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SPORTS ENTERTAINMENT AND THE LAW: THE ROLE OF GOVERNMENT REGULATION, INTELLECTUAL PROPERTY, AND
CONTRACTS IN WRESTLING AND MIXED MARTIAL ARTS
BY
PIERRE BEDARD
TABLE OF CONTENTS
I. Introduction ………………………………………………....……2
II. Two Dominant Players………………………………………..…3
III. Government Regulation………………………………………...8
IV. Intellectual Property Rights…………………………………..14
V. Contracts……………………………………………………...…25
VI. Conclusion: The legal future of sports entertainment……....30
Pierre Bedard Page 1 of 33
I. INTRODUCTION
Professional wrestling and Mixed Martial Arts (MMA), two forms of mayhem
known collectively by the euphemism “sports entertainment,” are like double-wide
trailers. To some, a double-wide is nothing more than a tornado magnet, a nest for white
trash. To others, it’s home.
In some social circles, admitting a love for wrestling or cage fighting is a form of
intellectual suicide, the moral equivalent of lighting a Camel no-filter in an aircraft
lavatory.1 Yet, many of us are drawn to wrestling through childhood memories or cultural
ties. The memory of my Dad and uncles, playing cards, while watching wrestling on a
15-inch black and white Dumont television set and drinking room temperature O’Keefe’s
beer in East Montreal is an early memory. When we moved to Southern California,
Freddie Blassie, being told by the LA Olympic Auditorium crowd to “Bite, Freddie,
Bite!” welcomed me to Orange County. Visions of Mad Dog Vachon, accidentally
opening up a vein in his head on a steel post, blood spurting out marking each heartbeat,
stay with me to this day, and not in a post-traumatic way.
But wrestling is less ethereal than my random memories of violence past. The
sports entertainment industry has left a rich historical trail of case law about government
1 Well, it may not be as bad as a federal crime, but professing a love of professional wrestling or MMA makes people question your demographic.
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regulation, intellectual property rights, and contract law. This paper attempts to gain
insight on the industry through these cases.
II. TWO DOMINANT PLAYERS
Sports entertainment as a concept has ebbed and flowed over the years. Emerging
from circus sideshows, carnivals, and traveling strong men, this form of sports
entertainment is arguably as legitimate as any sport, requiring conditioning, training, and
in wrestling’s case choreography and acting needed to get a performer “over” with the
crowd. Today, sports entertainment is dominated by two players – one in professional
wrestling and the other in MMA.
World Wrestling Entertainment (WWE)
The WWE, headquartered in Stamford, Connecticut is a publicly traded on the
NYSE (WWE). Once known as the World Wrestling Federation (WWF)2, the company
had revenues of $485.7M in 2007 and market capitalization of about $1.2B. The WWE
segments its revenue in four categories; 1) Live and TV entertainment, 2) Consumer
Products, 3) Digital Media, and 4) WWE Films.3
The WWE’s longterm financial objectives are 10% average revenue growth and
12% average earnings growth year-to-year from 2006 to 2011. Their primary path is
2 Until sued by the other WWF – the World Wildlife Fund. See WWF vs WWF: The trademark war http://slam.canoe.ca/SlamWrestlingArchive2000/oct26_wwf-ap.html (last visited May 14, 2008) 3 See Current WWE 10-K Report http://corporate.wwe.com/investors/documents/200710-KFinal.pdf (last visited May 14, 2008)
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through international expansion, the exploitation of Digital Media opportunities including
website advertising, the sale of hard goods through wwe.com, and the strengthening of
the core businesses, especially pay-per-view.4
Business Segments 2007 Revenue ($M) Percent of Total Revenue
Percent Growth
Live & TV Entertainment $ 316.8 65% 8%
Consumer Products $ 118.1 24% 24%
Digital Media $ 34.8 7% 24%
WWE Films $ 16.0 3% N/A
Total Revenues $ 485.7 17%
Just like they segment their business, the WWE knows how to segment the
demographics they serve. Their segmentation philosophy is a roadmap for growth. They
manage the business with an eye to trends and shifts. If they see an opening to
micromarket a t-shirt geared towards 35 year old divorced grandmothers, they exploit it
and a t-shirt geared to the demographic emerges on the WWE storefront at wwe.com.
While Live & TV Entertainment represented two-thirds of the revenue in 2007, its
growth (8%) lagged behind the other business segments. Was it because Live & TV
Entertainment is more susceptible to economic petroleum and agricultural shocks? Did
4 See WWE First Quarter 2008 Conference Call Presentation http://corporate.wwe.com/investors/documents/1Q2008Presentation_004.pdf (last visited May 13, 2008)
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the rate of growth correlate to the rise in the price of gasoline? Was the pay-per-view
market saturated? Their Trending Schedule5 dissects each granular part of each segment
and guides investment (and disinvestment) decisions. For example, in 2007, sensing an
overload in the pay-per-view schedule, the WWE canceled at least one show.
The WWE is growing the product line by looking to the international market.
They’ve determined that the US market is relatively saturated, with almost one pay-per-
view scheduled per month. The WWE has signed affiliates like BSkyB in Europe, taking
them into new markets and hoping to keep TV revenue on a positive slope.
Consumer Product revenues, which includes license fees, royalties, home video
sales and magazine sales was strong in 2007. From 2006 to 2007, licensing increased
47%. In Q1 2008 alone, licensing revenue rose 27% year to year based on the sale of 5.2
million units of WWE’s flagship videogame published by THQ. The strength of the
Consumer Product segment clearly demonstrates that the WWE is not just about
professional wrestling. With a deep intellectual property portfolio ripe for licensing, the
WWE is an entertainment company.
