United States District Court, S.D. New York
November 8, 2005.
Major League Baseball Properties, Inc., Plaintiff,
Salvino, Inc., Defendant. Salvino, Inc., Plaintiff, v. Major League Baseball Enterprises, Inc. and Major League Baseball Properties, Inc., Defendants.
The opinion of the court was delivered by: RICHARD CASEY, District Judge
OPINION & ORDER
These disputes arise out of Salvino, Inc.'s ("Salvino")
production and sales of small plush bean-filled bears, known as
Bammers, featuring the logo of certain Major League Baseball
("MLB") Clubs. Major League Baseball Properties ("MLBP") is
responsible for licensing the rights to use MLB intellectual
property on retail products. On November 3, 1999, after learning
Salvino was making and selling Bammers with MLB Club logos, MLBP
sent it a cease-and-desist letter. In response, Salvino filed a
complaint in November 1999 in the U.S. District Court for the
Central District of California against MLBP and MLBP's corporate
parent Major League Baseball Enterprises ("MLBE"). Salvino
alleges that the organization of MLBP and its licensing
activities violate antitrust laws. MLBP then brought its trade
dress, breach of contract, and unfair competition action against
Salvino in this Court. The California court subsequently
transferred the Salvino action here. MLBP and MLBE now move for
summary judgment on Salvino's antitrust, California unfair
competition, and tortious interference claims. Salvino cross
moves for partial summary judgment on MLBP's trade dress claims.
For the reasons explained herein, the motion by MLBP and MLBE is
granted, and Salvino's motion is denied. I. Background
Unless otherwise indicated, the following facts are not in
dispute. Since 1987, with limited, and irrelevant, exceptions,
MLBP has been the worldwide agent for licensing the use of
intellectual property rights owned or controlled by MLB Clubs,
the Baseball Office of the Commissioner ("BOC"), and MLBP on
retail products. (MLBP 56.1 Stmt. ¶¶ 2, 18, 25.) A series of
agreements known as the Agency Agreement govern MLBP's operations
and relationships with the Clubs. (Id.) The Agency Agreement
distinguishes between products sold at retail and those that
Clubs give away as part of a promotion at a game. (MLBP 56.1
Stmt. ¶ 11.) Retail items even if they are sold at a concession
stand inside a MLB stadium must be licensed through MLBP.
(Id.) "Giveaways," however, do not require a license from MLBP
as long as they do not include the marks of another Club, MLBP,
or the BOC. (MLBP 56.1 ¶ 12.) Similarly, Clubs may sell products
not licensed by MLBP at stadium concession stands provided the
products do not use any marks owned by MLBP or the BOC. (MLBP
56.1 ¶ 13.)
Prior to MLBP's assumption of all licensing responsibility and
authority, potential licensees had to approach each Club
separately to obtain a license for MLB intellectual property.
(MLBP 56.1 Stmt. ¶ 20.) For example, in 1965, the Houston Astros
refused to permit Topps Chewing Gum to make or sell a baseball
card with an Astros team photo. (MLBP 56.1 Stmt. ¶ 21.)
Similarly, Coca-Cola did not include MLB Clubs in an "under the
cap" promotion it ran in the 1960s because it was "too
cumbersome" to obtain licensing rights from each Club
individually. (MLBP 56.1 Stmt. ¶ 22.) MLBP contends that its
current organization provides efficient protection, quality
control, and design of MLB's intellectual property, as well as
efficiencies in promotions, advertising, sales, administration,
and licensing operations. (MLBP 56.1 Stmt. ¶ 19, 78-81). Salvino
claims there are less restrictive ways to achieve efficient
licensing operations. (Salvino Resp. to MLBP 56.1 Stmt. ¶ 37.)
Between 1989 and 2001, Salvino obtained licenses from MLBP to
use MLB intellectual property on baseball figurines. (MLBP 56.1 ¶
92.) Under the MLBP license agreement signed by Salvino, Salvino
promised it would not "use the Logos in any manner other than as
licensed. . . ." (MLBP 56.1 ¶ 95). In 1998, Salvino began selling
plush bean-filled bears known as Bammers. (MLBP 56.1 ¶ 96.) MLBP
contends that Salvino did not request a license to use MLBP
intellectual property on the Bammers, but did obtain a license
from the MLB Players Association to use MLB player names on them.
