United States: Licensing Journal Features Article By KMT's David Klein And Joshua Wueller: Intellectual Property Concerns For Sponsors Of Promotional Contests And Sweepstakes

Last Updated: May 28 2015
Article by David O. Klein and Joshua R. Wueller

Marketers are always looking for more effective ways to entice consumers, with the goal to build a brand and sell more products and services. Long ago, armed with the knowledge that people enjoy winning prizes, savvy promoters began offering promotional contests and sweepstakes, which encourage consumers to participate in a marketing initiative in exchange for the chance to win certain giveaways. Winners of sweepstakes are chosen by luck of the
draw, while contest prizes typically are awarded to entrants who best perform a given task. When administered effectively, these promotions can create buzz around a particular product or service, drive traffic to a storefront, produce user-generated advertising content and build marketing lists.

As time progressed, sponsors began redeploying the age-old concepts of promotional contests and sweepstakes on the Internet through the use of high-tech Web sites and social media platforms. However, as promotions have become more interactive and publicly accessible, sponsors become more susceptible to certain legal risks surrounding intellectual property (IP)—including images, names, symbols, designs, written text, inventions, and other materials. This article explores many of these IP-related legal concerns and considers some steps that sweepstakes and contest sponsors may take in an effort to minimize risk.

Entrants and User-Generated Content

First and foremost, sweepstakes and contest sponsors should be aware that the manner in which their promotions feature entrants themselves and, when applicable, the content that participants submit during the course of any given promotion, could have serious legal implications.

Entrant Submissions

One common form of promotional contest, especially among those conducted primarily online,
requires participants to submit original photographs, video clips, written works, or any manner of other material to the sponsor in order to enter. Sponsors often will incorporate this user-generated content (UGC) into their subject marketing campaigns.

As most of the readership is probably aware, the Copyright Act grants creators of original content the exclusive right to copy, distribute, perform, display, and create derivatives of their works.1 For promotions incorporating UGC, the official contest rules should grant the applicable sponsor a license to use entrant-submitted works for, at least, the limited purposes of use in connection with the subject promotion itself and related contest marketing endeavors.

We advise sponsors to avoid using over-reaching copyright transfer and licensing language in the contest rules associated with promotions involving UGC. For one thing, any transfer or exclusive license must be in writing and signed by the author in order to be valid under applicable law.2 Although some courts have found that clicking a button on a pop-up notice containing transfer language constitutes a sufficient "signed writing,"3 technology has outpaced the law in this area, and collecting signatures from entrants creates an additional burden for sponsors.

Moreover, sweepstakes often are considered games of chance and, therefore, illegal lotteries under applicable law, unless one of the following elements is removed: (1) a prize awarded to the winner; (2) chance in determining the winner; or (3) consideration for entry in the game.4 Sweepstakes sponsors typically are able to steer clear of the consideration element by providing entrants with a free, alternative method of entry (AMOE). However, one scholar has argued that promotions requiring the transfer or exclusive license of UGC as a condition of entry might qualify as consideration, which could bring the sweepstakes or contest within the dangerous realm of lottery regulation.5

Some contest entrants may submit UGC that incorporates third-party text, images, brands, or other materials. Similarly, UGC, such as photographs and video, might include a third party's name and/or likeness. As such, as a condition of entry, the official contest rules should include representations and warranties from the entrant: (1) that he or she has obtained the consent of every third party whose name, image, likeness, brand, or other materials are featured in the submission; and (2) that the materials submitted to the sponsor do not infringe upon any third-party copyright or trademark rights, rights of publicity (discussed below) or other intellectual property rights. Additionally, the contest rules should contain an indemnification provision that protects the sponsor from third-party claims and/or damages arising out of or related to any breach of the entrant's representations. As an additional precaution, some
sweepstakes sponsors require winners to sign separate written release agreements before using the winners' intellectual property.

Finally, sponsors that circulate UGC online may find additional protections in the safe harbor provisions of the Digital Millennium Copyright Act (DMCA).6 In order to qualify for the safe harbor, contest sponsors should designate a DMCA agent with the Copyright Office, include a DMCA take-down procedure notice on their respective promotion Web sites, monitor submitted complaints and respond expeditiously to any claims of infringement.