Zuffa
Zuffa, LLC, located in Las Vegas, Nevada, was formed to purchase the
Semaphore Entertainment Group (SEG) in 2001. Because Zuffa is a privately held
limited liability corporation, it is hard to pierce the veil surrounding internal financial
5 See WWE First Quarter 2008 Trending Schedule http://corporate.wwe.com/investors/documents/TrendingScheduleQ12008.pdf (last visited May 13, 2008)
Pierre Bedard Page 5 of 33
machinations of the company. Thankfully, an enterprising blogger / law student / writer,
Adam Swift, has been able to piece together some interesting facts harvested from a
Standard and Poor’s report downgrading Zuffa’s corporate debt rating in late 2007.
According to MMA Payout, Zuffa was carrying about $350M in debt at the end of 2007.
The money was most likely used to issue dividends to the partners, and refinance existing
debt needed for operating expenses and the purchase of three (3) MMA promotions, the
World Fighting Alliance, World Extreme Cagefighting, and PRIDE Fighting
Championships (PRIDE). Mr. Swift was also able to determine that about 100% of
Zuffa’s 2007 revenues came from live matches, television revenue, and pay-per-views.
If we look at the same metrics used by the WWE to evaluate their business, we
can surmise the following about Zuffa. First, we can assume Zuffa’s revenues are
approximately $300M per year based on pay-per-views, gate receipts, and television
contract revenue.
Today, their revenue is wholly from the Live TV Entertainment segment as
defined by the WWE in its segmentation. To truly grow, they need to follow the WWE’s
game plan, expanding into consumer product and digital media sales.
The UFC has started selling DVD editions of its The Ultimate Fighter television
show which appeared on SpikeTV. They are about to enter into consumer products with
the release of a UFC videogame by THQ in the Spring of 2009, but at best, this might
return $20M per year since the octagon is not located in Liberty City. With every live
event, they are building a catalog of digital assets and intellectual property Zuffa can
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repurpose into licensing and merchandising opportunities. But, Zuffa does not appear to
have a viable merchandising storefront, nor do they have a vast stable of characters they
own all rights to for exploitation.
Can Zuffa maintain its revenue and service its debt while trying to follow a
strategy perfected by the WWE? Can they expand the other segments of the business
while not going broke financing the expansion? On today’s trajectory, the only thing
standing in their way is execution. As long as cash flow is maintained and the proper
infrastructure is put in place, Zuffa will likely raise capital through an Initial Public
Offering (IPO) in an attempt to replicate the WWE’s success as sports entertainment
powerhouse.
Pierre Bedard Page 7 of 33
III. GOVERNMENT REGULATION
Government regulation has reared its head in many human enterprises, especially
in the MMA industry. Women’s rights, the First Amendment and taxation, and the
regulation of professional fighting have all been tackled in the courts. The following
cases examine government’s role in sports entertainment.
“Because there are too many blondes!” - Women in wrestling (1955)
In 1955, Rose Hesseltine, also known as Rose Roman, sought a license from the
Illinois Athletic Commission to wrestle. The Commission, citing “unladylike behavior”,
denied her the right to wrestle. 6 Rose, sporting purple hair, won her case based on a
6 WOMEN GRAPPLERS ADD BIT TO GROANERS
(Williamsport PA Gazette Bulletin, Friday, Aug. 26, 1955)
Reprinted from http://www.f4wonline.com/content/view/3216/105/ (last visited May 12, 2008)
CHICAGO -- Women wrestlers like Rose Roman Hesseltine believe a woman's place is in the ring. She ranks as a top hand among the 40 members of the fairer sex in the United States who have invaded man's wrestling domain for a share of the loot. Rose Roman has been wrestling professionally ever since she came to Chicago five years ago from Des Moines.
"I've had about a dozen black eyes, broken toes and fingers, and have been laid up with my back several times. But I've won better than half my matches," she says proudly. "That's better than I did in my first ones."
As for loot, lady wrestlers can make from $15,000 to $65,000 a year.
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literal reading of the statute. The Supreme Court of Illinois affirmed the ruling of the
Cook County circuit court, allowing her to wrestle. Attendance to the wrestling shows
immediately tripled. Finding the Commission’s ruling an “arbitrary assumption of
power,” the court felt there was no need to examine the constitutional issues since in
reading the statute; they found no mention of gender.7 Rose Roman was free to terrorize
other women and perform in front of the fans, helping to blaze the trail for today’s
popular WWE divas.
First Amendment challenges to taxation (1990 – 1992)
Titan Sports, the corporate predecessor to the WWE, challenged a media tax
levied by the State of New Jersey on its wrestling shows, claiming that wrestling should
Promoter Fred Kohler says since lady wrestling returned this spring after a long ban by the Illinois Athletic Commission, attendance has jumped 300 to 500 per cent.
The national boom began when Indiana early this year permitted women to wrestle in public exhibitions. It now is permitted in 43 states, Kohler said.
Rose Roman won women's rights a healthy boost when she pinned the Illinois Athletic Commission to the mat with a decision by the Illinois Supreme Court. Justice Roy Klingspiel said the commission had not statutory power to refuse Miss Roman a wrestling license.
She is one of six lady wrestlers in Kohler's stable which also has 35 men wrestlers for matches as far away as Mexico City and Caracas, Venezuela. He insists they be ladies and follow the rules set by athletic commissions on behavior. That means no kicking, or hair pulling, no gouging of eyes.
"They want to protect the fragility of women," Rose Roman says.
Her 138 pounds and 24 years are about average for her profession.
Her ringmate, Shirley Strimple, from Pittsburgh, is 26 and is married to a wrestler, Roy McClarity, a sleeper-hold specialist from Winnipeg, Canada. The couple have three children -- Debra, 3; Tony, 21 months, and Steven, 4 months. The tots are tended by a nurse when their parents are wrestling.
