No. 08-661

~reme ~eut~ of t~e ~nitel~ ~tate~

AMERICAN NEEDLE, INC.,

V=

Pefi~z’oner,

NATIONAL FOOTBALL LEAGUE, et aI.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THEUNITED STATES COURT OF/kPPEALS

FOR THE SEVENTH CIRCUIT

BRIEF FOR AMICUS CURIAETHE NATIONAL HOCKEY LEAGUE IN SUPPORT

OF THE NFL RESPONDENTS

Shepard GoldfeinCounsel of Record

James A. KeyteNicholas A. DanellaSKADDEN, ARPS, SLATE,

MEAGHER 8; FLOM LLPFour Times SquareNew York, NY 10036Tel: (212) 735"3000Fax: (212) 735-2000

TABLE OF CONTENTS

INTEREST OF THE AMICUS CURIAE ...................1

SUMMARY OF ARGUMENT ....................................2

ARGUMENT ...............................................................4

Certiorari Should Be Granted to ClarifyThat, Under the Reasoning of Daghor,the Core Business Decisions ofLegitimate Joint Ventures Should BeTreated As Single-Firm Conduct ....................4

II. Certiorari Should Be Granted Because,at a Minimum, Copperweld ShouldApply to the Core Business Decisions ofLegitimate Joint Ventures ...............................8

III. Certiorari Should Be Granted BecauseConfusion over Whether Courts ShouldTreat Legitimate Joint Ventures,Including Professional Sports Leagues,As "Single Firms" Discourages TheseVentures from Innovating and ServingConsumers ......................................................15

ii

IV. Certiorari Should Be Granted BecauseRule of Reason Scrutiny of the CoreBusiness Decisions of Legitimate JointVentures Leads to the Type of CostlyAntitrust Litigation Against WhichTwombly Counsels .........................................18

CONCLUSION .........................................................21

iii

TABLE OF AUTHORITIES

C~8es

PageAmerican Needle Inc. v. National Football

League, 538 F.3d 736 (7th Cir. 2008) ........passim

American Needle, Inc. v. New OrleansLouisiana Saints, 496 F. Supp. 2d 941(N.D. Ill. 2007) ................................................5, 11

Bell Atlantic Corp. v. Twombly,127 S. Ct. 1955 (2007) ..............................3, 19, 20

Chicago Pro£essional Sports LimitedPartnership v. National BasketballAssociation, 95 F.3d 593 (7th Cir. 1996)... passim

City o£Mt. Pleasant v. Associated ElectricCooperative, Inc., 838 F.2d 268(8th Cir. 1988) ..............................................10, 11

Copperweld Corp. v. Independence TubeCorp., 467 U.S. 752 (1984) .........................passim

Fraser v. Major League Soccer, L.L.C.,284 F.3d 47 (1st Cir. 2002) ...............................8, 9

Freeman v. San Diego Association o£Realtors,322 F.3d 1133 (9th Cir. 2003) ..............................9

Kentucky Speedway, LLC v. NationalAssociation o£Stoek Car Auto Racing, Inc.,No. 05-138, 2008 WL 113987(E.D. Ky. Jan. 7, 2008) .......................................18

iv

Page

Los Angeles Memorial Coliseum Commissionv. National Football Leaguo,726 F.2d 1381 (9th Cir. 1984) ..............................9

Madison Square Garden, L.P. v. NationalHockey League, No. 07 Civ. 8455(S.D.N.Y.) ..................................................3, 16, 19

Major League Baseball Properties, Inc. v.Salvino, Inc., 542 F.3d 290(2d Cir. 2008) ..........................................18, 19, 20

National Collegiate Athletic Association v.Board of Regents, 468 U.S. 85 (1984) ................14

National Football League v. North AmericanSoccer League, 459 U.S. 1074 (1982) ...........10, 14

North American Soccer League v. NationalFootball League, 670 F.2d 1249(2d Cir. 1982) ........................................................9

Seabury Management, Inc. v. ProfessionalGolfers’Association of America, Inc.,878 F. Supp. 771 (D. Md. 1994),afYd in part, rev’d in part on othergrounds, 52 F.3d 322 (4th Cir. 1995) .................11

