September 29, 2017

Litigation Update

Songwriters — Grab a Fork and Dig into the Spotify Settlement Pie

In May 2017, individual lawsuits filed against Spotify by David Lowery and Melissa Ferrick (and later joined) reached a settlement to the tune of $43.5 million. The suit arose after Spotify allegedly failed to compensate songwriters with publishing income deriving form mechanical licenses. From the start, Spotify maintained its denial of any wrongdoing in that respect, but to no avail. Spotify’s valiant attempts to derail the litigation were unsuccessful, ultimately leading Spotify to settle.

Songwriters, do you qualify for compensation under the Settlement Agreement? Here is what you need to know: First, do you qualify as a Class Member? You do if you own a musical composition copyright (actually registered with the U.S. Copyright Office before June 29, 2017), for which Spotify made available for downloading and/or interactive streaming, without a license, and did so between December 28, 2012 and June 29, 2017. Parties and/or entities exempt from the Settlement Agreement include Spotify and its affiliates/employees, government entities at all levels, members of the NMPA and other parties to a “Participating Publishing Pending and Unmatched Usage Agreement” between Spotify and NMPA.

Second, if you do qualify, you must submit your claim form to Garden City Group, LLC, who is tackling administration of the settlement funds. Forms are available at www.SpotifyPublishingSettlement. The form is self-explanatory: name, contact information and the musical compositions you claim are subject to the Settlement Agreement (pursuant to the above conditions). In addition, you will need to identify the “Track Identifier” for each recording on Spotify featuring that composition and can utilize Spotify’s Track Database to help you determine that information.

Hearing on final approval of the Settlement Agreement is scheduled for December 2017. If approved, however, Spotify will also have the opportunity to appeal and unfortunately, settlement funds may not be paid to Class Members until any such appeal(s) are resolved. Presuming the Settlement Agreement is approved and either no appeal is taken or an appeal is decided in favor of the Class Members, those Class Members will essentially take a percentage of the funds based on the number of streams of their compositions as well as payment of mechanical royalties for future compositions. In other words, payment could be substantial, depending on the number of plays in question for a respective Class Member. If you believe you may qualify as a Class Member under the Settlement Agreement, it is certainly in your best interest to investigate and take the appropriate steps to ensure your proper compensation.

(See generally, https://www.digitalmusicnews.com/2017/08/08/spotify-songwriter-settlement/, August 9, 2017)

Watch Out ASCAP & BMI, SESAC Just Stole the Limelight!

Although it seems social media has been saturated with posts, articles and blogs detailing ASCAP’s and BMI’s journey in challenging their respective Consent Decrees, SESAC may have stolen the limelight (albeit, temporarily), in light of its landmark U.S. radio deal with the Radio Music License Committee (“RMLC”). By way of reminder, arbitration between SESAC and the RMLC has been ongoing since 2015. The result is in and according to SESAC, the rates reflected in its RMLC arbitration award are approximately 50% higher than the rates ASCAP negotiated via its deal with RMLC in December 2016. The SESAC decision derives from a panel of three independent arbitrators who determined the rate SESAC can charge terrestrial radio stations represented by the RMLC, between January 1, 2016 and December 21, 2018 (e.g. over 10,000 commercial radio stations). Before this decision, no independent panel had set the rates paid by U.S. radio stations to a performing rights organization. This gives hope to those currently struggling with RMLS to come to a resolution on fair and reasonable rates, including Irving Azoff’s, Global Music Rights.

As most of us are aware, ASCAP and BMI are governed by Consent Decrees, which determine how fee disputes are resolved. By voluntarily signing its deal with RMLC, ASCAP avoided the risk of legal fees that would ultimately decrease member royalties. SESAC, on the other hand, has the ability to resort to commercial arbitration in resolving its license fee disputes thus better allowing its rightsholders to “realize the fair market value of their works.” In fact, Chairman and CEO of SESAC Holdings, Inc., summed it up himself “…the panel’s decision is a resounding affirmative of the fact that ASCAP rates in radio do not reflect fair market value.” Luckily, for SESAC members, private shareholders will be fronting the arbitration costs instead of shifting those costs directly to its members.

Others affected by the deal include SOCAN and APRA, who represent a share of U.S. radio play.

(See generally, http://mailchi.mp/musicbizworldwide/sesac-strikes-landmark-us-radio-deal?e+000a25ccc8, on July 31, 2917).

Licensing Transparency — Within Arm’s Reach?

ASCAP and BMI may be joining forces again, but this time, to better ensure transparency in music licensing. However, the notion of combating transparency concerns only as the same relates to their repertoires has raised concerns for many, particularly in light of a new bill introduced to Congress that is geared to addressing licensing concerns for all parties effected. Specifically, in July 2017, the Transparency in Music Licensing Ownership Act was introduced by U.S. Congressman, Jim Sensenbrenner. The legislation is intended to address three main points:

  1. Require the Register of Copyrights to create and maintain a database compiled of musical works and sound recordings, and to hire individuals and spend funds necessary to help carry out these functions;
  2. Ensure public access to the database, free of charge, in real-time, using up-to-date technology; and
  3. Limit remedies available to copyright owners to bring infringement actions for violation of performance, reproduction or distribution rights, if that owner/authorized party failed to provide or maintain the information required by the database for the works at issue.

