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Madison Square Garden, L.P. v. National Hockey League

November 2, 2007

MADISON SQUARE GARDEN, L.P., PLAINTIFF,
v.
NATIONAL HOCKEY LEAGUE, NATIONAL HOCKEY LEAGUE ENTERPRISES, L.P., NATIONAL HOCKEY LEAGUE INTERACTIVE CYBERENTERPRISES, L.L.C., NHL ENTERPRISES, L.L.C., NHL ENTERPRISES CANADA, L.P., AND NHL ENTERPRISES, B.V., DEFENDANTS.



The opinion of the court was delivered by: Loretta A. Preska, United States District Judge

MEMORANDUM AND ORDER

Madison Square Garden, L.P. ("MSG") moves for a preliminary injunction against what it alleges are anticompetitive practices on the part of the National Hockey League and affiliated entities (collectively "NHL" or "the League") relating to the NHL's New Media Strategy, primarily the transfer of the MSG-owned New York Rangers (the "Rangers") team website, see The Official Site of the New York Rangers, http://newyorkrangers.com (last visited Nov. 2, 2007), to the League-operated server. For the reasons discussed below, the motion is denied.

I. Factual Background

A. The NHL Organizational Structure

The NHL is an unincorporated association of thirty Member Clubs organized as a joint venture. See Complaint for Injunctive Relief ("Compl.") ¶ 7; Declaration of William L. Daly ("Daly Decl.") ¶ 2. Member clubs are independent and separate businesses, but all have signed and ratified the NHL Constitution and By-laws, and, as such, the clubs' internal affairs are subject to the provisions of those agreements. See Daly Decl. ¶ 3; see also Compl. ¶¶ 7-9. The Constitution delineates the joint venture's purposes and objects, which include: (i) the promotion of the common interests of the members of the League, and (ii) the promulgation of rules governing the relationships between Member Clubs and the League and between the Member Clubs and other hockey clubs. See Daly Decl. Ex. A (NHL Const.) at 1.

The League's Commissioner serves as the Chief Executive Officer of the League and is charged with acting in the best interest of the League as a whole. See Daly Decl. ¶ 7. The Commissioner has the power to interpret the provisions of the Constitution, By-Laws, League rules and resolutions; he also has "full and complete authority" to discipline Member Clubs for violations of League rules. See id. ¶¶ 8, 9.

B. The League Efforts to Create a National Brand

Insofar as it is a provider of sports entertainment, the NHL competes with other sports that attract a national audience, such as baseball and football. One problem that the NHL has had is bridging fan support for local teams with interest in the sport as a whole. See Declaration of John Collins ("Collins Decl.") ¶ 5. Hockey fans, for example, are less likely to watch the playoffs once "their team" is eliminated than are fans of other sports. In order to grow hockey in competition with other sports and entertainment offerings, the NHL has decided to take steps to improve the strength of the League brand. See Daly Decl. ¶ 21.*fn1 The League wants to provide fans with more multidimensional hockey coverage that emphasizes the importance of other League games and news. See Collins Decl. ¶ 7. In its view, the NHL website, see NHL.com, http://www.nhl.com (last visited Nov. 2, 2007), is a critical element of this national brand-building strategy because it encourages and facilitates traffic by fans among the various NHL Member Clubs' websites. See Collins Decl. ¶ 11.

C. Early League Efforts to Exploit Intellectual Property

Like other major sports leagues, the Member Clubs of the NHL have determined that they can best maximize the value of many of their intellectual property rights, like Club trademarks, by assigning them to the League to market on a collective basis. See Daly Decl. ¶¶ 28, 29. In January 1994, the Member Clubs, with the Rangers' vote, granted the League exclusive worldwide rights to use or license team trademarks for various marketing purposes, such as advertising and the sale and distribution of "products and services . . . of any nature." Id. ¶ 30. In June 1996, the League entered into an alliance with IBM (later known as NHL ICE) for the purpose of developing an NHL website. During the course of this project's development, the Clubs agreed that the right to develop and exploit the internet as a marketing tool resided in the League itself. See id. ¶ 36.*fn2 The Member Clubs also granted the Commissioner broad discretion to carry out the League's objectives relating to the exploitation of the Member Clubs' intellectual property on the internet by NHL ICE, including the authority to make directives regarding advertising and merchandising rights. See id. ¶ 37. Thus, since 1996, all Member Clubs have been subject to certain advertising, sponsorship, and merchandising restrictions. See id. ¶¶ 39, 40.

During a June 2000 meeting, the Member Clubs revisited their internet strategy. Changing their approach somewhat, they concluded that the optimal business model was a hybrid model, wherein the League's and Clubs' websites would be part of an integrated network, with certain elements available on the Clubs' sites and others available on NHL.com. See id. ¶ 42. Again at this meeting, the Board unanimously reaffirmed that rights to exploit the Member Clubs' intellectual property on the internet belong to the League and that the Commissioner has the authority to promulgate rules and regulations to carry out this mandate. See id. ¶ 43. Pursuant to this authority, the Commissioner promulgated internet regulations, including rules for the operation of Club websites. These regulations included, inter alia, setting aside a portion of each team site as an "NHL Area" for League content and reserving to the League the right to control thirty-five percent of all advertising on each Club's website. See id. ¶ 45; Declaration of Keith Ritter ("Ritter Decl.") ¶ 2. The rules also required all merchandise sales to be made through the League store. See Daly Decl. ¶ 47.

Under the 2000 regime, Member Club websites were supported by a variety of internet service providers. See Ritter Decl. ¶ 4. This technological regime had several undesirable qualities, including divergent levels of quality, problems sharing content between sites, and other technical problems. See id. ¶ 4. At no point did the Rangers object to the League's governing Internet Regulations, and they never contended that such regulations constituted a violation of the antitrust laws. See Daly Decl. ¶ 48.

D. The Genesis of the New Media Strategy

In December 2005, the Executive Committee of the Board of Governors instructed the League Office to consider potential alternative business models for the NHL's "new media business," with particular attention to be given to the benefits of greater centralization and integration of the League's media rights. See id. ¶ 49. Pursuant to this directive, the Commissioner formed a committee comprised of ten Member Clubs to develop a plan to maximize new media revenues (the "New Media Committee"). See id. ¶ 50.*fn3 The Committee surveyed the new media strategies of the Member Clubs. It found that many clubs were not using their websites as marketing or sales promotions ...


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