Kohler says Shirley and Rose are the two most beautiful ring dolls who ever applied a head lock. Rose has the edge with her purple hairdo, however. Why purple hair?
"I wanted to be different," she said. "There are too many blondes." 7 Hesseltine v. State Athletic Comm’n, 6 Ill.2d. 129
Pierre Bedard Page 9 of 33
be considered expressive free speech and thus protected by the First Amendment. Titan
asserted that the “video productions are an expressive activity” … “because they are
dramatizations which depict moral issues and are best classified as dramatic social
satire.”8 In its brief to the court, Titan broke kayfabe, the illusion that what happens in the
wrestling ring is real, in order to fight the tax. Titan argued that taxing a WWF wrestling
exhibition was analogous to taxing a soap opera like Dallas.
Linda McMahon, the WWF’s executive vice-president and Vince McMahon’s
wife, filed affidavits detailing how wrestlers are often nothing more than “characters and
personas” acting out “sagas in a form of drama that includes plots, subplots,
characterization, theme improvisation, spectacle, acrobatic expression, critical expression,
moral expression and political expression."9 Was Titan banking on wrestling fandom not
reading the proceedings of the New Jersey tax court, or was this an admission by one of
the two largest wrestling promotions at the time that wrestling was more entertainment
than sport, more theatre than reality?
Ultimately, the court ruled for the state and against Titan’s First Amendment and
commerce clause challenge, finding that New Jersey’s right to regulate professional
wrestling, be it an event, a soap opera, or a sporting event was not a constitutional issue
worthy of federal intervention.
8 Titan v. Hazzard, 11 N.J. Tax 259, at 269 9 Titan v. Hazzard, 11 N.J. Tax 259, 266
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MMA and the Role of Athletic Commissions
The Frawley Act, enacted in 1911, legalized professional boxing and placed it
under the control a state athletic commission.10 The death of a young boxer in 1917
prompted the repeal of the Act and the suppression of legal prize fighting until 1920,
when New York’s Walker Act established yet another commission to regulate boxing.11
This form stuck, and other states modeled themselves after New York’s Athletic
Commission. But MMA is neither fish nor fowl, neither boxing nor wrestling.
Incorporating rules from boxing, yet allowing choke holds, elbowing, and kicks you
would never see in a boxing match, promoters attempting to promote MMA events often
ran afoul of commissions originally set up to deal with boxing events. Eventually, some
state commissions embraced MMA, but not until MMA had been rehabilitated and
accepted by the general public. This attempt at rehabilitation continues. MMA is still
illegal in New York State.
Early Days of MMA – Semaphore Entertainment Group (SEG) v. the World
(1996 – 1998)
Commissions and legislatures tend to mirror and serve the public that elects them
to office. There are four cases which helped define the evolution of MMA as a regulated
activity. Not surprisingly, many of these cases were resolved by virtue of state’s rights
10 http://query.nytimes.com/mem/archive-free/pdf?res=9C07E5D7123BE633A25754C1A9679C946296D6CF (last visited May 13, 2008) 11 http://query.nytimes.com/mem/archive-free/pdf?res=9500E4D7143AEE32A25754C1A9609C946195D6CF (last visited May 13, 2008)
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questions or on technicalities suited to mesh with public sentiment and serve public
policy.
The first was in 1996, SEG v. Gonzales. 12 SEG scheduled an MMA pay-per-view
in Puerto Rico. At the time SEG entered into its contracts for the event, there was no
commission with jurisdiction over MMA events in Puerto Rico. The Commonwealth of
Puerto Rico decided to hold hearings on MMA. SEG sought equitable relief against the
Commonwealth and filed suit to enjoin them from holding the hearings, fearing that they
would prevent the event. The District Court, citing the potential for irreparable financial
harm ruled for SEG and enjoined the commission, allowing the show to go on.
SEG found New York less friendly in 1997. As in Puerto Rico, the New York
State Athletic Commission revised its rules just prior to a scheduled SEG MMA event.
Even though the company proved economic harm because of the rule changes, SEG
failed to clear the hurdle of “irreparable financial harm” needed for injunctive relief set
by the New York federal district court.13
In New Jersey in 1998, the federal court refused to preempt the state’s jurisdiction
and grant SEG a preliminary injunction when the New Jersey State Athletic Commission,
as in Puerto Rico and New York, revised its rules immediately before a scheduled MMA
12S.E.G. Sports Corp. v. Gonzales, 919 F.Supp. 543 13S.E.G. Sports Corp. v. State Athletic Comm’n , 952 F.Supp. 202
Pierre Bedard Page 12 of 33
event. The rulings in New York and New Jersey did little to enhance SEG’s financial
health.
In 1997, SEG did find one sympathetic ear in Michigan, foreshadowing a
changing societal attitude towards MMA. The Michigan Supreme Court 1) denied an
injunction canceling a Detroit Ultimate Fighting Championship (UFC) event , 2) threw
out a criminal contempt ruling against fighters who did not follow agreed-to rules (open
fists and no head butts), and 3) ruled that the UFC did not violate any criminal state
statutes in holding an MMA event. Though ruling that the UFC violated Michigan laws
because it constitutes "boxing," the court ruled only that the UFC must follow Michigan
laws in the future, and refused to stop the event or sanction the organizers.
In spite of Michigan, the uncertainty and the general public backlash against the
concept of MMA hastened the sale of the UFC to Zuffa in 2001. SEG was clearly
paddling uphill, fighting public perception and a court system which was generally
unfriendly and void of any sympathy for the promotion’s economic woes and hardships.
