Ambushed by the Marketing – A Wide New Sponsorship Right

This article was published in the June 2008 edition of the New Zealand Law Journal. This topic is of interest to me through my involvement as co-convener of the New Zealand Law Society’s Intellectual Property Committee (which contributed to the Society’s submissions to the Select Committee) and through  appearing before the select committee on this Bill.


Background


The Major Events Management Act 2007 (“the Act”) is an important new piece of legislation. It is designed to regulate and control the practice of ambush marketing.  Unlike the Act, ambush marketing is not new.  However, the tactics used have become more sophisticated and effective.  The explanatory note to the Bill observed that its purpose was essentially practical, namely to provide “for a clear, predictable, and fair regime for dealing with ambush marketing issues”.


This is done by providing for a regime for certain sporting events to be declared “major events” pursuant to s7 and to prevent unauthorised commercial exploitation at the expense of major event organisers or official sponsors.  It achieves this by prohibiting a range of conduct, including:

(a)representations that suggest an association with a major event;

(b)advertising that intrudes on a major event activity and the attention of the crowd or audience; and

(c)using certain emblems and words relating to events.


There seems to be reasonably widespread support for the law change.  This is not surprising, given the need to attract major sporting and other events to New Zealand.  Many would agree that ambush marketing needs to be closely regulated in a competitive international environment and that providing a relatively benign sponsorship environment is likely to deliver long-term benefits to the country.  However, at the same time, I believe that many people do not appreciate the wide sweep of the legislation.


Ambush Marketing in Play


Just what is ambush marketing?  A recent situation arose at the Soccer World Cup in Germany. Anheuser-Busch, marketers of Budweiser, had paid over the odds to have exclusive “pouring rights” at the tournament.  That obviously kept competitors off their turf.  However, Bavaria, a somewhat smaller Dutch (not German) brewery came up with the ploy of supplying Dutch fans with orange lederhosen (leather pants) with a lion’s tail (the team’s mascot being a lion) attached to the back and the brewery’s name on the front.

Anheuser-Busch complained and FIFA demanded that the fans remove their pants, resulting in many fans watching the game in their underwear. In the result, a win for the Dutch team on the day, not to mention the unofficial ambush marketer.

This is the very thing the Act is aimed at and colourful and at times amusing as it might be many people would agree with the need to tackle this sort of practice.  The explanatory note to the Bill notes that its purpose is to provide “for a clear, predictable, and fair regime for dealing with ambush marketing issues”.


Genesis of the Legislation


The Act is based in part on the London Olympic Games and Paralympic Games Act 2006. That legislation was seen as necessary to protect the United Kingdom’s interest in the 2012 Olympic Games. Few would quarrel with the broad purpose of the legislation.  However, some commentators have described the UK legislation as “the most draconian sponsorship law to date” and cautioned that businesses will need to take more than usual care “as even acts that seem intuitively fair can infringe”.


A number of the provisions in the Act are in fact wider in scope than the English legislation, in that they are not restricted to any specific event, for example the 2012 London Olympics, but cover any so-called “major event” declared by Order in Council pursuant to s7(1) to be so.  This gives the relevant government ministers very wide powers to recommend events be categorised as “major events”.


For example, would the Under-17 world rowing champs be deemed to be a major event? Probably not, as all events will need to meet set criteria in order to be designated a major event. To do so they will need to receive the recommendation of the Economic Development Minister after consultation with various other ministers and under s7(4)  take into account, inter alia, whether the event will:

(a)attract a large number of international participants or spectators;

(b)generate significant tourism opportunities for New Zealand; and

(c)offer substantial sporting, cultural, social, economic, or other benefits for New Zealand/ers.


However, unlike the proposed Canadian legislation, referred to below, there is no sunset clause.  Our legislation is both generic and permanent in nature, even though designated events may come and go and vary in terms of size, importance and national benefit.


Ambush by Association


The Act addresses two particular types of “ambush”.  The first is ambush marketing by association.  The explanatory note to the Bill states that this “involves an advertiser misleading the public into thinking that the ambush marketer is an authorised partner or somehow associated with the event”.


