Hollis Sponsorship Bulletin

The European Sponsorship Association (ESA) has voiced its disappointment at the recently released Health Committee Report on Alcohol. Self-regulation activity by rights holders has not been acknowledged by the report, it says, and therefore the report should not claim to give a complete picture of the alcohol sponsorship landscape.

ESA had submitted a paper to the Health Committee giving important background to the steps being taken by organisations involved in alcohol sponsorship with regard to responsible marketing activity. The submission demonstrated the considerable element of self-regulation being undertaken by the alcohol sponsorship industry (rights holders and sponsors alike).

A further concern of ESA’s is the fact that the principal focus of the report’s research and investigations was football sponsorship. By focussing predominantly on one sport, the report has failed to factor-in other sports and events, such as arts and culture, which also rely upon alcohol sponsorship.

According to the report, drinks brands spend up to £800 million per annum on advertising and sponsorship, considerably outspending the amount spent on alcohol awareness campaigns. The report has suggested that advertisers and sponsors should be required to fund a health education promotion.

The Committee has proposed that no event should be sponsored by an alcoholic product if more than ten percent of those attending are under 18 years of age. This proposition is rejected by ESA on two counts. Firstly, it feels that the ten percent threshold is wholly unworkable and unsupported by any evidence that this will have any positive effect on reducing alcohol-related harm.

ESA argues that imposing such a stringent test will be tantamount to a blanket ban on alcohol sponsorship, as it is inconceivable to accurately assess which events count less than ten percent of children amongst their audience. As a result, and in order to maintain the essential funding provided by their alcohol sponsors, clubs could seek to restrict access to anyone under the age of 18, thereby having a significant negative social impact.

The alcohol industry already works to a voluntary 25 percent rule, in accordance with the Portman Group Code of Practice, and ESA says that it has seen no evidence to suggest that this self-regulation guidance is not working.

Whilst recognising that the issue of alcohol-related harm is significant and serious, the association states that there is no evidence to support a causal link between alcohol sponsorship and alcohol-related harm. The key issues, ESA believes, should be education and sales/packaging/availability rather than sponsorship.

Whilst calls for restrictions and bans on alcohol sponsorship continue, ESA is keen to stress that any such ban would have a significant adverse cultural, social and economic impact and has submitted independent evidence to the Committee on this point.

So what exactly does it take for a sponsor to give up on a sports franchise? Well this year has given us a few meaty examples to chew over - culminating in Thierry Henry’s blatant handball for France vs the Republic of Ireland (which knocked the latter out of the FIFA World Cup).

The year kicked off with Kelloggs deciding to withdraw its support for swimming sensation Michael Phelps after he was caught smoking a cannabis pipe. We then saw ING quit the Renault Formula One team over the infamous instruction for Nelson Piquet Jr to crash his car. By contrast, we’ve seen rugby club Harlequins manage to avoid any serious fallout from the Bloodgate scandal. And now Gillette has decided to stand by Thierry Henry, who is one of the company’s top star endorsement properties.

At first sight, there’s no obvious unifying theme here. But let’s dig a little deeper and see what we can uncover. Let’s start with Kelloggs and Phelps. Here the message is that recreational drugs and family brands don’t mix. That point is further underlined by the way in which brands like H&M withdrew support from Kate Moss over her use of cocaine.

This taboo regarding recreational drugs doesn’t, however, extend to adult brands. It’s notable, for example, that Speedo, Omega, Visa, Mazda and Pure Sports all rallied round Phelps. Omega even went as far as to call it “a non-issue” - which was more feisty than the brand needed to be when you consider Phelps felt compelled to say sorry.

The ING F1 example is not so helpful in developing a viewpoint - since the company was already poised to quit the Renault team just a few races later (at the end of the 2009 season). Far more interesting would have been if the scandal had occurred just after ING signed up with the team. Such was the severity of the offence that ING would probably still have pulled out - but the decision to do so would unquestionably have been a much tougher call.

