Most sports fans remember American Needle Inc. from its antitrust lawsuit against the NFL that challenged the league's attempt to give exclusive apparel licensing rights to Reebok -- a move that squeezed American Needle from the NFL licensing marketplace. The lawsuit, which was first filed in 2004, made its way up to the Supreme Court. On May 24, 2010 the Court unanimously ruled that the NFL consisted of a collection of 32 independent businesses (not just one thing). Thus the Court held that the NFL's league-wide licensing practices were subject to antitrust scrutiny.
A few weeks ago, American Needle unceremoniously settled its antitrust lawsuit from the NFL, saving the case from trial. The settlement, which is under seal, presumably will pay a sum of money to American Needle. But, as a result, there will not be an underlying resolution of the legal challenge. Currently, the companies Nike and New Era share exclusive apparel licensing rights to the NFL marks. American Needle is still foreclosed from the marketplace.
Last week's settlement in the American Needle case marks the anticlimactic end to one of the most ceremonious sports-antitrust lawsuits in recent memory. Although the case was widely followed by sports fans up through the Supreme Court stage, many lost track of the matter once it was remanded from the Supreme Court in 2010.
The American Needle case, in fact, remained dormant for a long time after the Supreme Court's ruling -- first during the process of assigning a new district court judge (the previous judge, Hon. James Moran passed away while the case was on appeals), and then during the long and voluminous discovery process.
Nevertheless, even after remand, American Needle continued to win its important motions. In April 2014, Judge Sharon Johnson Coleman of the U.S. District Court for the Northern District of Illinois rejected another NFL motion for summary judgment, setting the stage for American Needle v. NFL to have gone to trial. But the recent settlement removes any need for such trial.
Of course, American Needle's decision to settle with the NFL is understandable from the company's own perspective. As a licensed apparel manufacturer a fraction of the size of Reebok and Nike, the cost of continuing to litigate these issues had, no doubt, would be burdensome. The large national law firm that had assisted American Needle with their Supreme Court appeal, Jones Day, was no longer in the picture. Presumably, the legal fees moving forward would have been untenable.
But for the larger sports law world, this settlement to 10+ years of antitrust litigation is a colossal disappointment. Not only would there have been widespread interest in the pending trial, but the issues pertinent to American Needle also relate to numerous other antitrust lawsuits involving sports leagues' collective licensing practices. Indeed, the same issues that would have been presented in trial at American Needle related to the legality of Major League Baseball and the National Hockey League's league-wide Internet broadcasting and blackout rules -- also practices currently under antitrust challenge.
Without a trial once and for all ruling that certain league-wide licensing practices are net anti-competitive under the antitrust laws, one could reasonably expect professional sports teams to continue acting in a largely collective manner, even despite the Supreme Court's May 24, 2010 ruling that the NFL teams were not a single entity. Indeed, even despite American Needle's big Supreme Court win nearly five years ago, nothing substantial has changed in pro sports's licensing practices in some time. And one can reasonably presume nothing substantial will change for at least several years moving forward -- at least until one of these antitrust challenges reaches final adjudication on the merits.
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Marc Edelman is an Associate Professor of Law at the City University of New York’s Baruch College, Zicklin School of Business, where he has written more than 25 law review articles including, most recently, "Will the NFL's Trademark Licensing Practices Survive Antitrust Scrutiny?" He also is a sports attorney and legal consultant for companies in the sports, online gaming, and social media industries. Nothing contained in this article should be construed as legal advice.
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