Nearly as quickly as “integrity fees” began to emerge in state sports betting bills — starting in the Midwest and then spreading nationwide — questions began to emerge regarding what an integrity fee actually is.
Before what the fee paid for was clearly defined, the cost of protecting integrity in sports betting was lowered in some states from one percent of all wagers, to .25 percent of the handle.
There now appears to be a pivot from the “integrity fee” push to a data rights fee, which is effectively a legislative requirement that betting operators use official league data. Various sports league representatives have referenced “our intellectual property” leading to the question, what is the intellectual property of the NBA, MLB, NFL, NHL and NCAA that the executives are referencing?
Leagues or affiliated rights holders (teams, distribution entities-MLBPA, NFL Films etc.) own extensive intellectual property rights. Every televised broadcast contains a statement about the league’s ownership of the broadcast: “this broadcast is copyrighted by NFL productions….”
Relatedly, the league and teams have intellectual property interests in their team names, logos, uniforms and even some of the colors they use. But what sports information beyond the broadcast and other enumerated property is owned by sports leagues is something of an open question.
Who owns what in sports?
The United States — in a Supreme Court filing by the Office of the Solicitor General — noted that while the broadcast of a sporting event is copyrightable, the events on the field do not constitute a performance, meaning they are outside the scope of things that can be copyrighted, the SG’s office stated:
“When a television network broadcasts a live sporting event, no underlying performance precedes the initial transmission-the telecast itself is the only copyrighted work.”
Similarly, in 1997, the Second Circuit Court of Appeals overruled the federal court for the Southern District of New York and stated that: “In our view, the underlying basketball games do not fall within the subject matter of federal copyright protection because they do not constitute ‘original works of authorship….’”
In 2004, an antitrust case filed against the PGA Tour by Morris Communications argued that the PGA was violating antitrust laws by creating what was effectively a monopoly on real-time golf scores. The Eleventh Circuit Court of Appeals found: “In this case, PGA met its business justification burden by showing that it seeks to prevent Morris from “free-riding” on PGA’s RTSS technology.”
Free-riding is a term that was recently mentioned by MLB Commissioner Rob Manfred, and applies in some circumstances where one entity invests costs into develop of something, and then another profits on the end product. But it is important to note that Morris was an antitrust case, not an intellectual property case, as the Eleventh Circuit articulated this case was: “not about copyright law, the Constitution, the First Amendment, or freedom of the press in news reporting.”
More recently, the Eighth Circuit Court of Appeals decided a case between a season-long fantasy company and MLB Advanced Media, an affiliate of MLB, over the ownership of data that facilitates the production of fantasy games.
The Eighth Circuit said: “the information used in CBC’s fantasy baseball games is all readily available in the public domain, and it would be strange law that a person would not have a First amendment right to use information that is available to everyone. It is true that CBC’s use of the information is meant to provide entertainment, but “[s]peech that entertains, like speech that informs, is protected by the First Amendment because `[t]he line between the informing and the entertaining is too elusive for the protection of that basic right.’””
Where does this ownership of sports data come from?
While the above-mentioned cases may appear to be less than favorable to the ability of sports leagues to demand compensation from gambling operators, overseas a series of cases in the last decade have reached slightly different conclusions and may serve as a basis for the call for data rights compensation.
Football Dataco Ltd. v. Sportradar GmbH & Sportradar AG
The case involved Football Dataco, who was contracted with various UK soccer leagues to manage data generated from matches in real-time and facilitate its distribution.
Sportradar was providing results of matches over the internet. Dataco claimed that Sportradar had infringed on their proprietary database by using information contained therein to facilitate the production of information on Sportradar’s own website.
The decision from the European Court of Justice (ECJ) is primarily focused on jurisdictional issues associated with online products and targeting of persons in different locales within the European Union and the responsibilities of complying with national laws, but did find that Football Dataco had protected interests in their databases. In the sports betting context, the ruling was meaningful because it supported the finding of a sui generis right in the creation of databases under the European Union’s database directive.
Football Dataco v. Yahoo
In March of 2012, the ECJ ruled, in a case between Football Dataco and Yahoo, that schedules for matches do not satisfy the requirements for copyright protection, noting that the copyright protection for databases is concerned with the structure of the database and not the contents of the database.
Additionally, the ECJ noted that “no other criteria than that of originality is to be applied to determine the eligibility of a database for the copyright protection provided for by the directive.”
What to make of these cases?
The sports leagues likely face an uphill battle in justifying a legal basis to receive data rights fees in the new world of legalized sports betting.
One interesting connection between the European cases and the integrity fee is that:
- A Sportradar subsidiary, Sportradar US, is a data partner with the NFL, NBA, NHL and NASCAR
- Football Dataco has partnerships with Genius Sports and the Perform Sports Content Group
- Genius has a data partnership with the NCAA and an integrity partnership with MLB.
The challenge in converting the sui generis database rights recognized by the European Union to the United States is two-fold: first, the United States is not a member of the European Union and therefore not bound by the ECJ’s decision; and second, the United States has a constitution that contains the First Amendment, which may pose a formidable obstacle to the leagues hopes of monetizing data that is in the public domain.
The search for a direct means for leagues to generate profit from betting operators has an uncertain end, it also remains to be seen what influence the existing jurisprudence will have on state lawmakers.
