Adidas America v. National Collegiate Athletic Association 40 F.Supp.

2d 1275 March 26, 1999 Statement of facts: The NCAA is a voluntary, unincorporated association of approximately 1100 four-year colleges and universities, conferences, affiliated associations and other academic institutions. Adidas America, Inc. ("Adidas") is just one of the United States' leading manufacturers of athletic footwear as well as apparel. Established in 1992, Adidas is a subsidiary of Adidas-Salomon AG, a German company, which is the second largest sporting goods company in the world. Adidas currently contracts with NCAA member institutions and their coaches to advertise and promote its products. From 1977, the NCAA policies on the use of logos on apparel have continued to change. Currently, the NCAA's rules on the usage of logos on equipment, uniforms and apparel are set forth in Bylaw 12.5.5. Bylaw 12.5.5 entails that a student-athlete institution's official uniform and all other apparel shall bear solely a single manufacturer's label or trademark, not to exceed 2 * square inches in area including any extra material adjoining the normal trademark or logo. The objective of Bylaw 12 .5 .5 would be to protect the integrity of collegiate athletics in order to prevent the economic exploitation of student-athletes. Furthermore, the bylaw was designed to evade an excessive amount of advertising and marketing that could in all probability interrupt the fundamental function of the student-athletes uniforms, which is certainly to present prompt identity of the athlete's number as well as team. There is no commercial objective behind the inception and enforcement of the bylaw. Adidas' trademark is three descending stripes down the sleeve or pant leg of a piece of apparel. The NCAA has prohibited college athletes from wearing uniforms that carry both the Adidas logo and three stripes. Therefore, the NCAA claims that an Adidas uniform bearing a three-stripe design element larger than two and one-quarter square inches violates the bylaw. Furthermore, the NCAA considers such a design element to be a second manufacturer's logo or trademark, which also violates the bylaw. Adidas America contracted with the NCAA to advertise and promote its athletic apparel. When the new by law was enacted by NCAA requiring that the logos on the athletes apparel should not exceed two and one quarter square inches. Adidas sued for breach of contract, tortuous interference with contractual relations and with prospective economic advantage and for violations of the Sections 1 and 2 of the Sherman Act. Adidas sought to enjoin enforcement of the by law until a trial on the merits. Procedural history: Adidas America filed suit for damages and injunctive relief against the National Collegiate Athletic Association (NCAA) alleging violations of Sections 1 and 2 of the Sherman Act; state law claims of tortious interference with contractual relations, tortious interference with prospective economic advantage, breach of contract; and violations of public policy and NCAA bylaws. The lawsuit, filed November 19, 1998, charged the NCAA with unfairly enforcing Bylaw 12.5.5, which mandates that there be only one logo on a college athlete's uniform. Arguments for Plaintiff Adidas argues that the NCAA is basically in competition with it along with other sports apparel companies by allowing to put its "NCAA Football" logo on college uniforms. For the reason that the NCAA Football logo is not governed by Bylaw 12 .5 .5's limitations, Adidas alleges that the NCAA is reaping competitive advantages from its application of the bylaw to Adidas and other sports apparel manufacturers.

Arguments for Defendant The NCAA believed that, for antitrust applications, Bylaw 12 .5 .5 is unnoticeable from its noncommercial eligibility rules. According to the NCAA , Bylaw 12 .5 .5 must not be susceptible to Sherman Act examination due to the fact the bylaw , akin to the eligibility rules , provides not any of the objective nor the effect of giving the NCAA or its member institutions an advantage in any commercial transaction . Issue: Where a by law has neither the purpose nor the effect of giving its members an advantage in any commercial transaction, is it a noncommercial activity not subject to the antitrust laws? Decision/Holding: Yes, where a by law has neither the purpose nor the effect of giving its members an advantage in any commercial transaction, it is noncommercial activity not subject to the antitrust laws. Adidas failed to show likelihood of success on the merits of its antitrust claims and it has failed to show that it would suffer irreparable harm in the absence of the injunction; hence its motion is denied. Courts Rationale In order for Adidas America to obtain preliminary injunctive relief, it had to demonstrate that (1) it will suffer irreparable injury in the absence of an injunction; (2) the threatened injury to Adidas outweighed whatever damage the injunction may cause to the NCAA; (3) the injunction, if issued, would not be adverse to the public interest; and (4) there is a substantial likelihood that Adidas would eventually prevail on the merits.1 To prevail on a section 1 claim, a plaintiff must prove that the defendant (1) participated in an agreement that (2) unreasonably restrained trade in the relevant market.2 To prevail on a section 2 claim, a plaintiff must establish the following elements: (1) "the possession of monopoly power in the relevant market," and (2) "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." 3 However, before analyzing the alleged antitrust violations under the above tests, the court must first determine the threshold issue of whether Bylaw 12.5.5 is properly the subject of federal antitrust law. Primarily, Adidas was unable to build up that they are going to deal with irreparable harm in the absence of a preliminary injunction. Adidas reasoned that without a preliminary injunction, it will eventually endure a diminution of its intellectual property and damage to its reputation, its association with member institutions, its processing and manufacturing affiliates, and the buying public. Nevertheless, Adidas presented only business supposition as well as presumption, which is certainly inadequate to render a definite showing of irreparable injury. Adidas' evidence and testimony was speculative and predominantly without genuine framework. Moreover, Adidas failed to demonstrate likelihood that it will probably succeed on the merits of its claims. Adidas believed that the NCAA had unreasonably restrained trade, engaged in a group boycott, and attempted to monopolize in violation of the Sherman Act. In determining if the NCAA had violated the Sherman Act, the court looked to the purpose of Bylaw 12 .5 .5.

Chemical Weapons Working Group v. United States Dept. of the Army, 111 F.3d 1485, 1489 (10th Cir.1997) See Reazin v. Blue Cross & Blue Shield of Kan., Inc., 899 F.2d 951, 959 (10th Cir. 1990). 3 United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966).
1 2

The court settled that the NCAA as well as its member institutions are not business competitors of Adidas and will not likely realize any financial or competitive advantage by reducing the amount of advertising authorized on the backs of student-athletes. Additionally, if Bylaw 12 .5 .5 places any restraint on the advertising market, it is an incidental by-product of the NCAA's valid attempt to preserve the amateurism and integrity of college sports, and it does not economically benefit the NCAA or its member institutions. The court even further came to the conclusion that Bylaw 12 .5 .5 is noncommercial in nature and purpose, and that the NCAA's enforcement of the bylaw is a noncommercial activity not subject to the antitrust laws. Therefore, Adidas failed to prove a likelihood of success on the merits of its antitrust claims. Analysis The court rightfully denied the application for injunctive relief by Adidas America, plaintiff really failed to prove that NCAA violated the Anti-trust Law4. The case at bar made a considerable impact on Legal Issues pertaining to Sports and Entertainment; it correctly discussed and illustrated the matter of copyright laws involving trademarks and logos. NCAA refused to use the complete Adidas logo on student uniforms, claiming that because each uniform can only have one logo, the Adidas logo and brand name were counted as two. Adidas specifically requested that their complete logo be used, copyrighting their logo so that their brand be successfully represented, not partially. The copyright of Adidas is a way of protecting their brand and allowing exclusive rights to anyone who uses it. The case exemplifies how relevant copyright laws are in the sports and entertainment industry.

The main statutes are the Sherman Act 1890, the Clayton Act 1914 and the Federal Trade Commission Act 1914