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Globally, sports apparel is an industry that is projected to generate over $200 billion in 2023, according to a report on Statista. This dynamic business stands at the intersection of fashion, sports, and business, and is built largely on the development, protection, licensing, and exploitation of intellectual property. Those participating in the sector’s growth, whether as brands, athletes, designers, or entrepreneurs, need tounderstand the nuances and intricacies of the legal and business issues.
Intellectual property is an umbrella term that describes a category of legal rights and protections for intangible property — essentially, “products of the mind.”
Patents protect inventions, methods, or processes for a specified period, usually 20 years. In the sports apparel industry, this might include technology like moisture-wicking fabrics, air cushioning in shoes, specific fabric blends, etc. Patent law allows the inventors of such technologies the exclusive right to use (or license others to use) the invention, and thus provides a financial incentive for the act of invention.
One of the most prevalent forms of IP in sports apparel, trademarks protect distinctive words, phrases, symbols, designs, and slogans that are used to identify goods or services. Sportswear companies like Nike, adidas, and Puma have iconic logos that are recognized worldwide.
In addition, professional sports teams, colleges and universities, and other organizations have logos, mascots, color schemes, and even typeface and font designs that are proprietary, and protected. The rationale behind trademark law is consumer protection.
Trade dress pertains to the visual appearance of a product or its packaging that signifies the source of the product to consumers. In the world of sports apparel, this could be the unique design, shape, color combination, or even texture of a product or its packaging. If a particular design or presentation becomes emblematic of a brand and gains widespread recognition, protecting it can be invaluable. It prevents competitors from mimicking the look and feel, ensuring that customers aren’t misled.
Copyright law is not as commonly associated with the apparel industry. In fact, clothing designs are generally viewed as utilitarian, useful articles, and thus not protectable. But, an important distinction is made for the separable, purely aesthetic design elements on a garment, which are entitled to copyright protection.
A trade secret is information that derives its value from the fact that it is not known to the public. For example, a unique method of fabric weaving or a specific blend of materials that offers better performance might be kept secret rather than patented. This way, the information remains protected as long as it remains confidential. Owners of such information use confidentiality clauses and non-disclosure agreements to ensure that the information remains confidential.
As the worlds of sport, entertainment, and business have converged, the value in a celebrity (or athlete) endorsement has garnered significant attention. Although technically Names, Images, and Likenesses (NIL) are not officially “intellectual property” rights, it is convenient to consider them similarly. Even student athletes (once prohibited from such activities by NCAA regulations), are exploring valuable opportunities to monetize their fame in this manner.
Obviously, with all of these various property rights in play, any business wishing to use something developed or created by another must secure permission. The mechanism for this is known as “licensing” – the process of negotiating and entering into licensing agreements.
Major sports teams and universities often enter into licensing agreements with apparel companies. For instance, the NBA might license its logo and team names to a company like Nike, allowing them to produce official jerseys. The same goes for high-profile athletes who license their names, images, or signatures for specific apparel lines.
Sports apparel brands sometimes collaborate with designers, celebrities, or other brands, creating limited-edition merchandise, and major sporting events like the Olympics or the FIFA World Cup have official merchandise, often produced by leading sportswear companies.
The process for licensing intellectual property (IP) for use in sports apparel can be broken down into the following steps:
Identify the IP you want to license and the kinds of goods you wish to make.
Identify and contact the IP owner.
Negotiate the terms of the license agreement.
Sign the license agreement.
Once the license agreement is in place, you can begin using the IP on your products.
In addition to the obvious essentials like the parties’ identities, a licensing agreement for IP must include:
Subject Matter of the License: What specific intellectual property is being licensed. The owner must also represent and warrant that it is the sole owner whose permission is required for the use intended.
Scope of the License: What kinds of goods will the licensed property be affixed to? Is the license exclusive or nonexclusive, with others also permitted to use the IP in similar fashion?
Territory: The geographical region(s) in which the licensee is entitled to use the IP.
Term: How long with the license agreement last, and what will happen to remaining inventory, etc., when it terminates?
Compensation: Typically, licensing agreements are compensated with a royalty. The Agreement should include the amounts, frequency, and methods of payment, along with details about how the royalty will be calculated and reported. The Licensor will also expect to have a right to audit the licensee’s books from time to time, to ensure proper accounting and payment.
Quality Control: In order to protect their brands’ reputation and the value of their intellectual property, Licensors must insist on licensees’ adherence to quality standards and often submission of sample goods for approval.
Navigating the complicated world of intellectual property and licensing requires careful thought, discipline, and a keen understanding of the legal principles involved. It’s always a good idea to consult with an experienced licensing attorney when drafting or entering into such an agreement.
