Data rights fees, integrity fees, royalties and more are part of the US sports betting landscape
Legal Sports Report

Making Sense Of Pro Sports Leagues’ Search For Sports Betting Data Fees

Digging for integrity fees

This is the first article in an ongoing series of articles that will examine the case law, which will likely be relevant in determining whether professional sports leagues and the NCAA or other amateur organizations receive compensation for information used by sports bettors.

Professional and amateur sports are businesses. Although some may maintain dubious tax statuses as non-profits, the major leagues and players’ associations all seek to generate as much money as possible.

Many leagues have specialized subsidiaries that are responsible for managing aspects of the leagues’ intellectual property and licensing to vendors who seek an association with the league or the league’s teams.

For instance, the NFL’s licensing and merchandising wing is named NFL Properties, and it is responsible for managing the league’s 32 team’s officially licensed merchandise and the use of the NFL shield, which is often cited by Commissioner Roger Goodell and others as a symbol of the league’s integrity. Protecting the shield as a symbol of the integrity of the league, has been cited by the NFL as the reason why they are so vehemently opposed to legalized sports betting.

Major League Baseball and the NHL both utilize Major League Baseball Advanced Media for the management of much of their online intellectual property, including the MLB At-Bat app. While these management subsidiaries control and license hundreds of millions of dollars in intellectual property, there are limits to what they can control.

In this series, we will explore the various cases that will likely play an important role in determining what the leagues (or players’ associations) will be compensated for. This article serves as an introduction to the series and provides an overview of some background concepts that will serve as a foundation to later articles exploring important intellectual property cases in depth.

What is intellectual property and why is it important to sports gambling?

Recently, Major League Baseball commissioner Rob Manfred said:

“We think that the integrity fee – a negotiable number somewhere below one percent at this point – is an appropriate recognition of the fact that the gambling industry is riding our intellectual property, our content, and is presenting a threat to our competition from an integrity perspective so that we’re going to have to spend money to prevent that threat from becoming a reality.”

This sentiment has been echoed by NBA commissioner Adam Silver who was quoted as saying:

“the 1% [integrity fee] came directly from other jurisdictions outside the United States that used that very fee as the model for how leagues or content creators should be compensated for the use of their intellectual property.”

The question that arises is what is the intellectual property they are referring to?

Intellectual property is generally thought of as falling into four distinct categories. Intellectual property protections in the United States have their origin in the constitution. The Intellectual Property Clause was meant to encourage inventors to continue coming up with new ideas by allowing them to have protection from others copying them for a limited time. The four types of intellectual property most commonly referenced are patents, trademarks, copyrights and trade secrets.

Patents

A patent “is the grant of a property right to the inventor, issued by the United States Patent and Trademark Office.” Patents are granted for a period of 20 years from the date on which an application is filed with the US Patent and Trademark Office. Patents fall into three categories: utility patents; design patents; and plant patents.

Patents in the sports world are abundant though they are often associated with areas off the field. While applications for patents for innovative training methods for example golf swings, fitness training, and putting a golf ball have all been granted, only one major sport obtained a patent on the game itself. The sport being arena football, which obtained a patent on the method of playing football indoors in 1990. (Arena football may or may not actually constitute a “major” sport.)

In the nascent sports gambling industry, patents will likely be sought in abundance in all methods of betting applications. Despite this, patent infringement claims are the unlikely to be sources of litigation initiated by the sports leagues in the legal betting world in regards to sportsbooks’ data use.

Trademarks

A trademark is a protection granted for a word, symbol, name, or device “that is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others. A service mark is the same as a trademark except that it identifies and distinguishes the source of a service rather than a product.” Trademarks can be easily identified by the “TM” denoting when the mark is unregistered or the ® symbol when the trademark is registered.

In the sports gambling world, trademarks are one of the categories most likely to be implicated. Indeed, as discussed previously, sports team and league marks and their “protection” was the impetus for the first hearing on a bill that would become PASPA. The hearing associated with what was then called the Sports Service Protection Act included Sen. Orrin Hatch’s statement that:

“The bill would protect the service marks of these teams regardless of whether the State [lottery] uses the service mark directly or refers to the teams by their geographic location or in any other manner.”