Sullivan v. National Football League,34 F.3d 1091 (1st Cir. 1994) .................................9

Super Sulky, Inc. v. United States TrottingAssociation, 174 F.3d 733 (6th Cir. 1999) .........15

V

Page

Texaco Inc. v. Dagher, 547 U.S. 1 (2006) ........passim

United States Football League v. NationalFootball League, 842 F.2d 1335(2d Cir. 1988) ........................................................9

Verizon Communications Inc. v. Law Of 2icesof Curtls V. Trinko, LLP, 540 U.S. 398(2004) ............................................................17, 18

Statutes

15 U.S.C. § 1 ................................................................1

Federal Rule of Civil Procedure 8 ............................19

Miscellaneous

Petition for a Writ of Certiorari, AmerleanNeedle Inc. v. National Football League,No. 08-661 (U.S. filed Nov. 17, 2008) ............7, 12

7 Phillip E. Areeda & Herbert Hovenkamp,Antitrust Law (2d ed. 2003) ...........................6, 17

1

INTEREST ’OF THE ~CUS C~’

Arnicus is one of the four major professionalsports leagues in North America and, hke the otherleagues, is a joint venture created to make, promoteand sell its sport - National Hockey League ("NHL")hockey, including its related products. Amicus has asignificant interest in this case. Like numerousother legitimate and output-enhancing joint venturesacross the country, Amicus has a vital concern thatthe antitrust laws are clear, predictable and fair.

As it relates to this case, Amieus has a criticalinterest in the Court clarifying that legitimate jointventures such as the NHL -"like any other firm" -can decide how to make, promote and sell theventure’s products without the risk and cost ofprotracted, complex and uncertain antitrustlitigation under Section 1 of the Sherman Act, 15U.S.C. § 1. See Texaco Inc. v. Dagher, 547 U.S. 1, 7(2006)? Accordingly, with respect to the activitiesthat fall within the scope of the NHL venture itself-

The parties have consented to the filing of this brief.Counsel of record for all parties received notice at least 10 daysprior to the due date of the amicus curiags intention to file thisbrief. No counsel for a party authored this brief in whole or inpart, and no counsel or party made a monetary contributionintended to fund the preparation or submission of this brief. Noperson other than amicus curiae, its members, or its counselmade a monetary contribution to its preparation or submission.

Amicus recognizes that if the member teams of aprofessional sports league enter into restraints outside thescope of the venture’s business, § 1 would continue to apply;under Dagher, an ancillary restraints analysis would apply tosuch activity. See 547 U.S. at 7-8.

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such as those in American Need]e Inc. v. NationalFootba]]Zeague, 538 F.3d 736 (7th Cir. 2008) -including the production of the game, the promotionof the sport, the licensing of league and teamintellectual property and the sale of related products,there is a significant and recurring need for thisCourt to address whether § 1 should ever apply tothe core business decisions of legitimate jointventures.

SUMMARY OF ARGUMENT

1. In Daglber, 547 U.S. 1, this Court recognizedthe importance of joint ventures to the Americaneconomy and the need for legitimate joint ventures tobe able to operate "like any other firm:" The Court,however, did not have the opportunity to addresswhether § 1 should apply at all to the decisions oflegitimate joint ventures - judicial direction thatwould greatly benefit the thousands of businessesplanning, forming and operating joint ventures everyday.

2. This Court in. Copperweld Corp. v.Independence Tube Corp., 467 U.S. 752 (1984), didnot have occasion to assess how the single’entityprinciples set forth in the parent-subsidiary contextshould apply to the ongoing production, promotionaland marketing decisions of legitimate joint ventures,Since then, lower federal court decisions concerning §l’s application to joint ventures, and professionalsports leagues in particular, either directly conflict orprovide no consistent guidance to the businesscommunity. This Court should clarify that, underCopperwelds principles, the decisions of professionalsports leagues derive from a single economic

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"source," a single functioning enterprise and a singleentity - the league - that ultimately controls theventure and its products. Absent such guidance, theconflicts and confusion over the applicability ofCopperwelc?s principles to professional sportsleagues will persist.

