Commentary

The Legal Implications Of Sponsorship

In 2011, Liberty Seguros, the Brazilian subsidiary of Boston-based Liberty Mutual Insurance, was announced as a national supporter of the 2013 FIFA Confederations Cup and the 2014 FIFA World Cup. This year, the property and casualty insurer became an official sponsor of the 2014 and 2016 U.S. Olympic and Paralympic Teams. These partnerships represent Liberty Mutual’s first major foray in the burgeoning world of sports sponsorship.

As the stage becomes bigger and brighter for the company, legal implications associated with sponsorships are bound to intensify -- a fact not lost on Chris Sloan, assistant vice president and senior corporate counsel at Liberty Mutual Insurance. He highlights "ambush marketing" as a case in point. "There is quite a bit of anecdotal evidence of how non-sponsors find ways to leverage big events without purchasing the rights to do so," he says. "And as a sponsor, it’s partly our responsibility to be vigilant of these kinds of things, to take very swift action. It’s about having eyeballs at the venues and knowing who you need to call."

Sloan, who will participate in a panel discussion on sports sponsorship and brand promotion at the 2013 ANA Advertising Law and Public Policy Conference, March 19-20, in Washington, D.C., discusses a few concerns of sponsorship, including the impact of social media.

Q. From a legal perspective, what are some of the concerns brands must take into account when entering into a sponsorship?

A. You really have to pay attention to the rights granted with the sponsoring entity. Are you getting the right rights, and how can you exercise them? How do those rights fit into your overall media and advertising plans? The rights around your specific category --  or bubble, if you will -- need to encompass everything you touch as a company. In other words, you must make sure that how you define your category -- how you define your bubble of exclusivity -- is correct. On the activation side, there are several legal issues that can crop up along the way. For example, you need to clearly understand how and where you can use the sponsorship logos and materials, including photos, films, and athletes; how you moderate and control messaging in the fast-paced world of social medal; and how you protect your exclusivity. You have to be able to react quickly, and have a plan for how you control something that may be going off track.

One of the biggest issues is ambush marketing. The rights to take action against an ambush marketer -- say, a competitor -- generally rest with the sponsorship organization, since an ambush marketer will try to find some way to create the illusion that it is affiliated with the sponsorship or the event. So it’s not so much that they’re using our logo or our trademark; they’re using the sponsorship organization’s trademarks to create a false affiliation. But in doing so, they’re stepping on our exclusivity bubble. It can occur innocently -- maybe a restaurant throwing up a sponsorship sign or a larger company trying to create the illusion that it is one of the partners by showing up close to a sponsorship event or in close proximity to the event advertising. Those are the ones we really have to pay attention to. So when you negotiate a contract, this is one of those areas you really need to understand.

In FIFA’s world, they often get legislation enacted in the host country giving FIFA special rights and special expedited avenues of recourse through the court system to get cease and desist and restraining orders against marketers that stray over the line. Ambush marketing has become almost a subspecialty in trademark enforcement. 

Q. Please elaborate on the impact social media can have on a sponsorship. 

A. There’s always the concern about staying on brand, staying on message. Social media amplifies both the frequency and the ability for people to interact with your brand. A sponsorship also adds another layer of complexity to what we do already with our social media campaigns, in terms of being mindful of who’s saying what, and making sure that when we post something, or say something about our sponsorships, we do it within our guidelines.

Each sponsorship entity has its own social media guidelines, so we all have to be aware of the rules of engagement. Companies that play in the social media space often have folks who are constantly monitoring what goes on across the Internet, on Facebook, on Twitter, on LinkedIn, and they use different tools to monitor the activity. It’s important to have protocols in place on how to respond to certain incidents or social media crises, and have established escalation paths for when things start to go sideways. 

Q. Sponsorships most often include the right to use or distribute premiums, such as a mascot, flags with a company logo, lanyards, mugs, and hats. What legal considerations do sponsors need to be aware of?

A. The sponsorship entities often work with pre-existing premium suppliers that you have to purchase premiums from. In other words, you may be locked into a particular channel that does not include your normal supplier or vendor. If there are things that you cannot get from that premium supply house, you have to be aware of what rights you have to go outside that channel. If you go to another supply house, they may need to get licensed by the sponsorship entity, and there may be some additional royalties you will need to pay. Sponsorship entities are also very sensitive to the quality of the manufacturing facility and to the quality of items that you plan to distribute with their logos on them.

Also, if your contract with the sponsorship entity permits you to ship premiums to other countries -- say, to your employees or to your invited guests -- you have to be very aware of the import/export practices of those countries. How these countries operate may be very different than what you’re accustomed to in the U.S. For example, you need to be aware of whether the extra time or special handling is necessary to get items through customs, so you need to plan accordingly. This is the type of thing, especially with a large-scale sponsorship, that can be a logistics nightmare if not thoroughly planned out. Having contingency plans is always a good idea.

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