Laidig Speaks: Cascadia

Yesterday, I waded into the the ongoing debate about the propriety of the league’s trademark application filed to secure rights to the Cascadia Cup.  Today, Footiebusiness contributor Dave Laidig offers his reply.  For more of Dave’s excellent work, click the tab at the top of the page, and find some more here.

xboxThe debate surrounding MLS’s trademark application of the Cascadia Cup is intense.  And each side has valid points.  The Supporter Groups that creates the Cascadia Cup nearly a decade ago – when the teams where in a different league – rightly feel that they own the Cup.  The Supporters have managed the ceremonial aspects of the Cup, its award and the subsequent taunting of the other teams, and have not neglected the Cup. For their part, MLS literally owns all of the teams that compete for the Cascadia Cup.  And it’s a common fact of modern day sports that leagues have an obligation to aggressively protect their brands.  To do otherwise may be interpreted as forfeiture of their rights, and may allow third parties to muck up the brand, confuse customers, and ultimately cost money.  In this situation, it’s tough to say who is right, and who is wrong.  

But Major League Soccer is wrong – I guess that wasn’t so tough. The league may not be wrong with regards to the law (and really this should not get that far).  They may not be wrong with trying to protect their investment.  The league is wrong because it misjudged its own customers, and pissed off a large swath of fans (and not just those in the Pacific Northwest) by roughly appropriating their creation. It’s tough to stay in business when you screw over your customers.

The Supporter Groups rightly have concerns about MLS ownership of their Cup. The award and caretaking of the Cup is between fan organizations, and represents these groups as much as the teams. By claiming ownership without notifying the groups, the league has indicated that it either (1) is not concerned with the Supporters Groups, or (2) feels it needs to hide its actions from the Supporters Groups.  Regardless of the reason, MLS is foreshadowing that the league may manage the trademark in conflict with the goals of the Supporter Groups.  The league may sell a sponsorship for the event that the Supporter Groups don’t want associated with their name.  Or the creation of a taunting t-shirt by a fan could be shut down as producing counterfeit goods – and one of the best parts about being in a Support Group is the homemade stuff.  Indeed, the league may cut out the Supporters Groups altogether if they wish.  Any of these events offends justice, and the league’s attempt to assure fans rings hollow after their unannounced and unilateral claim to the Cup.

And the fact is that the league already monetizes the event.  With every TV promo, crowd shot, and every ad sale, the league is making money off the creation of the fans.  So far, the Supporter Groups in the spirit of partnership with the league have not filed a claim asking MLS to return their profits. Unfortunately, MLS has not extended the same courtesy to its fans. 

If I could arbitrate a solution to this impasse, I would recognize that the Supporters Groups get to use their creation, and allow the league to police third parties.  The league indicates that it did not wish to infringe upon its fans.  Great, put it writing.  Whichever party ends up with “ownership,” the other party should be granted a license to use the mark.   Give the Supporter Groups some say in whether there will ever be a title sponsor, and recognize that the physical trophy and award will be controlled by supporters.  The league is in a better position to police the mark, and can incorporate the Cascadia Cup into its normal intellectual property protection practices. The league can market the event and supporter atmosphere as they have.  After all, it does make for great TV.  Of course, all of this is just a contractual settlement of an intellectual property dispute, and does not address the underlying relationship with fans. Even in my hypothetical world, I cannot fix that. Portland-Timbers-logo

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12 Responses

  1. Thanks to Dave for his thoughts. I provided my own analysis last night and was pilloried on Twitter for some of the things I put out there so I was glad when Dave elected to put this piece together. There is obviously a small, yet determined, group of fans concerned about this issue. I don’t need to reiterate my position, but there is nothing bad about the fact there is this much passion.

  2. Dave-

    I disagree with two things:

    1. The idea that there are good arguments on both sides and;
    2. The idea that it’s prudent to think of MLS as the “chief monetizer” of all things soccer.

    This isn’t the MLS’s brand, it’s the supporters groups brand. They’ve created the Cascadia Cup and decided how to award the it over the years. They own the thing. It’s theirs to TM. That’s why the law exists. A relevant comparison is the Heismann Trophy or the American College version of the Capital One Cup. Neither is owned or registered by the NCAA.

    MLS does not own the teams, as you state in the piece. Rather the teams own MLS in the frankenleague single entity structure that’s existed since the beginning. So, there’s a question if all 19 owners want to zealously pursue stuff like this while alienating ardent supporters and filing potentially flimsy/fraudulent TM registrations. They might, but I’d be curious to know if they all signed off before MLS started this TM registration campaign.

    If the Cascadia Cup Council decides to license the TM to MLS as you propose, so be it, but let’s not blindly assume that MLS has the right or is even best positioned to steward intellectual property. How many of the original logos/brands are in use today? Bigger usually isn’t better when it comes to things like this, especially when the big guy is trying to take something that doesn’t belong to them.

  3. I apologize if this reads jerkish. This was my second pass at trying to write a response after my first draft got eated by the internets and I was trying to get it down quick. Thanks Dave for your thoughts and the opportunity to comment.