3. The continued conflict and ambiguityconcerning the applicability of § 1 to the corebusiness decisions of legitimate joint venturessignificantly chills innovation and the competitiveactivities of such ventures, including Amicus andother professional sports leagues. Section I shouldnot be an invitation for every venture member,customer, supplier or vendor to second-guessinternal venture business decisions by threatening §1 treble damages actions. Amieus has been subjectto several such cases in the past and is now involvedin a costly and protracted antitrust challenge to thebasic way in which the NHL makes, promotes andsells NHL hockey, including its related products.See Madi~o~ Square Garden, L.P. v. Nat7 HockeyLeague, No. 07 Civ. 8455 (S.D.N.Y.) ("MSGv. NHL")(§ 1 challenge to NHL’s licensing of league and teamintellectual property rights, national and localbroadcasting arrangements, merchandising andmarketing of league and team products, advertisingand sponsorship regulations, and new mediaactivities).

4. As with this Court’s decision in BellAtla~ticCorp. v. Twornbly, 127 S. Ct. 1955 (2007), there arestrong policy reasons for considering whether § 1should be interpreted to avoid time’consuming,complex and costly antitrust litigation - here, overthe basic business decisions of legitimate jointventures.

4

ARGUMENT

Certiorari Should Be Granted to Clarify That,Under the Reasoning of ~Daglber, the CoreBusiness De~isions of Legitimate JointVentures Should Be Treated As Single-FirmConduct

In Dagher, 547 U.S. 1, this Court highlightedthat joint ventures are an "important andincreasingly popular form of business organization,"id. at 5, and that businesses need clarity with respectto how § 1 applies to their core business decisions.Finding that "[a]s a single entity, a joint venture,like an jr other ~Srm, must have the discretion todetermine the prices of the products that it sells," id.at 7 (emphasis added), this Court held - on thenarrow question presented - that per so scrutiny of"internal... decisions of a legitimate joint venture"would be inappropriate as a matter of law. Id. ThisCourt in Dagher emphasized that, because therespondents had not put forth a rule of reason claim,it was unnecessary to "address petitioners’alternative argument that § 1 of the Sherman Act isinapplicable to joint ventures." See id. at 7 n.2.

Granting certiorari to review Amerlcan Needle,538 F.3d 736, would provide this Court with theopportunity to address the important question offederal law that Dagher left unsettled: Whether § 1scrutiny should ever apply to the core businessdecisions of a legitimate joint venture - i.e., how to

make, promote and sell the very products that theventure creates.3

In Dag/~er, this Court asked whether the venturemembers were "competitors" prior to formation, andwhether they would remain independent competitorsafter creating or joining the venture. This Courtfound that the members:

[D]id not compete with one another inthe relevant market but insteadparticipated in that market jointlythrough their investments in [theventure]. In other words, the prici.ngpolicy challenged here amounts to littlemore than price setting by a singleentity-albeit within the context of ajoint venture-and not a pricingagreement between competing entitieswith respect to their competing products.

547 U.S. at 5-6; see also Copperweld, 467 U.S. at768-69. Thus, in Dag/~er, this Court implicitly foundthat § 1 should apply to members of a legitimate

The district court cited DagI~er in finding that, withrespect to its blanket licensing of league and team intellectualproperty, the National Football League ("NFL") should betreated as a single entity. See Am. Needle, Inc. v. New OrIean~La. Sal~ts, 496 F. Supp. 2d 941,944 (N.D. Ill. 2007) ("[I]nanswering CopperweIds functional question, we believecooperative marketing does serve to promote NFL football andfalls on the ’unilateral’ action side of the line.") (citing 547 U.S.1). However, the Seventh Circuit did not directly addressD~ghe~, again highlighting the need for this Court to clarify theevident application of Dsgl~e~s reasoning to the single-entityquestion.

6

joint venture only if: (1) prior to venture formation,the venture members were "competing entities" withrespect to "competing products"; (2) after forming theventure, the members remain independentcompetitors capable of offering competing products;and (3) the member,,~ offer products outside the scopeof the venture’s activities that "compete" with theventure. See Dagher, 547 U.S. at 7"8 (implicitlylimiting § 1 to an "ancillary restraints" analysis ofsuch "outside venture" activities).

