a surge in the integration of esports with popular culture, as the music, apparel and film industries seek to integrate themselves into gaming communities through in-game interactions.[12]

Increased Fragmentation and Evolution.

Other industry experts such as Spiketrap have observed that more and more people are streaming a greater variety and volume of content than ever before.[13]  For example, according to one source, 42% of the U.S. population has live-streamed online content (compared with just 25% in 2017), and live-streaming is expected to be a $70.5 billion industry by 2021.[14]  Spiketrap predicts greater fragmentation in the esports industry created by the explosive growth in the source, variety and content of live-streaming.[15]  Musicians, athletes and other content creators will need to find a way to integrate and leverage live-streamed content with their own to better connect and expand their relationships with fans and spectators.

Increased Participation in the Ecosystem.

Still other industry experts have observed an unprecedented increase in player participation within the esports ecosystem.  Esports One, for example, has witnessed a rampant rise in virtual currency, rankings, badges, skins and image banners, as player-members seek to “flex” their muscles and show off their skill to their friends and fellow competitors.[16]  As esports mature, and more games are supported by more titles, Esports One predicts that there will be more opportunities for sponsorships, integration, and tournament prizes.[17]

In short, as tumultuous and dynamic as 2020 was socially, politically and epistemologically, 2021 promises to be an unprecedented year in the esports world.

FOOTNOTES

[1] https://secure.outsiderclub.com/299076?msclkid=3270be3ec8d81c46bfa7e1de34b4f7d0

[2] https://markets.businessinsider.com/news/stocks/enthusiast-gaming-s-online-gaming-festival-eglx-watched-by-over-12-million-fans-1029837940

[3] Id.

[4] https://www.thegamingeconomy.com/2020/12/07/predictions-2021-esports/

[5] https://www.thegamingeconomy.com/2020/12/07/predictions-2021-esports/

[6] https://www.bignewsnetwork.com/news/267267002/eagles-become-first-nfl-team-with-esports-tournament-provider

[7] https://www.bignewsnetwork.com/news/267267002/eagles-become-first-nfl-team-with-esports-tournament-provider

[8] https://www.cnn.com/2020/04/24/entertainment/travis-scott-fortnite-concert/index.html

[9] https://www.theverge.com/2020/4/28/21239034/faze-clan-studios-film-tv-projects

[10] https://twitter.com/fazeclan/status/1273692097384714240

[11] https://nba.2k.com/2k20/en-US/news/first-ever-nba-2k-players-tournament/

[12] https://www.thegamingeconomy.com/2020/12/07/predictions-2021-esports/

[13] https://www.thegamingeconomy.com/2020/12/07/predictions-2021-esports/

[14] https://livestream.com/blog/62-must-know-stats-live-video-streaming#:-:text=Nielson%27s%20U.S.%20Video%20360%20Report.rise%20from%2025%25%20in%202017

[15] https://www.thegamingeconomy.com/2020/12/07/predictions-2021-esports/

[16] https://www.thegamingeconomy.com/2020/12/07/predictions-2021-esports/

[17] Id.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.
For more, visit the NLR Entertainment, Art & Sports section.

The Show Must Go On: Stimulus Package Provides Relief for Venue Operators

An important aspect of the new stimulus package passed by Congress is Section 324 of the Additional Coronavirus Response and Relief Act entitled “Grants for Shuttered Venue Operators.” Section 324 is intended to provide relief to live Venue Operators and promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theater operators and talent representatives (collectively “Venue Operators”). Incredibly, while the earlier versions of the stimulus package provided for $10 billion in relief for Venue Operators, the final version provided for $15 billion in relief for this group.

Under Section 324, Venue Operators can apply for non-repayable, two-part grants that cover up to 45 percent of a Venue Operator’s 2019 revenue, capped at $10 million in the first round of grants, which is followed by a supplemental grant in spring 2021 that can be valued up to 50 percent of the original grant. The general requirements to qualify for the two-part grants are that the applicant must have been in business on February 29, 2020, and must show 2020 revenue decline by at least 25 percent. Importantly, the funds for the first part of the grant will become available quickly, with priority given to Venue Operators that experienced revenue losses in 2020 in the range of 70 to 90 percent.

