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NCAA faces unspecified damages, changes in latest anti-trust case

Should athletes whose college days are long behind them be paid when the NCAA licenses their images and likenesses? Should they be able to negotiate their own licensing deals with television networks, video game companies and various businesses that use those same images and likenesses?

According to former UCLA basketball star Ed O'Bannon and a class of thousands of other former men's basketball and football players, the answer to both questions is yes.

On Tuesday, O'Bannon filed a class action complaint in the U.S. District Court for the Northern District of California seeking unspecified monetary damages for the NCAA's use and license of former student-athletes' identifies in various commercial ventures. Those ventures include DVDs commemorating championship seasons, broadcasts of old games on ESPN Classic and "classic teams" available to be played on EA's NCAA Basketball video game. The NCAA bars current and former student-athletes from receiving compensation for NCAA-licensed products, which comprise part of a $4 billion collegiate-licensed industry.

To be clear, current NCAA players are not part of O'Bannon v. NCAA. The class of plaintiffs only includes former NCAA men's basketball and football players whose images and likenesses have been commercially licensed by the NCAA, and specifically its official licensing representative, Collegiate Licensing Company. A victory or favorable settlement, however, would be poised to financially benefit current players when they leave college. In fact, O'Bannon requests that a constructive trust be established for any resulting damages or compensation. The trust would be available to current players upon leaving college. A victory would also compel changes in the way the NCAA interacts with current and prospective student-athletes.

O'Bannon v. NCAA stems from a series of documents Division I student-athletes are required to sign as part of their participation in college sports. Form 08-3a (the "Student-Athlete" statement) is one such document. Among other conditions, it specifies, "You authorize the NCAA . . . to use your name or picture to generally promote NCAA championships or other NCAA events, activities or programs." By signing the statement, student-athletes relinquish in perpetuity all future rights in the NCAA's licensing of their images and likenesses. O'Bannon claims that student-athletes -- some of whom are younger than 18 -- effectively have no choice but to sign, since they would otherwise be deemed ineligible to play and would risk losing their athletic scholarships.

In the NCAA's view, however, these documents promote the NCAA's core mission: the integration of intercollegiate athletics into higher education and the promotion of student-athletes' educational experiences. Along those lines, as a voluntary organization comprised primarily of colleges and universities, the NCAA tends to frown upon professional and other remunerative endeavors pursued by student-athletes.

Indeed, if student-athletes were paid salaries or received income through endorsement or licensing deals, they may begin to resemble professional athletes more than college students. The professionalization of student-athletes would frustrate the NCAA's focus on amateurism, possibly making it more difficult for schools to comply with Title IX, a federal law that commands gender equity in sports. Professionalization could also create economic divisions among student-athletes on the basis of their commercial appeal. Student-athletes' exposure to professional opportunities might also lead to exploitation by unsavory businesspersons, whom colleges and universities not want on their campuses or near their student bodies.

Some commentators do not find the NCAA's concerns persuasive. Attorney Alan Milstein of Sherman, Silverstein, Kohl, Rose & Podolsky argues, "If the NCAA genuinely wanted to keep the college game pure, it wouldn't sell any images or likenesses. Plus, compare how the NCAA treats student-athletes with how colleges and universities treat students who are professional actors or musicians -- they, unlike student-athletes, can keep their earnings without jeopardizing their scholarships. It is completely unfair for student-athletes to be treated differently."

Whether the NCAA's concerns are meritorious, O'Bannon argues, those concerns would not seem applicable to commercial opportunities for former student-athletes. In fact, some of those former student-athletes are decades removed from their college days and possess substantial business acumen. Therein lies the unique twist of O'Bannon v. NCAA: it is strictly about compensation for former student-athletes, not current ones.

There are two core areas of law implicated by O'Bannon v. NCAA.

First, by requiring student-athletes to forgo their identity rights in perpetuity, the NCAA has allegedly restrained trade in violation of the Sherman Act, a core source of federal antitrust law. Here's why: student-athletes, but for their authorization of the NCAA to license their images and likenesses, would be able to negotiate their own licensing deals after leaving college. If they could do so, more licenses would be sold, which would theoretically produce a more competitive market for those licenses. A more competitive market normally means more choices and better prices for consumers. For example, if former student-athletes could negotiate their own licensing deals, multiple video game publishers could publish games featuring ex-players. More games could enhance technological innovation and lower prices for video game consumers.

Second, according to the plaintiffs, the NCAA has deprived them of their "right of publicity." The right of publicity refers to the property interest of a person's name or likeness, i.e. one's image, voice or even signature. Last year, when explaining why the NCAA has refrained from suing CBS over its use of player information in its fantasy sports game on CBS Sportsline.com, NCAA officials acknowledged that players' rights of publicity belong to the players, and not to the NCAA.

The NCAA, however, will likely argue that by freely signing the Student-Athlete statement and similar documents, and by accepting free tuition, room, board, and other benefits as part of their athletic scholarship, student-athletes forgo any potential antitrust injury and also agree to not profit off of whatever property rights they might otherwise enjoy. The NCAA will probably also contend that under "Rule of Reason" analysis, which governs many claims under Section 1 of the Sherman Act, the policies O'Bannon challenges are more pro-competitive than anti-competitive. If so, the NCAA would likely defeat O'Bannon's antitrust claims.

In assessing O'Bannon's claims, a court will consider the extent to which student-athletes possess a real "choice" when presented with the Student-Athlete statement and similar documents. On that front, O'Bannon appears emboldened by NCAA policies on student-athletes' access to legal counsel. According to O'Bannon, neither NCAA officials nor college athletic officials advise student-athletes that they can seek legal advice in connection with the release of future compensation rights. Particularly given the lack of "life experience" of most incoming student-athletes, such a policy may be viewed as arguably exploitative and also one that creates a disparity in bargaining power.

Recent case law may bolster O'Bannon. In Oliver v. NCAA, an Ohio State court earlier this year held that an NCAA bylaw that prohibited a lawyer from being present during negotiations between a drafted high school baseball player and a Major League Baseball team violated public policy. The case is currently under appeal.

The stakes of O'Bannon v. NCAA are enormous. If O'Bannon and former student-athletes prevail or receive a favorable settlement, the NCAA, along with its member conferences and schools, could be required to pay tens of millions, if not hundreds of millions, of dollars in damages -- particularly since damages are trebled under federal antitrust law. The marketplace for goods may change as well, with potentially more competition over the identities and likenesses of former college stars.

A victory would also necessitate substantial changes in the relationship between the NCAA and student-athletes. Namely, the NCAA could be required to advise student-athletes of the importance of legal counsel and of ways in which student-athletes can obtain counsel.

Proponents of such an outcome would likely hail the creation of a more equitable bargaining relationship between student-athletes and the NCAA. Critics, in turn, would likely bemoan a more litigious experience for both student-athletes and athletic department officials. They might also worry about diminished NCAA protection of student-athletes, with swindlers and charlatans potentially having easier access to student-athletes as they transition into the real world.