The reasoning of Dagher is particularlycompelling as applied to decisions of professionalsports leagues. In Dagher, two previouslyindependent competitors agreed to cease competingwith one another - lbr a limited duration - andparticipate in the market only jointly through theventure. This Court referred to the joint venture’sinternal pricing decision regarding its product as"little more than price setting by a single entity."See 547 U.S. at 5"6 (noting that "though [theventure]’s pricing policy may be price fixing in aliteral sense, it is not price fixing in the antitrustsense").

By contrast, for professional sports leagues, thereis no pre-existing economic competition among theteams at the time of league formation. In turn, therecan be no potential "independent" competition afterformation of the league: the venture’s productscannot be created without the collective participationof the venture’s members; and, after formation, § 1should not apply to the decisions regarding how tomake, market or promote the venture’s products.See id.; see also 7 P:hillip E. Areeda & HerbertHovenkamp, Antitrust Law ¶ 1478c, at 325 (2d ed.2003) ("Once a venture is judged to have been lawful

7

at its inception and currently, decisions that do notaffect the behavior of the participants in theirnonventure business should generally be regarded asthose of a single entity rather than the parents’ dailyconspiracy.").

The Seventh Circuit below found that the NFLteams jointly create a product that no one team canmake alone and that the teams are fullyeconomically interdependent - i.e., they simplycannot be independent economic entities with respectto any "competing product" outside the NFL venture.See Am. Needle, 538 F.3d at 737, 743. Indeed, nomember of a professional sports league, or any of itsteam-specific products or intellectual property, canhave any meaningful value outside of participationin the league enterprise.

Nothing in the Seventh Circuit’s opinion isinconsistent with applying Daghe~s underlyingprinciples to shield from § 1 scrutiny Mlof aprofessional sports league’s decisions regarding theproduction, promotion and sale of the venture’sproducts. See Petition for a Writ of Certiorari at 12,Am. Needle, No. 08-661 (U.S. filed Nov. 17, 2008)("Nor can the Seventh Circuit’s decision be limited tothose aspects of league activities necessary to theproduction of games. The Seventh Circuit’s decisionextends the NFL’s exemption, derivatively, toactivities.., that ’promote’ the interests of theLeague or the teams.") (emphasis in original).

In light of the importance of joint ventures to theU.S. economy, certiorari should be granted to extendDaghe~s underlying reasoning to decisions of alllegitimate joint ventures, including the economicallyinterdependent members of professional sports

8

leagues, so that such enterprises can operate "likeany other firm."

Certiorari Should Be Granted Because, at a1Wnfimum, Copper~eld Should Apply to theCore Business Decisions of Legitimate JointVentures

Since this Court’s decision in Copperweid, 467U.S. 752, the application of the single-entity doctrineto legitimate joint ventures, such as professionalsports leagues, can be described as, at worst, amorass of conflicting circuit court decisions and, atbest, an important federal question mired inambiguity and confusion. See, e.g., Fraser v. MajorLeague Soccer, L.L.C., 284 F.3d 47, 55-56 (lst Cir.2002); Chl. Prol’l Sports Ltd. P’~hip v. Nat’]BasketballAss’n, 95 F.3d 593, 599"600 (7th Cir. 1996)("Bulls I2’). Moreover, when coupled with Daghe_~sunderlying principle that legitimate joint venturesshould be able to operate as do single firms withrespect to the products the ventures create, see 547U.S. at 7, the need ibr clarity regarding the single-entity issue under Copperweldbecomes all the morecompelling.

In Copperweld, this Court enunciated theprinciples under which § 1 should not apply toformally separate entities. Such entities cannotconspire for purposes of § 1 if the agreement orcoordination at issue: "does not represent a suddenjoining of two independent sources of economic powerpreviously pursuing separate interests," 467 U.S. at771; and/or does not "deprive[ ] the marketplace ofthe independent centers of decisionmaking thatcompetition assumes and demands," id. at 769.

9

Separately, the Court made clear that if "the parentmay assert full control" in the event that the affiliate"fails to act in the parent’s best interests," id. at 771"72, the entities cannot be deemed separate for § 1purposes. The Court did not have to reach that issuein Copperweldbecause, as it observed, a parent anda wholly-owned subsidiary, the alleged "co"conspirators" in Copperweld, share a "complete unityof interest" and therefore do not "deprive[ ] themarketplace of... independent centers ofdecisionmaking." Id. at 771.

