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Solid Advice on Sponsorship’s Legal Issues

By Lesa Ukman May 12, 2011

Mary Hutchings Reed, the attorney who has defined many of the business and legal issues surrounding sponsorship, sports, arts, entertainment and cause marketing, spoke to my graduate class at Northwestern University last night, and as always happens when I listen to her presentations, issues were clarified and solutions emerged.

As Mary says, the value lawyers bring to our business is “clarifying rights, creating and preserving the value of sponsorships, and allocating risks.”

Co-presenting with Mary was her colleague at Winston & Strawn LLP, Marc Trachtenberg. His specialties include domain name, Internet, social media, marketing, advertising, promotions, trademark, copyright, and privacy matters. He helped NBA star Chris Bosh recover almost 800 cybersquatted domain names that were identical to the names of various athletes and celebrities. He also has helped celebrities recover cybersquatted social media accounts.

Some highlights of what they discussed:

Strategies for extending category exclusivity:

  • Buy a right of first refusal (match) in close categories
  • Buy an option (pay a little more) for the right to buy close categories at a set price (if Event Owner receives any bona fide offer in that category)

Renewal options:

  • Right of first negotiation (“Rightsholder agrees to negotiate exclusively with the Sponsor for a certain number of days at a specified time in advance of termination. Negotiation must be in ‘Good Faith.’ When negotiations fail, the right dissolves”)
  • Right of first refusal (“A right to match competing offers. Specify the mechanism. A right to match financial terms of competitive bona fide offer. A specified period of time. If RFR is not exercised, Event Owner can't subsequently give another party a better deal”)

Athlete product endorsements must:

  • “Reflect the actual opinions or experience of the endorser; (2) only contain representations that could be substantiated if made directly by the advertiser; (3) not be presented out of context or reworded so as to distort the endorser’s views; and (4) be used only as long as the advertiser has good reason to believe that the endorser still subscribes to the views presented”
  • “The FTC has indicated that it will not pursue endorsers, but will pursue Advertisers”
  • “FTC endorsement rules apply to social media and blogging”
  • “Athlete must somehow disclose connection to Advertiser”
  • “Not as obvious as when athlete in TV commercial”
  • “Athlete’s statements must be true and accurate”

Sponsors should:

  • “Use representations and warranties to ensure FTC compliance”
  • “Obtain affidavit of use--statement that athlete actually used product and how they feel about it.”

Mary Hutchings Reed, mreed@winston.com, 312/558-5721; Marc Trachtenberg, mtrachtenberg@winston.com, 312/558-7964

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Lesa Ukman

About the Author

Lesa Ukman is the founder and chief insights officer of IEG. With the launch of IEG Sponsorship Report in 1982, she created a publication that defined an industry now worth more than $53 billion. She continues to define new and better ways for companies to get closer to their customers through sponsorship, including her current pioneering work developing the new industry standard for measuring the results of sponsorship, offered through IEG’s ROI Services. Follow Lesa on Twitter!

 

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