As mentioned earlier, following introduction of this bill, ASCAP and BMI announced they too would be creating a similar database, set to launch in late 2018. However, that announcement was met with some controversy, including from Representative Sensenbrenner, who stated that such a database would be incomplete given its failure to encompass all PROs. The ASCAP/BMI combined repertoire database was also met with criticism from The Music Innovation Consumer Coalition who vocalized their support for the Congressional bill in light of what it deems would be a “neutral, reliable and comprehensive database.”

In other words, a complete resolution is better achieved via the Transparency in Music Licensing and Ownership Act, since it includes all PROs and the works governed by each PRO. Currently, the PRO databases are incomplete and each PRO disclaims accuracy of and liability resulting from use of their databases. In light of the same, it would seem the new legislation would serve all interested parties and provide the kind of transparency needed to not only protect rights, but to also ensure proper compensation for usage of a work.

Singh v. PGA TOUR Order on MSJ

In May 2013, Vijay Singh, a professional golfer and a lifetime member of the PGA Tour (the Tour), filed suit against PGA Tour, the organizer of the main men’s professional golf tours and events in North America. Singh claimed that Tour unfairly suspended him for using deer-antler spray before it consulted with the World Anti-Doping Agency (WADA). The WADA previously ruled that the deer antler spray was not a violation so long as the player did not fail a drug test. Singh admitted to using the spray in a Sports Illustrated article back in January of 2013. The article suggested that the deer antler spray was a banned substance. Upon publication, Singh contacted the Tour to address the allegation. The bottle of deer antler spray was sent in to be tested. The bottle tested negatively; however, “IGF-1” or insulin-like Growth Factor-1, was identified in the substance. IGF-1 is listed as a prohibited substance by the WADA. Per the results, the Tour informed Singh that he was to be suspended for a period of 90 days and his earnings from competitions would be held in escrow until the court ruled on the issue. Shortly after, WADA issued a letter announcing deer antler spray is not considered prohibited.

Singh then commenced this suit claiming that the Tour recklessly administered its anti-doping program, exposing Singh to ridicule and humiliation. Singh asserted causes of action for negligence, breach of implied covenant of good faith and fair dealing, breach of fiduciary duty, intentional infliction of emotional distress and conversion.

After almost five years of back and forth, the Supreme Court of the State of New York Denied Singh’s Motion for Summary Judgment and Granted in Part and Denied in Part the Tour’s Motion for Summary Judgment.

The Court agreed with the Tour and stated that the Tour acted reasonably when they suspended Singh considering the article. The Court argued that it was not necessary for an organization of their stature to consult the WADA prior to the suspension. Furthermore, the Tour acted reasonably when they revoked the suspension upon the determination from the WADA regarding the deer antler spray. Ultimately, the Court gave it to a jury to determine whether the Tour’s decision not to consult the WADA and/or ignore WADA studies and findings prior to Singh’s suspension concerning such substance constituted an “appropriate” investigation.

The Court granted summary judgment as to whether the Tour breached its duties of good faith and fair dealings by testing the very bottle provided on Singh’s behalf for purposes of testing. Singh knew the Tour’s intention when it asked for the substance he had been using.

The Court left the issues of (1) whether the Tour breached the implied covenant of good faith and fair dealing by publicly speaking through the then Executive Vice President—Ty Votaw and (2) what, if any, damages did Singh suffer as a result of the Tour’s public discussion of the deer antler spray and its alleged prohibition and whether such discussion breached the implied covenant of good faith.

Finally, the Court dismissed the Cause of Action for Conversion arguing that because there was a potential violation of an anti-doping rule violation, the Tour was entitled to escrow all of Singh’s funds.

Lochte v. Ember Therapeutics Petition

Ryan Lochte, an Olympic Gold Medalist, agreed to be sponsored by Ember Therapeutics, a headache medicine. The sponsorship was born just weeks after the Olympic swimmer was suspended from competing for 10 months due to falsely asserted claims. Lochte claimed that he was held at gunpoint at a Rio gas station during the 2016 Olympics. In response to the fairy tale, Lochte was dropped by high profile sponsors including Speedo and Ralph Lauren.

However, Ember Therapeutics believed that in spite of his past Lochte still had an outstanding career ahead of him. Therapeutics also had skeletons of their own. In 2014, Ember had filed bankruptcy but was bought out by another pharmaceutical company the following year.

Shortly after they struck the deal, Ember breached its obligation to pay Lochte his dues. The deal required Lochte to pursue such dispute through the American Arbitration Association in New York. On April 5, 2017, after considering all submissions of Lochte and Ember, the Arbitrator entered the Award for $125,000 in Lochte's favor. Lochte filed a Verified Petition to Confirm Arbitration Award on April 7, 2017. The Court Confirmed the Award; Granted judgment in the amount of $128,250.00, and granted any further relief the Court deemed just and proper.

