Supreme Court Applies “Functional Analysis” to Determine Joint Venture Is Not a “Single Entity” Immune from Antitrust Liability

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In American Needle, Inc. v. National Football League, 560 U.S. __ (2010), the Supreme Court unanimously held that teams in the National Football League and a corporate entity that they formed to manage their intellectual property should be considered separate entities capable of conspiring with one another for purposes of antitrust liability under Section 1 of the Sherman Act. The American Needle decision has direct implications for sports leagues and other joint ventures, and the “functional analysis” the Court adopted for this purpose may also have implications in other contexts in which the “single entity” defense may be asserted.

The National Football League and its member teams have established a joint venture, National Football League Properties (NFLP), to develop, license, and market their trademarks and other intellectual property. Until 2000, NFLP granted a number of non-exclusive licenses to plaintiff American Needle and other licensees, but it then decided instead to grant a 10-year exclusive license to Reebok International Ltd. to manufacture and sell trademarked headwear for all 32 NFL teams. After NFLP declined to renew its non-exclusive licensees, American Needle sued the NFL, its member teams, NFLP and Reebok, contending that the defendants’ collective licensing arrangement constituted an unreasonable restraint of trade that was unlawful under Section 1 of the Sherman Act. The defendants successfully argued to the district court and Seventh Circuit Court of Appeals that the NFL, its teams, and the NFLP operate as a single entity, incapable of conspiring under Section 1 of the Sherman Act. The Supreme Court reversed.

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