CHICAGO (CN) - The National Football League may have violated antitrust laws in giving Reebok an exclusive hat deal, a federal judge ruled, on remand from the U.S. Supreme Court.
Reebok bought the exclusive rights to produce headwear with team logos in 2001, an agreement that broke the NFL's pattern of having many licensed vendors.
American Needle, a 20-year vendor, sued the NFL, 30 of 32 member teams and Reebok after its license was accordingly not renewed.
The Sherman Act of 1890 bars companies from creating any "contract, combination or conspiracy in restraint of trade."
In affirming dismissal of American Needle's case, the 7th Circuit found that the NFL is a single entity immune to antitrust laws, rather than a group of separate profit-making enterprises.
The NFL is composed of independently owned teams, but they share costs and revenue. Each team owns the rights to its intellectual property, but the league controls their colors and mascots.
The Supreme Court reinstated the case in 2010, however, after finding that each team pursues its own corporate interests when it licenses its intellectual property.
"The NFL respondents may be similar in some sense to a single enterprise that owns several pieces of intellectual property and licenses them jointly, but they are not similar in the relevant functional sense," Justice John Paul Stevens wrote for the unanimous court.
"Although NFL teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned," Stevens added.
The parties both moved for summary judgment on remand, but U.S. District Judge Sharon Coleman shot them down last week.
American Needle produced expert evidence that, "shortly following the execution of the exclusive arrangement between Reebok and NFL Properties, wholesale prices of licensed hats rose by a significant degree while output of those items dropped, and that the higher prices and lower output continued for years, never returning to their pre-exclusivity levels," the 9-page opinion states.
Meanwhile the NFL has no evidence to support its assertion that American Needle's license rights would not have been renewed even if the league had not entered into an exclusive arrangement with Reebok, and had instead chosen the top three licensees, according to the ruling.
"There is sufficient evidence to permit a jury to find that American Needle could have continued as a licensee under the traditional structure, and that its prospects were ended by defendants' concerted decision to limit the number of their licensees," Coleman said. "The possibility that a less onerous restraint would have also ended those prospects does not negate the causal link between the alleged injuries and the restraint actually imposed."
Summary judgment is nevertheless inappropriate for American Needle because the defendants "contend that the exclusive license arrangement encouraged additional licensee commitment and had numerous procompetitive effects," including improved design and style coordination, according to the ruling.
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