Evans v. Cardinals SJ Order

In 2015, twelve retired National Football League (NFL) players and the estate of a thirteenth filed suit against 32 member clubs of the NFL. The retired players and estate asserted three main allegations against the NFL clubs. First, general managers, coaches, and media attention allegedly pressured players to return to play as soon as possible despite injury or pain. Second, the clubs allegedly pressured players to return to play through non-guaranteed contracts that could be terminated at any time (also known as being “cut”) if players failed to perform. Third, club doctors and trainers allegedly provided injured players with prescription medications in lieu of adequate rest to return them to play as soon as possible. Furthermore, they alleged that the clubs colluded together.

The players claimed that they were given medications after games without knowledge of what they were taking. The team doctors would beat around the bush when asked about what medicines they were taking or the possible side effects or long-term effects. Moreover, the doctors failed to inform the players of health risks associated with mixing certain medications, or with mixing medications with alcohols provided by the clubs.

On July 21, 2017, the U.S. District Court for the Northern District of California filed an Order Granting Motion for Summary Judgment for the remaining two defendants. At this time only three claims remained: (1) By plaintiff Reggie Walker against defendant San Diego Chargers, based on allegations that (a) the club misrepresented that it cared about and prioritized players’ health and safety when in fact it prioritized getting players to return to play, even when injured, at the cost of their health and safety; (b) in reliance on those misrepresentations, Walker sprained his ankle during a game in 2014 but continued to play every game thereafter for the rest of his career with Toradol injections from the club doctor; and (c) as a result, Walker continues to experience pain in his ankles; (2) By plaintiff Alphonso Carreker against defendant Denver Broncos, based on allegations that (a) the club misrepresented that it cared about and prioritized players’ health and safety when in fact it prioritized getting players to return to play, even when injured, at the cost of their health and safety; (b) in reliance on those misrepresentations, Carreker regularly consumed enormous quantities of anti-inflammatory drugs; and (c) as a result, Carreker underwent heart surgery in 2013 to drain inflammation from a heart infection after anti-inflammatory drugs proved ineffective due to the resistance he had built up during his playing career; (3) by plaintiff Carreker against defendant Green Bay Packers, based on the same allegations as against the Broncos.

The Chargers, Broncos, and Packers moved for summary judgment asserting that all three remaining claims were barred by workers’ compensation exclusivity. Not wanting to diminish the underlying societal issue, the court made note that player injuries are a serious and inevitable evil and proper care of such injuries is a paramount need. However, the Court granted Summary Judgment based on the conclusion that there is no dispute of fact nor is the remedy sought by the players available under law.

Hernandez v. MLB Complaint

Hernandez filed suit against Major League Baseball (MLB) claiming that (1) discrimination in Violation of Title VII of the Civil Rights Act of 1964; (2) discrimination in Violation of Section 1981; (3) Discrimination in Violation of O.R.C. § 4112.02; and (4) Declaratory Judgment.

Hernandez, an umpire employed by MLB, has been an umpire for the MLB since at least 1993. The MLB regularly conducts evaluations of its umpires. Generally, these evaluations are conducted in the middle of the season and the seasons’ end.

From 2002 to 2010, Hernandez received multiple “exceeds standards” ratings in the areas including hustle, fraternization, four-umpire mechanics, demeanor, style and form of calls, reactions to developments of plays, situation management, official baseball rules and interpretations, and focus. His accuracy was frequently praised by the Office of Commissioner, MLB’s front office. Year after year Hernandez received commendable evaluations. In 2011, Hernandez did not receive any “exceeds standards in his evaluations. Hernandez claims that this was due to the Front Office change naming Joe Torre as the Executive President for Baseball Operations. Hernandez further claimed that such bad reviews were from the history of animosity between himself and Torre. In 2012, Hernandez received multiple praises from individuals; however, his evaluations did not reflect such praises. The 2013 season reflected the same issues. In 2014, Hernadez presented interest in a crew chief position for the World Series; however, the Office of Commissioner repeatedly higher other less qualified umpires for the position. Hernandez believes that he is fully qualified to be assigned to the World Series.

Hernandez has applied for the position of crew chief at least four times since 2011, including this past season. If an umpire expresses written interest in the position of crew chief but is not promoted to that position, the Office of the Commissioner must, upon request by that umpire, give a written explanation of the reasons why that umpire was not chosen for the position of crew chief. That explanation must be provided to the umpire by the beginning of the championship season. Hernandez alleges, both Hernandez and the World Umpires Association requested a written explanation from the Office of the Commissioner as to why Hernandez was not promoted to crew chief for the 2017 season. On or about March 27, 2017, Torre responded to these requests on behalf of the Office of the Commissioner. In the March 27, 2017, letter, Torre stated that Hernandez needed to “gain greater mastery of the Official Playing Rules and Replay regulations, continue to improve [his] situation management, and display an ability to refocus and move forward after missing calls or receiving constructive feedback from the Office.”

