With the recent reports that Call of Duty franchises will be sold for $25 million, now is as good a time as any to take stock of the issues that have plagued the CoD community for years. The franchise system that Activision-Blizzard has created for the Overwatch League is surely portable, at least in part, to their other games. However, the foundation created for OWL benefitted from the fact that Overwatch was a relatively new game, creating a new community unto its own, with little time and means for roots to take hold prior to the league and its academy system forming. That’s far from the case with Call of Duty, with years of a largely unstructured esports ecosystem that has become a Frankenstein of excitement, public contract disputes, sneaker flexes, entire rosters being dropped after qualification, third party tournament systems, and rampant player poaching. The CoD community is truly a unique space in esports, though one that has never risen to the popularity of League of Legends or Counterstrike. At $25 million per franchise, Activision-Blizzard will have the money, and opportunity, to stabilize what has otherwise been an unstable ecosystem in its corner of the esports industry. Having worked with dozens of teams, players and influencers in Call of Duty, here are some of the things I’d like to see implemented to create a more legally sustainable industry:
On November 5th, current and former employees of Riot Games filed a class action lawsuit against the publisher, alleging that Riot denied them equal pay and stifled their careers solely because they were women. Additionally, the two women allege that they encountered constant harassment in a work environment that punished them for speaking up. The complaint contains multiple allegations against Riot including: (1) a violation of California’s Equal Pay Act; (2) a discrimination and retaliation claim in violation of that same Act; (3) discrimination, harassment, and retaliation claims in violation of the Fair Employment & Housing Act; and (4) a claim for failure to prevent discrimination.
This lawsuit comes on the heels of an investigative report published by Kotaku in August that discussed Riot’s toxic working environment and the sexist culture of the company. In that report, Jessica Negron, a former employee and current plaintiff, shed light on her experiences within the company, including multiple incidents of harassment, discrimination based on her gender, and a pattern of pay inequity. In one instance, Negron recounted an experience where she did not receive adequate compensation or a change in her job title after assuming the role of her recently departed manager. After fulfilling the manager’s job duties for a lengthy period of time, management denied her request for increased pay and eventually filled the role with three consecutive male employees.
The complaint reiterates many of the incidents that were written in the Kotaku article and includes additional experiences in detail. In another instance of the alleged toxic work environment at Riot, Negron alleges that a former supervisor expressed his appreciation for the lack of diversity within the company, “because gaming culture is the last remaining safe haven for white teen boys.”
The second plaintiff, current Riot employee Melanie McCracken, described numerous occasions where her coworkers allegedly subjected her to sexism. In one specific encounter with her former supervisor, the supervisor allegedly communicated an outright opposition to hiring women for senior employment roles. The complaint states that the supervisor told McCracken that he would “feel weird having a male” as an assistant. Later, when McCracken filed an anonymous complaint with Riot Human Resources department, the HR employee relayed the encounter to management, which allegedly led to McCracken’s former supervisor advising her that she had five months to find a new position or be fired.
If all the incidents described in the complaint are proven to be true, including class action certification (which is difficult to achieve), it would seem likely that the plaintiffs would prevail on their claims should this case reach verdict. However, many of these kind of cases never reach verdict due to a settlement being reached. Settlement is oftentimes seen as a means of helping prevent negative PR stemming from the lawsuit and its allegations. Nonetheless, the alleged incidents described in the complaint and Kotaku’s article should be deemed a cautionary tale to other companies within the video game industry, which has an unfortunately long history of alleged discriminatory practices.
On September 27, 2018, Nintendo’s blue-shell finally reached the Japanese go-karting company MariCar. The Tokyo District Court ruled in favor of the video game giant and awarded it damages for Maricar’s copyright infringement. MariCar, a popular service in Tokyo since 2011, must now pay ¥10 million (nearly $89,000 USD) in compensation and cease its use of Nintendo-related cosplay to promote its business.
MariCar is a well-known tourist attraction in Tokyo that offers street-legal go-kart rentals to users who wish to tour the streets of the city. The company also gave customers the option of renting out costumes to wear during their go-kart adventure. These options included costumes that mirrored characters like Mario, Luigi, Princess Peach, Bowser, and other characters from the classic Nintendo title Mario Kart, undoubtedly in an effort to make the virtual game a reality for fans.
