This SportTechie Legal article was written by Lloyd Rothenberg, a Loeb & Loeb LLP partner and Deputy Chair of the firm’s Capital Markets practice
The Los Angeles Dodgers became a player in the accelerator space in 2015, partnering with R/GA Ventures to mentor founders of sports tech startups. Thriving alumni from that program include basketball analytics provider ShotTracker and automated sports video producer Keemotion, which both graduated from the second class in 2016.
The venture was so successful that the Dodgers and R/GA rebranded and refocused their accelerator last year as the Global Sports Venture Studio. The name-change and restructuring allowed the accelerator to expand its reach, both internationally and in breaking away from its original seasonal model to a year-round operation.
Other teams, leagues and sports entities are also creating their own ventures. The NBA and Intel last year announced the formation of a sports tech accelerator called the NBA + Intel Capital Emerging Technology Investment Initiative. Recently, the NCAA, Indianapolis Colts, Indianapolis Motor Speedway, and others partnered with accelerator giant Techstars to create the Indiana-based Techstars SportsTech Accelerator Powered by Indy.
On simple brand considerations alone, sports tech startups may see significant benefit from being linked to a pro team (and the teams themselves can receive recognition as leaders in the sports technology space).
The support provided to startups accepted into an accelerator’s program includes strategy advice, access to financing, mentoring and, in some cases, even housing and meals. The Sixers Innovation Lab, a sports tech accelerator founded by the Philadelphia 76ers and Kimball Office, a contract office furniture manufacturer, provides free marketing strategy services, free or discounted legal services, access to the team’s executives, as well as free housing, office space at the team’s headquarters, and even food to help the founders stay focused on their business.
In return, teams and leagues get ground-floor access, input and equity in some of the most promising and innovative sports tech out there. For sports organizations of all sizes, leveraging new technology is crucial to engaging fans, improving bottom lines, and expanding reach into new sectors of the sports world.
But with any business partnership comes legal considerations, particularly when that partnership can involve ground-breaking ideas and products in a highly competitive market.
Central to the development of any technology is the protection of intellectual property. That includes not only patents for the tech itself, but also the trappings of a fledgling brand’s identity—its name, written content, photos, videos, graphics and logos.
Founders and accelerator partners need to have the IP ownership terms clearly identified in writing, including what will happened to the IP rights if they part ways. IP disputes can arise among partners or former partners at any level.
Both sides of partnerships must be clear about who is responsible for monitoring for potential IP infringement, and who will lead enforcement actions such as take-down notices, as well as defenses against accusations of infringement.
The contracts governing the financial interests of the partnerships between accelerators and startups must be clear. At a minimum, contracts should state the terms of the approval rights the accelerator has to agree for the startup to enter into transactions regarding uses of its IP, and preemptive, anti-dilution and other investment rights that protect the accelerator’s stake in the startup.
Parties should also keep in mind that technology itself may transform the nature of contracts. Blockchain-based smart contracts can automatically execute provisions when certain criteria are met. The decentralized, automated system functions without a bank or other central authority.
Finally, the whole purpose of tech accelerators is to chart new territory. But doing so often raises legal questions in areas where no regulatory framework exists.
As startups develop their ideas and products, that lack of regulation means sport tech accelerators should keep an eye on legal developments that may impact emerging technologies, such as proposed regulations or lawsuits. Staying abreast of public sentiment and how consumers could be affected by the technology could also help anticipate possible legal issues.
The rise of sports tech accelerators at the team and league levels could spur sports innovation to greater heights, benefitting organizations, investors and fans. But anticipating and understanding the legal issues that come with that innovation is crucial to navigating these relationships.