And what of the Harlequins and Henry stories? Well the message here seems to be that sponsors understand the pressures that make teams and stars cheat - and are willing to forgive them if they show sufficient levels of contrition (the one stand-out exception being performance-enhancing drugs). Harlequins were mortified to discover the extent of the bloodgate scandal while Henry has not flinched from facing the press. That was enough to mollify their sponsors.

Still, such observations don’t really get us to the nub of sponsor decision-making - because they assume the final judgment by the brand owner is partly based on ethics, as though sponsors are a kind of offended surrogate parent. 

In truth, the issue of morality is a distraction. Sometimes morality and commerce seem to go hand in hand in sports sponsorship. But the ultimate decision whether to stay or go is almost invariably commercial - with only the most extreme forms of behaviour likely to lead to withdrawal on moral grounds. Assuming the conduct in question is not criminal (eg match-fixing), companies make a calculated decision based on the likely impact on brand equity and sales - nothing more. For all of the talk about fairplay, cheating is not regarded as sufficiently serious unless it involves performance drugs. And the reason that this stands alone is because sponsors need to be seen to stand side by side with governing bodies as they wage war on drugs.

This shouldn’t surprise us. After all, brand custodians are answerable in the final analysis to their shareholders. It’s not for them to make a decision that is likely to harm ROI. 

Consider Thierry Henry once more. If Gillette had dropped the French captain, it would have pleased Ireland but cost Gillette the large and lucrative French market. That was never going to happen. Again, it might have been more interesting if roles had been reversed - and Gillette had found itself having to appease an angry French audience.

How sponsorship is being used to transform the images of traditional brands, turning consumer perceptions on their head, will be a lead theme at the European Sponsorship Association’s Insights Forum in London on the 13^th October.

Keynote speakers from the Royal Opera House and Deloitte will discuss how their award-winning Deloitte Ignite Festival has brought contemporary and unconventional entertainment to thousands of people who would not normally relate to an opera company. Both partners were keen to change traditional thinking about their organisations and focus together on a shared goal of widening the access to the arts.

The Insights forum, part of the annual ESA’s Knowledge programme, will be held at the offices of Osborne Clarke, One London Wall, London EC2Y 5EB. Prices start at £100 /€125 (plus VAT). To book a place contact ESA on +44 (0) 208 390 3311.

With the debate over the pros and cons of alcohol sponsorship rarely out of the industry and mainstream news, the European Sponsorship Association (ESA) continues to take an active role in consulting with and representing the industry at local and European government level. It has recently reported the findings of its large-scale survey of rights holders to the EC, and the industry is now awaiting to hear in the autumn from the Director General for Health and Consumers, who has been taking evidence and consulting on all sides of the debate.

The big question, of course, is whether the issues of alcohol sponsorship and binge drinking are inter-related, and whether the industry can survive calls for external regulation. Is it facing European-wide legislative control, as happened with tobacco marketing, or will responsible marketing, codes of practice and co-operation with local governments ensure its survival?

Last year, the beer sector contributed some US$565m to the total global sponsorship investment pot, ranking it the fourth highest sponsoring industry in terms of investment (source, TWSM). Indeed, the beer brand, Budweiser was ranked the fifth largest sponsor in sponsorship commitment, pouring a reported US$131,250,000 investment into its sponsored activities. This positioned it above brands including BP, Emirates, Sony and O2.

Unsurprisingly, with sponsorship investments of these proportions, the alcohol industry has been keen to protect its position and investments. At a time when latest figures show that 24% of adults in England are classified hazardous drinkers and the cost of alcohol related harm to the NHS is £2.7 million, brands have taken significant voluntary steps to promote responsible drinking, and in some instances, to use their sponsorships as a vehicle for conveying messages of sensible drinking.

For example, for any new football team sponsorship deals, alcohol branding on children’s replica shirts is now not allowed by the drinks body, The Portman Group. Indeed, some brands were a step ahead of the timing of such prohibitions, with Carling, sponsor of both Celtic and Rangers offering children’s replica shirts without branding before the restrictions were implemented.