Courts, as they did in Mason v. City of Lincoln14 in 2003 in Nebraska, tend to
defer to the wishes of the state commissions or the legislature on these issues. Many
states have followed New Jersey’s lead, establishing their own commissions specifically
chartered to deal with issues around MMA.15
14 Mason v. City of Lincoln, 665 NW.2d 600 15 http://www.state.nj.us/lps/sacb/ (last visited May 13, 2008)
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It would take some astute marketing and positioning to slowly build MMA into a
regulated, controlled sport rather than a spectacle. Zuffa’s purchase of the UFC and its
affiliation with SpikeTV helped mainstream MMA and a harnessed a nation’s passion for
martial arts. Though legislatures are generally acceding to the public’s acceptance of
MMA as a legitimate sport, there are still boundaries which probably won’t be crossed,
such as the concept of an MMA Little League for children. A martial arts teacher’s
attempt to start an MMA youth league in Tulsa, Oklahoma is drawing fire from elected
officials.16 By establishing rules, self-control and government regulation, MMA is
quickly maturing into an industry.
IV. INTELLECTUAL PROPERTY RIGHTS
Compared to the MMA segment of the sports entertainment industry, professional
wrestling offers a more mature landscape in terms of intellectual property law. The
development and exploitation of established characters and story lines have sparked
trademark, copyright, and product licensing polemics which have surfaced in the courts.
As MMA establishes and entrenches itself, becoming more like professional wrestling in
terms of character development and merchandising, intellectual property issues common
to professional wrestling will start manifesting themselves in the MMA.
16 http://www.usatoday.com/news/nation/2008-04-03-mo-cage-fighting-ban_N.htm (last visited May 13, 2008)
Pierre Bedard Page 14 of 33
The typical WWE contract stipulates that the company either owns outright or
holds an exclusive license to a performer’s name, persona, and likeness.17 The company
believes that if they spend resources to develop and cultivate a character, the characters
likeness and name is an exploitable asset of the company’s intellectual property. In the
MMA, many of the conflicts have been over contracts and not about the ownership of
one’s persona or the sale of collectible action figures.
As with many industries, what has evolved into the wrestling sports entertainment
industry has seen unprecedented consolidation in the latter half of the 20th century. The
growth of cable television and the later growth of the internet created a seemingly
insatiable need for content to fill the airwaves and merchandise to sell over the internet.
The media strategy of many sports entertainment companies is complex and intertwined,
mixing at a minimum print, online, music, movies, pay-per-views, TV shows, live events
in a tight, focused promotional engine.
No one does it better than the WWE. One media outlet feeds the next. In both
professional wrestling and MMA, television shows often serve as de facto infomercials,
driving traffic to online merchandise sales and creating demand for pay-per-view events
and live performances. Typically, a story line, steeped in dramatic conflict, is set up on
television and resolved on a pay-per-view. Even in the UFC, where the fight is the story
line, the two “coaches” on The Ultimate Fighter meet in a pay-per-view fight or special
17 I am inferring that this is the case. I can only infer because I’ve never seen an actual WWE contract.
Pierre Bedard Page 15 of 33
primetime event at the end of the season. The television show introduces a new set of
cage fighters to a TV audience and generates interest in the pay-per-view resolution at the
end of the season.
As in the beer industry, which saw new local breweries emerge in response to a
homogeneous Bud and Miller world, boutique wrestling companies like Total Nonstop
Action Wrestling (TNA Wrestling) and Ring of Honor have sprouted, filling gaps in taste
and niches, attempting to be RC Colas to the Coca Cola of wrestling sports entertainment
companies, the WWE. The WWE’s market domination invites smaller, nimble micro-
competitors like Ring of Honor and TNA Wrestling.
Case law documents some of the intellectual property battles leading to the
WWE’s eventual domination. In examining the WWE’s path, one can predict some of the
issues the MMA industry is likely to deal with as it matures.
On its way to global wrestling / sports entertainment hegemony, the WWE (then
known as Titan Sports) competed with Turner Broadcasting’s World Championship
Wrestling (WCW). One of these skirmishes was actually a very real shooting war (at
least in terms of ratings) which took place on the airwaves and in the courts from 1995 to
1999. These were known as the Monday Night Wars.
The Monday Night Wars: Razor, Diesel, and Billionaire Ted (1995 – 1999)
The graph below shows the intense competition existing between Titan Sports and
Turner in the mid and late 1990’s. The centerpiece of this was the weekly Monday night
competition between WCW Monday Night Nitro and WWF Monday Night Raw, going
Pierre Bedard Page 16 of 33
head-to-head in the same time slot. Competition between the two was bitter and
destructive. TNT would regularly tell viewers the results of matches slated to take place
on RAW, just to preempt and spoil the WWF’s story lines.
The ratings18 documented the competition between the two companies, charting a
heated competition which only faded in 1999. Signing Terry Bollea (aka Hulk Hogan) in
1994 the two promotions fought tooth and nail over the wrestling fan’s hearts, minds,
eyes, ears, and dollars. Today, the ratings for Monday Night RAW barely crest over 4
points. This is misleading given today’s entertainment choices for the delivery of media.
Luckily, the promotion has diversified itself with more programming on alternative
networks and the worldwide web in line with the viewing habits of its clientele.
18 http://en.wikipedia.org/wiki/Monday_Night_Wars (last visited May 13, 2008)
Pierre Bedard Page 17 of 33
In 1995, Razor Ramon and Diesel (aka Scott Hall and Kevin Nash), important and
popular WWF performers, left Titan for Turner. Maintaining the fiction that they were
still WWF performers, they appeared on Turner’s TNT Nitro which, in a world before
Tivo, was programmed at the same time as Monday Night RAW. This spawned a lawsuit
by Titan against the WCW, alleging copyright infringement and torturous contract
interference.
Titan was not shy to strike back with its own form of over the top programming.