Hernandez alleges that he has been wrongfully passed over for the position crew chief for the World Series. On June 5, 2017, Hernandez filed two Charges of Discrimination with the Equal Employment Opportunity against The Office of the Commissioner of Baseball and Major League Baseball Blue, Inc. Hernandez filed with the June 5th Charges a letter requesting an early Notice of Right to Sue. On June 28, 2017, the Equal Employment Opportunity Commission issued to Hernandez a Notice of Right to Sue regarding the June 5th Charge against The Office of the Commissioner of Baseball. On June 29, 2017, the Equal Employment Opportunity Commission issued to Hernandez a Notice of Right to Sue regarding the June 5th Charge against Major League Baseball Blue, Inc.

Miranda v. MLB 9th Cir Opinion

The 9th Circuit Court affirmed that minor league baseball players are exempt from federal antitrust laws. Major League Baseball (MLB) is an unincorporated association of thirty MLB franchises. Within each franchise is approximately 40 baseball players on its “40-man roster” with up to twenty-five players on its “active roster,” who may play at the major league level. Each franchise has its own “farm system,” which employs 150 to 250 players who compete at the minor league level.

MLB requires all franchises to use its Uniform Player Contract when hiring minor league players. Once executed, all contracts are filed with the MLB Commissioner for approval. Within the player contracts, the MLB franchises receive exclusive rights to their minor league player for seven championship seasons. This eliminates the ability for players to play for any other team during such contract period. The MLB franchises do have the opportunity to transfer amongst themselves their exclusive rights to a player at the end of each contract season.

On February 5, 2015, the Players filed a complaint against the Office of the Commissioner of Baseball, former Commissioner Allan Huber “Bud” Selig, and the MLB’s thirty franchises (the Owners). Seeking declaratory and injunctive relief as well as damages, the Players allege that MLB’s hiring and employment policies have violated federal antitrust laws by “restrain[ing] horizontal competition between and among” the MLB franchises and “artificially and illegally depressing” minor league salaries. In response, the Owners filed a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, arguing that the business of baseball has long been exempt from federal antitrust laws, and Congress specifically declined to take minor league baseball out of the scope of the exemption. The district court granted the Owners’ motion to dismiss and the Players timely appealed.

The Supreme Court first exempted the business of baseball from these federal antitrust laws almost a century ago in Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922). In Federal Baseball, the Supreme Court held that the business of baseball does not constitute “trade or commerce among the several States,” 15 U.S.C. § 1, and therefore is not bound by antitrust laws because the “business is giving exhibitions of baseball, which are purely state affairs.” Federal Baseball, 259 U.S. at 208. Comparing the baseball league to a law firm sending a lawyer to another state to argue a case, the Court reasoned that the need for baseball teams to cross state lines to attend competitions was “mere[ly] incident[al]” to the business itself. Id. at 209.

In 1998, Congress passed the Curt Flood Act, taking long- awaited action on the business-of-baseball exemption. Curt Flood Act of 1998, Pub. L. No. 105-297, 112 Stat. 2824 (codified at 15 U.S.C. § 266). The Curt Flood Act established that “the conduct, acts, practices, or agreements of persons in the business of organized professional major league baseball directly relating to or affecting employment of major league baseball players . . . are subject to the antitrust laws.” 15 U.S.C. § 26b(a). However, it explicitly maintained the baseball exemption for anything related to the employment of minor league baseball players—including the use of reserve clauses—and the relationship between organized professional major and minor league baseball. 15 U.S.C. § 26b(b)(1)–(2).

Conversely, the Players argue that the baseball exemption does not apply to minor league baseball because Federal Baseball, Toolson, and Flood did not decide the issue of “whether major league baseball and its constituent clubs could conspire to fix the salaries paid to minor league players.”

The Court understood the farming system to be synonymous as being hired directly with the Franchises, therefore, the minor leagues fall into the same exemption as major league players. That being said, the Court affirmed the minor league exemption from federal antitrust laws.

Spielman v. IMG College, OSU Complaint

Spielman on behalf of himself and former and current student-athlete who competed for Ohio State University’s (OSU) football program. Spielman alleges that those who participated in the Program had their images licensed or sold or distributed by OSU, their Co-Conspirators, or their licensees preceding the filing of this Complaint (the “Class Period”), and will continue in the future. Plaintiff also brings this action on behalf of current student-athletes competing in the Football Program, as well as former and current student-athletes of the Football Program, for purposes of the injunctive relief class only, as both groups’ future compensation rights are impacted by the anti-competitive practices.

Spielman claims that Defendants OSU and IMG/WME and their Co-Conspirators, including Nike USA Inc. and Nike, Inc. (“NIKE”) and American Honda Motor Co. Inc. ("HONDA") have committed per se violations of the federal antitrust laws by engaging in a price-fixing conspiracy and a group boycott / refusal to deal that has unlawfully foreclosed class members from receiving compensation in connection with the commercial exploitation of their images alleges an (1) Unreasonable Restraint of Trade in Violation of Section 1 of the Sherman Act 15 U.S.C. §1, (2) Unreasonable Restraint of Trade – Group Boycott / Refusal to Deal in Violation of Section 1 of the Sherman Act 15 U.S.C. §1, (3) Violations of 15 U.S.C. §1125, et seq., (4) Violations of R.C. 4165, et seq., (5) Violations of R.C. 2741, et seq., (6) Accounting, (7) Unjust Enrichment, and (8) Declaratory Relief.

