Game Changer

On 1 July 2021, the US National Collegiate Athletic Association (NCAA) adopted a new Name, Image, and Likeness (NIL) policy¹ for college athletes, forever altering the college athletics landscape.

The new policy provides a unique opportunity for brands to secure lucrative endorsement and licensing deals with top student athletes. But this market is novel and likely to change as legislators and policymakers attempt to set parameters around what is permissible. What pitfalls should brands and advertisers be aware of before inking deals with student athletes?

The new NIL policy comes in the immediate wake of the NCAA’s recent loss at the Supreme Court of the US.²In National Collegiate Athletic Association v Alston Et Al,³the court struck down the NCAA’s practice of restricting “non-cash education-related benefits” for student athletes on antitrust grounds. The court’s decision opened the door to future antitrust challenges.

Student-athlete NIL activities have also gained attention in state legislatures. At the time of writing, over 28 states have adopted laws requiring the NCAA to permit NIL activities, and more states are likely to follow.⁴But each state’s law is slightly different: for example,Pennsylvania’s NIL law is already in effect, while New Jersey’s law is not set to kick in until 2025. These differences have raised concerns about an uneven playing field for athletic recruiting efforts.

The NCAA has asked Congress to smooth out these differences with a uniform federal law. And while it waits for Congressional action, the NCAA has adopted the interim NIL set forth on 1 July 2021. This policy temporarily levels the playing field by permitting athletes nationwide to engage in NIL activities. Several restrictions apply, however. For example:

• NIL agreements must represent compensation for work performed; agreements without “quid pro quo” are still prohibited.
• NIL agreements cannot be contingent on an athlete’s enrollment to a specific school, nor can they include direct compensation for athletic performance (pay-for-play).

Top athletes have already started taking advantage⁵of the fledgling NIL market. University of Miami quarterback D’Eriq King claims to have signed the first NIL agreement in history at 12:01am on 1 July – just one minute after the new NCAA policy took effect.

Pitfalls

Brands should carefully structure their agreements in compliance with federal law, state law, NCAA policy, and individual school policy. New laws are under consideration in several states and in Congress, while the NCAA’s interim policy is subject to change. To complicate things more, individual schools have also started adopting their own NIL policies.⁶For example, the University of Connecticut (UConn) prohibits athletes from licensing their NIL to brands that conflict with school sponsors. Violations of law or policy could lead to serious consequences for brands and their athletes – including, for example, NCAA disciplinary proceedings, lawsuits,and reputational harm.

Brands should be particularly cautious when using intellectual property associated with an athlete’s school. Athletes generally do not have the authority to license their school’s intellectual property. Rather, athletes can only license their own intellectual property such as their NIL. If a brand wants to use a school’s logo or marketing materials, they generally must negotiate a licence with the school itself. Many schools have dedicated trademark and licensing departments that handle such transactions. For example, the University of North Carolina (UNC) recently launched⁷a group licensing programme. Brands that engage with UNC’s programme will gain rights to UNC logos and select athletes’ NIL under a single comprehensive licence.

Social media platforms can also pose unique challenges for brands. Brands often reference sporting events on their social media accounts to promote their goods and services. Brands should ensure that such posts do not contain unlicensed usage of athletes’ NIL. Even “re-tweeting” or “sharing” an athlete’s own content could be problematic, particularly if doing so suggests an endorsement arrangement.

Finally, brands – and their counsel – should take all the precautions they would typically take when negotiating a licence. The scope of the licensed IP should be specified with particularity. Can the brand use the athlete’s picture and slogan, or just their name? In which territories can the brand use the athlete’s NIL? How long does the NIL agreement last? These terms should be negotiated and placed in writing.

¹bit.ly/3x8MHB4. See more: https://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_QandA.pdf
²www.supremecourt.gov/opinions/20pdf/20-512_gfbh.pdf
³594 US ___ (2021).
⁴businessofcollegesports.com/tracker-name-image-and-likeness-legislation-by-state/
⁵bit.ly/3i8lOsF
⁶https://wapo.st/3zFzPUD
⁷https://bit.ly/3zIeNob