Hank's IP Brew — Issue #18

Howdy, y'all.

This week: the college athletes who were promised NIL money are finding out it's being held up or rejected by an enforcement system that was never supposed to exist — and two of them just sued to blow the whole thing up. Plus, Google says the fine print you agreed to when you uploaded music to YouTube already gave them permission to train their AI on it. Nobody told you that. Nobody told anybody.

Let's get into it.

When the NCAA's House settlement was approved last June, it was supposed to end the chaos. Schools would pay athletes directly. NIL deals would flow through a transparent clearinghouse. The patchwork of 50-plus state laws would stop mattering quite so much, because everybody would be operating inside the same federal framework.

That's not what happened.

As of last month, more than $125 million worth of NIL compensation that had been promised to athletes — deals that were signed, negotiated, and communicated as real commitments — was either under review or had been rejected outright by the College Sports Commission's NIL Go clearinghouse. As much as 80% of that backlog is coming from SEC and Big Ten programs, where boosters and corporate sponsors have been routing money to rosters in ways the clearinghouse has decided look too much like pay-for-play.

On June 9, two California football players decided they'd had enough.

The lawsuit

USC freshman linebacker Talanoa Ili and Stanford senior quarterback Charlie Mirer filed a class-action complaint in the U.S. District Court for the Northern District of California, naming as defendants NCAA president Charlie Baker, all four power conference commissioners — Jim Phillips (ACC), Brett Yormark (Big 12), Tony Petitti (Big Ten), and Greg Sankey (SEC) — and Bryan Seeley, the CEO of the College Sports Commission.

The core argument: the College Sports Commission and its NIL Go clearinghouse are illegal. The clearinghouse's policies — which determine whether an NIL deal has a "valid business purpose" and whether it falls within a Deloitte-created "range-of-compensation" algorithm — directly contradict state laws in 17 states, including California, New York, Ohio, and Michigan, that prohibit conferences and the NCAA from blocking or penalizing athletes' NIL compensation. And the $20.5 million revenue-sharing cap constitutes illegal price-fixing under federal antitrust law.

The plaintiffs aren't challenging the House settlement itself — they're going after the enforcement structure built on top of it. That's a meaningful distinction. The CSC and NIL Go were created after the settlement was approved, as the mechanism for implementing it. The Ili-Mirer suit says that mechanism exceeded what the settlement authorized, and that it violates independent legal rights the athletes hold under state law.

The timing is significant

This lawsuit didn't arrive in a vacuum. The same week it was filed, one of the lead attorneys in the original House settlement — Jeffrey Kessler — argued before the settlement's magistrate judge that the CSC is already violating settlement terms with how it's running the clearinghouse. Specifically, Kessler is challenging whether the CSC has the right to scrutinize deals with school-affiliated businesses like corporate sponsors, multimedia rights holders, and apparel brands.

If Kessler wins that argument, the clearinghouse effectively gets defanged on the deals that matter most financially — and schools could start funneling sponsorship and booster money to athletes with far less restriction. The Big Ten commissioner called it a potential "turbocharged" environment. An ACC athletic director, in a moment of unusual candor, said he was "rooting for us to lose."

Meanwhile, the power conference commissioners were huddling the same week to discuss patchwork fixes: exempting certain categories of deals, raising the automatic-approval threshold from $2,500 to $10,000 per deal. These are adjustments at the margins while the architecture is being challenged at the foundation.

What this means if you're working in NIL

The $125 million in limbo is the real story here, and it has two audiences.

For athletes: deals you've signed are not necessarily money you'll receive. The clearinghouse can reject them, and the arbitration process to challenge that takes time and money. Until the legal structure settles — through the Kessler hearing, the Ili-Mirer suit, potential congressional action, or some combination — your NIL deal is only as real as the enforcement environment allows it to be. Build contingencies into any deal that's school-adjacent.

For brands: if you're running a legitimate third-party NIL deal — genuine endorsement, commercial appearance, sponsored content — you're in a better position than school-affiliated deals that look like compensation disguised as sponsorship. But "legitimate" is being defined by a clearinghouse algorithm, not common sense. Get your deal through counsel before it goes to NIL Go.

