Georgina Bell-Scott, a Commercial Contracts Solicitor at technology practice Kosnahan Law, writes for Esports Insider to highlight matters for esports organisations to consider when navigating shirt sponsorships.
In the dynamic world of esports, securing a shirt sponsorship deal can be game-changing for teams. Significant deals could provide a vital financial boost to an esports organisation’s operations, which would be more than welcome at a time of economic uncertainty in the sector.
Although at first, some sponsorships may seem like a simple jersey sponsorship with branding appearing on various areas (front, back, sleeve or collarbone), potential partners will often also want their rights to extend to other facets, such as digital rights, in-person activations and use of intellectual property rights (‘IPRs’), to name a few.
Recent examples include Spanish esports organisation Giants Gaming partnering with Spanish regional government Junta de Andalucía and Tundra Esports’ partnership with Ballantine’s scotch whiskey. Both deals featured branding on jerseys and the activation of additional rights to follow.
While the specifics of sponsorship contracts may vary, at Kosnahan, we’ve seen many which are one-sided, potentially causing the sponsored party legal issues moving forward, particularly when it comes to IPRs.
So what should an esports organisation need to consider? Some important factors include:
1. Scope:
- Determine if the contract grants exclusivity to the sponsor within a specific industry and/or region. Teams and players need to be aware of any restrictions limiting their ability to enter into similar contracts with competitors.
- The duration of the sponsorship deal, including start and end dates should be clearly outlined. Teams will need to be careful not to be caught by unwanted automatic rights of renewal, which may be unclear.
- Teams will want the obligations and rights of both parties to be clearly specified to avoid any ambiguity arising.
2. IPRs:
- Careful consideration is required around a sponsor’s use of names, logos, and other IP, whether during the term, or following expiry/termination. Whilst a sponsor may want to use footage/images of players’ in its own promotional activities, it’s important to get the balance right.
At Kosnahan, we noticed teams inadvertently granting rights of players’ images, names, voices etc. on an exclusive and perpetual basis. It’s essential for teams to understand the complexity of these IP clauses, because if agreed, it might obstruct a team’s subsequent sponsorship arrangements, breach player contracts and/or potentially restrict players’ ability to monetise their own IP in future using other avenues, such as streaming.
- Any licences for use of trade marks (including composite logos designed in collaboration), should be agreed in advance, together with limitations, brand guidelines and approval processes to be followed.
- Sponsors may sometimes deliberately omit reciprocal indemnifications in favour of the sponsored party. When it comes to IP, teams should secure an indemnity from the sponsor regarding any use of its trade marks/materials.
3. Fees:
- The amount and any payment schedules, upfront and/or performance-based bonuses/incentives should be clearly specified. Parties may also negotiate compensation where all or a portion of rights are undelivered for cancelled/postponed events due to reasons outside a party’s control.
It is not unusual to see unfair terms enabling sponsors to determine alone the potential substituted benefits, or fee adjustment for undelivered rights. Teams will want to ensure equivalent value is granted for lost rights and may wish to seek legal advice for assistance.
4. Termination:
- Circumstances surrounding rights of termination and potential consequences should be included, together with payment obligations of any early termination/break clauses. Future obligations following termination should also be incorporated, such as removal of logos from jerseys, discontinuation of promotional activities and use of IPRs etc.
Shirt sponsorships are not just about having a brand on a jersey, it’s a strategic partnership that requires careful consideration, especially when it comes to legal matters.
For further advice or assistance on sponsorship contracts, the team at Kosnahan Law are at hand and would be happy to assist.
This article was written by Kosnahan Law, a law firm based in the Isle of Man, which offers services regarding organisation structures & management, player contract terms & transfers, brand & IP Rights protection and licensing, team sponsorships and endorsements, general commercial contracts and much more.
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