Appellate Court Hears MLB/CBC Arguments

[Greg Ambrosius]

This is a story that I wrote for Fantasy Sports Magazine and SI.com that should appear soon. Here's a quick peak for our NFBC users since this ruling will affect all fantasy players:



APPELLATE COURT HEARS MLBAM/CBC ARGUMENTS

BY Greg Ambrosius

ST. LOUIS -- Three appellate court judges took less than an hour yesterday to hear arguments from lawyers representing Major League Baseball and CBC Distribution in the latest fight over who owns the rights to player statistics. Hanging in the balance now is the future of the $1.5 billion-a-year fantasy sports industry.



This two-and-a-half-year legal battle between CBC Distribution (which owns CDM Fantasy Sports) and MLB Advanced Media reached the 8th U.S. Circuit Court of Appeals on Thursday as lawyers representing MLBAM and the Major League Baseball Players Association appealed an earlier decision that went against them. On Aug. 8, 2006, U.S. Magistrate Judge Mary Ann L. Medler strongly sided with CBC Distribution, stating that “players do not have a right of publicity in their names and playing records as used in CBC’s fantasy games.”



The appeal process came to a head yesterday before three judges who were well versed about baseball, fantasy sports and the rights of publicity. They appeared skeptical right from the start that Major League Baseball could control the rights to statistics of well-known players that are immediately available in the public domain.



“Major League Baseball is like a public religion, it’s like a civic religion in the United States, isn’t it?” said U.S. Judge Morris Arnold. “Everybody knows their names, what they look like, what their averages are, they talk about it all the time. This is just part of being an American, isn’t it?”



Virginia Seitz, who represented MLB Advanced Media and the MLB Players Association at the hearing, stated that fantasy games are no different than board games with player identities and that companies like CDM gain an advantage by using those names. She argued that it was important for the leagues to license all fantasy companies that use player names with actual player statistics.



“This is simply taking a player and using him as a game piece in a game where you predict what his performance will be over the course of a season,” Seitz said. “It is much less interesting to predict the crime rates in American cities, apparently, than to have a predictive game that involves Major League Baseball players’ identities. That’s what gives the value to the game and that’s why it’s a commercial use for which players are entitled to license.”



CDM Fantasy Sports was the first MLBPA fantasy game licensee in 1994 and had held a license for a decade before being denied one in 2005. It is a leading fantasy game provider of the $1.5 billion a year fantasy sports industry that also generated millions of dollars a year in licensing revenue for the MLBPA and NFL Players Association. Companies such as ESPN and CBS SportsLine.com reportedly pay millions of dollars a year to those two entities to operate online fantasy leagues. Now the question is whether every fantasy game operator needs to be licensed by the leagues to legally operate.



Judge Medler clearly stated in her Aug. 8, 2006 opinion that fantasy game operators did not need to be licensed and the three appellate court judges had tough rhetoric for Major League Baseball’s claims to those statistics.

“This is about names you say, this is about statistics they say,” said Chief Judge James Loken. “I understand the practicality of the war because the statistics are in the public domain. And it seems to me it’s clearly a use of public information to figure out that if you’re going to have an ongoing fantasy sports league over the life of a real professional sports league -- clearly a collateral market -- you have to have an opening set of statistics and evolving statistics that will allow for competition and trades and so forth. And so where do you get those statistics? Well, you can’t take the 1923 Philadelphia Athletics because that doesn’t evolve over a season. So you take these statistics that are in the public domain. And as I translate your argument into this case, ‘well, we won’t argue with that but don’t you dare put a name next to those statistics.’ Well, of course, that’s ridiculous.”



Loken even questioned whether the leagues would be able to monopolize the fantasy sports market if it gained legal rights to own those statistics. “So you are saying that this collateral market can be monopolized by your clients, the statistics, the public’s statistics can not be marshaled and be used for another kind of game without your clients getting a share of the action.”



Seitz countered that there was no monopolization of the rights and that even though MLBPA licensed 18 fantasy companies in 2005 before MLBAM purchased those rights for $50 million over five years, the league still had six licensees in 2006. But Loken wasn’t buying the argument that turning over those rights that are in the public domain to a single entity would hold to more open competition.



“We’re not on the same wavelength here,” he said to Seitz. “Their game is based on the statistics. You have to be able to track the statistics. Since this is simply tangential to Major League Baseball and success at Major League Baseball, I don’t understand where that success and that identity gives the players -- at least I’m having trouble seeing -- how it gives the players the right to monopolize an entirely separate entertainment industry.



“If your clients have the exclusive rights to license the purveyors of the billion and a half (dollar a year) fantasy sports world, we’re looking at concerted action by owners and players to monopolize a collateral market through conduct that’s not protected by the labor anti-trust exemption.”



CDM attorney Rudy Telscher reiterated to the judges that if MLB won this suit it would give the leagues the right to license as few companies as it wanted, possibly even just one. With hundreds of companies currently providing fantasy games, services and information, Telscher said this is the case that will forever shape the scope of this thriving industry.



“This is the shot,” he said. “And this case should be reached on the merits. If we lose this case, hundreds of companies go out of business. Now if they have these rights, then of course it’s the reality, they go out of business. But the case needs to be judged on its merits.”



While Judge Arnold admitted there was no current debate of monopolization of the fantasy rights, he told Seitz that it still deserved consideration from the court. “There is no technical monopoly issue, but I think in determining whether someone has a property right, the scope of that property right might be influenced by what sort of economic effect a creation of one might have, isn’t that right?” he asked.



Telscher also argued that fantasy games are no different than newspapers that run box scores of game stats with player names every day and gain a financial advantage because of that. The judges seemed to concur on that point, with Judge Loken even reciting Judge Medler’s earlier decision that stated “even if the players have a claimed right of publicity, the First Amendment takes precedence over such a right.”



“People pay for newspapers, so newspapers use these things for commercial advantage and so do you,” Loken said to Telscher. “So there’s no right of publicity here and in any event the First Amendment would trump it if there were.”



Seitz argued that placing names on fantasy games is no different than placing names on coffee cups or posters. Without the player names, the fantasy leagues could not exist. Yet Loken again countered by saying that because the statistics are “out there, your clients don’t have a right to limit its use in the public domain.”



The judges will likely offer a ruling in the next 3-6 months. It will represent the final decision unless one of the parties seeks en banc review from the 8th Circuit or Supreme Court review. En Banc review at the 8th Circuit level means that a panel of nine judges would rehear the issues that the panel of three judges just heard. They would do so if they considered the issues sufficiently important and if there is a split among the three judge panel.



Telscher obviously felt that the decision was correct the first time and he’s hopeful that the Appellate Court saw the facts the same way. “On balance, the questioning suggested that the panel was sympathetic that the fantasy sports industry is merely using publicly available statistics to play a game that entertains millions of Americans,” he said after the hearing. “I believe that they understand this is not a normal rights of publicity endorsement case. I am hopeful that they will therefore find that rights of publicity are

not being violated and that, in any event, First Amendment and Copyright principles would bar any such relief under the right of publicity Missouri common law.”



The fantasy sports industry anxiously awaits the final answer.

[headhunters]

greg- so it goes from 1 to 3 to maybe 9 judges. if we don't get out the legal bug spray in 20 years it will be 81 next for our kids to deal with. geez