The resulting conflict and confusion - both inand out of the professional sports league context - iswell documented. Many courts, latching on to the"complete unity of interest" language, have held thatthe separate teams of a professional sports leaguemust be treated as separate economic entities underCopporweld. See, e.g., Fraser, 284 F.3d 47; Sullivanv. Nat’lFootballLeague, 34 F.3d 1091 (1st Cir. 1994);L.A. Morn ’1 Cob’scum Cornrn’n v. Nat’l FootballLeague, 726 F.2d 1381 (9th Cir. 1984) (pre-Copperweldbut cited approvingly in Freeman v. S.D.Ass’n o£Realtors, 322 F.3d 1133 (9th Cir. 2003)); N.Am. Soccer League v. Nat’l Football League, 670F.2d 1249 (2d Cir. 1982) (pre-Copperweldbut citedapprovingly in U.S. Football League v. Nat’l FootballLeague, 842 F.2d 1335 (2d Cir. 1988)).

Other courts, recognizing that this "completeunity of interest" language was not a limitingprinciple at all,a have applied Copperwelcts

See, e.g., Bulls II, 95 F.3d at 598 (describing "completeunity of interest" as a "statement of fact about the parent"subsidiary relation, not as a proposition of law about the limits

(cont’d)

10

principles to find that § 1 should not apply to thecore business decisions of professional sports leaguesand other non-sports legitimate joint ventures. Forexample, in Bu//s I/, the Seventh Circuit found that,in the context of a professional sports league, therecan be only one source of economic power. 95 F.3d at599 ("From the perspective of fans and advertisers(who use sports telecasts to reach fans), ’NBABasketball’ is one product from a single source eventhough the Chicago Bulls and Seattle Supersonicsare highly distinguishable, just as General Motors isa single firm even though a Corvette differs from aChevrolet."); see a]soAm. Needle, 538 F.3d at 744;City o£Mt. Pleasant v. Associated Elec. Coop., Inc.,¯ 838 F.2d 268, 277 (Sth Cir. 1988) ("Even though thecooperatives may quarrel among themselves on howto divide the spoils of their economic power, it cannotreasonably be said that they are independent sourcesof that power. Their power depends, and has alwaysdepended, on the cooperation among themselves.They are interdependent, not independent.")(emphasis in originaD; Nat’l Football League v. N.Am. Soccer League, 459 U.S. 1074, 1077 (1982)(Rehnquist, J., dissenting) (the NFL "competes as aunit against other forms of entertainment")(emphasis added).

Courts also have rejected § l’s application tothese decisions because of how leagues necessarilyfunction - i.e., from its inception, a professionalsports league collectively decides how to produce,

(cont’d frorn previous page)of permissible cooperation. As a proposition of law, it would besilly").

11

promote, market and sell its jointly created products.See Am. Needle, 496 F. Supp. 2d 941,943-44(recognizing the role of NFL Properties in theblanket licensing of league and team intellectualproperty and finding that "[d]elegated decision-making does not deprive the marketplace ofindependent centers of decision-making"); see aIsoCity o£Mt. Pleasant, 838 F.2d at 274-75.

Finally, the court in Seabury Management, Inc. v.ProYesslonal Gol£ers’ Assoclation o£Amerlca, Inc.,878 F. Supp. 771 (D. Md. 1994), ah°d in part, rev’dJnpart on other grounds, 52 F.3d 322 (4th Cir. 1995),held that single-entity treatment applies where theenterprise has the ultimate power to reign in arelated entity that wishes to pursue its owndivergent interests. See id. at 778 & n.6 (noting thatthe "PGA always had ultimate control over thesection[s], which could not function as [sections]independent of the PGA"- "[t]his type of ’ability tocontrol’ is perhaps the determinative factor in theCopperweld analysis").

The core business decisions of a professionalsports league satisfy each of these Copperweldprinciples. The products would not exist but for the"source" of the league’s formation. The leaguefunctions as a single enterprise from the league’svery creation, collectively deciding how to make,promote and sell the venture’s products. And theenterprise has the ultimate control over theindividual teams, including the right to terminate afranchise, if any venture member fails to act in theenterprise’s best interest.

