Cody E. Myers, Associate

Smart Summary

• Businesses may now enter into sponsorship, advertising, licensing and other paid arrangements with college student-athletes thanks to a new ruling from the NCAA.
• Primary considerations for businesses should include formalizing an agreement, protecting IP, ensuring confidentiality, understanding the anticipated ROI on the engagement, requesting termination and exclusivity clauses, and focusing on compliance with myriad public and private regulations.
• The first step toward embracing this strategy is to create a form sponsorship and licensing agreement that addresses the items above in partnership with your attorney.

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On June 30th, in the wake of Alston v. NCAA, the NCAA adopted a policy allowing student-athletes to benefit from their name, image, and likeness (NIL). This drastic change not only means that the virtual “dynasty” you may have created in NCAA Football 14 is likely coming back, but it also means that, for the first time, businesses can leverage sponsorship without running afoul of NCAA regulations.

For the student-athletes, the long-awaited ruling finally allows them to take advantage of their personal brand by making money from personal appearances, commercials, autograph signings, and other endorsements. Wasting no time, a few athletes have already applied for trademarks and announced corporate sponsorships. For businesses, the policy opens opportunities for sponsorships and advertisements that were previously unavailable.

But before jumping into a relationship with the student-athletes, however, there are plenty of best practices you should consider:

1. Formalize a Sponsorship Agreement. It will be imperative to formalize the arrangement in a “Sponsorship Agreement,” which lays out the legal relationship and rules between a sponsor and the sponsored party. It’s important that both the sponsor and the sponsored person or organization understands what the scope of the arrangement is and what their legal obligations are.
2. Protect Intellectual Property. Businesses often have unique products, public images, or brands, which drive their success. These assets should be thoroughly protected with a comprehensive license grant. Additionally, to make the most of a sponsorship arrangement, businesses should also consider how a sponsored college athlete can and cannot use their image or marks.
3. Ensure Confidentiality/Trade Secret Protection. Licensing businesses should contemplate how they can protect themselves from the sponsored athletes’ disclosure and/or access to confidential information and/or trade secrets relating to business and sponsorship fee matters.
4. Understand the ROI on a Sponsorship Payment. Who is the athlete? How much revenue do you expect a sponsored event or post to generate? What is your budget? Based on this information, businesses should arrange a secure and profitable payment structure.
5. Set Realistic Terms and Termination Clauses. Taking several factors into account, businesses ought to think about how long they expect the sponsorship to be a fruitful form of advertising. Without a proper termination or morals clause, the relationship with the athlete may continue longer than desired. This could result in the business being obligated to pay the athlete for a longer period of time than it originally anticipated. Further, a business will want to retain the right to terminate the relationship in the event a student-athlete is embroiled in a scandal or otherwise engaged in activities that are not consistent with the business’s culture and brand.
6. Request an Exclusivity Clause. Drafting exclusivity clauses can be like walking a tight rope, as including such a provision may limit the universe of athletes interested in advertising on a business’s behalf. Nonetheless, it might be less than ideal if the athlete advertising your product or services is also appearing in posts, commercials, and other ads for your competitors or brands that are inconsistent with your own. An exclusivity clause would be an appropriate mechanism by which you can encourage a more open working relationship with the athlete, while protecting your brand’s image.
7. Focus on Compliance. Compliance with state, federal, NCAA, and even university laws, regulations, and policies will be absolutely necessary. The NCAA has stated its intent to pass official regulations on name, image, and likeness; however, without official regulations in place, individual states, including Ohio, have already begun enacting legislation on the subject. Moreover, it is likely that individual schools will draft policies relating to what products and services their student-athletes may or may not advertise. It will be imperative for your business to ensure the student-athlete complies with its school’s compliance obligations, and that your arrangement can be terminated in the event such compliance is infeasible.

What’s the First Step?

With this new development, there will be many opportunities for businesses of all sizes to forge relationships with local athletes to promote their brands. The first action step for any business hoping to forge such a partnership should be to work with an attorney to craft a thoughtful and comprehensive sponsorship and licensing agreement that addresses the items discussed in this article and any other considerations specific to the business and its proposed relationship with the student-athlete. Once that’s in place, your business will be able to quickly sponsor your favorite hometown heroes while protecting the business’s brand.

*This article is co-authored by Summer Associate Mina Zaky