By: Michael Lehr

Ready – Set – Shift: NCAA’s NIL Overhaul

NCAA Student-Athletes MAY Now Be Able to Monetize Their Name, Image, and Likeness | Part 3

This is part three of a four part series; Click here to read part one; Click here to read part two.

In 2015, the Ninth Circuit Court of Appeals dealt with a similar challenge to the NCAA’s restriction on “pay” for college athletes, see, O’Bannon v. NCAA, 802 F.3d 1049 (9th Cir. 2015). In O’Bannon, several college athletes challenged the NCAA’s prohibition on compensation for the NCAA’s use of their “name, image, or likeness” or “NIL” in advertisements, marketing, and specifically NCAA’s sanctioned video games. While the district court held in favor of the former athletes, the Ninth Circuit reversed, in part, disagreeing with the lower court’s decision. The appellate court held that the district court “clearly erred when it found that allowing students to be paid compensation for their NILs is virtually as effective as the NCAA’s current amateur-status rule.” Id. at 1074. Essentially, both the trial court and appellate court recognized that the NCAA’s rules were anti-competitive. Still, the appellate court determined that allowing athletes to receive compensation from the NCAA and/or the member schools for exploitation of their NILs would undercut the NCAA’s legitimate “procompetitive” justification of promoting amateurism in college athletics. The U. S. Supreme Court denied hearing the plaintiff’s appeal in this case.

Although the NCAA v. Alston decision did not explicitly call for a rejection of O’Bannon or hold that the NCAA’s prohibition on compensation to student athletes for their name, image, and likeness is unlawful, the writing was now made present on the wall. The crux of the decision dealt with challenges to the NCAA’s rules restricting compensation unrelated to education, and to limitations on “education-related benefits” that NCAA-member schools may make available to their student athletes. These education-related benefits included limits on scholarships to graduate or vocational school, payments for academic tutoring, and paid internships. Both the district court and the appellate court found that restrictions on compensation unrelated to education were likely reasonable, but that the latter restriction on education-related benefits were not.

Delivering the unanimous opinion of the NCAA v. Alston Court, Justice Gorsuch plainly stated: “Put simply, this suit involves admitted horizontal price-fixing in a market where the defendants exercise monopoly control.” Alston, 141 S. Ct. at 2154. He went on to state that while the NCAA’s purpose for appeal was unclear, “[t]o the extent [the NCAA] means to propose a sort of judicially ordained immunity from the terms of the Sherman Act for its restraints of trade—that we should overlook its restrictions because they happen to fall at the intersection of higher education, sports, and money—we cannot agree.” Id. at 2159. In his concurrence, Justice Kavanaugh went slightly further, noting that the NCAA’s rules regarding a prohibition on compensating NCAA student athletes have “historically restricted student athletes from receiving money from endorsement deals and the like.” Id. at 2166. He also echoed Gorsuch’s plain statement of the law regarding the NCAA’s business model, stating that “[t]he NCAA couches its arguments for not paying student athletes in innocuous labels. But the labels cannot disguise the reality: The NCAA’s business model would be flatly illegal in almost any other industry in America.” Id. Importantly, in Gorsuchs’ main opinion and Kavanaugh’s concurrence, the Court states that the main place for progress on this issue is the legislature rather than the courts.
In other words, the NCAA v. Alston Court recognized the NCAA’s monopoly over its athletes and took a hardline against it while falling short of stating that all restrictions on compensation are unlawful. However, this grey area—and direction for state and federal legislatures to act—left the door open for (and openly invited) changes to the current system.

As of the time of this writing, 28 states have signed bills into law regarding student athlete’s use and/or exploitation of their name, image, and likeness. Of those, 19 states’ laws have gone into effect, or will go into effect, before the end of 2021. Multiple federal bills have also been introduced in both the U. S. House and Senate, but it is unclear if and when these federal bills will pass or what their scope will be. Thus, for now, student athletes are left with a minefield of legal jargon to consider. Each state’s laws – albeit similar – differ from the next. Moreover, dozens of schools and NCAA conferences have enacted new rules and policies concerning what their specific student athletes may do with their name, image, and likeness, largely dependent on the universities’ own branding contracts with their sponsors or suppliers.

This is part three of a four part series; stay tuned for the final part of  “Ready – Set – Shift: NCAA’s NIL Overhaul”!

Read: Ready – Set – Shift: NCAA’s NIL Overhaul Part 1

Read: Ready – Set – Shift: NCAA’s NIL Overhaul Part 2

To learn more about intellectual property, visit our Intellectual Property page.

The author, Michael Lehr, is an Associate at the law firm of Dunlap Bennett & Ludwig, PLLC. Kurt R. Klaus and Alex Butterman contributed to writing this article.

Dunlap Bennett and Ludwig, PLLC: is a multi-state and international law firm whose Media & Entertainment Law Section attorneys have decades of experience dealing with NIL (individual name, image, and likeness) matters, intellectual property, business formation, and disputes, and commercial transactions.

Michael Lehr is a litigation attorney who routinely deals with intellectual property disputes such as trademarks and copyrights that may arise in modern media/entertainment. Michael provides businesses and individuals with legal counsel whenever disputes arise and helps his clients navigate the complex waters of litigation—while trying to help them avoid it at all cost. Michael is an avid sports fan.

Kurt R. Klaus (Media & Entertainment Law Section Lead) is a media/entertainment business and legal affairs attorney who provides counsel to individuals and companies working in entertainment (television, music, digital, talent, copyrights) and branding (influencers, trademarks, social media, compliance). Kurt structures conventional and creative solutions for clients that mirror the needs of emerging and traditional media/content landscapes. He supports contractual and pre-litigation aspects of entertainment, marketing, and social media functions and partnerships, including media content production and distribution, influencer engagements, branding transactions, and NIL rights and negotiations. Prior to practicing law, Kurt produced television commercials and worked in the recording industry. Kurt is the father of an NCAA D-I athlete and an amateur sports enthusiast.

Alex Butterman (Trademarks Section Lead) is an intellectual property attorney specializing in the procurement, registration, enforcement, and maintenance of trademark and copyright rights and leads the trademark registration practice at Dunlap Bennett & Ludwig. Alex was a trademark examining attorney at the U.S. Patent and Trademark Office and has worked in several intellectual property boutique law firms for the past two and a half decades. Alex is an avid sports fan, and in law school, authored an article about the Major League Baseball anti-trust exemption, which was published in an American Bar Association section journal.

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Posted in: Intellectual Property

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