While that all seems relatively clear we need to get a better understanding of what is meant by “association”.  This is defined in s4 as meaning “a relationship of (sic) connection, whether direct or implied, such as an approval, authorisation, sponsorship, or commercial arrangement and includes offering, giving away, or selling a ticket to a major event activity in connection with the promotion of goods or services“.


This definition does not require anyone to be misled or deceived.  All that is required is that an appearance of a relationship or connection arises, whether direct or by way of implication.  The explanatory note acknowledges as much, stating at page 25 that: “the threshold tests require persons to prove a misleading or deceptive, confusing or deceptive, or false or misleading representation.  These tests are such that many types of ambush marketing cannot be prevented“.


In other words, mere association, without anything more is sufficient to trigger the infringement provisions of the Act.  This is clear from the wording of s10(1), which reads:

No person may, during a major event’s protection period, make any representation in a way likely to suggest to a reasonable person that there is an association between the major event and—


(a)goods or services; or


(b)a brand of goods or services; or


(c)a person who provides goods or services.


Dr Owen Morgan of Auckland University has noted, based on research done by Jerry Welsh (who coined the phrase “ambush marketing”), that a sponsor buys a specific product, not an event as a whole; that there is no obligation (legal or otherwise) to market away from a thematic space and finally that ambush marketing in fact makes events more not less valuable.  This suggests that the philosophical underpinnings of the law may be less secure than thought.

S10 needs to be interpreted in conjunction with ss 11 and 12.  S11 creates a presumption of breach if a representation uses so-called major event words or emblems, or something that so closely resembles them, so as to be likely to deceive or confuse a reasonable person. The commentary on the Bill makes it clear that once such a representation is made that the person making it cannot escape liability by using a disclaimer or a term such as “unofficial” or “unauthorised”.

S12 contains exceptions to ss 10 and 11.  The exception covers, inter alia,

a situation where a written authorisation has been provided or a representation is made and it is in the form of a “personal opinion” expressed by a natural person for no commercial gain. During the course of the Select Committee hearings the Select Committee agreed with the recommendation of the New Zealand Law Society, that some form of saving for freedom of expression was needed.


The Society proposed a reasonably wide exemption for conduct which amounted to social expression, commentary, parody or satire. This proposal was not accepted.  However, an express exemption for “expressing a personal opinion” was added. This provision is reasonably limited in nature because it needs to be expressed by way of an opinion, needs to be made by a natural person and for no commercial gain.


An exception covering representations which were incorporated into a context to which the major event was substantially irrelevant has been struck out.  Presumably this would have covered situations where the reference or representation was inconsequential or of limited significance, similar to the incidental copying exception under copyright law.  It is unclear why this was done.


Practical Pitfalls


In terms of practical pitfalls, the names and indicia relied upon by the event organiser or sponsor may be descriptive and commonplace words which would otherwise lack the distinctiveness required for legal protection, whether as common law or registered trade marks, or otherwise.  Once again, this is identified as one of the so-called “gaps” that the legislation seeks to fill.  In other words, for businesses operating day in and day out, non-distinctive and descriptive marks remain unprotectable at law, as they have always been.  For major event organisers, the position will be different.


If we put this in a bit more context, according to the Schedule to the Act certain Commonwealth Games and Olympic symbols and names are specifically reserved.  Thus, words or terms such as “Games”, “2008” and “Games City” are off limits, as are any abbreviations extensions or derivations of the words, or indeed words that have the same or a similar meaning.  Once again, there is no need for the word or term to be misleading or even confusing in any way; similarity alone is sufficient.


No doubt, major events will spawn their own non-distinctive terminology and symbols – with the Rugby World Cup on the horizon presumably covering words such as Black, White and Green.


The net effect of this approach is likely to be to avoid and circumvent well-established rules which require that in order to secure trade mark rights or effective rights by way of passing off, that the mark or indicia is to some extent distinctive, and that consumers or other relevant people will be misled in some way and that the offending trade mark or indicia is not just similar but at least confusingly similar in some way.