Name and Likeness of Entrants

Separate intellectual property rights exist with respect to the entrant's name and likeness. The laws of at least 47 states have acknowledged a right of publicity, which grants an individual the right to control the commercial use of his or her identity.7

Many promotion sponsors choose to identify participants, finalists, and/or prize winners during the course of (or following) their sweepstakes and contests. On a related note, some jurisdictions require sweepstakes sponsors to provide the names of winners upon request8 or file a winners' list with the state within a designated period of time following winner selection.9 In many instances, winners are featured in such a prominent manner that the means of identification itself becomes one of the prizes.10

Sponsors that use an entrant's name and likeness without authorization, however, risk violating that person's right of publicity.11 In most cases, official contest rules should expressly state that each entrant, by entering the contest or sweepstakes, consents to the sponsor's use of his or her name, image, voice, and likeness for purposes of the promotion and any subsequent promotional and advertising endeavors. In addition, winners should be asked to sign a Winner's Affidavit and Release when they are selected as contest winners, which, among other things, grants to the applicable sponsor the right to use each winner's name and likeness for promotional purposes. Please note, however, that the laws of at least one state (Tennessee) prohibit conditioning a contest or sweepstakes prize on the winners' consent to the use of their names for promotional purposes.12

Third-Party Brands and Materials

Many contest sponsors incorporate the names, products, and materials of third parties during the course of their respective promotions. Aside from entrant-related IP issues (discussed above), sponsors should be aware of the risks that accompany the unauthorized use of third-party intellectual property.

Endorsers, "Works Made for Hire," and Sampled Content

A wide range of photos and other media are featured in contest promotional advertising, Web sites, and brochures. In some instances, sponsors will have employees or independent contractors take photographs of prizes or create other materials that ultimately are incorporated into the advertising creative associated with a given contest or sweepstakes. Each of these workers should agree in a signed writing that: (1) photos and other materials that they generate are "works made for hire;" and (2) all content deemed not to be a work made for hire is assigned to the sponsor.

In other instances, a sponsor may prefer to use songs, photos, or other media belonging to a third party. In such situations, the sponsor should be sure to seek out the permission of the content owner(s) to avoid claims of infringement. Sponsors must never assume that stock photos, clip art, or other seemingly innocuous materials are in the public domain and free to use without the subject owners' consent.

Additionally, promotions often attract entrants by including the names, images, written endorsements, or other identifying characteristics of celebrities, models, or other third parties.13 To minimize rights of publicity violation claims, sponsors are advised to obtain consent in writing to the commercial use of third parties' names and likeness.14

Promotion Names, Prizes, and Platforms

It is no secret that prizes drive consumers to participate in sweepstakes and contests. Many sponsors encourage participation by timing their promotions around high-profile sporting events, concerts, and media releases, as well as prizes and themes that are related to the applicable events. Pursuant to the Lanham Act15 and applicable state unfair competition
laws,16 however, contest sponsors should refrain from using third-party names, logos, or other identifiers in a way that confuses consumers as to the origin or sponsorship of contests and sweepstakes.

Consider, for example, Bauer Entertainment Group's "50 Shades of Grey Themed Prize Package" sweepstakes, which highlights the name of the popular erotic romance novel and film in its title and URL address.17 The promotion's description and Web site landing page photo prominently feature a pair of tickets to the movie and a "Limited Edition 50 Shades of Grey Teddy Bear" as prizes, and its timeline coincides with the film's international release dates. Against this backdrop, consumers might reasonably affiliate Bauer's sweepstakes with the 50 Shades book and film brands. Review of the Patent and Trademark Office's database reveals that Fifty Shades Ltd. (the company of author, E. L. James) has trademarked the phrase FIFTY SHADES OF GREY for a range of "colorful" goods and services.18

Similarly situated sponsors should always obtain the written permission of any third-party brand owner whose name, logos, and/or products are prominently featured in connection with a promotion. Among other things, trademark and copyright owners may insist on being: (1) explicitly disclaimed as a sponsor of, or affiliated with, the promotion in the official contest rules and in promotion advertising; (2) included as co-sponsors of the promotion; (3) acknowledged with trademark symbols (® or ") when the sponsor references their
brands; or (4) omitted from the subject promotion's title and description entirely. Generally, sponsors may use a brand name inconspicuously, such as in the sweepstakes or contest rules, for the limited purpose of identifying the prizes that are offered through the promotion.

