When American middle-distance runner Kate Grace won the women’s 800-meter Olympic trials on July 4, the Seattle-based women’s athletic apparel company Oiselle, which sponsors Grace, congratulated her on Instagram by saying, “She’s heading to Rio!” The very next day, Oiselle received a letter from the US Olympic Committee.

The letter, seen by Yahoo Finance, demanded that Oiselle take down the post and, “completely refrain from creating Olympic-themed advertising… Please act expeditiously to remove all Olympic themed information from all Oiselle promotional materials… The USOC has tried to work with Oiselle to provide the educational tools to enable your company to support athletes without infringing on our trademarks, but will exercise all available remedies to protect its intellectual property rights.”

The fix Oiselle made to a photo on its blog of runners at the 800-meter Olympic trials

Oiselle isn’t an official Olympic sponsor, a privilege for which mega-brands like Coca-Cola, McDonald’s, Visa and P&G have paid an estimated $200 million each. Under a decades-old Olympic restriction, Rule 40, non-sponsors cannot publicly refer to the Olympics in any way during a blackout period that begins nine days before the Opening Ceremony and lasts for three days after the Closing Ceremony. Rule 40 made athletes angry in 2012, leading to a key change this year, but critics say the changes haven’t changed much of anything.

In light of the letter, Oiselle (pronounced “Wa-ZELL”) was left to refer to the Olympics on its blog as, “The Big Event in the Southern Hemisphere,” or “The Big Rodeo,” not unlike brands running ads about “The Big Game” around the time of the Super Bowl. Non-sponsor brands cannot even retweet the official @Olympics Twitter account.

What a world we live in that cos who spend hundreds of thousands of $ each year to produce Olympians are considered a threat to @Olympics. — Sally Bergesen (@oiselle_sally) July 28, 2016





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Meanwhile, Berkshire Hathaway-owned Brooks Running, also in Seattle, launched a social media campaign against Rule 40. Brooks CEO Jim Weber tells Yahoo Finance, “We launched rule40.com to draw attention to the restrictions it places on athletes and their ability to market themselves during the highest profile time of their running careers… We hope it’s a good start to a bigger conversation. We believe the rules have to change.”

The question that many critics of Rule 40 have is whether the USOC can really threaten legal action against brands. The answer is a resounding yes.

Under Title 36, Subtitle II, Part B of the US Code of federal statutes, the USOC is an organization with special protection above standard trademarks. Nearly 100 organizations get similar protection, including Boy Scouts and Girl Scouts of America, Boys and Girls Clubs of America, and many veterans groups. (See the full list of protected organizations.)

The USOC’s section is called the Ted Stevens Olympic and Amateur Sports Act of 1978 (updated in 1998), and it recognizes the USOC as a corporation (though it is a nonprofit) that owns the exclusive rights to: the International Olympic Committee symbol of the five interlocking rings; the symbol of the International Paralympic Committee; the symbol of the Pan-American Sports Organization; and the words or phrases “Olympic,” “Olympiad,” “Citius Altius Fortius,” “Paralympic,” “Paralympiad,” “Pan-American,” and “America Espirito Sport Fraternite.”

If the USOC operated under regular US trademark law, non-sponsors might be able to say things like, “Good luck to our Olympic athletes in Rio” and argue that the infringement is allowed because it is “fair use.” But the USOC’s protection overrides any fair use argument.

The point of the heightened protection, explains St. Louis University trademark law professor Yvette Liebesman, “is to stop people from using the Olympics to promote their own businesses.” The USOC, which reaps nearly $100 million per year from official sponsors for “marks rights,” makes the case that its sponsors would lose value, and maybe even walk, if non-sponsors had rights to use the Olympic marks.

Liebesman doesn’t buy that argument. She believes the USOC would have a hard time demonstrating damages, since it would have to show that one brand’s use of its mark caused financial damages to the USOC. “A company with better grounds would be if Coke is the sponsor, and Pepsi stepped in and started doing promotional stuff,” she says. “Then Coke might have a claim for damages.”

But it doesn’t matter; the USOC has a trump card.

Special trademark protection for the USOC

In a typical trademark lawsuit, a plaintiff suing someone for trademark infringement would have to establish liability by showing that the use of the trademark was causing confusion among consumers—but the USOC’s special protection under Congress means the USOC doesn’t have to prove confusion. By using the USOC’s marks at all, brands are infringing.

Could a small brand still take action and challenge the USOC in court? Yes—but it’s unlikely any would, because most small brands can’t afford it. The USOC has big power and big money; its revenue was $270 million in 2014, up 8% from 2010, and its CEO Scott Blackmun earns more than $1 million per year in pay. And it takes a long time to litigate.

