As we close the book on 2021, we have had a full fall season to examine the NCAA’s interim policy allowing student-athletes to profit from the use of their name, image, and likeness (“NIL”) in endorsements and sponsorships while retaining amateur status. The NCAA’s interim policy left in place its prohibitions on pay-for-play and improper recruiting inducements but punted specific rulemaking to the states until such time that either federal legislation or new NCAA rules are adopted. Although there has been a push to have NIL governed by federal law, including a recent visit to Congress by NCAA President Mark Emmert, nothing has materialized to this point. As a result, NIL is still in the hands of the states—arguably creating a competitive landscape among them.
While the new NIL landscape has been positive for both student-athletes and local businesses, the legal landscape is still developing. This article is meant to provide a brief overview of some legal items that student-athletes and businesses should be aware of as they attempt to navigate the current legal landscape.
Nebraska Fair Pay to Play Act
Nebraska was one of the first states to introduce an NIL law allowing student-athletes to be compensated for the use of their NIL. The Nebraska Fair Pay to Play Act of 2020 (the “Act”) was approved by Governor Ricketts on July 24, 2020 (Nebraska Legislative Bill 962, 106th Leg., 2nd Sess.) and is now codified in Sections 48-3601 through 48-3609 of the Nebraska Revised Statutes. The Act allows Nebraska’s colleges and universities to select any date on or before July 1, 2023, for implementation (Neb. Rev. Stat. § 48-3609). Creighton University, for example, declared an effective date of July 1, 2021.
Outlined below are some of the important provisions of the Act.
- Athletes can be compensated and remain eligible for scholarships or grants.
- The Act prevents colleges and universities from allowing compensation earned by a student-athlete for NIL from affecting the duration, amount, or eligibility for, or renewal of, any athletic grant-in-aid or other institutional scholarship. However, it is important to note that compensation earned by a student-athlete for use of his or her NIL may be used in the calculation of income for determining eligibility for need-based financial aid (Neb. Rev. Stat. § 48-3603).
- Professional representation.
- Student-athletes can receive professional representation from agents holding a certificate of registration under the Nebraska Uniform Athlete Agents Act, financial advisors registered under the Securities Act of Nebraska, and attorneys admitted to the bar in Nebraska (Neb. Rev. Stat. § 48-3606; Neb. Rev. Stat. § 48-3602).
- A student-athlete who enters into a contract that provides for the use of his or her NIL is required to disclose the terms of the contract to an official of his or her college or university. The college or university is prohibited from disclosing the terms of any contract that the student-athlete or the student-athlete’s professional representation deems to be a trade secret or otherwise non-disclosable (Neb. Rev. Stat. § 48-3604).
- Conflicting Endorsements.
- Student-athletes are prohibited from contracting with a sponsor if (a) the contract requires the student-athlete to display the sponsor’s apparel or otherwise advertise for the sponsor during official team activities, and (b) compliance with the contract would conflict with a team contract. If the college or university asserts a conflict, then the college or university must disclose to the student-athlete and the student-athlete’s professional representation the full team contract that is in question (Neb. Rev. Stat. § 48-3605).
FTC Endorsement Guides
The Federal Trade Commission (“FTC”) has created Guides Concerning the Use of Endorsements and Testimonials in Advertising (“FTC Endorsement Guides”) to specifically address and provide direction to the public on the use of endorsements and testimonials, and to prevent deceptive and misleading advertisements. The FTC Endorsement Guides set forth the general principles that the FTC uses in evaluating whether practices fall within the scope of conduct declared unlawful by Section 5 of the Federal Trade Commission Act (15 U.S.C. 45; 16 C.F.R. § 255).
As with any endorsement, a student-athlete’s endorsement of a product or service must reflect his or her honest opinions, findings, beliefs, or experiences (16 C.F.R. § 255.1(a)). If the advertisement represents that the student-athlete uses the endorsed product, the student-athlete must have been a bona fide user of the product at the time the endorsement is given (16 C.F.R. § 255.1(c)). For example, if an advertisement portrays a student-athlete playing a video game and stating that it is the best game she has played, the endorsement must have reflected her honest opinion and she must have been a bona fide user of the game at the time her endorsement was given.
