United States: Five Reasons For Universities And Colleges To Update Their NIL Policies

This weekend, four teams will play for a chance to go the NCAA Football National Championship Game. My alma maters missed the playoff, but like millions of fans I will be tuned in.

These games will give athletes a chance to become stars. They may well have new endorsement deals before the weekend is over. One question for those athletes and the companies that want to contract with them will be what school policies allow.

The NCAA requires its member institutions to maintain a Name, Image and Likeness policy. Schools rushed to adopt those polices after the NCAA released its initial "interim guidance" on NIL activities in June 2021. In October 2022, the NCAA clarified that guidance based on changes to the NIL landscape.

Just like the NCAA, schools should be taking what they have learned about NIL activities and adopting updated policies to reflect the reality of the NIL market. Athletic departments competing for the best student athletes largely want to have the most permissive policies. University counsel want to weigh the risks of those open policies. Taking a hard look at the actual practices that have developed and putting those practices into written policies is the best way to protect schools and allow students to know the bounds of permitted behavior.

Five reasons your policies need an update:

1. NIL Education

The NCAA's latest guidance encourages school to educate students on finances, taxes, entrepreneurship and social media. Additionally, the NCAA guidance allows for education for collectives, prospects and boosters.

This is one of the areas where mandatory trainings can be implemented. Schools should be thinking about NIL education during official recruiting trips, student athlete orientations and then as an on-going part of a student's education.

For collectives and boosters, schools could adopt a wide variety of policies. Schools should balance the desire to encourage collectives and boosters to support them with the need to ensure a culture of compliance. One thing that schools could consider is tying education to meet and greet events and other booster driven meetings.

2. School Involvement with NIL Opportunities

Duke University's basketball program hired a former NBA and Nike employee to serve as its general manager for NIL activities. She will doubtlessly be providing NIL education to students. More interestingly, her history suggest that she will be working with students to identify ways to build their brands and create NIL opportunities for themselves.

The October 2022 guidance makes clearer the ways universities can be involved in NIL activities. Now schools can not only inform students about NIL opportunities but can also collaborate with service providers to find the appropriate market for those students. Schools can also promote students' NIL activities if the student or company pays the standard advertising fees under the guidance, schools still cannot enter into agreements or negotiate deals on behalf of a student.

For most schools this type of involvement was not contemplated when the initial NIL policies were adopted. Schools should be considering how involved they are going to be in creating and finding NIL markets for their students. Additionally, there should be clear written guidance about any person or entity advertising through schools or in stadiums when that advertising includes a student athlete.

3. Working with Collectives

One of the biggest questions before the latest guidance was how schools could interact with collectives. The rise of collectives was a bit of a surprise. Now collectives dominate the NIL marketplace.

Under the new guidance, schools may promote fundraising for collectives by providing signed memorabilia or arranging student athlete appearances. Schools may direct donor funds to collectives, but they may not specify or direct how the funds are used. Schools are permitted to provide tickets to collectives if the tickets are provided under the same terms as other sponsorships.

The latest guidance okays a close connection between schools and collectives. However, school employees are not permitted to work for, or own collectives and schools are not permitted to make direct donations or payments to these collectives.

In June 2021, it would have been impossible to see the importance of collectives for the NIL landscape. Today, it is important for schools to have written policies regarding how they will work with and interact with collectives. If a school is considering working with only one of several collectives, the school should have a policy about how it decides which collective is the one that will receive different treatment. Most importantly, every school should have policies that make clear the collectives are separate from the school and will not receive more favorable treatment that other similarly situated boosters or advertisers.

4. Use of School Intellectual Property

In June 2021, most attorneys were telling advertisers and students that schools might be hesitant to allow the use of their trademark or copyrighted material, including uniforms and apparel, in advertising. However, schools have been more open to allowing the use of their intellectual property than many experts predicted.

Every school should have a policy that its intellectual property can only be used by students and advertisers when authorized in writing. That protects the schools from losing control of their intellectual property or having that intellectual property used in a manner that hurts the schools' image or brand.

Schools should assess any existing policies that require licensing of its intellectual property and any contracts that give exclusive licenses for the use of that intellectual property in certain ways, before adopting a policy about the use of intellectual property for NIL activities. Having a uniform written policy, and following it, will allow the school to point to the policy should any dispute arise. This should prevent any claims of discrimination against a specific athlete or sport.

5. NIL Approvals and Denials

The NCAA's latest guidance says schools should require students to report all NIL activities if they are permitted to do so by state law. Having realistic policies in place to review these reports is important. However, notice requirements should preserve flexibility for students seeking to take advantage of their one shining moment.

Most states and schools have laws or policies that prohibit students from entering NIL agreements that conflict with school contracts. Certainly, a Nike sponsored school would be concerned about one of their students promoting Reebok. In thinking through these policies, one important thing to consider is the definition of "school contract." Should the definition only apply to third-party agreements like those with equipment and apparel manufacturers, or should the definition be broader and apply to team rules and university handbooks?

Some state laws prohibit NIL activities around certain industries like adult entertainment or alcohol. Schools should consider whether to go further. A school may want to restrict students from promoting certain products or services that conflict with institutional values or community standards. On the other hand, schools may rightly be concerned about having an official beer sponsor while simultaneously prohibiting of-age students from promoting alcohol. Every school will have different values that it needs to consider in making these decisions.

Most NIL policies were adopted as the NCAA began allowing student athlete NIL activities. We know a lot more today than we did in June 2021. Updating your policies to reflect the marketplace that exists is the best course of action for your school and your students.

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.