The High Court has ruled that New Balance Athletics, Inc., which trades under the NB brand, could not match the terms of a proposed manufacturing and sponsorship deal between Liverpool FC and Nike, leaving Liverpool free to sign the deal with Nike, which starts in 2020. An appeal request by NB against this judgment was recently rejected by the Court of Appeal.
NB had an agreement to sponsor Liverpool and to manufacture and sell replica shirts, which ends in 2020. It contained a “matching right” clause, which stipulated that NB “will enter into a new agreement with the Club on terms no less favourable to the Club than (i) the terms of this Agreement and/or (ii) the material, measureable and matchable terms of such third-party offer”.
Nike made Liverpool a sponsorship and manufacturing offer to begin in 2020, which NB claimed to have matched. But crucially, Nike’s offer included, among other things, marketing initiatives “featuring not less than three (3) non-football global superstar athletes and influencers of the calibre of Lebron James, Serena Williams, Drake, etc.” While NB’s offer closely mirrored Nike’s offer, it omitted any reference to “of the calibre of Lebron James, Serena Williams, Drake, etc.”.
After considering both offers, Liverpool rejected the NB offer on the basis that it was not “genuine”, and so the matching-rights clause was not triggered. NB brought a claim in the High Court to enforce its matching right.
For Mr Justice Teare, the outcome hinged on whether NB could match the marketing initiative that required superstar athletes and influencers “of the calibre of Lebron James, Serena Williams, Drake, etc.”. The judge rejected NB’s argument that the marketing term as a whole was not measurable because it is “too vague”, and found that the calibre of athletes and influencers such as Lebron James, Serena Williams and Drake could be measured in a variety of valid ways.
So, the judge found that the omission of the examples of global superstars in NB’s offer made their offer less favourable, as Liverpool could not require NB, on the terms of its offer, to use global superstar athletes of that particular calibre. As a result, the terms had not been matched, and so Liverpool was not obliged to enter into a new agreement with NB on the terms of the NB’s offer, leaving Liverpool free to pursue Nike’s deal instead.
This case provides a useful reminder of the importance of specific and detailed drafting for matching rights. The matching-rights clause in this case was drafted in an open-ended way. So, the requirement for NB to match all “material, measureable and matchable terms” made it vulnerable to having to match terms that it had not envisaged might apply. Nor was there a carve-out, as commonly provided, for obligations that could only be performed by the third party personally.
Had NB focussed on the key terms of the sponsorship deal (such as payments, royalties, distribution and duration) and specifically drafted the clause around those key measurable points, it might have been able to establish that the offer had indeed matched Nike’s offer. Instead, Liverpool could establish that three named “non-football global superstar athletes and influencers” amounted to a measurable element of an offer – and one that, ultimately, NB did not match. Nota bene.
Article written for Entertainment Law Review. To read the full article, click here .