The game developer filed the lawsuit in February 2017 alleging copyright infringement and a violation of Japan’s Unfair Competition Prevention Act. In its filing, Nintendo stated that MariCar provided users of the service with copyrighted Nintendo character costumes and often posted photos and videos of the customers in said outfits in an effort to promote its business. Nintendo believed the go-kart company’s actions were a violation of Nintendo’s intellectual property rights, since MariCar had been using the characters’ likeness without a license. The Tokyo District Court agreed with Nintendo and ordered MariCar to stop using Nintendo-related outfits in connection with its services and awarded Nintendo the requested amount of 10 million yen. Interestingly enough, the company still offers its customers the option of wearing other character cosplay like Superman and Spiderman – for now.
This lawsuit was not the first time Nintendo legally opposed MariCar. Prior to filing its lawsuit against the go-kart company, Nintendo filed an objection with the Japan Patent Office over MariCar’s registered trademark. In its objection, Nintendo argued that the MariCar trademark beared a striking resemblance to Nintendo’s Mario Kart franchise, and that MariCar directly intended its trademark to confuse the public. Nintendo went on to assert that the public widely interpreted MariCar to be nickname for Mario Kart, much like other abbreviated Japanese nicknames for game titles, such as “Pokemon” for “Pocket Monsters,” “Pazudora” for “Puzzle & Dragons” and “Sumabura” for “Super Smash Bros.” This colorful argument did not appeal to the authoritative body, as the Japan Patent Office maintained that there was no connection between the two trademarks, handing Nintendo a rare legal loss.
Nintendo has a long history of aggressively defending its trademarks and copyrights. The publisher recently opposed a United States couple's “Poké Go” trademark that was intended for use in connection with clothing. Predictably, Nintendo stated that the trademark would be confusingly similar with its Poké trademarks. More recently, the game developer sued a website operator over two websites that allowed anyone to play and download a number of Nintendo games for free. Over the years, Nintendo has shaped the gaming industry through its zealous fights to protect its intellectual property against copyright infringement.
At first it may be hard for passionate Nintendo fans to understand why the publisher has taken such an aggressive approach in defending against copyright and trademark infringement. From their perspective, the Japanese company is simply preventing supporters from living out their fantasies of a real life video game like Mario Kart and stopping others from making its older games more available to the masses. However, Nintendo is only doing what is necessary to protect its property and brands that have taken years, and substantial sums of money, to build. Without opposing similarly confusing trademark registrations, Nintendo, in time, could potentially lose a trademark that it previously held. Additionally, by allowing others to use its copyrights for their own businesses, the publisher would be losing out on creative control over similar opportunities it may have planned to provide at a later date and any profits that would be associated. Still, companies that wish to use Nintendo’s copyrights may do so legally by obtaining a license from the game developer, though the price for a license may be steep. In the mean time, fans will have to wait for Nintendo to make their dreams come true with a theme park containing all their favorite characters.
(Image used under creative commons license from Cory Denton)
On September 11, 2018, New Mexico’s Attorney General Hector Balderas filed a federal lawsuit against an app developer and its contracted advertisers for violating the Children’s Online Privacy Protection Act (“COPPA”), New Mexico’s Unfair Business Practices Act, and the Federal Trade Commission Act. The 85-page complaint contains allegations that Tiny Lab Productions, an app developer, operated 91 apps designed for children that failed to adequately comply with COPPA. The complaint states that the developer collected and sold children’s data to advertisers, who then used the data to track and profile the children for targeted advertising without parental consent. Under COPPA, companies must comply with a certain privacy rules before they are able to collect a child’s data, including obtaining explicit consent from the child’s parents. New Mexico also alleges that some of the apps’ advertisers, namely Google (and its advertising company, AdMob) and Twitter (and its advertising company, MoPub,), marketed these apps through their platforms, which gave the public a false impression that the apps were in compliance with COPPA.
The Attorney General is seeking a permanent injunction to prevent any further tracking practices and destruction of any improperly obtained personal data, along with civil penalties for the COPPA violations, and nominal and punitive damages for violating New Mexico’s Unfair Business Practices Act.
