Sports initially started as a recreational activity. Over the years sports has gained so much popularity, that it has turned into a multi-billion dollar industry. The transformation of the industry into a money spinner can be accredited to the billions of fans across the globe, who consider it an emotion. It is this emotional bond among the fans that makes sports a global phenomenon.
Sports play an essential role in the society with respect to uniting people from different spheres. The sports industry has turned into one of the most profitable industries across the globe and the business opportunities in the industry have grown tremendously. The interface between intellectual property rights and sports can be understood by recognising the commonality between the two. Intellectual property rights promote innovation and creativity and sport is no exception. One such domain of intellectual property rights that has turned to be a money spinner for athletes is the concept of ‘image rights’ which stems out from copyright.
Meaning of Image Rights
The term image rights is synonymously used as ‘personality rights’ in continental Europe, ‘publicity rights’ in the United States and ‘image rights’ in the United Kingdom and the concept of image rights is subject to different legal treatment in different jurisdictions. Image rights are basically rights which an owner/ individual holds to control, license and exploit all personality attributes related to the owner/ individual. Image rights can include name, pictures, signatures, personal brands, logos etc. These rights grant the owner to right to authorize or prohibit the use of name, image and likeness by a third party. If the use of these rights is granted to the third party by the owner itself, then the owner shall be entitled to remuneration for the use of his images, names and likeliness. Image rights are quintessentially vital for celebrities and athletes are one such type of celebrities to whom these image rights are of great commercial value. It is the commercial value attached to the image rights which allows the athlete to use his image rights for financial gains.
In 1977, a historic event took place, the famous English soccer player Kevin Keegan and his representatives, after his transfer to Hamburg, signed soccer’s first ‘face deal’ now known as ‘image rights contract’, his image was used to promote football boots and road safety campaign on television. He became the face of English football at the time by signing numerous endorsement deals. In 2002, David Beckham, a famous football player while negotiating his contract with Manchester United stated that “ It’s not the salary that’s a problem it’s the image rights which need a bit of perking”. It was reported that the English midfielder demanded a whooping £ 1.3 million a year apart from his salary as his remuneration from Manchester United for using his image on club paraphernalia which included stickers, merchandise and match programmes.
We can well imagine the commercial value of image rights of an athlete. In the case of Irvine vs. Talksport Ltd the claimant filled a complaint of passing off and claimed ‘false endorsement’ on part of the defendant. Eddie Irvine a Formula1 racing driver agreed on doing an episode with the defendant. The defendant for promotion purposes sent out material including a brochure featuring a photograph of the F1 racer which was manipulated by cutting out the mobile that Irvine was speaking into and replacing it with image of a radio to which words ‘Talk Radio’ were added. The court held that image was falsely implying that the claimant had endorsed the defendant’s radio station. The defendant was asked to pay damages worth £ 25,000. In the United States it was the case of Haelan Laboratories vs. Topps Chewing Gum in which the term ‘right of publicity’ was coined by Justice Jerome Frank in 1953. Since then the right to publicity has constantly evolved in the United States.
The Name, Image and Likeness Rule (NIL) Explained
The Previous Rule
In the United States, NIL rights come under the umbrella of rights of publicity, which prohibits the unauthorized commercial use of name, image and other aspects of one’s persona. It grants the individual an exclusive right to license their personality for monetary benefits. NIL rights promote the concept of personal brand and allow the athlete to make profit out of various endorsements deals, appearances, sponsorships, camps etc., although until recently the National Collegiate Athletic Association (NCAA) was not in the favour of college athletes getting paid through their name, image and likeness. As per NCAA Division- I Manual, article 12.1.2, an individual to be considered as an amateur and to be eligible to compete at the NCAA tournaments in that particular sport shall not:-
1. Agree to receive remuneration for his skill in that sport.
2. Agree to promise even if such remuneration is to be received by the end of his college programme
3. During college programme commits to play professionally
4. During college programme receives any kind of reimbursement or financial assistance from any sporting organisation for his/her skill in that sport, if not specified in NCAA rules and regulations.
5. During college programme, enters into a professional draft.
6. During college programme, signs an agent representation agreement.
Article 12.5.2 states that the student athlete shall not be allowed to receive remuneration for the use of his/her name or image and endorsement of any commercial product.
A historic change was brought in the NCAA manual which gave the student athletes an opportunity to use their name, image and likeness and earn profit from it. A uniform interim policy was adopted by the NCAA as a result of which the previous name, image and likeness policy of the NCAA that prohibited student athletes to benefit of their name, image and likeness was suspended. The rule change allowed athletes from all the divisions (D1, D2 and D3) to benefit from their name, image and likeness. The new guidelines issued by NCAA included:-
1. The athletes can engage in NIL activities which are in compliance with the state law where their high school or college is situated.
2. The student athlete can engage in NIL activities even if the state law does not have provision for NIL activities, provided there is no breach of NCAA rules.
3. Student athletes can sign a contract with professional agencies for NIL activities.
4. Student athletes should report NIL activities in compliance with state law or school and conference requirements to their respective schools.
