Oakley v Nike and Rory McIlroy
Published 21 January 2013 By: Andrew Nixon
As announced on Monday , Rory McIlroy has signed a reported £150m, ten year sponsorship agreement with sportswear brand, Nike.
The player previously had a 'patchwork' of sponsorship agreements with various global brands: the rights to his eyewear/clothing (Oakley); his clubs and golf balls (Titleist); Santander Bank; Audemars Piguet and his principal sponsor, seen most prominently on his cap (Jumeirah).
In consideration for the sums involved, the player will be locked in for ten years to Nike's exclusive 'head-to-toe' endorsement deal, compelling him to wear only Nike products. The player's agreement with Titleist and Jumeirah were terminated by mutual consent.
Oakley's legal challenge
In December 2012, Oakley filed a lawsuit in the federal court in California concerning the contract the brand had in place with the player. The provisions between the player and Oakley included a 'right of first refusal', giving Oakley the contractual privilege to match any offer presented to the player for eyewear and clothing. Nike's 'head-to-toe' arrangement clearly prevents the player from wearing any Oakley brand product.
Oakley claims that the Nike sponsorship deal had been agreed whilst the player was still under contract to Oakley. It also submits that it offered to match the terms of Nike's offer but was repeatedly ignored by both the player and his agent. On these grounds, Oakley asserts that it was denied the right of first refusal validly enforceable in its contract, and thus both Nike and the player are in breach of contract (or more accurately Nike has induced the player to breach his contract). Oakley had threatened an injunction, and is now seeking damages from Nike/the player as a consequence of the alleged unilateral termination.
The player was cited as the second most marketable athlete in the world by Sportspro magazine. This was by virtue of his age, popularity, charisma and on course success. Oakley has alleged therefore that the failure to adhere to the contract has caused 'irreparable' damage to its brand. The brand also asserts that US$300,000 was spent on a photo-shoot for the new products that the player was due to endorse in 2013.
The player's management company, Horizon, asserts that all contractual obligations to Oakley were fulfilled' and that any claim for breach of contract has no merit. This contention appears to be based upon a series of emails exchanged between an Oakley marketing executive and the player's agent in late September. It is alleged that the emails indicated that Oakley understood (and agreed) that it was out of the running for the 2013 contract.
The sponsorship has now been announced, so Oakley will not be able to obtain an injunction. In any event, it would have been difficult to successfully argue that an injunction was essential and that damages were not an adequate remedy for what is, when boiled down, a simple breach of contract/inducement to breach allegation.
The deal also demonstrates the lengths that a brand will go to secure a high profile athlete when it forms a key part of the brand strategy. Nike took all steps to ensure that the player became a Nike athlete, in the face of stiff competition (in particular from Adidas/Taylormade). Ultimately, there is always an element of risk when entering into a long range deal; however Nike will have taken this decision based on a carefully analysed business model and sound projections.
This work was written for and first published on LawInSport.com (unless otherwise stated) and the copyright is owned by LawInSport Ltd. Permission to make digital or hard copies of this work (or part, or abstracts, of it) for personal use provided copies are not made or distributed for profit or commercial advantage, and provided that all copies bear this notice and full citation on the first page (which should include the URL, company name (LawInSport), article title, author name, date of the publication and date of use) of any copies made. Copyright for components of this work owned by parties other than LawInSport must be honoured.
Andrew Nixon is a Partner in the Sport Group at Sheridans. Referred to in this year's Legal 500 as a “very bright and talented sports lawyer” Andrew's practice focuses principally on regulatory, governance, disciplinary, arbitration and dispute resolution within the sport sector. Andrew's clients include governing bodies, sports clubs, sports agencies and individual athletes.