Marketing with the Stars of March: NCAA Athletes and the New ‘NIL’ Policy

Name, Image, and Likeness, or “NIL,” is the buzz word spinning around college athletics. In July 2021, the National Collegiate Athletic Association (NCAA) adopted its Interim NIL Policy (“the Policy”) which allows, for the first time, student athletes to monetize their NIL rights without losing scholarships or eligibility. Fans love college sports and cheering on athletes who play for their alma mater or favorite school teams, which creates collaboration opportunities for athletes and brands alike. In an attempt to connect their products and services with college athletes—who are the face of a billion-dollar industry—brands are jumping on the college-athlete bandwagon.

Women’s and men’s college basketball ranked second and third, respectively, in total compensation by sport in an NIL report. Among many, University of Connecticut star Paige Bueckers could make an estimated $1 million a year after signing multiyear NIL deals with Gatorade and StockX. March Madness, or the NCAA Tournament, is the premier event for both women’s and men’s basketball and offers a lucrative opportunity for both brands and athletes. For example, heading into the NCAA Tournament, Dollar Shave Club inked a deal with top ranked Gonzaga University’s Drew Timme to be the “#Chinfluencer” of March Madness.

Cashing In

So, how can other brand sponsors cash in on the sweet craze and what should they be aware of before entering NIL deals with college athletes? Generally, people have a “Right of Publicity” in their NIL, or the right to control the commercial use of their NIL. However, until the Policy was enacted, college athletes were prohibited from accepting payment for their NIL. The Policy now allows college athletes to accept money from brand sponsors in exchange for the sponsor’s use of their NIL in advertising its products and/or services. These rights, however, come with important limitations. The Policy provides for the following guidance:

• Individuals can engage in NIL activities that are consistent with the law of the state where the school is located. Colleges and universities may be a resource for state law questions.
• College athletes who attend a school in a state without an NIL law can engage in this type of activity without violating NCAA rules related to NIL.
• Individuals can use a professional services provider for NIL activities, except as otherwise provided by a state law.
• Student-athletes should report NIL activities consistent with state law or school and conference requirements to their school.

Importantly, a key takeaway from the Policy is that an NIL agreement cannot be pay-to-play. That is, NIL compensation cannot be contingent on enrollment at a particular school, cannot be based on athletic achievement (e.g., number of points scored, games won), and must be for actual work performed (not future work).

Know the Law

Brand sponsors looking to partner with college athletes need to do their research. Many states have enacted NIL legislation. These state laws include several common provisions, including:

• Prohibiting schools from withholding scholarships or eligibility to participate in athletics from athletes who exercise NIL rights;
• Prohibiting schools from providing NIL compensation to current or prospective student-athletes or using NIL agreements as recruiting inducements;
• Allowing athletes to hire agents, attorneys, or other representatives to assist them with NIL contracts; and
• Protecting the intellectual property rights of schools.

Brand sponsors need to be familiar with the state law applicable to each athlete.

Moreover, most NCAA member schools have enacted school-specific policies that their athletes must follow. College athletes are also bound by contracts with their schools—further limiting sponsorships they may enter. For example, a college athlete will likely not be able to enter sponsorship deals adverse to existing deals with their school, or in conflict with their team contract. Before entering into any contractual agreements, brand sponsors should be familiar with any school policies, contracts, or team contracts applicable to the college athlete.

Brand sponsors should also inquire about any prior contracts a college athlete has entered in relation to their NIL, as well as the relevant definitions set forth in those agreements. Prior rights often trump subsequent rights. Agreements between a brand sponsor should clearly define the NIL rights being given and the scope and exclusivity of those rights, including:

• the term of the agreement;
• the markets or geographical scope of the agreement;
• the specific products and services covered; and
• the types and amount of advertising permitted.

For example, a college athlete contracting with a brand sponsor may not be allowed to use their school’s intellectual property, such as a trademarked school logo, without the school’s consent. Additionally, brand sponsors will not be allowed to use any of the NCAA’s trademarks, such as March Madness^®. The NCAA does not allow unauthorized use of its trademarks and requires prior written consent to use its marks.

Do Your Homework

Although the new NIL Policy offers appealing commercial opportunities, brand sponsors also need to take measures to protect their brand reputation. This process requires assessing the college athletes to confirm that their values align with the company’s values and reserve the right to terminate the agreement if values diverge. This vetting may include reviewing their social media accounts and interviewing them in person. Similarly, brand sponsors must retain quality control over the use of their trademarks. For example, brand sponsors should require a brand representative to approve a social media post using the brand’s marks before it is posted by the athlete.

Brand sponsors also need to be flexible in adapting to changing laws and rules. Although there is no current federal legislation, legislation may pass that could preempt state laws and school policies. The NCAA is encouraging federal legislation. As NCAA President Mark Emmert said, “With the variety of state laws adopted across the country, we will continue to work with Congress to develop a solution that will provide clarity on a national level.” While several federal bills have been proposed, none have passed, so varying state laws will govern in the meantime. Brand sponsors should be aware that these rules are new and likely to evolve. Moreover, the current NCAA Policy is only temporary and is currently under review. Brand sponsors should look out for new NCAA guidelines, updated school policies, amendments to state laws, and federal legislation for potential changes.