Nevertheless, American Needle is illustrative ofthe lingering conflict over Copperwelcls application

12

to the decisions of professional sports leagues.Petitioner states that:

The League does not have anyownership interest in any of the teamsand no team owns any interest in anyother team. Each team has its ownplayers, coaches, managers,administrators and marketers. Theteams do not: share capital, profits orlosses, and income and profits varyconsiderably from team to team. Theteams operate the League by agreement,through a constitution that may beamended on][y by agreement of theteams.

The teams own and control theirrespective Club Marks separately;neither the League nor any other teamhas any rights to another team’s ClubMarks. But for their agreement not to,the teams have the right to license theirClub Marks independently of, and incompetition with, each other and theLeague.

Petition for a Writ of Certiorari at 3, supra. Yet, theSeventh Circuit held that - because the productcould not exist but for the formation of the NFL jointventure - under Copperweld"the NFL teams arebest described as a single source of economic powerwhen promoting NFL football through licensing the

13

teams’ intellectual property." See Az~. Needle, 538F.3d at 744 (emphasis added). Indeed, the commonrefrain from antitrust plaintiffs that teams, as jointventure partners, can nevertheless "compete" againsteach other or the league venture itself in an"antitrust sense" not only ignores the teams’complete economic interdependence, it confirms theneed for this Court to clarify once and for allCoppe_rweIcls application to professional sportsleagues.

As the Seventh Circuit explained:

[T]he NFL is an unincorporatedassociation of (now) 32 separatelyowned and operated football teams thatcollectively produce an annual series (or"season") of over 250 interrelatedfootball games. Each season culminatesin a championship game-a game betterknown as the Super Bowl. As such, theproduct that the teams produce jointly-NFL football-requires extensivecoordination and integration betweenthe teams. After all, NFL football isproduced only when two teams play afootball game. Thus, although eachteam is a separate corporate entity orpartnership unto itself, no team canproduce a game-the product of NFLfootball-by itself, much less a fullseason of games or the Super Bowl.Likewise, the teams’ individual successis necessarily linked to the success ofthe league as a whole; to put it anotherway, it makes little difference if a team

14

wins the Super Bowl if no one caresabout the Super Bowl.

Am. Need/e, 538 F.3d at 737. Simply stated, therewould be no product without the ongoing cooperationwithin the NFL joint venture, and no team wouldhave an~veconomic value were it not a member of theventure)

Likewise, the Seventh Circuit held that"[c]ertainly the NFL teams can function only as onesource of economic power when collectively producingNFL football." See Am. Needle, 538 F.3d at 743(citing Nat’l Collegiate Athletic Ass’n v. Bd. o£Regents, 468 U.S. 85, 101 (1984) ("[S]ome activitiescan only be carried out jointly. Perhaps the leadingexample is league sports.") (citation and internalquotation marks omitted); Bulls II, 95 F.3d at 599("[T]he NBA has no existence independent of sports.It makes professional basketball; only it can make’NBA Basketball’ games; and.., the NBA also’makes’ teams."); Nat7 Football League v. N. Am.Soccer League, 459 U.S. 1074, 1077 (1982)(Rehnquist, J., dissenting) ("The NFL... competeswith other sports and other forms of entertainmentin the entertainment market. Although individualNFL teams compete with :one another on the playingfield, they rarely compete in the market place.")).

5 SeeAm. Needle. 538 F.3d at 743 ("Asserting that a

single football team could produce a football game is less of alegal argument than it is a Zen riddle: Who wins when afootball team plays itself?."); Bu_//s I/, 95 F.3d at 598-99 ("[A]league with one team would be like one hand clapping.").

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American NeedIe thus provides a well-ripenedopportunity for this Court to clarify Copperweldsapplication to the decisions of professional sportsleagues. See Super Sulky, Inc. v. U.S. Trotting Ass’n,174 F.3d 733, 741 (6th Cir. 1999) ("[T]he notion ofconcerted action liability in the field of professionalsports is at best confusing."). This Court shouldgrant certiorari to hold, under one or more ofCopporwelcls principles, that § 1 scrutiny shouldnever apply to the production, promotional andmarketing decisions of professional sports leagues -or any other legitimate joint venture for that matter- where the alleged restraints reflect nothing morethan the members’ ongoing venture activities.

