the need to know legalities of marketing sponsorships

The Need to Know Legalities of Marketing Sponsorships

Oliver Gleeson, SDI MarketingBill Hearn, Davis LLP

Jolan Storch, Canadian Olympic Committee

The Canadian Institute’s19th Annual Advertising & Marketing Law Conference

January 24, 2013, Toronto

Overview

• Key elements of sponsorship agreements - Bill• Ambush marketing and sponsorship activation - Jolan• Negotiation of sponsorship agreements - Oliver• Case studies• Q&A

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Key Elements of Sponsorship Agreements

• What’s the nature of the sponsorship?• Who is the rights holder (sponsee)?• What are the sponsorship rights?• Exclusivity and carve-outs• Licensing and protecting IP

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Key Elements of Sponsorship Agreements

• Payment of fees and other consideration• Commercial Considerations

• Representations and warranties (e.g., morals clauses)• Term, termination and options to renew• Cancellation and postponement

• Dispute resolution

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What’s the nature of the sponsorship?

• Five basic categories of sponsorship agreements• Events - e.g., Rogers Cup• Venues - e.g., Air Canada Centre• Organizations - e.g., NHL• Individuals - e.g., athletes• Product Placements - e.g., in movies and TV shows

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Event Sponsorship• One-off events

• Typically less expensive and lower risk• A good way to “test the waters” in developing a long term strategy

• Recurring and long term events• Greater expense and risk• Risk can be mitigated with effective payment, termination, force

majeure, and insurance provisions

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Venue Sponsorship• Title Identification

• Automatic association with every event held at the venue• Potential Drawbacks

• High cost (e.g., $US16M/year for MetLife Stadium; $US300M over 32 years for Reliant Stadium & Astrodome; $CA20 million over 30 years for Air Canada Centre - presumably, “ACC” not what Air Canada had in mind)

• Potential for negative publicity associated with the venue

• Other Considerations• Sponsor should be aware of events typically held at venue and any

superseding rights of others

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Sponsorship of Organizations• Leagues, teams, playoffs, tournaments, associations, charities

Sponsorship of Individuals• Risk of scandals creating a negative association with brand:

• Examples - Michael Phelps (marijuana), Lance Armstrong (doping)• Mitigate risks with “morals clauses”

• Triggering events (e.g., criminal behaviour or even an allegation of it)

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Product Placements• Presumably, most companies would like to have their products

shown in movies and TV shows (especially without payment) unless the placement is detrimental to the brand

• For instance, the creepy villain who uses their branded tablet computer to stalk their victims/amass their followers online• Clearly, this is “off message” and may tarnish the tablet’s brand

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Product Placements• Two scenarios: Unauthorized and Authorized • Two main issues

• If unauthorized, how should brand owner respond?• If authorized, how should interests (often competing) of sponsor

(usually seeking effective product placement and protection of brand image) and producer (usually seeking to maintain creative control) be reconciled?

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Unauthorized Product Placements• What might brand owner do if placement is unauthorized and negative?

• Get thick-skinned, forego legal response, try to keep PR response light?• E.g., Jaguar plot line in Mad Men, IKEA store in 30 Rock

• Forego legal response but rebuke strongly in PR response?• E.g., Budweiser beer in movie Flight starring Denzel Washington

• Sue?• E.g., Slip ‘n Slide in movie Dickie Roberts: Former Child Star - Wham-O Inc.’s US

court case against Paramount Pictures dismissed in 2004

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Authorized Product Placements• Why would a film/TV producer go to the trouble of getting permission from

the brand owner to give it “free publicity” in a movie/show? Two main reasons:

• Reducing Production Costs - Get access to free props

• Mitigating Legal Risks - Often the producer must get the brand owner’s consent to satisfy the producer’s insurer - i.e., reduce the risks of having to defend against lawsuits and ensure coverage

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Authorized Product Placements• When the placement is authorized, what can the brand owner do to protect

its interests?• Specify “Placement” Rights in Writing - Helps sponsor get what it is paying for

in terms of appropriate quality and amount of product exposure• Agree In Advance on Control Sponsor Has Over Brand Image - If it is not

possible for sponsor to get approval and ultimate veto rights, then sponsor should at least seek (a) the right to be consulted, (b) an obligation on the producer to use its best efforts to resolve the sponsor’s concerns over insufficient/inappropriate brand exposure and (c) the right to require its trade-marks and logos to be blurred out to protect brand image

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Who is the rights holder (sponsee)?

