When Oakley sponsorship executive Pat McIlvain learned the company’s star golfer, Rory McIlroy, had landed a new, $25 million a year deal with Nike, he sent a flurry of emails to McIlroy’s agent. Every push he made to extend Oakley’s deal with the golfer was rebuffed, which led him to write a frustrated, late-night email.
“Understood. We are out of the mix. No contract for 2013. Pat Mac.”
That reply has become a central issue in a lawsuit Oakley filed against McIlroy and Nike last December. The lawsuit alleges that McIlroy and Nike breached the golfer’s agreement with Oakley by not following “first right of refusal” language.
Oakley claims that it had a contractual right to see Nike’s offer, match it and even assign 10 percent of the offer to eyewear and extend a deal in that category alone. It asserts that McIlroy’s agent, Conor Ridge of Horizon Sports Management, didn’t honor those terms of the contract.
McIlroy and Nike are expected to claim in court that McIlvain’s email, which was sent in late September, waived Oakley’s right to renew with the golfer. But McIlroy’s agent and attorney continued to swap emails with Oakley’s legal team after McIlvain sent his email.
The case, which is slated to go to trial in February, represents one of the rare instances when a brand sues an endorser
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Rory McIlroy is introduced as a Nike brand ambassador during a January news conference.
Photo by: Getty Images |
forbreach of contract. Brands typically avoid litigation with endorsers over “right of first refusal” disputes because filing a claim could make future endorsees leery of working with the brand, said Christopher Chase, an intellectual property and entertainment lawyer at Frankfurt Kurnit Klein & Selz.
“It is important in the sports business world because it shows a sponsor who had a deal is willing to go so far as filing a case in federal court to protect its right,” Chase said.
The important lesson of the case for intellectual property lawyers and agents alike is that they should revisit first-right-of-refusal language in contracts, understand it and make sure that they protect their endorsement and avoid litigation in the future.
“It’s tricky to draft the specifics on how the clause will be enforced,” Chase said. “When will the period be? When can you test the market? What do you have to do to present the offer from the new company? It’s easy to draft, but to draft an enforceable one is tricky because you want both parties to understand what their obligations are.”