Spielman alleges that he nor any other of the former or current student-athletes transferred or conveyed their rights in the licensing or use of their image or likeness to OSU or IMG/WME or their Co-Conspirators. Spielman claims that there are less restrictive alternatives other than OSU’s “zero compensation” policy on licensing rights.

Spielman requests a jury trial and awaits the Courts decision on such allegations.

FCC Moving Towards Reversing Title II of the Communications Act

In May of 2017, the Federal Communication Commission moved forward on a proposal that would reverse the 2015 decision to classify broadband as a utility under Title II of the Communications Act. The agency made its final proposal, known as a Notice of Proposed Rulemaking, available to the public on May 23, 2017. That proposal kicked off the official period for public comment, with all comments due by mid-July.

The 2-1 vote to move forward with this proposal could result in a change to the net neutrality principles which prohibit Internet Service Providers (ISPs) from blocking or prioritizing traffic. Essentially, net neutrality assures open and consistent access to all content that comes over an ISPs network.>

The goal of the proposal is clear, as the proposal itself states that the 2015 rules "put at risk online investment and innovation, threatening the very open Internet it purported to preserve. “It proposes to eliminate the general conduct standard and suggests not adopting any alternatives to the rules. The proposal also asks whether net neutrality principles are even necessary and indicates a preference of no rules.

There has been concern that this new proposal will backfire and instead of keeping the Internet open, it will allow ISPs to exact a toll from content providers in order to get their content passed through equally. There have also been First Amendment concerns, as net neutrality rules currently prevent ISPs from blocking content of their choosing. Companies that refuse to pay more, or are unable to pay more, for faster speeds will likely lose viewers, as customers tend to visit sites that load quickest, which could give ISPs the power to drive traffic, or block traffic, from sites. The proposal does discuss that other sources of authority, such as Section 706 of the Telecommunications Act, may be able to implement rules moving forward. The next vote is expected to be near the end of August.

Is a License Needed to Show Tattoos?

In August of 2016, Solid Oak Sketches, LLC brought a claim against 2K Games, Inc. and Take-Two Interactive Software, Inc. asserting copyright infringement. 2K and Take-Two had recently released the latest version of the popular NBA 2K video game series, a game called NBA 2K16. The new game featured players in significant detail, including the tattoos the players sported. Solid Oak's copyright claim is based on the fact that it had copyrights in several of the tattoo designs that were shown in the game. The two companies have been in court over this copyright issue for more than a year.

Take-Two has gone on the defensive with counterclaims that sought a judicial declaration that its use of the tattoos is both fair use and de minimis use. This past May, the District Court allowed those counterclaims to proceed, noting that resolution of this issue would be useful to the community in general and would relieve uncertainty.

Tattoo copyright is not a new issue, but the majority of cases involving tattoos and copyrights have been settled and therefore, there is not a decision to be cited as precedent. Take-Two's attorney argues that if Take-Two's use were considered infringement, "anyone appearing in public, on a television program, or in an advertisement would need to license the display of their tattoos," which he called an "encroachment on basic human rights."

As the case proceeds, with Take-Two's counterclaims included, it has potential to be the first time a court has decided the issue of copyrights and tattoos and will ideally clear up confusion around the increasingly common issue.

Virtual Hotspots May Mean Real-Life Trespass

Niantic, Inc. is facing a class action lawsuit over the popular game, Pokemon Go. The game sends users out into the real world to "catch" Pokemon and visit hotspots, also known as Pokestops and Gyms. The problem? Those Pokemon, Gyms, and Pokestops may be in someone's backyard. A group of homeowners who are frustrated with Pokemon Go players invading their space have filed a lawsuit against the game's developers, alleging violations of trespass and negligence laws. Niantic, one of the game's creators, fired back, arguing that players are required to agree to "Terms and Trainer Guidelines" which specifically note that players should not break the law to play the game.

That argument was not enough to satisfy the homeowners who note that Niantic specifically put Pokemon, Pokestops, and Gyms on private property, even though it should have known that players would go to them, resulting in trespass and a nuisance to the property's owners. The brief filed goes as far as to argue that landowners should have a right to refuse the placement of virtual objects on their property when the virtual objects offer an incentive for people to come to the location. Niantic stuck with their argument that trespass does not extend to virtual objects, but only tangible objects, and has moved to dismiss the homeowner's claim.

Another defendant, The Pokemon Company brought its own motion to dismiss in April of 2017, arguing that the Japanese-based company is not subject to jurisdiction, and further that the unlawful acts are attributed to the other Defendants, who had more of a role in placing the virtual objects. The case is currently still pending in the Northern District of California.

The outcome will be closely watched by video game makers and any other companies hoping to create in the virtual world. If the defendants are held liable for trespass or negligence, it will likely affect how games that merge virtual and real life are created in the future. On the opposite side of the coin, a victory for the defendants may open the doors for more games akin to Pokemon Go, and more frustrated homeowners.