There is also some precedent for court cases involving the USOC. In 1987, the USOC took a nonprofit, San Francisco Arts & Athletics, to court over an event it was calling the “Gay Olympics.” SFAA argued it should be able to use the word “Olympics” under the First Amendment. The US Supreme Court did not agree; it sided with the USOC. That was a different kind of case than a brand would bring—the SFAA was using the term “Olympics” for commercial use—but it is at least a foreboding sign that SCOTUS supports the USOC’s heightened protection.

A monopoly on the word ‘summer’?

The special trademark protection from Congress does not include words like “medal,” “gold,” “summer,” “games,” “performance,” “challenge,” or “effort,” but those are also words that the USOC has sent threatening letters over.

For restricting those words, the USOC threatens punishment of athletes. It has warned brands that it can ban an athlete from competition, or revoke medals. It hasn’t ever actually done so, but could.

It is this part of Rule 40, the idea that even generic words like “gold” aren’t allowed, that angers brands the most.

Can the USOC really ban use of such terms? Yes—not under US law, but under its own rules. As Liebesman says, “They can set the rules for their own event. As long as they’re not being discriminatory. They can’t say, ‘We won’t let your athlete compete because she’s Jewish.’ But they can say, ‘If you use these words, we won’t let your athletes compete.’”

In other words, the USOC has all the power. “They threaten the worst-case scenario,” Bergesen says. “And of course we would never want that to happen to any athlete.”

To be sure, one could argue that the USOC is right to protect its intellectual property. The Summer Olympics is the biggest global event in sports, it only comes every four years, and the USOC can do whatever it likes to protect its ownership of the event.

Finding a happy balance for USOC and sports brands

Unless they want to bring costly legal action, risking their own budget and the status of their sponsored athletes, all that a frustrated non-sponsor can do is make big noise on social media. So that is what Bergesen is doing. “We would like to see change in the sport,” she says. “That’s why I have been as vocal as I am—not just to kick some Rio sand in the USOC’s face, but to say, this is a system that’s broken and we would like to look towards 2020, 2024, and see these rules change.”

One change she asks for: that track-and-field athletes be able to display a sponsor name or logo on their uniforms. Currently they cannot, but the golfers can, and the swimmers can, hence why Michael Phelps is allowed to wear a swim cap that bears his personal MP brand, made by Aqua Sphere. (But all athletes have to cover the logo on headphones made by Apple-owned Beats, because Samsung is an official sponsor.)

The rules did change this year, in two ways. The USOC allowed non-sponsors to run ad campaigns during the blackout period if the campaigns didn’t reference the Olympics, and if the campaigns were submitted for approval way back in January, and started running in March. Under Armour did this with a minute-long ad that shows Michael Phelps training in the pool, but doesn’t mention the Olympics. Smaller brands may not have had the time or resources to jump in with a new creative campaign in time for the early approval date.

The second change was that non-sponsors now can post about their sponsored athletes on social media during the blackout, and athletes can post about their non-official sponsors, but only if they don’t reference the Olympics in any way.

Bergesen explains why that didn’t amount to any helpful change for a company like hers: “The top three to five household-name athletes will get some benefit from it, like a Michael Phelps… It’s pretty easy to connect the dots between who he is and the fact that the Olympics is happening. I think where it’s much more problematic is for lesser-known athletes and smaller sponsors. We could be running an ad about one of our newer athletes, like Kate Grace… If we run an ad with her image that says nothing about the Olympics, I think it’s questionable that somebody would be able to connect the dots between that ad and her competing in the Olympics.”

if your sponsor says good luck to you in Olympic time you face being booted out #rio2016,but drugs cheats??! #rule40 https://t.co/WUhOTuaAk9 — Kelly Sotherton (@KellySotherton) July 26, 2016





In a blog post last year, the USOC said the relaxed rules were an effort, “to fairly and consistently institute an equitable waiver process to benefit athletes and protect Olympic and Paralympic sponsors’ rights.” The USOC did not have a comment for this story.

Bergesen says Oiselle spent about $300,000 over four years on each Olympic athlete it sponsors, through marketing and gear and other efforts to help them. “It sort of seems like the USOC ought to be thanking us,” she says, “rather than penalizing us.”

It is worth noting that the federal statute protecting the USOC’s trademark was written before the Internet. With social media, the IOC and USOC are getting more of a black eye than ever before. Could all the fuss on social media drive the USOC to relax Rule 40 further? Liebesman doubts it. “They won’t care until the bad press is so bad that the big guys start pulling out and the USOC loses money,” she says.

So the onus is on an official sponsor like McDonald’s to pull its sponsorship in favor of smaller brands getting in. Don’t expect that to happen.

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Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology. Follow him on Twitter at @readDanwrite. Sportsbook is our recurring sports business video series.

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