For an operator to qualify as a Venue Operator for purposes of relief, the operator must have mixing equipment as well as a public address system and lighting rig. Further, the operator must sell paid tickets or have a cover charge “to attend most performances” so that “artists are paid fairly and do not play for free or solely for tips except fundraisers or similar charitable events.”

Venue Operators that receive grant funds may use the funds for payroll costs, rent obligations, utility payments, mortgage obligations, the payment of principal and interest on debt incurred prior to February 15, 2020, covered worker protection expenditures, payments to independent contractors, and ordinary and necessary business expenses. Any applicant receiving the grant funds will be required to maintain four years of employment records after receiving the funds and three years of all business records.

© 2020 Much Shelist, P.C.
For more, visit the NLR Entertainment, Art & Sports section.

Supreme Court to Weigh in College Sports: The Intersection of Antitrust and “Amateurism”

The Supreme Court announced Wednesday that it would hear arguments in the long-running NCAA dispute over student-athlete compensation, granting and consolidating two cases, National Collegiate Athletic Association v. Alston and American Athletic Conference v. Alston, that seek to overturn a May decision by the U.S. Court of Appeals for the Ninth Circuit. The case will be argued in early 2021, with a decision expected by the end of June. This will be the first time in over 35 years that the Court has heard an antitrust matter involving college athletics.

NCAA v. Board of Regents

In 1984, the Supreme Court, in a 7-2 decision in NCAA v. the Board of Regents, stripped the NCAA of its control over television broadcast rights for college football games. Although the Court held that the NCAA’s broadcast restrictions were in the nature of a per se illegal restraint on trade, the majority explicitly declined to apply a per se rule to the case because “a certain degree of cooperation is necessary if the type of competition that [the NCAA] seek[s] to market is to be preserved.” The Court instead applied the less stringent Rule of Reason to the NCAA’s restrictions because the NCAA needed “ample latitude” to play “a critical role in the maintenance of a revered tradition of amateurism in college sports.” Writing for the majority, Justice Stevens advised future courts that “[it] is reasonable to assume that most of the regulatory controls of the NCAA are justifiable means of fostering competition among amateur athletic teams and therefore procompetitive because they enhance public interest in intercollegiate athletics.” This language has allowed the NCAA for decades to argue for special treatment under antitrust law with regard to any of its bylaws that further amateurism. In his dissent, Justice White was concerned that the majority’s opinion would not further the NCAA’s stated purpose to “keep university athletics from being professionalized to the extent that profit making objectives would overshadow educational objectives.” Some now argue that Justice White’s fears have come to fruition – the NCAA has evolved into a monolith generating billions in revenues on the backs of student-athletes.

O’Bannon v. NCAA

The most recent case before Alston was a class action brought in 2009 by former UCLA basketball player Ed O’Bannon that challenged the NCAA’s use of the images of former student-athletes for commercial purposes. O’Bannon argued that a former student-athlete should be entitled to financial compensation for the NCAA’s commercial use of his or her image, while the NCAA contended that paying its student-athletes would be a violation of its concept of amateurism. In 2014, Judge Claudia Wilken of the U.S. District Court for the Northern District of California found for O’Bannon, holding that the NCAA’s rules and bylaws operate as an unreasonable restraint of trade violating federal antitrust law. In 2015, the Ninth Circuit rejected the NCAA’s arguments based on Board of Regents and affirmed the NCAA’s violation of the Sherman Act. The court stated “we are not bound by Board of Regents to conclude that every NCAA rule that somehow relates to amateurism is automatically valid.” Both sides appealed to the Supreme Court—the NCAA challenged the court’s affirmation that its compensation rules were an unlawful restraint of trade, and O’Bannon challenged the court’s conclusion that preserving amateurism is an important goal and that any compensation athletes might receive had to be related to education. The Supreme Court declined to hear the case.