Facebook and Twitter Defeat Patent Claims on Web Publishing

In May of 2017, Twitter won a ruling that will bring an end to the patent infringement cases brought against the company by Easyweb Innovations LLC. Easyweb has also brought infringement suits against Facebook, which are expected to end as a result of this decision as well. The patent lawsuits brought by Easyweb are based on a family of patents relating to internet publishing that Easyweb obtained in 2006 from a software developer based in New York.

Prior to suing Facebook and Twitter, Easyweb sued photo-sharing services Photobucket.com Inc. and SmugMug Inc., along with the social network Myspace Inc. All of those cases settled. Easyweb's latest lawsuits, against Facebook and Twitter, began in 2011.

In March of 2016, the District Court judge granted Twitter's motion for summary judgment and ruled that the five patents asserted by Easyweb all relate to the abstract idea of authenticating messages. Easyweb appealed the ruling and agreed that if it lost the appeal it would also drop the case against Facebook.

Easyweb argued that the District Court failed to address the patents in their entirety and that the patents are directed to a specific message publishing system. That argument did not hold up. The Federal Circuit Court held that all the claims were directed to an abstract idea and that they fail to transform the abstract idea into a patent eligible invention.

Supreme Court Tightens Patent Suit Rules

In the recent case TC Heartland v. Kraft Food Group Brands, the Supreme Court tightened rules for where patent lawsuits can be filed. The decision is expected to make it harder for "patent trolls" to "shop" in an attempt to bring their cases in friendly courts

In an 8-0 decision, the Court held that patent suits can be filed only in courts located in the jurisdiction where the targeted company is incorporated. This decision directly overturned a prior ruling by the U.S. Court of Appeals for the Federal Circuit and upended over 20 years of patent law.

The decision is applauded by high-tech companies such as Apple, Google, and Microsoft, who have frequently faced patent lawsuits and have been vocal about the need for reform. Many believe the Court's decision is a positive step in curbing shaky patent litigation and may address the amount of poor-quality patents that will be enforced. At the very least, it gives the companies being sued a potentially valuable home court advantage.

Federal District Court Orders Former NFL Player to be Paid Full Disability Benefits (Solomon v. Bert Belle/Pete Rozelle NFL Player Retirement Plan)

The U.S. Court of Appeals for the Fourth Circuit addressed whether the plan administrator for the Bert Belle/Pete Rozelle National Football League (NFL) Retirement Plan and the NFL Player Supplemental Disability Plan, abused its discretion by denying disability benefits to Jesse Solomon, former NFL player. The court ultimately held that the NFL’s disability plan administrators ignored compelling evidence of a retired player’s Chronic Traumatic Encephalopathy (CTE). CTE is a disease associated with trauma usually related as a result of helmet to helmet contact.

Jesse Solomon played for nine seasons as a linebacker in the NFL. Over the course of Jesse Solomon's NFL career, “it was estimated that he sustained approximately 69,000 full-speed contact hits.”1 After retiring from football, Solomon began as second career as a teacher and football coach. Unfortunately, this did not last long as a result of the injuries sustained while playing in the NFL. Solomon began to experience pain throughout his body including intense headaches, dizziness and blurred vision.2 Medical tests conducted revealed that Solomon’s brain showed signs of CTE and as a result he struggled to concentrate and remember things. As a result of Solomon’s injuries he sought to claim benefits under the Bert Bell/Pete Rozelle NFL Retirement Plan and the NFL Player Supplemental Disability Plan.

The Bert Bell/Pete Rozelle NFL Retirement Plan and the NFL Player Supplemental Disability Plan provides disability benefits to retired players who become disabled as a result of their football career. Solomon applied for Total and Permanent Disability (TPD) benefits with the Bert Bell/Pete Rozelle Player Retirement Plan twice. The first time he based his claim on orthopedic injuries but his claim was denied.

Solomon's second application came in 2010. This application claimed that football-related neurological and cognitive impairments caused him to become TPD. This application contained a number of new medical reports describing the severity of his CTE-related disability. A two-person Committee denied Solomon benefits under the terms of the Plan. Solomon appealed and a Social Security Administration Administrative Law Judge (ALJ) granted Solomon disability benefits. Nonetheless, the Board stated that the record did not support a finding of total and permanent disability prior to the 15-year cutoff date after Solomon's retirement. The Board's denial functioned as a final decision under ERISA. Solomon timely filed the instant suit to recover Football Degenerative benefits.

The issue before the district court was whether the Board's decision that Solomon became TPD after the March 2010 cutoff constituted an abuse of discretion. The district court concluded that Solomon was entitled to Football Degenerative benefits because of ALJ’s decision to use the date of when the CTE began to manifest clearly was before the fifteen year cutoff and alternatively, the Board's Inactive determination constituted an abuse of discretion.3

The appeals court stated, “[a] decision is reasonable if it is the result of a deliberate, principled reasoning process and if it is supported by substantial evidence.”4 To aid in making a determination if a decision is reasonable some factors to consider are the language of the plan; the adequacy of the materials considered making the decision and whether the fiduciary's interpretation was consistent with other provisions in the plan. The appeals court held, “[a] fiduciary must rely on substantial evidence to sustain its denial of benefits and thus abuses its discretion when it ignores unanimous relevant evidence supporting an award of benefits.”5 The Board failed to submit any evidence to contradict the claims of Solomon. Moreover, there was evidence of several reports with descriptions of serious neurological impairments linked to Solomon’s football career dated months before the plan cutoff.