These new guidelines were issued as a result of a case in which student athletes challenged the NCAA rules and contented that these rules are in violation of § 1 of the Sherman Act.
The rule change has already shown its impact, as various college athletes have signed endorsements deals, sponsorship contracts and monetized their social media presence. Chloe Mitchell, a freshman volleyball player became one of the first student athletes to profit from the new NIL rules. She has signed a sponsorship agreement with Smart Cups. Bryce Younghad, a University of Alabama quarterback, made approximately $ 1 million in endorsement deals. Mikey Williams, one of the top ranked high school players and top prospect in 2023 college recruiting class has inked a deal with Excel Sports to handle NIL rights. He will be eligible for the 2024 NBA draft and has already signed an endorsement deal with PUMA and with PUMA trying to make a comeback in the basketball market, signing athletes like LaMelo Ball, Kyle Kuzma and Mikey Williams, who have a very strong social media presence will help them compete with the giants of the basketball market like Nike and Adidas.
The Intersection between Image Rights and Non Fungible Token (NFT) in Sports
NFT stands for non-fungible token; these are a unique form of digital art or digital collectible which cannot be interchanged, unlike other forms of cryptocurrencies that are interchangeable and not unique. The process of creating a NFT is known as ‘minting’. The introduction of NFT into the sports industry provides a new marketing opportunity for athletes to earn profit from their image rights. For instance a NFT contains a highlight moment from a basketball game, where Devin Booker has scored a game winner mid-range turn around fade away jumper over Paul George and Kwahi Leonard and any individual who mints a NFT of that particular moment will not be able to profit out of the NFT without Devin Booker licensing his image rights for that particular moment. Many athletes like DeMarcus Cousins and Rob Gronkowski have released their own NFT’s which will allow them to profit from their image rights.
Role of Non Fungible Token (NFT’s) in Sports
NFT’s in sports are like old wine in a new bottle; back in the day we had trading sports card but their relevance died down due to emergence of internet. This is where non fungible token bridges the gap. The potential of NFT’s in sports industry is enormous, on one hand athletes are looking to strengthen their presence and monetize their intellectual property by using NFT’s and on the other hand the fans are willing to buy an unforgettable sports moment in the form of a NFT along with the other benefits attached to it. NFT’s consist of a software code known as ‘smart contracts’. The details of the digital asset are present in these smart contracts along with the rights and rules attached to the NFT. The NFT model allows athletes to directly sell their NFT’s to fans thereby eliminating the middleman. In the 2021 NBA draft, the 3rd overall pick Evan Mobley declared for the NBA draft by releasing a NFT, rather than opting for a traditional method of declaring for a NBA draft which is through a press release.
Few of the digital collectibles in the sports NFT sphere are as follows:-
· NBA Top Shot - NBA in collaboration with Dapper Labs established a market place known as NBA Top Shot. It is a marketplace where fans can buy, sell or trade their NFT’s. These NFT’s are essentially player cards which include highlights and video clips of basketball games of a particular player.
· Sorare – Sorare has partnered with more than 180 clubs like FC Barcelona, Bayern Munich, Paris Saint Germian and others. The football fantasy game allows the participant to buy and sell digital player cards.
· Fan Tokens – These tokens provide its owner an all altogether different sporting experience. Fan tokens render exclusive sports content, a closer connection with teams or clubs and some monetary gains as well.
The Sports industry has had major commercial boom in the last decade or two. The idea of licensing image rights provides an athlete the opportunity to make financial gains from name, image, likeness, autographs, logos etc. Although the unauthorised use of image rights is a menace and needs to be taken care of. Countries apart from the United States and few European countries do not have a framework in place which can provide relief to their athletes. The change in the NIL rule by NCAA has provided an opportunity to Division 2, 3 and female student athletes to make use of their name, image and likeness to earn profits and also athletes who participate in sports apart from basketball and American football (which are considered popular sports in the United States) to monetize their name, image and likeness without effecting their college eligibility. The awareness about NFT’s in sports has increased many-fold, this not only allows the athletes and the blockchain companies to earn profit but it also gives the individual who buys the NFT a tradable asset so that they can also earn profit.
The issue with digital assets like NFT’s is with respect to its ownership rights. Digital assets by its very nature can be easily replicated. The NFT space is still relatively new and there is lot of grey area with respect to image rights of an athlete associated with a particular NFT. For example the legendary block by Lebron James in the 2016 NBA finals is a moment which every King James fan would like to have as a collectable. The NBA holds the broadcasting rights for that particular moment, so any individual cannot commercialize the NFT with respect to that particular moment without entering into image right agreement with Lebron James, the NBA allowing broadcasting license to the individual minting the NFT and also the trademark rights of Cleveland Cavaliers, as Lebron James in that particular recording is wearing a their jersey which would have the team logo on it. There are multiple intellectual property rights which require protection while commercializing a NFT. For a NFT to be well commercialized it is essential that everyone in the ecosystem is well incentivised.
Article written by Nandan Malhotra, Incoming LL.M candidate at ISDE, Madrid