Key Considerations• Identify the rights holder• Verify that it has the authority to grant the desired rights• Ensure that any required third party consents are obtained• Obtain appropriate reps and warranties Examples of Third Party Consent Requirements• Sponsorship rights granted by sports teams may be subject to superseding

league rules or collective bargaining agreements• Performers may be restricted from performing certain songs or portraying

certain characters without permissions

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What are the sponsorship rights?

Key Considerations• Almost anything can be sponsored. Seek solutions that align with

marketing objectives, and don’t be afraid to be creative!• Definition of rights can be a tedious exercise. They must be thought

out carefully and drafted precisely• Common drafting technique - to accommodate detail, incorporate

rights as a schedule to the main agreement

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Sample Clause• Subject to the terms and conditions of this Agreement, and subject to the

performance of the Sponsor of all of its obligations under this Agreement, the Sponsee will provide to the Sponsor during the Term the advertising, promotion, and sponsorship rights specifically set out in Schedule “A” (the “Promotional Rights”) to be exercised solely in connection with the products and services in the Category.

Examples of required specificity• Size of ad displays (to the millimeter) • How long rotating signage is displayed for and when (in seconds) • Placement of product (including exact positioning of product, amount of time product

is featured, how many mentions/uses are made of the product, etc.)

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A variety of sponsorship rights can be bargained for

• Advertising (title sponsorship, use of trade-marks in advertising, pass-through rights for sponsor’s partners)

• Merchandising (affixing trade-marks to product)• Product supply to league/team/athlete and/or at venue/event• Broadcasting (right to use footage, right to time slots, etc.)

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A variety of sponsorship rights can be bargained for

• Others• Perks, such as free tickets and special access• Product displays and product placement• Public appearances by the sponsee or its employees • Having a special kiosk at events to display products• Holding contests featuring the sponsee (e.g., tickets to event)

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Exclusivity and Carve Outs

• Exclusivity clauses tend to be among the most heavily negotiated clauses in sponsorship agreements

• Main interest of the sponsor• Maximize value of sponsorship rights by

• Preventing competitor advertising in the space• Preventing overcrowding in the space generally

• Main interest of the sponsee• Accommodate existing sponsorship arrangements• Maintain flexibility to accommodate potential new arrangements

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Key Terms• “Exclusive”• “Non-exclusive”• “Sole”Important Considerations• Types of products/services covered and carve outs• Duration• Geographic and spatial limitations• Temporal limitations

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Typical Structure of Exclusivity Clauses• General grant of exclusivity + carve outs

ExampleThe Sponsee hereby grants to the Sponsor the exclusive right to use the Sponsee’s trade-marks in connection with the advertisement of products in the Category. For the purposes of this Agreement, the term “Category” means and is limited to the following products: TVs, home audio, home appliances, notebook computers, and mobile phones. For greater certainty, the Category excludes uninstalled countertop appliances, computer software, computer hardware (other than notebook computers), mobile phone accessories, and any associated services.”

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Licensing and Protecting IP

• Sponsorship agreements commonly allow the parties to use each other’s trade-marks to associate themselves with one another -e.g., Coca-Cola and the Olympics

• Key considerations for protecting IP• Maintaining distinctiveness of trade-marks• Dealing with newly created IP

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Maintaining Distinctiveness of Trade-marks• Failure to do this could mean trade-mark registration gets

expunged• Appropriate licensing provisions are necessary• Licensor must exercise control over use of trade-mark

• Examples• Restrictions on how and where a trade-mark can be used• Font, size, and colour specifications• Final approval rights for any use of trade-marks reserved by the licensor

Licensor must then diligently police use of trade-marks

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Dealing With Newly Created IP• Sponsorship agreement should determine who owns rights to

newly created IP in order to prevent later disputes• Examples of new IP

• Websites• Advertisements• Composite trade-marks

Other Considerations• Indemnities

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Payment of Fees and Other Consideration

• Many ways to address payment of fees, including• Lump sum payments• Periodic or milestone payments• Contributions in kind• Any combination of above

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Lump Sum Payments• Benefit to the sponsee; may be acceptable in simpler agreements

Periodic/Milestone Payments• Can tie the sponsee to specific performance milestones• Reduces risk to sponsor, especially in longer term sponsorships• Examples of milestones

• Minimum attendance levels• Success fees (for athletes)

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Contributions in Kind• Sponsor may provide products/services in lieu of cash payments• Potential for win-win scenario

• Sponsor reduces direct costs + may gain more exposure• Sponsee acquires needed products or services at a reduced price

• Examples• Electronics manufacturer provides digital displays to an event• Sponsor provides training equipment/facilities to athlete

• Note: Additional considerations when providing product (e.g., who bears risk of damage, who keeps product after event, etc.)