III. Certiorari Should Be Granted BecauseConfusion over Whether Courts Should TreatLegitimate Joint Ventures, IncludingProfessional Sports Leagues, As "SingleFirms" Discourages These Ventures f~omInnovating and Serving Consumers

The ever increasing conflict and ambiguityconcerning the application of § 1 have a significantchilling effect on legitimate joint ventures, includingprofessional sports leagues such as Amicus. The riskof a potential treble damages (or disruptiveinjunctive) action looms following literally everyinternal dispute regarding how best to make,promote and sell the venture’s products, includingintellectual property the value of which the venturecreates. Consequently, rather than serving themarketplace and responding to consumer demand, aswould "any other firm," professional sports leagues

16

and other legitimate joint ventures - within theventure itself- will tend to calibrate their innovationand competitive vigor to account for the risk ofprotracted and costly rule of reason litigation.

A~nicus currently finds itself in the midst of justsuch a litigation, defending against a lawsuitbrought by one of its team owners that - after losinga vote among all of its venture partners regardinghow best to promote NHL hockey, including relatedproducts, through "new media" - turned to thefederal courts and § 1 for outside relief. The case,MSGv. NHL, No. 07 Civ. 8455 (S.D.N.Y.),demonstrates the confusion surrounding theapplicability of § 1 to the business decisions oflegitimate joint ventures and the resultant difficultyfor such ventures in effectively planning andoperating. Madison Square Garden ("MSG"), ownerof the New York Rangers, sued Amicus, allegingviolations of § .1 regarding the territorial exclusivityrights of the NHL teams and the allocation of otherventure rights collectively shared among the teams,as compared to those reserved to an individual teamwithin its local territory. MSG is seeking injunctiverelief against a broad array of the NHL’s corebusiness decisions, including licensing of league andteam intellectual property rights, national and localbroadcasting arrangements, merchandising andmarketing of league and team products, advertisingand sponsorship regulations, and all new mediaactivities- all of which are collectively governedwithin the league venture by MSG and the twenty-nine other team owners, and all of which clearlyrelate to NHL hockey and the products jointlycreated by the 30 NHL teams. MSG’s lawsuitattacks practices and policies both past - many

17

dating back to the league’s formative document, theNHL Constitution - and future, including howAmicus should best exploit the venture’s online andother new media opportunities.

The effect on Amicud business is evident.Putting aside the cost of such broad-ranginglitigation - both monetary and in terms of businessopportunities and goodwill lost with potentialbusiness partners, as well as Rangers and NHL fans- MSG seeks to have a federal court step inside theNHL joint venture and review virtually every one ofits output-related business decisions, the vastmajority of which are decades old. If joint venturesare to be treated "like any other firm," see Dagher,547 U.S. at 7, § 1 jurisprudence cannot permitunhappy venture members, customers, suppliers orvendors to have the federal courts second-guess theventure’s basic business decisions. See VerlzonCommc’ns Inc. v. Law Ot~ces of Curtis V. Trinko,LLP, 540 U.S. 398, 408 (2004) (observing that federalcourts "are ill-suited" to "act as central planners,identifying the proper price, quantity and otherterms of dealing" of a single firm). With respect tothese internal venture decisions regarding theventure’s product, the venture members are notcompetitors "in the antitrust sense," see Dagher, 547U.S. at 5-6, and such internal decisions allocatingdecision-making authority between the league andindividual teams pose no economic threat tocompetition or the consumer. See 7 Areeda &Hovenkamp, supra, ¶ 1462b, at 194 ("Coordinationwithin an otherwise lawful enterprise does not createadditional market power or facilitate a restraint.").

