Lawsuit threatens big business of collegiate licensing

Collegiate retail licensing is a $4 billion industry.
February 25, 2010

A pending class-action antitrust lawsuit filed against the NCAA is threatening to disrupt the way the association does business.
Former University of California-Los Angeles basketball star Ed O’Bannon has filed a complaint on behalf of former student-athletes seeking compensation when their image or likeness is sold for use in commercials, video games, television rebroadcasts and various sorts of merchandise.
The lawsuit was originally filed last July, but earlier this month a U.S. District Court judge in San Francisco denied a motion by the NCAA to dismiss the case.
According to the NCAA’s licensing arm, the Collegiate Licensing Company, collegiate licensed merchandise is a $4 billion industry each year .
Jon King, a partner at Hausfeld LLP , the law firm representing O’Bannon, said about 10 other similar cases have been filed after O’Bannon’s, including one filed by former University of Minnesota men’s basketball player Sam Jacobson . Jacobson was a member of the Gophers Final Four team in 1997.
Another high profile suit was filed by former Arizona State University and University of Nebraska quarterback Sam Keller against video game giant Electronics Arts Inc .
On March 10, Hausfeld will file an amended complaint officially merging the other suits with the O’Bannon case.
O’Bannon, who declined to comment for this story, argues in the complaint that NCAA member institutions have violated antitrust laws by agreeing to fix prices of merchandise without coming to an agreement with players as to what compensation they are entitled to.
The CLC, which is a co-defendant in the case, represents nearly 200 universities, including most universities in the Football Bowl Subdivision, as well as athletic conferences, bowl game and other collegiate athletic brands like the Heisman Trophy .
According to court documents, “O’Bannon asserts NCAA’s and CLC’s actions excluded him and other former student-athletes from the collegiate licensing market” and the consolidation of universities for licensing purposes has restrained trade by limiting the number of licenses available.
“Any given school could make a decision independently if it wanted to,” King said.
King said his firm was initially approached by O’Bannon and Sonny Vaccaro , a former shoe company executive and controversial figure in collegiate basketball. Vaccaro has been involved in summer basketball camps and tournaments and has orchestrated million-dollar shoe deals for players.
In addition to compensation for former student-athletes, King said the plaintiffs are seeking funds for supplemental or vocational education for players who leave school without a degree, as well as establish the framework for future athletes to have access to each.
Though O’Bannon’s complaint only applies to men’s basketball and football players, a former Gophers hockey player is a fervent supporter of what he is trying to accomplish.
Steve Debus was a goaltender for the Gophers men’s hockey team from 1995 to 1998 .
Debus was in net during an NCAA Tournament game in 1996 against the University of Michigan when Michigan player Mike Legg scored one of the most famous goals in college hockey.
Legg balanced the puck on the blade of his stick and shoved it over Debus’ left shoulder to tie the game . The play has since been replayed in numerous highlight reels and commercials.
“I absolutely think we should be compensated,” Debus said. “We’re done, we served our time. We’re not underneath the NCAA’s rules anymore.”
While O’Bannon’s case is being litigated as an antitrust case, University law professor Thomas Cotter believes, at its roots, it is a right of publicity issue.
Cotter said that the right of publicity is recognized in approximately 30 states and it grants individuals the ability to control the use of their name, likeness or identity.
“It’s an area of the law that is evolving, and different courts have reached different conclusions on some very fundamental issues,” Cotter said.
By litigating the case as an antitrust suit, Hausfeld could be awarded Treble damages , which would allow the plaintiffs to collect three times the amount of the actual damages plus attorney’s fees, Cotter said.
Before competing each year, the NCAA requires student-athletes to sign a release form which allows them to use a player’s “name or picture to generally promote NCAA championships or other NCAA events, activities or programs.”
King said when asked by the judge at a December hearing, the NCAA said it retains those rights even after a player leaves college.
The NCAA did not return requests for comment.
The lawsuit comes at a time when many athletics departments are struggling with declining revenue and increased subsidies from their respective universities’ general funds. If successful, the suit could pry a significant chunk of the $4 billion collegiate licensing industry away from the NCAA and from the institutions.
During the 2009 fiscal year, trademark and licensing contracts generated nearly $970,000 for the University’s athletics department.
A further drop in revenue could force some athletics departments to seek more aid from universities or cut spending.
The fiscal impact on universities aside, Debus is pleased someone is standing up to the NCAA on behalf of former athletes.
“You look at the NCAA as such a big monster and you have to obey their rules,” Debus said. “You can’t let the NCAA win everything.”

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