Alcohol brands have also been active in joining with the UK Government on social sponsorship campaigns. For example, the UK Dept of Transport’s THINK! campaign joined with Bacardi Martini, to support the brand’s PR link, using Michael Schumacher as an ambassador, with a joint promotion of responsible drinking at Grand Prix.

Elsewhere, Carlsberg was seen to use its UEFA football sponsorship to convey a responsible drinking message: ‘Carlsberg supports fair play on and off the pitch. Please drink responsibly’ within stadia and on fan park cups. Tennants, the owners of the T in the Park music festival, gives half of its signage free to the Drinkaware Trust, as part of their social responsibility programme.

But will these voluntary steps be enough to stave off legislative intervention? The EC is looking very closely at the issue through its Alcohol and Health Forum, the objectives of which include the creation of an action plan to protect children and young people, investigation into scientific evidence, and to consider self-regulation as a means to increase responsible commercial alcohol communication and sales.

As part of ESA’s commitment to the Forum, and in conjunction with Comperio Research, its wide-reaching survey of European rights-holders was conducted to gain insight into practice and attitudes towards alcohol sponsorship. ESA was keen to discover the extent to which rights holders hold concerns over alcohol sponsorship, together with the extent of any measures, voluntary or otherwise, in place to regulate such activity and protect these important revenue streams.

The results clearly indicate that many rights holders have their own internal procedures to set the nature and extent of their partnerships with alcohol brands, and do not wish for additional legislative control. Many assess alcohol sponsorship on a case-by-case basis, with some banning it along the lines of unsuitability or the target age of their audience.

The majority of respondents indicated that they would prefer to self-regulate their partnerships under guidelines by an industry body, such as the European Sponsorship Association, rather than an external body unrelated to the marketing sector or through legislation.

Restrictions on alcohol sponsorship, or more critically, a blanket ban would see many rights-holders struggle to fill the void left by alcohol brands’ investments. Indeed, around half of the organisations surveyed, said they would be affected if legal restrictions were imposed upon alcohol sponsorships; significantly more for those with current alcohol sponsorship deals.

As Jennifer Davies, Development Director of the Philharmonia Orchestra puts it: “For UK arts organisations that are experiencing diminishing subsidy and a critical reliance on a limited pool of private donors, alcohol sponsorships can make the difference between a successful fundraising campaign, or one that does not cover its costs. And private fundraising is key to an arts organisation’s survival.”

So, what does the future hold for alcohol sponsorship? Can the drinks brands and the rights-holders who rely upon their support, steer a mutually responsible path to ensure its survival free of legislative control? Will the current approach of the EC, which is encouraging self-regulation to see if this helps address the problem, prevail, or will national governments decide to impose their own legislative restrictions?

The industry, in particular the rights holders, as well as the sponsors themselves, need to be vigilant in ensuring that alcohol sponsorships are professionally managed. Not only must they guarantee that no promotions are made to under 18 year olds and that all advertising, giveaways, sales and hospitality are managed to the highest level of control, but they must also take positive steps to promote responsible drinking. Abiding by voluntary codes of practice and imposing their own self-regulations, and by managing events so that there are no alcohol-related incidents, is the best way that the industry can demonstrate their awareness of the issue and their responsibility towards it.

Helen Day, Head of European Policy, ESA

[1] Statistics on Alcohol, England, 2009, The Health and Social Care Information Centre

For further information, or to find out more about ESA’s Policy Group, please contact ESA via office@sponsorship.org or telephone +44 (0) 208 390 3311, or contact Helen Day at helenday@sponsorship.org

Earlier this spring, Ofcom, the UK communications regulator, published a review of broadcast sponsorship having monitored over 60 broadcast sponsorship campaigns. Various television programmes, including Big Brother, The X Factor and The Alan Titchmarsh Show, were been found to have breached Ofcom’s sponsorship rules.

· What prompted the review?

An apparent increase in the amount of information about sponsors’ products/services included in some sponsorship credits. Most campaigns were found to be compliant, but a number of broadcasters of major programmes, with major sponsors, were considered to be in breach of Ofcom’s Broadcasting Code.

