Sports and Entertainment Customer Alert – November 2022 | Kaufman & Canales

Following the recent release of the NCAA’s updated guidance on “Prohibited” and “Prohibited” Actions, the following is guidance for colleges, universities, student athletes, brands and sponsors regarding name, likeness and likeness matters.

Regarding colleges and universities:

  • Universities should adopt NIL rules that strike the right balance between protecting the university’s interests in avoiding affiliation with “vice” industries and avoiding conflicts with school sponsors, while protecting athletes’ ability to Doing NIL Deals, Do Not Overly Restrict.
  • University NIL policies should address booster collective activities and what athletics staff may and may not do in relation to relationships with individual boosters, as well as booster collectives and external brand representatives who wish to work with the school’s student-athletes.
  • Universities should also clearly communicate their NIL rules and any applicable state NIL laws to athletes and staff who may interact with athletes or booster collectives. In addition, institutions should provide easy-to-use (and understandable) forms for students to disclose NIL trades before execution and to request permission to use school marks, logos or insignia in NIL activities.
  • While existing trademark law protects universities from unauthorized use of the institution’s marks, logos or insignia in NIL activities by students and athletes, it is better not to deal with the school’s use of intellectual property in NIL activities before it takes place thereafter. At the very least, the use of the institution’s marks, logos and insignia in NIL activities should not be permitted without prior written permission, and universities should explicitly notify their student-athletes in advance.
  • Universities should also establish an internal process to identify university sponsor contracts and the length and breadth of those contracts. Schools should also identify and determine competitors of the institution’s sponsors with which the school would restrict student and athlete NIL activities and how or to what extent.

Regarding student-athletes:

  • Student athletes should strive to protect their personal brands, logos and trademarks as early as possible. A student-athlete, alone or with the assistance of legal counsel, may file a U.S. trademark application for a personal mark that he or she wishes to use in good faith for up to three years before the student-athlete actually begins selling products or services under the personal brand name, so there is no reason to delay submission until sales begin. In the event that the student-athlete’s brand becomes popular, the student-athlete has safeguards in place to have unauthorized products removed from online stores and prevent infringement or counterfeiting of the brand.
  • Student-athletes should also ensure – with the help of legal counsel – that their NIL activities comply with all applicable state laws and the university’s NIL rules. Many states have adopted NIL statutes, and the universities in non-statutory states have adopted their own institutional policies that student athletes must adhere to.
  • Student-Athletes should always remember that NIL deals are “compensation for consideration,” meaning that the Student-Athlete must perform an identifiable service or activity in order to be paid for it. Universities and their NIL partners may request proof of such activity (e.g. a photo at a performance). If a NIL business is terminated without such service or activity being performed by the Student-Athlete, the Student-Athlete cannot receive payment or withhold any advance payment for such business as this would jeopardize the Student-Athlete’s amateur status.
  • Athletic students and their families can hire a non-representative attorney at any time and do not risk losing their amateur status. As such, if student-athletes have questions or are approached by brands or agents regarding NIL business, they can engage and consult with legal counsel to help navigate applicable laws and rules.
  • To help identify, market and obtain NIL deals, student-athletes are permitted to hire NIL agents before executing a NIL deal and even before committing to play for a particular school.
  • When hiring agents, it is important to consult a non-agent attorney to ensure all parties comply with state NIL laws, which may require that the agent be licensed or registered in the state or that the Representative has not represented a university in the last four years. Student-athletes and NIL agents should also review state NIL laws and school NIL rules to determine whether the professional relationship must also be disclosed to the student-athlete’s university, as well as the appropriate timing for hiring a NIL Agents, as this could have consequences for high school amateur status depending on state law in the student-athlete’s home state.
  • The terms of any association with a NIL agent should be consulted and closely followed by legal counsel to ensure that the relationship relates solely to NIL matters while the student-athlete is participating in collegiate athletics and does not extend beyond that period . This is especially important when considering “enrolling” for an institution’s collective, as some collectives have become a mechanism to become the “agent of record” for an athlete, which can have some negative repercussions later when a student-athlete there transfers to the next level or transfers to another school that does not deal with such Agent of Record collectives.
  • NIL contracts should be negotiated to allow the student-athlete the opportunity to do additional business later and to allow the student-athlete to continue promoting their own personal brand without their personal brand being exclusively to just an external NIL – License sponsor.
  • NIL deals should include clear, understandable language describing what service or activity the student-athlete will provide in exchange for the stated compensation. It is important that student-athletes understand what is expected of them, but also ensure that the service can be clearly shown in retrospect to have been provided in accordance with the terms of the NIL Deal.
  • When negotiating contracts, Student-Athletes should consider including reverse morality clauses that would allow the Student-Athlete to terminate a contract with a Brand if the Brand takes actions that seriously conflict with the Student-Athlete’s social values .
  • NIL deals should ideally be made year to year. In the age of “one-and-done” and the transfer portal, it is important to avoid problems that NIL deals are not transferrable to another institution or limit the ability of student-athletes to connect to other deals at their next stop participate. It is important to have the terms of a NIL deal properly reviewed and negotiated by legal counsel to ensure pay-for-play or pay-for-enrollment issues are avoided while still providing student-athletes being given the freedom to make decisions in their own best interests and careers.
  • Most major universities have partnered with external NIL partners to help with NIL matters and provide a platform for student-athletes to engage in NIL activities and help educate student-athletes on NIL matters. While most of these NIL exchanges have processes to review NIL deals and their reporting requirements, student-athletes should not rely on them. It is important that student-athletes remain diligent in their NIL activities, which would include having their NIL dealings reviewed by legal counsel as well as independent follow-up by the school’s NIL reporting department to ensure compliance with state laws and school rules.
  • Remember, when it comes to earning NIL compensation, it is not the amateur status of the NIL Exchange or NIL Brand Sponsor that is at stake – it is student-athlete.