The two promotions played off each other, often crossing over the boundaries of TV land
to meet in federal court. Titan went so far as to stage so-called “attacks” at WCW events
“during which WWF wrestlers verbally denigrated plaintiff and its wrestlers, accosted
plaintiff's fans while they were waiting in line to see plaintiff's show, and claimed that
Hall and Nash wanted to return to the WWF, but were being prevented from doing so by
plaintiff.”19 Vince McMahon, not only the CEO of WWE, Inc. but a driving force in the
company’s creative team, went so far as to create a character called “Billionaire Ted,”
mocking Ted Turner. In 1999, the Connecticut District Court refused to dismiss Turner’s
claims against Titan.20
It didn’t matter since events had turned in Titan’s favor. Purchased by Time
Warner AOL, Turner lost its will to fight. Personnel changes and political infighting
19 World Championship Wrestling v. Titan Sports, 46 F. Supp. 2d 118, 121 20 Id.
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doomed the WCW. In 2001, the WWE purchased what was left of WCW from Time
Warner AOL, ending the Monday Night Wars.
RICO, videogames, THQ and the WWE (2004, 2007, and beyond)
Arguably the most important licensing and merchandising case in sports
entertainment this decade is WWE v. Jakks Pacific Inc. and THQ.21 THQ publishes a
videogame WWE SmackDown vs. Raw 2008 which allows players to play as WWE
performers, create story lines, and perform signature wrestling moves. The WWE
accused THQ management of doing everything but shoplifting Actifed to make bathroom
meth. Accusing THQ of crimes under the RICO statute, bribes, kickbacks, and
conspiracies, all in the name of negotiating a favorable licensing deal, the WWE believes
that the videogame licensing rights were licensed illegally by a bad seed within the WWE
ranks. James Bell is alleged to have received kickbacks and bribes from THQ through a
limited liability shell company until he was terminated as head of the WWE licensing
group in 2000. In an October 2004 seventy-three (73) page filing, the WWE sought to
void the contract between itself and THQ/Jakks. In December 2007, THQ was able to
successfully argue that the RICO allegations were time-barred and all RICO allegations
were dismissed.22
21 W.W.E. v. Jakks Pac. Inc. and T.H.Q., 2007 U.S. Dist. LEXIS 93775 22 Id.
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In spite of the lawsuit, the two companies enjoy tremendous success. THQ’s
WWE 2008: RAW vs. Smackdown has sold six (6) million units since its release. The
WWE has even broadcast faux matches on Monday Night RAW with the game, pitting
Barack Obama against Hillary Clinton.23
So what is going on behind the closed doors in meetings between WWE and THQ
management? Will there be a divorce or reconciliation? Insiders at THQ are tightlipped,
but odds are the relationship, fueled by mutual success, will continue. As long as the
economics work, THQ and the WWE will probably remain bedfellows.
MMA is soon following suit into the videogame arena. The “octagon,” the eight-
sided ring synonymous with cage fighting and MMA, will be represented by a THQ title
slated for release in the Spring of 2009. This title should add to THQ’s 33% share in
“fight” videogames.24
MMA, like boxing before it and wrestling today, needs story lines. They need the
good, the badass, and the ugly. Without it, they will peak. A videogame can help with
this. Chris Leben urinating in a fellow fighter’s bed in the first season of The Ultimate
Fighter created a character that either had a screw loose or was pure evil, depending on
your opinion. Either way, you remember Chris Leben. Forrest Griffin and Stephan
Bonnar, two other competitors on the same program, pounded each other bloody for three
23 http://xboxmovies.teamxbox.com/xbox-360/6678/Hilary-Clinton-vs-Barack-Obama/ (last visited May 13, 2008) 24 http://investor.thq.com/phoenix.zhtml?c=96376&p=irol-newsArticle&ID=1140787&highlight= (last visited May 13, 2008)
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solid rounds. Dana White, UFC’s CEO, was impressed enough to offer each a contract
with the UFC on the spot even though only the winner, Forrest Griffin was supposed to
be offered a contract.
Vince McMahon knows that legends and stories sell. If an angle doesn’t work,
they trash it. If Steve Austin says “You sit there and you thump your Bible, and you say
your prayers, and it didn't get you anywhere! Talk about your Psalms, talk about John
3:16 ... Austin 3:16 says I just whipped your ass!” they see it catch on, gauge people’s
positive reaction to the character, and put it on a t-shirt – and it gets licensed and
merchandised. MMA lacks this today. MMA is too real. The hideously deformed and
calcified cauliflower ears are real. The blood and inch wide cuts exposing flesh are real.
Big Dog Wins - 2003
In WWF Entertainment v. Big Dog Holdings, the WWF sued for copyright and
trademark infringement.25 The court papers describe in detail what the WWE considers to
be its intellectual property, including the Rock’s “People’s Eyebrow” and Stone Cold
Steve Austin’s 3:1626 “says I just whipped your ass.” Big Dog sold T-shirts and other
25World Wrestling Fed’n Entm’t v. Big Dog Holdings, 280 F.Supp.2d 413 26 Id. I include the entire text excerpt below as I find it simply too good to just cite. My apologies to Bluebook citation, most of these facts below were stated in the WWE’s amended complaint.
