Dispatch From The Trademark Wars: Ambush Marketing And The Arena Of Sports

Tuesday, February 1, 2005 - 01:00

American consumers receive over 3,000 commercial messages each day. To cut through this clutter, advertisers are employing new, outside-the-box techniques. Guerrilla marketers stencil messages onto sidewalks and paste stickers onto walls, windows, and even competitors' ads. Viral marketers generate buzz through word-of-mouth and e-mail campaigns. Ambient marketers wield provocative signs and hand out samples on city streets. Stealth marketers arrange for television characters to consume their soft drinks or drive their cars.

While these tactics are sometimes controversial, none has attracted the outcry provoked by ambush marketing. Ambush marketers seek to attach their products to major sports and cultural events - the Olympics, the Super Bowl, the Academy Awards - without the expense of sponsorship.

Although sponsors complain that ambush marketing is done solely to save on sponsorship fees, it isn't necessarily a cost-cutting measure. Rather, many employ it to stand out from the "official sponsor" crowd by cleverly subverting those messages. The debate persists. Critics claim that it will destroy the value of sponsorships and ultimately make financing events like the Olympics impossible. Proponents claim that anything that increases information for consumers, particularly if presented in an ingenious way, is a social good.

In the American marketplace, ambush marketing is -- generally -- legal and tolerated. Jerry Walsh, former marketing chief of American Express and credited as the inventor of ambush marketing, described it as "an important, ethically correct, competitive tool in a non-sponsoring company's arsenal of business and image-building weapons." Outside the United States, however, numerous countries have attempted to protect official sponsors through restrictive legislation. This article discusses the legal environments in which ambush marketing occurs and highlights some strategies for those attempting it.

What Is Ambush Marketing?

Broadly defined, ambush marketing is any attempt by a non-sponsor to capitalize on the popularity of an event to promote its own products or services. When the Academy Awards are aired, for example, the whole world is watching: not only ceremony attendees and celebrity-spotters at the Kodak Theatre, but the worldwide television audience watching the show and its costly commercial breaks. Official sponsors of the event receive special recognition. Their competitors, however, are often unwilling to sit on the sidelines, resorting instead to ambush marketing.

Ambushes fall on a continuum, ranging from the clearly illegal -- selling counterfeit Olympic t-shirts -- to the utterly benign -- taking a client to a Yankees game. Where one draws the line depends largely on the country; what is legal in the United States may be grounds for arrest abroad.

Some famous examples: At the 2002 Salt Lake Olympics, Sprint, not an official sponsor, ran ads in snowy settings: "Sprint: Proud sponsor of everything fast, new, and really quite amazing." At the 1994 Winter Games, sponsored by Visa, non-sponsor American Express blanketed the airwaves with its catchy slogan: "If you are traveling to Lillehammer, you will need a passport, but you won't need a Visa!" During the 2004 Summer Games, non-sponsor Miller ran ads touting its dominance in a beer taste test in Athens, Georgia. Miller was blunt: "We weren't prepared to surrender these two weeks" to sponsor Anheuser-Busch.

Why does it matter? Large events are enormously costly to produce; sponsorships help make them possible. The total worldwide audience for the 2002 World Cup was estimated at 5 billion people; last summer, the Athens Olympics was beamed to 8 billion viewers. The cost of an official Olympic sponsorship has risen correspondingly over the years to an average of over $50 million per sponsor per two-game cycle. The returns to the marketplace and the host country are correspondingly large: the 2000 Sydney Games, the most profitable ever, generated $2.6 billion in licensing and sponsorship revenue.

Legal Framework

United States

The Lanham Act (15 U.S.C. §§ 1051, et seq.) effectively (though not explicitly) provides protection against the more invidious forms of ambush marketing. Under the Act, infringement remedies are available against one who uses a mark sufficiently similar to a registered mark that it is likely to cause confusion or deceive consumers regarding the source or sponsorship of a product.

Lanham Act protections, however, are subject to the "fair use" defense, which permits good-faith, descriptive use of a mark by someone other than a trade mark owner or licensee, even for commercial purposes, if the use: (i) is necessary to identify the product or services; (ii) is limited to that reasonably necessary; and (iii) creates no suggestion of sponsorship or endorsement by the trademark owner. For example, in WCVB-TV v. Boston Athletic Ass'n, 926 F.2d 42 (1st Cir. 1991), the First Circuit held that Channel 5's use of the mark "Boston Marathon" in reporting on the Marathon qualified as a legitimate fair use with no risk of confusion to the public.

The Olympics receive special protections against ambush marketing under the Ted Stevens Olympic and Amateur Sports Act of 1998, which gives the U.S. Olympic Committee control over commercial use of Olympic imagery. Interestingly, there is no need to show a likelihood of confusion for certain enumerated Olympic symbols. Thus, in San Francisco Arts & Athletics v. U.S O.C., 483 U.S. 522 (1987), the Supreme Court held that the use of the term "GAY OLYMPICS" was an infringement, even though there was no likelihood of confusion between the Gay Olympics and the Olympics.

