AMBUSH MARKETING AND HOW TO AVOID IT

By Russell H. Falconer

Euromoney's Managing Intellectual Property

December/January 1996

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Companies sometimes invest millions of dollars to ensure the exclusive sponsorship rights to a major sporting event only to see competitors associating their products with the event as well. Russell Falconer discusses how such ambush marketing can be prevented

Commercial sponsorship is big business. Some estimate that sponsorship rights for the 1988 Olympics, held in Seoul, South Korea, yielded about $338 million in sponsorship fees. To say that this is a growth industry would be a gross understatement. Indeed, it has been estimated that the total sponsorship for the 1992 Olympic Games, which took place in Barcelona, was worth approximately $700 million. A sum almost double the sponsorship fees for the same event just four years earlier.

Why would companies wish to spend such princely sums? The obvious rationale for underwriting such sponsorships is to achieve audience awareness and image enhancement. This sponsorship role permits marketing communicators to talk more directly to particular market segments in a manner that may be more efficient and less costly than traditional media advertising.

Not surprisingly, such high-visibility marketing, promotional and advertising opportunities attract aggressive competitors intent on creating their own association with the event. Ambush marketing is a phrase that describes the actions of companies who seek to associate themselves with a sponsored event without paying the requisite fee. The ambush consists of giving the impression (sometimes false, sometimes not) to consumers that the ambusher is actually a sponsor or is somehow affiliated with the event.

Ambush marketing can provide some, if not most, of the benefits of a legitimate, paid-for sponsorship at relatively little cost. The danger, of course, is that such marketing may have the propensity to cause confusion among consumers or otherwise to impact negatively on the sponsorship rights. Indeed, depending on the nature of the ambush, it can violate the law. For example, in the United States, such marketing practices can violate the Lanham Act (typically, Section 43(a)) if, for example, they convey the false message that a company is an of ficial sponsor or affiliate when, in fact, it is not. Such conduct can also raise issues of unfair competition, breach of contract, tortious interference with contractual relations and tortious interference with prospective business advantage. In certain instances it could conceivably raise questions of prima facie tort and violation of the states' various "little FTC acts", often codified as the Uniform Deceptive Trade Practices Act.

Jurisprudence

Ambush marketing practices have arisen in the United States, Canada, Ireland, Australia, Germany and other countries. Nonetheless, there is precious little in the way of jurisprudence internationally. This article will highlight some of the various practices that have been observed and will suggest certain approaches that can help anticipate ambush marketing and blunt much of the negative impact that can result from such conduct. To illustrate these points, the article will also discuss some of the principal decisions by the courts.

The best way to appreciate the subtlety and potential of ambush marketing is to discuss specifics. There are many who will recall the build-up to the 1994 Winter Olympics in Lillehammer, Norway. Visa, one of the official sponsors, aired television advertisements which, in addition to prominently featuring the Olympic logo, highlighted the message that American Express cards were not accepted in the Olympic Village. American Express was not a sponsor. Nevertheless, in response to Visa, it aired television advertisements which explained that American Express cards were accepted throughout Norway and featured a tagline stating that American travellers did not need a "visa" to go to Norway. Because American travellers did not need visas to travel to Norway, the American Express statement was quite accurate. But the clever double entendre left unanswered the question of whether viewers of the American Express advertisements mistakenly believed that American Express was a sponsor of the Olympic Games or was somehow affiliated with the Games. If such confusion was, in fact, proven to exist, then this might have been actionable conduct, at least under US law.

But not all ambush marketing is actionable. Indeed, the ambush canarise in a variety of differing contexts. For example, a promotion may be offered by a manufacturer stating that in honour of the World Cup football matches, a donation will be made to US Junior Soccer for every product purchased from that company. If the promotional materials truthfully refer to the event but do not display the official logos or give undue emphasis to the event, such a promotion, in and of itself, would probably not comprise actionable conduct.