“B. WWE's Intellectual Property
"THE ROCK", portrayed by Dwayne Johnson, "STONE COLD STEVE AUSTIN", portrayed by Steve Williams, and the "UNDERTAKER", portrayed by Mark Calloway, have been three of the WWE's most popular wrestling characters over the past five (5) years. WWE alleges that it has developed and promoted THE ROCK since 1997, and has created and developed a unique trademarked name, persona and trade dress for THE ROCK. Similarly, a unique trademarked name, persona and trade dress has been created,
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paraphernalia with slogans such as "Bone Cold Steve Pawstin.”27 Big Dog’s defense was
that its creations were parodies – a defense to copyright infringement. The court agreed.
developed and promoted by WWE for STONE COLD STEVE AUSTIN since 1996, and the UNDERTAKER since 1990. WWE further contends that it owns trademarks and service marks in THE ROCK, STONE COLD STEVE AUSTIN, and the UNDERTAKER. In addition, WWE claims ownership in trademarks and service marks for: (1) registrations for WWF; (2) the WWF scratch logo; (3) WWF Smackdown! design mark; and (4) AUSTIIN 3:16.
In conjunction with its registration of THE ROCK mark, WWE alleges that it has acquired common law trademarks in THE ROCK's signature catch phrases and slogans: "Know Your Role"; "Jabroni"; and the "Brahma Bull". WWE also contends it has acquired a common law trademark in THE ROCK's Brahma Bull design mark.
Integral to WWE's portrayal of the STONE COLD STEVE AUSTIN character is the use of catch phrase slogans and symbols, including: "Open Up a Can of Whoop Ass"; "Austin 3:16"; "Rattlesnake" 3; "Cause Stone Cold Said So"; and the Skull design. WWE contends that it has acquired a common law trademark in the "Open Up a Can of Whoop Ass," "Rattlesnake," and the "Cause Stone Cold Said So" marks and the Skull design mark.
In addition to their unique persona and character, WWE has portrayed THE ROCK, STONE COLD STEVE AUSTIN and the UNDERTAKER characters with unique and distinctive trade dress. A central component of THE ROCK's trade dress is the Brahma Bull symbol. Not only is THE ROCK often referred to as the "Brahma Bull," but he has a tattoo of a Brahma Bull on his right arm, and his clothing, including his wrestling trunks, t-shirts and black leather jacket, bear the image of a Brahma Bull. THE ROCK is generally portrayed wearing tinted sunglasses, which are often tipped down to reveal THE ROCK's signature facial expressions, most notably, the "People's Eyebrow." THE ROCK's signature facial expression is known as the "People's Eyebrow," in which he raises his right eyebrow while staring, with intimidation in his eyes, at his opponent or the crowd.
STONE COLD STEVE AUSTIN is generally depicted with solid black wrestling trunks, black wrestling boots, no shirt and an open black leather vest with an image of a white skull on the left side and the name "AUSTIN" written vertically in white lettering down the right side.
To further the "menacing persona" of the UNDERTAKER, he has been generally portrayed in all black clothing with black leather designs on the legs, a black leather vest with silver buckles, and tattoos covering his body. The UNDERTAKER also wore black elbow pads, black leather fingerless gloves, black leather boots, and often entered the ring wearing a long black cape. The persona, trade dress and character traits of THE ROCK, STONE COLD STEVE AUSTIN, and the UNDERTAKER are used by WWE in its merchandising of a myriad of products, including photographs, shirts, posters, videos, and action figures.” 27 Id.
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Superstar of Stuporstars - 2006
Albert Patterson, a small time wrestling promoter, sued both the WWE and TNA
on five counts 1) unfair competition, 2) false designation 3) willful violation of 15 U.S.C.
§ 1125(a), 4) misappropriation of methods of advertising, and 5) a common law statutory
claim of trademark infringement. At its raw essence, the claim had to do with the use of
terms like “Wrestling Superstar” by the two wrestling promotions. The WWE
successfully (and thankfully) sought and received summary judgment in its favor. 28
TNA Wrestling, misled by Patterson that he had prevailed against the WWE in a
similar action, mistakenly settled the case under false pretenses.29 When informed that
Patterson had misrepresented the claim, TNA filed a motion reinstating the request for
summary judgment, which was quickly and emphatically granted by a judge whose anger
was transparently dripped from the published ruling.30
Copyright: Zuffa v Showtime Networks – 2007
This seemingly innocuous dispute, over less than a minute of video presented by
Showtime at an MMA event, may have been the opening skirmish in a thermonuclear
battle between EliteXC and Zuffa. Ken Shamrock allowed EliteXC to show a video
highlight of a fight he had participated in for the UFC. Unfortunately, Shamrock didn’t
own the copyright to the video and Zuffa, UFC’s parent, sued EliteXC and Showtime in
28 Patterson v. W.W.E., 2006 U.S. Dist. LEXIS 7453 29 Patterson v. T.N.A. Wrestling, 2006 U.S. Dist. LEXIS 13425 30 Patterson v. T.N.A. Wrestling, 2006 U.S. Dist. LEXIS 78629
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Nevada.31 The battle disintegrated into one of jurisdiction, with every case but
International Shoe32 cited in the opinion. The court ruled for Elite ProXC and deferred a
ruling for Showtime pending discovery on the extent of the contacts in the Nevada
jurisdiction.
By suing and seeking jurisdiction in Nevada, Zuffa made it clear that they were
taking the enemy to task in their home court. Elite ProXC has joined forces with
Strikeforce to put on MMA shows. They have an exclusive deal with Showtime and have
just signed with CBS33, the first promotion to escape the earthly bounds of cable. They
feature Ken Shamrock (Frank Shamrock’s younger stepbrother), Cung Le (a San Jose
based fighter who broke Shamrock’s forearm with a well placed kick in their last fight),
and Kimbo Slice, a frightening streetfighter who was discovered through YouTube. They
also probably aim to sign Randy Couture, a fighter currently embroiled in a lawsuit with
Zuffa over his contract.