  4. The fact that you’ve illustrated this post with an image that is NOT and NEVER HAS BEEN an actual Portland Timbers logo goes beyond irony and parody and succinctly proves the point that local ownership of such brands is essential.

  5. Isn’t one if the requirements for owning intellectual property taking the steps to protect it? If you don’t you can Los your rights

    That said this is a trophy awarded to a team that earns the most points over a season not nuclear science

  6. I don’t know anything about Canadian trademark law at all. In the U.S. there is a first use provision surrounding trademarks. I would argue that the Supporter’s Groups have a pretty substantial first (and continuous) use argument to make, regardless of MLS’ position.

    However, Laidig does speak of a very good compromise and one that can be easily reached.

    Frankly, I think all the various regional cups should remain a supporter’s group creation and dominion. MLS can and probably should have a license to use the cups as a marketing tool. If you think about it from a viewpoint of general sports fandom, rivalries are made by fans more than the teams. Players come and go as their careers cannot be and are not nearly as long as a fan’s connection to the team.

  7. This ll sounds rather reasonable. To punctuate, MLS has about as much right to trademark the Cascadia Cup as it does Footiebusiness. a fan created it. It isn’t theirs. The subject of the entity involves their organization, but that doesn’t make it theirs.

  8. A judge once told me that you know you made the right decision if both sides leave unhappy. And that philosophy probably bleeds into my proposed resolution. But in the end, while I don’t like the league’s actions, I also think that some sort of agreement still can (and should) be reached by the parties.

  9. To Jacques Pelham: Sadly it’s the other way around. MLS does own the trademarks of all the clubs in the league and they have final say on transfers even if the clubs do make a deal. Welcome to Single Entity.

  10. Daniel-

    This is where it’s gets a little tricky. The teams control equity stakes in the MLS entity (an LLC registered in Delaware). These equity stakes grant the owners a majority of votes on the governing board. This is ownership, pure and simple. Don Garber and the whole league administration are agents of the owners and subject to their control.

    As for IP ownership, some of the IP is probably solely owned by MLS (likely the case for the original teams). However, for the expansion teams that came into the league with existing IP owned outside the league structure, the rights were likely assigned to the MLS entity. Again, this is a choice made by the teams and it has evolved over time. The recent trend has been to push control/benefit back to the teams for things like local tv rights and (I believe) some types of IP licensing

    Re: personnel decisions, the system in place exists because a majority of the owners (the teams) chose for it to be that way. If MLS league officers make enough decisions to piss off a majority of the owners/teams, the owners have the power to make changes.

    There is a single entity, but it is not an independently governed or managed. The original teams set it up this way as a business decision to consolidate power/leverage and avoid antitrust litigation.

  11. I believe that Jacques is correctly describing the ownership structure (i.e., seems to match what I know of it – which sounds a bit egocentric to me). However, I disagree as to how much leverage any one ownership interest has (and I acknowledge an ownership interest aligns with decision-making responsibility for a particular team(s)).

    First, it is true that Garber works as an agent for the owners. But this is also true for any publicly traded corporation – including the one where I work (I guess I am outing myself as a corporate lawyer). And most would not argue that a corporation is not a single entity, even though the owners (i.e., shareholders) can dismiss the management.

    And the teams are less independent than it seems on the surface. I am aware of scenarios where a player and Team A believe they have a deal, and the league tells the player to either sign with Team B or find employment elsewhere. (I think this is wrong – but it appears to happen from time to time). And teams from the second division would assign their IP to MLS upon entry, which then has an opaque arrangement with SUM to manage and market the brand. As best as I can understand, SUM is independent of MLS legally, but happens to have the same set of owners (or perhaps a large overlap of ownership).

    While a Byzantine corporate structure, or cozy sister companies, are nothing new, the main point is that the league office is a pretty strong force (compared to other US sports or Euro leagues), and there are numerous interdependent relationships.

    And making the assumption that each ownership interest has as much weight as another, the ability of one owner/team to unilaterally make a drastic action is lessened. This is not to say that one owner could not persuade others that Garber (or others) need to change course or be fired. But the dynamic is much different than a team threatening to go elsewhere, and is closer to a business partnership.

    Using a very successful team as an example – if the investors controlling the Sounders were angry enough to leave MLS (for whatever reason), they would likely be able to start another soccer team in Seattle (assuming their entry into MLS did not include a non-compete…which it probably did). If they start an alternate team in Seattle or Bellevue (working around our hypothetical non-compete), they would not be able to call it the Sounders. Because “Sounders” is owned by MLS as the successor-in-interest to the USL/A-League team. Withdrawing from MLS does not necessarily mean that you get to take items with you. If you sell your interest in the company (MLS), you would need to assign all that you own to your replacement. If you straight withdraw from the company (the “I quit” scenario), you don’t get to take IP with you; just like you would not be entitled to the company Xerox machine. And not only would the Sounders name remain, all of the players would as well. Their contracts are executed between the players (or their lawyers) and MLS. This originally may have been a way to artificially lower salaries without raising anti-trust issues, but this also prevents a team from going rogue.