(MLBP 56.1 ¶ 97.) Salvino claims it tried to obtain a license
from MLBP to use MLBP logos and other intellectual property on
its Bammers. (Salvino Resp. to MLB 56.1 ¶ 98.) Salvino sold its
Bammers to retailers, including MLB Clubs and stadium concession
stands. (MLBP 56.1 ¶¶ 111-12.)
Colin Hagen of MLBP assumed responsibility for the Salvino
account in late 1998. (MLBP 56.1 ¶ 121). He met with Wayne
Salvino, Salvino's vice president, to discuss the possibility of
a license for Club trademarks on Bammers in the spring of 1999.
(MLBP 56.1 ¶¶ 94, 123-24.) MLBP claims it never received a
license application from Salvino. (MLBP 56.1 ¶¶ 126-27.) Salvino
claims that Wayne Salvino personally delivered a completed
license application to Hagen, although it has not produced a copy
of the completed from. (Salvino Resp. to MLB 56.1 ¶ 126; MLB 56.1 ¶ 128.) Regardless, MLBP did not
issue Salvino a license to use MLB intellectual property on
In March 1999, MLBP granted a non-exclusive license to Team
Beans to use certain MLB intellectual property on bean-filled
bears. (MLBP 56.1 ¶ 130.) Team Beans also obtained an exclusive
license for the use of Club marks on plush bears with sewn-on
authentic uniforms and a non-exclusive license for other
categories of bears, including bean-filled bears similar to
Bammers. (MLBP 56.1 ¶ 131). MLBP claims Salvino tried to make its
Bammers match Club uniforms as much as possible, including, for
example, by using color matches provided in the MLBP Style Guide
that Salvino received in conjunction with its previously obtained
MLBP licences. (MLBP 56.1 ¶¶ 136, 139-40.) In 2000, Salvino
placed the city or state name across the chest of certain of its
Bammers. (MLBP 56.1 ¶ 141.) The parties dispute whether Salvino
told Clubs and retailers that it had an MLBP license for its
Bammers. (MLBP Resp. to Salvino 56.1 ¶ 8.)
In October 1999, MLBP learned that Salvino was making and
selling Bammers with the Arizona Diamondbacks logo to the
Diamondbacks Club store without a MLBP license. (MLBP 56.1 ¶
145.) Salvino claims the Diamondbacks ordered these Bammers.
(Salvino Resp. to MLBP 56.1 ¶ 145.) Regardless, MLBP sent a
cease-and-desist letter to Salvino and Salvino responded by
filing a lawsuit against MLBP in the Central District of
California on November 23, 1999. (MLBP 56.1 ¶¶ 146-47.) This
consolidated litigation followed.
A. Summary Judgment Standard
Summary judgment is appropriate where the parties' submissions
demonstrate "that there is no genuine issue as to any material
fact and the moving party is entitled to judgment as a matter of
law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986). "Only disputes over facts that might affect
the outcome of the suit under the governing law will properly
preclude the entry of summary judgment." Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). In evaluating a summary
judgment motion, the court must resolve all ambiguities and draw
all inferences in favor of the non-moving party. Anderson,
477 U.S. at 255. The party seeking summary judgment bears the initial
burden of showing that no genuine issue of fact exists.
Celotex, 477 U.S. at 323. Once such a showing is made, the
opposing party must present "specific facts showing there is a
genuine issue for trial." Fed.R.Civ.P. 56(e). However, the
non-moving party "may not rely on conclusory allegations or
unsubstantiated speculation." Scott v. Almenas, 143 F.3d 105,
114 (2d Cir. 1998).
B. MLBP's Motion for Summary Judgment on Salvino's Antitrust
Section 1 of the Sherman Act prohibits "[e]very contract,
combination in the form of trust or otherwise, or conspiracy, in
restraint of trade or commerce among the several States." 15 U.S.C. § 1.*fn1 The Supreme Court has limited § 1 of the
Sherman Act "to prohibit only unreasonable restraints of trade."
