Tech & Sourcing @ Morgan Lewis

Brand partnerships are expanding beyond traditional sponsorships and celebrity endorsements into arrangements that can combine licensing, content creation, product development, distribution, and data sharing. As those relationships become more complex, contracts need to clearly define the partnership, control of brand assets, and what happens to jointly created materials when the relationship ends.

The modern brand partnership no longer stops at the stadium or the celebrity endorsement deal. A fashion house may collaborate with a video game to release digital versions of its designs. A consumer brand may work with an influencer to develop a new product rather than simply paying for a sponsored post. Luxury brands are partnering with artists, hotels, restaurants, and technology companies to reach consumers in unexpected settings.

That expansion raises questions the underlying contract needs to answer:

• What exactly are the parties building together, and what are their obligations?
• Who controls the brand once it leaves the sponsor’s own channels?
• What happens to the partnership (and everything it created) when it ends?

This two-part Contract Corner looks at how to structure and manage these evolving arrangements. Part 1 discusses how to contractually define the partnership, licensing and approval rights, and ownership of co-branded products. Part 2 will turn to exclusivity, reputational risk, influencer and celebrity usage rights, and how partnerships measure success.

“Brand partnership” can describe very different relationships. At one end of the spectrum is a traditional sponsorship or endorsement: one party provides money or other value for defined promotional rights, such as an athlete’s image on a cereal box. At the other end is a deeply integrated partnership in which the parties jointly develop products or incorporate one brand’s intellectual property (IP) into another’s digital environment (e.g., a fashion house designing a wearable skin for characters in a popular video game).

Influencer arrangements show how those relationships can expand. A relationship may start as a few sponsored posts but expand into product development, appearances, affiliate sales, a long-term ambassador role, or even an equity stake in the company. Gaming and esports partnerships can follow a similar path, moving from a logo in tournament broadcast graphics to branded virtual items, livestreamed events, and creator content.

A broad reference to “promotional activities” may provide useful flexibility at signing, but that same breadth can create real uncertainty later, for instance, when a single Instagram post evolves into a limited-edition product or an interactive digital experience no one specifically contemplated at signing. To avoid that uncertainty, the agreement should begin with a clear description of the partnership, including specific language addressing the following:

• What is each party providing, and what are their obligations?
• Will the partnership appear in a product, platform, physical venue, and/or digital environment?
• Which territories and audiences are included or excluded in the scope of the partnership?
• Are there any restrictions on the parties in connection with the partnership?
• What is the duration of the partnership?

Brand partnerships depend on IP, and each party typically wants to control how its name, trademarks, designs, characters, images, and/or likeness are used. The agreement should identify the IP each party may use and set the scope, purpose, territory, media, and duration of the applicable licenses, including whether those rights extend to affiliates, agencies, or production companies involved in the campaign.

The appropriate scope of those rights will depend on the parties and their relative bargaining power. As a practical matter, the contract should spell out what requires approval and the mechanics of the review process. At a minimum, it should identify who is authorized to grant approval, the time permitted for review, the number of review and revision cycles, and whether previously approved materials may be adapted for other formats without requiring additional approval.

Well-established brands and high-profile talent may require longer review periods, multiple opportunities to comment, and affirmative written approval before any use proceeds. Whatever the parties negotiate, the timeline for approvals should be built into the campaign schedule so that brand protection and launch deadlines do not collide at the eleventh hour.

Some partnerships result in a co-branded physical or digital product (e.g., a limited-edition sneaker or a branded character skin in a video game). In this context, the parties should determine who is responsible for designing, manufacturing, distributing, and supporting the product, and the agreement should address production quantities, launch dates, and recall procedures. Where a trademark license is granted, the agreement should also address quality standards and quality control procedures.

Ownership can also become more complicated with a co-branded product when each party retains its preexisting IP, but the finished product and related campaign materials combine elements belonging to both parties. In this instance, each party must consider whether its preexisting rights, standing alone, are enough to justify continued use once the partnership ends.

A brand, for example, might ask whether it can remove an athlete’s name, image, and likeness from a print advertisement and substitute a new partner while continuing to run the rest of the ad. Either party might also ask whether it can continue using a “debranded” version of the jointly created materials, or elements of them, such as a tagline developed for the campaign that it wants to use more broadly or after the partnership ends.

Given these considerations, the agreement should address whether the parties must mutually cease use of the jointly developed materials or whether either party may continue exploiting a modified or debranded version and on what terms. Those questions are best resolved before the campaign succeeds and the jointly created assets become valuable.