As a result, the appeals court affirmed the ruling of the district court and held that the Board abused its discretion in its arbitrary denial of Football Degenerative Benefits. This case is important because for starters it serves as precedent for future cases dealing with potential CTE claims. Moreover, this issue is likely to be addressed by the owners in the next round of collective bargaining negotiations. Furthermore, the mere fact that the collective bargaining agreement pertaining to disability and retirement has three owners on the determination panel appears to be a conflict of interest. Owners will routinely rule against claims to keep costs low especially when the disability and retirement plans are funded by them. This is an issue that needs to be reviewed some more.

  1. http://advocacyforfairnessinsports.org/current-litigation/denial-of-nfl-players-disability-claim-shrouded-in-inconsistencies-and-conflicts-of-interest/
  2. http://www.espn.com/nfl/story/_/id/14929768/judge-nfl-pay-benefits-jesse-solomon-brain-injury
  3. https://www.forbes.com/sites/rogergroves/2017/07/03/federal-court-exposes-nfls-quiet-travesty-denial-of-retired-player-benefits/#58ff3b694ad1
  4. http://www.zuckerman.com/newsroom-news-appeals-court-rules-against-NFL-pension-plan-finds-ex-player-totally-disabled-from-concussion-and-cte.html
  5. http://profootballtalk.nbcsports.com/2017/06/23/federal-appeals-court-seems-to-accept-evidence-of-cte-in-living-football-players/
  6. http://www.dilawgroup.com/blog/2017/05/bert-bellpete-rozelle-nfl-player-retirement-plan-and-the-nfl-player-supplemental-disability-plan-ord.shtml

Minor League Baseball Players Loses Antitrust Appeal Based on Baseball Exemption (Miranda v. Selig)

The U.S. Court of Appeals for the Ninth Circuit addressed whether professional minor league baseball holds the same exemption from federal antitrust law as does major league baseball (MLB). The complaint of the players was that while employed in the minor league, they worked an average of fifty to sixty hours per week and earned less than $10,000 per year. Furthermore, the players allege that MLB's hiring and employment policies \violated federal antitrust laws by artificially and illegally depressing minor league salaries. The Owners filed a motion to dismiss arguing that the business of baseball has long been exempt from federal antitrust laws, and Congress specifically declined to take minor league baseball out of the scope of the exemption. The district court granted the motion to dismiss and the players timely appealed.

The issue before the court is based on whether minor league baseball is exempted from federal antitrust law. As a result, the court felt it was imperative to review the business of baseball in a historical context. The first antitrust legislation that was passed was the Sherman Act and it was aimed at “preserving free and unfettered competition as the rule of trade.”6 Moreover the Sherman Act states, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”7 However, cases pertaining to baseball were construed in a different light. For that reason, it is necessary to have an understanding of how the courts have ruled on similar issues.

The business of baseball was first exempted from federal antitrust laws as a result of the Fed. Baseball Club of Baltimore v. Nat'l League of Prof'l Base Ball Clubs case8. In Fed. Baseball, the court held that “the business is giving exhibitions of baseball, which are purely state affairs and although made for money would not be called trade of commerce in the commonly accepted use of those words.”9

In Flood v. Kuhn, the court held that the baseball exemption to antitrust laws should remain valid.10 In fact the court stated, (1) “professional baseball is in fact interstate commerce”; (2) “baseball is an anomaly with regard to its exemption from federal antitrust laws”; (3) the Supreme Court previously emphasized that Congress allowed for baseball to develop unhindered by federal antitrust laws; and any change to this should be made by Congress and not the courts.11

In 1998, Congress enacted the Curt Flood Act.12 The Curt Flood Act established that the “conduct, acts, practices, or agreements of persons in the business of organized professional major league baseball directly relating to or affecting employment of major league baseball players are subject to the antitrust laws.”13 However, the act also explicitly maintained the baseball exemption relationship between organized professional league baseballs.

The players unsuccessfully argued that the baseball exemption does not apply to minor league baseball because the previous court cases did not address minor league baseball or the ability of MLB to conspire to fix salaries of minor league baseball players. The argument of the players rested on the notion that MLB and the minor leagues were two separate entities. However, MLB was able to demonstrate that the farming system of the MLB was inclusive of the minor leagues and served as a place to develop players for MLB. As a result, MLB and minor league baseball are not two separate distinct organizations.

To that end, the U.S. Court of Appeals for the Ninth Circuit held that in light of Supreme Court precedent, decisions of various other courts and the Curt Flood Act, minor league baseball falls within the business of baseball exemption from federal antitrust laws. The reasoning is because employment contracts of minor league players relate to the business of providing public baseball games for profit between clubs of professional baseball players. Furthermore, both the courts and Congress have made it clear that they intend to maintain the baseball exemption from antitrust law.

