[Editors Note: This is the second installment in a two-part series by Justin M. Jacobson, Esq. – read PART 1 here.]
In addition to the considerations we addressed in part one of this piece, there are some other clauses an artist should be aware of and include in a sponsorship agreement. We will now briefly explore some of those matters below.
A company may aim to include non-competition provisions in an effort to prevent the artist from working with a competitor for a specified period of time after the expiration or termination of their sponsorship agreement. Such example language is displayed below.
- During the Term hereof and for a period of three (3) months after the expiration of this Agreement or the earlier termination of this Agreement by COMPANY, the ARTIST agrees that it shall not directly or indirectly perform the same and/or similar “deliverables” and/or work on behalf of any other company involved in distribution, marketing and/or promotion of the same or substantially similar product (GUITAR) as that sold, marketed and/or promoted by COMPANY throughout North America and Europe.
Another important matter that should be addressed and memorialized in a written agreement are the brand’s right to utilize the celebrity’s image and name in association with its product. This includes during the sponsorship term as well as how matters would proceed after the expiration of an existing endorsement.
Generally, a brand owner prefers for its rights to be wide with minimal requirements and restrictions on them; conversely, a musician typically wishes to maintain control over the use of his image and name, so an agreement on these points is important.
Below is an example of a clause providing a sponsoring brand with the right to utilize an artist’s name and image during the sponsorship and with the company’s right terminating upon the expiration of the term.
- COMPANY shall have the non-exclusive right to utilize ARTIST’s name, likeness and biography for no further payment, in any and all media now known or hereafter invented, for the duration of the Term. Upon expiration or termination of this Agreement, COMPANY shall immediately cease any and all uses of ARTIST’s name, likeness and/or biography as well as any statements of association with ARTIST.
In addition to an influencer’s deliverables on behalf of a brand and the brand’s category exclusivity, provisions relating to the potential early termination of the agreement should also be negotiated. In particular, most sponsorship agreements have a “harmful behavior” or “morals clause.” This permits a brand to immediately terminate an existing endorsement arrangement with an individual who “engages in illegal, indecent, immoral, harmful or scandalous behavior or activities.”
Such a provision is often used to protect the image and reputation of the company; and enables one party to unilaterally terminate the contract if the other party engages in conduct that could have some type of negative impact upon the particular company or brand’s public reputation. In addition, many celebrities are now negotiating “reverse morals clause.” These clauses provide the musician with the right to terminate a sponsorship agreement if the brand behaves in similarly brand “damaging” way. This is meant to protect the musician’s reputation from association with a disgraced company or brand. A sample of such a clause is depicted below.
- Harmful Behavior/Morals Clause – Either Party shall have the right to immediately terminate this Agreement in the event that the other Party, in such Party’s reasonable discretion, engages in illegal, indecent, immoral, harmful or scandalous behavior that brings the other party into public hatred, public disrepute, contempt, scorn, or ridicule, or that will tend to shock, insult or offend the community or public morals or decency and that may, directly or indirectly damage, such Party’s reputation or goodwill or if such party commits an offense involving moral turpitude under Federal, state or local laws or ordinances, or otherwise violates any applicable rules or regulations. In addition, ARTIST shall not engage in any act or conduct and/or make any derogatory statements which denigrate the COMPANY and/or its brand.
As we have discussed, there are many important matters related to a brand’s sponsorship of a musician. These include the particular “deliverables” or obligations that the musician owes to the brand as well as the compensation due to the artist for performing its duties on behalf of the sponsor. Category exclusivity and non-compete provision scopes are also important issues to be aware of.
It is clear that as the music industry continues to shift toward a greater reliance and larger portion of an artist’s income will be generated from brand affiliations. This makes it more pressing to properly agree on the terms of these relationships. Memorializing the sponsorship terms in writing is the best way to ensure all parties are on the same page and receive the protections that they desire.
This article is not intended as legal advice, as an attorney specializing in the field should be consulted. Some of the clauses have been condensed and/or edited for content purposes, so none of these clauses should be used verbatim nor do they act as any form of legal advice or counseling.