The facts of the case are as follows:

In 2002, NFL Properties (“NFLP”), the business responsible for controlling all NFL licensing contracts, signed a ten-year exclusivity agreement granting Reebok the sole right to manufacture officially licensed NFL apparel.  American Needle, an apparel manufacturer that held a non-exclusive license to produce NFL apparel for nearly three decades, argued that the NFL’s exclusive agreement with Reebok is a violation of federal antitrust law, specifically Section 1 of the Sherman Antitrust Act.

While private companies are typically allowed to engage in exclusive licensing agreements without violating the Sherman Act, Section 1 of the Act forbids competitors to conspire in order to limit competition or harm consumers.  Because the NFL consists of 32 privately-owned, competitive teams and NFL Properties is equally owned by all 32 teams, American Needle argues that the Reebok exclusivity contract constitutes an agreement between the NFL teams to limit competition and harm consumers in violation of the Sherman Act.

American Needle argues that the Reebok/NFLP agreement limits competition by preventing apparel manufacturers from negotiating with individual NFL teams for the right to produce branded apparel and, as a result of exclusivity in apparel markets, allows Reebok to charge higher prices than it could with adequate competition.  Anyone who has ever paid $100+ for a polyester Bears jersey has surely felt the effects of exclusivity agreements.

Aside from merely harming consumers through increased prices, the Sherman Act is also designed to prevent competitors from conspiring to limit consumer choice, which American Needle argues is a major concern when there is only one apparel supplier.

In response, the NFL argues that it is, despite being composed of separate and competitive teams, a “single entity” for purposes of antitrust law.  As a single entity, the NFL cannot possibly conspire with itself nor can it limit competition because it is, quite literally, the only game in town.

Both the district court and Seventh Circuit Court of Appeals opined that the NFL is a single entity for purposes of antitrust law, but I would tend to disagree with their decision.  A 1984 Supreme Court opinion held that only parent companies and their wholly-owned subsidiaries qualify as single entities, which certainly doesn’t apply to the structure of the NFL or NFLP.  While there are a number of good reasons to maintain the NFL’s current licensing arrangements, it does not seem to me that the long history of competition between NFL teams–including ticket sales and media rights–supports the idea that the NFL should be considered a single entity.

While the effects of the Court’s decision will be far-reaching, the primary concern for gamers will be over existing licensing arrangements for sports games.  If the NFL loses the case, EA could lose its current position as the exclusive publisher of NFL-licensed games.  Furthermore, the ways in which future game licensing agreements are negotiated would be forever changed.  Rather than appealing to a single business or organization, such as the NFLP, publishers would be able to negotiate with individual teams.  While this could lead to more competition in the sports gaming markets, it could also lead to really wonky arrangements–imagine EA releasing an NFL game with 20 NFL teams and a dozen or so fantasy teams to round out the roster while 2K releases a game with the 12 NFL teams missing from EA’s game and a handful of its own fantasy teams.  However, it’s also very likely that publishers would have no trouble securing the rights to each individual team for their games.

In another interesting scenario, publishers could consider the cost to license individual marks and opt only to enter into agreements with the teams that seemed economically “worth it.”  After all, it is possible that a publisher does not derive as much value from including the Lions in their game as they do from including the Packers.  While the Madden franchise will certainly continue to include the full “NFL experience,” it’s likely that another publisher may want to take advantage of individual licensing agreements to create a scaled-back football experience that only includes top teams.

With the American Needle decision potentially affecting the NFL, NBA, and NHL (among others), gamers may soon be seeing some big changes in a significant portion of the industry.

Retired Supreme Court Justice Sandra Day O’Connor revealed Wednesday that she will be working on a new video game designed to teach children how United States courts work. The game, currently titled Our Courts, will consist of two distinct parts and will be released in stages beginning this September.

The first part of the game is a free online civics program developed with the Georgetown University Law Center and Arizona State University. The interactive online program is designed for students in grades seven through nine and is intended to supplement existing courses or act as a standalone program. The website, www.ourcourts.org, hopes to engage students by forcing them to consider real legal issues. For instance, Reuters summarized a hypothetical game scenario presented by O’Connor: “one element would focus on … a school attempting to stop students wearing a T-shirt with a controversial slogan — a free speech issue designed to elicit argument about the 1st Amendment.”