  1. http://www.dailyreportingsuite.com/antitrust/news/baseball_s_antitrust_exemption_applies_to_minor_league_contracts
  2. http://www.abajournal.com/news/article/minor_league_players_lose_federal_antitrust_appeal_over_low_wages
  3. https://www.theatlantic.com/business/archive/2016/09/minor-leagues-minimum-wage-lawsuit/500216/
  4. https://www.beyondtheboxscore.com/2017/6/27/15869934/minor-league-baseball-wage-salary-antitrust-lawsuit-mlbpa

The Supreme Court of the United States will rule on Sports Betting

On Monday, June 26, 2017, the Supreme Court of the United States agreed to review New Jersey’s bid for legalized sports betting. The Professional and Amateur Sports Protection Act of 1992 (PASPA) prohibits 46 states from licensing, sponsoring or authorizing sports betting. The exceptions are Nevada, Delaware, Oregon and Montana as they were exempt from PASPA since they had already adopted sports betting practices in 1991.14 New Jersey has been waiting to add sports gambling to the casino industry which has been failing as of recently.15 It is estimated that hundreds of millions of dollars are gambled illegally and states like New Jersey would like to tap into this untaxed funding from leaving the state.16

The controversy started approximately six years ago when Governor Chris Christie of the State of New Jersey implemented a state law that would allow casinos to offer gambling on sports. Opponents to this law consisted of the National Football League (NFL), National Basketball Association (NBA), Major League Baseball (MLB), National Hockey League (NHL) and the National Collegiate Athletic Association (NCAA) which collectively argued that the state law being implemented in New Jersey was incompatible with the PASPA.17

There are two legal issues being presented in this case. The first one suggests that PASPA violates the doctrine of anti-commandeering. The anti-commandeering doctrine “bars Congress from ordering states to adopt a particular regulatory scheme when the federal government has not adopted the scheme itself.”18 The second issue is that PASPA violates the equal sovereignty doctrine because four states are given preferential treatment from the federal government when it comes to sports betting.19 The equal sovereignty doctrine declares that states are owed equal treatment from the federal government. The Department of Justice and the sports leagues (both professional and collegiate) disagrees that PASPA obligates New Jersey to adopt a regulatory scheme, but rather blocks New Jersey from legalizing sports betting. That rational addresses both issues. The federal government also indicated that sports betting crosses state lines and as a result is governed under the Commerce Clause.

Although, the outcome of this case is unknown, a victory for New Jersey could be epic. For starters, the impact of New Jersey winning would mean that other states could also pass legislation and have the gambling of sports legalized. In fact, “Connecticut, Maryland, Michigan, New York, Oklahoma, Pennsylvania, South Carolina and West Virginia have introduced sports betting legislation in 2017.”20 Moreover, the stronghold grip that Nevada has over the ability to bet on sports would decrease due to more states being able to compete. However, the NCAA and sports leagues could begin to hold tournaments and huge sporting events that could generate significant income for both the collegiate and professional leagues as well as Nevada.

In the event, that New Jersey does not win, there is still hope for ending PASPA. That hope rests in the hands of Congress. Fortunately, in May 2017, legislation was drafted that would repeal PASPA.21 In addition, the American Gaming Association serve as strong advocates for the repeal of PASPA and they are lobbying Congress to make the repeal of PASPA a reality, especially now that President Trump is in power and is in favor of legalizing sports betting across the country.22 Time will tell.

  1. http://www.nj.com/politics/index.ssf/2017/06/supreme_court_agrees_to_hear_nj_sports_betting_case.html
  2. https://www.washingtonpost.com/news/early-lead/wp/2017/06/27/in-surprise-move-supreme-court-says-it-will-take-on-new-jersey-sports-betting-case/?utm_term=.5f35c3a8bacd
  3. http://www.espn.com/chalk/story/_/id/17848529/congressional-committee-reviews-federal-gambling-laws-plans-introduce-new-legislation
  4. https://www.si.com/nfl/2017/06/27/supreme-court-review-sports-betting-gambling-ban-new-jersey-chris-christie
  5. http://www.gambling-law-us.com/Federal-Laws/sports-protection.htm
  6. https://www.legalsportsreport.com/12205/paspa-scope-and-intent-us-sports-betting/
  7. https://www.legalsportsreport.com/14503/scotus-yes-to-new-jersey-sports-betting/
  8. https://www.nytimes.com/2017/06/27/nyregion/new-jerseys-appeal-of-sports-betting-ban-heads-to-supreme-court.html
  9. http://www.espn.com/espn/print?id=19736525


Contributing Authors:

Michelle M. Wahl
Partner, Swanson, Martin & Bell, LLP, Chicago

Katie R. Day
Quinnipiac University School of Law, Juris Doctor Candidate, 2018

Kyle E. Simmons
MPA, JD, Special Assistant, Office of Labor Relations & Collective Bargaining

Kathryn S. Yoches
The University of Tennessee College of Law, Juris Doctor Candidate, 2018


Edited by:

Michelle M. Wahl
Partner, Swanson, Martin & Bell, LLP, Chicago

Katelin Drass, IIT
Chicago-Kent College of Law, Juris Doctorate Candidate 2018

Brian A. Rosenblatt
Partner, Bryce Downey & Lenkov LLC