Making Sense Of Pro Sports Leagues’ Search For Sports Betting Data Fees: Case Study No. 3

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Phonebook and sports betting

In this series we will explore some of the important case law that is relevant to the sports leagues’ argument that they should be compensated for “data,” “intellectual property,” or whatever other term du jour the sports league executives choose to use.

The quest for data rights and fees has been one that has evolved since it first emerged in Indiana in January of 2018. The early wave of requests for one percent integrity fees has died down, with the leagues seeking .25 percent in New York.

The question that many are asking is why should the leagues get paid? What is the foundation of their argument? The short answer is that their argument’s foundation is built on sand in a typhoon zone. What follows is an overview of one of the cases that is the basis for the long answer.

The case: Feist Publications Inc. v. Rural Telephone Service Co., Inc.

Feist is a unanimous US Supreme Court decision that was both argued and decided in the first quarter of 1991. Justice Sandra Day O’Connor summarized the issue in the case in a single sentence, stating: “This case requires us to clarify the extent of copyright protection available to telephone directory white pages.” In other words, can you get copyright protection for the phonebook?

Who was Rural Telephone Service?

Rural Telephone Service was a telephone company that operated in northwest Kansas. Rural Telephone was required by law to issue an updated telephone directory once per year. The telephone book was divided into white pages and yellow pages.

The white pages contained the names and addresses of all the individuals who had subscribed to Rural Telephone Service’s monopoly in northwest Kansas. The yellow pages, by contrast, contained advertisements for businesses. The advertising revenue generated by the yellow pages allowed Rural Telephone to provide the directory to subscribers for free.

What was Feist Publications?

Feist was a publishing company that was also in the phone book business, though servicing a much larger geographic area. In fact, the Feist directory covered “11 different telephone service areas in 15 counties and contained 46,878 white pages listings — compared to Rural’s approximately 7,700 listings.”

This allowed for consumers to only have to consult one directory, rather than having to have multiple phonebooks or having to call a directory service. Feist made its directory freely available and funded its publication the same way as Rural Telephone, through the sale of advertising in its yellow pages.

What happened in the case?

Rural Telephone Service was a telephone company; they obtained customer information rather easily by virtue of having a monopoly on the geographic area and being able to simply compile customer telephone data from billing information. Feist, by contrast, was not a telephone company. Feist was a publishing company. In the early 1980s, Feist approached 11 Kansas telephone companies and attempted to enter into a licensing agreement with them and 10 agreed. Only Rural Telephone did not. Not to be deterred, Feist published Rural Telephone’s listings without permission. Rural Telephone sued.

Feist did collect some additional information and verify information from Rural Telephone’s directory, however, as a method to detect theft, Rural Telephone had included a number of fictitious listings. Sure enough, Feist’s directory contained all the fake listings.

Rural Telephone argued that Feist had infringed on their copyright. Rural relied on a series of district court decisions that found telephone books and directories were copyrightable. The Supreme Court narrowed the issue slightly, stating that they elected to review the case: “to determine whether the copyright in Rural’s directory protects the names, towns, and telephone numbers copied by Feist.”

After Rural Telephone enjoyed victories at both the district court and Tenth Circuit Court of Appeals, the Supreme Court ruled unanimously in favor of Feist.

Justice O’Connor articulated a differentiation between compilations of facts in databases and facts themselves, stating:

“Factual compilations, on the other hand, may possess the requisite originality. The compilation author typically chooses which facts to include, in what order to place them, and how to arrange the collected data so that they may be used effectively by readers. These choices as to selection and arrangement, so long as they are made independently by the compiler and entail a minimal degree of creativity, are sufficiently original that Congress may protect such compilations through the copyright laws….Thus, even a directory that contains absolutely no protectible written expression, only facts, meets the constitutional minimum for copyright protection if it features an original selection or arrangement.[internal citations omitted].”

The distinction between the completed organization of the database and the information that serves to construct the database is important. This is referred to as the fact/expression dichotomy. Expression of facts, for example in a database, are protectable under copyright law. Facts themselves, however, enjoy no such protection. O’ Connor very presciently for our present environment stated: “copyright is not a tool by which a compilation author may keep others from using the facts or data he or she has collected.”

The unanimous court concluded by stating:

“We conclude that the names, towns, and telephone numbers copied by Feist were not original to Rural and therefore were not protected by the copyright in Rural’s combined white and yellow pages directory. As a constitutional matter, copyright protects only those constituent elements of a work that possess more than a de minimis quantum of creativity. Rural’s white pages, limited to basic subscriber information and arranged alphabetically, fall short of the mark.”

How does this apply to legalized sports betting?

The Feist decision is likely to have immense importance for sports betting. In fact, the decision has likely played an important role in shaping the desire and making feasible the offering of sports betting, not only in states like New Jersey and Delaware who have recently launched single-game betting, but also in Nevada. In the “what if” scenario of Feist turning out the other way and the Supreme Court holding that creators of databases could protect the information, as well as the database structure, there would be a feasible argument that various pieces of information that sportsbooks require could be protected.

As we have noted, sports leagues own vast portfolios of intellectual property, we can even elaborate on previous articles noting that the leagues likely have intellectual property rights in the various databases and compilations of information, but the sports leagues do not own the information contained therein. While sports leagues may own a specific display of the standings, they cannot copyright and demand payment for someone repeating that the Orioles are 30 games below .500. The Supreme Court even suggested that alphabetically ordering falls short of sufficient database creativity to merit protection, this could likely be extended to other orderings like ordinal ranking.

Sportsbooks rely on factual information to operate: scores, team records, game times. These are all pieces of factual information. They are often collected by individual leagues and put into databases, but the information that is factual in and of itself is not subject to copyright.

As a result of the sports leagues not owning much of the information sportsbooks require to operate (as we have observed the sports leagues do have some proprietary data that they can likely restrict its use) it makes even more curious the push for data fees from legislators. Obviously, the sports leagues would desire data fees, just as Rural Telephone did, but for lawmakers to suggest payment to sports leagues for the use of facts is truly puzzling given that money could be used to provide other resources to the electorate.