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Second Circuit: MLB collective trademark licensing does not violate Sherman Act

September 26, 2008
Post by Blog Staff

In a recent decision, the Second Circuit affirmed a district court's summary judgment to the defendant in an antitrust case regarding trademark licensing. The case involved the collective licensing setup of Major League Baseball Properties ("MLBP"). The plaintiff was a licensee of MLBP. The court held the centralized licensing agent for all Major League Baseball teams did not violate § 1 of the Sherman Act. The plaintiff argued the agreement should be either per se illegal or subject to "quick look" rule of reason analysis. The court rejected both of these contentions, instead applying traditional rule of reason analysis. The court's lengthy opinion held that MLBP does not depress any collectibles market or violate antitrust provisions through its centralized licensing structure and equal apportionment of licensing revenue to each baseball club.More on Major League Baseball Props., Inc. v. Salvino, Inc. after the jump.Salvino, Inc. manufactured a line of collectible bean-filled bears named "Bammers." Salvino received licenses from MLBP to use the names and numbers of a few MLB players, including a Hank Aaron Bammer used to celebrate the 25th anniversary of his breaking of Babe Ruth's home-run record. Salvino also made and distributed Bammers that included the Arizona Diamondbacks logo without a license. MLBP filed a trademark-infringement lawsuit against Salvino for use of unlicensed trademarks in his production of Bammers. Salvino then filed a separate suit against MLBP for antitrust violations. The lawsuits were consolidated, and eventually all counts other than Salvino's § 1 antitrust counts were either abandoned or settled.Salvino alleged that MLBP violated antitrust laws through its collective licensing scheme that equally apportioned licensing revenue to all of the MLB clubs. Salvino claimed that this licensing arrangement resulted in an overall reduction in the clubs' incentive to sell and create markets for its individual products, because all clubs would see an equal return on investment, allegedly resulting in a decreased market for MLBP's licensed goods. The district court disagreed, and granted MLBP's motion for summary judgment. Salvino appealed.The Second Circuit affirmed. The court held Salvino did not provide sufficient evidence the MLBP's actions in creating a centralized licensing agent harmed competition. The court spent significant time discussing the appropriate analytical framework for the antitrust claims. Salvino appeal rested in part on its assertion that the MLBP licensing was either per se unlawful or should be subject to "quick-look" rule of reason analysis. The court held per se treatment was only appropriate for "manifestly anticompetitive effects" that are "so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality." The court further rejected the "quick-look" standard, stating that its use is only appropriate when "the great likelihood of anticompetitive effects can easily be ascertained."

Instead, the court held here the "rule of reason" analysis was appropriate. The traditional rule of reason analysis requires the plaintiff to show challenged behavior has an "actual adverse effect on competition as a whole in the relevant market." Salvino could not meet this standard. As stated by the court, Salvino "failed to adduce evidence to show that the challenged organization and activities have an actual adverse effect on competition or that MLBP has sufficient market power to inhibit competition market-wide." Specifically, the court looked for evidence of reduced output, depressed purchasing markets, or other restrictions on memorabilia markets, any of which might be evidence of an inhibitory effect on competition in the marketplace. Salvino did not raise a genuine issue of fact on these issues however. The only evidence of any adverse effects was a conclusory reference in Salvino's economic expert's report with no supporting facts. In fact, the court stated evidence showing the opposite was apparent in the record. MLBP and its expert presented evidence showing that MLBP has over 300 licenses for production of nearly 4,000 retain products incorporating various MLB intellectual property. MLBP also presented evidence of increased efficiencies, both administrative and creative, resulting in such increased amounts of licenses and commercial products. Salvino was unable to present evidence to the contrary. Thus, the court observed MLBP acted within antitrust law in its centralized licensing arrangement used to license team names, logos and other trademarks, and affirmed the district court's grant of summary judgment.To read the full decision in Major League Baseball Props., Inc. v. Salvino, Inc., click here.


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