Contrast this with an incident in which an official sponsor had been awarded (at substantial cost) an exclusive 1994 World Cup sponsorship in a broad category. In connection with its sponsorship of the 1994 World Cup, MasterCard received the exclusive right before and during the competition to use World Cup logos on, and in association with, "all card-based payment and account access devices". Sprint Communications was also involved as a backer of World Cup as an official partner, a category that was neither as extensive as that of a sponsor nor as costly. Sprint's exclusivity was in the field of long distance telecommunications. Sprint began marketing pre-paid telephone calling cards both in the US and Europe bearing World Cup logos, despite MasterCard's strong objection. In the litigation that ensued in the Federal Court in New York City, MasterCard established that Sprint's use of World Cup logos on its telephone cards infringed on MasterCard's category of "card-based payment and account access devices", even though the telephone cards were not functionally the same as MasterCard's cards. The Court held that consumers would, on seeing the Sprint card bearing a World Cup logo, mistakenly assume that Sprint had rights in a category that, in fact, belonged exclusively to MasterCard. This case, MasterCard International Incorporated v Sprint Communications Co v ISL Football AG, 30 USPQ 2d 1963 (SDNY 1994); 23 F3d 397 (2d Cir. 1994), is one of the rare decisions where ambush marketing was the subject of a court injunction.

Minimizing the risks

To enable your sponsor-client to have a reasonable opportunity to minimize ambush marketing efforts by competitors or combat them in court, it is vital to appreciate the myriad contexts in which ambush marketing can arise. These include tangential actions ranging from the placement of competitive advertising on television broadcasts of the event to the underwriting of promotions to send to families, participants or contestants to the event.

To illustrate the former, consider, for example, that, in 1984, Fuji was the worldwide Olympic sponsor. Rival Kodak became a sponsor of the television broadcast of the Games and even became the official film of the US track team. To illustrate the latter, in the context of a major sporting event such as the World Cup or the Olympics, there can be a small sponsorship of, for example, the Irish football squad or the German Olympic swimming team. This small sponsorship may present an unofficial sponsor with an opportunity to ambush an official sponsor. An actual example of this took place in 1990 in the context of the World Cup held in Italy. CocaCola was the official worldwide soft drink sponsor. Nevertheless, Pepsi, its competitor, sponsored the Brazilian soccer team.

Some other ambush scenarios can include placement of hoardings or booths at strategic locations or near the site of an event. Nike did this to Converse (which was the official shoe sponsor) during the Los Angeles Olympics in 1984 by erecting huge wall murals near the Los Angeles Coliseum which prominently displayed Nike track and field athletes. Another strategy is to use illustrations or photographs of places, buildings, etc, that are associated with an event in advertising as background to the ambusher's product. Other competitors give away promotional items that bring the event to mind, even though they do not use the particular marks or logos of the event.

Protecting against an ambush

For a sponsor to anticipate all potentials for ambush marketing is, practically speaking, impossible. But event organizers and sponsors can adopt several practices which will improve the odds against ambushing.

Primary among the steps necessary to protect against ambush marketing is to ensure that the event organizers have effectively protected, usually via trade mark registration, the principal visual identifiers of the event, from the names and logos to the obligatory mascot and merchandise. Likewise, photo and broadcast rights should be controlled within the realm of common sense. Souvenirs and hoardings, either on-site or near the focus of the event, should also be tightly controlled.

Apart from the fact that the event organizers must own the intellectual property and related rights, it is absolutely essential that they effectively control the disposition of such rights via effective licensing contracts. For example, it is vital to ensure that the event organizers not only warrant their ownership and control of intellectual property rights but also that they are contractually obligated to defend the rights of the licensed sponsors. Sponsors should also have an independent contractual right of enforcement if the organizers choose not to take action.

Also vital among the assurances that a sponsor must receive from the event organizer is the effective control by contract of other sponsors or other companies who have an affiliation with the event. Each sponsor or affiliate should be placed on notice in its contract of the specific rights granted to all other sponsors and affiliates. In this way, each field for which exclusivity is sought is defined so that the most frustrating of all types of ambush scenarios, that in which one officially authorized sponsor is ambushed by another sponsor, can be effectively avoided, as in the MasterCard case.

Another point to keep in mind when dealing with sponsorship contract issues is the fact that the event owners will often engage a licensing organization to oversee and administer the periodic presentation of the event. This is true, for example, with the World Cup. The owner of the event, the Federation Internationale de Football (FIFA), is the exclusive holder of all worldwide commercial exploitation and broadcast rights for the formal World Cup competition. But FIFA grants to Swiss-based ISL Football AG (International Sport and Leisure) the exclusive licence for worldwide commercial exploitation rights.

Russell H. Falconer is a litigation partner at Brumbaugh Graves Donohue & Raymond, an intellectual property law firm based in New York. Mr. Falconer specializes in trademarks, copyrights false advertising and trade secrets.