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.
- Read the introduction to the series here.
- Case study No. 1
- Case study No. 2
- Case study No. 3
- Case study No. 4
- Case study No. 5
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.
What happened in the case?
Motorola and STATS were separate defendants who appealed a district ruling in favor of the NBA. The case centered on a pager, SportsTrax, which allowed bettors or fans to receive a stream of updated information regarding live NBA games. The information was gathered and distributed by STATS via the pagers and online via STATS website.
In January 1996, Motorola released the SportsTrax pager for sale at the retail price of $200 (about $320 today). The pager had four modes: statistics, final scores, demonstration and current. It was the current mode, which the NBA took exception to. The SportsTrax current mode, which was updated every two to three minutes, displayed six different pieces of information:
- The teams playing
- Team with the ball
- Whether a team is in the free-throw bonus
- Which quarter it was
- How much time was remaining
SportsTrax relied on STATS reporters, much like integrity monitoring companies still use today. STATS reporters watched (or listened) to broadcasts of games and then entered changes and updates into their own computers. This information was then transmitted to STATS who disseminated it to the SportsTrax pagers via satellite and then to various local FM radio networks, which emitted the signal to the pagers.
The NBA argued that Motorola and STATS had violated state laws regarding unfair competition by misappropriating the rights of the NBA, and that Motorola and STATS had engaged in false advertising. These issues were addressed on appeal at the Court of Appeals for the Second Circuit.
What did the court say?
On the issue of misappropriation by Motorola and STATS, the Court noted that the issues are not new and in fact have their roots in the International News Service v. Associated Press case from 1918. In going through the history of the misappropriation doctrine, the court stated:
With the advance of technology, radio stations began “live” broadcasts of events such as baseball games and operas, and various entrepreneurs began to use the transmissions of others in one way or another for their own profit. In response, New York courts created a body of misappropriation law, loosely based on INS, that sought to apply ethical standards to the use by one party of another’s transmissions of events.
Prior to the Copyright Act of 1976, there was a “general understanding” that live events like sporting events were not copyrightable; in fact, there were even doubts as to whether a recording of a live event was copyrightable prior to passage of Congress’s landmark intellectual property statute in 1976. The Copyright Act extended protection to the broadcasts of live events, but not the events themselves.
In order to have been successful on the misappropriation claim against Motorola and SportsTrax, the NBA needed to satisfy the five-part hot news misappropriation test:
- A plaintiff generates or gathers information at a cost,
- the information is time-sensitive,
- a defendant’s use of the information constitutes free riding on the plaintiff’s efforts,
- the defendant is in direct competition with a product or service offered by the plaintiffs, and
- the ability of other parties to free-ride on the efforts of the plaintiff or others would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened.
The NBA was unsuccessful in convincing the Second Circuit that they met the required elements of the hot news misappropriation test.
What about the fact that Motorola was using the broadcasts?
The Second Circuit “held that Motorola and STATS did not infringe on the NBA’s copyright because they reproduced only facts from the broadcasts, not the expression or description of the game that constitutes the broadcast.”
There is no copyright protection for facts, like scores, and as such, Motorola was able to watch the broadcasts and then redistribute the information. The court noted: “[d]efendants provide purely factual information which any patron of an NBA game could acquire from the arena without any involvement from the director, cameramen, or others who contribute to the originality of a broadcast.”
What did the NBA do?
Perhaps sensing the need to be in direct competition with Motorola and STATS, the NBA launched a service called Gamestats, which provided official play-by-play information to the media at each NBA game. The NBA even planned to launch a pager system to compete with SportsTrax. The Second Circuit noted that no one was confusing the information on the SportsTrax pager for being in attendance at an NBA game or watching a live broadcast, as such the NBA’s primary business-producing basketball games and licensing broadcasts-was not in competition with SportsTrax.
With regards the Gamestats project, the court stated that the SportsTrax pager was still not free-riding on the NBA’s work because the statistics for both Gamestats and SportsTrax were independently gathered.
The NBA was defeated.
How does this apply to legalized sports betting?
Despite the loss at the Second Circuit Court of Appeals, the NBA has taken to repeatedly emphasizing their rights in-game information. There appears to be a very real effort by the NBA executives, and other sports league executives, to have state legislators grant them a property right in the information associated with the games themselves. The likelihood that such a grant would survive litigation is uncertain, but it would likely be a costly challenge for any entity seeking to challenge such a property right.
The Motorola and STATS case likely remains one of the most important cases for foreshadowing the outcome of litigation involving sports data in the world of legal sports betting in the United States. The case is possibly a major blow to the sports leagues, as the case appears to uphold the rights of entities to watch games and then disseminate the scores to others provided that the companies are not free riding on the leagues property.
While delays associated with broadcasts may date some information, rendering it no longer useful to bookmakers, there appears to remain lawful means of collecting and disseminating data outside of the framework that the leagues have advocated.