Returning to our example, Bauer's ticket and teddy bear prizes feature registered trademarks of
Fandango and the Vermont Teddy Bear Company, respectively. Ideally, a sponsor in this situation would obtain the written consent of these brand owners. At a minimum, the sweepstakes' official contest rules should disclaim that these companies, and any applicable Fifty Shades of Grey parties, are in any way sponsors of, or affiliated with, the promotion.

Increasingly, many social media services require sponsors of online sweepstakes and contests to take additional steps before running a promotion on or through their platforms. For example, the Facebook Page Terms state that promotions on its user pages must: (1) require each entrant to release Facebook of all liability; (2) acknowledge that the contest or sweepstakes is not sponsored, endorsed, or administered by or associated with Facebook; and (3) refrain from making participants share the promotion on their Timeline or tag friends to enter.19 Sponsors that use Facebook, Twitter, Instagram, or other social media in connection with their promotional contests or sweepstakes are advised to comply with applicable policies and terms of use.

Bad-Mouthing Brands

Another risk awaits sponsors of sweepstakes and promotional competitions that are designed to make featured products or services look superior to those of another company. In addition to preventing marketers from confusing the origin of goods or services, the Lanham Act prohibits any false or misleading representations of fact in commercial advertising or promotion that misrepresent the nature or characteristics of another's goods, services, or commercial activities.20

One notable example was the "Quiznos vs. Subway TV Ad Challenge." As part of this promotion, contestants were encouraged to submit videos through the Web site "MeatNoMeat.com," which depicted Quiznos' sandwiches as fresh and overflowing with meat, while Subway's offerings purportedly appeared stale and skimpy in terms of the size of its meat servings. Subway sued Quiznos in federal court, alleging that the comparisons amounted to false and misleading advertising in violation of the Lanham Act.21 The parties ended up settling their dispute after the court refused to grant Quiznos' motion for summary judgment.

In sum, sponsors should think twice before launching a smear campaign disguised as a  promotion. Special care must be taken to ensure that sweepstakes and contest materials are factually accurate and not likely to mislead or confuse consumers.

The Promotion Itself

After investing a great deal of time and money in  developing a successful contest or sweepstakes, a sponsor may look to protect the underlying promotion itself. Although registration with the Copyright Office may seem like an obvious choice, courts have consistently found that contest rules, marketing materials and concepts are collectively too factual or unoriginal in nature to warrant copyright protection.22

Sponsors might have better luck obtaining protection before the Patent and Trademark Office, where a number of contests and sweepstakes have successfully obtained federal protection as trademarks (for their respective contest names)23 or as business method patents (for their underlying novel concepts).24 Having a trademark or patent can generate valuable licensing opportunities for the owner if other sponsors wish to use the owner's contest name or model. On the flip side of the coin, before borrowing elements of another promotion, sponsors should determine whether a valid patent or trademark has been issued that might require the owner's permission.

As an additional consideration, if a sponsor develops an entirely private method, plan, or process that it uses in the course of operating its contest or sweepstakes, that information may be protectable as a trade secret. Unlike copyrights, trademarks, and patents, trade secrets are not registered publicly. In fact, as the name suggests, secrecy is essential to their creation and continued existence. Trade secrets have the theoretical potential to last indefinitely, but sponsors with trade secrets have a duty to use reasonable measures to safeguard their secrecy, such as using non-disclosure agreements (NDAs) and placing warning labels on confidential documents to safeguard and maintain their trade secret status.

Conclusion

This article provides a non-exhaustive survey of the many copyright, trademark, patent, right of publicity, trade secret and unfair competition issues that face sponsors of sweepstakes and promotional contests. In addition to this wide range of intellectual property issues, promotion sponsors must address a number of other legal concerns related to lotteries, advertising,
consumer privacy, bonding requirements, and other areas of compliance. Because every promotional contest and sweepstakes is different, sponsors are advised to speak with an experienced promotions attorney about minimizing their unique legal risks before running a contest or sweepstakes.


David O. Klein is the managing partner of Klein Moynihan Turco in New York, where he practices Internet marketing law, promotions law, sweepstakes law, and gaming law. He can be reached at dklein@kleinmoynihan.com. Joshua R. Wueller is an associate at Klein Moynihan Turco and can be reached at jwueller@kleinmoynihan.com.



