From athletic footwear and connected fitness to digital athletes and sports gaming.
How is intellectual property valued in the sports industry?
Valuing sports-related intellectual property (IP) requires determining the economic contribution of a specific patent, copyright, trademark, technology, or licensed asset within a larger product or commercial ecosystem. Relevant evidence may include comparable licenses, consumer demand, non-infringing alternatives, manufacturing cost savings, incremental revenue and profit, and the contribution of other IP and non-IP assets. Sports products and platforms illustrate these issues across athletic footwear, connected fitness, wearables, athlete likenesses, and video games.
The Expanding Role of Intellectual Property in Sports
For decades, the commercial value of sports was most visibly associated with franchises, athletes, venues, broadcast rights, sponsorships, and merchandise. Those assets remain important, but technology has dramatically expanded the intellectual property underlying the sports economy.
Consider how many forms of intellectual property can now intersect with an individual’s sports and fitness experience.
A consumer may wear shoes incorporating patented performance technology, track activity through a wearable device, participate in a workout through a connected fitness platform, and later play a video game featuring digital representations of professional athletes. Patents, copyrights, trademarks, software, licensed images, and other intellectual property may all contribute to these experiences.
From an economic perspective, the important question is not simply whether intellectual property is present or valuable. It is determining what portion of the economic value of the product or experience can reasonably be attributed to a particular IP asset.
That distinction can become critical in licensing negotiations, transactions, and litigation.
When the Intellectual Property Is Embedded in the Product
Athletic footwear illustrates the challenge.
A modern performance shoe can incorporate patented materials, manufacturing processes, structural designs, trademarks, and significant brand value. At the same time, consumer demand may be influenced by comfort, appearance, price, athlete endorsements, marketing, distribution, and numerous other factors.
When a patent covering one aspect of that product becomes the subject of a dispute, assigning the economic value of the entire shoe to the patented feature would overlook these other contributors.
This is where concepts such as apportionment, non-infringing alternatives, incremental economic benefit, and reasonable royalties become important.
In my work as an economic damages expert in patent litigation between Nike and lululemon, for example, the economic analysis included consideration of manufacturing alternatives and the cost savings associated with alternative methods of producing footwear.
The principle extends well beyond shoes: the value of an IP asset needs to be considered within the economic context of the larger product in which it exists.
Connected Fitness Makes the Valuation Question More Complex
Connected fitness presents a different challenge because what the consumer purchases is increasingly an ecosystem rather than a stand-alone piece of equipment.
A connected exercise bike may combine mechanical engineering, patented technology, software, user interfaces, streaming content, data, instructors, community features, and a subscription relationship.
Similarly, wearable devices combine physical hardware with sensors, algorithms, software, connectivity, data analysis, and applications.
I have encountered these questions through IP disputes involving businesses including ICON Health & Fitness and Peloton, as well as an International Trade Commission matter involving wearable activity-tracking technology.
These environments demonstrate why valuation analysis must begin with understanding how the asserted intellectual property actually contributes to the economics of the product or platform.
For example, does the technology allow a manufacturer to charge a higher price? Does it lower the cost of manufacturing? Does it contribute demonstrably to consumer demand? Does it enable a recurring subscription relationship? Are commercially viable alternatives available?
The answers can be considerably more informative than simply knowing that a particular technology exists within a successful product.
Digital Athletes Introduce Another Layer of IP Economics
The expansion of professional sports into video games and other digital environments makes the analysis still more interesting.
A digital representation of a professional athlete may bring together a complex collection of rights and assets: the athlete’s name and likeness, team and league intellectual property, trademarks, copyrighted artwork, game software, visual representations, and multiple licensing agreements.
This creates an important economic distinction between appearing in a commercially successful product and causing the economic success of that product.
I have addressed versions of this question in copyright matters involving the NBA 2K and WWE 2K video game franchises.
In litigation involving NBA 2K, the asserted copyrights involved tattoos appearing on digital representations of NBA players including LeBron James, Danny Green, and Tristan Thompson. In a separate matter involving WWE 2K, the dispute concerned tattoos appearing on the digital representation of professional wrestler Randy Orton.
These types of disputes illustrate a broader valuation issue with significance beyond sports.
When one copyrighted element appears within a complex commercial product, what evidence establishes the economic contribution of that particular element?
The fact that a copyrighted work appears within a profitable product does not, by itself, establish that the work generated those profits.
Presence Is Not the Same as Economic Contribution
This distinction is central to many IP valuation and damages analyses.
A patented feature, copyrighted image, piece of software, trademark, or other asset can be legally significant and commercially relevant without accounting for all, or even a substantial portion, of the economic value associated with the product in which it appears.
Determining that contribution may require consideration of multiple forms of evidence, including:
- consumer demand and purchasing behavior;
- comparable license agreements;
- available alternative technologies;
- manufacturing cost savings;
- incremental revenue or profit;
- product pricing and profitability;
- importance of other intellectual property within the product;
- brand and marketing investment; and
- evidence demonstrating whether the asserted IP actually influenced purchasing decisions.
The appropriate analysis depends upon the facts of the matter and the economic question being addressed.
But the underlying discipline remains consistent: value should be connected to observable evidence rather than assumed from the prominence of an asset or the success of the product containing it.
Following the Value Across the Sports Ecosystem
The sports industry provides an unusually visible illustration of this challenge because physical products, technology, entertainment, brands, personalities, and digital experiences increasingly intersect.
Athletic footwear may incorporate patented manufacturing technology. Exercise equipment can evolve into a connected platform. Wearable devices transform physical activity into data. Professional athletes become digital characters in interactive environments. Copyrighted works and licensed content move with those athletes across physical and virtual markets.
Each development creates new ways to monetize intellectual property, but it can also create new questions about who owns value, how that value is created, and how much can reasonably be attributed to a particular asset.
Those questions ultimately extend well beyond sports.
What makes sports particularly instructive is the ability to see many of the forces transforming the broader IP economy in one place: technology, content, brands, licensing, digital platforms, intelligent physical systems, and increasingly complex combinations of intellectual property.
As those boundaries continue to converge, understanding the economic contribution of individual IP assets will become increasingly important to companies, investors, licensors, and counsel seeking to make informed decisions about the value of intellectual property.
To discuss the economic contribution of intellectual property in the context of valuation, licensing, transactions, or disputes, contact James E. Malackowski at [email protected] or +1 312 327 4410.
Transparency Statement: Artificial intelligence tools were used to support the development of this thought leadership content, which could include research support, information synthesis, and editorial refinement. The analysis, insights, perspectives, and conclusions presented are those of the author(s) and reflect their professional expertise and judgment. The content was reviewed by the author(s) for accuracy, relevance, and consistency with the source materials. Artificial intelligence tools did not independently determine the content’s conclusions or recommendations.
