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Athletes, Not Courts, Should Be the Ones to Control NIL Rights

Invalidating long-term, exclusive contracts between professional athletes and trading card companies would unfairly limit athletes’ right to benefit from their name, image, and likeness, says Warren Friss of Einbinder & Dunn.

In June 2021, the US Supreme Court in NCAA v. Alston opened the door for college athletes to financially benefit from their name, image, and likeness rights. This was long overdue.

A more recent lawsuit, Panini America v. Fanatics, now threatens to adversely impact the NIL rights of professional athletes. The suit claims that the grant of long-term, exclusive trading card licenses is monopolistic conduct in violation of the Sherman and Clayton Antitrust Acts.

Professional athletes deserve the right to control and benefit from the value of their NIL, given the time, energy, and talent required to achieve celebrity status. Athletes should have virtually unfettered freedom to decide how they are portrayed in commercial products. That right shouldn’t be curtailed by the courts merely because exclusive licensing could have a negative impact on the prices and quality of trading cards.

Athletes have been fighting to protect this right for some time. In 2003, Barry Bonds opted out of MLB Players Association’s group licensing program. Trading card and video-game companies that relied on obtaining rights through the program couldn’t include him in their products starting in 2004.

Trading card manufacturer Topps Co. had a different legal arrangement with baseball players, as it had been signing baseball players to individual agreements as far back as 1951—before the union existed.

But Bonds initially wouldn’t sign Topps’ standard player contract, either. His primary concern was that he didn’t have any control over how his image was used or how he and his career were portrayed. He wanted fans to continue collecting his baseball cards, but in a way he approved.

Bonds wasn’t voicing a novel theory. The right to control a person’s NIL—known as the right of publicity—was first recognized in Haelan Laboratories v. Topps Chewing Gum.

In that case, the plaintiff had an exclusive contract to use a player’s image on trading cards, and the defendant had subsequently signed a contract with the same player and used his image. Topps argued that the player didn’t have a property right in his image and couldn’t have granted exclusive image rights to plaintiff.

The Second Circuit disagreed, saying, “A man has a right in the publicity value of his photograph, i.e., the right to grant the exclusive privilege of publishing his picture.”

In each of the four major US professional sports leagues—MLB, NFL, NBA, and NHL—athletes almost universally assign their NIL rights to entities such as the MLB Players Association so they can be licensed to third parties that commercialize them in products such as trading cards, video games, and jerseys.

The trading card industry has endured numerous precedent-setting disputes regarding player rights throughout its history. Panini v. Fanatics is just the latest instance. In August, Panini America Inc. sued Fanatics Inc., alleging monopolistic behavior in violation of the Sherman and Clayton Antitrust Acts.

Fanatics, an e-commerce giant that’s a rookie in the trading card industry, signed exclusive baseball card agreements with MLB Players Association and MLB in August 2021. It then signed exclusive, long-term agreements with NFL and NBA, replacing incumbent licensees Topps and Panini in three of the four major US sports. In January 2022, Fanatics acquired Topps.

The Panini lawsuit highlights the contradictory nature of antitrust and intellectual property law. Antitrust law is designed to promote competition by prohibiting certain monopolies. The rationale is that monopolies lead to increases in prices and decreases in quality, innovation, and choice, which harms consumers.

Intellectual property rights are designed to reward innovation and creativity by providing the holder with certain exclusive rights—in effect, a monopoly.

It would be inequitable for the court in Panini v. Fanatics to curtail professional athletes’ rights of publicity by invalidating their exclusive contracts with Fanatics. Athletes expend much time and effort to develop skills that are of great public interest and can yield fame and economic rewards.

The Supreme Court in Zacchini v. Scripps-Howard Broadcasting noted that athletes’ skills and efforts are as worthy of protection as those of a songwriter, photographer, or inventor—all of whom, through copyright and patents, receive the benefit of exclusivity and the power to decide who is permitted to use their work.

There are also conditions in the trading card world that mitigate potential consumer harm. Trading card licensors are required to pay tens of millions of dollars in annual guaranteed royalties and marketing investments.

To be profitable, licensors must create a variety of products that are sufficiently innovative to attract consumers. And although Fanatics’ licenses last 10 to 20 years, they will end, much like patents.

Topps ultimately secured a deal with Barry Bonds after giving him the right to approve each of his Topps cards. Professional athletes and celebrities have earned the right to control use of their NIL, and the courts shouldn’t use the Sherman and Clayton Antitrust Acts to take it from them.

The case is Panini America Inc. v. Fanatics Inc., S.D.N.Y., No. 1:23-cv-09714.

This article was originally published on Bloomberg Law on Nov. 30, 2023. Copyright [2023] Bloomberg Industry Group, Inc. (800-372-1033) www.bloombergindustry.com. Reproduced with permission.

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