· So what does Ofcom’s Code say?

Rule 9.13 of the Code provides that:

“Sponsorship must be clearly separated from advertising. Sponsor credits must not contain advertising messages or calls to action. In particular, credits must not encourage the purchase or rental of the products or services of the sponsor or a third party.”

The reason for the prohibition is that the Television Without Frontiers Directive, from which the Code is derived, limits the amount of advertising a broadcaster can transmit and requires that advertising messages are kept separate from programmes.

· What is permitted?

References to the products and services of a sponsor in sponsor credits are permitted under the Code on the basis that they can help identify the sponsor or help create that link or association between the sponsor and the sponsored content.

Guidance issued by the European Commission on the interpretation of the Directive states that such references may only be made for the “sole purpose” of identifying the sponsor and making clear the link between the programme and the sponsor.

· Sponsorship credits or advertising - what’s the difference?

There is no clear dividing line between where sponsorship credits end, and advertising begins. Whether a sponsorship credit is actually advertising will depend on a number of factors. Ofcom will take into account factors such as:

- What is the primary focus of the credits - the sponsorship arrangement itself or the sponsor’s product or service?

- What information about the sponsor’s products/services is included in the credits? Does it go beyond simply helping to identify the sponsor?

- Is the viewer encouraged to contact the sponsor to make a purchase (as opposed to simply providing details of the sponsor’s website)?

· Where did the broadcasters go wrong?

From the responses given by broadcasters during Ofcom’s investigation, it seems that some broadcasters took the view that they had seen similar content being broadcast which had not resulted in regulatory intervention and had thus assumed that it was permitted. However, Ofcom has made clear that compliance decisions made by broadcasters should be based only on the Code, not on assumptions based on material previously broadcast.

· What did Ofcom consider unacceptable?

Some examples from the findings in the recent review will help in assessing whether current sponsorship credits are acceptable.

Virgin Media’s sponsorship of Big Brother including the following voiceovers:

“Ellie and Ruth use their Virgin mobiles to get perks at V Festival without having to flash a roadie like usual”.

“Len’s fibre optic cable is just like his women, fast and easy”.

Reference to being able to get “perks at the V Festival” was considered to be a promotional reference to the benefits of being a Virgin Mobile customer and the use of promotional language (”fast and easy”) went beyond a brief description of Virgin’s business and amounted to advertising messages.

The credits for Carphone Warehouse’s sponsorship of X Factor included the following messages:

“The new Nokia 5310 comes with music - exclusively on pay-as-you-go”

“We’ve got a broadband package to suit everyone”

Ofcom considered that these statements referred to positive attributes of Carphone Warehouse’s products, and as such went beyond simply helping to identify the sponsor, and were in fact advertising messages to promote particular products.

Benecol’s sponsorship credits of The Alan Titchmarsh Show included the following voiceover:

“some things you can’t control but at least you can control your cholesterol. Sponsored by Benecol”

and the caption

“at least you can control your cholesterol. Alan Titchmarsh show sponsored by Benecol”.

The credits also contained animated pack shots of the sponsor’s products, on which the printed claim “Proven to reduce cholesterol” was clearly visible. Ofcom’s view was that each of the claims that suggested the product was effective in lowering cholesterol, despite some being factual statements, in this context also amounted to advertising messages.

· What is the upshot of all this?

Although Ofcom has the power to impose significant fines on broadcasters, no fines have been imposed following the recent review. However, Ofcom intends to repeat its monitoring exercise of sponsorship campaigns this summer and has said that any credits found to be in breach of the Code may be considered for further regulatory action. As a result, sponsors and broadcasters may want to review current TV sponsorship credits to ensure that they do not contain advertising messages or references to products and services which go beyond what is permitted.

· Isn’t this the broadcasters’ problem?

While sponsors are not directly subject to the Code, the impact of the Ofcom review is clear: the content of many sponsorship credits will now have to change, something which both sponsors and broadcasters alike must address.

