By Joseph Esses
As the esports industry continues to soar in popularity and revenue, it has caught the attention of regulatory bodies like the Federal Trade Commission (FTC) in the United States. The FTC plays a crucial role in safeguarding consumer interests and promoting fair competition in the marketplace. With the rise of endorsements and advertisements in esports, the FTC has implemented rules and regulations to ensure transparency, authenticity, and accountability. In this article, we will explore how the FTC’s guidelines impact the esports industry.
Understanding Esports Sponsorships
Sponsorships provide a significant source of revenue for esports organizations, players, and content creators. Sponsorships are largely categorized into two sections: endorsements and advertisements. Endorsements involve the promotion of products, services, or brands by individuals who have a substantial following or influence. Advertisements, on the other hand, refer to sponsored content created to market products or services.
The financial support from sponsors allows teams and organizations to invest in player salaries, training facilities, equipment, and marketing efforts. These resources contribute to the overall growth and development of the esports ecosystem, enabling organizations to attract and retain top talent, expand their operations, and enhance their competitive performance.
For sponsors, the esports industry offers a unique opportunity to engage with a highly desirable and engaged demographic. Esports enthusiasts are typically tech-savvy, digitally connected, and open to embracing new products and services. By aligning with esports organizations, sponsors can gain exposure to a dedicated and passionate fanbase, increasing brand awareness and reaching a valuable target market.
Additionally, sponsors can leverage various marketing channels within the esports space. These include in-game branding, jersey logo placements, content integration, event sponsorship, and social media activations. Such diverse marketing opportunities allow sponsors to create authentic and immersive experiences for esports fans, fostering a deeper connection between the brand and its audience.
An often-overlooked challenge in the esports industry is ensuring these highly valuable sponsorships comply with federal rules related to endorsements. The vast majority of these rules are promulgated by the FTC under the powers granted to them under the FTC Act.
The FTC’s Role in Ensuring Transparency
The primary mission of the FTC is to protect consumers and promote fair competition in the marketplace. The agency is responsible for enforcing various federal laws related to consumer protection, including those related to deceptive advertising and unfair business practices.
The FTC plays a crucial role in regulating marketing practices to ensure that consumers receive accurate information and are not misled or deceived by advertisements. It establishes guidelines, rules, and regulations that businesses and marketers must follow to maintain transparency and fairness in their marketing efforts. The agency’s regulations cover a wide range of areas, including endorsements, testimonials, disclosures, false claims, and privacy.
The FTC’s approach to marketing regulation focuses on promoting truthfulness, preventing deceptive practices, and fostering competition. It requires marketers to provide clear and accurate information to consumers, disclose material connections between endorsers and brands, avoid false or misleading claims, and respect consumer privacy.
Through investigations, enforcement actions, and educational initiatives, the FTC monitors and addresses marketing practices that violate consumer protection laws. The agency has the authority to impose penalties, issue cease and desist orders, and seek redress for consumers affected by deceptive or unfair marketing practices.
FTC Guidelines on Disclosures
The FTC has issued guidelines specifically tailored to endorsements and advertisements in the digital realm, called the “Guides Concerning the Use of Endorsement and Testimonials in Advertising.” These guidelines provide direction and clarity to businesses, advertisers, endorsers, and influencers on how to disclose material connections and maintain transparency in their marketing practices. Here’s a synopsis of the key aspects of the FTC Guides:
- Disclosure Requirements: The most important part of Esports sponsorships complying with FTC rules is making sure there are proper disclosures. The FTC requires that endorsers must disclose any material connections they have with the advertiser that might affect the credibility or impartiality of their endorsements. Material connections can include monetary compensation, free products, or other benefits received in exchange for promoting a product or service. Disclosures of material connections must be clear, conspicuous, and easily noticeable to consumers. They should be placed in a location where consumers are likely to see them and use language that is understandable and unambiguous.
- Online Endorsements: The FTC’s guidelines also apply to endorsements made through digital platforms, including social media. Disclosures in online endorsements should be placed prominently and be easily viewable on the same screen where the endorsement is made. Hashtags or abbreviations alone may not be sufficient to convey the disclosure effectively.
- False or Misleading Claims: The FTC prohibits deceptive practices, including false or misleading claims made in endorsements or testimonials. Advertisers and endorsers should have a reasonable basis for their claims, and they should not make representations that would likely mislead consumers.
