Sports, by their nature, are competitive, which is why we watch on television, and why the business is such big business.
Professional teams and collegiate institutions recognize that on-field success naturally translates to increased revenues and greater opportunities, not just for players and coaches, but for a wide range of organizations. Because of this, sports organizations have sought new ways to gain competitive advantages, whether that be through new training techniques, medical treatment and, of course, advanced scouting and analytics.
Expanded budgets and emphasis in these fields has undoubtedly improved performance in a wide range of sports, but as teams continue to develop proprietary methods, there comes a newfound emphasis on protecting valuable assets.
This can come in the form of tangible intellectual property as well as human capital. In the sports world, where competition is at the heart of the business itself, this can create a paradoxical struggle to determine what can be, and should be, protected from sharing with on-field competitors.
With respect to competition for players’ services, there is little dispute over the free movement of talent within the bounds of player contracts and leagues’ collective bargaining agreements.
Player free agency, which is now generally accepted, can be traced back to the landmark lawsuit filed by former Major League Baseball player Curt Flood.
Flood sued MLB challenging the reserve clause, which essentially rendered the player property of the team that signed him, for life, unless traded. Flood v. Kuhn, 407 U.S. 258 (1972). Flood ultimately lost the case, but it triggered substantial developments that led to an arbitrator ruling against the validity of the reserve clause and establishing free agency in baseball.
Now, offseason free agency is as ubiquitous as the games themselves. At least intraleague, we do not see noncompete agreements in player contracts, though obviously players are obligated to honor the terms of their contracts.
The free movement afforded to players is not necessarily granted to the same degree to coaches. Coaching noncompete agreements have become a tool utilized in the field, particularly in college football. Schools are taking extraordinary measures to protect their brand, and often the coach is one of the most important assets to that brand.
In 2013, Forbes estimated the value of the University of Alabama’s football program grew 32 percent in head coach Nick Saban’s first six years as head of the program.
University Chancellor Robert Witt called Saban the best investment in Alabama’s history. Saban may be the best example of the value that a coach can provide, but he is not unique.
The use of restrictive covenants in coaching contracts drew attention in 2013 when the University of Arkansas hired Bret Bielma away from the University of Wisconsin. Bielma’s contract with Arkansas includes a noncompete clause that prohibits Bielma from coaching at any other Southeastern Conference school through at least December 2018.
While coaches’ contracts often contain expensive buyout provisions that are essentially liquidated-damages clauses, and often also require consent to interview a sitting coach, an actual noncompete agreement is a relatively novel concept in the college sports business.
Arizona State University followed suit when it hired head football coach Todd Graham from the University of Pittsburgh. It is a fair bet to assume that this trend may continue as teams and institutions recognize the monetary value of coaches as assets.
While relatively novel in the coaching field, the front office and executive level is where restrictive covenants are taking hold, particularly given the rise of analytical tools to develop and scout players.
With respect to front office employees, the critical concern is determining what can and cannot be protected from external dissemination. Just like players and coaches, knowledge, and the mechanisms that provide such data, are assets to an organization.
Sometimes these systems are proprietary to the individual employee if created before he or she joined the organization, but sometimes the team owns the rights.
The critical question facing the industry is how much can be done to protect the sharing of new technology and proprietary analysis when teams and individuals part ways.
Obviously, the illegal hacking of a team’s scouting system is prohibited, as evidenced by the conviction and imprisonment of former St. Louis Cardinals scouting director Chris Correa.
However, front office personnel regularly move from team to team, and this is the primary path for career growth for most in the business. Further, most of these employees are not making anywhere near the amount of money earned by the players.
Ben Lindbergh of The Ringer recently wrote an investigative piece on the subject, titled “Baseball’s Ever-Expiring Secrets” on Feb. 6. In the piece, Lindbergh noted that inter-organization transfers are common place, with an open interview policy in baseball that is widely observed; however, teams are now starting to take steps to prevent proprietary information from leaking outside of their organization. A key tool in doing so is through nondisclosure agreements.
The difficulty, however, is drawing the line between a tangible, protectable system/mechanism, versus information learned and retained simply through the day-to-day experience on the job. From a legal perspective, a mere idea or concept is generally not protectable, but a specific process or technology might be.
On the other hand, an inherent problem with patents is that filing for protection requires certain disclosures that expose the propriety information anyway.
To combat unwanted sharing, teams could start exploring more widespread use of restrictive covenants such as noncompete clauses, but the practical application of this strategy is questionable.
In a business where competition is inherent, and teams regularly employ copycat strategies with respect to on-field play, this may be viewed as counterproductive. What is evident is that limiting the promulgation of propriety information has become increasingly difficult, while the value of doing so has increased exponentially.
Whether it is on the field, on the sidelines or in the front office, sports organizations will continue to seek new ways to protect their assets.