In addition, student-athletes, as advertisers, are required to disclose material connections between themselves and their endorsers (16 C.F.R. § 255.1(d)). A material connection can be an employment, personal, family, or financial relationship between the student-athlete and the business he or she is endorsing. Both student-athletes and businesses need to understand that a financial relationship is not limited to money; rather, it can consist of anything of value, such as free or discounted products or other perks.
The disclosure should be clear and conspicuous – that is, it should not be hard for the reader or viewer to miss and should be in plain language so that it is easily understandable. The FTC recommends that the disclosure be placed in the message itself and not mixed or hidden in a group of hashtags or links. The FTC has indicated that the terms “ad,” “advertisement” and “sponsored” are oftentimes enough when placed in a location that is hard to miss to notify the consumer of the material connection between the advertiser and endorser.
To ensure compliance and for more information on the FTC Endorsement Guides, please visit the FTC’s website. If you have further questions about your compliance with the FTC Endorsement Guides, consider contacting a licensed attorney for assistance.
College or University Owned Trademarks
Student-athletes need to be mindful that their NIL is separate and apart from his or her college’s or university’s brand. A college or university has exclusive ownership of and rights to its trademarks, which are words, phrases, symbols, logos, or designs the college or university uses to identify its goods or services. This is a tricky area for student-athletes and businesses to navigate as it can be very difficult to separate the student-athlete from the university and vice versa. Student-athletes using confusingly similar trademarks to their colleges’ or universities’ trademarks are likely to mislead the public into believing that their respective college or university somehow endorses, sponsors, or is otherwise affiliated with the endorsed product or service, or that the college or university is associated with the sponsor, creating the basis for a trademark infringement lawsuit under the Lanham Act (15 U.S.C. §1051 et seq). A student-athlete’s unauthorized use of his or her college’s or university’s trademarks can be especially problematic in situations where the student-athlete is endorsing products or services that are not in alignment with the college or university’s values.
Many colleges and universities have entered into licensing agreements with their current and former student-athletes to allow both the current and former student-athletes and the colleges and universities to benefit from the use of the college’s or university’s trademarks. These licensing agreements are also a mechanism for colleges and universities to restrict the use of their trademarks to endorsements that align with the colleges’ or universities’ values. Student-athletes and the businesses who are engaging student-athletes for endorsements need to have a clear understanding of the scope of use permitted under these license agreements to ensure compliance.
Student-Athlete Owned Trademarks
A student-athlete can register his or her own trademarks with the United States Patent and Trademark Office to capitalize on his or her NIL and facilitate brand recognition nationwide. In addition, federal trademark registrations also provide a student-athlete with legal protection against imitations and counterfeits.
A student-athlete can register a federal trademark for the student-athlete’s name, including any nicknames; slogans or phrases, or logos that identify his or her brand. For example, Graham Mertz, the quarterback at the University of Wisconsin-Madison, filed an application for a personal logo which he is proposing to use in connection with clothing and accessories. Although they were not student-athletes at the time, current NFL running back Ezekiel Elliot filed a federal application to use HERO IN A HALF SHIRT (U.S. Serial Application No. 86-732,902; this mark was abandoned on May 30, 2017), and obtained a federal registration for the mark EZE (U.S. Reg. No. 5,459,414), and ex-NFL running back Marshawn Lynch obtained federal registrations for the phrases I’M JUST HERE SO I WON’T GET FINED (U.S. Reg. No. 4,878,656) and BEAST MODE (U.S. Reg. No. 3,650,781) during his NFL playing days. These are great examples of individuals being proactive and taking advantage of the strong protections federal registrations provide to capitalize on and protect their NIL.
Whether you are a student-athlete looking to capitalize on your NIL or your business is looking to engage student-athletes to promote your goods and/or services, consider consulting with a licensed attorney to ensure you have a clear understanding of all your obligations and rights under applicable federal and state laws.
*All references are current as of December 27, 2021
Author: M. Tyler Johnson
M. Tyler Johnson
This article has been prepared for general information purposes and (1) does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. Always seek professional counsel prior to taking action.