The Legal Liability for Trade Secrets in Sports

Judge Baskin

Edited by Dillon Murti, Mac Kang, and Jia Lin

Super Bowl XXXVII was a blowout. The Tampa Bay Buccaneers beat the Oakland Raiders in a decisive 48-21 win. Oakland wanted an excuse. Although the Raiders’s center Barret Robbins disappeared shortly before the game, the Raiders needed a better explanation for their lopsided loss. The one they landed on was shocking: “the Bucs stole our playbook [1].” Although this claim was ultimately a scramble to justify their loss, and did not lead to a lawsuit, the publicity garnered from this accusation raises an interesting question: when does information in sports become a protected trade secret?

Unless related to specific topics like athlete contracts, antitrust laws, or labor relations, lawsuits in American sports are generally uncommon. Our legal system often refrains from prosecuting violence on the field or cheating within leagues. In general, sports are treated as entertainment, and leagues are allowed to regulate themselves as long as nothing happens outside of a reasonable expectation in their games. Of course, there are times where the line is crossed. Legal liability can creep into games and franchises when players or teams operate outside of reasonable expectations. Take intentional injury, for example. Late in a 1973 NFL game between the Denver Broncos and Cincinnati Bengals, Bengals quarterback Ken Anderson threw an interception, effectively sealing the Broncos’s win. In a frustrated response to his team’s failure, Bengals running back Charles "Booby" Clark intentionally hit Broncos defensive back Dale Hackbart in the back of the neck. As a result, Hackbart sued in civil court in the case Hackbart v. Cincinnati Bengals (1973). He lost in the trial court, but won an appeal on the grounds that the hit was intentional and outside of the reasonable expectations for a football game [2]. 

The court’s decision in Hackbart v. Cincinnati Bengals is not the clearest. Although it showed that courts do have jurisdiction over what happens on the field, it remains unclear what standards courts should use to determine a potential crime in sports. The usual logic used in these sorts of situations is similar to Justice Potter Stewart’s notorious definition of pornography in Jacobellis v. Ohio (1964): “I know it when I see it” [3]. The American legal system lets sports teams “leave it on the field” until something is so blatantly illegal that the courts will “know it when they see it,” creating an unclear distinction between sport and tort.

This philosophy of leaving sports out of courts can be applied to the question of secret keeping as well. Sports teams hold plenty of information secrets, from playbooks to contracts and scouting records to analytics. But determining if that information should receive protection is a complex process. Historically, trade secrets protections on both the state and federal level were derived from common law, until statutory law was enacted in the 1980s [4]. For years, the underlying First Amendment right to the distribution of information, based on the freedoms of speech and press and established by Martin v. City of Struthers (1943), kept trade secret protections alive without codification [5]. Federally, under the Economic Espionage Act of 1996 (EEA), in the business world, any “secret” information of economic value to a company would likely be considered a trade secret [6]. When determining if a piece of information is a trade secret, courts closely examine how a business holds the information [7]. For example, a digitally encrypted and stored client list for a business is much more likely to be ruled a trade secret than a client list well-known in an industry [8]. However, because sports franchises are so public-facing, with much of the information eventually coming out publicly regardless, much of their stored information would not receive trade secret protection. In the case of Super Bowl XXXVII, the Tampa Bay Buccaneers were not punished for closely studying the Oakland Raiders’ offense, as many playbooks and strategy designs in sports are not trade secrets because the information in question will become public on the field of play. 

Broadly, violations of the EEA have the potential to turn trade secrets disputes into federal crimes, but few situations meet the criteria for this. To qualify for criminal proceedings under the EEA, the trade secret violation must involve some sort of interstate or foreign commerce [9]. Instead, most disputes result in civil lawsuits between the two parties. These cases are often decided at the state level and use a different set of statutory trade secret regulations. With the exceptions of New York and North Carolina, all US states and territories have adopted the Uniform Trade Secrets Act (UTSA) [10]. This standard law sets a consistent definition for trade secret protected information similar to that set by the EEA. Of course, the enforcement slightly varies by state and differs from the federal consequences for violations. However, in both the EEA and UTSA, plaintiffs must prove that a trade secret exists and that the defendant acquired the information improperly [11]. In all cases, whether a piece of information is a trade secret and if the defendant acted “improperly” are questions of fact for a court. In 2016, Congress supplemented the EEA with the Defend Trade Secrets Act (DTSA) to try and align the federal definition of trade secrets with that of the UTSA [12]. Though the statutory definitions aim to account for many scenarios, they can still be difficult to apply in court. 

