Intersport, Inc. v. Ncaa

• Decision Date: 26 March 2008
• Docket Number: No. 1-07-0626.,1-07-0626.
• Citation: 885 N.E.2d 532
• Parties: INTERSPORT, INC., Plaintiff-Appellee, v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION and March Madness Athletic Association, L.L.C., Defendants-Appellants.
• Court: United States Appellate Court of Illinois

885 N.E.2d 532

INTERSPORT, INC., Plaintiff-Appellee, v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION and March Madness Athletic Association, L.L.C., Defendants-Appellants.

No. 1-07-0626.

Appellate Court of Illinois, First District, Third Division.

March 26, 2008.

Rehearing Denied April 23, 2008.

Antony J. McShane, Michael G. Kelber, Hillary A. Mann, Neal, Gerber & Eisenberg LLP, Chicago, IL, for Defendants-Appellants.

Paul E. Veith, Michael C. Andolina, April D. Lambert, Sidley Austin LLP, Chicago, IL, for Plaintiff-Appellee.

Justice THEIS delivered the opinion of the court:

Defendants, the National Collegiate Athletic Association (the NCAA) and the March Madness Athletic Association, L.L.C. (the MMAA), appeal from the order of the circuit court of Cook County entering a declaratory judgment in favor of plaintiff Intersport, Inc. Specifically, the circuit court found that Intersport's license from the MMAA to use the trademark term "March Madness" to "advertise, promote, and sell videos" of certain sports programming encompassed the right to distribute content to video-enabled wireless communications devices on demand. On appeal, defendants now contend that: (1) the circuit court erred in interpreting the term "videos" as including material transmitted to Sprint PCS cell phone customers on demand; (2) the circuit court impermissibly rewrote the language of Intersport's license agreement; and (3) the circuit court had an insufficient factual basis to enter judgment on Intersport's declaratory judgment claim. For the following reasons, we affirm the judgment of the circuit court.

The record discloses that Intersport filed an amended verified complaint for declaratory relief alleging the following facts relevant to this appeal. Intersport produces sports-related programming for broadcast in a range of media, including television programming featuring college basketball coaches discussing and analyzing the NCAA men's Division I college basketball tournament (the Coaches Shows). Intersport's Coaches Shows have been broadcast on ESPN, Fox Sports Network, and elsewhere.

Intersport has been using the term "March Madness" in connection with its programming since 1986. In 1989, Intersport registered the term "March Madness" as a service mark with the United States Patent and Trademark Office. The registration was for the purpose of using the term in connection with Intersport's business.

However, in 1990, the Illinois High School Association (the IHSA) sought to register the mark, claiming that it had used the term "March Madness" in connection with its state high school basketball championships since the 1940s. The IHSA discovered Intersport's registration, and a dispute ensued. Ultimately, the IHSA and Intersport agreed to resolve any dispute regarding the ownership of the mark by pooling their trademark rights into a new entity, March Madness, L.L.C. This arrangement continued until 1995, when the IHSA became involved in a dispute with the NCAA over the use of the term. At that time, Intersport assigned its rights in the March Madness mark to the IHSA in exchange for, inter alia, royalties and an exclusive, perpetual license to use the mark in connection with its Coaches Shows. The license agreement specifically provided that:

"SECTION 2 — LICENSE GRANT

2.1 IHSA hereby grants Intersport an exclusive, paid-up license to use the March Madness Mark in the following manner:

(a) in connection with entertainment services, namely the presentation of athletic and entertainment personalities in a panel forum; and

(B) to advertise, promote, and sell publications, videos, and media broadcasts in connection with section 2.1(a)."

The license agreement further provided that Intersport could not use the mark in any manner inconsistent with the above license grant. The agreement also provided that "[t]he term of this Agreement shall be perpetual." The parties also simultaneously entered into a perpetual marketing and representation agreement, under which Intersport agreed to "use all reasonable efforts to promote and further the licensing and use of the March Madness Marks in a manner consistent with this Agreement."

The NCAA claimed that its rights in the March Madness mark began in 1982, when CBS announcer Brent Musburger described the NCAA men's Division I basketball tournament as "March Madness." Litigation between the NCAA and the Illinois State High School Association continued from 1995 until 2000, when they agreed to pool their rights in the mark and form the March Madness Athletic Association (the MMAA). The written agreement between the IHSA and the NCAA forming the MMAA specifically provided that the IHSA thereby assigned the Intersport license agreement, exactly as written, to the MMAA.

