The underlying facts in the American Needle case are rather straightforward. The plaintiff, American Needle, had for more than twenty years held a non-exclusive license to design and manufacture headgear bearing the NFL clubs' names and logos. Then, nine years ago, the NFL clubs decided to offer an exclusive license to American Needle's main rival, Reebok.
American Needle thereafter sued the NFL clubs in the Northern District of Illinois, contending that the NFL clubs conspired with one another to keep American Needle out of the NFL clothing market in violation of Section 1 of the Sherman Act. The NFL clubs, in turn, responded by not only alleging that their licensing arrangement was pro-competitive (which is the traditional defense to this sort of antitrust challenge), but also that the NFL clubs could not have illegally conspired with one another because they are really just one entity (the "single entity" defense).
Heading into this case, it did not seem as if any court would find the single-entity defense to apply to the NFL. While the Supreme Court has long held that a parent company and its wholly owned subsidiary combine to constitute a single entity for antitrust purposes, until recently no traditionally structured sports league had ever been defined as a "single entity" because each club in such a league has its own, independent ownership. Indeed, between the years 1982 and 2006, the NFL clubs had raised the single-entity defense on seven different occasions, with the reviewing court rejecting this defense each time.The Seventh Circuit in American Needle, however, recently has taken a more pro-league view toward the single-entity defense. At the district court level, Judge Moran held that the NFL clubs morphed from a collection of separate businesses into a single entity by jointly licensing their trademarks for many years through a subsidiary, NFL Properties. Then, on appeal, a unanimous court affirmed, stating that the single-entity status of sports leagues "should be addressed not only one league at a time, but also one facet of a league at a time."
American Needle is challenging the appropriateness of the Seventh Circuit's broad interpretation of the single entity defense.