Most major sporting and entertainment events attract fringe operators who may benefit directly or indirectly from the event but are not in any way formally associated with it.  As discussed below, this will however change, particularly in and around clean zones.


It is apparent that parody will be difficult if not impossible under this regime because an essential requirement of any good parody is to create an association with the real thing but to distinguish itself at the same time.  The problem with the broad concept of “association” that underpins this proposed legislation is that once an association is created that “link”, no matter how tenuous, cannot be broken.  Accordingly, parody or social commentary is not really an option.  As noted above however, that issue has to some extent been addressed with the limited exception for personal expressions of opinion.


Ambush by Intrusion/Clean Zones


The second form of ambush marketing is by intrusion.  This simply means “intruding on the attention of an audience” gathered to watch an event.


Pursuant to s16 the Minister of Economic Development is able to declare clean zones and clean transport routes  These zones are limited, to the extent that:

(a)they extend up to 5 kilometres from the closest point of the boundary of a clean zone (Green Party efforts to reduce this to 2 kilometres having failed);

(b)are directly proximate to a motorway, State highway, or railway line; and

(c)are likely to be used by a substantial number of people to transit to or from a clean zone during the applicable clean period.


It is apparent that these clean zones will be large and cover not just the venues but all arterial routes to and from them.  The situation may be compounded by overlapping clean zones when a number of venues are being used for a particular event.


S17 prohibits street trading in a clean zone during a clean period without the written authorisation of the major event organiser.  S18 prohibits advertising in the same fashion. Similar clauses deal specifically with billboards, aircraft etc. Essentially, any intrusive activity around a venue will be strictly controlled.


S22 does however protect existing organisations continuing to carry out their ordinary activities in accordance with honest practices in industrial or commercial matters, including:

(a)articles of clothing or other personal items being worn, carried, or used by a member of the public or participants, officials, or volunteers in a major event activity: and

(b)in a newspaper or magazine or on radios, television, or other electronic devices being used for personal use.


The intention here is to allow honest behaviour but clamp down on any form of coordinated activity by groups of people who intend that the advertising intrude on a major event.  In other words, it may be permissible for an individual to wear a T-shirt with an offending name or trademark on it, but as soon as one or two people do so together, the activity may be seen as coordinated and thus unlawful.  S23 states that it is an offence to knowingly breach the intrusion provisions. The penalty on summary conviction is a fine not exceeding $150,000.


S25 prohibits the unauthorised selling or trading of a ticket to a major event activity for a value greater than the original sale price of that ticket. Breach, which occurs up on knowingly selling or trading a ticket, is an offence with a penalty of a fine not exceeding $5,000.


S27 now makes it an offence to invade a pitch at a major sporting event.  This is defined as going onto the playing surface at a major sporting event or propelling an object onto the playing surface.


This provision was introduced by a Supplementary Order Paper tabled on 4 April 2007. This is no doubt designed to clamp down on streaking and the like. However, it is now proposed that it be an offence to merely “propel any object onto the playing surface”.  While the purpose might be to discourage crowds throwing projectiles, particularly those with rival brands on them, onto the playing surface, the problem with widely framed provisions like this is that it could arguably also catch innocuous conduct like throwing (defined as “intentionally setting an object in motion in any manner”) a paper cup or bottle into the air during a “Mexican wave”.


As noted above, given that the only form of expression recognized under the legislation is for expressions of “personal opinion”; when it comes to pitch invasions there is no exemption. Conduct such as streaking, even if the purpose is purely exhibitionist in nature or designed to make some form of social commentary or protest (and one need think no further than the 1981 Springbok tour by way of example) is clearly prohibited.


Is Legislation in this Form Necessary?

We are told that major sponsors “insist that there be protection against ambush marketing before they will commit to sponsorship contracts” and that this type of legislation is necessary to secure large sporting and other events.  I question whether this is perhaps overstating the position a little, given that a number of international events have been secured without such legislation.