· What next?

Ofcom has said it intends to provide further guidance in due course on the interpretation of the rules on sponsorship, a move which will hopefully provide greater certainty on this issue. The Audiovisual Media Services Directive, set to be implemented by the end of 2009, will also be of interest to both broadcasters and sponsors. This is an issue worth keeping an eye out for over the coming months.

Stuart Grey and John Mayes are Associates in the Intellectual Property, Technology and Sports Group at the London office of international law firm K&L Gates LLP (www.klgates.com - +44 (0) 20 7648 9000).

This article is for information purposes only and does not contain or convey legal advice. The information in this article should not be used or relied upon with regard to any particular facts or circumstances without first consulting a lawyer.

To suggest that sports sponsorship is just a corporate jolly is like thinking that marriage is all about a white wedding.  Both assumptions merely scratch the surface and, although an important aspect to some people, neither tells the whole story.

Corporate entertainment at sporting events has come in for some criticism lately, especially when taxpayers think their investments are being wasted on what they see as unnecessary extravagance. And it’s true to say that budgets are being scrutinised on entertainment expenditure – as they are on all marketing activities – in the midst of these poor economic conditions.

But, in the same way as advertising will continue, sponsorship, in its totality, will also continue – and this includes corporate hospitality. 

To understand the reasons for this, consumers (or, rather, taxpayers) need to understand the importance of marketing and why sponsorship has become such a powerful marketing tool.

In an age of greater consumer choice and media proliferation, it is important that brands engage with consumers and create meaningful relationships.  The way in which O2 do this through their partnership with AEG at The O2 is a prime example of a brand which understands that it must nurture its consumers and make them love the brand.  O2 customers get access to a number of exclusive opportunities at the venue such as priority ticketing and queuing – opportunities they don’t get with any other mobile network.  Once the connection has been made, it is carried on into other areas in which the consumer shows an interest.  O2’s research shows that this approach is working very well and it’s an approach that the brand takes into each of its sponsorships – the England rugby team being a prime example.

Sponsorship is increasingly chosen because, in addition to consumer engagement, it offers brands a number of other marketing opportunities.  For example, sponsorship can promote brand awareness, provide sales promotion options, engage with employees, promote social and environmental credentials, create extensive media coverage, promote brand messages – the list goes on.

For businesses wanting to promote themselves and their products to other businesses (B2B), sponsorship which includes a corporate hospitality element provides an effective platform.  Making the right connections can be difficult in today’s non-stop technology-driven workplace.  An invitation to a sporting or arts event which research has proven is of interest to the recipient is much more likely to achieve success than a request for a business meeting.  And a meaningful relationship is much more likely to be built in a relaxed, informal atmosphere away from the office environment.  Hence the popularity, growth and success of corporate entertainment.

Quite rightly, taxpayers want to feel confident that there is some accountability for such entertainment – and they are not the only ones.  For some time now, businesses have recognised that return on their investment (ROI) needs to be calculated to ensure that budgets are being well spent in this area.

A leading stock-broking firm believes that entertaining clients in its box at Old Trafford is vitally important and a highly cost-effective component of their marketing and public relations activities. The expenditure is highly targeted and focused. They know exactly upon whom they are spending their money and they assess the success of every event, believing there is probably no other medium about which they can say that. They conclude that while avoiding excess and extravagance, they see entertaining in the right environment as likely to be the most successful way of building lasting relationships.

The European Sponsorship Association (ESA) is committed to promoting best practice within the sponsorship industry.  As part of this commitment it provides guidance to its members on how best to ensure Return on Investment (ROI) when making sponsorship investments.  ESA encourages its members to be fully accountable in meeting marketing objectives through sponsorship.

As regards corporate hospitality, there is no recognised standard measurement as every company has different objectives.  But there is a fairly universal measurement used by the majority of sponsoring companies today by which expenditure is matched against business return to ensure value for money.

