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The Entrepreneurial Agenda by Robb Mandelbaum
June 20, 2008
Sorry, But Your Name Is Mine (How Joseph Abboud Lost His Name)
Posted by Michael Lechter at 11:16 AM
Believe it or not, you can lose the right to your own good name.
Consider the case of fashion designer Joseph Abboud. Several decades ago, Abboud registered his personal name as a trademark for use with men's clothing and licensed JA Apparel (which he was partially owned) to manufacture and market clothing under the Joseph Abboud brand.
Then, in 2000, for a reported $65 million, Abboud sold his interest in JA Apparel, including the rights to "names, trademarks, trade names... and the goodwill related thereto." He stayed on in a creative role for several years, but after falling out with new owners of JA Apparel in 2005, he left. Soon after, he jumped back in the industry with a competitive line of clothing called Jaz, hoping to use the tagline "a new composition by designer Joseph Abboud" in his marketing materials. But the owners of JA Apparel sued to prevent him from doing so--and won. Earlier this month, the court forbade Abboud from not only using his name in advertising materials, but from even identifying himself as the designer of the clothing. Abboud had signed away the right to use his own name in the trade.
To be sure, this was an unusual case. As often as not, when you sell a company, the name and trademarks it used are part of the deal. After all, the company's goodwill is tied to the name and trademarks, and the purchaser typically wants that goodwill as part of the deal. Usually, though, someone selling a "namesake" trade name or trademark is precluded only from using the name as a tradename or trademark; in most cases, he or she may still take advantage of personal reputation, as long as the way the name is used doesn't create the impression of affiliation with the mark holder.
Because of the particular language in the contract with JA Apparel, however, the restrictions on Abboud were more stringent than normal. In particular, the court noted that Abboud agreed to sell, "all of [his] right, title and interest in and to: … names, trademarks, trade names... and the goodwill related thereto." In other words, the contract called for transfer of "names" in addition to trademarks and trade names. To interpret the contract otherwise would mean that the term "names" added nothing--had no meaning.
The lesson: Name a company after yourself or turn your name into a trademark--and beware. If you sell (or lose) the company, you may have to include the exclusive right to use your name as part of the company assets transferred--and then find yourself competing against someone else using your name. And if you (or your attorney) are careless in drafting the agreement, then you may lose the benefit of your reputation as well.
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It was totally unnecessary and kind of silly for this fellow to sell his name along with trademarks - wow!
Unfortunately this will set a precedent. Meaning its more likely to happen in the future!
-- Lee
Jake, Lee -- I appreciate your comments.
Unnecessary and kind of silly for Abboud to sell his name along with the trademarks? As a practical matter, he may not have had a choice -- unless he was willing to forgo at least part of the $65 million price for his interest in JA Apparel. The problem was that during the formative years of JA apparel, Abboud played to his ego; he inextricably tied to his name to JA Apparel’s product lines by using his name as the brand. He consciously turned his name into one of the trademarks! In all likelihood the only way that Abboud could get the $65 million price tag for his interest in the company was to include the rights to the brand -- his name.
Could Abboud have negotiated the right to continue to use his name and still walk away with $65 million? Perhaps he could have negotiated a phase out of the use of the Abboud name by JA apparel over a period of time or the right to use his name in specific language or phrases. We will probably never know. The fact is, however, he could have avoided the issue altogether if he had chosen something other than his name to use as the trademark for the JA Apparel products when he set up the business.
Is the Abboud case precedent setting? Perhaps. But this is not the first case where the use of personal name in a trade name or trademark has later cost a businessman the right to freely use his name. For example, while the restrictions were nowhere close to those on Abboud, Donald Trump, at least for a time, give up trademark rights to his name and likeness for use in connection with casino operations as part of a bankruptcy restructuring of Trump Hotels & Casino Resorts Trump in 2004.
Is there a lesson to be learned from this? Pick something other than your name to be your trademark. Using your name as part of the name of your business, or in the branding of your products or services may be great for your ego, but is probably not a wise long-term business decision.
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