Sponsorship arrangements are becoming ever more popular and are now the norm at sporting events, popular music events and festivals and even in relation to films and television programmes. Of benefit to both parties, it is clear to see why they are becoming increasingly common. The sponsor obtains high levels of publicity at prominent events or on primetime television for example, while the sponsored party receives funding and possibly other products and services.
However, sponsorship deals impinge on several areas of law and with the parties often pulling in different directions in respect of certain aspects, it is vital that a detailed and clearly written sponsorship agreement is put in place to document the terms agreed, so getting the help of an experienced commercial solicitor is always recommended.
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What is sponsorship?
Sponsorship is the arrangement between two parties whereby one party (the sponsor) provides funding, products and/or services to the other party (the sponsored party) in return for certain publicity, marketing and other rights. It is often used at key sports events, as well as in relation to music and other events, television programmes and films.
As a result, there are various types of sponsorship, including:
- Exclusive or sole sponsorship, where the sponsor has sole sponsorship rights.
- Multi-sponsorship, where various non-competing sponsors share the sponsorship rights. For example, Nike and Coca-Cola may share the sponsorship of an event, but Nike and Adidas would not.
- Venue sponsorship, where the sponsor gives its name to the actual venue, such as the O2 in London.
- Official supplier rights where the sponsor provides certain products. A typical case here is football kit for a Premier League football team.
- Merchandising, where the sponsor is permitted to make and supply products which incorporate the official logo or name.
- Broadcast sponsorship, where the sponsor is able to place adverts on either side of the main advertising breaks during a particular programme or film.
What is a sponsorship agreement?
A sponsorship agreement is the written document between a sponsor and a sponsored party, which sets out the terms of the sponsorship, the obligations of both parties and other key aspects of the deal. They can be extremely detailed and complex and require careful drafting and negotiation to ensure that the parties are both clear as to the terms of their relationship, both during and after the sponsorship term.
How to write a sponsorship agreement: Key things to consider
The rights, obligations and terms of sponsorship can touch on various aspects of the law, including contract, competition and intellectual property and should not be entered into lightly or informally. Certain matters need careful consideration to ensure that the parties are each aware of their duties and obligations and to cover potential eventualities, which may adversely affect the sponsorship terms, such as cancellation of the event or the disqualification of a key individual.
Below we set out the main aspects of a sponsorship agreement but please bear in mind that this note is simply an overview and does not in any way take the place of legal advice. Parties should remember that certain aspects of the sponsorship agreement may overlap with others, for example, the use of a name could result in trade mark issues.
Parties
The sponsorship agreement must be clear as to the parties. It is important to ensure that the sponsored party can grant the various rights owed to the sponsor and is able to enter into the sponsorship agreement and related agreements. For example, is the sponsored party the actual organiser of the event or is it another company in the same group?
Details of sponsorship
The terms of the sponsorship must be clearly set out. What type of sponsorship is being given? Does the sponsor have exclusive sponsorship rights or are there secondary sponsors? What is the event/programme/film/ person to which the sponsorship rights attach? Which countries does it cover?
Sponsor’s rights
The rights of the sponsor will often depend on the nature of the sponsorship and the subject of the sponsorship. For example, an exclusive sponsor may want its name in the event title or be able to use the logo on its products and in its marketing.
The sponsor’s advertising remit must also be agreed, covering, for example, where the sponsor is allowed to place any logo, whether it can place its name on the tickets or use its own logo in certain places and where it is allowed to advertise around the venue or event. A sponsor may also request that it be able to use the contact details of ticket holders, subscribers, and so on, which are maintained by the sponsored party, or use key individuals in its own marketing, such as a sports personality or film star.
Being granted corporate hospitality packages or tickets or being able to take part in any medals or trophy ceremony may be other rights granted to the sponsor. Requiring key people at the event to wear branded clothing or accessories is another way to ensure that the sponsor receives maximum publicity.
As well as the publicity and marketing aspects, a sponsor should also consider whether it should have input into key decisions relating to whatever is being sponsored. A sponsor could insist that it has final approval on certain issues or that its consent is required for specified actions.
Sponsor’s obligations
The main obligation on the sponsor is to pay the agreed sponsorship amount and/or provide the specified goods or services to the sponsored party. This, in itself, raises various issues and considerations.
The sponsored party will prefer to receive the amount in advance and often requires at least some of the payment to fund the event. While the sponsor is likely to want to retain part of the sponsorship amount until it knows that the sponsored party is fulfilling its obligations under the sponsorship agreement or that the event, for example, has been a success. The sponsor should also bear in mind that without the payment, the event may not be as successful as it could have been, thereby adversely affecting its publicity potential. Often, the parties will compromise in some way, for example, by agreeing payment in instalments, but it is crucial that the sponsor considers its position if things do not go according to plan. Will it be repaid, for example, if the sponsored event is cancelled or a key individual cannot participate?
A sponsor may also be required to provide certain products in connection with the deal and the details for this require documenting. For example, what is the value of the products or how many of each product has to be provided and when?
In addition, compliance with any relevant laws and regulations may be a requirement under the sponsorship agreement or the sponsor may have to promote the event/programme/film/individual in certain ways.
