Licensing Journal Features Article By KMT's David Klein And Joshua Wueller: Intellectual Property Concerns For Sponsors Of Promotional Contests And Sweepstakes

Marketers are always looking for more effective ways to entice consumers, with the goal to build a brand and sell more products and services. Long ago, armed with the knowledge that people enjoy winning prizes, savvy promoters began offering promotional contests and sweepstakes, which encourage consumers to participate in a marketing initiative in exchange for the chance to win certain giveaways. Winners of sweepstakes are chosen by luck of the draw, while contest prizes typically are awarded to entrants who best perform a given task. When administered effectively, these promotions can create buzz around a particular product or service, drive traffic to a storefront, produce user-generated advertising content and build marketing lists.

As time progressed, sponsors began redeploying the age-old concepts of promotional contests and sweepstakes on the Internet through the use of high-tech Web sites and social media platforms. However, as promotions have become more interactive and publicly accessible, sponsors become more susceptible to certain legal risks surrounding intellectual property (IP)—including images, names, symbols, designs, written text, inventions, and other materials. This article explores many of these IP-related legal concerns and considers some steps that sweepstakes and contest sponsors may take in an effort to minimize risk.

Entrants and User-Generated Content

First and foremost, sweepstakes and contest sponsors should be aware that the manner in which their promotions feature entrants themselves and, when applicable, the content that participants submit during the course of any given promotion, could have serious legal implications.

Entrant Submissions

One common form of promotional contest, especially among those conducted primarily online, requires participants to submit original photographs, video clips, written works, or any manner of other material to the sponsor in order to enter. Sponsors often will incorporate this user-generated content (UGC) into their subject marketing campaigns.

As most of the readership is probably aware, the Copyright Act grants creators of original content the exclusive right to copy, distribute, perform, display, and create derivatives of their works.1 For promotions incorporating UGC, the official contest rules should grant the applicable sponsor a license to use entrant-submitted works for, at least, the limited purposes of use in connection with the subject promotion itself and related contest marketing endeavors.

We advise sponsors to avoid using over-reaching copyright transfer and licensing language in the contest rules associated with promotions involving UGC. For one thing, any transfer or exclusive license must be in writing and signed by the author in order to be valid under applicable law.2 Although some courts have found that clicking a button on a pop-up notice containing transfer language constitutes a sufficient "signed writing,"3 technology has outpaced the law in this area, and collecting signatures from entrants creates an additional burden for sponsors.

Moreover, sweepstakes often are considered games of chance and, therefore, illegal lotteries under applicable law, unless one of the following elements is removed: (1) a prize awarded to the winner; (2) chance in determining the winner; or (3) consideration for entry in the game.4 Sweepstakes sponsors typically are able to steer clear of the consideration element by providing entrants with a free, alternative method of entry (AMOE). However, one scholar has argued that promotions requiring the transfer or exclusive license of UGC as a condition of entry might qualify as consideration, which could bring the sweepstakes or contest within the dangerous realm of lottery regulation.5

Some contest entrants may submit UGC that incorporates third-party text, images, brands, or other materials. Similarly, UGC, such as photographs and video, might include a third party's name and/or likeness. As such, as a condition of entry, the official contest rules should include representations and warranties from the entrant: (1) that he or she has obtained the consent of every third party whose name, image, likeness, brand, or other materials are featured in the submission; and (2)...