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John B.
Farmer

 

Lawrence E. Laubscher, Jr.

 

Ian D. Titley

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Will Colleges Lose Their Trademark Monopoly on Selling Sports Fan Gear?

Wednesday, December 21st, 2022

Let’s take a reader poll:

When you see someone wearing a T-shirt with the name or logo of a college, do you think that either the college made the item or licensed the manufacturer to do so?

Do you think the law requires you to have a license from a college to put its name or logos on such sports fan apparel?

Public opinion on those two questions could determine the fate of the multibillion-dollar sports fan apparel business and, indeed, the entire industry of putting famous business logos on fan gear.

Penn State recently sued a company called Vintage Brand, which, appropriately, makes college sports fan gear featuring past logos of popular colleges. Vintage Brand does so without Penn State’s permission, which appears to be Vintage Brand’s standard procedure.

Penn State probably anticipated an easy win. Until now, courts ruled fairly consistently that it is trademark infringement to produce college-team sports fan gear displaying the name, logos, or colors of colleges without the colleges’ permission, which would require paying a license fee. The federal court in the Penn State case questioned that case law and signaled it may rule that colleges don’t always have a monopoly on such business.

The Pennsylvania court based its reasoning on the purpose of trademarks. The trademark owner is the party that controls the quality of the branded good or service.

That owner might be the maker of the branded good or provider of the branded service. Or it might be the person or company that controls the quality of making such goods or providing such services, such as Nike controlling the quality of shoes made by its Asian contract manufacturers.

Trademark infringement occurs when someone uses a trademark in a manner that is likely to confuse the public as to whether the new user is the trademark owner or is affiliated with it. For example, I can’t open a hamburger stand called McRONALD’S because some people would think I’m affiliated with McDONALD’S.

But owning a trademark is not a monopoly on all displays of it. For example, if you use a college’s logo on a sweatshirt just on the front or back, the public may not view it as an indicator of who made or authorized making it. What the public believes about manufacture and permission controls the infringement analysis.
For that reason, the Pennsylvania court held it needs evidence as to what the public believes about source and permission when it sees college fan apparel, like a T-shirt emblazoned with the famous Penn State mountain lion logo. That belief will control whether Vintage Brands is committing trademark infringement.

The court held two questions must be answered:

First, does the public believe the college itself made the T-shirt? Almost certainly not. Practically everybody knows such items are typically made by licensed manufacturers such as Nike, Adidas, and Under Armour.

Second, does the public believe such fan merchandise can be made only under license from that college? If the public believes a license is required, then, logically, under trademark law, such belief would make it trademark infringement to produce college sports fan apparel without the college’s permission because the public would believe Penn State licensed Vintage Brand to make stuff when it didn’t.

The court criticized that result as circular logic, with this being the circle: colleges have a trademark monopoly on producing or licensing their fan merchandise because the public thinks a license is required, and the public thinking that a license is required creates the trademark monopoly. Seeing this as a “chicken and egg” problem, the court ruminated over whether courts should disregard such mistaken consumer beliefs and allow unlicensed parties to produce college sports fan gear when the traditional indications of source (e.g., hangtags, labels, shirt tags) don’t claim an affiliation with the college.

We won’t know for a while how the Pennsylvania court will rule. There’s much left to litigate. Penn State could settle the case to avoid an adverse ruling, but that won’t stuff the Nittany Lion back in the bag. Rogue operators are always getting sued for producing sports-team fan gear without permission. Someone else would take up the fight.

There’s a lot on the line here. Sports-fan merchandise licensing revenue is a major income stream for colleges, and the case’s implications extend far beyond colleges. The case outcome will affect all big brands for which people like to show their affinity on fan apparel and gear, such as professional sports teams, and car, personal technology, and luxury goods makers.

As the Pennsylvania court observed, these big brands have built lucrative fan-gear merchandising castles (perhaps we should say stadiums), but they might have been built on unstable foundations of sand.

Written on December 21, 2022

by John B. Farmer

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