App developers and online businesses need to recognize that privacy and data collection practices have become a principal concern for the Federal Trade Commission and Attorneys General throughout the country, especially when it pertains to the collection of children’s data. Website and online service operators should be aware of COPPA and must understand that compliance with it is necessary in order to avoid facing punishment.
What is COPPA?
COPPA is a series of federal laws that was enacted by Congress in 1998 to protect the privacy of children under 13 years old. Congress created the regulations to protect children from unknowingly sharing their data with companies, after noticing an increase of marketing techniques that targeted children. The data that was being collected often included personal information ranging from the child’s first and last name, home address, telephone number, and more recently, files that contained the child’s image or voice, and geolocation information that made it easy to identify the child’s street name and home city or town. Congress recognized that children giving away this information posed obvious dangers, and enacted a list of practices for website and online service operators to implement. Effectively, these practices allow parents to control what types of data operators are able to collect from their children. The Act was revised in 2012 to apply to social networks and smartphone apps as well.
Who does COPPA apply to?
Many people believe that COPPA only applies to commercial websites and online services that are directed to children under 13 years old, but the Act also extends to other operators who collect data from children. Under the Act, all general audience website or online service operators with actual knowledge that they are collecting, using, or disclosing personal information from children under 13 must also comply with COPPA. Additionally, all website or online service operators that have actual knowledge that they are collecting personal information directly from users of another website or online service directed to children will be subject to penalties for not complying with the Act.
The Act defines “online services” in a broad manner that includes any service available over the Internet or that connects to the Internet or a wide-area network. This includes all mobile apps that connect to the Internet, Internet-enabled gaming platforms, and services that allow users to play network-connected games, engage in social networking activities, purchase goods or services online. It also includes Internet-enabled location-based services also are online services covered by COPPA.
How to comply
Operators must make sure they follow these requirements in order to comply with COPPA:
What are the consequences of not complying?
For each violation of COPPA, courts may impose a civil penalty of up to $41,484. Courts look at a variety of factors when determining how severe of fine it should levy. If the operator was not collecting a great deal of personal information and had it never violated the Act previously, a court would be less likely to impose the maximum fine. However, if the operator repeatedly violated COPPA, collected a multitude of personal information, and it was sharing the data with third parties, a court would be more inclined to impose the maximum penalty. The fine amount can quickly add up since each violation is penalized. Last January, VTech Electronics agreed to pay the Federal Trade Commission $650,000 over charges that it violated COPPA by collecting personal information from children without providing direct notice and obtaining their parent’s consent, and failing to take reasonable steps to secure the data it collected.
As data collection and tracking continue to be valuable marketing tools for companies, it is important for these companies to understand that they must comply with certain regulations if they wish to perform these practices and collect data from children under the age of 13. By failing to do so, companies will be exposed to steep fines considering the volume of data that is continuously being collected. Without proper compliance and protections in place, a company may end up being subject to fines that can cause permanent damage to the company. If you have any questions on how to correctly with COPPA, please feel free to contact us.
Due diligence is a critical part of any acquisition. A company looking to buy an asset (any property a business owns) will typically conduct due diligence prior to acquiring the asset in order to determine whether the asset it wishes to buy has been characterized correctly by the Seller. This process consists of a thorough review of all aspects related to the target asset. While it may seem like a tedious task to complete, due diligence is an important part of the acquisition process because it essentially provides the buyer with a complete evaluation of information relating to the asset so as to protect against any misrepresentations made by the Seller. By engaging in sufficient due diligence, companies can further protect themselves from entering into bad deals.
Due diligence can be completed on the acquisition of any asset, including social media accounts. Unfortunately, it can be difficult to determine the ownership rights of digital assets if a company has not instituted the proper protections for this property. Before acquiring these types of digital assets, purchasers should consider a number points in order to make sure they are not getting swindled.
Here are several aspects to consider when evaluating whether to acquire a target’s social media accounts:
Generally, if you believe there are no issues with the target asset after completing this checklist, it is likely that the seller made accurate representations regarding the asset, and you may be more comfortable in proceeding with the deal. However, if any red flags appear along the way, you may want to take a more cautious approach and ask follow-up questions in order to understand the situation. Nonetheless, businesses should keep in mind that each acquisition is different and there are a number of additional factors that should be considered when entering into this type of agreement. If you need any assistance in performing due diligence and completing your acquisition, please feel free to contact us.