Such measurements will normally include an internal application process for tickets to an event through which invitees are named and ranked in existing or potential business terms.  Some companies ask employees to state how much additional business can be expected as a result of the invitation.  Feedback questionnaires following an event are commonplace, together with on-going monitoring of the relationship.  One FIFA World Cup sponsor does not allow employees to ask business guests to the event if positive results have not been forthcoming from previous invitations.

In other words, and as in all aspects of business activity, corporate hospitality has to be accountable and seen as value for money. It needs to have a ‘business case’ for the expenditure and a disciplined approach to post-event evaluation.

There are also instances where additional income is not the objective, at least not the immediate, short-term objective.  An example could be a situation where a company has an image problem - maybe an involvement in a scandal of some sort.  The company may wish to entertain certain representatives from the media with the aim of putting across its version of events. Another example could have a very simple objective of wishing to introduce the new managing director to key clients. Neither of these illustrations have a monetary objective but they can nonetheless be an extremely good use of money. 

Taxpayers can be more relaxed over companies in which they have vested interests and which engage in sponsorships, knowing that there is some accountability being applied.  More than can be said for some business practices of late.  

For further information, contact the ESA Office on +44 (0) 208 390 3311 or via

office@sponsorship.org. To find out more about ESA, visit  www.sponsorship.org

The decision to hire external resources to assist with delivering successful sponsorship programmes should be treated with no less rigour than any other service. 

For many, however, there is some apprehension about how to make the best selection as, like many other marketing services, quality suppliers can only be accurately measured based on results for a specific brand, often long after the agency selection process has been completed. 

Whilst past history may be an indicator, as with financial services, it is not necessarily a predictor of future success.  How then do you structure a selection process to maximise the chance that you will pick the right partner?

ESA has consulted with a number of marketing-related associations, including the Incorporated Society of British Advertisers and the Chartered Institute of Marketing.  Having created a draft process, ESA then requested input from a number of members to ensure that the final guidelines were tailored specifically to the needs and practices of the sponsorship industry.  It has therefore identified several steps that can be taken to avoid the worst pitfalls and increase the likelihood of a favourable outcome.

Whilst at first glance the agency selection process may seem long and resource-intensive, adopting a systematic approach to selecting external support will pay dividends in the long term.  That said, the extent to which the process is implemented in full will be a function of the value and priority put on the required service delivery.  Where the service requirements are high value with significant business impact, this process will enable the sponsor to have the best possible outcomes.  Of course, where the service requirement is limited in nature, it is possible to adopt a pragmatic approach to implementing the process. 

A full guidelines document is available for download from the ESA website www.sponsorship.org .  This covers the business case for employing external resources, identifying needs and gaining buy-in from all stakeholders before writing the brief and establishing agency selection criteria.  It then goes on to discuss methods for researching the market and selection methodologies.    Key considerations for running successful pitches are addressed including:

·        Number of candidates

·        Paying for pitches

·        Incumbent agencies

·        Preferred suppliers

·        Timetables

·        Meetings and minute taking

·        Access to members of the Decision Making Unit

·        Pitch day

·        Online procurement

·        Final negotiations

·        Contracts

Finally, there are some thoughts on how to manage the post-selection period, including informing unsuccessful parties and issuing press releases. 

Above all, parties should retain a sense of perspective.  Most clients choose the firm with whom they feel the best emotional fit and therefore it is critical that the selection process leaves enough time for key personnel on both sides to get to know each other. Ultimately, these relationships may prove invaluable at a later 

The ninth annual IEG/Performance Research Sponsorship Decision-makers Survey shows how US sponsors are being affected the staggering economy.

Fifty-one percent of the survey’s respondents said their companies’ spend on sponsorship fees will decrease this year from 2008 levels. Only 14 percent of sponsors plan to spend more, while 36 percent said their budgets would stay the same as last year.

Almost half of sponsors –47% –noted they were seeking to get out of some of their current sponsorships even though those deals were not currently up for renewal. One glimmer of hope emerged with the revelation that 60% of sponsors say they would consider signing first-time sponsorships in 2009.

