SBJ/January 14-20, 2013/Opinion

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  • Cartoon: On the road again

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  • Timing of lawsuit against NCAA undermines its real intent

    Just when Penn State was beginning to move forward in the healing process, Pennsylvania Gov. Tom Corbett has stepped forward with a curiously timed lawsuit asserting that the NCAA exceeded its delegated authority when it penalized Penn State for its role in the Jerry Sandusky scandal. The lawsuit asks that a federal judge throw out the sanctions on antitrust grounds. Those sanctions include a $60 million fine and a four-year ban on bowl games.

    While the NCAA probably overreached, the lawsuit is fatally flawed based on poor timing and quite possibly, a lack of legal standing. Simply put, this effort is too little, too late from a purely legal perspective.

    When filing a civil lawsuit, the plaintiff must have standing to sue; in simple terms, this is usually defined as a stake in the outcome of the dispute. Pennsylvania would seem to lack legal standing to sue the NCAA in this matter since the government’s relationship to Penn State is based on providing limited financial support and not administrative control of the institution. The complaint attempts to establish standing with multiple references to potential damage to the state’s revenue base.

    An additional legal problem is that the university agreed to the sanctions in a consent order last summer and simultaneously waived its right to sue the NCAA. The school has made it clear that it is not a party to the lawsuit. The time to file this type of lawsuit would have been before the university signed the decree and the correct plaintiff to file the lawsuit would have been Penn State. Curiously, Corbett endorsed the signing of the consent decree in his role as a university trustee.

    A lawsuit filed by Pennsylvania Gov. Tom Corbett seeks the dismissal of sanctions against Penn State.
    Photo by: ICON SMI
    The lawsuit asserts that the NCAA is using its monopoly powers to restrain Penn State from competing with other member schools, which sounds competitively paranoid. To prevail, the state must prove that the NCAA acted outside the scope of its legal authority in sanctioning Penn State and that this punishment for a criminal, non-sports matter impairs Penn State’s ability to compete on and off the field.

    The lawsuit is seeking an injunction barring the NCAA from enforcing the sanctions. To obtain the injunction, the state must show irreparable harm and a probability that it will succeed at trial. These will be difficult standards to meet.

    Protecting the business of football

    Sadly and incredulously, the lawsuit seems to confirm the state’s preoccupation with Penn State football, a core finding in the Freeh Report and the foundation for the NCAA’s actions. To illustrate this point, Corbett said that he “didn’t want to file during football season to take away from the team’s momentum.” Corbett also said that he “waited until now to sue over the harsh penalties because he wanted to thoroughly research the legal issues and did not want to interfere with the football season.”

    The governor’s legal counsel, James Schultz, essentially made the same point: “Look, this is big business. You have the hospitality industry and all the folks associated with it; the small mom and pop businesses. You have the folks at the university associated with the football program. You have a number of people that have jobs related to the industry of football here in State College and around the Commonwealth.”

    These statements seem to confirm both Freeh’s finding and the NCAA’s belief that there was a failure to act by Penn State out of concern that it would damage the football program. The Freeh Report found: “A culture of reverence for the football program that is ingrained at all levels of the campus community.” Apparently it extends to the state government as well. It is hard to fathom that Corbett or Schultz could have missed this finding in their reading of the record.

    Political considerations

    Corbett, a Republican, said his office did not coordinate this current legal strategy with incoming state Attorney General-elect Kathleen Kane. Instead, the current attorney general, Linda Kelly, granted the governor authority to pursue the matter since she believed the lawsuit could pose a conflict of interest and would drain her staff’s resources and time. Kelly was formerly Corbett’s top deputy when he served as attorney general.

    Kane, a Democrat, ran partially on a vow to investigate why it took state prosecutors under Corbett nearly three years to charge Sandusky. Corbett is up for re-election as governor in 2014.

    The real goal

    Recently, Pennsylvania’s state and congressional lawmakers have objected to use of the NCAA fine to finance child-abuse prevention efforts outside of Pennsylvania. Penn State has already made the first $12 million payment, and an NCAA task force is deciding how and where it should be spent with only 25 percent of it slated for expenditure within Pennsylvania. State Sen. Jake Corman has also filed a lawsuit seeking to force the NCAA to spend the entire fine amount within the state.

    Given the tenuous legal nature of the federal lawsuit and the unnecessary embarrassment that it has caused, the real goal may be to simply apply pressure to the NCAA to rethink the disposition of the fine. A more equitable distribution would have 75 percent of the money allocated within Pennsylvania where all of these crimes took place and the victims reside, and 25 percent allocated nationally. To effectively accomplish this goal, the state will have to defeat an anticipated NCAA motion to dismiss the case. If the complaint survives the motion, the costs and disruptive nature of the discovery process may force the NCAA to reassess where the bulk of the money will be spent. For the child sex abuse victims of Pennsylvania, that may be worth the fight, no matter how clumsily fought.