As social media and other digital platforms continue to function as successful ways to connect esports brands to consumers, the value of these digital assets continues to increase. Yet, many esports businesses fail to adequately protect these assets by clearly defining the ownership rights of its social media accounts and digital assets. This ambiguity can lead to problems if a hired party who has created the account or digital assets, decides to leave the company, since there is a strong presumption in favor of granting the original creator ownership rights, absent controlling language.
Ownership of digital assets has become an increasingly trendy issue to litigate in recent years, as businesses and their workers have increasingly filed lawsuits to determine who rightfully owns these assets. Most recently, last week, a Virginia newspaper filed a lawsuit against its former Virginia Tech football reporter to determine ownership over a Twitter account used by the employee while working for the media site. While determining ownership rights to digital assets may seem complex, esports businesses can take preventative measures in a variety of contexts to minimize the likelihood of these situations arising.
This type of dispute often occurs in the context of an employer/employee relationship. When hiring an employee, businesses will first enter into an employment agreement with the new employee. This is the first opportunity businesses have to establish protection for digital assets. These employment contracts should include a provision that clearly states that the business shall own any work product (and its associated intellectual property), or anything created by the employee, resulting from the services provided by the new employee. This language would extend company protection to any property created by an employee in furtherance of their employee duties, including the creation of a social media account by an employee tasked to do so.
Businesses can also limit digital asset ownership issues by providing additional clarity in the business’ employee handbook. In the handbook, a company can (re)state its social media and digital asset policy, thereby eliminating any ownership confusion. For example, a business’ employee handbook can state that any account used by employees who participate in social media activities as employees of the company is property of the company. This would likely include social media accounts dedicated to assisting the business’ customers. An effective social media policy will also specify in its employee handbook that employees cannot keep the account if they leave the company, perhaps even further specifying that the account’s password will not be changed, nor will the employee create a confusingly similar account. Employee handbooks may also include protections relating to associated contacts, follower lists, and connections the employee has gained through the account.
Independent contractor relationships are ripe for social media/digital asset ownership issues to arise. Generally in contractor agreements, companies will not own the work product created by independent contractors unless the agreement specifically includes language effectuating that. Companies often mistakenly believe that they own the rights to all work product created by the contractor simply because the companies are paying for the contractor’s services. This misconception can prove to be costly if the ownership rights are not clearly and correctly defined. Nonetheless, these potential ownership issues can be avoided by including a provision in the contractor agreement that affirms that the contractor agrees to assign all rights to the work product created during the course of his services to the company. This written assignment of ownership will effectively transfer any rights the contractor may have had in his work over to the employer. The specific language used in these provisions is integral to properly determining ownership rights.
Ownership issues relating to digital assets as intellectual property may also arise in the context of partnerships. If two partners in a business decide to create a social media account to help grow their business, and one partner creates the account, regardless of who operates the account, it may be difficult to determine ownership rights unless the partnership agreement explicitly lays out who owns this asset. Partners will want to make sure their agreement explains that any work done, or assets, created for or utilized in furtherance of the company’s business shall be property of the company. By incorporating language that makes this clear, these types of assets will belong to the company and will be subject to distribution, as typical of any other assets, upon dissolution of the partnership.
Ineffectively defining the ownership rights to social media accounts and other digital assets may seem inconsequential in the grand scheme of a multi-million dollar business, but overlooking the inclusion of adequate protections relating to this subject can be extremely costly. Both employers and hired parties have initiated lawsuits containing claims ranging from trade secret protection of accounts/contacts to common law theories of misappropriation and conversion against employees who have taken accounts/contacts or passwords upon leaving the company. While it may be difficult to definitively prevent all potential litigation involving digital assets, a clear definition of ownership rights will help all parties understand who owns what and hopefully preclude any problems from arising. No business wants to lose their successful social media account due to its own inability to secure said assets through its contracts and handbooks.
