Tech & Sourcing @ Morgan Lewis

Modern brand partnerships raise contract questions around exclusivity, reputational risk, how influencer and celebrity content can be used after it is posted, and how the parties will measure performance. Part 2 of this Contract Corner series examines how parties can address those issues in their agreements.

Part 1 discussed how these partnerships have expanded beyond stadium sponsorships and traditional celebrity endorsements into co-branded products, influencer partnerships, and integrated digital experiences, as well as how the agreement should define the partnership, establish workable intellectual property (IP) and approval rights, and address ownership of jointly created products.

Exclusivity is often central to the commercial value of a brand partnership, but the scope of a restricted category can be difficult to define. The following questions often arise:

• A sponsor may expect to be the exclusive beverage company for a team, but is a sports drink a competitor to bottled water? How should the agreement address potential conflicts with competing league sponsors in the same category?
• An influencer partnering with a cosmetics company may be restricted from promoting “competing beauty products,” but how broad is that limitation if the cosmetics company is part of a multibrand conglomerate, and does it extend to other beauty products, such as face creams and hair products?
• An actor endorsing an automaker may be barred from appearing in vehicle advertising, but does that prohibit the actor from promoting a car-sharing app or rental car company?

The agreement should define the restricted category, the parties that are bound, the applicable channels, the territory, and the duration with enough specificity that both sides understand the bargain. Carveouts for preexisting relationships disclosed before signing can prevent avoidable disputes later.

Brand partnerships intentionally link public images, creating reputational risk when one partner attracts unwanted attention. A morals or reputational harm clause may permit suspension or termination following specified conduct (e.g., an arrest, a public controversy, or conduct drawing sustained negative press).

As we’ve previously discussed, the same drafting care that applies to team sponsorship agreements applies equally here. Negotiations frequently turn on how objective the trigger must be. One party may seek broad rights to terminate whenever conduct could bring the brand into public disrepute, while the other may resist a standard based solely on adverse publicity, preferring a defined list of triggering conduct with an opportunity to cure.

The contract should also address what happens to existing content and products once a trigger occurs and the relationship is terminated (e.g., whether social posts must be deleted, whether branded merchandise already in stores may continue to be sold through existing inventory, and whether digital items already purchased remain available to users). A partnership can end overnight; however, removing related digital and physical collateral from the marketplace may take considerably longer.

The agreement should also address what happens after the content is created: whether the brand may repost it, turn it into a paid advertisement, use the person’s image in stores, edit it, or continue using it after the relationship ends. A right to create three social media posts is not necessarily a right to put those posts on a billboard, and if the brand wants that broader right, the agreement should say so explicitly, ideally with a corresponding adjustment to compensation.

When influencers, creators, athletes, or other public figures are involved, the parties should address not only what content or appearances are required but also how the resulting content will be used both during and after the term of the agreement. Deliverables can specify platforms, formats, timing, usage rights, and whether content must stay publicly available for a minimum period. Agreements should also address disclosure requirements.

The Federal Trade Commission’s (FTC’s) Guides Concerning Use of Endorsements and Testimonials in Advertising (Endorsement Guides) address disclosure of material connections between brands and endorsers. Under the Endorsement Guides, a payment, free product, or other relationship material to the endorsement must be disclosed clearly and conspicuously. FTC guidance notes that terms such as “ad” or “sponsored” can be effective and that a platform’s built-in disclosure tool may not be sufficient on its own. The contract should allocate responsibility for making those disclosures, specify the required disclosure language and placement, and address liability if a regulator later finds the disclosure insufficient.

Traditional sponsorship agreements often identify tangible and easily verifiable benefits, such as signage placements, hospitality packages, media impressions, or naming rights. Digital partnerships can call for different performance metrics entirely. An influencer campaign may focus on engagement rate, click-throughs, or affiliate sales; a gaming partnership may look to downloads, in-game item sales, or livestream viewership; an experiential campaign may track event attendance or customer registrations after the event.

If compensation, renewal rights, or termination rights depend on meeting performance targets, the agreement should identify the specific metrics, the source of the underlying data, reporting obligations and frequency, and a process for resolving disputed measurements, particularly where the relevant data is controlled by a third-party platform such as a social media company or app store rather than by either contracting party. Not every partnership needs a guaranteed return on investment, but the parties should agree on what will be measured and by whom before deciding whether the partnership worked.

Today’s brand partnerships can move from stadium signage and celebrity endorsements to social media feeds, retail shelves, and virtual experiences within the same campaign. That flexibility creates commercial opportunities but also increases the number of issues the agreement needs to address.

A successful agreement should do more than grant permission to display two logos side by side. It should define the partnership with precision, establish workable intellectual property and approval rights, address exclusivity and reputational risk in concrete terms, allocate responsibility for content and regulatory compliance, and spell out what happens to the content, the products, and the brand relationship itself when the partnership ends. The consumer-facing partnership may look straightforward, but negotiating the agreement behind them often is not.