    Dave O’Brien (dpo32@drexel.edu) is an associate teaching professor and sport management program director at Drexel University, and is editor of CollegeSportsBusinessNews.com.

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  • Closer look: MLSE’s depth; Coach K on future of college sports

    The editorial process can be slow and methodical. One example of that would be this week’s cover story on Maple Leaf Sports and Entertainment. The idea behind it started at the NBA All-Star Game last February in Orlando. Staff writer John Lombardo and I were talking to a few sources about the M&A marketplace, and the massive deal by Bell and Rogers for majority control of MLSE was top of mind. The conversation drifted into various sidebars: How come so few talk about this company? Do sports business executives in the U.S. realize the breadth and depth of both this deal among rival telecommunications companies and MLSE? Does everyone understand the content, reach and real estate components to MLSE?

    We left Orlando eager to dig deeper into this story, and it took months of researching, reporting and follow-up to complete. We really began getting access to the key people in the fall once the deal gained regulatory approval and Tom Anselmi was named president. The result, I believe, is a piece that showcases the strength of the bundle of diverse assets, and the talent in the organization. I have felt for years that company Chairman Larry Tanenbaum is one of the most influential figures in sports that few know — and that’s evident by Lombardo’s look at the low-key but driven executive. In addition, the executive search for the still-open CEO position is one of the most talked about in sports, so keep an eye on that.

    “At our school, basketball drives money, and a lot of schools are like that. But football can drive a lot of money. So that’s why we’re doing all of this? There’s no grand plan.”
    Mike Krzyzewski on the big picture in college sports
    Photo by: JON GARDINER / DUKE PHOTOGRAPHY
    > SIT-DOWN WITH COACH K: Staff writer Michael Smith was fortunate enough to drive from Charlotte to Durham just before the new year and get 30 minutes with Duke basketball coach Mike Krzyzewski. We have long targeted him as an ideal subject for our “Sit-Down” back-page feature, which looks at leadership, management and innovation. “I met with Coach K in the players’ lounge, just off the team’s main locker room in Cameron Indoor Stadium,” Smith told me. “He was in a great mood because they had just received a commitment from one of the nation’s top recruits, Jabari Parker, the night before. This was in addition to being the nation’s No. 1 team. He was fit, wearing a navy blazer, open-collar shirt and much more relaxed than you’d ever see him on the sidelines. I’ve dealt with a lot of coaches who are used to giving canned, thoughtless quotes, and he was just the opposite. Thoughtful, smart, willing to question the leaders and the direction of college athletics.”
     
    A few outtakes from the discussion show just how concerned Krzyzewski is about some of the rapid realignment changes in college sports, and the role of the NCAA. “I’m not knocking [NCAA President] Mark Emmert,” he said. “He’s in charge of an organization that is very important. But it does not run intercollegiate athletics. If the NCAA ran intercollegiate athletics, it would say, ‘No, you can’t do that. It doesn’t fit a grand plan.’ So consequently, you have conferences that are looking out for their best interests. The best interest of the Big Ten may not be what’s in the best interest of the ACC or the Patriot League or the MAC. There’s no big vision for college athletics.”

    He continued to express frustration at the lack of a big-picture grand plan for college sports. “It’s about money. People say it’s about football, and for 100 or so schools, football drives that. At our school, basketball drives money, and a lot of schools are like that. But football can drive a lot of money. So that’s why we’re doing all of this? There’s no grand plan.”
    And he says it’s not over. “It’s not done by a long shot. Who is the Big East? What new conferences might there be? What does it do to another division? Is there going to be another division in the NCAA, or is there going to be another organization? That’s scary to me.” See Page 34 for the rest of our “Sit-Down” interview with Coach K.

    > MLS REACHES OUT: Kudos to Houston Dynamo President Chris Canetti and MLS for getting nearly 50 of the top names in U.S. soccer to conduct an event at the Newtown Youth Academy Sports & Fitness Center in Connecticut last week for the children and parents affected by last month’s tragedy at Sandy Hook Elementary School. It was Canetti, who grew up in the state and attended Quinnipiac, who came up with the idea, and worked with MLS on the execution. To bring that many of the top names, active and retired, to this small, grieving town had to be one of the proudest moments in the careers of the organizers and participants.

    > GOING THROUGH THE ARCHIVES: What a difference a year makes. A year ago, CBS touted a 24.0 Nielsen rating for the Tim Tebow-led Broncos’ upset of the Steelers in an AFC wild-card game. The overtime win marked the most-viewed wild-card game in at least 24 years. CBS Sports President Sean McManus said a few days later of the Tebow phenomenon, “When you have these things, whether it’s a Tiger Woods or a Tim Tebow, you sort of hang on and hope the ride lasts a long time.” He added the Tebow phenomenon “could end on Saturday night or it could go on for five more years, six more years, 10 more years.” Interesting point, as Tebow’s Broncos lost to the Patriots that Saturday, and some now wonder if he will ever again return to the NFL spotlight.

    Abraham D. Madkour can be reached at amadkour@sportsbusinessjournal.com.