31 Zuffa v Showtime Networks, 2007 U.S. Dist. LEXIS 60711 32 Int’l Shoe Co. v. Washington, 326 U.S. 310 33 http://sportsline.com/mcc/blogs/entry/5815454/6673449 (last visited May 13, 2008)
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V. CONTRACTS
Sports entertainment has had its share of contractual squabbles. Because of
WWE’s hegemony, few WWE contracts are litigated. However, in MMA, contracts seem
to be disputed every day. MMA has more than its share of breach of contract suits
because fighters are trying to follow the money. Big money players, like Mark Cuban and
HDNet, are starting MMA promotions and trying to lure the top talent. The highest
visibility dispute in play today is that between Randy Couture and the UFC.34
Bash at the Beach - Bollea v. World Championship Wrestling – 2002 - 2005
The only wrestling contract case in this section features two of the most colorful
characters in professional wrestling – Terry Bollea, better known as Hulk Hogan, and
Vince Russo, a booker and writer known intimately to wrestling insiders but unknown to
the world outside the ring. Russo, who now works for TNA Wrestling, is known for
gimmicks and ridiculous twists that seem to go nowhere. He is the Ed Wood of sports
entertainment.
This dispute was reduced to a breach of contract case once all the defamation and
false light charges were cut away by the trial court. Hogan was supposed to give up his
title to Jeff Jarrett, another performer in a show for WCW called Bash at the Beach.
Jarrett refused to fight Hogan and lay down on the mat. Hogan, confused, left the arena
34 See Sorting out the issues in Couture's wake by Dave Meltzer, Yahoo! Sports http://sports.yahoo.com/mma/news?slug=dm-couture101507&prov=yhoo&type=lgns (last visited May 13, 2008)
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with the championship belt. Russo then climbed into the ring and exacerbated Hogan by
doing a promo where he “called Hulk Hogan a "god damn politician" "who doesn't give a
shit about this company" [who always] "wants to play his creative control card."” Russo
promised everyone in the arena that “they would "never see that piece of shit again."” He
closed by saying “Hogan you big bald son of a bitch ... KISS MY ASS!” 35
Hogan claimed that the WCW was contractually bound to advise him of the
content of any promos.36 The court eventually saw things Hogan’s way in terms of the
breach of contract claim ruling that there was enough question of fact for the case to
proceed. No record of a trial exists adjudicating this issue which infers that it was settled
out of court. Here’s a first person account from Hulk Hogan’s perspective.
Chiapparelli v. Henderson – 2005
Henderson, an MMA fighter, hired Chiapparelli to 1) procure fighting contracts,
2) procure merchandise contracts, 3) train Henderson to compete in such contests; 4)
provide general assistance and look out for the best interests of Henderson, and 5)
procure other employment, such as MMA training engagements. In consideration, the
plaintiff was to receive 15% of Henderson’s gross revenue.
35 Bollea v. W.C.W. , 271 Ga.App. 555 36 Id. “Bollea claims WCW breached [his] Agreement when it allowed Russo to do a "promo" which was not approved by Bollea. WCW claims that the promos were used to develop the story lines and there is nothing in the Agreement that gives Bollea the right to approve the story lines which relate to his fictional character.
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t,
ct in
rts agent.
Henderson left the US and went to Japan to fight, earning $335,000, booking his
own bouts through his own connections. Chiapparelli brought the case before a
Washington state arbitrator and won a judgment against the defendant MMA fighter.
Henderson then sued in a California court, claiming that the contract was void because 1)
Chiapparelli did not comply with the Miller-Ayala Act37, 2) Chiapparelli was not
licensed under the Boxing Act38, and 3) MMA was illegal in California. The California
appellate court ruled against the plaintiff, overturning the arbitration decision because he
was not a sports agent as set out in the statute of with the Miller-Ayala Act. The
significance of this case is that in its dicta, the court set out that the revised Boxing Ac
enacted after the filing of the suit, empowered the California State Athletic Commission
to regulate MMA in California.39 The court never ruled on the validity of the contra
terms of the illegality of MMA. The court instead chose to attack the plaintiff’s standing
as a spo
37 Miller-Ayala Athlete Agents Act, Cal Bus & Prof Code § 18895 (Deering, LEXIS 2007) 38 Boxing Act, Cal Bus & Prof Code § 18640 (Deering, LEXIS 2007) 39 Id. The amended statute now reads "The commission has the sole direction, management, control of, and jurisdiction over all professional and amateur boxing, professional and amateur kickboxing, all forms and combinations of forms of full contact martial arts contests, including mixed martial arts, and matches or exhibitions conducted, held, or given within this state. No event shall take place without the prior approval of the commission. No person shall engage in the promotion of, or participate in, a boxing or martial arts contest, match, or exhibition without a license, and except in accordance with this chapter and the rules adopted hereunder." ( § 18640, as amended by Stats. 2004, c. 691 (SB 1549) § 30, amendments italicized.)
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Hall v. Shamrock - 2006
While the illegal contract claim failed for Henderson, it worked for Ken
Shamrock in 2006. Ken Shamrock is a legendary fighter who has fought both in
professional wrestling for the WWF and MMA for PRIDE and the UFC. In 2000, he
allegedly beat Mark Hall badly in a barroom fight at an MMA event at a casino resort in
California. The fight had not been part of the night’s fight card. As part of a settlement
agreement with Hall, Shamrock agreed to fight him in an MMA match in Japan. Hall’s
purse for the fight was to be $30,000.
Shamrock reneged on the terms of the contract and the fight never occurred. Hall
sued for breach of contract. Shamrock prevailed, the court finding that their agreement
was “void and unenforceable on the ground it had an illegal purpose in violation of Penal
Code section 412.”40 Shamrock avoided Hall in the ring and won his fight in the courts.
Did he know when he signed the settlement agreement that the contract was void?
Probably not, but his lawyer used the California Penal Code to his benefit.