Indeed, the sports teams and leagues own various marks including the team names and logos. The ability to exclude others from using the names of geographic locations associated with where professional teams are located is likely problematic. For example, the leagues and teams do not own the name of the city they play in. A state or executive cognizant of litigation may require sportsbooks to use only geographic locations on the board or in printed materials.

While the NBA and the NFL have both attempted to block states from using the leagues’ marks, neither has been successful in receiving a judgment blocking the use of geographic location names.

Team names and logos, by contrast, may represent a stronger target for sports leagues looking to assert some power. MLB has been particularly zealous in protecting against unauthorized users of league marks, even suing trading card company Upper Deck over the unauthorized use of team logos when Upper Deck “did not airbrush out team logos on hats and uniforms on players pictured in action on the cards.”

Upper Deck and Major League Baseball would eventually settle out of court, leaving us uncertain how a court would have ruled. Despite the absence of a ruling, the use of team names may represent a proving ground of sorts for leagues seeking to collect a fee in states that do not pay the leagues’ requested royalty.

Copyrights

Copyrights are available to “original works of authorship.” These include: “literary, dramatic, musical, artistic, and certain other intellectual works, both published and unpublished.”

You will note that sporting events are not mentioned in this list. Copyrights are generally denoted by a © symbol. The Second Circuit Court of Appeals in NBA v. Motorola articulated the challenge for sports leagues in arguing that the games themselves are copyrightable by stating:

“Sports events are not “authored” in any common sense of the word. There is, of course, at least at the professional level, considerable preparation for a game. However, the preparation is as much an expression of hope or faith as a determination of what will actually happen. Unlike movies, plays, television programs, or operas, athletic events are competitive and have no underlying script. Preparation may even cause mistakes to succeed, like the broken play in football that gains yardage because the opposition could not expect it. Athletic events may also result in wholly unanticipated occurrences, the most notable recent event being in a championship baseball game in which interference with a fly ball caused an umpire to signal erroneously a home run.”

In fact, despite the recent claims by commissioners Manfred and Silver as to “their intellectual property,” NHL commissioner Gary Bettman, while an employee of the NBA, testified before Congress that the league had not gone after tout services and the publication of point spreads because:

“given the nature of these activities, and publishers’ First Amendment rights to publish information, policing the publication of point spreads would be virtually impossible.”

As Bettman correctly articulated in 1990, the First Amendment looms large in this area. Facts themselves are not copyrightable and the public policy rationale behind this is that we as a society want to encourage the dissemination of knowledge and encourage communication.

Though the sports leagues face an uphill battle in seeking copyright protection for information used and published by sportsbook, this is an area that both the NBA and Major League Baseball Advanced Media have previously sought judicial rulings, with both coming up short. Despite previous failures, this area presents an additional means for the leagues to attempt to gain a cut of sportsbook revenue.

Trade secrets

Trade secrets are the final area of intellectual property that we will take a look at. According to the World Intellectual Property Organization, a trade secret is: “any confidential business information which provides an enterprise a competitive edge may be considered a trade secret. Trade secrets encompass manufacturing or industrial secrets and commercial secrets. The unauthorized use of such information by persons other than the holder is regarded as an unfair practice and a violation of the trade secret.”

Examples of what are commonly cited as trade secrets are things like the recipe for Coca-Cola or the mixture of ingredients in the coating on Kentucky Fried Chicken. In sports, trade secrets are most likely to be found in proprietary methods used in the front office like pre-draft analytics.

Trade secrets represent one opportunity for sports leagues to enter into partnerships with sportsbooks and be compensated for their data. MLB has proprietary technological data associated with measures like Statcast, as do the NBA and other leagues. Technology such as SportVU cameras offer the leagues an opportunity to bring a new and novel piece of technology to market. Proprietary data offers the sports leagues a truly unique opportunity to make money from data that is indisputably theirs.

The remainder of this multi-part series will focus on in-depth looks at both sport and non-sport cases that will likely impact any future litigation over the ownership of sports data used by sportsbooks.

John Holden
- John Holden J.D. / Ph.D. is an academic. His research focuses on policy issues surrounding sports corruption.
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