Coordination Essential in Sports

June 2003
The Licensing Book

Hurriedly opening the door as the taxi braked to a stop, I exited to the curb. Retrieving my briefcase from the seat, and accepting change and a receipt from the driver,  I forced a smile and "Have a good day" as I closed the door.  He was apparently a recent addition to the corps of the City's cab drivers and not yet familiar with its traffic patterns.  As a result, I was already more than ten minutes late for my appointment with Larry Lexus, the licensing lawyer.
 
Climbing the steps of the brownstone two at a time, while at once struggling to adjust my tie and my irritation, I hurried through the ornate lobby and exchanged greetings with the guard.  The elevator doors opened onto the anteroom to Larry's offices.  His assistant smiled "He's waiting for you" and opened Larry's door. 

Larry carefully returned his grandfather's watch to its place in his vest pocket as he rose from behind his massive desk, offered a smile and his hand in greeting.  "I'm very glad you could come, my friend.  I was concerned that circumstances might cause you to cancel our meeting."  I began to fumble for an apology in response to Larry's gentle reproof, but he shared his calm with a slight wave of his left hand and said, "Not to worry, my friend, I was grateful for the few extra minutes to prepare for our conversation.  Please, let's sit together at the conference table.  I have collected a few papers to show you."

Sports Licensing

Larry strode across the dense oriental carpet and beckoned me to sit with him at the oak table.  He filled two tumblers with ice water from the glass pitcher and offered one, which I gratefully accepted.  "From our telephone conversation, I understand that your client is interested in marketing a line of products involving likenesses of professional athletes."

"That's right, Larry, and the client has requested direction for the acquisition of rights necessary to support its planned products.  I recall that you have prior experience in these matters, and I would appreciate your assistance in developing an outline for the discussion of pertinent issues."

"My friend, I'm at your disposal for any assistance I might provide.  You're quite right.  One of my clients, a major manufacturer of sports memorabilia, developed a line of figures embodying sculpted likenesses of professional athletes in team uniforms with a panoply of accessory items.  The acquisition of rights and coordination of agreements became somewhat complex.  For your reference, my assistant has photocopied a number of pertinent documents, and has redacted the identities of the parties and material deal points.  I know that I can rely upon your discretion, my friend, but must beg your indulgence. 

"For the sake of simplicity, and I use the term advisedly, I will generalize to some degree in describing my experience in these matters. In the United States, one normally thinks of the major professional team sports as those of baseball, football, basketball, and hockey.  Automobile racing and professional soccer are structured somewhat differently, so let us focus for the moment on the other four for the purpose of our discussion. 

"Sports collectibles enthusiasts insist upon authenticity.  As a result, representations of professional athletes have proven to be far more marketable in 'official' team uniforms than in generic simulations.  As counsel to a manufacturer of such products, one must assure that license agreements are negotiated with representatives of player interests as well as those of league and team property rights.

The Players

"First, with respect to player rights, the name, likeness, signature, playing statistics and certain biographical information are pertinent.  Assuming that a licensee's products will involve a plurality of currently active players from a particular sport, one must ordinarily consider acquiring merchandising rights through the pertinent players' union representatives.  Upon becoming associated with a professional sports league, a player is generally expected to grant authorization to the respective union for uses of his likeness and other rights in the context of his sport whenever a certain minimum number of other players' likenesses are also planned to be combined in a product category.  This minimum number varies by sport, and rights are conveyed by such entities in a 'group license'. 

"A complicating factor when considering player rights is that the most stellar players of a particular sport may have the ability to 'opt out' of union merchandising representation.  In such circumstances, use of those players' likenesses will depend upon acquiring rights directly from representatives of the individuals.  Another complication arises when products focus upon accomplishments or special events involving individual players who are otherwise subject to a group license.  In such circumstances, a supplementary 'highlight' agreement may be required, and with it an incremental payment to the player or to the union.

"Yet another complication involving player rights is that the union may lose authority to represent a player in merchandising arrangements immediately upon his retirement from his sport.  It is essential to understand whether pre-season or mid-season retirement by a particular player could affect the ability of the client to continue to market products involving his likeness.  It would not be unprecedented that one would require a supplementary grant of rights from the individual to finish the current selling season. 

"A natural segue to this consideration is that planned inclusion of retired players in a product line will require grants from representatives of each retiree.  That is, if your client intends to market an 'old timers' segment representing a group of retired players, additional and individual grants must be sought."