- Celebrity Endorsements: The FTC recognizes that celebrity endorsements have a strong influence on consumers. However, the guidelines make it clear that celebrities have the same disclosure obligations as any other endorser, and their material connections with advertisers must be disclosed.
- Responsibility of Advertisers: Advertisers are responsible for ensuring that their endorsers comply with the disclosure requirements. They should establish clear policies and educate their endorsers about the importance of proper disclosures.
The FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising are aimed at fostering transparency and protecting consumers from deceptive marketing practices. By adhering to these guidelines, businesses and influencers can maintain consumer trust, promote ethical advertising practices, and avoid potential legal repercussions from the FTC.
In the context of esports, this means that players, content creators, and influencers must disclose when they receive compensation or other benefits for promoting products or services. Disclosures should be clear, conspicuous, and easily noticeable to viewers, ensuring that consumers are not deceived or misled by the endorsements.
Conclusion
The FTC’s rules and regulations on endorsements and advertisements have a substantial impact on the esports industry. By emphasizing transparency and disclosure, the FTC protects consumer interests and promotes fair competition. Although compliance with these regulations may present challenges, they ultimately contribute to building trust, fostering healthy brand-endorser relationships, and shaping the industry’s standards. As the esports industry continues to evolve, it is essential for all stakeholders to prioritize ethical practices and ensure compliance with the FTC’s guidelines to maintain the industry’s growth and credibility.
The Intersection of Intellectual Property and Esports: Protecting Innovation
In recent years, the esports industry has experienced exponential growth, attracting a massive global audience and lucrative sponsorship deals. As this industry continues to expand, it has become increasingly important to address the complex legal landscape surrounding intellectual property (IP) rights. In this article, we will explore the key considerations and challenges related to IP in esports, including advertising and branding, licensing agreements, and the protection of innovative ideas.
IP Basics
In the United States, IP protections are governed by various laws and regulations. Patents, copyrights, trademarks, and trade secrets form the foundation of IP protection. The U.S. Patent and Trademark Office (USPTO) grants patents for novel and non-obvious inventions, providing exclusive rights to the inventor for a limited period. An example of patentable material would be for VR headsets like the one created by Meta.
Perhaps the two most important types of IP in the esports industry are copyrights and trademarks. Copyrights protect original creative works, including literary, artistic, and musical creations. All video games are copyrightable so long as they are creative as video games are audiovisual creations. The creator of the video game owns the copyright to the game. For example, Activision Publishing, Inc. owns the copyright for the Call of Duty video game series as evidenced by their US Copyright Office filing here. As discussed below, the streaming industry comes with a myriad of copyright issues as it relates to using another individual or entity’s rights while creating a copyrighted work of your own as streams are copyrightable material as well.
Trademarks play a crucial role in the esports industry, serving as powerful assets for teams, leagues, and esports-related companies. A trademark can be any word, phrase, symbol, design, or combination thereof that identifies a brand’s goods or services. Trademarks are how customers recognize brands in the marketplace and distinguish a certain brand’s products from their competitors. For example, OpTic Gaming has three trademarks including “OpTic Gaming,” “Greenwall,” and the OpTic logo. When an entity registers a trademark, no other entity can use their trademark in commerce. Brands wishing to trademark their name, logo, or phrase should consult an attorney to help them file the trademark with the USPTO.
Registering these protections helps an organization in the event that another company infringes upon their IP rights. There are different types of IP infringement that can occur, each posing distinct challenges and potential legal consequences. Copyright infringement involves the unauthorized use, reproduction, or distribution of copyrighted works, such as game graphics, music, or streaming content, without the permission of the copyright owner. Trademark infringement occurs when a third party uses a similar or identical trademark in a way that causes confusion among consumers, potentially diluting the original brand’s distinctiveness. Patent infringement entails the unauthorized use, manufacture, or sale of a patented invention, violating the exclusive rights granted to the patent holder. Trade secret infringement involves the unauthorized access, use, or disclosure of confidential and valuable business information. In the esports industry, these types of infringement can occur in various contexts, such as unauthorized streaming of copyrighted content, unauthorized use of team logos or player likenesses, or the misappropriation of innovative gameplay mechanics. To protect against IP infringement, proactive measures such as obtaining proper licenses, conducting thorough trademark searches, implementing security measures to safeguard trade secrets, and monitoring online platforms for potential violations are crucial. By understanding the different types of IP infringement and taking appropriate actions, esports entities can protect their intellectual property and safeguard their competitive advantage.
