Sponsorship - the golden goal of advertisement?

25 July 2014

Craig Giles

IP & IT analysis: How can sponsors protect their rights? Craig Giles, a senior associate in the sport and media groups of Bird & Bird LLP, advises on the practical issues concerning sponsorship of major international sporting events.

What are the key issues surrounding the sponsorship of major international sporting events?
Sponsoring a major sporting event can provide a great opportunity to reach out to a global audience, and associate your brand with an inspirational event that captures their imagination. However, the larger the event the more likely it is a sponsor will need to invest a considerable amount of resources (both financial and manpower) to ensure the sponsorship is activated successfully. Before committing to any sponsor programme it is therefore crucial to conduct proper due diligence to ensure the sponsorship delivers the expected benefits.

Firstly, the rights holder of any major event is likely to operate a sponsorship hierarchy--ie, it will separate out the available sponsorship rights into different tiers, with sponsors being granted a different package of rights dependent upon the level at which they invest. A sponsor will need to know how many other sponsors the rights holder could appoint, and where they sit in the hierarchy to ensure that their own messaging is not lost among those of other brands. A sponsor will also require assurance that the rights holder will not grant sponsorship rights to any of their primary competitors. This is usually achieved by a system of 'category exclusivity'--ie, identifying the key products or services offered by the sponsor, and seeking a contractual assurance from the rights holder that they will not grant rights to any competitor operating in the same space.

The sponsor also needs to consider carefully the exposure that the rights holder is providing for their brand, and whether that exposure is targeted at the territories and demographics the sponsor requires.

What is the existing legal framework in this area?
As a matter of English law at least, there are no intellectual property rights in a sporting event per se. In order to protect the event against infringement by third parties--known as 'ambushing'--it is necessary to rely on a patchwork of other rights, such as trade mark infringement (eg of names or logos), copyright infringement (eg of photos or videos) or passing off. Rights holders have frequently argued that these rights do not offer sufficient protection for an event, which is why the most powerful ones lobby the governments of the territories in which their events are held to pass specific laws to protect them (eg the 'Olympic Association Right' at London 2012).

The sponsor will also want to ensure it is familiar with any laws or industry regulation which may have a bearing on the activation of its rights (eg advertising or broadcasting codes).

What practical steps should sponsors take to protect their rights?

Where a right of action exists against an ambusher, in the majority of cases it is likely to be available only to the rights holder. The sponsor will therefore need to seek safeguards in the sponsorship agreement that the rights holder will operate an appropriate anti-ambush campaign around the event, and take action against ambushers where their activities are damaging the sponsor's investment.

A sponsor may also wish to consider whether there are any more specific protections that the rights holder could offer. For example, can the rights holder procure that the sponsor is offered a first opportunity to purchase broadcast sponsorship of any television coverage of the event, or ensure that a competitor is not allowed to purchase these rights? Will the rights holder purchase advertising space around relevant stadia to stop rival brands from exploiting this inventory? Can the rights holder exert any control over the competing athletes themselves, to prevent them from endorsing competitors during the event period? (see, for example, the Bye-Law to Rule 40 of the Olympic Charter).

What are the implications for lawyers in this area? What do they need to be mindful of when advising clients?
A key role for any sponsorship lawyer will be to assist in conducting due diligence on what competing rights may exist, and whether these can be addressed via the sponsorship contract. For example, if a sponsor wishes to purchase rights from an event organiser, it will be important to check whether it is possible that a participating team from a key jurisdiction for the sponsor could be sponsored by one of its competitors (who may ultimately receive more exposure in that jurisdiction). This will require having an understanding of the overall structure of the relevant sport, and the sport-specific rules and regulations that govern the applicable event.

It will also be necessary to analyse what funds the sponsor will need to set aside in order to make the sponsorship a success (in addition to the sponsorship fee itself). For example, it may be that the sponsor needs to combine the sponsorship of the overall event with additional arrangements with teams or individuals as part of a coordinated strategy to target certain markets. The sponsor will also need to consider the additional resources that will need to be invested in activating the sponsorship (such as media or ad campaigns).

A further important consideration is establishing the legal options that should be available if the sponsorship does not work out as planned. This could, for example, be a reduction in the sponsorship fee if the event does not receive the anticipated television viewing figures, or a right to terminate the relationship if the event is beset by some form of adverse publicity or controversy.

How do you see this area of law developing in the future?
It is unlikely that sport will gain any specific additional legal protection in the near future. However, changes in other areas of law may well have an impact on the sporting landscape--for example, developments in the law on privacy or confidence may have an impact on a rights holder's ability to protect access to, and exploitation of, its events.

On the other hand, the manner in which sponsorship rights can be activated is more likely to be affected by legal developments--for example, further relaxation on the rules on product placement, or tougher regulations on the promotion of alcohol or unhealthy foods.

Sponsors should also be aware that sporting rules and regulations are subject to regular revision and change, and should monitor how these changes could affect their portfolio of sponsorship rights.

This article was first published on Lexis®PSL IP & IT on 1 July 2014.

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