1. 17 U.S.C. § 106.
2. Id. § 204.
3. See, e.g., Craigslist Inc. v. 3Taps Inc., 942 F. Supp. 2d 962 (N.D. Cal. 2013) (finding that clicking "Continue" on a pop-up notice with exclusive licensing language is a sufficient signed writing).
4. For more on the broader legal issues affecting sweepstakes, see David O. Klein, "Rules of the Game: Marketing Through Sweepstakes," Corp. Couns. (Jan. 30, 2015), http://www.corpcounsel.com/id=1202716613745/Rules-of-the-Game-Marketing-Through-Sweepstakes.
5. See Pamela S. Evers, "Contests, Contracts & Copyright: Sometimes a Great CONtest," 8 U. Denv. Sports & Ent. L.J. 34 (2010).
6. 17 U.S.C. § 512(c).
7. See, e.g., Cal. Civ. Code § 3344.1; N.Y. Civ. Rights Law § 50.
8. See, e.g., Cal. Bus. & Prof. Code § 17539.2(c); Fla. Stat. § 849.094(5); N.Y. Gen. Bus. Law § 369-e(5).
9. See, e.g., Fla. Stat. § 849.094(5); N.Y. Gen. Bus. Law § 369-e(5).
10. For example, the winner of the "Quiznos vs. Subway" competition, infra n.21, was aired on VH1 and posted on a Times Square billboard in New York City on New Year's Eve.
11. See Trannel v. Prairie Ridge Media, Inc., 987 N.E.2d 923 (Ill. App. Ct. 2013) (holding a contest sponsor liable for using contestant's photo in a media kit without her permission); David O. Klein & Jonathan E. Turco, "Running Sweepstakes Promotions: An Endeavor Best Not Left to Chance," Justia (Mar. 19, 2013), https://verdict.justia.com/2013/03/19/running-sweepstakes-promotions.
12. Tenn. Code § 47-18-120(c)(3)(C). In 2001, Tennessee filed suit against Publishers Clearing House for promoting sweepstakes in violation of this provision (and many others). The case ultimately settled for $34 million. See State v. Publishers Clearing House, No. 01C-3168 (Tenn. Cir. Ct. Oct. 17, 2001), available at http://www.tn.gov/attorneygeneral/cases/pch/pch.htm.
13. See, e.g., "Slapshots & Snapshots Sweepstakes," Kraft Foods, https://kraft.promo.eprize.com/slapsnsnapssweeps/ (last visited April 10, 2015) (Contestants enter by taking a "selfie" with a cardboard cutout of Boston Bruins defenseman Torey Krug and sharing the photo on Instagram or Twitter).
14. See, e.g., Ting Ji v. Bose Corp., 626 F.3d 116 (1st Cir. 2010) (awarding damages to a model for unauthorized use of her likeness on promotional materials).
15. 15 U.S.C. § 1125(a).
16. See, e.g., Cal. Bus. & Prof. Code §§ 17200–10; N.Y. Gen. Bus. Law § 349.
17. "Win a 50 Shades of Grey Themed Prize Package!," Life & Style Mag., http://winit.lifeandstylemag.com/sweepstakes/win-a-50-shades-of-greythemed-prize-package-7544 (last visited April 10, 2015).
18. FIFTY SHADES OF GREY, Registration Nos. 4500880 & 4630572.
19. "Facebook Page Terms," Facebook, https://www.facebook.com/page_guidelines.php (last modified Jan 16, 2015).
20. 15 U.S.C. § 1125(a).
21. Doctor's Assocs., Inc. v. QIP Holder LLC, No. 3:06-cv-1710(VLB) (D. Conn. Feb. 19, 2010).
22. See, e.g., CMM Cable Rep, Inc. v. Ocean Coast Props., Inc., 97 F.3d 1504 (1st Cir. 1996); Morrissey v. Procter & Gamble Co., 379 F.2d 675 (1st Cir. 1967); Taft TV & Radio Co. v. King Broad. Co., No. 85-518-FR, 1986 U.S. Dist. LEXIS 20597 (D. Or. Sept. 10, 1986).
23. See, e.g., THE GREAT CHRISTMAS LIGHT FIGHT, Registration No. 4633956; BILLION DOLLAR BRACKET, Registration No. 4693652.
24. See, e.g., User-Controlled Sweepstakes Entries, U.S. Patent No. 8,821,295 (filed May 7, 2013); Method for Conducting an Online Contest, U.S. Patent No. 8,348,737 (filed May 21, 2010).

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