Grant Howitt, Trust and Company Director at Intertrust in Guernsey, looks at the Island's proposed new image rights legislation and what it might mean for sports people worldwide.
The commercial appropriation or exploitation of a person's identity and associated images are commercially valuable, particularly for individuals such as actors, musicians and athletes who commercialise their images in association with the promotion of products or services. These days it is not only about talent, it's just as much, or even more, about the brand. Often a career in sport is at its height at a young age, but if the brand can be built and protected, it is possible to capitalise on that talent for years after retirement and even after death.
The protection of the image of an individual has increased over the years in many jurisdictions, either through case law or through limited inclusion in other Intellectual Property ("IP") laws such as the Copyright Act in The Netherlands. However currently no legislation exists anywhere in the world that is exclusively drafted for the protection of all aspects of someone's image. Seeing this gap, and after years of debate and a successful consultation exercise with lawyers, financial experts and various other advisors, Guernsey is now set to become the first jurisdiction in the world to establish an individual legal code solely for the registration and protection of "Image Rights".
The development of an Image Rights Register in Guernsey will be a world first. The plan is for the legislation to be in place in the third quarter of 2012 at the earliest. The States of Guernsey has been slowly building the legal framework, which essentially required the update of laws based on outdated English legislation, over the past decade. The approach taken was that a correct legislative environment was essential to attract IP-intensive companies to the Island, prioritising business and commercial needs over administrative processes. The resulting package drew from best experiences across the world. Guernsey is now compliant with the TRIPS (Trade Related aspects of Intellectual Property Rights) Treaty, which requires that Treaty members provide for a certain minimum level of protection of IP rights. Guernsey is one of the very few traditional "offshore" jurisdictions to have achieved such status.
To give an example of how broad this law will be: the basis for the protection under this law is a personality, and the definition of such personality covers not only individual human beings, but also groups of individuals, legal entities and even fictional characters of human beings.
The image rights legislation, once introduced, will allow athletes and sports teams, amongst others, to consider centralising the ownership of their image (and other IP) rights in Guernsey, safe in the knowledge that there is a clear legislative framework. The proposal is that registered (image rights) agents will need to have a place of business in Guernsey to ensure a commitment and contribution to the Island. This would increase the ability of the Guernsey IP Registrar to enforce a Code of Practice and regulations and ensure that only companies who have been deemed fit and proper will be accepted as an image rights agent by the Guernsey IP Office. The island is hopeful that this unique position will offer diversification and growth potential for the local economy, provide a marketing opportunity for the island and a chance to build on the existing IP legislation.
Image rights payments are normally made through companies owned by the sports star or an appropriate vehicle such as a Trust or Foundation. Payments relate to any off-field earnings including replica shirt sales, promotional work and endorsements. Depending on the residence and domicile status of the sports star, those payments can possibly be exploited more effectively and efficiently by being packaged outside the separate employment contract, and in most cases can significantly reduce the tax burden.
Image rights are increasingly important in negotiations and it is becoming more common for top-flight sports stars, depending on their tax status, to base their image rights company in a low tax jurisdiction such as Guernsey. The company owning the image rights can be used as an accumulation vehicle for retirement, or profits can be taken out of the company in a tax-efficient manner. A well planned offshore structure can also potentially further enhance the tax advantages and provide a long-term estate and succession planning for the sports star and his or her family.
While Guernsey is often perceived as just another offshore tax haven, the island is in fact trying to create the best environment possible for the Island to become a location for centralization and management of intellectual property.
The new image rights law will take its place alongside other IP rights already in place in Guernsey such as trademarks, patents, design rights and copyright. The new law has been drafted in a way to complement these other IP rights and this total package can potentially provide significant benefits. Although the new image rights law will only apply and protect such rights registered in Guernsey, registration will also provide useful collateral evidence in other countries of the intent of the sports star to protect their proprietary image and may well add strength to other IP rights already held in other territories.
For Guernsey to become a headquarter for intellectual property management and convincing companies and individuals to move their IP-related activities to the island, certain conditions would need to be met. Firstly, the procedural and administrative aspects for registration, maintenance and enforcement of image rights and other IP rights must be straightforward and (cost-) efficient. Secondly, Guernsey must become a party to all major international IP treaties, in order for IP-owners to achieve "easy" prosecution and enforceability of intellectual property rights on an international level. Thirdly, the IP management related services must be of high quality. Guernsey is already meeting most of these targets and if not, serious consideration is currently being taken by the appropriate Authorities, including Guernsey's IP Office, to do so.
There are further considerations to be made by any IP owner considering centralizing the management of his IP rights in Guernsey. For instance: does the transfer of the IP rights to Guernsey and subsequent set-up of an international licensing structure indeed achieve an improvement for the IP-owner in any way? Or does it create an administrative, legal or logistic burden that exceeds the benefits? Does the centralization in Guernsey support or hinder the day-to-day business? How about insolvency of an IP-owning entity in Guernsey: what is the effect on transferability or ownership of the IP?
In conclusion many factors determine whether an IP owner will decide to manage its IP portfolio from within Guernsey (or from any other country, for that matter). But the Island should be lauded for taking a world lead in providing for appropriate legislation in the increasingly important area of image rights protection. And together with the update of its existing IP legislation, Guernsey is taking important steps in creating the appropriate infrastructure for effective IP management.
Grant Howitt is Trust & Company Director of Intertrust in Guernsey and member of Intertrust's Global Intellectual Property Group. Intertrust is one of the largest corporate services providers in the world, specialized in the incorporation and management of holding, finance and licensing companies for corporate and private clients throughout the world.
Originally published in Law in Sport, 21 June 2012
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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