However, assuming some form of ambush marketing law is in fact required in order to secure major events, the question is whether such far-reaching changes are necessary?  By way of comparison, the Canadian government has just introduced new legislation in the same area.  The purpose of the legislation is to deal with sponsorship concerns around the upcoming Vancouver 2010 Winter Games. The Olympic and Paralympic Marks Bill (Bill No C-47) provides the organising committee with specific powers over designated words and symbols.

The major thrust of the legislation is to prevent third parties from advertising in a manner that is likely to create a mistaken association. In particular, it prohibits any person from adopting or using in connection with a business, as a trademark or otherwise, an Olympic or Paralympic mark or a mark that so nearly resembles an Olympic or Paralympic mark as to be likely to be mistaken for it.

It also prohibits any person from promoting or otherwise directing public attention to a business in a manner that misleads or is likely to mislead the public into believing that there is an association between the person’s business and the Games or the organising committee or that the business has been approved, authorized or endorsed.

Likewise, s12 of the Melbourne 2006 Commonwealth Games (Indicia and Images) Protection Act 2006 requires that a reasonable person who is likely to mistake the infringing use as being legitimate use.

It is thus apparent that in this regard that Canada and Australia have tackled the same problem but in a more conventional and arguably appropriate way.  It also seems that a cornerstone of this overseas legislation is that while wide-ranging protection is necessary, that it still needs to be shown that people are likely to be misled as to the nature of the association (Canada) or mistaken by the infringing use (Australia).  This is a fundamental tenet of traditional consumer protection and intellectual property law. For some reason however we have gone down a different path.


Is the Balance Right?


The explanatory note to the Bill states that it is necessary to ensure that any new legislative protections are not “overly broad” and that “unnecessary duplication” of existing provisions is minimised.  The wish to avoid overbroad provisions and duplication is laudable. However, is it likely to be achieved?  I suggest that on closer analysis the answer is unclear.


Firstly, in terms of the scope and possible impact of the legislation, it is interesting to note that the Australian Department of Communications, Information Technology and the Arts is conducting a review of Chapter 3 of the Olympic Insignia Protection Act 1987 and the Melbourne 2006 Commonwealth Games (Indicia and Images) Protection Act 2005. The purpose of this review is to provide information and recommendations to the Australian government as to the effectiveness of this legislation and its impact on various stakeholders.  In particular, the review will look at whether the legislation strikes a fair balance between the interests of event organizers and those of other stakeholders, such as athletes, coaches, service providers and media organizations; and whether it has had any indirect, unintended or detrimental effects on certain organizations. I am unsure as to the nature and extent of any impact assessment done by our government.


The explanatory note to the Bill also stated that it is important for the fairness and efficiency of any ambush marketing legislation that there is an onus on event organisers to use existing measures where those measures are adequate to address the identified issues and can be reasonably implemented.   While this suggests that there is an onus on event organisers to use existing measures where those measures are adequate to address the identified issues and can be reasonably implemented, there is no express requirement in the Act itself to do so.


Instead, a new category of enforcers, “enforcement officers” are created. It is unclear why any event organiser would bother with enforcing traditional IP rights when these enforcement officers have the powers to police the events and issue formal warnings, obtain search warrants, seize and cover offending materials and generally oversee things which breach the provisions of the legislation.


The wide powers of these new enforcement officers are a concern, as is the means by which those powers are exercised. S67 allows a warrant to be issued by any High Court Judge, District Court Judge, Community Magistrate, Justice of the Peace, or Registrar of a District Court.  It is worth comparing these provisions with other existing regimes allowing, statutory search, and seizure and interception powers.  For example, Section 312B of the Crimes Act 1961 provides for application by the Police to obtain warrants to intercept private communications.  In this situation an application needs to be made to a Judge of the High Court (not for example the registrar of a court) and can be executed only by members of the Police.  The section contains a number of requirements including that the Judge needs to be satisfied that it is unlikely that the Police investigation of the case could be brought to a successful conclusion without the grant of such a warrant.  A central requirement is thus necessity.


