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April 30th, 2019
April 2019 Sports Industry News
Here’s what’s happening at the intersection of sports, marketing, and entertainment law as we hit Spring.
AAF = Always About to Fail?
Several start-up sports leagues have been developed over the past year or so in various sports and with respect to American football, a handful already kicked off (including The Alliance of American Football / AAF and Your Call Football), while others are coming soon (The XFL and Pacific Pro League). Unfortunately, just 8 weeks into its inaugural season, the AAF has already gone under – suspending operations on April 2 and filing for bankruptcy on April 17. Although it had well-known founders from the television production and football industries, a respectable broadcast deal with CBS, and respectable game day attendance in some locations, it has been reported that overwhelming costs and the difficulty of obtaining workers compensation insurance caused the league’s downfall. And with failure comes lawsuits. In addition to dozens of claims filed with the bankruptcy trustee (with top creditors including early investor MGM Resorts International, broadcaster CBS, advertising agency Mcgarrybowen, and concessionaire Aramark), former league employees have filed a class action complaint for violations of the Worker Adjustment and Retraining Notification Act (the “WARN” Act), which requires that employers provide their workers with at least 60 days’ notice in the event of a “mass layoff,” and former players have filed a class action suit alleging breach of contract and failure to pay wages.
The AAF’s struggles show that even with highly regarded founders and multiple opportunities for investors, media distributors, and sponsors, developing a successful professional sports league is difficult to do.
Who controls the right to use the term INTER in global soccer? Only well known and historical Italian club Inter Milan or any club seeking to use the shortened form of “international?” That’s the question currently before the US Patent and Trademark Office’s Trademark Trial and Appeal Board, where Major League Soccer and David Beckham-owned club Inter Miami have filed an opposition against Inter Milan’s trademark application for INTER. Arguing that the term is descriptive for soccer clubs and their related goods and services rather than an identifier for a single source, Major League Soccer is attempting to prevent Inter Milan from solely controlling the term INTER. This is a significant proceeding, as club names and nicknames fuel global soccer marketing and licensing.
The NBA has loosened its territorial restrictions for team sponsorships and will now allow teams to sell global marketing rights to two current or new sponsors. The new “International Team Marketing Program” will have a three year test run beginning next season. Although international territories will open up, the 75-mile (or 150-mile, in certain locations) radius limit for teams’ domestic sponsorships will remain in place. Team sponsors outside of the US and Canada will now be able to activate at retail and place non-game team content on the sponsors’ websites and social media pages, which will not only be a benefit to the sponsors but also to NBA teams seeking exposure abroad.
Teaming Up for Gold
LA 2028, the organizing body for the 2028 Summer Olympics in Los Angeles, and NBCUniversal, the exclusive U.S. broadcaster of the Olympics through 2032, announced a joint venture between the two for the sale of media and sponsorships from 2021 through 2028. This is an unprecedented deal: Olympic media and sponsorship sales have traditionally been separated (with the former not including the rights to use the “rings” and other Olympic intellectual property, which only the IOC or USOC can offer in the U.S.). This tie-up has massive potential for marketers, who now will have a one-stop shop for both types of rights – the lack of which was often cited as a problem for Olympic sponsorship in the past. The potential downside – marketers who may have only wanted to buy one of these types of rights and now will have only one place to go.
Puma’s recently released “Cali O Drive Through” sneaker raised the ire of California-based burger chain In-N-Out, with the chain filing a trademark and trade dress infringement action against the apparel and footwear brand in early March. In-N-Out argues that Puma’s use of the red, yellow, and white color scheme and palm tree iconography on the shoelaces infringes the burger chain’s trademarks (including the federally registered palm tree logo) and trade dress, stating that consumers are likely to be confused and deceived into believing that Puma’s products are associated with or approved by In-N-Out. With respect to the trade dress claim, one that is often harder to make than trademark infringement, for In-N-Out to succeed it will have to show that its trade dress is non-functional, inherently distinctive, and likely to cause confusion, based on Supreme Court precedent. Judge for yourself.
The Naismith Memorial Basketball Hall of Fame recently sued Naismith Pub & Pretzel for trademark infringement under federal and state laws, arguing that the name of the pub would cause confusion for consumers. The plaintiff owns several trademark registrations incorporating the term NAISMITH. Both located in Springfield, MA, the Hall of Fame argues that the pub’s use of the name “Naismith” (which, like the Hall of Fame, is named after the founder of basketball James Naismith) and the display of basketball paraphernalia in combination with that name deceives consumers about whether the Hall of Fame’s services are associated with those of the pub. The case will turn on whether the pub intended to fairly associate itself with the basketball founder’s namesake or unfairly associate itself with the Hall of Fame.
Noted and Quoted
Sprint recently sued AT&T for false advertising due to AT&T's "just ok" ads, which ran consistently during sports broadcasts (including the latest NCAA men's basketball tournament). In the suit, Sprint argued that AT&T's claim of having "5GE" service was deceptive. A Frankfurt Kurnit team consisting of Craig Whitney, Ned Rosenthal, Kim Maynard, and Nicole Bergstrom handled the suit for Sprint. Coverage of the suit appears here.
Congratulations to Frankfurt Kurnit client Christian Wilkins for being selected in the first round of the NFL Draft by the Miami Dolphins with pick #13.
Want to Learn More?
If you have questions about sports industry legal matters, please contact Christopher Chase at firstname.lastname@example.org or (212) 826 5568, or contact any other member of the Sports Group at Frankfurt Kurnit. To keep up with changes in advertising and marketing law, please check out our Advertising Law blog.
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