SIG Talks Sport and the Law

16 Feb 2015

How often do rights holders and sponsors enter into a sponsorship agreement where one of the rights granted to the sponsor is the right to use the rights holder’s intellectual property (IP), normally a trademark (in the form of a logo) in combination with a team or event name. The sponsorship agreement may go one step further to provide that such use by the sponsor can only be for media, social media, print, advertising and promotional purposes but that’s where it ends. Sponsorship agreements seldom go further to regulate IP licensing.

A rights holder’s intellectual property and the association with it by the sponsor, are a key element of any sponsorship agreement. The sponsor wants to associate its brand with that of the rights holder, to piggy back and capitalise on the brand equity of the rights holder’s IP. Forget the player appearances, stadium advertising, branding on websites, access to the fan database, hospitality opportunities and all the other peripheral stuff…….it’s the brand association that the sponsor is after and the license to utilise the rights holder’s IP is central to this.

So, why is the IP licensing component of a sponsorship agreement not dealt with in detail? After all, the rights holder is virtually allowing the sponsor relative carte blanch association with its IP. IP in which brand equity has often been built over decades and at considerable effort and expense. How many rights holders provide a sponsor with a formal and detailed Corporate Identity (CI) document regulating the use of its IP ? The rights holder’s logo is normally emailed to some marketing lackey at the sponsor, initially often not in the format nor in sufficiently high resolution required for commercial use by the sponsor. The same goes for sponsors, who although they more often than not have detailed and complex CIs, unlike rights holders, these are not shared with the rights holder they are sponsoring and who is applying their logo on match kit, websites, tickets and in advertising campaigns.

Rights holders utilise sponsor IP to a lesser extent than sponsors use rights holder IP. It’s the  sponsor who needs to maximise its association with the sporting brand and integrate it into its sales, marketing and advertising campaigns. The rights holder may be required to place the sponsor logo on its website, on match tickets, in the event programme or even on its playing apparel but the real risk in what we’re discussing, lies with the rights holder and the sponsor’s use of its IP.

What are some of the areas of risk for a rights holder and how can it reduce or even alleviate such risk?

  1. The first risk relates to the precise definition and description of the IP to be licensed to the sponsor. This goes well beyond merely providing in the agreement that “the sponsor is licensed to utilise the rights holder’s IP for marketing, advertising and promotional purposes”. Each trade mark licensed to the sponsor should be detailed with its registration number and territory of registration, together with a graphic representation. This will prevent any confusion as to exactly what IP is the subject of the license.
  2. The ambit of the license needs to be clearly defined through the insertion of detail on the:
    • extent of any exclusive use right to the IP – is it absolute exclusive use to the exclusion of all third parties or product / service category exclusivity only;
    • the geographical territory in which the sponsor is licensed to utilise the IP must be stated. This is particularly important in the case of sporting events which extend beyond our geographical borders (for example SupeRugby) or local sporting brands which have appeal and are marketable beyond our national borders;
    • the parameters of licensed use must be outlined.  For example, is the sponsor allowed to utilise the right holder IP on co-branded merchandise to sell or give away to staff and clients as freebies? Such use may breach existing rights holder licensing and merchandising agreements but if regulated and dovetailed with the latter agreements, may be a useful royalty revenue stream for the rights holder. All sponsorship agreements should have a “Premiums” clause detailing the process to be followed by the sponsor should it wish to produce co-branded promotional items for sale or give-away.  
  3. The brand or brands with which the sponsor is allowed to associate with the rights holder IP in terms of the sponsorship agreement, needs to be clearly defined, if sponsor has more than one brand in its stable. Use across a family of diverse sponsor brands may not have been what the rights holder envisaged, may conflict with other rights holder sponsor agreements or may result in products or services not complementary to the rights holder’s image and reputation, being associated with it.
  4. Is sponsor permitted to sub-license the right holder IP acquired under a sponsorship agreement?  This needs to be specified and in most sponsorship agreements needs to be prohibited. Sub-licensing is more prevalent in sports licensing and merchandising agreements.
  5. What IP application restrictions and use approvals process has been put in place by the rights holder? Who at the rights holder is responsible for the approval of the application and use of the rights holder’s IP by the sponsor? A detailed and comprehensive rights holder CI will assist in the application and use process by the sponsor but ultimately the rights holder should sign-off on any and all use of its IP prior to production.

The licensing of rights holder IP in a sponsorship agreement needs to be taken more seriously by contracting parties. It’s in the interests of both parties that the licensing aspects are dealt with in infinite detail (certainly more so than is currently the norm) and are closely managed. 

Parties should either enter into a separate IP licensing agreement which provides all the necessary legal, technical and operational provisions, in parallel with the sponsorship agreement or incorporate the terms and conditions of the licensing agreement as an annexure to the sponsorship agreement.

The nature of the agreement between a rights holder and sponsor is not one where the rights holder is in a favourable position to take on a sponsor legally for abuse or improper use of its IP. So, ensure that at the time of contracting, all conceivable risk around IP use by both parties is addressed in detail. 

Your legal professional will be able to assist you further in protecting one of, if not the most valuable asset you have as a rights holder – your brand and the associated IP.

Cautus!

John van den Aardweg

Sport categories: 
Miscellaneous