Combining the variable enforcement and loose definitions of trade secrets statutes with the “know it when you see it” philosophy of sports regulations results in an amalgam of ambiguity. Here, there is plenty of room to interpret information in the sporting world as a trade secret. This gray area is best illustrated in National Football Scouting v. Rang (2012) [13]. National Football Scouting Inc. (NFS) is a well-established scouting and recruitment consulting organization. Each year, around 20 NFL teams purchase scouting reports from them for around $75,000 per report. These comprehensive, copyrighted reports include a “Player Grade” for teams to use in comparing potential college athletes for the draft. In 2010 and 2011, Robert Rang, a sports journalist for Sports Xchange, wrote and published articles disclosing some of these private NFS player grades. After ignoring several cease and desist orders, Rang was sued by NFS for both copyright infringement and trade secrets violations. Both sides motioned for summary judgments, court decisions that end a dispute without requiring a trial [14]. The Western Washington District Court judge dismissed the copyright violation claims from NFS with prejudice, effectively making those claims unable to be brought back to court [15]. This narrowed the case to the singular question of whether or not the player grades and scouting reports should be considered protected information under the UTSA. Rang argued that because the player grades are derived from a subjective opinion, they are not a factual piece of information, and therefore cannot be protected information in the first place [16]. NFS responded that, while the player grades are based on opinion, the assigned rating is a fact with “independent significance.” Eventually, the judge ruled that scouting reports and player ratings, due to their economic value and storage method, could be considered for trade secret protections. However, he made clear that it was a question of fact for a court, not for a summary judgment, and denied both parties’ motions. There have been no updates on further trial pursuits by NFS since. While National Football Scouting v. Rang leaves us with unanswered questions, the court’s decision at least illustrates the ambiguity surrounding this issue in the world of sports and suggests that scouting reports and athlete information kept secret may be subject to trade secret protection.

The case law on this topic is sparse. As explained before, the sports leagues try to stay as self-regulated as possible, which is why most major cases are from third-party individuals or companies. One of the only significant cases to involve an actual sports franchise was the recent controversy involving the National Basketball Association’s New York Knicks and Toronto Raptors. In New York Knicks v. Maple Leaf Sports & Entertainment (2024), the Knicks accused the Raptors’s parent company of instructing Ikechukwu Azotam, who Toronto hired from New York, to steal confidential information as he left [17]. However, instead of going to trial, the New York District Court judge handed the case over to the NBA due to their private arbitration clause. The court effectively waived its jurisdiction. Though this judicial surrender of a case is common in sports, it can lead to unfair results for parties that have been wronged. Here, the judge gave the NBA six months to determine whether or not the case could be internally arbitrated, allowing the NBA to delay the process and putting the Knicks in a vulnerable position [18]. If it was true that the Raptors gained a competitive and economic advantage from the stolen information, swift justice would be the only way to level the playing field. The Knicks also suspect the internal arbitration methods are biased by potential conflicts of interest, citing NBA Commissioner Adam Silver’s particularly good relationship with the Raptors’s management [19]. This example calls the legal system’s default of letting sports leagues and franchises manage themselves into question. A court proceeding would likely be a faster, fairer method of dealing with this clear violation of civil law. 

Another contributing factor to the lack of case law is that when sports teams do keep secrets, they keep them very well. Survey data from the Washington and Lee Law Review in 2016 confirms this [20]. The research team asked lawyers from National Hockey League, Major League Baseball, NBA, and NFL teams what their franchise’s trade secret protocols were. Of the teams that responded, more than 70% regarded their scouting reports, player trade proposals, and statistical and biometric analyses as deserving of trade secret protections. 

Based on the importance of their protected information, teams use a mix of strategies for secret-keeping. Beyond strong computer encryption and password management, the most popular method for protecting information is using non-disclosure agreements (NDAs). These contracts are meant to explicitly prevent employees from exposing secrets to the outside world [21]. NDAs are often signed on the way out of jobs, with most of the signees being managers, coaches, and analysts, rather than players. According to the same research survey, the majority of the NDAs that franchises use last around one year [22]. This contract release timeline makes sense given that many of the secrets (i.e. analytics, trade proposals, and scouting reports) are only pertinent or economically valuable within the season they are created. The competitive advantage of most information in sports will decrease drastically within one season of play. For example, under ideal circumstances, the New York Knicks would likely have had Ikechukwu Azotam sign an NDA as he was leaving the franchise in order to protect the most relevant information he had on hand. Instead, the Raptors received those secrets within the timeframe they were most valuable. In comparison, over a year later, the secrets that Azotam stole risk becoming moot. 

Another, more controversial option the Knicks could have used to protect their information is a non-compete agreement (NCA). These contracts are more varied, but generally prevent signees from working for a competitor or, plainly, engaging in any activity that would increase competition for their previous employer [23]. These contracts have similar timelines in the sporting world, and a lot of their main utility is protecting trade secrets. Although NCAs recently came under fire from the Biden administration, they are likely here to stay under Trump [24] [25]. Both non-competes and non-disclosures will continue to be effective mainstays in sports teams’ secret-keeping. 