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Commercial Considerations

Reps and Warranties• Some common provisions include

• Sponsee has obtained or will obtain all regulatory approvals and all agreements, rights, licenses, representations, and warranties necessary in order to carry out its obligations

• Sponsee has not entered and will not enter into any agreements of any kind that would conflict with the rights granted to the sponsor

• Sponsee has the legal ability to grant all rights associated with the agreement, including the use of names, trade-marks, logos, etc., with no further authorization or action necessary by the sponsor

• Neither the event or the exercise of its rights under this Agreement by the sponsor will infringe upon the intellectual property of any party

• Other warranties may stipulate standards of morality, cleanliness, security, etc

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Commercial Considerations

Term, Termination, and Options to Renew• Term

• Consider extending beyond end of event• Termination

• Address different possibilities (bankruptcy, force majeure, bad publicity, etc.) and the remedies that may be appropriate in the circumstances (rebate of fees paid, etc.)

• Options to Renew • May only be possible in shorter term agreements. If not possible,

consider an option to renew, possibly combined with an exclusive renegotiation period

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Dispute Resolution

• Some Considerations for DR Process to First Require Exhaustion of Alternatives to Litigation in First Instance

• Keeps private the resolution of disputes (not made public/aired in open court)• Allows for flexible process to manage wide range of issues that can (and

probably will) arise in long-term business relationship• Respects aspiration that sponsor and sponsee are “partners” in the business of

co-promoting and building each other’s brands• May facilitate speedier resolution of disputes than litigation alone• May contain and make more certain legal and other dispute resolution costs

(e.g., management effort and time)

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Dispute Resolution

• Process • Negotiation - structured and escalated • Mediation• Arbitration• Litigation - last resort

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Key Elements of Sponsorship Agreement - Panel

• Rights of first refusal and negotiation -• Labatt v. NHL - example and litigationRENEWAL OPTION - Before entering into negotiations with a third party for sponsorship rights with respect to the Canadian Territory within the Category for the period beginning immediately after expiration of the License Term, the NHLECos shall deliver to LABATT a written proposal for the renewal of this Agreement on or before October 1, 2006. Thereafter, LABATT will have the exclusive first right to negotiate the terms of a renewal of this Agreement for a period of sixty days … If, during such sixty-day period, LABATT and the NHLECos are unable to agree on the terms of such renewal, LABATT will, within fifteen days after the end of such sixty day period, offer to the NHLECos a proposal to which LABATT would be willing to agree. The NHLECos will then have ten days to accept or reject LABATT’s counteroffer, after which time, if the NHLECos reject LABATT’s counteroffer, the NHLECos will be free to negotiate the rights and benefits relating to the renewal with any third party; provided that the NHLECos will not offer any third party terms more favourable to such third party than those in LABATT’s counteroffer without providing LABATT the opportunity to accept such an offer within a ten-day period.

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AMBUSH MARKETING &SPONSORSHIP ACTIVATION

LONDON 2012

https://cot.box.com/s/r5m7l8obvprbg4

POSITIONVISIONMISSIONTo lead the achievement of the Canadian Olympic Team’s podium success and to advance the Olympic values in Canada

To make Canada a world leader in sport, inspired by the passion and performance of the Canadian Olympic Team

The COC is the best-in-class NOC providing support for athletes to perform at their highest level and inspiring fans who are passionate about amateur sports

CANADIAN OLYMPIC TEAM

OUR VISION: To be the best corporate marketing partner with a reputation for quality, unparalleled service and delivering tangible results.

OUR GOAL: To deliver best in class results for their business according to their objectives, contributing to the bottom-line profitability of their organization.

