The Time is Now for College and High School Athletes to Prepare for the Name, Image, and Likeness Revolution
College athletes (and potentially their high school counterparts) will soon be able to be paid for the use of their names, images, and likenesses (NILs). The laws and/or NCAA bylaws that will govern NIL deals have not been finalized, but college athletes will almost certainly be able to begin monetizing their NILs later this year. As an example, Florida’s NIL law goes into effect on July 1, 2021 and other states are currently considering bills with similar effective dates. And California, which was the first state to pass a college athlete NIL bill, is considering moving up the effective date of its law from 2023 to 2021. Multiple federal bills are also pending on the issue and the NCAA’s proposed NIL legislation is still awaiting a vote from its member schools.
Each of these laws and the NCAA’s proposed bylaws would allow college athletes to be paid by third parties (not their universities) for things such as appearing in commercials, wearing a brand’s apparel, and making sponsored social media posts. In addition, the athletes would be allowed to be paid for making appearances, signing autographs, holding camps, and giving private lessons in their respective sports. Further, college athletes may be able to enter into group licensing arrangements which would allow them to receive licensing payments from video game publishers such as EA Sports.
Regardless of which law ultimately governs the issue and which NIL activities athletes are allowed to engage in, there are a number of steps that college athletes and prospective college athletes should take to prepare themselves for the NIL era. Taking these steps will allow the athletes to take advantage of this new revenue stream from day one. And it is not just the athletes in the revenue sports of football and men’s basketball that should be taking these steps. Recent studies have shown that athletes in non-revenue sports such as gymnastics, softball, volleyball, and baseball may have substantial earning potential through NIL compensation.
Business Formation
Athletes who anticipate receiving NIL compensation (i.e., all college athletes) should create a separate legal entity that enters into NIL deals on their behalf. In most cases, an athlete should likely create a limited liability company (LLC). This allows an athlete to reduce personal liability should issues arise with an NIL deal or activity. For example, if an athlete is holding a camp and one of the camp attendees gets injured, an LLC would help the athlete avoid personal liability for any damages the attendee suffered. Similarly, if an issue arises with an endorsement deal, the LLC would be the entity responsible for the issue, not the athlete in his or her personal capacity. In addition, forming an LLC may allow for some greater flexibility in managing your NIL assets, obligations, and benefits. Creating a separate LLC will also encourage you to maintain better records so that you can manage your NIL business in a tax-efficient manner.
Intellectual Property Protection and Policing
- Trademarks
There are a number of intellectual property issues that will arise once college athletes are allowed to profit from their NIL activities. One obvious area is trademarks for athlete nicknames, logos, and slogans. College athletes are often known by nicknames that could produce significant revenue streams when used on t-shirts and other apparel. Recent examples are Garzilla (Luka Garza), Zanos (Zion Williamson), and Sunshine (Trevor Lawrence). And we can’t forget what is perhaps the most famous college athlete nickname of all time: Johnny Football (Johnny Manziel). College athletes should be registering these nicknames as federal trademarks as soon as possible. Doing so allows athletes (1) to prevent others from registering the nicknames and (2) to more effectively police the unauthorized use of the nicknames by third parties.
The Johnny Football example provides a good case study on this issue. When Manziel rose to fame as Texas A&M’s quarterback he was quickly given the Johnny Football nickname by fans. However, he failed to move quickly in federally registering the nickname as a trademark, which allowed an investment firm to file for trademark rights to the nickname in November 2012, three months before Manziel’s business entity, JMAN2 Enterprises. Because the investment firm had previously filed its application, Manziel’s application was suspended pending the disposition of the investment firm’s application. Although the USPTO later refused the investment firm’s application, it took the USPTO around a year and a half to reach that decision. Manziel’s application was not allowed to proceed until after that final decision, resulting in a long delay in Manziel’s acquisition of trademark rights in his nickname.
