Recent Changes in Federal Nil Law

Recent changes in “name image and likeness” (“NIL”) law created a new market for goods and services that have never existed before in college athletics. However, the NIL activity that occurred recently remains subject to the federal legal authority that spurred such activity. An understanding of the federal case law is needed to understand the future and risks associated with the current NIL landscape.

• What is NIL?

From a legal perspective, the term “NIL” generally refers to an individual’s legal right to control the usage of their name, image, or likeness. NIL includes any trait of a person that serves to identify that person to an ordinary viewer or listener, including their name, signature, photograph, image, likeness, voice, or a substantially similar copy of any of the foregoing. Individuals have a legal right to protect their NIL from others who attempt to publish, print, display or otherwise publicly use a person’s NIL for trade, commercial, or advertising purposes, without consent.

• Changes in Federal NIL Law and Athlete Compensation
• O’Bannon v. NCAA

In 2014, the current framework of NIL law began to take shape. O’Bannon v. Nat’l Collegiate Athletic Ass’n, involved a case where a group of current and former college football and men’s basketball players brought antitrust class action against the NCAA alleging ant-trust violations for restraining trade in relation to players’ names, images, and likenesses.  O’Bannon v. NCAA, 7 F. Supp. 3d 955 (N.D. Cal. 2014). The district court permanently enjoined the NCAA from prohibiting its member schools from (1) compensating FBS football and Division I men’s basketball players for the use of their NILs by awarding them grants-in-aid up to the full cost of attendance at their respective schools, or (2) paying up to $5,000 per year in deferred compensation to FBS football and Division I men’s basketball players for the use of their NILs, through trust funds distributable after they leave school.

In 2015, A United States Court of Appeals court upheld the injunction with regards to allowing NCAA members to give scholarships up to the full cost of attendance to students for their NIL. However, the court overturned the injunction to the extent it allowed. students to be paid cash compensation of up to $5,000 per year. O’Bannon v. NCAA, 802 F.3d 1049, 1078–79 (9th Cir. 2015). The Court of Appeals noted that the difference between offering student-athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap. Once that line is crossed, the court noted “there is no basis for returning to a rule of amateurism and no defined stopping point;  we have little doubt that plaintiffs will continue to challenge the arbitrary limit imposed by the district court until they have captured the full value of their NIL. At that point the NCAA will have surrendered its amateurism principles entirely and transitioned from its “particular brand of football” to minor league status.”

•   NCAA v. Alston 

In 2019, a California district court issued a ruling that changed college athletics forever. Nat’l Collegiate Athletic Ass’n v. Alston, involved a case where a group of current and former student-athletes suing the NCAA and eleven of its conference that participate in FBS football and Division I basketball on ground that an interconnected set of NCAA rules that limit the compensation college athletes may receive in exchange for their athletic services violates federal antitrust law. In re Nat’l Collegiate Athletic Ass’n Athletic Grant-in-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058, 1065 (N.D. Cal. 2019). The California district court sided with the athletes and issued a permanent injunction that barred the NCAA from imposing education-related compensation limitations on college athletes. 

However, the NCAA retained the right to define education-related benefits, to regulate how schools provide them to student-athletes, and to assist conferences and schools in enforcing any conference rules limiting educational benefits. Additionally, conferences can independently limit compensation or benefits received by athletes including the education-related benefits that the NCAA will not be permitted to cap. The California court also determined that the NCAA was allowed to impose limitations on compensation that athletes receive unrelated education-related expenses, reasoning “at least some conferences would allow their schools to offer student-athletes unlimited cash payments that are unrelated to education. Such payments could be akin to those observed in professional sports and that payments of that nature could diminish the popularity of college sports as a product distinct from professional sports.

After the NCAA timely appealed, California enacted the Fair Pay to Play Act (the “FPP Act”). The FPP Act required the NCAA and its member institutions to permit student-athletes enrolled in California colleges and universities to earn compensation from the use of their NILs.  In response to the FPP Act, the NCAA created a working group that recommended permitting NIL benefits so long as they are tethered to education and otherwise preserve the distinction between college and professional sports recognized in O’Bannon v. NCAA. 

In 2020, a United States Court of Appeals court upheld the California district court’s injunction and similarly concluded that NCAA limits on education-related benefits are unreasonable restraints of trade, and accordingly enjoined those limits. In re Nat’l Collegiate Athletic Ass’n Athletic Grant-in-Aid Cap Antitrust Litig., 958 F.3d 1239 (9th Cir. 2020), The Court of Appeals similarly concluded that the NCAA is allowed to limit cash compensation unrelated to education and that conferences were allowed to regulate the education-related benefits received by athletes. The of Appeals noted that the district court’s antitrust analysis is faithful to our decision in O’Bannon v. NCAA recognizing that the NCAA has not endorsed cash compensation untethered to education; instead, it has undertaken to comply with the FPP Act in a manner that is consistent with O’Bannon —that is, by loosening its restrictions to permit NIL benefits that are “tethered to education.”

In 2021, The United States Supreme Court affirmed the California district court’s injunction that enjoined the NCAA from restricting education-related compensation or benefits “that may be made available from conferences or schools.” Nat’l Collegiate Athletic Ass’n v. Alston, 210 L. Ed. 2d 314 (2021). The United States Supreme court noted that as the student-athletes concede, the injunction “does not stop the NCAA from continuing to prohibit compensation from “sneaker companies, auto dealerships, boosters” “or anyone else.” The United States Supreme Court futher noted that the district court left the NCAA considerable flexibility and that NCAA rules were still allowed to prohibit its members from providing compensation or benefits unrelated to legitimate educational activities—thus leaving the league room to police phony internship.

Additionally, the United States Supreme Court noted that the was allowed NCAA to propose (and enforce) rules defining what benefits do and do not relate to education, noting that the NCAA may seek whatever limits on paid internships it thinks appropriate. Under the current decree, the NCAA is free to forbid in-kind benefits unrelated to a student’s actual education; nothing stops it from enforcing a “no Lamborghini” rule and the district court invited the NCAA to specify and later enforce rules delineating which benefits it considers legitimately related to education. To the extent the NCAA believes meaningful ambiguity really exists about the scope of its authority—regarding internships, academic awards, in-kind benefits, or anything else—it remains free to seek clarification from the district court since the court issued its injunction three years ago.

• Unsettled issues following Alston 

Following Alston, the possibility exists for the NCAA to limit several of the practices that have been occurring following the United State Supreme Court’s ruling. The United States Supreme Court acknowledges the NCAA is only currently enjoined from limiting the education-related compensation or benefits “that may be made available from conferences or schools” to athletes. The United Stated Supreme Court further acknowledged the injunction “does not stop the NCAA from continuing to prohibit compensation from” sneaker companies, auto dealerships, boosters, “or anyone else.” Additionally, the United Stated Supreme Court clearly indicated that the NCAA could continue to prohibit universities and conference from providing compensation or benefits unrelated to legitimate educational activities and delineate which benefits the NCAA considers legitimately related to education. The NCAA appears to have significantly more power and authority to potentially police much of the NIL activities then we are currently witnessing applying the Supreme Court’s decision and reasoning in Alston. However, the NCAA is restricted from prohibiting schools or conferences from restricting compensation related to education. 

Conclusion

Navigating the NIL landscape as an athlete, university, or school requires a careful understanding of the underlying legal authority spurring the recent NIL wave. The potential exists for the NCAA to potentially restrict certain NIL activities in the future that could significantly impact athlete eligibility or the availability of compensation. However, the NCAA is restricted from prohibiting schools or conferences from restricting compensation related to education.