The STRENGTHof our brand

The STRENGTHof our brand

The QUALITYof our people

The QUALITYof our people

The PERFORMANCE

of our athletes

The PERFORMANCE

of our athletes

OUR PARTNERS’ BEST PARTNER

PRT

OUR STRATEGIES

1. LEVERAGING AND NEGOTIATING WITH A SPONSOR

2. LEGALITIES SURROUNDING SPONSORSHIP ACTIVATION

3. AMBUSH MARKETING

DOMESTIC PARTNERS

A. Beyond cash, what else can you ask for if you’ve hit the cash limit?

B. Trading off legal obligations

C. The power of a strong brand

D. Arbitration vs. Litigation

E. Big Money = Expectations for Ambush Protection

LEVERAGING AND NEGOTIATING WITH A SPONSOR

LEGALITIES SURROUNDING SPONSORSHIP ACTIVATIONA. Devil in the details

B. Graphics Standards Manual

C. Brand Protection Guidelines

D. It’s more than Intellectual Property!

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AMBUSH MARKETING

• Tactic whereby advertisers associate themselves with

an event/marketing property without securing

official rights (no consideration, no contract, no

relationship)

AMBUSH 2012

• Total of 84 cases of Ambush Marketing in 2012 leading up to and during the London Games

• Cases ranged from posing minimal commercial harm to major infringements taken over by legal counsel

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AMBUSH CASES IN 2012

AMBUSH RATING SCALE

COMMON TRENDS DURING LONDON 2012 GAMES

• Congratulatory Tweets and Facebook posts and contests

• Use of Symbols of London – Torch and Medal imagery, Tower Bridge, Big Ben, etc.

• Use of “Olympics”, “Summer Games” in promotions

OLD NAVY

•• Considered to be a major

infringement • Unauthorized sale of Olympic T-

Shirts in Canadian Old Navy Stores• Variety of registered trade marks were

reprinted and sold• Case is currently in progress

BENJAMIN MOORE

• Considered to be a major infringement• Facebook contest occurred during

London 2012 Olympic Games• “Everytime your country wins a medal

during the Summer 2012 games we’ll draw a winner to receive two gallons of Benjamin Moore paint.”

• “Grand Prize: 2 winners will be chosen during Closing Ceremony to receive an iPad 3 loaded with Benjamin Moore colour tools”

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ANTICIPATIONS FOR 2014

• High level of Ambush Marketing

• Russian imagery to start flooding advertisements

• Increase in online activity and contesting largely due to

time zone limitations

Ambush Marketing & Sponsorship Activation:Case Study • Budweiser Playoff Payoff Contest - Spring 2012

• Background to contest• Nature of contest• Ambush marketing?• Dispute with NHL• Resolution? A cautionary tale?

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Case Study – Playoff Payoff

Background• In early 2011, Molson muscles out Labatt and becomes the new official

beer sponsor of the NHL for North America, dealing a heavy blow to Labatt (a 7-year, $375M deal)

“The NHL and the access it provides to Labatt ... is the single greatest opportunity to grow Labatt’s share in Canada … There is no other substitute for this national access to these consumers. The nexus of sports / heritage / emotional / tradition in hockey has no other Canadian comparable.”

- Kyle Norrington, Mkting Director of Budweiser and regional brands for Labatt in Canada

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Labatt Strikes Back• Bud’s Big Game Commercial - Winter 2012

http://www.youtube.com/watch?v=y0qZYqdsYAg&list=UUJ36B8tFFZG8sHaLjAxS7zQ

• Bud’s Playoff Payoff - Spring 2012http://www.youtube.com/watch?v=M9HaXYb1hBU

• Bud’s Deal with CBC’s Hockey Night in Canada - January 2013• Multi-year contract to get Bud brand on CBC’s Coach’s Corner with Ron

MacLean and Don Cherry

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Nature of the Contest• Labatt launched the Budweiser Playoff Payoff contest,

coinciding with the NHL playoffs • The Prize = “Hockey Tickets for Life!”

• The winner would get tickets to 20 home games a year for 50 years for the Canadian team of his or her choice

• At least one implication • Drink Budweiser and you could win NHL tickets

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Ambush Marketing?• Labatt never explicitly promised tickets• Labatt never referenced any specific teams or leagues.• Advertising never made use of NHL trade-marks• Any associations with the NHL and the Stanley Cup

Playoffs were specifically disclaimed

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Ambush Marketing?Disclaimer in Contest Advertising

Budweiser is not an official sponsor of the NHL. The Playoff Payoff is not licensed by, sponsored by, or otherwise associated with the National Hockey League or its member teams.