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  • Value gained from nontraditional trademarks worth the effort

    Everyone knows the tremendous financial value of brands like the Nike swoosh (valued at more than $14 billion by a recent survey) and the Adidas brand (valued at more than $6 billion in the same survey). But beyond these traditional brands, comprising names and logos, are a variety of other symbols waiting for marketers to create and nurture, which will increase the value of the products with which they are used.

    Brands translate to trademarks in legal parlance, and a trademark can be anything as long as it designates a particular source to consumers. For example, the Heisman Trophy is a trademark because viewers recognize it as coming from one source, even if they cannot identify that source. Other product shapes are similarly famous and also protected as trademarks — for example, the Coca-Cola bottle. That iconic shape undoubtedly is worth millions, if not billions.

    Stranger things have been claimed as trademarks. One company got a federal trademark registration (since canceled) for the yellow line designating a first down in televised football games. The sound of the NBC chimes is a federally registered trademark. Colors have also been registered. The trustees of the University of Alabama have registered crimson and white as used on football uniforms. There are even federal trademark registrations for goats munching grass on the roof of a restaurant and for a piña colada-scented ukulele. The options are endless.

    The yellow first-down line was once a protected trademark. Jordan Brand hopes its “elephant print” becomes as recognizable a trademark as Coke’s bottle and the Heisman.
    Photo by: GETTY IMAGES (Heisman)
    The value of these trademarks derives from the fact that the owner gets the exclusive use of them. Companies therefore need to spend some time and effort making sure their use remains exclusive. Federal registration helps here. A federal trademark registration is the government’s stamp of approval that the registered trademark actually is a trademark, and that the registrant owns it.

    Nontraditional trademarks take more care and feeding than the average brand. But their potential value to the company probably warrants it. A shape, for example, cannot be registered as a trademark unless its owner can show that consumers have come to recognize it as indicating a particular source. The legal term here is “secondary meaning.” Evidence of significant sales, substantial advertising, long use and frequent media mentions helps establish secondary meaning. Proper advertising can seal a product feature’s trademark status, but improper advertising can as easily torpedo it. Advertising alerting customers to look for a particular color or shape can establish trademark rights, but if your advertising advises customers of the utilitarian advantages of a product feature, you probably will not be able to claim that feature as a trademark.

    Nike’s recent registration for a design sometimes called the “elephant print” that appears on its Jordan Brand products is an exemplar for showing secondary meaning. Nike submitted about a dozen media articles calling out the design, along with claims of $150 million and 4.5 million units in sales. Such a significant showing is not always necessary, but it is instructive.

    Of course, when a shape is new, evidence of secondary meaning will be unavailable. Under some circumstances, the U.S. Patent and Trademark Office may let an applicant for registration of a new mark reserve it until after he starts using the mark or can show secondary meaning in it. Other protection options may be available, like copyright registrations and design patents. Ultimately, it is likely worthwhile to add trademark protection to these other options, since, unlike other types of protection, trademark protection does not expire.

    A shape cannot be protected if it is functional, meaning that without it the product won’t work, or with it, the product can be made cheaper or better. The yellow first-down line mentioned above was canceled for just this reason. Sportvision, the owner of the registration, filed a lawsuit against a competitor, Sportsmedia Technology Corp., alleging that Sportsmedia’s use of a yellow line in broadcasts infringed the mark. The court found for Sportsmedia, stating that ESPN had picked the color yellow as one of only a few colors that would show up against a green football field with white lines. Therefore the yellow line was functional because it was one of only a few acceptable choices, and one company could not monopolize it. There are some similar, but perhaps less defensible cases illustrating functionality. A court found the green of John Deere farm equipment to be functional because farmers wanted their “equipment to match.” Another court found that the black color of outboard motors was functional in part because it decreased the apparent size of the motor (does this motor make my boat look fat?).

    Many companies that own a patent for a product feature fall in to the trap of trying to continue exclusive use of the feature after the patent expires by claiming that the same feature is protected by trademark law. However, the patent itself probably establishes that the feature is functional, and therefore can’t be a trademark.

    These stories might make you think that trying to get trademark rights for anything other than a name or logo is not worth the effort. And indeed, there are challenges. But many cases reflect either overreaching or poor planning on the part of the would-be trademark owner.

    As with most everything else, the key to nontraditional trademark protection is to plan ahead and consider the protection at the time that a product is developed. If an extra source-differentiating feature, like a color or a fanciful shape, can be added to the product upon its introduction, that feature will continue to be a valuable trademark even after any patent has expired. Moreover, like many companies, yours may already have developed trademarks that now can and should be federally protected. For example, Wilson Sporting Goods filed an application in 2005 for its trademark red color for tennis equipment bags (No. 3155678), which it had been using since 1974. Your company too probably already owns valuable trademarks that you can now federally protect.

    Janet Marvel (jmarvel@pattishall.com) is a partner at Pattishall, McAuliffe, Newbury, Hilliard & Geraldson in Chicago.

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