On June 22, ten well-known Twitch streamers had their Twitch accounts suspended after they received DMCA violations for playing copyrighted music during their streams. This is not the first time streamers have had their accounts suspended or terminated for this type of violation, and unfortunately, it likely won’t be the last. Streamers often play music during their stream without a license to so do. While the streamer may be unaware that this amounts to copyright infringement, service providers must take action against the perpetrator once they are alerted of this unlawful activity. Accordingly, streamers should be aware that incorporating music into their streams needs to be done so appropriately, in order to avoid potential account suspensions or legal repercussions. .
What is the DMCA?
The Digital Millennium Copyright Act (“DMCA”) is a United States copyright law enacted in 1998 to protect the interests of both copyright holders and online services providers, like Twitch and YouTube. The Act aims to provide copyright holders with an easier way to protect their work from being used in an unauthorized way online, while also affording service providers with protection from liability that may arise as a result of their users’ unlawful actions. Under the DMCA’s “Safe Harbor” provision, service providers are protected from copyright infringement liability as long as they comply with certain requirements. As long as these requirements are met, the Safe Harbor protection shields service providers from being held directly liable for any copyright infringement committed by their users.
How does it work?
The DMCA’s Safe Harbor provision states that a service provider cannot be held liable for copyright infringement if it:
This means that service providers will not be liable for copyright claims on content that users upload unless they know about the infringing activity and fail to take action by either disabling or removing the content. Since it would be difficult for service providers to constantly monitor potentially infringing content uploaded by their millions of users, service providers usually state the procedure for DMCA Takedown claim on their sites. Copyright holders must include the following information in their DMCA Takedown claim to service providers in order to correctly file a claim in accordance with the law:
Once this claim is received, the service provider must immediately disable or takedown the content with the infringing activity. If the service provider does not immediately disable or remove the content after receiving the DMCA Takedown Notice, it may lose its Safe Harbor protection and be liable for ALL infringing content on the site.
Why is the DMCA important to streamers?
DMCA takedowns are important to streamers because streams usually incorporate a number of elements that are subject to copyright law (ex. gameplay, music, commentary, etc.). Fortunately, most developers allow their games to be streamed by providing a license to do so. However, playing music during a stream is a particularly sticky issue. If a streamer were to play music on their stream without a license to use that music, the streamer is infringing on the artist’s copyright. Streamers must be aware that playing most music without the proper license can have lasting consequences.
What are the consequences of DMCA Takedown Notices?
Most of the time, service providers are responsible for doling out punishments to users who receive DMCA Takedown Notices. Each service provider has a set of terms that apply to their users when dealing with these notices, but oftentimes, services providers will provide users with warnings or strikes against their account for each notice they receive. If a user receives multiple DMCA notices, a service provider will typically suspended, or even terminate, the user’s account. This is a steep consequence for users who have worked long and hard to obtain their following. DMCA violators can also be subject to severe civil and criminal penalties.
How can I prevent this from happening to me?
In order to avoid any DMCA Takedown Notices, content creators should be aware of any copyrighted material that they may be incorporating into their stream. Streamers that want to play music during their stream should utilize a royalty free music service or otherwise obtain a license for any song they’d like to play. There are a number of inexpensive services available that provide users with licenses for a library of songs.
Streamers need to be aware that DMCA violations are serious and can have a lasting effect on their business and brand. In order to avoid any problems, streamers should be conscious of their potential exposure to copyright infringement in their stream, especially in relation to the music they choose to play during their stream. Without the proper license to play the music, streamers are subject to DMCA Takedown Notices, which can result in the termination of their account, and potentially subject them to more serious penalties. If you are streamer or influencer and you have any questions regarding this topic, please feel free to contact us.
(Photo used under creative commons by David Wees)
(This post is the third in our series on sponsorship considerations. Our first post, on defining expectations and payments, can be found here and our second post, on defining exclusivity, can be found here)
The last topic we will discuss in our sponsorship essentials series is intellectual property rights in sponsorship agreements. Just like the concerns we’ve already covered, intellectually property rights can easily become convoluted if not explicitly addressed in the terms of the agreement. These rights are at the core of a sponsorship agreement and are essential to its successful activation. The very nature of sponsorship centers around the usage of another brand for promotional purpose. A standard agreement will grant the sponsored party (licensee) the right to use the sponsoring party’s (licensor) name and logo in a specified manner (like a patch on a team jersey) and for a defined period of time. However, there are other intellectual property concerns to be aware of with respect to sponsorship agreements.