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Dispute With the NHL• NHL released the following statement:

• “We want our fans to know that the NHL has no affiliation with that promotion, and we can offer no assurances to our fans that the desired tickets will be available to the winner.”

• See terms and conditions on back of NHL ticket

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Dispute With the NHL• Excerpt from Typical Ts&Cs on Back of Ticket to NHL Game

IMPORTANT! PLEASE READ. WARNING! DESPITE ENHANCED SPECTATOR SHIELDING MEASURES,PUCKS STILL MAY FLY INTO THE SPECTATOR AREA. SERIOUS INJURY CAN OCCUR. STAY ALERT ATALL TIMES INCLUDING DURING WARM-UP AND AFTER PLAY STOPS. IF STRUCK, IMMEDIATELY ASKUSHER FOR DIRECTIONS TO MEDICAL STATION. The Holder, on behalf of the Holder and minoraccompanying the Holder (individually and collectively, the "Holder"), is admitted on condition and by using thisticket and entering the arena, agrees to be bound by all of the terms of this ticket license. The arena is astrictly enforced smoke-free environment. Bottles, coolers and containers of any kind are not allowed into thearena and may be confiscated. Tickets obtained from unauthorized sources may be lost, stolen orcounterfeit and may not be honored. Tickets cannot be replaced if lost, stolen or destroyed. This ticket is arevocable license which may be withdrawn and admission refused at any time upon refunding Holder theprinted purchase price. This license will automatically terminate if any term is breached. Ticket may not beoffered for resale in any manner which would violate any law or regulation. Ticket may not be used for anyform of commercial or trade purposes, including, but not limited to, advertising, promotions, contests orsweepstakes without the express written consent of [NHL Team Name]. (“TEAM) …


Dispute With the NHL• Prize Description in Contest Rules

There is one Grand Prize available to be won, consisting of two regular season tickets for twenty games per year, for fifty years, for a Canadian hockey team’s games held in Canada in that Canadian team’s city of the winner’s choice … approximate retail value … between $35,000 and $350,000. The approximate retail value will vary depending on the city selected. Location of seats will vary by game and by venue … If the Contest Sponsor is unable to secure tickets on the winner’s behalf to the winner’s city of choice, the Contest Sponsor will substitute a prize of equal value or cash. Winner may have the option of a single cash payment in the amount of $250,000 in lieu of the Grand Prize as described above.

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Resolution? A Cautionary Tale?

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NEGOTIATING SPONSORSHIPS

• Sponsorship Strategy

• Properties• Development

• Execution

OLIVER GLEESONCORPORATE COUNSEL, SDIMKTG

CONTRIBUTION TO PANEL • Unique Perspective• Man in the Middle –

“Go Go Go vs. No No No”• Black and White (Grey)• Increase your value

to your clientsor corporate marketing colleagues

STARTING POINTUNDERSTANDING OBJECTIVES• Pre-Fundamentals• Know the Story – “Cup of Coffee”; “Have a Beer”• “Spirit of the Agreement” • Good Faith• Risk Management

MIGHT DOES NOT ALWAYS MAKE RIGHT• Leverage key in negotiations• “Maxing” Leverage not always in best interest of your client

Pro Con

Protect Your Clients May be “offside” with intentions of parties

Responsible to your Clients Deal may not get done

Squeeze the Juice Reputation Tainted – yours or your client

WALKING THE “GREY LINE”PLAYING FAST AND LOOSE- ROAD HOCKEY TO CONQUER CANCER

WALKING THE “GREY LINE”PLAYING FAST AND LOOSE• Sponsor Activations • Promotions and Contests • Activating before Agreements signed • Understand what’s truly important

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Questions

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Bill Hearn, Davis [email protected]

416.369.5298

JOLAN B. STORCHGeneral Counsel

and Business

Development Advisor

[email protected]

Oliver GleesonVP Business Development & Corporate [email protected]

Disclaimer: This presentation contains general information only and does not constitute legal advice. Qualified legal counsel should be consulted to assess the application of laws to specific facts.

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the need to know legalities of marketing sponsorships

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