Ambush Marketing Laws Abroad

Contrary to the tolerant legal regime in the United States, several other countries have enacted stringent protections against ambush marketing. These laws distinguish between two types of ambush marketing: (1) ambush marketing by association (certain types of which may be actionable under the Lanham Act), which improperly suggests that the advertiser is a sponsor of the event (selling counterfeit "World Cup" t-shirts) and (2) ambush marketing by intrusion, which merely exploits the publicity surrounding an event without implying any official association (distributing samples of your company's sports drink outside the World Cup venue).

South Africa has enacted strong protections against ambush marketing. The Trade Practices Act makes ambushing by association a criminal offense, and the Merchandise Marks Act (MMA) outlaws acts of ambush by intrusion where the government has declared an event to be "protected." Prohibited acts include: (i) placing advertisement on the outskirts of an event; (ii) referencing a protected event - even if there is no suggestion that the advertiser is a sponsor; and (iii) bringing a product to the attention of people interested in the event - again, even if there is no suggestion that the advertiser is a sponsor. On the basis of these laws, organizers of the 2003 World Cricket Cup in South Africa boasted that they could activate police to enforce these protections "at the push of a button." Asked whether such policies might alienate fans, they responded, "we are more concerned about the money that goes to the international sports."

Although few countries have gone as far as South Africa, other examples abound. In preparation for the 2008 Beijing Olympics, China banned activities that "may make third parties believe that there are sponsorship ... relationships between the users and the . . . owners of Olympic symbols." Fines for infringers could be substantial, since they can reflect the lost license fees for the marks infringed. Similarly, in preparation for the 2000 Sydney Olympics, Australia outlawed any activities that "to a reasonable person, would suggest that ... [an advertiser] is or was a sponsor of ... the Olympics." Finally, for the Athens Olympics, Greek organizers implemented a "Clean Venue Policy," explicitly banning ambush marketing as well as "banners, ... signs, ... commercial items with obvious logos of competitive companies to sponsors (hats, t-shirts, bags, etc.), ... unauthorized signs, [and] advertising print material...." Olympic stewards were even instructed not to wear shoes with non-sponsor logos.

Anti-ambush legislation is now routinely promised by countries vying to host international events. For instance, in competing bids to host the 2007 World Cup, both Barbados and Saint Lucia have stated their intention to pass legislation to ban ambush marketing.

Implications For Marketers And Their Lawyers -- What Lies Ahead

The good news for those unable to obtain official sponsorship is that ambush marketing is - at least in most of its forms -- legal in the United States, and probably will remain so for the foreseeable future. The key to remaining safely below the legal radar is to refrain from using the event's official marks and symbols (particularly the heavily protected Olympic words and symbols), and to create the association by other means. If the principal event is off-limits, for instance, consider sponsoring an athlete, a team, or an off-site event.

The bad news is that greater sophistication on the part of sponsors and event organizers has led to more sophisticated tactics to block would-be ambushers. For example, local Olympic Committees now routinely purchase all outdoor advertising space for exclusive use by official sponsors. At Athens, sponsors' failure to purchase all reserved space resulted in billboards that were simply left blank. The organizers preparing the bid for New York to host the 2012 Olympics recently announced that they had signed contracts to control 95% of the city's advertising space for exclusive Olympic use, should the Games come to town. In the same spirit, Mayor Bloomberg signed an executive order creating a special enforcement board to crack down on ambush marketing at the hoped-for New York Games.

As we approach the next Olympics, watch for rhetoric surrounding ambush marketing and ask yourself whether it is reasonable, in our current competitive climate, to expect companies like American Express, Visa, and MasterCard or AT&T and Sprint to compete full throttle 365 days of the year but stay home doing nothing when a major event occurs. At the 2004 Boston Marathon, for example, Adidas was the official sponsor, but all of its competitors found ways to come to the party: Reebok vans dispensed Gatorade, PowerBars, and massages; Nike provided expert running consultations at the Nike store on Boylston Street; Brooks reps handed out flip-flops, bandages, and "runner's rescue guides"; Saucony ran an ad campaign featuring 26 local runners; and New Balance offered instant photos in front of a New Balance finish line.

Isn't that the American way?

Jamie Bischoff is Partner-in-Charge of the Intellectual Property Practice at Ballard, Spahr, Andrews & Ingersoll, LLP. Jeffrey P. Curry and Ingrida Berzins are Associates in the Intellectual Property Practice Group.

Please email the authors at jbischoff@ballardspahr.com, jcurry@ballardspahr.com or iberzins@ballardspahr.comwith questions about this article.