Almost two years ago, I reported on California legislation that would allow college athletes to earn money from their name, likeness and other personal attributes despite NCAA prohibitions. As expected, the NCAA followed suit relaxing their restrictions and allowing college athletes to earn money for their names and likenesses. As I watched the Ohio State game with my family this weekend, we talked about some of the endorsement deals and it reminded me of some of the pitfalls that athletes face when beginning to develop their personal brand and how important it is to establish intellectual property rights early to defeat the inevitable opportunists that register domain names and social media handles that are identical or similar to an athletes name or other aspect of their personal brand. It also brought to mind pitfalls faced by athletes that are unfamiliar with key contract provisions and how they may affect future earnings.
The day after the NCAA relaxed its restrictions in 2020, FoxNews reported that several college athletes were busy inking deals and releasing their own personal logo designs. https://www.foxsports.com/stories/college-football/ncaa-name-image-likeness-nil-tracker-college-athletes-signed-endorsement-deals-day-1-antwan-owens-bo-nix-deriq-king It is encouraging to see these athletes enjoy the benefits of their accomplishments and the notoriety that they enjoy. Other news stories have shown a correlation between the number of followers these athletes have and the dollars earned through endorsements.
In essence, college athletes are being recognized as influencers within the social media space, and also are accessing traditional advertising, public appearance and name and likeness dollars. Having represented athletes and worked on a number of social influencer deals in the past, the common pitfalls from the athlete's perspective is adhering to Federal Communications Commission regulations and so-called morals clauses in these agreements.
FCC Regulations
The FCC has developed regulations in response to social media advertising to provide transparency when influencers post about their sponsors. The influencer is required to disclose the fact that they are sponsored. Other regulations, from the FTC, govern the truthfulness of statements made in the context of a sponsored post and evidentiary support for any product claims. https://www.ftc.gov/news-events/media-resources/truth-advertising/advertisement-endorsements
Often influencer agreements place the burden of compliance on the influencer since they are ultimately responsible for what gets posted on social media. Athletes should get acquainted with the FCC regulations and know what their responsibilities are to ensure they comply. One resource is the FCC sponsorship fact page. https://www.fcc.gov/consumers/guides/sponsorship-identification-rules Also, if they are being asked to publish statements or claims about products, they ask for supporting documentation from the sponsor that they can refer to in making their posts.
Morals Clauses
With respect to morals clauses, typically these are placed in endorsement contracts to allow the sponsor to terminate the relationship if the athlete commits a crime or engages in conduct that conflicts with the values of the sponsor. They are the subject of considerable negotiation in any athlete's contract since they often have significant financial implications for the athlete. The amount of leverage an athlete wields will directly affect their ability to negotiate the impact of a morals clause. Even with a great deal of leverage, it may be difficult to avoid a morals clause altogether. With that in mind, a practical starting point for any athlete is to consider whether your values align with the sponsor. Before meeting with the sponsor, I typically look to see if there are public instances of the sponsor enforcing a morals clause in the past, consider their positions on social, economic and political issues; and look at the other athletes or entertainers that they sponsor to get a feel for whether the sponsor is particularly sensitive to certain issues or prone to using morals clauses to escape their obligations. The meeting should flush out additional details as to whether there is a good alignment between the athlete and the sponsor that may reduce the chance of issues down the road. If there is a lack of alignment or other indications that a sponsor may unreasonably enforce morals clauses, it may be better to pass on a sponsorship to find a better fit with another sponsor. Negotiating more guaranteed or up front money, may mitigate this risk.
Additional Contract Terms
Other key issues to consider are the level of exclusivity that is provided by the athlete, the territorial reach of the contract and the duration. From an athlete's perspective, any exclusive arrangement should be narrowly tailored. For example, a contract for beverages may be too broad if the only product being endorsed is a sports drink. The beverage exclusivity might foreclose the possibility of additional deals for beverages that are not sold by the sponsor. With respect to territory, if the athlete is endorsing a local car dealer, they should limit the geographic scope relative to the dealership. Again, the concern is that too broad of a territory may foreclose larger scale endorsements such as statewide or national advertising that would not necessarily conflict or may be much more lucrative. A shorter duration allows the athlete to move to other deals in a shorter period of time but sacrifices some of the security of a long term deal. Since the student athlete's sports career may not extend past college, the duration of the contract may be a primary concern for both sides.
Intellectual Property Rights
These are exciting times for student athletes. They now have greater control over the use of their personal brand and should take steps to protect it. Aside from avoiding pitfalls in negotiating contracts, they also should ensure that aspects of their brand are protected. Typically, when working with athletes, we secured trademark registrations for their name and any other branding aspects such as logos and catch phrases. We also secured social media handles, domain names and email addresses for their personal names, nicknames and the like.
When working with IP counsel, an athlete should ask for an assessment of the rights available to them. Given their notoriety and the commercial value associated with them as an individual, most of these athletes will enjoy rights of publicity under state law to prevent unauthorized use of their name, likeness and other aspects of their public image. Trademarks rights protect the use of a name, image, logo or other identifier of source in connection with goods and services. In this sense, any use of the athletes name, likeness or other source identifier including logos that they have developed in connection with goods or services may be protected under state trademark and unfair competition laws. If the use of a trademark is or will be in interstate commerce, federal trademark protection will be available. Most social media sites and commerce sites, like Amazon, have programs geared toward recognizing and protecting federally registered trademarks. Therefore, a federal registration is a powerful tool for enforcement. As a result, it is important for counsel to have a comprehensive view of the athlete's current and planned promotional activities and any names, logos, nicknames, or other aspects of their identity that may be used in connection with products and services. From there, counsel can prepare a brand strategy to help the athlete protect IP assets and grow them for the future.
The starting point of the strategy should include a search to determine the scope of rights available and any potential conflicts that could hamper the athlete's plan. From there, a typical strategy will consider what forms of protection need to be immediately secured and others that may be secured in the future. The strategy will also consider social media handles, domain names and other platforms to attempt to obtain exclusive use of the athlete's name or brand. A later step may be seeking verification as a public figure on these platforms. In some instances, other users may have prior use of the same or similar names and it may be necessary to negotiate a transfer.
A comprehensive strategy will estimate the costs of acquiring registered IP rights and maintaining them into the future. As mentioned, these estimates may inform the timing for acquiring rights between immediate needs and those that may be phased in as the athlete receives the benefits of their endorsement efforts. Having registered rights in hand when negotiating with sponsors will demonstrate a high level of sophistication to the sponsor and assure them that the athlete is in a good position to maintain levels of exclusivity. The negotiation may also flush out other areas for additional IP protection in support of endorsements.
Conclusion
Influencer and endorsement contracts can be very complex, and it pays to have secured intellectual property rights before entering into these deals. Registered intellectual property rights can assist in preventing unauthorized uses and, therefore, increase the value of the athlete's endorsement. As you can see this article just scratches the surface of the intellectual property, regulation, and contract terms involved in athlete sponsorship. Athletes should consult with appropriate counsel earlier in the process rather than later to protect themselves.