Nat'l Collegiate Athletic Ass'n v. Bd. of Regents, 468 U.S. 85,
98 (1984); Metro. Intercollegiate Basketball Ass'n v. Nat'l
Collegiate Athletic Ass'n, 337 F. Supp. 2d 563, 569 (S.D.N.Y.
2004). "Independent conduct falls outside the purview of this
provision." Id. "To prove a § 1 violation, a plaintiff must
demonstrate: (1) a combination or some form of concerted action
between at least two legally distinct economic entities that (2)
unreasonably restrains trade" under a per se or rule or
reason analysis. Geneva Pharms. Tech. Corp. v. Barr Labs. Inc.,
386 F.3d 485, 506 (2d Cir. 2004); see also Metro.
Intercollegiate Basketball Ass'n, 337 F. Supp. 2d. at 569.
The parties disagree over how the Court should analyze
Salvino's Sherman Act claim. MLBP argues that a rule of reason
analysis is required. Salvino contends that the per se rule
should be applied, but that even a quick look would demonstrate
that MLBP's organization places unreasonable restraints on
competition. "[T]he categories of analysis of anticompetitive
effect are less fixed than terms like `per se,' `quick look,'
and `rule of reason' tend to make them appear. . . . The
essential inquiry remains the same whether or not the
challenged restraint enhances competition." Cal. Dental Ass'n v.
Fed. Trade Comm'n, 526 U.S. 756, 779-80 (1999).
For conduct to be illegal per se, it must fall within "the
narrow range of behavior that is considered so plainly
anti-competitive and so lacking in redeeming pro-competitive
value that it is `presumed illegal without further examination.'"
Geneva Pharms., 386 F.3d at 506 (quoting Broad. Music, Inc. v.
Columbia Broad. Sys., Inc., 441 U.S. 1, 8 (1979)); see also
United States v. Topco Assocs., Inc., 405 U.S. 596, 607 (1972)
("While the Court has utilized the `rule of reason' in evaluating
the legality of most restraints alleged to be violative of the
Sherman Act, it has also developed the doctrine that certain
business relationships are per se violations of the Act without
regard to a consideration of their reasonableness."). "Restraints
such as price fixing, market divisions, tying arrangements, and
group boycotts have all been found to be unreasonable in and of
themselves." Metro. Intercollegiate Basketball Ass'n,
337 F. Supp. 2d. at 570 (citing N. Pac. Ry. Co. v. U.S., 356 U.S. 1, 5
(1958)); see also Topco Assocs., 405 U.S. at 608 (noting
courts may classify certain business relationships as per se
illegal "only after considerable experience" with them).
This Court cannot say that the organization of MLBP and its
licensing authority is a per se violation of § 1 of the
Sherman Act. The Supreme Court in Broadcast Music,
441 U.S. at 20, found that the plaintiff's blanket licensing arrangement was
not per se unlawful because it was "not a `naked [restraint]
on trade with no purpose except stifling of competition,' but
rather accompanies the integration of sales, monitoring, and
enforcement against unauthorized copyright use." Similarly, this
Court finds that MLBP's role in licensing MLB intellectual property is not a naked restraint on trade. Like the license
agreement in Broadcast Music, it also facilitates the efficient
protection and quality control of MLB intellectual property.
Moreover, courts have declined to apply the per se rule to
sports leagues where cooperation among competitors "can under
some circumstances have legitimate purposes as well as
anticompetitive effects." N. Am. Soccer League v. Nat'l Football
League, 670 F.2d 1249, 1258-59 (2d Cir. 1982) (applying rule of
reason analysis to NFL's cross-league ownership ban); see also
Nat'l Collegiate Athletic Ass'n v. Bd. of Regents of the Univ.
of Okla., 468 U.S. 85, 99 (1984) (declining to apply the per
se rule to "an industry in which horizontal restraints on
competition are essential if the product is to be available at
Under a rule of reason analysis, which is applied "where, the
economic impact of certain practices is not immediately obvious,"
Fed. Trade Comm'n v. Ind. Fed'n of Dentists, 476 U.S. 447, 459
(1986), "conduct will be deemed illegal only if it unreasonably
restrains competition," Atlantic Richfield Co. v. USA Petroleum
Co., 495 U.S. 328, 342 (1990). The plaintiff bears the burden of
demonstrating that the challenged behavior "had an actual adverse
effect on competition as a whole in the relevant market."
