Advertising Law Tool Kit - Ninth Edition | 2021

Venable / 71 70 / Venable Compensation • Flat fee? Equity interest? Royalty? Combination? If talent is paid a royalty, is there an advance or minimum guarantee? Are any upfront amounts recoupable against the royalty? Is the royalty limited to certain types of sales (e.g. direct-to-consumer only)? • If there is a term extension option (for the service term and/or usage term), does the agreement include a term extension fee? • If there is a possibility of needing additional service days from the talent, then add a day, half-day, or hourly rate for additional time. • If all or some of the services fall under SAG/AFTRA jurisdiction (e.g., TV, radio, digital video), then add an allocation provision. This is generally at least 50% for union services if TV is involved, but the allocation could be lower for SAG/AFTRA for multi-service contracts. • Include royalty definitions, if applicable, such as “gross revenue/sales” and “net revenues/sales.” • Is there a royalty tail (i.e., royalty for a period of time after the term ends)? Exclusivity • Define the exclusive industry category and the scope of exclusive services. • Exclusivity can either apply only during the service/usage term or be included in a tail of some period following term expiration. Termination • Include a standard for-cause termination that includes breach, violation of morals clause, death or disability, and force majeure. • If talent has public appeal for reasons other than talent’s celebrity status, include termination rights linked to talent’s continued performance of the thing for which talent is famous or with which the endorsement is linked. For example, if talent is a musician, talent must continue to make or perform music, or if talent is a professional athlete, talent must continue to play the sport at a professional level. • Address termination for convenience (e.g., due to change in campaign strategy). This typically requires a “kill fee” or “early termination fee.” • What is the effect of early termination on compensation and usage rights? Ownership • Generally, the brand should own all campaign materials and anything produced in connection with the campaign, including all contributions made by the talent. One exception may be social media posts, which, except to the extent they contain materials provided by the brand or the brand’s trademarks, might be owned by the talent. • If campaign materials include preexisting material provided by the talent, add a license from the talent to use such material in campaign materials, and the brand’s ownership of campaign materials should be subject to the talent’s ownership of preexisting material. Compliance with Laws • Talent must agree to comply with the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising and related guidance (“FTC Guides”). • For social media, in particular, talent must disclose talent’s relationship in posts using disclosure language, such as “#SPONSORED” or “#AD.” • In its contract with talent, the brand should have a right to require talent to correct or remove information that is not in compliance with the FTC Guides, and the brand should reserve its right to terminate the relationship with talent, if talent doesn’t comply with the FTC Guides and other laws. Loan-out Letter • If the talent is using a “loan-out” company instead of entering into the agreement directly, then the agreement should include a loan-out letter signed by the talent, acknowledging and agreeing to the terms of the spokesperson agreement signed by the loan-out company. Affidavit • If services include TV commercials that include talent’s endorsement of the brand’s products or services, include a sworn endorsement affidavit to be signed by the talent. Spokesperson Agreements