Alston v. NCAA

The current case was brought by former West Virginia football player Shawne Alston and others. In May of this year, the Ninth Circuit ruled that the NCAA violated Section 1 of the Sherman Antitrust Act when it limited schools from offering certain education-related benefits to student-athletes in Division I basketball and Football Bowl Subdivision football programs. The opinion affirmed an injunction issued by District Judge Claudia Wilken in Alston v. NCAA that would prevent the NCAA from adopting rules that prohibit member schools from limiting the non-cash education-related benefits that can be provided to student-athletes. The case does not focus on the contentious issue of pay for college athletes and concerns only non-cash benefits related to education, such as computers, science equipment, musical instruments, study abroad and post-graduate scholarships, and paid internships. Schools would not be required to provide these types of benefits, and individual conferences may restrict such benefits. The NCAA also still may set limits on compensation that is not education-based. However, that model may change radically next year with the NCAA Board of Governors’ adoption of the Final Report and Recommendations of its Federal and State Legislation Working Group concerning modernization of the NCAA rules applying to student-athletes’ rights to commercialize their name, image and likeness.

In Alston, the NCAA argued that Board of Regents required plaintiffs attacking an NCAA rule promoting amateurism to meet a heavier burden in a Rule of Reason analysis. The Ninth Circuit rejected the NCAA’s arguments, noting that it had previously found the Board of Regents language relied upon by the NCAA to be dicta in its O’Bannon decision. In his concurring opinion, Judge Milan Smith states his concern that “[t]he treatment of Student-Athletes is not the result of free market competition” and instead “is the result of  a cartel of buyers acting in concert to artificially depress the price that sellers could otherwise receive for their services. Our antitrust laws were originally meant to prohibit exactly this sort of distortion.” Judge Smith’s concerns are consistent with the growing weight of academic opinions that the NCAA’s amateurism rules should not enjoy a special exemption from antitrust scrutiny. The amateurism rules, like any other trade association’s rules, should be defensible under antitrust law only if they yield procompetitive benefits and enhance overall consumer welfare. (See, for example, literature published by Case Western Reserve Law Review, Michigan Law Review, Tennessee Law Review, Harvard Journal of Sports and Entertainment Law, Washington and Lee Law Review and The John Marshall Law Review.)

The Supreme Court

After the Supreme Court denied a request from the NCAA to freeze the lower court rulings, the NCAA in October successfully petitioned the Supreme Court to review the Ninth Circuit’s decision. The NCAA argues that the Ninth Circuit’s ruling “will fundamentally transform the century-old institution of NCAA sports, blurring the traditional line between college and professional athletes.” On the other side, players argue that the top athletic teams are operating a system that acts as a classic restraint of trade in violation of Section 1 of the Sherman Act. Without those restraints, they argue that student-athletes would be compensated at a level more commensurate with their value to their universities, conferences, and the NCAA.

The Supreme Court’s decision could fundamentally change the economics and structure of college sports. On the one hand, a decision holding that the NCAA’s amateurism rules violate federal antitrust law could open the door to significant competition between schools for athletes and likely would lead to more benefits for players whose collegiate sports careers allow their schools, conferences and the NCAA to reap billions in television and other revenue. On the other hand, a decision siding with the NCAA could foreclose that type of competition, allowing the NCAA to maintain its restrictions on benefits for the nation’s top student-athletes. The Court’s decision also has implications for how the currently constituted Court views the Rule of Reason mode of antitrust analysis and how that analysis is properly applied to labor markets. We will continue to monitor this important case and will report back after the Supreme Court renders its decision.

© Copyright 2020 Cadwalader, Wickersham & Taft LLP
For more articles on sports, visit the National Law Review Entertainment, Art & Sports section.