In addition to preventing others from obtaining trademark rights in an athlete’s nickname, federally registering a nickname will also make it easier for college athletes to police unauthorized uses of a registered nickname. Once college athletes are allowed to profit from their NILs, there will inevitably be third parties who use the NILs on apparel and other items without the athlete’s authorization. Having a federally registered trademark allows the owner to bring infringement claims against unauthorized users in federal court, making it easier to stop infringing use
- Copyrights
Copyright is another area where athletes should obtain legal assistance. Creating and sharing copyrightable content, such as photos and videos, will be a large part of an athlete’s NIL strategy. This creates two issues.
First, the athletes themselves will be creating much of that content and will have rights to the copyrights in those materials. The ease with which bad actors can misappropriate an athlete’s photo or video for their own profit will require vigilant policing by athletes that are creating content. As with trademarks, timely registering copyrights with the US Copyright Office allows the creator to more easily police the use of that content and to more easily obtain damages for unauthorized uses.
Second, athletes will also have to be careful to not engage in the unauthorized use of copyrighted materials. It’s easy for an athlete to unwittingly share a copyrighted photo of himself or herself without first obtaining authorization from the copyright owner. For example, Lebron James was recently sued by a photographer for copyright infringement after James shared one of the photographer’s photos of James on Instagram without the photographer’s permission.
- Publicity Rights
The right of publicity prevents the unauthorized commercial use of an individual’s name, likeness, or other recognizable aspects of one’s persona. It gives an individual the exclusive right to license the use of their identity for commercial purposes. These rights are determined by state law and the length, scope, and specifics of your publicity rights may vary depending upon your state of residence or the state in which your rights were infringed. You should consider your “image” on social networking applications and in other public settings because the value of your publicity rights may hinge on the overall strength of your reputation and image. In addition, you may consider how you can use social networking to your advantage to increase the value of your publicity rights.
Other Legal Issues
Once the NIL laws are finalized and college athletes are allowed to enter into NIL deals, there are a number of other areas in which the athletes will need legal assistance.
One area is contract negotiation and finalization with the third parties that sign athletes to NIL deals. These contracts will address important issues such as who owns intellectual property (such as the aforementioned trademarks and copyrights) used in marketing campaigns. Failure to adequately assess an issue such as this could lead to significant loss of control over an athlete’s intellectual property, not to mention a significant loss of future NIL revenue.
Another area is federal and NCAA compliance. The laws and rules that ultimately govern NIL compensation will likely contain a number of requirements that athletes must follow to in order to remain eligible to play college sports. Failure to adhere to these rules could temporarily, or even permanently, end a college athlete’s career.
Conclusion
The liberalization of NIL rules for college athletes will open up exciting opportunities for the athletes to create new revenue streams and to partner with a wide variety of businesses. But in order to make sure these opportunities are being taken advantage of in a smart and legally sound way, college athletes should seek out counsel on the issues addressed above and the many others that are sure to arise.
By Mit Winter, Kennyhertz Perry, LLC
Mit Winter is a former Division I scholarship basketball player at the College of William & Mary with extensive experience working on collegiate athletics legal matters. Mit has first-hand experience in understanding the pressures and demands faced by college athletes both on and off the field, and has represented a number of sports-related clients in his practice, including college athletes, universities the Big 12 Conference, Conference USA, and the NCAA.
Mit is widely regarded as an expert in collegiate sports law and frequently writes on these legal issues. He is also the founder and chairman of the Kansas City Metropolitan Bar Association’s Sports and Entertainment Law Committee, a member of the National Association of College and University Attorneys, and serves as a Regional Captain in the states of Kansas and Missouri for the Sports Lawyers Association’s (“SLA”) Outreach Committee.
Kennyhertz Perry’s college sports practice provides representation to those who are seeking an attorney with expertise to advise them on the myriad legal and compliance concerns prevalent in college athletics today. To learn more about the firm, visit kennyhertzperry.com.
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