In last week’s class, the main topic of concern was knowing the difference between a licensing and sponsorship agreement in sports. When our class was asked to state the differences between a sponsorship and licensing agreement, many answers varied.
The main difference between the two types of agreements is the following:
Sponsorship - When a company is looking to sponsor a property (in this case a sport organization or an athlete), they essentially are trying to build their brand by creating exposure, and associating themselves with a property allows them to do this. If the sponsorship is successful, it can drive business. In return, the property receives a form of compensation whether it is a payment, discounts, free products etc. This does not need to be two-way. In other words, an athlete may be sponsored by a company such as Gatorade, but in return the athlete may be required to endorse Gatorade’s products.
Licensing - An intellectual property (either a sport organization or an athlete) can rent out their IP rights such as patents, copyrights, and trademarks to another person or company in return for a payment. The payment is usually royalties. The transfer of rights is done without the Intellectual Property giving away their ownership of their property.
An example of a sponsorship deal is between Arizona State University and Nike, a contract which was discussed in class. The purpose of the agreement states Nike will provide the University’s student-athletes with athletic accessories such as footwear. Nike will do this in order to make these resources free rather than having students pay for them, and therefore improve the opportunities for student-athletes. In return, Nike asks that the University endorses their products by ensuring student-athletes and coaches do not wear any other non-Nike accessories or any altered Nike Products. It requires no athlete or coach to use any non-Nike footwear while on live television.
The MIT athletic department licensing agreement was an example of a licensing agreement examined in class. When reading the “License Grant” section of the agreement, it states that MIT grants (meaning to allow) the licensee to use, sell, and have sold their athletic logo rights. MIT grants the licensee nonexclusive rights to manufacture their logo on products as long as it complies with the MIT code of conduct. When reading the “Payments” section of the contract, you can see the licensee is required to pay MIT royalties (10% of their net sales price of all athletic marked products sold). The contract states the licensee must pay their royalties within 30 days of each calendar quarter and be accompanied by royalty reports.
This is the essential difference between a license agreement and sponsorship agreement in sport as was discussed in class.
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