Advertising and Branding in Esports
Advertising plays a vital role in the monetization of esports, with brands seeking to connect with passionate fanbases. However, using IP in advertising campaigns requires careful consideration to avoid infringement. Trademarks, copyrights, and image rights are some of the primary IP assets that must be respected. Properly securing licenses and permissions from rights holders is crucial to avoid legal disputes. Additionally, esports organizations must exercise caution when incorporating third-party trademarks or copyrighted materials into their branding to prevent unintended legal consequences.
Licensing Agreements
Esports teams, leagues, and event organizers often rely on licensing agreements to monetize their IP assets and collaborate with sponsors. These agreements grant the licensee the right to use particular IP for promotional purposes. However, negotiating favorable licensing terms can be challenging, particularly when dealing with well-established brands. Esports entities should carefully evaluate the scope of the license, exclusivity provisions, territorial restrictions, and financial considerations. Thoroughly understanding the legal implications of licensing agreements is crucial to protecting the interests of all parties involved.
IP Concerns with Streaming
Esports streaming, while providing tremendous opportunities for content creators and platforms, also brings forth a host of IP concerns that must be navigated carefully. Copyright infringement is a primary worry, as streaming platforms and content creators must obtain licenses or permissions to avoid infringing on copyrighted materials featured in esports broadcasts. Trademark usage and branding require caution to avoid trademark infringement claims, while streamers must obtain consents or releases to respect personality and image rights. Ownership rights and licensing agreements must be considered for original content creation, and measures should be implemented to prevent unfair competition such as stream sniping. By proactively addressing these IP concerns, esports streamers can foster a sustainable and legally compliant streaming ecosystem that benefits both creators and the wider esports community.
Protecting Innovations in Esports
As the esports industry evolves, innovation becomes a key driver of success. Whether it’s new gameplay mechanics, streaming platforms, or virtual reality experiences, protecting these innovations through IP rights is essential. Patents can safeguard technical inventions, while copyrights protect creative works such as game graphics and music. However, the global nature of esports poses unique challenges, as IP protection varies across jurisdictions. To navigate this landscape effectively, esports professionals must work with experienced legal counsel to identify the most appropriate strategies for protecting their innovative ideas.
IP Challenges in Cross-Border Esports
Esports is a global phenomenon, with tournaments and teams spanning multiple countries. However, this international aspect presents additional complexities in terms of IP protection. While IP protections vary across jurisdictions, some international agreements and treaties establish minimum standards of IP rights protection on a global scale. The World Intellectual Property Organization (WIPO) plays a central role in promoting and protecting IP worldwide. Treaties like the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works facilitate harmonization and mutual recognition of IP rights across participating countries. Additionally, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) sets out minimum standards of IP protection and enforcement within the framework of the World Trade Organization (WTO).
These international agreements provide a framework for cooperation and enforcement, allowing esports stakeholders to seek protection for their IP rights beyond their home jurisdiction and encouraging global innovation and creativity. However, it is important to note that enforcement and the level of protection may still vary from country to country, requiring careful consideration and strategizing when seeking global IP protection. Esports organizations must develop a comprehensive understanding of IP laws in each relevant jurisdiction. This knowledge enables them to effectively enforce their IP rights, mitigate infringement risks, and safeguard their competitive advantage.
Conclusion
As the esports industry continues to grow, so does the importance of effectively managing intellectual property rights. From navigating advertising and branding considerations to negotiating licensing agreements and protecting innovative ideas, esports entities must prioritize understanding the legal landscape surrounding IP. By proactively addressing these challenges and working closely with legal experts, esports professionals can ensure the longevity and sustainability of their brands, foster innovation, and contribute to the continued success of this dynamic and evolving industry.
Joseph Esses is a corporate attorney at the Gordon Law Group working with various clients in the esports industry ranging from individual streamers to multinational corporations. He previously worked in the in-house legal departments of a sports and entertainment startup and the UN. Joe received his law degree from the Sandra Day O’Connor College of Law at Arizona State University and his MBA from Northern Illinois University.
