23 October 2020 - Article
Originally published by Forbes on February 11, 2021.
On January 20th, U.S. District Court Judge Loretta C. Biggs granted New Orleans Pelicans star Zion Williamson a partial judgment in his lawsuit brought against former marketing agent Gina Ford and her agency Prime Sports Marketing. Williamson, who played for Duke during the 2018-2019 NCAA season and was the first pick in the 2019 NBA Draft, signed with Prime Sports in April 2019. Williamson later sued the agency in June 2019 to terminate his marketing agreement, claiming the contract was voidable under North Carolina’s Uniform Athlete Agents Act, a law designed to protect college athletes. In response, Ford sued Williamson for $100 million claiming breach of contract, commencing a multistate legal battle.
The ruling voided Williamson’s contract with Ford’s agency. Specifically, Biggs determined that Williamson was a student-athlete when he entered into the agreement, was not otherwise declared permanently ineligible by the NCAA, and that Ford was not a certified agent in North Carolina. The contract also did not include statutorily required warnings about engaging an agent.
College athletes will soon be able to hire agents and monetize the use of their name, image, and likeness during college athletic careers. Proposed state legislation on the subject could take effect as early as July. In early January, the NCAA announced that it was delaying its proposed rules on the subject due to factors, including recent communications with the U.S. Department of Justice, which expressed concerns that the proposed rules were too restrictive and could violate antitrust laws. Regardless of whether NCAA rule changes are announced before state legislation takes effect, it’s unlikely that future legislation will protect athletes from failing to properly understand and negotiate agreements. Since most college athletes are not top NBA draft picks with the ability to take on significant legal disputes, college athletes need access to resources that provide guidance for their future commercial activity.
Signing with a marketing agency may be the first commercially-driven decision a college athlete will make. While an agent’s relationships with brands, sponsors, and other athletes can influence decision-making, the agreement with an agency requires scrutiny.
For example, Ford sued Williamson because her marketing contract could only be terminated “with cause,” meaning only in the event of significant issues like material breaches, fraud, or willful misconduct. If Biggs had sided with Ford, Williamson would likely be stuck and unable to terminate his contract with Ford without paying considerable amounts of money.
College athletes should also pay close attention to provisions in agent contracts that describe relationship scope, the agent’s responsibilities and authority, and exclusivity. Understanding how and when an agent gets paid is more than a simple review of percentages. For example, “fee tails,” entitle agents to commissions after contracts end. The duration of a fee tail, and the agreements and introductions to which the fee tail applies, if excessive and broad, can impact future relationships with other agents, brands, and sponsors.
Contracts with brands and sponsors will vary significantly among college athletes, depending on factors such as celebrity and influence. If not carefully reviewed, certain routine contract terms can unreasonably eliminate additional revenue streams or impact an athlete’s personal brand. Brands and sponsors generally prohibit an athlete from working with their competitors. However, overly broad non-competition provisions should be tailored to accurately reflect the actual business, products, or services of the brand or sponsor. Retaining reasonable control over how an athlete’s name, image, or likeness is used is essential to protect personal brands.
Provisions like morals clauses, which attempt to hold athletes to specific behavioral standards to not bring disrepute, contempt, or scandal to a brand or sponsor, are standard. Any ambiguous language in morals clauses should be clarified, and broad language should be narrowed. Morals clauses are generally unilateral in favor of a brand or sponsor. However, increasing activity on significant social issues among athletes, has led, in some situations, to reciprocal morals clauses regarding activity by the brand or sponsor or members of their executive team.
Commercial activities can result in creating intellectual property rights, some of which the athlete should own. Understanding the type of intellectual property created and how and where to protect it is crucial. Valuable trademarks are created from an athlete’s name, distinctive logos, or unique hashtags, slogans, or catchphrases. Athletes should independently protect their ownership of these marks. Protecting intellectual property provides the ability to control and monetize the use of the marks by third parties and enforce against counterfeit and infringing products. Failing to properly register marks outside of the U.S. and attempting to recover those marks once registered by third parties in foreign countries can be time-consuming and costly.
Many students today are also unique and successful content creators. For those students, registering copyrights and protecting their content value will deter improper use and infringement. Copyrights can protect photos, videos, and other creative content shared on social media.
To make the most of future commercial opportunities, college athletes will need adequate resources to ensure commercial relationships are fair and equitable. Many colleges and universities currently provide financial literacy programs to student-athletes. It would be ideal for colleges and universities to expand existing programs to prepare student-athletes for the commercial aspects and agreements associated with monetizing their name, image, and likeness.