United States District Court, N.D. Illinois, Eastern Division
June 6, 2005.
AMERICAN NEEDLE, INC., Plaintiff,
NEW ORLEANS LOUISIANA SAINTS, et al., Defendants.
The opinion of the court was delivered by: JAMES MORAN, Senior District Judge
MEMORANDUM OPINION AND ORDER
Defendants, the National Football League (NFL), the individual
owners of the NFL's member teams, National Football League
Properties, Inc. (NFLP), and Reebok International, Ltd. (Reebok),
move for partial reconsideration of this court's Memorandum
Opinion and Order of May 5, 2005. In that decision, defendants'
motion to dismiss count IV of plaintiff American Needle's
complaint was granted, but their motion to dismiss counts I, II,
III, and V was denied. Defendants now argue that the court erred
by considering that headwear and apparel carrying NFL and NFL
teams' logos may constitute a relevant market to support
plaintiff's claims. They contend that the court should have only
considered the market in licenses to use trademarks and logos.
Defendants correctly point out that there is a distinction
between American Needles' input markets and outputs markets. In
its complaint, American Needle alleges that there are six
relevant markets: two are markets in which it is a buyer of
licenses for trademarks (input markets), and four where it is the
producer of products displaying those trademarks, which are sold
to consumers (output markets). The court did not devote any
attention in its prior opinion to this distinction between plaintiff's alleged markets
because it was irrelevant, given defendants' argument for
dismissal. In their original motion to dismiss and subsequent
briefs, defendants argued that none of plaintiff's alleged
markets was a relevant market for antitrust claims because such
markets could not be defined by trademarks. Defendants applied
this broad argument to all of plaintiffs alleged markets input
and output markets alike. In the court's opinion it rejected
defendants' contention that as a matter of law plaintiff's
relevant markets could not be defined by trademarked logos.
Defendants present a different argument in this motion to
reconsider. While before they argued that none of plaintiff's
alleged markets was viable because they all relied on trademarks,
which could never define a market, they now argue that American
Needle can only allege a restriction, and therefore harm, in the
input market, for licenses to use NFL logos, and that this is not
a relevant market because there is a cross-elasticity with
licenses for other logos. Rather than asking the court to
reconsider its assessment of their previous arguments, defendants
ask the court to consider this new argument. For the following
reasons, we deny the motion for partial reconsideration.
Defendants argue that the NFLP's alleged exclusive contract
with Reebok restricts the market for licenses to use the NFL's
and NFL teams' trademarks. They further maintain that the
contract does not affect plaintiff's output of products, i.e.,
American Needle can still sell as many hats as it likes.
Therefore, defendants argue, the only market relevant to the
court's inquiry should be American Needle's input market,
licenses for various trademarks and logos, not its output market,
headwear and apparel.
In support of their argument, defendants cite Collins v.
Associated Pathologists, Ltd., 844 F.2d 473 (7th Cir. 1988).
In Collins, the plaintiff, a pathologist formerly employed by Associated Pathologists, Ltd. (APL), brought an antitrust action
against APL and St. John's Hospital. Id. at 474-75. APL
contracted with St. John's to provide all of its pathology
services. Id. at 475. As an APL employee, the plaintiff
provided services for the hospital; however, after he was forced
to resign, St. John's refused to hire him due to its contract
with APL. Id. When determining whether APL's contract with St.
John's was an unreasonable restraint of trade, the Seventh Circuit
concluded that the relevant market to analyze was the market in which
pathologists competed for jobs, not the market in which hospitals offered
pathology services to their patients. Id. at 478-79.
The Seventh Circuit provided two reasons for this decision.
First, the court held that a market of pathology services to
hospital patients is not relevant because there is no distinct
demand for pathology services separate from other hospital
services. Id. at 478. In other words, the court found that a
consumer market for pathology services did not exist and "[t]herefore
the contract between St. John's and APL for the provision of pathological
services could not have had an impact on patients." Id. The court stated
that only hospitals and clinical laboratories could have been affected by
the defendants' contract. Id.
The same does not hold true for the trademark licensing
contract. There is a distinct demand for headwear and apparel
carrying the logos of the NFL and NFL teams. As explained in our
prior opinion, there is a basis to believe that for some
consumers the NFL teams' logos are the "product," rather than the
items carrying the logos. A contract which provides one company
with an exclusive right to produce items carrying these logos may
very well have an affect on the consumers who purchase them.
The second reason the Seventh Circuit limited the relevant
market in Collins to the market in which pathologists compete
for jobs was because of the Supreme Court's decision in Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320
(1961), where a coal mining company entered into a contract to
provide an electric power company in Tampa, Florida, with all of
its required coal for twenty years. Id. at 322. Before the
first shipment of coal, but after considerable investment by both
parties, the mining company informed the utility company that the
requirement contract violated antitrust laws and therefore it
would not perform. Id. at 323. The utility sought coal
elsewhere and sued for a declaration that the contract was valid.