Capital Imaging Assocs. P.C. v. Mohawk Valley Med. Assocs.,
Inc., 996 F.2d 537, 543 (2d Cir. 1993). Evidence that the
plaintiff has been harmed as an individual competitor will not
suffice. Atlantic Richfield, 495 U.S. at 343-44. If the
plaintiff meets its burden, the burden shifts to the defendant to
offer evidence of the pro-competitive effects of its agreement.
Capital Imaging, 996 F.2d at 543. The burden then shifts back
to the plaintiff to prove that any legitimate competitive
benefits offered by the defendant could have been achieved
through less restrictive means. Id. "Ultimately, the factfinder
must engage in a careful weighing of the competitive effects of
the agreement both pro and con to determine if the effects of
the challenged restraint tend to promote or destroy competition."
Geneva Pharms., 386 F.3d at 507 (citing Capital Imaging,
996 F.2d at 543).
Under a quick look analysis, the "plaintiff is relieved of its
initial burden of showing that the challenged restraints have an
adverse effect on competition because the anticompetitive effects
are obvious." Metro. Intercollegiate Basketball Ass'n,
337 F. Supp. 2d. at 569. Under an "abbreviated or `quick-look' analysis
. . . an observer with even a rudimentary understanding of
economics could conclude that the arrangements in question would
have an anticompetitive effect on customers and markets." Cal.
Dental, 526 U.S. at 770. The "quick-look analysis carries the
day when the great likelihood of anticompetitive effects can
easily be ascertained." Id. It is not appropriate, however,
where the anticompetitive effects of an agreement are not obvious
or may "have a net procompetitive effect, or possibly no effect
at all on competition." Id. at 771. MLBP's expert identifies
several procompetitive justifications for MLBP's arrangement,
including the benefits of one-stop shopping for MLB intellectual
property (MLBP 56.1 Stmt. ¶¶ 46-8), and the efficiencies of
enforcement, quality control, and coordinated promotion, design,
sales, and marketing support (MLB 56.1 Stmt. ¶¶ 62-91). While
Salvino's expert conclusorily disagrees with MLBP's expert's
opinion (Guth Decl. ¶¶ 8-19), MLBP's proffer demonstrates that
the quick look doctrine is inappropriate here since the casual
observer could not summarily conclude that MLBP's arrangement has
an anticompetitive effect on customers. Cf. Cal. Dental,
526 U.S. at 570. The Court finds, therefore, that the rule of reason
is the appropriate review for Salvino's claim.
Accordingly, Salvino bears the initial burden "of showing that
the challenged action has had an actual adverse effect on
competition as a whole in the relevant market." K.M.B. Warehouse
Distrib., Inc. v. Walker Mfg. Co., 61 F.3d 123, 127 (2d Cir.
1995) (affirming district court's grant of summary judgment after
the plaintiff failed to show the defendants' actions had an
anticompetitive effect). The mere fact that Salvino did not
receive an MLBP license for its Bammers is not sufficient. Id.
(explaining "the plaintiff must show more than just that he was
harmed by defendants' conduct). Salvino has not offered any
evidence of an adverse effect on competition resulting from
MLBP's licensing authority. Indeed, Salvino did not respond to
MLBP's arguments regarding the rule of reason analysis and
instead urged the Court to analyze its claims under the per
se rule or quick look doctrine, neither of which would require
Salvino to make a showing of adverse effect on the market.
Further, Salvino does not dispute MLBP's stated increase in
MLBP-licensed products since MLBP took over licensing authority
for MLB intellectual property. (MLBP 56.1 Stmt. ¶¶ 26-36.)
Salvino only takes issue with MLBP's proffered reasons for the
increase, i.e., it claims the increase is a product of the
"licensing boom" and not a result of MLBP's centralized process.
(Salvino Resp. to MLBP 56.1 Stmt. ¶ 29.)
