Opinion ID: 2583
Heading Depth: 2
Heading Rank: 1

Heading: The Parties and the Licensing Dispute

Text: MLBP is a wholly-owned subsidiary of Major League Baseball Enterprises, Inc. (MLBE), an entity in which each of the 30 current MLB clubs (the Clubs) owns an equal interest. MLBP is, with limited exceptions, the exclusive worldwide agent for licensing the use of all names, logos, trademarks, service marks, trade dress, and other intellectual property owned or controlled by the MLB Clubs, MLB's Office of the Commissioner (BOC), and MLBP (collectively MLB Intellectual Property), on retail products. MLBP also acts as agent for the Clubs with respect to, inter alia, trademark protection, quality control, design services, royalty accounting, and auditing. Salvino is a California corporation that produces, sells, and distributes sports collectibles, including stuffed plush animals that are usually identified with sports celebrities. Between 1989 and 2001, Salvino obtained licenses from MLBP to use Club marks and other MLB marks on figurines of baseball players in uniform. In the license agreements, Salvino promised not to use the marks in any manner other than as licensed. In the spring of 1998, Salvino developed a line of plush, bean-filled bears that it called Bammers. Salvino obtained licenses for sports-personality Bammers from, inter alia, National Football League (NFL) Properties, Inc., National Basketball Association (NBA) Properties, Inc., National Hockey League (NHL) Enterprises, L.P., the NHL Players' Association, and companies representing several professional figure skaters, as well as from various individual NBA players, retired NFL players, current and retired MLB players, and drivers in the National Association for Stock Car Auto Racing (NASCAR). Salvino produced baseball Bammers without Club logos for sale to commercial outlets such as hobby shops, Hallmark stores, and other retail chains. In 1998 and/or 1999, it sold Bammers in uniforms bearing Club logos to at least seven MLB Clubs, and sold Bammers with Club logos only on the sales tags to two MLB Clubs, for retail sale in their stadia or for free stadium giveaways. Salvino obtained licenses to use baseball player names and numbers from the Major League Baseball Players' Association, Inc. (MLB Players' Association). However, despite discussing a possible license from MLBP for the use of MLB Club logos on Bammers in early 1999, the only license for a Bammer that Salvino obtained from MLBP was an April 1999 license for a Hank Aaron Bammer commemorating the 25th anniversary of Aaron's breaking Babe Ruth's home run record. In October 1999, MLBP learned that Salvino had sold Bammers to the Arizona Diamondbacks baseball club with the Diamondbacks logo on them; Salvino had not obtained an MLBP license to use that logo. MLBP sent Salvino a cease-and-desist letter stating that Salvino was in violation of its existing license agreement with MLBP, in which Salvino [had] represent[ed] and warrant[ed] that it would not, during the license period or any license period thereafter, use the Logos except as licensed under the [license a]greement (Letter from MLBP to Salvino dated November 3, 1999, at 1). The letter stated that [i]n addition, the unauthorized use of the trademark constitutes trademark infringement. The Arizona Diamondbacks have informed [MLBP] that, although they reviewed artwork demonstrating the appearance of the proposed product, they never gave express consent to use the Arizona Diamondbacks' logo featured thereon, nor are they being compensated by Salvino (in the form of a royalty or otherwise) for the use of the Logo. ( Id. at 1-2.) Salvino responded by commencing an action against MLBP and MLBE in federal court in California (the California action), alleging that MLBP's activities violated §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, as well as § 7 of the Clayton Act, 15 U.S.C. § 18, and various state laws. As it related to the § 1 claim, Salvino's complaint in that action alleged principally that [b]ecause [MLBP] distributes the income from its exploitation of trademarks equally to each member club  even though a relatively small number of clubs generate[s] the bulk of the revenue  the incentive of many major league clubs to invest in and promote and compete through its [ sic ] trademark has been diminished and suppressed. As a result, the [agreement between MLBP and the Clubs] ... has reduced output, diminished the quality of product offered to the public, diminished the choice of product offered to the public, reduced and suppressed price competition leading to higher prices to the public and reduced market efficiency to the detriment of the public. (Salvino's California action complaint ¶ 13.) In April 2000, MLBP commenced the present action against Salvino, asserting claims under federal and state law for, inter alia, trademark and trade dress infringement arising out of Salvino's unauthorized use of MLB marks. Salvino's California action was transferred to the Southern District of New York, where it was consolidated with the present action, with Salvino's California action claims becoming counterclaims in the present action.