Finally, regarding brands and sponsors:

  • Brands should ensure that all student and athlete payments for NIL activities are not dependent on enrollment at a particular university or improper pay-for-play payments. No brand wants to be the cause of a student-athlete’s ineligibility due to improper payment, as brands pay for notoriety and need that student-athlete to maintain that notoriety.
  • Brands must also ensure that the compensation offered to student-athletes is reasonable given the NIL activity undertaken to avoid retrospective review. For example, paying $20,000 per social media recommendation post to a student-athlete who has only a few hundred followers is likely to be viewed as an improper payment and risks the student-athlete being eligible as an amateur. On the other hand, if the student-athlete has millions of social media followers, paying $20,000 per social media referral post to a student-athlete may well be appropriate, since the brand ultimately pays for the exposure of those followers.
  • It is also advisable that brands include morality clauses in NIL contracts with student-athletes that give the brand the right to terminate the agreement in the event of certain prohibited behavior by the student-athlete. Let’s face it: college students don’t always have the best judgment when navigating through maturity during college, so it’s important for brands to put these safeguards in place from the start. It is also important to include provisions in the contract that prevent student-athletes from withholding payments for uncompleted NIL activities in the event the NIL contract is terminated.
  • Brands need self-confidence for their industries and their actions. If a brand operates in a “vice” industry that is prohibited by state NIL legislation or a particular school’s NIL policy from participating in NIL contracts with student athletes, that brand should focus on a different area of ​​marketing , rather than trying to bond their brand to college athletes. Additionally, brands in “vice” or prohibited industries also need to keep eye on event sponsorship opportunities, as sponsoring a zero-performance event for a student-athlete or collective — even if the brand doesn’t directly support the student-athlete paid – could have had negative consequences for the student-athlete.

Schools, universities and athletic students can count on Kaufman & Canoles to help them implement these policies. We look forward to navigating this particular area with you.

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