"`Where the plaintiff is unable to demonstrate such actual
effects . . . it must at least establish that defendants possess
the requisite market power' and thus the capacity to inhibit
competition market-wide." K.M.B. Warehouse Distrib.,
61 F.3d at 129 (citing Capital Imaging, 996 F.2d at 546). Salvino argues
that a showing of market power is unnecessary (Salvino Mem. in
Opp'n to MLBP Mot. for Summ. J. at 8 n. 3), and dismisses as
immaterial MLBP's attempts to define the relevant market (Salvino
Resp. to MLBP 56.1 Stmt. ¶¶ 60-61). Salvino cannot escape its
burden of demonstrating MLBP's market power in light of its
inability to demonstrate an actual adverse effect on competition.
Capital Imaging, 996 F.2d at 546. The Court finds that Salvino
has failed to offer any evidence of MLBP's actual adverse effect
on the market or its sufficient market power. Accordingly,
Salvino cannot demonstrate under the rule of reason that MLBP
places unreasonable restraints on trade. MLBP's motion for
summary judgment on Salvino's § 1 Sherman Act claim is granted.
The parties agree that Salvino's California unfair competition
claim and New York tortious interference with a contract claim
depend on the success of its Sherman Act claim. Since the Court
grants summary judgment to MLBP on the Sherman Act claim and
Salvino has not offered any evidence to support the California
unfair competition or New York tortious interference claim,
MLBP's motion for summary judgment on Salvino's state law claims
is also granted.
C. Salvino's Motion for Partial Summary Judgment on MLBP's
Lanham Act Claim
Salvino moves for partial summary judgment on MLBP's Lanham Act
claims. Salvino produced Bammers with the names of MLB players
after it received a license to do so from the MLB Players
Association. (Salvino 56.1 Stmt. ¶ 4.) The Salvino Bammers
featured the names and numbers of the players, as well as their
Club colors and, in some instances, city names in block letters. (MLBP Resp. to Salvino 56.1 Stmt. ¶ 8.) Salvino
does not dispute that its Bammers colors were chosen to be
similar to Club colors and to depict the players' association
with their respective teams. (Salvino Mem. in Supp. of Summ. J.
at 6.) By using team colors on the Bammers, MLBP claims Salvino
infringed and diluted its trade dress under §§ 43(a) and (c) of
the Lanham Act. MLBP has since withdrawn with prejudice its
dilution claim. (MLBP Opp'n to Salvino Mot. for Summ. J. at 1.)
Section 43(a) of the Lanham Act protects trade dress.
15 U.S.C. § 1125(a). "A product's trade dress encompasses the overall
design and appearance that make the product identifiable to
consumers." Nora Beverages, Inc. v. Perrier Group of Am., Inc.,
269 F.3d 114, 118 (2d Cir. 2001). A product's trade dress is
protected if it is not functional and if it is either inherently
distinctive or has acquired secondary meaning in the marketplace.
Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 769 (1992).
To prevail on a trade dress infringement claim, a plaintiff must
also prove that the allegedly infringing product is likely to
confuse customers as to its source or sponsorship. Nora
Beverages, 269 F.3d at 118-19; see also Polaroid Corp. v.
Polorad Elecs. Corp., 287 F.2d 492, 495 (2d Cir. 1961) (setting
forth multi-factor test to determine the likelihood of
confusion). In undertaking its analysis, the Court understands it
"must not lose sight of the underlying purpose of the Lanham Act,
which is protecting consumers and manufacturers from deceptive
representations of affiliation and origin." Landscape Forms,
Inc. v. Columbia Cascade Co., 113 F.3d 373, 375 (2d Cir. 1997).
The Court begins with the question of functionality. "In an
action for trade dress infringement brought under
15 U.S.C. § 1125(a), Congress has placed the burden on the plaintiff to show
that its unregistered trade dress is non-functional." Deere &
Co. v. MTD Holdings Inc., No. 00 Civ. 5936 (LMM), 2004 WL
324890, at *7 (S.D.N.Y. Feb. 19, 2004). A feature is functional
if it is "essential to the use or purpose of the article or if it
affects the cost or quality of the article, that is if exclusive
use of the feature would put competitors at a significant
non-reputation-related disadvantage." Qualitex Co. v. Jacobson
Prods. Co., 514 U.S. 159, 165 (1995) (citations omitted). MLBP
argues, correctly, that the color of a Bammer is not essential to
its purpose and does not affect its quality or cost. Salvino has
used other colors and color combinations on its baseball player
Bammers that are not meant to replicate the player's Club colors.
