LONDON, July 23 (Reuters) - In the shadow of London's gleaming Olympic venues, a quiet battle is under way over who gets to cash in on the Games.
Olympic organisers have enforced strict rules to protect official trademarks, deploying about 250 uniformed "brand police" on the streets of the capital to ensure businesses do not piggyback off the world's biggest sporting event.
The rules are simple: no one outside a small band of official sponsors such as McDonalds or adidas is allowed to make a profit by creating an association with the Games.
It is not the rules themselves that have irked some Londoners but their stringent enforcement and phrases such as "absurd" and "police state" - often used jokingly but with a shade of resentment - frequently crop up in conversation.
"It's mad. It just seems... that corporations are being looked after but not the people," said Lewis Parrin, 22, who runs a stall selling jewellery and watches in London's eastern district of Stratford where the main Olympic venues are located.
"It's quite scary, really. It's like a police state."
Another vendor nearby, when asked about a display of Olympic mascots on his makeshift stall, choked on his sandwich and removed them hastily. "I am glad you reminded me," he said.
London is buzzing with curious stories of those who have found themselves on the wrong side of the brand police such as a stall owner who was told off for displaying the London 2012 logo and a butcher in a town hosting sailing events who had to remove a sign showing the Olympic rings made from sausages.
On a quiet side-street within walking distance of the Olympic stadium where the Games open officially on Friday, a cafe called Olympic has had to paint over the letter "O" to comply with the rules.
Some have taken a more radical approach with a subversive new campaign mocking the policing and the brands themselves - a theme that has struck a chord with many in London's eastern areas where unemployment and social resentment run high.
On Monday, a pair of activists calling themselves guerrilla artists chose a busy street in east London to put up a giant protest billboard showing rows of police lined up against a dark background, and a slogan reading "INSPIRE A GENERATION".
Some passers-by paused to look, bewildered. An Olympic-style logo in the bottom right corner of the billboard read: "Official Protester of the London 2012 Olympic Games".
"The problem with Olympic advertising is that there is no ethics. It's supposed to be about excellence but it's not reflected in their branding partners," said one of the activists, who asked to be identified only by his nickname Del.
"Local businesses have been there for generations (but) they can't even promote things made locally. How is London supposed to prosper, really? It's sucking out their sense of pride and enjoyment."
Olympic organisers fight a regular battle to intercept "ambush marketing" - businesses trying to associate themselves with an event without paying for the rights.
For many firms, the stakes are high and fines can be up to 20,000 pounds ($31,000).
Enforcers wearing purple Olympic uniforms are often seen patrolling the streets, checking window displays, taking notes and issuing warnings.
British laws have been tightened to protect Olympic sponsors who argue the rules protect their investment and reduce the amount of public money needed to stage international sporting spectaculars.
Under a special law passed by the British parliament, the logos of competitor brands are also banned from Olympic venues.
Businesses are not allowed to use official phrases and words such as "gold", "bronze", "silver" or even "London", as well as symbols and mascots associated with the Games.
Inside the so-called exclusion zone around the main venues, cafes, shops and other businesses will remain under the watchful eye of the brand police during the Games to make sure no one bends the regulations.
There were rumours that even ordinary people could fall victim to the rules and be asked to remove T-shirts displaying the logos of competitor firms. However, Olympic organisers have played down concerns, saying policing will be done within reason.
"The rules apply to sponsors as much as to any other business," said a spokesman for the Olympic Delivery Authority (ODA).
"The ODA is employing around 250 specialist enforcement officers to do this in a reasonable and proportionate way... They are not there to enforce sponsors' marketing deals but instead to ensure that regulations laid down by parliament are observed, rules that also apply to sponsors."
Coca-Cola is among 11 companies who have paid $957 million for worldwide rights to market their products on the back of the Games over a four-year cycle.
Local organisers have raised about 700 million pounds ($1.10 billion) from an additional 41 sponsors for the London Games.
Despite the reservations of some locals, others were more optimistic, saying the Games will help regenerate some of London's most rundown areas - an ethnic melting pot plagued by gang crime where memories of last year's wave of unrest are still fresh.
"We have to distinguish between the concept of the Olympic Games the sporting event and the corporate circus. It certainly put Stratford on the map," said Dennis Fisher, who runs a stall selling T-shirts and represents stall owners in Stratford.
"We are in such close proximity to the stadium that we can't associate the Olympic brand. And I can understand that."