Trademark and brand management: What’s in a (stadium) name?

December 8, 2021 – As a sign of the times, the name of a cryptocurrency service company will soon replace the name of an office supplies retail store on Los Angeles’s professional basketball and hockey arena and music concert venue. Affixing a brand name to an arena, stadium, or other facility is a complex and expensive marketing decision. There are also legal implications, especially in the trademark and brand management context.

Under a typical trademark license agreement, a licensee pays a brand-owning licensor for the privilege of using the licensor’s trademark on the licensee’s goods or services. For example, a T-shirt manufacturer might pay a sports team a royalty in exchange for the legal right to print T-shirts branded with the sports team’s logo. The licensor and licensee negotiate the various rules of the license, such as how many T-shirts the licensee may produce, in what stores the T-shirts may be sold (trade channels), in what countries the T-shirts may be sold (territory), and for how long the T-shirts may be sold (term).

In addition to these typical commercial terms, to be a valid trademark license, the licensor must maintain control over the quality of the licensed goods or services. This quality control is typically exercised through some combination of approval rights, inspection rights, termination rights, and the licensee’s adherence to pre-established use rules (such as a style guide).

If a licensor does not have a contractual right to control the quality of the licensed goods or services bearing the licensor’s mark or has the contractual right but does not actually exercise these rights, a court may rule that the trademark is no longer exclusively associated with the licensor and has been abandoned through naked licensing. In other words, the stakes can be high, even with a seemingly benign trademark license and should be carefully evaluated by a trademark lawyer.

A stadium or arena naming rights agreement is a unique type of trademark license agreement in which the licensor pays the licensee. And instead of the licensee receiving a privilege, the licensee accepts an obligation to use the licensor’s brand on stadium or arena signage and when promoting the stadium or arena. But the hallmarks of a trademark license remain. The licensor and licensee must reach an agreement regarding how and where the stadium or arena operator can and must use the licensor’s name. For example, can the venue operator create ancillary goods like shirts, hats, and tote bags with the licensed stadium name on them?

The quality control provisions of a stadium or arena naming rights agreement are particularly complex. On one hand, the operation of a stadium or arena is typically far afield of the goods or services the licensor offers on a day-to-day basis. So, the licensor — often a financial services company, retail store, utilities provider, or consumer products company — has little to offer the operator in terms of high-quality operation of a venue.

On the other hand, the venue name might be the most visible use of the trademark to the general public. Therefore, the licensor’s interest in protecting its public image is high. Accordingly, the licensor and licensee must find a system of pre-approvals, first-instance approvals, and case-by-case approvals that does not overwhelm the brand-owning licensor or unreasonably bottleneck the venue operator.

Regardless of the approval system established between the brand owner and venue operator, entering into the naming rights agreement requires a leap of faith for the brand owner. This is especially true for brand owners very protective of their trademarks and brand owners entering into their first stadium or arena naming rights agreement. And the licensed uses are just the tip of the iceberg. Trademark nominative fair use law generously allows third parties to use the name of a venue or location to refer to that location (for example, “Joe’s Restaurant, just 50 steps from Widget Arena!”). A company’s desire for the thrill of seeing its name atop an iconic sports venue must be paired with a healthy amount of thick skin.

With the great visibility of a stadium name comes great opportunity for trademark and brand management strategy. At a minimum, affixing a brand to a major sports venue generally increases the commercial strength of the brand in consumer surveys and allows the brand owner to populate its “fame binder” with press mentions of the brand, both of which are very helpful for brand enforcement.

But the trademark and brand management benefits do not end there. Because the operation of a stadium is typically far afield from the brand owner’s core business, developing trademark rights in stadium or arena services typically allows the brand owner to materially expand the scope of its trademark portfolio. In fact, because the U.S. Trademark Office typically refuses registration of generic and highly descriptive terms for the goods and services they identify, for some brand owners like the hypothetical widget manufacturer using WIDGETS.COM as its brand, registering its mark for stadium and arena services might be its best attempt at securing federal registration of its mark.

For trademark office administrative convenience, services are divided into 11 classes. The three service mark classes commonly implicated by large venues are:

•Class 35 — advertising and promoting the events of others and retail store services;

•Class 41 — entertainment services; and

•Class 43 — hospitality services.

Interestingly, “arena services” are classified in Class 43, but “stadium services” are classified in Class 41. The U.S. Trademark Office explains, “Although services involving rental of general purpose facilities, such as banquet facilities, are classified in Class 43, services involving rental of specialized facilities/facilities for a particular purpose are classified according to the intended purpose. Stadiums are generally used for sporting events and music concerts, which serve entertainment purposes. Therefore, rental of stadium facilities is classified in Class 41.”

In any event, for any large sports venue, effective trademark lawyers can typically secure both Class 41 and 43 registrations for a brand owner’s named sports venue, especially because of the ancillary services at these venues, like food and beverage concessions and musical concerts. Because trademark law usually evaluates the relatedness of goods and services when the same or similar mark is used, establishing rights in Classes 35, 41, and 43 can greatly expand the scope of what is “related” to the brand owner’s goods and services, especially if the brand owner primarily sells goods.

Of the 27 professional U.S. basketball venues with corporate names, 21 of the 27 brand-owning licensors have federally registered the venue name in at least Class 41 or 43 (and typically both). Likewise, of the 27 professional U.S. football venues with corporate names, 22 of the 27 brand-owning licensors have registered the venue name in at least Class 41 or 43.

Of course, these trademark and brand management principles are not exclusive to the elite tier of professional basketball and football venues. Both the risk and reward of naming rights can apply to mid-sized and small facilities for sports, concerts, conventions, and exhibitions and even many office buildings and complexes. When the naming rights discussions begin, the trademark lawyer should have a seat at the table and, perhaps, an intent-to-use service mark application at the ready.