In March 2006, Intersport entered into an agreement with Sprint, under which Intersport would provide Sprint with a variety of original programming to be disseminated to Sprint customers via Sprint's mobile wireless media network. Intersport would also provide edited segments of its Coaches Show programming for dissemination over Sprint's mobile wireless media network.

The day after Intersport and Sprint announced their agreement, the NCAA sent Intersport and Sprint a letter asserting that if Intersport were to provide the Coaches Shows to Sprint for distribution to mobile communications subscribers, Intersport will have violated the license agreement. The NCAA also took the position that the term "media broadcast" as used in the license agreement should be interpreted in accordance with the definition of "broadcast" in the Federal Communications Act (47 U.S.C. § 153(6) (2000)), which defines "broadcasting" as a distribution to the public via television or radio, and the federal regulations concerning personal communications services (47 C.F.R. § 24.3 (2007)), which prohibit personal communications service providers from broadcasting as defined in the Federal Communications Act.

Intersport asserted that the language of its license agreement with the MMAA did grant it the authority to contract with Sprint to disseminate Coaches Show programming to mobile communications customers. Thus, Intersport sought a declaratory judgment proclaiming that Intersport was within its rights to use the mark "in connection with the Coaches Shows and `to advertise, promote, and sell videos or media broadcasts' of the Coaches Shows to be distributed via any broadcast media," including video-enabled mobile wireless communications devices.

Intersport attached several items to its complaint, including the license agreement, the perpetual marketing and representation agreement, a letter from the NCAA dated November 15, 2000, indicating that the NCAA and the MMAA would honor Intersport's agreements with the IHSA, and another letter from the NCAA dated March 10, 2006, warning Intersport that it considered Intersport's agreement with Sprint to be a violation of the license agreement. Attached to the March 10, 2006, letter was a Sprint press release, which announced that Sprint would be delivering "exclusive, made-for-mobile collegiate hoops programming to its customers." The press release quoted the vice-president of marketing for Sprint as saying, "Mobile phones offer so much more than just voice applications today." Among the "programming" or "on-demand video segments" offered to Sprint customers would be "installments" of the March Madness Coaches Preview. This programming would be provided by Intersport, which the release described as "an Emmy Award-winning creator, producer and distributor of original sports programming content and an industry leader in sports hospitality and event marketing." The press release further explained that the majority of this "mobile-exclusive content is free to Sprint Vision and Power Vision subscribers." The Sprint subscribers would be able to "enjoy" this content "on demand."

In their answer, defendants admitted that Intersport had been granted the license as alleged, but denied that the language of the license agreement encompassed distribution of the Coaches Shows for viewing on mobile communications devices. Defendants also raised two affirmative defenses and several counterclaims. The affirmative defenses were that Intersport had materially breached the license agreement by granting rights to use the mark to Sprint, which was prohibited by the agreement, and that Intersport's admitted and continued efforts to license the mark to third parties constituted a further material breach of the license agreement.

In their counterclaims, defendants asserted that Intersport's actions in intentionally allowing Sprint to use the mark constituted a breach of contract as well as contributory and direct trademark infringement in violation of section 1114 of the Trademark Act of 1946 (15 U.S.C. § 1114 (2000)). Defendants also alleged that Intersport's actions improperly gave Sprint the appearance of having been sanctioned or endorsed by the NCAA, allowing Sprint to be unjustly enriched. As such, Intersport's actions constituted contributory and direct unfair competition in violation of section 1125(a) of the Trademark Act of 1946 (15 U.S.C. § 1125(a) (2000)), deceptive trade practices in violation of the Uniform Deceptive Trade Practices Act (815 ILCS 510/1 et seq. (West 2006)), and unfair competition in violation of Illinois common law. Accordingly, defendants requested that the court deny Intersport the relief it had requested, enter a finding that Intersport's actions constituted a breach of the license agreement and trademark infringement, award the NCAA and the MMAA monetary damages, and permanently enjoin Intersport from using the mark. Intersport responded to these counterclaims by denying any liability.

Thereafter, defendants moved for partial summary judgment on Intersport's declaratory judgment claim and on their own breach of contract claim. Therein, they claimed that the plain and ordinary meaning of the...