Defining control and ownership
Any sponsorship agreement should also precisely outline any rights associated with control over the licensed brand usage. In these agreements, parties will typically want control over: (1) the message being expressed in specific sponsorship activations, and (2) ownership of any content created as a result of an activation.
Control over the message being expressed in an activation is important to sponsors because it gives the sponsor the ability to determine whether any specific content being utilized for the activation is appropriate or in line with the brand image that the sponsor wishes to convey. An involved sponsor may negotiate for approval rights before any sponsored content is posted to ensure that the appropriate message is being delivered in conjunction with its branding. An established sponsor may not want to risk receiving any potential backlash from an inexperienced sponsee who posts controversial content. However, there are also many sponsors who don’t have the time to vet and approve potential sponsor content, so this may not be of concern to them. Instead, they’ll simply hold the sponsee accountable after any problematic content has been posted.
A sponsor may also want to own all IP rights associated with the content created during the activation of the sponsorship. This is particularly evident in streamer sponsorship agreements. Sponsors will want to own the content in which its IP or product is being used so that it can potentially utilize the video for promotional purposes at a later date. For an ongoing, “use on stream” deal, this equates to essentially owning the content of someone’s stream for the duration of the sponsorship agreement. Sponsees should be aware that granting this type of control to a sponsor would be problematic because it would effectively eliminate many of the rights the streamer had in the content of their stream, and their potential monetization of the stream.
As the streaming and esports industries continue to grow, companies will continue to flock to the market to align with new and trendy brands. Whether the sponsor is a well established company or not, it is important to consider all of the terms included in any potential agreement before entering into it. The specific provisions discussed in this series of articles are a good place to start when deciding whether you are being adequately protected in a sponsorship deal, but they are by no means the only terms to consider. Every provision in an agreement is significant and should be evaluated independently and within the context of the agreement as a whole. If you are a business, a player, streamer, or influencer, feel free to contact us to assist with your sponsorship agreements.
(Image used via creative commons, courtesy of BusinessSarah)
(This post is the second on our series on sponsorship considerations. Our first post, on defining expectations and payments, can be found here)
In all sponsorship negotiations, the issue of exclusivity is perhaps the single most important topic of discussion. Exclusivity is significant because it prohibits a sponsee (the company/individual being sponsored) from entering into other sponsorships, whether at large or in specified categories. Sponsors will often push for complete exclusivity over broad sponsorship categories because this protection provides the sponsor with an uninterrupted spotlight for their brand. For example, a drink sponsor like Cola-Cola will not want to pay top dollar for a sponsorship deal if the sponsee can simultaneously enter into an agreement with Pepsi. It is easy to see why a sponsor would want this type of protection, but a sophisticated sponsee should be aware that exclusivity can be tailored to better reflect the desires of both parties to the sponsorship.
An effective exclusivity provision starts with detailed communication. Both parties need to know what each side expects the exclusive product category to include. Sponsors will want the product category to be as broad as possible in order limit the amount of competitors. For instance, a company that offers nutritional supplements may try to expand its product category to include nutritional bars, protein shakes, and other types of supplements. In response, sponsees should try to limit the scope of the exclusive product category to be as narrow as possible. Using the above example, if a sponsee can limit the category to only include nutritional bars, it will have more flexibility when soliciting additional sponsors for the protein shakes and other supplement categories. This flexibility allows for potentially greater sponsorship revenue.
However, newer organizations, players, or influencers, may find it difficult to negotiate the scope of the rights to their advantage. Nonetheless, sponsees should at least make sure the categories and exclusivity are thoroughly defined to curb potential sponsor overreach. A sponsor may believe its deal as a sponsee’s “exclusive camera” would preclude a sponsee from entering into another deal with a company like Panasonic, who sells a variety of products including cameras, headphones, and televisions. A sponsee should insist that any obligation it has to not enter into a deal with a competing sponsor (exclusivity) is limited to the category that the sponsorship is in. Unfortunately for sponsors, a sponsee would still be able to enter into a deal with Panasonic as long as it only agreed to endorse a Panasonic product that did not fall under a protected category. While this may not be ideal for the current camera sponsor, an explicitly defined product category would inform sponsors of any limitations and hopefully clear up any potential confusion or issues that may arise down the line when partnering with multiple sponsors.