The average percentage of overall marketing budgets claimed by sponsorship fell from a record high 19.5% to 17.6%, while the average amount spent on activation relative to rights fees slipped for the second straight year to US$1.40 for every US$1 spent on rights fees from US$1.50-to-US$1 in the 2008 survey.

What implications does the recent European ruling on famous trade marks have for major international sports brands?  What can those brand owners do to protect their position?

The European Court of Justice (ECJ), in its recent ruling in the Intel v Intelmark case, has dealt a blow to the owners of ‘famous’ brands who wish to protect their valuable trade marks, by cutting back the extra protection such marks are afforded under trade mark law.

Famous marks

Generally speaking, owning a trade mark protects that mark against use of the same or similar mark for the same or similar goods or services.  Extra protection is available for the owners of ‘famous’ trade marks, who can also object to the use of a similar mark by a third party even when the goods and services are not similar, if they can show evidence of dilution or tarnishment or unfair advantage.

The reason for this extra protection is that some trade marks are so famous that people automatically think of them, and the brands they represent, when they see similar third party marks (even where the goods and services are different).  Because the public associate the two marks, and may think they are related, there is a risk that the reputation and value of the famous brand could be damaged.  Equally, third parties could try to take unfair advantage of more famous brands in order to gain free publicity and goodwill for their products and services.

So how do you define a ‘famous’ mark?  The test is that the brand, as represented by its trade mark,  must be well known to the public for the goods and services offered.  This doesn’t mean that the brand must be well known by the general public but that it has a strong reputation in its particular industry.

Over the last few years, the famous mark claim has been successfully used by brand owners to ensure that their brands remain distinctive in the marketplace.  So, for example, the owner of a famous credit card brand (VISA), was able to prevent use of the same mark on condoms.

The latest decision

The recent ECJ ruling in the Intel case has weakened the protection for famous marks.  The case concerned Intel, the maker of computer chips, and Intelmark, a telemarketing company.   Intel argued that its famous INTEL mark would be damaged if Intelmark was allowed to register INTELMARK as a trade mark for telemarketing services.  The English court was unsympathetic to Intel (saying that “trade mark owners of big brands want more protection than they really need”), but nevertheless referred certain questions of interpretation of European trade mark law to the ECJ.

The ECJ agreed with the English court’s view and stated that the owner of a famous mark must, in order to succeed with a claim, now show a change in the economic behaviour of a consumer caused by the third party mark.  Providing evidence of such a change has not previously been necessary and may be difficult for a claimant to demonstrate.

The English court will shortly apply the ECJ ruling to the specific facts in the Intel case and it will be interesting to see if it provides more information as to what sort of evidence, such as records of financial loss, will be acceptable to demonstrate a ‘change in economic behaviour’.

All is not lost

The ECJ ruling makes it harder to protect famous marks but it does not make it impossible.  Famous marks will still have at least the same level of protection as non-famous marks under trade mark law, but the bar for success for the extra level of protection afforded to famous marks is now set higher than before.  Depending on the circumstances, famous brand owners may still be able to bring claims for copyright infringement or for passing off against third parties using identical or similar marks.  As the ECJ ruling is applied in the UK and across Europe, the type of evidence required to demonstrate a change in economic behaviour should gradually become clear and famous mark owners should then have defined criteria against which to evaluate any possible claim.

In the meantime, the key thing for brand owners who are considering a claim based on the famous mark provisions of trade mark law is to gather as much evidence of a change in consumer behaviour as possible, and to consider carefully the merits of trade mark infringement claims which would previously have been straightforward. 

Stuart Baker is an Assistant in the Sports Group at the London office of international law firm K&L Gates LLP (020 7648 9000; stuart.baker@klgates.com).

This article is for information purposes only and does not contain or convey legal advice. The information in this article should not be used or relied upon in regard to any particular facts or circumstances without first consulting with a lawyer.

In the middle of a global recession it would be naïve for the sponsorship industry to expect to escape unscathed.  But, in some media coverage sponsorship has been portrayed as expensive and with little business benefit. This type of comment is wrong, and must be corrected.

