Explaining Usage Rights Clauses in Athlete Endorsement Contracts

By Matt Haage, Athlete Partnerships Associate

Last week, I explained some of the different issues surrounding exclusivity clauses to be aware of in athlete endorsement contracts. This week, I’m explaining another important provision found in these contracts: the usage rights clause.

In the world of sports endorsements, usage rights clauses grant a company the right to use an athlete’s name, image, and likeness (NIL) rights. This is the main reason a brand or company is interested in sponsoring an athlete in the first place. They want the ability to use an athlete’s likeness in a commercial, magazine advertisement, or on their social media platforms.

This clause is usually a win-win for both the athlete and the company. For the company, having the usage rights to an athlete’s NIL is what helps a company promote its products and make money through its partnership with the athlete. For example, Gatorade paid retired NBA star Dwayne Wade for the ability to use his NIL in their commercials. The idea is fans and consumers would see this commercial, associate the Gatorade brand with one of their favorite athletes, and go purchase Gatorade at the store over other sports drinks.

For the athlete, the ability to grant NIL rights to a company is exactly how endorsement earnings are made. Without expressly granting these rights to a company via an endorsement contract, it is illegal for a company to use an athlete’s name, image, or likeness in any way.

Even though usage rights can be very beneficial for both parties, there are still a few things to keep in mind when agreeing to the legal language in the usage rights clause.

Types of Media

The standard in athlete endorsement contracts is for the athlete to grant usage rights of their NIL to a company in any and all media. This includes things such as marketing materials, print and electronic advertising (i.e. magazine ads, commercials, social media, etc.), product packaging, company website, press releases, apparel and merchandise, product catalogs, and many other forms of promotion for a company’s products.

Generally, a company will have a marketing plan and communicate with an athlete how they plan to use their NIL to promote their products, but it is important to be aware of this language if any types of media should be excluded from the deal for any reason.

Post-Termination Usage

Unfortunately, 99% of athlete endorsement contracts come to an end. Unless an athlete is fortunate enough to receive a lifetime contract, much like the one LeBron James earned with Nike, then there must be careful consideration of the post-termination legal language in the usage rights clause. This language can get tricky and often leads to some legal negotiation between the parties.

Companies often want to be able to use an athlete’s NIL after the endorsement agreement has ended because they spent time and money making advertising materials associated with the athlete. Companies will often attempt to include language that allows them to use an athlete’s NIL for 180 days after the endorsement agreement or even “in perpetuity.”

However, this type of language is not in the best interest of the athlete. As previously mentioned, usage rights are how athletes make endorsement money. Companies can’t use an athlete’s NIL rights without paying for them. If a company is using an athlete’s rights 180 days after the formal partnership ended, they just got 180 days’ worth of free usage rights without paying the athlete any additional money.

How to Avoid Issues

The best way for an athlete to avoid this is by settling on something called an exhaustion period. An exhaustion period allows a sponsoring company to use an athlete’s NIL on products or materials produced before the termination of the endorsement agreement for a time period between 30-90 days after the athlete partnership ends. Here is an example of good legal language that spells this out:

“Company will discontinue usage of Athlete’s likeness upon termination of this Agreement, except that, Company shall have the right to exhaust all marketing materials already produced or in distribution as of the date of termination of this Agreement for a period of sixty (60) days.”

As always, the best way to avoid issues can be done through an athlete’s own careful review or having an agent/attorney on their team assist with the legal negotiation of these clauses.