The 9th U.S. Circuit Court of Appeals said the Redwood City, Calif., company can't invoke the 1st Amendment to shield it from the players' lawsuit.
The legal action was filed in 2009 by Sam Keller, a quarterback who played for Arizona State before transferring to the University of Nebraska. It argues for class action status to represent all current and former players and has been combined with a similar lawsuit filed by former UCLA basketball star Ed O'Bannon against the NCAA.
EA said it plans to appeal the ruling. The company has claimed its college-based sports games were works of arts deserving freedom of expression protection.
The court disagreed, ruling the avatars used in the company's basketball and football games were exact replicas of individual players. The court concluded that the company did little to transform the avatars into works of art and said EA's NCAA Football game was too realistic to be considered a new art form.
"Every real football player on each team included in the game has a corresponding avatar in the game with the player's actual jersey number and virtually identical height, weight, build, skin tone, hair color, and home state," Judge Jay Bybee wrote for the divided three-judge panel.
Bybee rejected EA's contention that the game was akin to a newsgathering product that restates statistical, biographical and other publicly available information.
Bybee noted that EA omitted putting the names of players on the avatars.
"EA can hardly be considered to be 'reporting' on Keller's career at Arizona State and Nebraska when it is not even using Keller's name in connection with his avatar in the game," Bybee concluded.
Judge Sidney Thomas dissented. She warned that the majority's stance will jeopardize the rights of authors, movie makers and others to use real people in fictional settings.
"Absent the use of actual footage, the motion picture 'Forrest Gump' might as well be just a box of chocolates," Thomas wrote. "Without its historical characters, 'Midnight in Paris' would be reduced to a pedestrian domestic squabble."
EA no longer makes a college basketball game. The NCAA said two weeks ago that it won't seek a new contract with EA Sports when the current deal expires in June 2014. EA said it intended to continue making a college football product without NCAA logos.
The decision upheld a lower court ruling.
In a separate ruling, the same panel tossed out Jim Brown's lawsuit against EA, even though Brown made similar - but not identical - allegations as Keller.
Brown argued that his inclusion in the Madden games suggested he endorsed the product.
Brown's attorney Ron Katz said his client filed his lawsuit alleging a violation of the Hall of Famer's "trademark" rather than Keller's claim that EA violated his "right to publicity."
Authors, filmmakers and others are allowed to use famous people's "trademarks" as long as they are creating new artwork and not seeking to profit specifically from the celebrity.
The 9th Circuit said Brown, unlike Keller, needed to prove that EA explicitly mislead consumers into thinking Brown endorsed the Madden video games because of his inclusion. EA promoted a feature in older Madden games that included 50 of the greatest NFL players.
"EA's statement is true and not misleading," Bybee said, noting that the NFL had named Brown one of its 50 greatest players.
"As expressive works, the Madden NFL video games are entitled to the same First Amendment protection as great literature, plays, or books," the panel concluded. "Brown's likeness is artistically relevant to the games and there are no alleged facts to support the claim that EA explicitly misled consumers as to Brown's involvement with the games."