Inside Trademarks Trademark Analytics, Research & Strategy

Upper Deck Pays Up – Major League Baseball & Upper Deck Settle Lawsuit

MLB Properties v. Upper Deck (Part II)

Major League Baseball filed a federal complaint for trademark infringement against Upper Deck on February 1 (Part I) seeking to stop Upper Deck from selling cards that featured Major League Baseball team logos and trademarks with MLB permission.  The case didn't last long and the parties settled yesterday.

MLB leveraged its trademark portfolio and Upper Deck's unauthorized use of its trademarks to extract a significant pay out, by our estimates, of over $8 million from Upper Deck - certainly a favorable settlement for MLB. 

Here is a quick summary of the nonconfidential portions of the settlement:

• Upper Deck pays MLB more than $2.4 million it owed on back debts for royalties not paid to MLB for card sales in 2009. 
• Upper Deck pays MLB "a substantial sum of monies" for the unlicensed cards it sold in 2010. 
• Upper Deck agrees not to make any new sets of cards using "MLB logos, uniforms, trade dress, or Club color combinations." 
• Upper Deck agrees it will not airbrush, alter or block MLB marks in future products.
• Upper Deck must receive approval from MLB for the use of baseball jerseys, pants, jackets, caps, helmets or catcher's equipment in future products featuring players. 

The MLB also publicly made the following statement:

"Our settlement in the case against Upper Deck is a clear and decisive victory for Major League Baseball. Upper Deck will be unable to release baseball trading cards that incorporate Major League Baseball's intellectual property in the future.  The real winners today are the millions of fans who collect baseball cards.  They will be able to clearly identify official Major League Baseball trading cards without any confusion."

Here is the Inside Trademarks™ assessment:

1. For starters, Upper Deck had to pay $2.4 million to MLB for it to even consider allowing Upper Deck to sell baseball cards based on MLB players and teams in the future.

2. We estimate that the "substantial sum of monies" that Upper Deck will pay to MLB for unlicensed card sales this year is at least $6 million.

3. Getting Upper Deck to agree to not to use Club color combinations is significant victory for MLB. This grants broad enforcement rights against those who may not even use MLB team logos or names, but do use similarly colored products or services relating to baseball.

4. The MLB has effectively prevented Upper Deck (and likely other card sellers) from selling similar cards without a MLB trademark license just because they cover up a team logo found, for example, on a baseball player's helmet on a baseball card.

5. Upper Deck likely agreed to MLB's onerous approval provision just to keep selling the three new sets of baseball cards it is offering for sale in 2010, and to preserve its future baseball card revenue beyond 2010.

6. It is not often that parties settling a lawsuit allow one party to publicly proclaim victory based on the settlement.  MLB's public statement indicates that they clearly had leverage over Upper Deck and that if the case had gone further, the court would have likely granted an injunction ordering Upper Deck to cease all sales of its infringing baseball cards.  This would have resulted in huge losses for Upper Deck, and such losses may have easily exceeded what it now ultimately has to pay MLB in this settlement.    

Major League Baseball v. Upper Deck

Major League Baseball (MLB) Properties, the licensing arm of the league's 30 clubs,  filed a federal lawsuit on February 1st against Upper Deck, a baseball card manufacturer, alleging trademark infringement for their recent use of MLB team logos on baseball cards without permission.

In August 2009, MLB signed an exclusive multi-year agreement with Topps Co. (Upper Deck's main rival in the baseball card market).  This deal ousted Upper Deck from its 22-year long relationship with MLB, and gave Topps the exclusive rights to use MLB team logos and uniforms on baseball cards.  Recognizing the loss of future revenues they would incur without an exclusive deal, Upper Deck executives reportedly re-signed a licensing agreement with the MLB Players Association, so that Upper Deck would still have rights to sell baseball cards with players' images and likenesses in its Upper Deck 2010 baseball card sets.

MLB was not happy with this move, and even sent letters to baseball card distributors asking them not to sell upper Deck's 2010 baseball card sets.  The MLB then filed a federal complaint, stating that "Upper Deck's current conduct is reflective of a pattern of utter disrespect for the contractual and intellectual property rights of those from whom it licenses valuable trademarks."  In its complaint MLB asks the court to stop the sale of Upper Deck's unauthorized baseball cards, and seeks triple and punitive damages.  The complaint also claims that Upper Deck owes MLB $2.4 million.

Despite a decline in card sales over the past two decades, the licensing of sports team logos, players' images and likenesses is still big business.  According to estimates from Sports Collector's Digest, card sales amounted to $1.2 billion in 1991, but by the end of the millennium total sales had declined to $400 million, and sales dropped all the way to $200 million by 2008. (Forbes, August 31, 2009).

Here is a copy of the complaint in the case: