Protecting Image Rights

This weekend's post on Afro-IP is worthy of comment on this blog because it involves a case where damages were claimed based on the misuse of a photograph containing the image of a former Miss South Africa in advertising. The facts of the case are set out in the first few paragraphs of this post.

RSA, like most former colonies, has a hybrid legal system with influences from a number of different past masters. In this case, damages (sentimental and patrimonial) were claimed for infringement of common law personality rights and constitutional rights to privacy. Although not claimed in the pleadings, there was also the possibility of damages being claimed under passing off and, in my opinion, trade mark infringement (notwithstanding the limitations of trade marks when protecting image rights).

The Judge in the case went into some detail analyzing the jurisprudence, both locally and abroad, from authors both live and centuries dead. He upheld the claim for sentimental damages (the amount not decided, though unlikely to be very high). In doing so, he re-affirmed a principle that personality rights are inextricably linked to the person and cannot be transferred. Incidentally, this month's World Trademark Review contains thought provoking piece by Bob Cumbow on what happens to personality rights when the person dies - in many territories, they too expire.

I am left with a renewed urge to persuade those with valuable image rights to try to use conventional IP rights such as trade marks (name, signature, effigy) and, where possible, copyrights to protect their image together with a licensing and enforcement program that controls and educates about the use of their image. Unlike personality rights, IP rights can be transferred, infringements can be easier to prove (for example, there is no need to show 'intent' under trade mark infringement) and the financial minded may better understand their value on the balance sheet. Again, I say this very much aware of the limitations in using trade marks to protect image rights.


- Posted by Darren

HMRC on the attack on image rights?

IP Finance thanks Angus Bujalski (Michael Simkins LLP) for the following post:

Amid the general outcry over Manchester United’s proposed £500 million bond issue, one of the many risk factors listed seems to have received undeservingly scant attention. The club noted that it was under investigation by Her Majesty's Revenue & Customs (HMRC) for payments made in relation to players’ image rights. These structures, common in top-flight football, typically involve a player assigning all rights in the exploitation of his image to a company, often offshore. Unlike most civil law jurisdictions, since there is no single concept of an “image right” in English law, the agreements typically include a broad assignment of all rights to use a player’s name, image, likeness, voice, even shirt number, and so on. The club then pays a licence fee to the company for the right to exploit these rights.

Crucially, the clubs argue that these payments should be viewed as capital sums, and therefore not taxed as income, since the payments are made under genuine arm’s length transactions under which the club gets real value for the money paid to the players. HMRC’s position, however, is quite the opposite, arguing that image right structures are artificial schemes designed to avoid tax. Specifically, payments made in this way are not subject to UK income tax or national insurance in the hands of the player, so the clubs can therefore incur less expense to ensure the player receives the same net amount as if the payments were paid as wages. Second, it means the club does not incur the National Insurance costs on the payments it would have to make, were the payments made as wages.

The legality of image rights structures has long been problematic even after the courts first ruled such payments legal in the cases involving Dennis Bergkamp and David Platt. It has been suggested that HMRC have been aching for the opportunity to bring a case to court as a means of overturning these decisions. Indeed, the fear of the courts reversing the Bergkamp decision is one reason why several Premier League clubs do not use these structures.

Now, with public finances stretched, it may be that HMRC are more actively pursuing this opportunity. Any judgment overturning the Bergkamp decision would have serious consequences for many Premier League clubs. The prospectus for Manchester United’s proposed bond issue suggests that the club could be liable for up to £5.3 million in past National Insurance contributions. Of greater concern to clubs, however, would be the increased wage costs, since there is little doubt that players would request their wages be grossed up to leave them in the same net position, particularly as they will be subject to the new higher rate income tax of 50%.

Coincidentally, it was reported last week that the annual profits of Beckham Brand Limited, the company set up to exploit the image rights of David and Victoria Beckham, grew 60% after his first season with the LA Galaxy. Beckham’s return to Manchester United with AC Milan in the Champions League will no doubt serve as a reminder of the real value of the rights to a high profile player’s image.

The power of image rights

The power of image rights is no better illustrated than by this link to an article in The Guardian entitled "Endorsements block a 'major factor' in Ronaldo's move to Real Madrid".  Brand Finance specialist and brains behind Elle Mcpherson's original licensing model, Mary-Ellen Field, is heavily quoted:

"Ferguson's view that [commercial exploitation] takes a player's mind off the game is valid," Field said. "However, the contract between the player and licensee means they usually have to work 20 days a year at most.

"With any brand building, whether it's a person or product, the more positive exposure you get, the more valuable your brand becomes. It would have been beneficial for the club and player to get as much exposure as possible."

"In 2002, United signed a 13-year £300m contract with Nike that allows the company to control the club's global licensing and retail operations. believes that if Ronaldo had been able to develop, for example, his own perfume brand, like Beckham's lucrative Pure Instinct, it would have been mutually favourable. Despite being the world and European player of the year, Ronaldo's only major deal is a recent agreement with Castrol, in contrast to Beckham's blue-chip partnerships with Armani and Adidas. "There is no downside. The player is happy with his endorsements, and the club can sell the product and get the mark-up – website sales are huge," Field said

When it comes to player management it is not often that one criticises Sir Alex but is this an indication that Manu are struggling to keep pace? Or perhaps it is another shrewd move by a manager who realises that a team is not just a collection of stars but a closely knit unit where no individual is beyond the game or the team? Either way, it is a fascinating insight into the potential power of image rights. The irony is that stars like Ronaldo and Beckham owe so much to nurturing by the likes Ferguson in creating their image. One just has to consider the deft management of both players' images following the infamous Rooney (created by Ronaldo) and Beckham send offs during crucial tournaments; on both occasions potential image annihilators. 

....which leads me to my quote of the day: "The intellectual property and sheer weight of experience in this Springbok squad make them one of the best ever" The Sunday Times, ahead of the Springbok v Lions test match series in South Africa this month.

A cricketer's pose

The West Indies Players Association have been assigned the image and intellectual property rights for 75 of their members as set out in the formal agreement between the players and WIPA. It is an initiative that has been welcomed by WIPA and its members as the organisation seeks to exploit and maximize the full commercial potential for the use of the players' intellectual property and image rights. "WIPA has fought many long and tough battles in recent times including those to protect the intellectual property and imaging rights of players and we are quite pleased that the parameters are now much clearer in relation to such rights," said WIPA president and CEO, Dinanath Ramnarine. He said the deal with the 75 cricketers follow the emerging trend of similar arrangements between cricket players and their associations as in the case with the equivalent groups in South Africa and England.(source: CarribeanCricket.com).

There is often much debate about whether it should be the individual, the team or the league or the federations in charge of the sport as to ownership of image rights. Some people argue that the personalities have worked hard to create their fame and so should be able to control commercially the results of this hard work by owning the rights themselves. There is also a case that since the public created the personality's fame, that it should be the public as a whole that decide who owns the rights.

Whatever the position this development must come as relief to WICA who suffered the emabarrasment of a revolt over image rights, as reported in the Telegraph here in 2004.

Tiger's march to become the first $1 billion athlete

According to Golf Digest, a leading South African golf magazine, Tiger Woods (no surprise) leads the 2007 top 50 earners with a recorded annual income of $122 702 706. Interestingly, only one sixth of his income comes from actually playing golf with the remainder coming from endorsements, bonuses, appearance fees, corporate outings, speaking engagements, licensing receipts, course architecture, books, instructional videos and other businesses that capitalise on what is often referred to as his "image rights". Tiger's overall career earnings, according to the article, are $769 440 709 putting him on track to become the world's first $1 billion athlete.

In other sports the opportunities to exploit image rights are nowhere near those afforded to golfers. Golfers have unique opportunities to earn income - for example designing golf courses. Furthermore, they can play the game throughout their lives. This is no more evident than in the case of 42nd ranked Gary Player who, at age 73, is still able to generate over $5million off his brand, tag lined "The Black Knight". To put golf earnings in perspective, David Beckham, arguably the greatest contemporary brand of the "worlds' most popular sport" - football, was only! able to earn a third of the income of Tiger Woods over 12 months in 2006/7 (according to figures released by Forbes magazine).