The settlement was supposed to bring stability. What it actually produced is a new layer of legal conflict on top of the old one. That layer is now being litigated in at least two simultaneous proceedings. Watch the Kessler hearing outcome closely — it may resolve faster than the class action and carry more immediate practical weight.

Every musician who has ever uploaded a song to YouTube agreed to terms of service that grant Google a "worldwide, non-exclusive, royalty-free, sublicensable and transferable license to use that content — including to reproduce, distribute, prepare derivative works, display and perform it — in connection with the service and YouTube's (and its successors' and affiliates') business."

Most of them didn't read that sentence. None of them understood it to mean: we can train an AI music generator on your songs and build a product designed to compete with you.

Google thinks that's exactly what it means.

The lawsuit

In February, Google launched Lyria 3, an AI music model capable of generating original-sounding music. A group of independent artists, songwriters, and producers filed a copyright infringement lawsuit claiming Lyria 3 was trained on songs ripped from YouTube without their knowledge or compensation.

On June 8, Google filed a motion to dismiss. Rather than argue fair use — the defense most AI companies have relied on — Google took a different approach. It argued that it already has a license. The ToS every YouTube uploader agreed to, Google's lawyers wrote, "authorized the conduct alleged in the complaint."

The exact quote from Google's brief, filed by Quinn Emanuel: "Even accepting their untested allegations as fact, the complaint cannot stand. Plaintiffs each granted YouTube, and Google — which provides the service — a broad license to use the uploaded content."

This is a legally distinct move from the fair use arguments we've seen in other AI copyright cases. Google isn't saying what it did was transformative or educational or otherwise excused. It's saying it had permission the whole time — buried in the fine print of a terms-of-service agreement that nobody reads, that nobody was ever told included AI training rights, and that predates the existence of the technology it's now being used to justify.

Why this is different

In the Suno and Udio cases covered here in Issue #17, the labels sued and eventually settled. The argument was that training on copyrighted recordings without a license was infringement — and the settlement implied some acknowledgment of that, even if nobody said so explicitly.

Google's argument flips that logic entirely. It doesn't need to settle, because it's claiming there was never an unauthorized use to begin with. Every creator who uploaded to YouTube is, under Google's theory, already a licensor of Google's AI products — without ever agreeing to be, without receiving any compensation, and without the "royalty-free" framing raising any red flags because it was already standard ToS language when they signed up.

The plaintiffs' attorney, Ross Kimbarovsky of Loevy & Loevy, put it plainly: "Google hasn't shown a single plaintiff ever agreed to its terms of service. And no version of those terms has ever said a word about AI training. Artists put music online to reach listeners, not to hand a four-trillion-dollar company free raw material for a product built to replace them."

That last sentence is the argument in a nutshell. The intent of uploading — reach listeners, build an audience, share work — has nothing to do with what Google is now claiming the act of uploading authorized.

The distinction that may save you

It's worth noting one significant nuance in Billboard's coverage: the "broad license" argument appears to apply to individual creators who upload directly to YouTube under standard ToS. The major labels — UMG, Sony, Warner — have separate licensing agreements with YouTube that specifically govern how their content can be used, and some of those agreements include AI-specific language added in recent years.

In other words: the people with lawyers and leverage got explicit protections written into their contracts. Everyone else got a ToS checkbox.

If you are an independent creator who distributes through YouTube directly — uploading your own music, videos, or other content — this case is about you. Google's position, if accepted by the court, means you've already licensed your work for AI training purposes by virtue of having a YouTube account.

That may or may not hold up. The plaintiffs have a real counterargument: the ToS language predates AI training as a use case, no version of it ever mentioned AI, and consent requires some reasonable notice of what you're consenting to. Courts have been skeptical of ToS clauses that purport to authorize uses nobody contemplated at the time of signing.

But the case hasn't been decided yet. Google's motion to dismiss is pending. And in the meantime, every upload is being treated by one of the world's largest companies as a royalty-free AI training license.

Read your ToS. And if you're signing new distribution agreements with any platform, look for the AI training language. It may not be there — but you should know whether it is.

See you next time,

Hank

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