Ultimately, it is the consumer who suffers fromthis ambiguity surrounding § 1. Venture members

18

are more likely to forestall innovation or ether plansaimed at better competing in the marketplace if amember or disadvantaged customer (such as.Petitoner), supplier ,or vendor disagrees with thestrategy. This cannot be the law applicable to jointventures with respect to the products the venturescreate, see Verizon, 540 U.S. at 414 (cautioningagainst any construction of antitrust law that may"chill the very conduct the antitrust laws aredesigned to protect") (citation and internal quotationmarks omitted). Accordingly, this Court shouldgrant certiorari to ensure the ability of legitimatejoint ventures to bring their products to market "likeany other firm."

Certiorari Should Be Granted Because Rule ofReason Scrutiny of the Core BusinessDecisions of Legitimate Joint Ventures Leadsto the Type of Costly Antitrust LitigationAgainst Which TwomblyCounsels

The inevitable consequences of not grantingcertiorari to address this recurring § I issue arepredictable: many federal courts (again, often inconflict with prior precedent) will assess theseantitrust challenges to the fundamental businessdecisions of legitimate joint ventures under the "full"rule of reason, typically resulting in massive andprotracted fact discovery and expert testimony priorto summary adjudication or trial. See, e.g., MajorLeague Baseball Props., Inc. v. Salvino, Inc., 542F.3d 290 (2d Cir. 2008); Ky. Speedway, LLC v. Nat’lAss’n o£Stoek Car Auto Racing, Inc., No. 05-138,2008 WL 113987 (E.D. Ky. Jan. 7, 2008). And, whilemany courts now recognize that the ongoing internal

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business decisions of professional sports leaguesregarding the production, promotion and sale of theventure products (and derivative products) areinevitably procompetitive and efficiency enhancing,see, e.g’., Sa]vino, 542 F.3d 290, as long as the allureof § 1 treble damages and the potential antitrusthammer of injunctive relief remain available todisgruntled venture members, customers, suppliersand vendors, these costly litigations will persist.

This Court should grant certiorari to assesswhether the policy concerns articulated in BellAtlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007),are equally applicable to these single-entity issues asapplied to the decisions of legitimate joint ventures.In Twombly, this Court characterized discovery inantitrust actions as a "sprawling, costly, and hugelytime’eonsuming undertaking," see id. at 1967 n.6,while discussing the need for clarity with respect tothe pleading standards under Rule 8, Fed. R. Cir.Proe. 8. See Twombly, 127 S. Ct. at 1964"69. ThisCourt also noted that judicial supervision ("carefulease management"), "careful scrutiny of evidence atthe summary judgment stage," and "lucidinstructions to juries" have all proved ineffective incurbing discovery abuses. See Twombly, 127 S. Ct.at 1967 (adding that the "threat of discovery expensewill push cost-conscious defendants to settle evenanemic cases before reaching [summary judgment ortrial] proceedings").

These same concerns are no less relevant tolegitimate joint ventures that face, as the defaultstandard, full rule of reason discovery and litigation.Cases such as MEG v. NHL, No. 07 Civ. 8455(S.D.N.Y.), cost millions of dollars to defend, take upincalculable time, and inconvenience both parties

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and non-parties. These cases also tend to underminerelationships with customers, suppliers and vendors- relationships that should be managed in thecorporate boardroom rather than in the federalcourts.

The procedural posture of American Needle- i.e.,the affirmance of summary judgment on the single-entity issue - presents this Court with the rareopportunity to grant certiorari on this importantquestion of federal law. Rule of reason cases tend tobe intensely factually driven, requiring voluminousfact discovery and complex economic expert discovery.See, e.g., SaIvlno, 542 F.3d 290. Regardless of whichparty prevails, these massive cases are rarelylitigated and appea].ed on the single-entity issue. See,e.g., id. This Court should clarify § 1 to remedy the1~ terrorem effect these lawsuits have on thefunctioning of legitimate joint ventures, see Twombly,127 S. Ct. at 1966 (discussing "practical significance"of Rule 8 in preventing groundless claims aimed atsettlement), as well as to resolve the conflict amongthe circuit courts on this issue.

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CONCLUSION

For the foregoing reasons, the petition for a writof certiorari should be granted.

Respectfully submitted,

Shepard GoldfeinCounsel of Record

James A. KeyteNicholas A. DanellaSKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLPFour Times SquareNew York, NY 10036Tel: (212) 735-3000Fax: (212) 735-2000

Dated: January 21, 2009