Hank's IP Brew — Issue #15

Howdy, y'all.

This week: the college sports compliance machine just defined a term every NIL brand needs to know — and it could invalidate deals you think are already done. Plus, a two-person music duo watched AI swallow 80% of their income, and now they're suing for $35 million. The most concrete "AI took my livelihood" case yet.

Let's get into it.

Back in Issue #14, we covered the College Sports Commission's first major enforcement win: an arbitrator upheld the CSC's decision to block $7.5 million in NIL deals for 18 Nebraska football players, ruling that Playfly Sports — the multimedia rights company that brokered the deals — was an "associated entity" subject to the same cap restrictions as NIL collectives.

That ruling drew the headlines. But buried in it was something more important for the long-term compliance landscape: the arbitrator's definition of "warehousing."

Here's what it means, in plain language. Warehousing is when a company pays an athlete a set amount of money for future, non-specific NIL work — deliverables that haven't been identified yet, for deals that haven't been structured yet. The company is essentially buying the athlete's NIL rights now and figuring out how to use them later. The arbitrator found that arrangement violates the House settlement's "valid business purpose" requirement. The deals were blocked not primarily because of who brokered them, but because they didn't represent a genuine, immediate commercial transaction.

This is a significant development.

Why it matters beyond Nebraska

The warehousing structure wasn't unique to Playfly or Nebraska. Versions of it are common throughout college athletics — multimedia rights companies and NIL collectives routinely sign athletes to general agreements that commit to future payments in exchange for loosely defined future deliverables. The arrangement is attractive to everyone: athletes get guaranteed income, brands get flexibility, and schools get a pool of available talent for sponsorship activations.

The arbitrator just ruled that model doesn't pass scrutiny under the House settlement.

The CSC's enforcement authority extends to any deal submitted through the NIL Go system. Brands and collectives that have been structuring agreements this way are now on notice: "we'll figure out the deliverables later" is not a valid business purpose. Every deal needs a real, defined commercial purpose at the time it's signed.

What a compliant deal looks like

The arbitrator's ruling implicitly describes what a valid deal requires: a specific service or deliverable, a defined timeframe, compensation that reflects fair market value for that specific work, and a genuine business rationale — meaning the company would pay a non-athlete comparable money for comparable work.

If you're a brand structuring NIL deals with college athletes, the documentation checklist matters more now than it did two weeks ago. Before you sign:

This isn't just about CSC compliance. If an arbitrator ever reviews your deal, "we were going to figure it out later" is now an established losing argument.

One more wrinkle: the associated-entity question isn't settled

The arbitrator ruled Playfly was an associated entity in this specific case. But that classification question — whether multimedia rights companies and other third parties should face the same scrutiny as NIL collectives — is now heading to federal court. Plaintiff attorneys Jeff Kessler and Steve Berman have filed a motion asking a magistrate judge to rule those entities out of the associated-entity category entirely. A ruling is expected soon.

If they win, the compliance picture changes again. Watch for it.

John Emanuele and Richard Cupolo have been making music together since 2005, when they met in college and formed The American Dollar. For two decades, they built a career on purely instrumental, cinematic ambient music — no lyrics, no vocals, just layered sound design that turned out to be exactly what sync licensing clients wanted. Their catalog has been licensed by Warner Brothers, Apple, Activision (for Spider-Man 2), Colgate, PBS, MLB Network, and the American Heart Association. Their tracks have appeared in CSI: Miami, 30 for 30, and Keeping Up with the Kardashians. Their most-licensed song, Anything You Synthesize, sits in the top 1% on Spotify.

Then Suno launched, and their licensing revenue dropped by nearly 80%.

On May 12, they filed suit in the Southern District of New York through their company Poseidon Wave Media, seeking $35 million in damages. The complaint covers 236 of their sound recordings across 164 copyright registrations.

What makes this case different

There have been a lot of AI copyright suits in the past two years. Most of them involve major labels — Universal, Sony, Warner — suing with institutional resources and legal armies behind them. This one is two independent musicians who spent twenty years building a career, watched it get demolished, and are now trying to hold the company responsible.

The complaint also does something other suits haven't: it quantifies economic harm with specificity. "There is a clear line of demarcation in revenue fall-off dated from the public launch of Suno's AI service," the filing states. Not "we think AI hurt us generally." Not "the industry is suffering." A before-and-after timeline, tied directly to Suno's launch, showing an 80% revenue drop in a niche the plaintiffs had spent two decades developing.

That framing matters. One of the hardest problems in AI copyright litigation has been proving causation — that the AI specifically caused the harm, rather than a general market shift. Poseidon Wave Media is arguing it can draw a direct line. That's a model other plaintiffs will study carefully.

The testing methodology

The complaint describes a specific methodology: one of the musicians signed up for a Suno Pro subscription in September 2024 and prompted the AI with queries naming specific American Dollar tracks. The outputs, the complaint alleges, replicated the "rhythmic structure, production, and delay-based temporal architecture" of the originals with what it calls "indisputable similarities."

The suit is careful on one point: it isn't currently alleging the AI outputs themselves infringe the copyrighted tracks — unless discovery reveals otherwise. The primary claim is that Suno ingested the recordings into its training data without authorization. The output similarities are presented as evidence that ingestion occurred.

The bigger picture

Suno is currently valued at $5 billion and is reportedly closing a $250 million Series D. It has 2 million paid subscribers generating an estimated 7 million new music tracks every day. One of its earliest investors told Rolling Stone in 2024: "If we had deals with labels when this company got started, I probably wouldn't have invested in it. I think they needed to make this product without the constraints."

That quote appears in the complaint.

Warner Music settled with Suno in November 2025, striking a licensing partnership. Universal and Sony are still active plaintiffs in Massachusetts. UMG recently argued the Warner settlement terms should be disclosed in discovery, characterizing it as "a forward-looking commercial arrangement" — not just a settlement, but evidence of what Suno's model is actually worth.

The American Dollar suit adds a different dimension. The label cases will determine whether ingestion was copyright infringement. The Poseidon Wave Media case will try to determine what that infringement cost two independent musicians who had no institutional backing, no legal army, and no leverage — just two decades of careful work and a catalog that made a living until it didn't.

For any creator whose work is instrumental, ambient, cinematic, or otherwise AI-trainable without obvious lyric fingerprints: this case is the one to watch. If the economic harm argument holds, it opens the door to damages claims that go beyond "you copied my songs" to "you destroyed the market I spent my career building."

That's a different, and potentially much larger, legal theory.

See you next time,

Hank

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