Another matter the parties to a sponsorship should be aware of is whether any restrictions are imposed by third parties. Frequently in traditional sports and esports, leagues will prevent teams, and teams will prevent players, from entering into sponsorship agreements within its own defined “Reserved Categories.” A Reserved Category is effectively a sponsorship category in which the restricted party is contractually required to not obtain sponsors in. For example, if a league has an exclusive sponsorship with Alienware and it has specified in its league participation agreement that the PC category was protected or reserved from teams, then a team could not enter into a sponsorship which would include PCs. This also occurs between teams and players in their player contracts, with players having certain sponsorship categories closed off to them. Importantly, it is in everyone’s best interest that these Reserved Categories are well defined, so as to avoid any possible confusion and disputes.
Negotiating exclusivity rights can be difficult but it is in all parties’ best interests to have a clear picture of what specific products are being protected and the associated rights/obligations. Without this, a number of potential problems can exist, which may ultimately harm the sponsorship relationship.
Our next post will discuss the various intellectual property concerns when entering into a sponsorship agreement.
Sponsorships are integral to the esports and sports industries as they provide a vital stream of revenue to their recipients. As 2018 is shaping up to be the biggest year for non-endemic sponsorships in the history of esports, it is important to keep in mind some basic sponsorship considerations when reviewing any sponsorship agreement. Specifically, the agreement’s expectations/obligations, payment, intellectual property, and exclusivity terms are key areas of any sponsorship agreement that you should pay close attention to. This post will address the expectations and payment provisions of a sponsorship agreement, and subsequent posts will discuss considerations regarding intellectual property and exclusivity.
When executed correctly, a sponsorship is a valuable arrangement because it is designed to benefit both parties. The foundation of a sponsorship is the expectations and obligations involved, and here we begin to see the mutually beneficial arrangement comes in to view. What is the sponsoring company asking of me? What are you receiving in exchange for the sponsorship? These questions are the starting point for an analysis of the expectations and obligations involved in a sponsorship agreement.
The key to an effective sponsorship agreement starts with both parties’ expectations being clearly defined. Without a precise description of each party’s obligations, the parties will, at least partly, be unaware of what is expected, making it difficult to properly fulfill their obligations. This ambiguity can often lead to arguments, terminations, or even breach of contract lawsuits. Considering that it’s in the best interest of both parties to develop a long-standing business relationship, avoiding conflicts through precise wording is beneficial to everyone.
Both parties should articulate its goals for the deal and explain how they plans to achieve their goals. For example, if a company wants to sponsor to a team and its players, requiring the players wear clothing with the company logo prominently displayed, it is imperative to specify when the company wants the team, and its players, to do this. With teams constantly pushing out content on various social media platforms and players doing the same on their individual accounts, a sponsor may expect to see its logo on team gear at all times. This may be broader than the team anticipated, who solely wanted the items’ usage to be while the players are streaming. A clearly defined provision would eliminate any confusion amongst the parties and provide a solid foundation for the sponsorship by eliminating any unknown intentions.
Payment terms are also of critical concern in evaluating a sponsorship agreement. Unfortunately, failed sponsorship payments are routine within the esports industry, and oftentimes create further issues for the sponsored party. For instance, if a team doesn’t get its sponsorship payment on time, it may have trouble paying its players’ salaries. At its most base level, payment provisions are what the sponsored entity or person receives in exchange for the sponsored promotion. Of course, the sponsorship agreement should specify the amount to be paid (or the specifics as to how a variable amount is determined) and when the amount will be paid. However, the payment terms of the agreement can also be used to incentivize proper payment. Savvy negotiators will seek to add penalties, termination rights, or other things that would disincentivize late/failed payments. In the event that payment is late or does not occur, these additions would provide you with greater flexibility to offset some of the impact incurred.
When it comes to sponsorship agreements, clarity and precision are key. This is especially true when defining each party’s expectations and obligations with respect to each other, including payment terms.
In our next post, we’ll discuss exclusivity rights and some of the considerations involved by both parties.
Quiles Law is an esports and sports law firm based in New York City.
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