A Hidden Risk in the Sports Tech Boom

Technology has long played a part in professional sports, but these days it permeates the industry. Cameras, sensors, and models of playing surfaces compute and communicate data and information in real time — enhancing broadcasts, creating new categories of stats, and even helping officials make critical in-game decisions with greater accuracy.

Wearables track positional information and biometrics with pinpoint precision, equipping teams with advanced analytics to evaluate player health, fitness and performance. Sportsbooks feed their apps with any analytics they can access, enabling bettors to wager on an ever-expanding array of micro-events.

Video encryption, content delivery networks, and user interfaces power the many novel platforms providing content to fans. Some of the companies owning these platforms leverage AI to mine their viewership data for information they can use to cross-sell and upsell their customers.

Risk level: elevated

The list above could stretch for pages, thanks to decades of investment from leagues, teams, media companies, technology vendors, and more. Last year, sports tech dealmaking activity reached $37 billion, nearly twice the $21 billion in 2022, and the industry’s extraordinary growth looks poised to continue.

Yet for all the opportunity in this fast-moving industry, a major risk looms large: Patent holders claim to own the intellectual property (IP) rights to much of the technology taking over sports and sports media, and companies that fail to fully vet their investments in this space could find themselves the target of an infringement lawsuit.

A new dynamic in IP ownership is elevating the risk. When sports technology began to take off in the early 2000s, the sports tech patent holders who exist entirely to monetize their IP portfolios were mostly small, emerging outfits, often operating with limited resources and little if any legal expertise.

By contrast, today’s sports tech patent holders are established and powerful, with sophisticated operations and deep pockets. Wielding massive IP portfolios, some even trade in public markets or are business units of multinational conglomerates (or both).

Many of these patent holders read their patent claims onto the technology underpinning numerous corners of the sports world and are confident that a jury would do the same. Recent deal values and high-profile tech rollouts will only further embolden them, as even a narrow infringement finding could yield a lucrative judgment.

In this environment, the sports industry would be wise to take caution as they consider major technology investments. No two sports tech investments have the same risk profile, nor does every tech patent holder take the same approach to enforcing its IP. But adopting protective practices early in the investment process can help mitigate the threat of a legal challenge.

Managing vendor relationships

Among the most important is to manage vendor relationships. Leagues and teams often do not develop the technology in stadiums, on players, or behind our screens. Instead, appropriately, they outsource development to vendors or license established technology from them.

In either arrangement, gathering complete and precise information on the scope of the vendor’s IP is essential. This information should include all of the vendor’s technology-related patents and licenses and what they cover in rigorous detail.

Leagues and teams can also protect themselves against the possibility that the vendor has infringed others’ IP and ensure that — if another patent holder were to bring a lawsuit — the vendor would be obligated to pay for their defense. This means negotiating comprehensive representations and warranties of non-infringement, alongside robust indemnities to stand behind them.

The value of provisions like these is hard to overstate. Indeed, when patent holders bring technology IP lawsuits, they often seek relief from the highest-profile entity in the development chain — that is, the users of the technology, rather than the developers of it.

Complicating matters further, patents often overlap, granting multiple companies IP rights to the same technology — or to complementary components of the same product or service. This makes it harder for innovators to commercialize their work and for the sports industry to use it.

The broader patent playing field

Understanding the broader patent playing field is similarly important. Investing in sports technology is expensive, as are the wide-ranging rollouts that accompany these investments, so it’s advisable for companies in the industry to assess the technology’s risk profile before putting resources behind it.

This complex assessment involves scrutinizing any disputes involving the technology they’re looking to deploy, any patent holders beyond their vendor that may own IP rights to it, and how litigious those patent holders have shown themselves to be, among other vital information.

Conducting this assessment helps companies evaluate the viability of a prospective sports technology investment, affords them greater leverage to negotiate potential licenses, and offers insight on how best to avoid infringing others’ IP or to defend a legal challenge should one arise.

Here to Stay

Just as sports are a centerpiece of society, technology has become a centerpiece of sports, playing a pivotal role in building rosters, engaging fans, and deciding close plays. Like it or not, the sports tech takeover is here to stay.

In the years ahead, any company involved in sports technology will need a thoughtful IP strategy. Developing and implementing one requires time, effort, and deep legal expertise. But only by doing so can companies make sound decisions on what sports technology investments to make — and how best to protect them.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.