Though strong data and information security in sports is something to celebrate, there are externalities that stem from this. As discussed, both state and federal laws provide more protection for information the more secure it is. The assumption is that the trade secret violation would, in turn, be more flagrant if the secret is well-kept. So, while few trade secrets are blatantly stolen in sports, the violations are particularly serious when they actually occur. This pattern of violations, paired with the courts’ default to greenlighting internal arbitration, is a slippery slope, as illustrated by the New York Knicks’s situation, that doesn’t end up arriving at the right destination.

Though letting sports be sports and staying hands-off is generally a good thing, it is clear the American legal system can do a better job of protecting the interests of sports franchises. No one wants to see championships decided in the courtroom, but the inconsistency that follows differing policies between states and the surplus ambiguity of sports media law precedents is a dangerous combination. Better-defined trade secrets in sports are incredibly important, especially given how closely teams guard their information. Further, courts should consider using their jurisdiction to prevent internal arbitration efforts from delaying justice. Overall, judicial officials may have to be more proactive in order to level the economic and legal playing field for the nation’s sports franchises.

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[1] Josh Schrock, Raiders claim Jon Gruden, Buccaneers knew their plays in Super Bowl XXXVII, NBC SPORTS (July 10, 2020), https://www.nbcsportsbayarea.com/nfl/raiders-claim-jon-gruden-buccaneers-knew-their-plays-in-super-bowl-xxxvii/1325862/, (last visited February 17, 2025).

[2] Hackbart v. Cincinnati Bengals, Inc., 601 F.2d 516 (10th Cir. 1979). 

[3] Jacobellis v. Ohio, 378 U.S. 184 (1964).

[4] Judy Davis, LibGuides: Tort Law Research Guide: Restatements, https://lawlibguides.usc.edu/c.php?g=687841&p=4876675 (last visited February 27, 2025).

[5] Martin v. City of Struthers, 319 U.S. 141 (1943)

[6] Economic Espionage Act of 1996, Pub. L. No. 104-294 (1996).

[7] Criminal Resource Manual 1101-1199, 1127. 18 U.S.C. § 1831 Element Three — The Information Was a Trade Secret (1996).

[8] Morlife, Inc. v. Perry, No. A074958. First Dist., Div. Two (August 14, 1997).

[9] Trade secret, LII / LEGAL INFORMATION INSTITUTE, https://www.law.cornell.edu/wex/trade_secret (last visited February 17, 2025).

[10] National Conference of Commissioners on Uniform State Laws, Uniform Trade Secrets Act With 1985 Amendments, https://www.uniformlaws.org/committees/community-home?CommunityKey=3a2538fb-e030-4e2d-a9e2-90373dc05792 (last visited February 17, 2025).

[11]Marina Lao, Federalizing Trade Secrets Law in an Information Economy, 59 Ohio State Law Journal (1998). 

[12]Orrin Hatch, Defend Trade Secrets Act of 2016, (2016).

[13] National Football Scouting, Inc. v. Rob Rang, et al., No. 11-cv-5762-RBL, (W.D. Wash. 2012).

[14] Summary judgment, LII / LEGAL INFORMATION INSTITUTE, https://www.law.cornell.edu/wex/summary_judgment (last visited February 17, 2025).

[15] With prejudice, LII / LEGAL INFORMATION INSTITUTE, https://www.law.cornell.edu/wex/with_prejudice (last visited February 17, 2025).

[16] See [13].

[17] New York Knicks, LLC v. Maple Leaf Sports & Entertainment LTD. d/b/a Toronto Raptors et al, No. 1:2023cv07394 - Document 46 (S.D.N.Y. 2024).

[18] Geoff Magliocchetti, Knicks Comment on Lawsuit Update, SPORTS ILLUSTRATED (December 17, 2024), https://www.si.com/nba/knicks/news/new-york-knicks-comment-lawsuit-update (last visited February 17, 2025).

[19] Geoff Magliocchetti, Adam Silver Mum on Knicks Complaints, SPORTS ILLUSTRATED (July 17, 2024), https://www.si.com/nba/knicks/news/adam-silver-mum-new-york-knicks-complaints (last visited February 17, 2025).

[20] Lara Grow and Nathaniel Grow, Protecting Big Data in the Big Leagues: Trade Secrets in Professional Sports, WASHINGTON AND LEE LAW REVIEW, Vol. 71, Iss. 3, Art. 7 (June 1, 2016).

[21] non-disclosure agreement (NDA), LII / Legal Information Institute, https://www.law.cornell.edu/wex/non-disclosure_agreement_(nda) (last visited February 27, 2025).

[22] See [19].

[23] noncompetition agreement, LII / Legal Information Institute, https://www.law.cornell.edu/wex/noncompetition_agreement (last visited February 27, 2025).

[24] FTC Announces Rule Banning Noncompetes, Federal Trade Commission (2024), https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes (last visited Feb 27, 2025).

[25] Paul Mulholland, Ban on Non-Compete Agreements Likely Doomed Under Trump, National Association of Plan Advisors (Feb. 3, 2025), https://www.napa-net.org/news/2025/1/ban-on-non-compete-agreements-likely-doomed-under-trump/.