(See, e.g., MLBP Ex. 138). The colors Salvino chooses to place
on its Bammers do not represent an "advance in the useful arts,
the [colors] merely function to enable consumers . . . to
identify a [Bammer] with a particular [baseball player.]" Warner
Brothers, Inc. v. Gay Toys, Inc., 724 F.2d 327, 332 (2d Cir.
1983) (concluding "that only functions which represent
development of useful features, and not functions which serve
merely to identify, are considered in determining
functionality"). Accordingly, MLBP has sufficiently demonstrated
the non-functional nature of the Bammers' trade dress.
Next, MLBP must demonstrate that the Clubs' trade dress are
either inherently distinctive or have acquired a secondary
meaning in the marketplace. Two Pesos, 505 U.S. at 769. "A
trade dress based on the design of a product can never be
inherently distinctive." Malaco Leaf, AB v. Promotion in
Motion, 287 F. Supp. 2d 355, 363 (2d Cir. 2003) (citing
Wal-Mart Stores, Inc. v. Samara Bros. Inc., 529 U.S. 205, 212-215 (2000)).
Accordingly, MLBP must come forward with evidence that the Clubs'
team colors and city names have achieved a secondary meaning.
That is, "in the minds of the public, the primary significance of
[the trade dress] is to identify the source of the product rather
than the product itself." Yurman Design, Inc. v. PAJ, Inc.,
262 F.3d 101, 115 (2d Cir. 2001). MLBP's success in this regard
requires an inquiry into the following factors: "(1) advertising
expenditures, (2) consumer studies linking the [trade dress] to
the source, (3) unsolicited media coverage of the product, (4)
sales success, (5) attempts to plagiarize the [trade dress], and
(6) the length and exclusivity of the [trade dress'] use." Deere
& Co., 2004 WL 324890, at *10. Salvino argues that MLBP has not
presented evidence to demonstrate a secondary meaning for each of
the Clubs' colors or combinations. However, summary judgment on
this fact-sensitive inquiry is appropriate only if MLBP
completely fails to "come forward with evidence that would
demonstrate the need for a trial on this issue." Ideal World
Mktg, Inc. v. Duracell, Inc., 15 F. Supp. 2d 239, 245 (E.D.N.Y.
MLBP argues that the Clubs' trade dress is extensively
advertised; its consumer surveys indicated recognition of Clubs'
colors and some confusion regarding the source of Bammers (MLBP
Ex. 138); the Clubs' trade dress and city names receive
substantial media attention; MLBP-licensed products exceeded $10
billion in sales since 1992 (MLBP Ex. 126, ¶ 5); and that most
MLB Clubs have long histories and their colors, uniforms, and
city names have long been used to identify them. Most pointedly,
Salvino's own actions demonstrate that the trade dress is subject
to intentional imitation. For example, Wayne Salvino, Salvino's
president, testified that he selected colors for Bammers in light
of the fact that "certain players are associated with certain
colors." (MLBP Ex. 27 at 208.) He explained, "when people think
of Griffey when he was with Seattle, they would probably think
green. . . .") (Id.) Rick Salvino testified that "people . . .
want the logos. . . . They want the whole piece of pie." (MLBP
Ex. 135 at 203-04). Salvino does not address these arguments or
the record evidence cited by MLBP. Accordingly, the evidence
cited by MLBP is sufficient to establish the existence of genuine
issues of fact to be tried with respect to the secondary meaning
of the MLB Clubs' trade dress. MLBP will, of course, be required
to prove at trial the secondary meaning for each of the trade
dress items for which it seeks protection. See Yurman Design,
Inc. v. Golden Treasure Imports, Inc., 275 F. Supp. 2d 506, 513
The Court finds that a genuine issue of fact exists as to
whether MLB Clubs' trade dress has achieved a secondary meaning
in the marketplace. As such, summary judgment on MLBP's Lanham
Act claim is inappropriate.
For the reasons explained above, MLBE's and MLBP's motion for
summary judgment on all of Salvino's claims is granted. Salvino's
motion for partial summary judgment on MLBP's trade dress claim
is denied. MLBP is to inform the Court within three weeks of the
entry of this order as to how it wishes to proceed with its
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