Id. at 323-24. The district and appellate courts held that the
contract violated section 3 of the Clayton Act, 15 U.S.C. § 12
et seq.,*fn1 but the Supreme Court reversed. Id. at 324.
The Supreme Court found that the lower courts had not properly
considered the relevant market when determining whether the
contract foreclosed competition in a substantial share of the
line of commerce affected. Id. at 329-330. While the lower
courts analyzed how the contract affected competition in the
market for coal in peninsular Florida, the Supreme Court found
that the relevant market was not so geographically narrow and
that it should have been defined by the region in which the coal
company and its competitors sold their coal. Id. at 331-32.
Within this much larger geographic market the parties' coal
contract had an insubstantial effect on the coal market. Id. at
332-33. In Collins, the Seventh Circuit relies on Tampa
Electric Co. in finding that the only market relevant to the
exclusive dealing contract between APL and the hospital is the
market for pathologists. 844 F.2d at 478-79. The court points out
that the Supreme Court never focused on the electricity company's
energy market when considering the requirement contract's effect
on competition. Id.
Defendants in the instant case argue that, as in Collins and
Tampa Electric Co., we should not consider the contract's effect on the output market.
However, Collins and Tampa Electric Co. are significantly
different from American Needle's action. The contract between the
parties in Tampa Electric Co., as with the contract in
Collins, had no apparent effect on competition in the output
market. The Supreme Court does not note, and it is not evident,
how Tampa Electric Co.'s source of coal would affect its
customers' market for electric energy. It is not even clear from
the opinion whether Tampa Electric Co.'s customers had any choice
other than this public utility for their electricity service.
The same is not true of the NFLP's alleged contract with
Reebok. It is readily apparent how restricting the issuance of
licenses for the use of the NFL's and NFL teams' trademarked
logos in the input market could directly affect the ability of
consumers to purchase goods carrying the trademarked logos in the
output market. For this reason, this case is distinct from those
relied upon by defendants.
Two cases that were repeatedly cited in the court's prior
opinion, NCAA v. Board of Regents of the University of
Oklahoma, 468 U.S. 85 (1984), and Chicago Professional Sports
Limited Partnership v. NBA, 961 F.2d 667 (7th Cir. 1992),
provide greater insight into the relevance of input and output
markets to this case. Their facts also bear more in common with
this case than those cited by defendants. In Board of Regents
and Chicago Professional Sports, the NCAA and NBA,
respectively, restricted member teams' sale of broadcast rights
of their games to television stations. In Chicago Professional
Sports, WGN, the television station that wished to purchase the
right to air more Chicago Bulls games, was also a plaintiff.
961 F.2d at 669. In these cases the NCAA and NBA were restricting an
input market the market of television rights available for
broadcasters to purchase. The member teams complained that they
missed out on revenues and publicity due to the restrictions, and
in Chicago Professional Sports, WGN likewise complained that it lost out on potential
advertising revenues. Of course, WGN had many other options from
which to choose in filling its programming schedule, just as
American Needle has other licensing options for logos to put on
its products. However, the courts' analyses in Board of Regents
and Chicago Professional Sports did not consider only the
directly restricted input market the market in television
rights they also considered the output market the market in
televised games available to the viewing public. As the Supreme
Court noted, "By restraining the quantity of television rights
available for sale, the challenged practices create a limitation
on output." Board of Regents, 468 U.S. 85, 99 (1984). Since the
restriction on the input market creates such a direct effect on
the output market, it is proper for the court to consider that
market in its analysis. This direct link is also present in the
instant case, making it more akin to Board of Regents and
Chicago Professional Sports than Collins and Tampa Electric
American Needle is in the same position as WGN in Chicago
Professional Sports; it has a role as both a buyer and producer.
See 961 F.2d at 670. Though the harm to WGN occurred in the
market where it was the buyer of the television rights to Bulls
games, the court considered the effect on the market in which WGN
was the producer and the television viewers were the consumers.
Likewise, the harm to American Needle results from its inability
to obtain a license to use NFL and NFL teams' trademarks, but
that does not preclude the court from considering how the NFLP's
alleged exclusive contract with Reebok affects the consumers of
the products carrying those trademarks "the consumers that
antitrust laws are supposed to protect." See id. at 669. While,
as we previously noted, plaintiff's claim may face some daunting
obstacles, the legal concept of a relevant market is not one of
For the foregoing reasons, defendants' motion to reconsider is