Originally published in Private Client Practitioner Guernsey Supplement, December 2011

Guernsey is to introduce new image rights legislation. This will be of benefit for high profile wealthy individuals to protect their reputation and may also have tax advantages, writes Jason Romer of Collas Crill.

Guernsey benefits from a modern, state of the art legal regime and is often at the forefront of innovative developments. The area of intellectual property is no exception. In 2004, Guernsey introduced an 'enabling law'; primary legislation that allowed for the introduction of separate intellectual property rights (IPRs) by way of secondary legislation. To date, a wide variety of IPRs have been introduced, ranging from the more traditional rights such as trademarks, design rights and copyright, to data base rights and plant breeders rights.

On 30 September 2011, the States of Guernsey (the island's parliament) approved the drafting and introduction of a new IPR: image rights. This right is primed to have a significant impact on the way individuals protect the use of their image and structure their tax planning.

Generally speaking, an 'image right' may be defined as a right intended to protect the use of an individual's name, image, likeness or other aspect of his or her distinctiveness or personality. A number of jurisdictions have been willing to recognise the concept of an image right, such as the 'right of publicity' in certain US states, which prevents the unauthorised commercial use of a person's name, likeness, or other recognisable aspects of their persona.

However, Guernsey is about to lead the way in the development of this new IPR. The law approved in Guernsey will recognise image rights on a statutory footing and see the introduction of a register image rights: a world first.

A valuable asset

Image rights are already recognised as extremely valuable assets, predominantly for sports stars and other celebrities. A celebrity's endorsement of a business - or the use of their image - has the potential to provide significant value, both for the celebrity and the business concerned.

A recent study by Forbes found that, despite his infamous scandal and injury plagued season, Tiger Woods is still considered the world's most valuable sports star, with the Tiger Woods "brand" being valued at $55 million. He is ahead of Roger Federer ($26 million), Phil Mickelson ($24 million) and David Beckham ($20 million).

Nike famously paid Woods $200 million for 10 years of endorsement. There is no doubt that Nike's additional revenue produced by the association with Woods has warranted such a considerable fee.

Although image rights are not be expressly recognised under English law, they still form an important part of many commercial agreements. An agreement assigning Wayne Rooney's "off-field" image was found to be unenforceable for reasons of restraint of trade in a High Court case last year. However, the court acknowledged that agreements relating to image rights and their exploitation had become a common and accepted form of commercial agreement.

The Guernsey image right may assist in the drafting of such agreements and provide clarity on the subject matter, as this will be an identifiable right on the register of image rights in Guernsey.

The intention is for Guernsey image rights to be introduced in time for London's Olympic Games and the 2012/13 football transfer season. Celebrities, sports stars and other recognisable figures will be able to obtain a registered Guernsey image right protecting certain definable aspects (such as their name), as well as those less easily defined (like gestures, distinctive expressions, characteristics or attributes). The legislation will balance the protection of such image rights against other important rights, such as freedom of news reporting and the public interest.

Notably, a Guernsey image right may be registered by a person's estate, meaning such protection is offered to both the living and deceased. The potential for exploitation of a deceased individual's image may seem limited at fi rst, but for those celebrities whose status and reputation survive their death, the use of their image can provide a continued income to surviving relatives. CKX Inc., a company that, among other things, owns the rights to Elvis Presley's name, image and likeness, was purchased earlier this year for $509 million. Whether it's entry fees to Graceland or the purchase of memorabilia, Elvis is clearly still capable of producing a substantial income and the Guernsey image right will help to protect this for years to come.

Tax issues

Not only are image rights important due to their commercial value, but the taxation of income arising from such rights is a very hot topic. Tennis player Rafael Nadal has recently confirmed that, for just the second time in six years (the other due to injury), he will not be playing at Queen's Club next year in preparation for Wimbledon.

This is as a direct result of the UK's approach of taxing a proportion of a sports star's global income for every day spent in the UK. The UK has previously decided that a player's income, whether from tournament winnings or endorsement contracts, is indistinguishable and should be taxed as a whole. Therefore, if a competition's potential winnings do not outweigh the proportionate taxation on global income, it may not make financial sense for sports stars to visit the UK. Although it is impossible to predict how this area may develop over the coming years, registering a Guernsey image right and structuring income through the licensing of such right could help to show a distinction between a sports person's income arising from commercial endorsements and that from actually playing their sport.

The introduction of a statutory image rights regime is not the only advantage Guernsey has to offer from an intellectual property management perspective. It may be extremely beneficial for IP holders, particularly sporting figures and other famous individuals, to consider holding all of their IP in Guernsey.

With innovative corporate structures like the protected cell company and incorporated cell company, beneficial tax regime and world class professional service providers (including accountancy firms, banks, asset managers and administrators),

Guernsey is a clear choice for the holding of IP and other assets. Although the full impact of Guernsey's image rights legislation is yet to be realised, the island is set to lead the way in developing and experiencing a new and exciting intellectual property right. It seems clear that other jurisdictions will follow suit.

For more information about Guernsey's finance industry please visit www.guernseyfinance.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.