    Thus, if the owners for Seattle (wealthy enough to start their own team if they wanted to) left MLS, they would have a new name and new players. And they would need to find some regular opponents. Basically, they would be a second or third division team. For reference, when Seattle was in the second division, it averaged between 1,885 and 4,087 per game; in other words, about 5-10% of their current attendance levels.

    Because of the need to convince other owners to take any meaningful action, and the dearth of alternatives, I would say that an individual ownership group does not have much influence.

    In contrast, I think supporter groups have LOTS of leverage. They are the best customers, watch the most games and spend the most money. Those that live and die for their team: will buy the products on the shirt. (How many Section 8 folks have gotten into oatmeal?). The league’s existential crisis of the early 2000’s is not forgotten, and management is wary. The league is underperforming in TV rights money, and cannot afford to prop up many mismanaged teams (I’m looking at you Chivas). And any team that turns from success story into a drag on the other teams is a very large problem. A customer revolt should send shivers down the spines of the New York offices. Especially if the customer revolt is well organized and highly visible (I’m thinking Cascadia Cup here).

    Bottom line, the league (and by association, all of the ownership groups running teams) need all the customers it can get. And the league must continue to carry its momentum forward. The league will be selling their TV rights hard in 2014, and 2013 may be the last full year of data used in its negotiations. A blip right now could cost millions in lost revenue – above and beyond what some pissed off fans would withhold from their normal spending.

    Consequently, when discussing issues within MLS, I would prefer to separate fan interests from the “team” as well as the position of the league. While there is some overlap depending on the issue, there are really several different layers interacting with each other.

  12. Good points Dave. No disagreements here regarding the day to day realities of MLS operations. However, with regards to your observation about the relative strength of the “league office,” I’d just reiterate that the league rules and administrators that enforce them are only in place because enough of the owners are satisfied with the current state of affairs.

    I didn’t state that one ownership group could unilaterally dictate MLS policy, however your point regarding the likely political realties between the owners is a good one and well taken. I also have no knowledge regarding the MLS operating agreement non-compete provisions so I can’t comment on your Sounders hypothetical.

    Mainly, I agree that league supporters and U.S. Soccer constituents have important and powerful leverage in shaping professional soccer’s future in the U.S. Like you stated, financial success requires engaged supporters and fans that are willing to attend/watch the games and patronize the teams and sponsors.

    So, my question is: As a supporter or fan of the professional game, do we approach this debate from a viewpoint of the “league” needing to be successful/sustainable, or; do we approach it from the viewpoint of building sustainable clubs/teams that raise the level of Division 1 soccer organically? Do we look at it from the top down, or from the bottom up?

    It’s my sense that these two approaches produce a different set of priorities depending on which one you adopt. That’s where the Cascadia debate comes into play for me. At a business level, there’s a unique symbiotic relationship between supporters and the individual teams which MLS (which includes Por/Sea/Van ownership) took a dump on by making the trademark play. Legally, I haven’t seen a single analysis in MLS’s favor (at least based on U.S. TM law). And yet, the Cascadia supporters were criticized for not being sensitive enough to the “league’s” interests (not by you Dave, but by several others).

    There’s no doubt the Cascadia teams have benefited by joining MLS. But so have the other MLS teams! Like the teams with the fans, the teams have a symbiotic relationship with one another. Financially, Por/Sea/Van are all pulling their weight and subsidizing the teams that have been in MLS for longer.

    MLS’s single entity set up is effectively a formalization of hyper-structured symbiotic relationships between teams. Clubs give up a significant amount of control as part of the bargain to join up with other teams within the DI sanctioned entity. The coaches, players, fans and team staff are all effected by this bargain and the agreements under which MLS operates.

    The nature of these relationships has changed over time. The Designated Player, Home Grown Player, and draft rules have all been implemented or changed from year to year to reflect the owner’s wishes for how they want the relationships to exist. Each time a new team joins or a new ownership group takes over an existing team, the relationships change a little bit.

    The clubs are trying to put the best product they can on the field in spite of the league’s rules and regulations, not because of them. This all happens at the club level and coaches and owners get pissed all the time when the rest of MLS refuses to sign off on a personnel move that could help the team put a better product on the field. Remember this: http://www.thestar.com/sports/soccer/mls/article/1278643–toronto-fc-s-hands-tied-by-meddling-mls-kelly

    These rules and regulations don’t do a whole lot of good if nobody pays to see the show put on by the teams. Are people going to pay for a ticket or watch on tv because of MLS’s unique set of rules and regulations if the soccer being played doesn’t draw an audience on its own? Are their really folks out there that loooove single entity and the re-entry draft?

    I’m not arguing that Seattle or any other current MLS team should ditch MLS if this Cascadia issue isn’t resolved to their liking (who knows,SEA may have been advocating to TM the Cascadia Cup). Rather, I’m advocating for a analytical shift in how we evaluate the relative value of what the “league” actually is and what it contributes vs. what the symbiotic relationship between the clubs and supporters contributes to the overall success and sustainability of Division 1 soccer in the U.S.

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