The Teams

My growing discomfort must have been apparent.  Larry paused in his narrative and said, "I apologize, my friend, if this subject is somewhat daunting.  Unfortunately, we have only touched the surface.  It is still necessary to focus upon the league and team rights involved in such licensing structures. Also, your client's intentions regarding accessory items, packaging, advertising and other peripheral materials may of necessity multiply the complexities. 

"If a licensee desires to market products involving a single team in a geographical region limited to the natural market of that team, then it may be sufficient to acquire rights directly from the team.  However, if your client intends to market products nationally that involve representations of multiple teams, then a grant of rights from the professional league itself likely will be a necessity.  If this is the case, the league may impose a requirement that a minimum number of players from each of the league's teams be represented in the product line. 

"This may create marketing difficulty, because weaker teams usually have smaller followings and fewer star players in whom collectors have interest.  It will also be important to understand how such a requirement may impact the acquisition of player rights.  For example, it is possible that requirements of this nature imposed by a league could necessitate acquiring a 'group license', although the licensee might otherwise fulfill its marketing objectives with fewer players.  Thus the rights acquired through one licensor may impact the scope of rights needed from another, and may quite unexpectedly introduce practical as well as legal considerations.

Coordination

"As these various agreements are developed, my friend, it is important to keep one's 'eye on the ball,' as it were.  Where might your client find itself, for example, if league rights and obligations have been undertaken but player rights prove unattainable?  Quite unhappy, I would venture.  "Similarly, if the term of one agreement fails to extend throughout the term of a companion agreement, the payments associated with any extraneous period of the longer term could not bear fruit.

"For these reasons, it is advisable to condition the obligations of each agreement upon the acquisition and continuity of essential companion rights - for example, by making league or team rights dependent upon the licensee's ability to strike a coextensive deal for player rights, and vice versa. Circumspect counsel must ensure that any essentially coupled rights are available and will be equivalent in duration."

The Crowd

My temples began to throb as Larry continued, "Hopefully, this gives you some understanding of the course on which your client has embarked.  Unfortunately, the audience for such products as you have described often insists upon a level of authenticity that may require yet additional rights.  For example, teams and individual players frequently retain the authority to enter agreements with manufacturers of athletic footwear or other paraphernalia that require the manufacturer's brands to appear on associated merchandise.  However, one cannot assume that taking a license from the player or team necessarily conveys rights to the shoe brands or other indicia.  Separate  agreements with manufacturers of a player's 'tools of the trade' may be required to supplement rights previously obtained.

"Similarly, if the appearance of the stadium or auditorium within which a team plays its games is intended to be represented in the client's merchandise, packaging or advertising, additional rights may be required.  Those rights may be subject to obligations to the company having 'naming rights' for the particular facility. 

"Another complication can arise if the client intends to represent such associated images as championship trophies in its product line, since certain such items involve rights of third parties.  For example, offering replicas of the 'Stanley Cup' that is indicative of the National Hockey League's championship may require a separate grant of rights. Continuing the hockey example, independent artists may own copyrights in the artwork borne by the masks worn by goalies of particular teams, and those artistic rights may not be controlled by the league, team or player, but by the artist.

"Packaging and advertising materials can raise new categories of rights issues. Use of a photograph of a team celebrating its having won a championship could involve rights owned by the photographer or by the publication in which the photograph appears; and releases from individuals who are not part of the team but are recognizable in the photograph, as well as from team members whose rights may have not been acquired in the group license may be needed. 

"Further, if the photograph depicts logos and trademarks of sponsors of the event, one should not assume that those indicia may be reproduced in commercializing the photograph despite the frequency with which such photographs appear in newspapers and magazines.  The latter uses can be exempt from obligation to the various rights holders as 'newsworthy' while identical photographs appearing in the packaging or advertising of merchandise could require permissions from and payments to any number of entities and organizations."

Take Two Aspirin

"Larry, this is overwhelming.  Do companies actually manage to manufacture products that involve all of these elements?"

"Certainly, my friend. And these problems are entirely surmountable, but they require diligent and experienced handling.  As always, I am at your disposal as may be needed.  For the present, I believe that what we have discussed should enable you to give your client a flavor for what may be required, at least for the four traditional sports. 

"Let us take a brief respite and have lunch.  Then we can begin to discuss the merchandising of automobile racing, which has a very different structure that is quite convoluted." 

Larry was almost gleeful as he said this. 

Practices

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