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Company sues league for playing hardball over stats

By The Associated Press
01.15.06

ST. LOUIS — As the St. Louis Cardinals contend for the National League pennant this summer, a federal court hearing a few blocks away will decide if statistics generated at those games are public domain or the intellectual property of Major League Baseball.

The lawsuit, scheduled for a July 24 hearing at U.S. District Court in St. Louis, will be watched closely by the hundreds of companies whose software facilitates fantasy sports leagues played by an estimated 16 million Americans.

The suit was filed last year by CBC Distribution and Marketing Inc., a St. Louis-based company that has operated sports fantasy products and leagues under its brand name CDM Fantasy Sports since 1992.

Until 2005, CBC had a licensing agreement with the Major League Baseball Players Association for the rights to player profiles and statistics — the lifeblood of fantasy baseball. In return, CBC paid the association 9% of gross royalties.

But in January 2005, Major League Baseball announced a $50 million agreement with the players association giving baseball exclusive rights to license statistics — and a bigger stake in the growing fantasy sports marketplace.

CBC requested a new license, but was turned down, prompting the suit. The company continues to operate leagues during the legal dispute.

The suit before U.S. Magistrate Mary Ann Medler claims that baseball statistics become historical facts as soon as the game is over. The company believes it shouldn't have to pay for the right to use those statistics.

"I like to say it's the defining moment in the fantasy sports industry," said Charlie Wiegert, a former newspaper advertising salesman who helped start CBC after playing in his own fantasy leagues in the 1980s. "If she decides they're right, what you'll see is 90 percent of the fantasy sports operators put out of business."

Major League Baseball has claimed that intellectual-property law makes it illegal for fantasy league operators to "commercially exploit the identities and statistical profiles" of big league players. Jim Gallagher, a spokesman for Major League Baseball Advanced Media, declined comment.

The suit could have huge ramifications for the multimillion-dollar fantasy sports industry, said Ben Clark, a St. Louis attorney who specializes in intellectual-property rights.

If baseball wins, "I think it would send a shudder through the entire fantasy industry," Clark said. "The ramifications are pretty large."

Ramifications are large for baseball, too. If it loses, it may forfeit the rights to any royalties for use of statistics, Clark said.

"You just wonder whether it's a fight Major League Baseball wants to have," he said.

In fantasy leagues, players are "drafted," and the team's performance depends upon the on-field performance of those players. Some leagues are just for fun. Others award cash prizes, some worth tens of thousands of dollars.

Fantasy sports operators like CBC post statistics both to determine which fantasy team is winning, and to aid participants in choosing whom to draft, whom to trade, or whom to play on a given day, according to CBC's lawsuit.

CBC attorney Rudy Telscher Jr. said about 300 companies currently operate fantasy leagues. He figures baseball's motive is to greatly reduce that number, funneling all fantasy business to a handful of providers and likely generating traffic and advertising to those Web sites — funds baseball can share.

"If baseball wins, it's going to go from 300 down to three, and maybe less," Telscher said.

Wiegert said NFL-related fantasy games are far and away the most popular, with about 9 million players. Fantasy baseball has about 3.5 million players, and basketball has an estimated 3 million.

While the St. Louis suit applies only to baseball, Telscher believes the decision will set the tone for all fantasy leagues.

"Everything pretty much rides on this decision," Telscher said. "My guess is there's going to be an appeal. It could be a case that ends up in the Supreme Court."


Update
Strike 1: Major League Baseball can't control player names, stats
Federal judge finds fantasy leagues may use information because it isn't the intellectual property of Major League Baseball. 08.09.06

Related

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When is sports information private intellectual property, and when is it fair game for distribution? 01.29.01

High court asked to break up PGA's 'monopoly' on facts
Morris Communications is appealing ruling by 11th Circuit that upheld tour's policy barring news media from releasing real-time golf scores. 08.31.04

High court turns deaf ear to several First Amendment appeals
Justices refuse to consider disputes including media distribution of real-time golf scores, federal do-not-call registry, contraceptive health benefits. 10.04.04

Below par: The PGA and freedom of the press
By Ken Paulson Court rules that golf tour can prevent news media from reporting scores as they happen. 04.18.04

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