Sponsored party’s obligations
The list of obligations on the sponsored party can be lengthy depending on what is being sponsored and it is worth remembering that a material breach of any of these may allow the sponsor to terminate the sponsorship agreement and walk away from the deal.
Often, the sponsored party will be obliged to act in such a way that the sponsor receives as much publicity as possible. This could be, for example, by angling television cameras to allow billboards to be seen or ensuring that the venue is ‘clean’, meaning that there are no other advertisements or competitors’ logos visible from a previous event.
In addition, the sponsored party will be responsible for ensuring that any laws and regulations are complied with, that the event or programme goes ahead as agreed and that adequate promotion and marketing of the event or programme is made. The sponsor will be keen to ensure that the sponsored party does not enter into any agreements which would or could have an adverse effect on the sponsor’s publicity and that it cannot act in such a way that may result in the sponsor being held liable for anything.
The sponsored party may also have to take steps to ensure that competitors do not ‘piggy-back’ on the sponsor’s rights or use ‘ambush marketing’. This could be an issue, for example, where an event is being held at a certain venue and competitors use advertising space near the venue for their own purposes. The sponsor may require that the sponsored party acquire this space and allow the sponsor to use it for its own marketing purposes, as well as making clear in its own promotional activities that the sponsor is the ‘official sponsor’ of the event.
Length of sponsorship agreement
The duration of the sponsorship agreement needs to be agreed between the parties. This may be fairly straightforward if, for example, it relates to one stand-alone event, but where there are a number of events (for example, the World Cup or Formula 1 racing) or a long-running television programme, careful drafting is required.
The parties will also need to consider their relationship once the sponsorship term has ended. They may agree that the sponsor will have an option to renew the sponsorship agreement for another specific period or be given the chance to match an offer from another potential sponsor.
Intellectual property (IP)
IP is a crucial element of any sponsorship agreement and many of the rights and obligations of the parties will stem from this. Careful thought needs to be given as to which IP rights are involved in the relationship. Trade marks, copyright, unregistered trade marks, image rights and licensing rights could all be relevant.
The sponsorship agreement must be clear as to who owns the various IP rights and where anything has been prepared jointly, such as a combined logo, who owns this. The sponsored party should remember that if the sponsor is given ownership rights, it could, for example, continue to use the logo after the sponsorship agreement has ended.
The parties should ensure that all trade marks are correctly registered and that any licences required to enable them to use any trade marks have been obtained.
Copyright vests in the creator. Therefore, the sponsored party will need to obtain from the creator the copyright to use, for example, a theme tune or certain photos.
Harper James has extensive experience in IP law and can advise you in relation to any queries or concerns that you may have. Get in touch for expert support from our intellectual property solicitors.
Termination: what if things don’t go to plan?
Provisions setting out who can terminate the sponsorship agreement and when, also need careful consideration. The sponsorship agreement may be for a fixed period but could provide that either party may terminate the agreement by giving certain notice and that a material breach by a party of its obligations could entitle the other party to terminate the agreement.
The sponsor is also likely to want termination rights if the event is cancelled for example, or a key individual is disqualified, or a television programme is taken off the air. Less final but no less important is considering what the position should be if an event is postponed.
Once these matters have been agreed, the termination obligations of the parties need thought. Can the sponsor impose repayment obligations on the sponsored party for certain termination events and how will these be calculated?
Warranties
Each party is likely to want the other to give certain warranties. These will cover their ability to enter into the agreement, that they have the relevant trade marks and IP licenses, that any required third-party agreements and consents have been obtained, and so on.
Liability
The parties are likely to want to limit their liability under the sponsorship agreement in some way. This may be by including a maximum liability amount or excluding liability for certain claims.
Do you need specific insurance?
Depending on the subject of the sponsorship, insurance cover may be advisable, such as product liability, public liability, interruption of transmission, key individuals, and so on. Any such insurance requirements will be set out in the sponsorship agreement, but you may want to take advice on this.
Confidentiality
The parties are likely to want the terms of the sponsorship agreement to be kept confidential from third parties and so a confidentiality obligation will be included in the sponsorship agreement.
Tax
Detailed tax considerations are beyond the scope of this note, but tax may be an issue depending on the type of sponsorship being given and the jurisdictions that it covers. For example, care should be taken to minimise the risk of double taxation being payable in two or more countries. Tax advice should be taken.
Competition
Competition issues can arise as a result of sponsorship agreements and it is important to bear these in mind when negotiating the terms of a sponsorship deal.
Further information about competition law can be found at Competition Law: An Overview.
Regulatory issues
There are various laws and regulations which can affect sponsorship agreements and their terms, which should be borne in mind. These include guidance in respect of advertising and marketing, the use of photos or pictures of a person and when their consent will be required, product placement and broadcasting.
In addition, specific regulations relating to the subject of the sponsorship may also apply and affect how the relationship between the parties can be conducted. For example, the marketing of tobacco is heavily regulated as is advertising aimed at children.
How Harper James Solicitors can offer support upon entering a sponsorship agreement?
We at Harper James Solicitors have experience in all types of sponsorship agreements, contract law and IP law and are more than happy to discuss your sponsorship plans with you to ensure that you are adequately protected and obtain full advantage of the benefits available under these arrangements.