As one of the most effective forms of marketing available to brands, it seems unbalanced to suggest that sponsorship should be the first, rather than the last, budget cut made by businesses and brands facing challenging trading conditions.   The European Sponsorship Association maintains that  sponsorship makes good business sense and companies should put it at the bottom, rather than the top, of its list of budgets cuts in this difficult financial climate.

Sponsorship appears to have been singled out precisely because it enjoys a high profile with consumers.  When Manchester United’s sponsor decides not to renew its contract or when a Formula One team loses its backer, it makes headline news.  But it is precisely this high profile consumer interest that attracts brands to sponsorship and is at the root of the industry’s success as an effective marketing tool.

A prime example of this is the world’s largest sports brand, Nike, which struck a US$40 million sponsorship deal with Tiger Woods in 1996.  At that time the brand had a one percent share of the global golf equipment market.  When the brand re-signed the deal with Woods in 2000 for US$90million, it had captured a 15% share of the global market - a position it largely attributed to the tie-up with Woods and one worth considerably more than the sponsorship outlay.

Another is Red Bull.  It has built a billion-dollar brand and an entirely new category – energy drinks – from scratch exclusively using sports marketing.

Today’s difficult financial circumstances dictate that brands must think harder about effective marketing strategies which deliver tangible business value.  With examples like General Electric’s sponsorship of the Beijing Olympic Games, it isn’t surprising that sponsorship is moving up the marketing agenda.  GE used its Beijing sponsorship to target US$1billion in Olympics-related contracts.  These ranged from lighting and security at stadiums to electrical equipment at subway stations and treatment systems at waste-water facilities.  The company deliberately used the sponsorship to develop relationships with difficult-to-access decision makers within the Chinese government and, as a result, won more than US $150million in contracts for projects such as new baggage-scanning equipment at Beijing Capital Airport.  GE reported US$5billion in revenue in China last year, and aims to raise that figure to US$10billion by 2010.

Sponsorship’s flexibility is another reason brands choose it.  It can address not just one, but many different marketing objectives.  It can drive brand awareness, brand preference and build customer relationships; it can provide the platform for sales promotion, public relations and online campaigns;  it can engage customers and employees; it can act as an expression of corporate reputation and social responsibility;  it can drive both brand and corporate agendas.  Perhaps most importantly, it can act as a platform from which all marketing channels can be accessed, thus providing the glue for successful, cohesive campaigns.

This is why there is no shortage of well-respected consumer marketing companies such as Diageo, Coca-Cola, Vodafone and Heineken investing in sponsorship.  These experienced marketers have recognised that creating unique and relevant content through the investment in consumer passion points creates relationships that can drive real equity and commercial benefits for businesses.

As with any marketing investment, sponsorship must deliver real business benefit.  The European Sponsorship Association has produced an Evaluation Guideline as a benchmark for sponsors.  It examines the wide range of measurement tools available to sponsors, all of which can be tailored to particular marketing objectives to prove the returns to a business or brand.

Increasingly, sponsorship is being recognised as a cost-effective marketing tool.  It currently represents an average 17% of overall marketing expenditure and its growth has outpaced the growth of advertising and sales promotion in each of the last 15 years (source: IEG).  It can act on an international, national or local scale and is successful because it engages with consumers through their passions.

This would explain why there are daily announcements of brands wanting to invest in sponsorship. For example, Heineken has renewed its sponsorship of the European Rugby Cup, The Co-operative has extended its partnership with rugby league until 2012, the new-look Irish rugby stadium will be known as Aviva Lansdowne Road following a naming rights deal, British Airways and Marks & Spencer confirmed their sponsorship of the up-coming British Lions tour of South Africa – indicating that businesses recognise that sponsorship delivers real business value.  And that’s something very valuable in difficult financial times.

For more information, please contact:

Karen Earl, Chairman, The European Sponsorship Association (ESA)

Tel: +44 (0) 203 128 6801, +44 (0) 7912 781 149, ESA Office: +44 (0) 208 390 3311.