The Police also need to satisfy the Judge that other investigative procedures and techniques have been tried but have failed to facilitate the successful conclusion of the Police investigation of the case, and the reasons why they have failed in that respect. Alternatively, they need to establish to the satisfaction of the judge the reasons why it is considered that the case is so urgent that it would be impractical to carry out the Police investigation using only investigative procedures and techniques, other than the interception of private communications. Once again, questions of proportionality and necessity and other available remedies/options are central to the enquiry.


This makes it clear that the Police have an appropriately heavy burden to satisfy and that the interests of the community are safeguarded in material respects, even though the offenders may be suspected of committing a criminal offence.


Under the Summary Proceedings Act 1957 for offences punishable by imprisonment, search warrants may be obtained pursuant to section 198.  Such warrants may be issued by a District Court Judge or Justice, Community Magistrate, or any Registrar (not being a constable). However, in the case of an application for a tracking device warrant, application needs to be made under s200B and only by an authorised officer to a High Court Judge or a District Court Judge. A pre-requisite is that the authorised officer believes that there are reasonable grounds to suspect that an offence has been, is being, or will be committed and that information that is relevant to the commission of the offence can be obtained by virtue of the tracking device.


In addition to this it needs to be established, pursuant to s200B(c), that:


“it is in the public interest to issue a warrant, taking into account the seriousness of the offence, the degree to which privacy or property rights are likely to be intruded upon, the usefulness of the information likely to be obtained, and whether it is reasonably practicable for the information to be obtained in another way.”


It is thus apparent that in the case of more intrusive intervention the bar is lifted and extensive safeguards are written into the legislation to ensure that the proper balance between public and private interests is maintained and that issues of privacy, protection of property rights and of course that of overall utility are adequately addressed.


The Commerce Act 1986 also contains relatively extensive “search and seizure” powers. S98 permits the Commission to authorise an employee of the Commission to search premises under a warrant.  Once again, s98A permits search warrants to be issued.  However, it needs to be established that there are “reasonable grounds to believe that it is necessary for the purpose of” ascertaining whether there is a breach or likely breach of the Act.  Once again, the question of necessity underpins the assessment.


This differs from the situation in the Act, which has the potential to cut across well-established common law principles relating to search and seizure. There may well be urgency involved in obtaining access to premises and computer records but the Anton Piller jurisprudence and procedures are now well honed and they are constantly being refined and updated. The Act essentially circumvents these rules in favour of a statutory search and seizure power, subject to few of the important safeguards developed by the Courts and the legal profession over the years, including for example the use of independent solicitors appointed by the Court to execute the Court Orders and protect the interests of those affected thereby.


Arguably, these concerns are magnified when the proposed role and appointment of enforcement officers is considered. The Act simply states that the chief executive of the Ministry of Economic Development may appoint enforcement officers, on a permanent or temporary basis, to perform the functions and exercise the powers conferred by the Act (s38).  However, we are not told what the criteria for appointment are, what law enforcement training these officers need or indeed whether they need any training at all.  Likewise, we are not told who is to instruct and supervise them and who is to coordinate their activities around major events.


The concern is that these officers could include, for example, individuals from private security companies, even part-time employees with no significant training, acting on behalf of the event organiser.  My concern is that this could be open to potential abuse. These powers have been mitigated to a limited extent by s68(2) which requires the enforcement officer to be accompanied by a member of the police when exercising search and seizure powers.


Conclusion


I support effective restrictions on ambush marketing. However, I consider that this legislation goes too far.  It may well provide a clear and predictable regime but I question whether it achieves the right balance between event organisers and sponsors and the wider New Zealand public, including fans and local businesses.


Supporters might argue that the benefits to the country are so great that these well established principles should yield to the new order.  However, in my view we should not implement legislation that is so broad that a range of decent people are likely to get caught up in its wake and end up falling foul of its pretty severe civil or criminal sanctions. That is, particularly when other viable and arguably less extreme options are available. That however is not the way Parliament saw it.

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