The shape of things to come: Sapp v. K-1 Corporation
Probably the most celebrated contract dispute in MMA, before the Couture
controversy, was between Bob Sapp and the K-1 promotion. K-1 is a Japanese-based
MMA promotion, alleged in some circles to be affiliated with the infamous Japanese mob
– the Yakuza. An ex-NFL lineman known as “The Beast,” Sapp created a persona for
40 Hall v. Shamrock, 2006 Cal. App. Unpub. LEXIS 2027
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himself and earned far more in promotional and sponsorship fees than he ever earned in
the ring.41 K-1 filed suit against Sapp in Tokyo on November 7, 2006 over breach of
contract when he refused to fight in an MMA event in Amsterdam. Sapp countersued on
December 14 and sought a preliminary injunction.
As with many cases, this one was decided along jurisdictional lines. In an opinion
hearkening back to Asahi Metal Industry v. Superior Court42, the court ruled that the
contract should be adjudicated by the Japanese courts, in spite of Sapp’s insistence that
the he had no choice but to sign the standard K-1 contract which dictated the forum.
This case is chockfull of rich background information and briefs that make up the
public record, giving an interesting perspective on the MMA industry and its players.
Sapp wanted to get out of his contract and join the burgeoning MMA scene in the United
States while he was still young enough to fight and draw top dollar. K-1 wanted to
maintain control, and saw Sapp as the centerpiece of their promotion, almost as a
character of their creation, as Vince McMahon sees in his performers. Ultimately, K-1
prevailed and the parties eventually reached a compromise. Sapp was last seen fight in an
EliteXC / Strikeforce event in Seattle in March 2008. He lost badly.
41 The Beast Goes East http://www.time.com/time/asia/2003/bob_sapp/story.html (last visited May 14, 2008) 42 Asahi Metal Indus. v. Super. Ct., 480 U.S. 102
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VI. CONCLUSION: THE LEGAL FUTURE OF SPORTS ENTERTAINMENT
Government Regulation
Professional wrestling may start seeing more government regulation issues crop
up than it has experienced in the last 40 years, mainly because of the perceived rampant
steroid use and early death of many of its performers. In spite of the publicity, I believe
that the federal government will take a more hands off approach and continue leaving
regulation to the states. The WWE and other promotions have begun to implement a
wellness policy, if only to keep the government and the legislatures from reacting to well-
publicized cases, such as the double murder suicide committed by Chris Benoit.
Drug testing and wellness is dictated by state athletic commissions who are used
to regulating prize fights. Wrestling is attempting self-regulation in order to prevent
outside agencies from coming in and regulating them. The MMA industry, after a long
struggle in the 1990’s for acceptance, have almost achieved it. MMA is now considered
the moral equal of boxing, and state athletic commissions have taken on the monitoring
and regulation of MMA, including post-bout drug testing. A great example is the New
Jersey State Athletic Control Board website, which allows promoters to find license
applications online. David Meltzer, reported on May 9, 2008 that the UFC is actively
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involved lobbying New York to legalize MMA.43 If New York accepts MMA, the rest of
the country who have not legalized it will likely follow New York’s lead, as they did with
professional boxing. The MMA industry, led by Zuffa understands this and is lobbying
hard to effect this change.
Intellectual Property
The WWE has nurtured and developed the concept of Intellectual Property
throughout its history. The more we liked the Rock, the more the WWE pushed the Rock,
the sunglasses and the catchphrases (“The People’s Eyebrow” and “The People’s
Elbow”). These translated into merchandising, t-shirts, cargo pants, sunglasses, books,
DVDs, the ring tones, and the videogame character. That is the power of intellectual
property in sports entertainment.
Zuffa is just starting to fathom these waters. They secretly aim to be the WWE,
but can MMA performers be actors? MMA fighters may fight three times a year in real,
honest matches; WWE performers perform 150 times a year in choreographed matches,
physical skits and routines. Until Zuffa can master the art of harnessing their performers’
character and merchandising it, they risk not breaking out of the box, remaining a
company dependent on live shows and pay-per-view buy rates. Though buy rates for
43 Serra, UFC in a New York groove, by David Meltzer, Yahoo! Sports http://sports.yahoo.com/mma/news?slug=dm-ufcny050908&prov=yhoo&type=lgns (last visited May 13, 2008)
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MMA continue to grow, their growth is not infinite. Zuffa will need to mine its
intellectual property to sustain growth.
Contracts
Unlike professional wrestling, where the terms of performer contracts are dictated
by the WWE, MMA contracts are more susceptible to interpretation. Contract
performance is often based on the number of fights in a given period of time. Wrestling
has developed farm systems. Anyone performing at the national level has been trained,
tried, groomed, and tested in front of audiences. While MMA has dojos and stables, there
is no real farm system. Though top performers draw top dollar, most MMA fighters need
to do more than fight to make a living. Some create stables of fighters, others teach MMA,
as others embark on individual promotional tours and exhibitions to make ends meet.
The bottom performers lack sustainable careers. In wrestling, story lines and the
performer’s popularity and Vince McMahon dictate your longevity in the sport. There’s
wear and tear that comes with performing, but there’s usually no encounters with other
performers who intend to “choke you out,” bleed you dry, or beat you senseless into
unconsciousness or submission.
In conclusion, professional wrestling and MMA are two ends of a continuum
defining the business of sports entertainment. Both sides watch each other and privately
lust after the parts of each other’s business. The WWE sees the growth in MMA’s
popularity and pay-per-view rates and drools. Zuffa looks at the growing licensing and
merchandising revenue and wonders how it can produce a Steve Austin or Duane
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Johnson who they can license and merchandise. Either way, the business known as sports
entertainment continues to grow, competing for the international entertainment dollar. A
look at the case law has taken us down a path that only leaves more questions about two
facets of sports entertainment that have established a beachhead and are here to stay.
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