Month: February 2020

Recent Name/Image/Likeness Legislation Will Change the NCAA (or Not)

by Ronald S. Katz

INTRODUCTION

In a list of organizations creating inequities, the National Collegiate Athletic Association would certainly be included. For example, like professional sports, the NCAA is a multi-billion-dollar enterprise, but, unlike professional sports, it pays only a minuscule percentage of its revenues to its athletes, mainly in the form of athletic scholarships. In the field of intellectual property, those players have not been allowed to receive payments for their names, images and likenesses, even though every other student on campus has that right.

To remedy this latter injustice, California in September 2019 passed the Fair Pay to Play Act, allowing athletes rights regarding their names, images and likenesses similar to those enjoyed by all other students. Numerous other states are considering NIL legislation similar to California’s.

Because college sports receive much public attention, the California law, which does not come into effect until 2023, has generated numerous opinions about its potential effect. The extremes of those opinions range from those who say that the law will end intercollegiate sport as we know it to those who say that the law will have no effect. The NCAA has now also weighed in, stating, opaquely, that it will at some unknown point “permit” college athletes “the opportunity to benefit” from their name/image/likeness “in a manner consistent with the collegiate model.”

In fact, at this juncture, no one can really say what the effect, if any, of the law will be. That point was driven home by an order rendered on January 6, 2020, by the federal appellate court with jurisdiction over California, the Ninth Circuit Court of Appeals. Pursuant to that order, in  the pending appeal (No. 19-15566) of In re: National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation, a case concerning the payment of college athletes, “The parties are directed to file…briefs…on the impact, if any, of California’s Fair Pay to Play Act…on this case.”

If the judges of the Ninth Circuit do not yet know the effect of the NIL law, it is fair to say that no one else does either. In my opinion, the best that can be done at this point, as below, is to put the law into context by triangulating among the extreme opinions noted above and the NCAA’s position on the Fair Pay to Play Act.

EXTREME OPINION #1: NIL LEGISLATION WILL END INTERCOLLEGIATE SPORT AS WE KNOW IT

There is logic supporting this view. For example, there is no difference in economic effect if an athlete receives from an alumni booster of a university $10,000 under the table, which violates NCAA rules; $10,000 in salary, which violates NCAA rules; or $10,000 for name, image or likeness, which would be legal under the Fair Pay to Play Act and, possibly, under new NCAA regulations. Because money is fungible, it really does not matter, in an economic sense, for what reason it is purportedly paid. Therefore, payment for names, images and/or likenesses can completely undermine the NCAA principle that athletes should not be paid. The amounts paid, in theory, could be virtually unlimited.

EXTREME OPINION #2: NIL LEGISLATION WILL HAVE NO EFFECT

This extreme view has support in the law. Under the Commerce Clause of the U.S. Constitution, states cannot make laws that regulate interstate commerce, and intercollegiate sports clearly constitute interstate commerce, viz., the NATIONAL Collegiate Athletic Association. Indeed, a case decided by the Ninth Circuit Court of Appeals in 1993 (NCAA v. Miller, 10 F.3d 633) applied this principle to intercollegiate sports.

In that case, Nevada made a law that would have caused NCAA disciplinary proceedings to have rules in Nevada different from those that the NCAA applied nationally. Like the Fair Pay to Play Act, the Nevada law had been emulated in other states.

The court did not hesitate to invalidate the Nevada statute on the ground that it regulated interstate commerce in violation of the U.S. Constitution: “The statute directly regulates interstate commerce and runs afoul of the Commerce Clause both because it regulates a product in interstate commerce beyond Nevada’s state boundaries, and because it puts the NCAA…in jeopardy of being subjected to inconsistent legislation arising from the injection of Nevada’s regulatory scheme into the jurisdiction of other states.” It is difficult, if not impossible, to distinguish the judicial reasoning applied to this Nevada legislation from the judicial reasoning that would be applied to California’s Fair Pay to Play Act.

THE NCAA’S OPAQUE PRONOUNCEMENT

 As noted above, in October, 2019, after the California law passed, the NCAA issued a vague statement to the effect that It will study how college athletes may be paid for their names, images and/or likenesses “in a manner consistent with the collegiate model” at some unstated point in time. One problem with the NCAA’s statement is that the collegiate model is nowhere clearly defined.

Underscoring that fundamental problem is that the District Court decision being considered in the Ninth Circuit order mentioned above (In re Nat’l Collegiate Athletic Ass’n Athletic Grant-in­ Aid Cap Antitrust Litig., No. 14-MD-02541 CW, 2019 WL 1747780, (N.D. Cal. Mar. 8, 2019)) concluded that the NCAA rules “that permit, limit, or forbid student-athlete compensation and benefits do not follow any coherent definition of amateurism,” which is the core principle of the NCAA. This finding was based, among other things, on inconsistent definitions of amateurism given by different NCAA witnesses and on the fact that at trial, according to the court’s opinion, there was evidence of seventeen different ways-such as payment for post­ season bowl or championship play–that the NCAA permits athletes to be compensated.

Thus, whatever the NCAA’s definition of an amateur is, it does not comport with the dictionary definition: “a person who engages in a study, sport or other activity for pleasure rather than for financial benefit or professional reasons.” Given the above, it is difficult to divine how the NCAA will create a system of payment for athlete names, images and likenesses “consistent with the collegiate model.” It should be noted that payment for the names, images and/or likenesses of athletes rarely have a connection to education.

CONCLUSION

Intellectual property injustice is a symptom of the NCAA’s underlying problem, and the Fair Pay to Play Act is a reaction to that symptom. The fundamental problem of the NCAA is that its top levels are indistinguishable from professional sports, and the theory of amateurism-however that is defined–does not work in that context. Whether the Fair Pay to Play Act survives or not, the pressure will continue to bring the regulation of college sport in line with its reality.

Ronald S. Katz is a Senior Counsel at GCA Law Partners LLP. A co-author of Sport, Ethics and Leadership, he will be speaking on the subject covered above at the 2020 IP and Social Justice CLE this coming February 28.