With school back in session, name, image, and likeness (NIL) rights are once again at the forefront of the amateur sports discussion. As NIL rights continue to evolve nationwide, collegiate student-athletes and high school student-athletes in most states have the opportunity to profit from their personal brands like never before.
In July, Bloomberg published an article that summarized some of the less scrupulous and fraudulent activity that occurred in the NIL space since the NIL era of athletics began – i.e. student-athletes signing NIL agreements with fake companies and NIL advisors charging 40% fees.
This primer outlines several important provisions that student-athletes should scrutinize carefully when reviewing NIL contracts. While this primer provides general guidance, each student-athlete’s situation is unique, and seeking individual legal counsel is recommended when navigating the NIL landscape.
Prior to entertaining NIL opportunities, it is best to first familiarize yourself with the applicable NIL rules and regulations of your state, your interscholastic athletic association and or conference, and your school. With that as a foundation, some provisions to scrutinize are:
Scope of Use: Determine how your name, image, and likeness will be used. It is important to know who has control over the content being produced – e.g. does the company that is a party to the agreement have final say on the content being used, or if you are licensing your NIL to the company, do you have a say in how your NIL is used.
Performance: Clarify any performance expectations associated with the contract, both for the company and the student-athlete, to help ensure both parties know what their obligations are under the contract.
Compensation Structure & Fees: Review and understand the proposed compensation structure. Make sure you understand whether you will be paid a flat fee, receive royalties, or get a percentage of sales. Determine whether you will ever need to repay the company for any services provided under the contract. Lastly, be cognizant of the percentage of any fees being paid to a third party under any contract – i.e. a NIL agent or marketing agency.
Duration and Renewal: Pay attention to the contract’s duration and any clauses related to renewal. You may wish to weigh the flexibility of short-term agreements against the stability of longer-term agreements. If a contract has any renewal rights, it is important to understand who has the option to renew the agreement – does the company have the right to renew the agreement, does the student-athlete have the right, or does renewal require mutual agreement of both parties. Lastly, if a contract does have renewal provisions, it is imperative to know the terms under which the contract is renewed – i.e. is the renewal on the same fundamental terms as the initial term of the contract, or will there be a structured increase in the compensation paid to the student-athlete.
Exclusivity and Conflicts: Be cautious of exclusivity clauses that could restrict you from entering into other contracts within the same industry. To help ensure compliance with any applicable policies and procedures, check for any conflicts that might arise with your school’s business partners – i.e. will the student-athlete entering into their NIL agreement constitute a breach by the school under any of their agreements.
Intellectual Property: It is imperative to understand the terms of the license of the student-athlete’s intellectual property, specifically, what is the duration of such license – does the license terminate upon the expiration of the underlying agreement, or does the license last in perpetuity? It is also important to be aware of the terms of use of any third-party intellectual property. For example, under the terms of the agreement, does the company provide the student-athlete a limited use license of its intellectual property, are there any conditions of use of such intellectual property, or after the termination of the agreement is the student-athlete restricted from using any content incorporating the company’s intellectual property.
Termination: Examine and understand the conditions under which the contract is, or may be terminated – i.e. consider whether the contract is terminable by providing written notice to the other party, or whether the contract is automatically terminated upon the occurrence of a specific event.
Breach: Determine what events must occur for each respective party to be in breach under the contract – i.e. when one party fails to perform their responsibilities under the agreement – and what rights does the other party have upon the breach.
Use of NIL Post-Termination: Consider what happens to the content and materials created under the contract once it expires. Consider whether the company still has the right to use your NIL following termination or whether you have the authority to use any content produced during the contract term after its expiration.
The above list of contract provisions is by no means an exhaustive list of provisions student-athletes should focus on when reviewing a NIL agreement. Each NIL agreement should be reviewed in detail in its entirety, and by proper legal counsel if possible.
Moreover, by reviewing NIL contracts with scrutiny, student-athletes can make more informed choices, avoid common contract pitfalls, and be in a better position to maximize their financial gain.
Disclaimer: The information presented is for general education purposes only and no attorney-client relationship has been created hereby. You should engage and consult with counsel regarding the applicability of the concepts presented to your circumstances