O’Connor was scant on details concerning the second part of Our Courts, but stated that it would be designed for children to use in their free time. O’Connor realized the value of reaching children through modern technology by interaction with her grandchildren. Citing statistics that children typically spend forty hours a week using media, including video games, O’Connor stated:

If we can capture just a little bit of that time to get them thinking about government and civic engagement rather than playing shoot-’em-up video games, that’s a huge step in the right direction.

O’Connor became involved with the game’s development out of concern over the increasingly negative partisan criticism of judges and courts. O’Connor hopes that Our Courts will counter such criticisms and educate a largely ignorant public:

In recent years I’ve become increasingly concerned about vitriolic attacks by some members of Congress, some members of state legislatures and various private interest groups …. We hear a great deal about judges who are activists — godless, secular, humanists trying to impose their will on the rest of us.

With partisan attacks and political pressure mounting, it’s much more difficult to achieve fair and impartial judgments from the judges who are serving.

When asked if she played video games herself, O’Connor stated that she did not.

Source: Reuters

Today I had the rare honor of not only attending a Supreme Court argument, but also spending an hour and a half with Justice Scalia, the Court’s second most senior Associate Justice.

Those of you who are familiar with American jurisprudence are probably familiar with Justice Scalia’s reputation as an extremely conservative justice who is a strict originalist when it comes to constitutional interpretation. For those that are unfamiliar with the different schools of thought in constitutional interpretation, originalist believe that the terms of the United States Constitution should be interpreted as they were intended at the time they were ratified. The critical question asked by originalist is, “What would a reasonable person at the time of ratification have understood these words to mean?” (For a look at opposing schools of thought Google “interpretivists” and/or “living Constitution.”)

While the bulk of my time with Justice Scalia was focused on matters that are largely unrelated to video games, I did take this rare opportunity to ask the Justice his feelings concerning recent state video game legislation. In particular, I asked him whether as an originalist he believed that state laws banning the sale of mature-rated video games to minors ran afoul of the First Amendment.

In his most succinct reply of the day, Justice Scalia replied that he did believe such legislation was constitutional. He began by explaining his belief that sound constitutional precedent holds that minors may be subjected to prohibitions that adults are not — he instantly drew the parallel to regulation of pornography sales. However, Justice Scalia emphasized that unprotected speech, such as obscenity — which he was unwilling to define for reasons that are immediately evident to any constitutional scholar — can be prohibited from sale regardless of the purchaser’s age. Justice Scalia did not suggest that violent and/or sexual content in games rises to the level of unprotected speech. In fact, he did not even suggest that video games themselves are not protected by the First Amendment (as some have suggested) and, instead, seemed to agree with numerous lower courts that games are entitled to First Amendment protection.

The implications of Justice Scalia’s answers are multi-dimensional. First, he suggests that upon appeal to the Supreme Court at least one of the nine justices would affirm state laws that ban the sale of mature-rated games to minors. Second, his remarks suggest Justice Scalia believes that video games not qualifying as obscenity¹ are protected by the First Amendment.

Essentially, this means that one of nine Supreme Court justices believes the sale of mature games to minors can be regulated, but the context of his answer suggested that the overall regulation of the medium would most likely be unconstitutional. Such a holding would not place a ban on parents buying mature games for their children; it would simply prevent minors from buying the games on their own and would leave parents to be parents.

It is important to note that several state and federal courts are in disagreement with Justice Scalia. In particular, an opinion penned by Richard Posner, a judge I hold in the highest regard, as well as opinions in numerous other Circuit Courts have held that the government cannot prevent minors access to mature arcade games or from purchasing mature-rated console titles. What does the Laws of Play community think?

Ed. Note: As this article has been gaining a lot of attention, I think it is important to make a few clarifications.  First, despite Justice Scalia’s belief that video game laws banning the sale of mature games to minors could be Constitutional, there are many other factors that could change his mind.  American jurisprudence is firmly grounded in the idea that suits are decided on a case-by-case basis and a generalized response in an informal conversation is hardly a definitive answer.  Second, as my language suggests, much of the latter half of this article is conjecture based on how Justice Scalia answered the question.  Take that for what it’s worth.

1. The current test for obscenity was established in Miller v. California, 413 U.S. 15 (1973), and is typically referred to as The Miller Test. The test sets forth three prongs that must be satisfied in order for a work to be considered obscene. The three prongs are: (1) Whether the average person, applying contemporary community standards, would find that the work, taken as a whole, appeals to the prurient interest, (2) whether the work depicts or describes, in a patently offensive way, sexual conduct or excretory functions as defined by applicable state law, and (3) whether the work, taken as a whole, lacks serious literary, artistic, political, and scientific value.