Navigating the Lifecycle of an Eponymous Brand (Part 3)

In this three-part series, we identified three distinct seasons in the lifecycle of an eponymous brand: (1) Choosing the Brand, (2) Commercializing the Brand, and (3) Legacy of the Brand. In Part 1, we discussed what is at stake when selecting an eponymous brand. In Part 2, we explored some unique issues that arise in the context of commercializing personal name brands. In Part 3, the final in the series, we contemplate the “Legacy of the Brand,” particularly when the namesake separates from the brand.

The Legacy of the Brand is particularly tricky for eponymous brands. Successful eponymous brands are uniquely imbued with the namesake’s character, personality, and values, a distinction that influences much of their success and customer loyalty. This connection naturally creates an inextricable link between the brand’s value proposition, brand promise, and the founder’s name. And, as a result, the name no longer belongs to the founder alone; it belongs to a collective, including the company, its shareholders, and customers, and along the way takes on an entirely new meaning. This evolution from “personal name” to “powerhouse brand” can present a host of personal and legal challenges, made particularly evident when the founder decides to step away from the helm of the brand.

The Decision to Leave
A founder’s decision to withdraw from their namesake company is a deeply personal and emotional one, typically involving not just relinquishing control over the direction of the business, but also decisions on how the founder’s “name as brand” will be used in the future. To stave off future conflict, the parties need to be clear on their individual rights and responsibilities post-separation, and clearly enumerate those rights and responsibilities before inking a deal.

Complicating matters, the founder and the company may have contrary post-separation goals: the founder may want to use his or her name commercially in connection with new opportunities and ventures; the company may want to restrict that use to ensure it doesn’t infringe any of its trademarks or create consumer confusion regarding the founder’s affiliation or association with the brand. These competing interests can quickly lead to loggerheads absent a mutually beneficial arrangement made prior to the founder’s exit. Famous fashion designers Paulo Gucci, Kate Spade, and Joseph Abboud ended up in litigation with their namesake companies over these types of issues; lifestyle brand owner Adam Lippes went so far as to buy back his label to regain control of the business, bring back its “charm and intimacy,” and shape its legacy.

“What’s Mine is Mine and What’s Yours is Yours”: Claiming Control of Trade Identity Rights
When a founder announces the decision to withdraw from a namesake brand, it is critical to consider all key identity assets at stake beyond trademarks, including rights of publicity, domain names, and social media usernames.

(1) Trademarks: The company’s trademarks are among an eponymous brand’s most valuable assets. As part of a withdrawal, the founder may (a) assign all rights in the trademarks to the company (Paulo Gucci, Kate Spade, and Halston took this approach), or (b) retain ownership and license rights back to the company under negotiated terms (Donna Karan took this approach when her company went public in the mid-1990s). How ownership will be structured is usually one of the first points negotiated in a deal, as it necessarily impacts valuation of the business going forward.

(2) Rights of Publicity: Rights of publicity, also referred to as personality rights, include the right to use one’s name, image, and likeness in commercial settings. For founders, the amount of control retained over these rights governs their ability to move on to new opportunities post-separation. Typical separation agreements include parameters for post-separation use to identify the founder’s involvement with new endeavors, affiliations, and endorsements, beyond use of the name as a trademark/brand name.

Illustrating this point, designer Joseph Abboud was mired in litigation over commercial use of his name in connection with his JAZ brand, which he launched a few years after he sold his trademarks to his namesake company, JA Apparel. At issue was Mr. Abboud’s use of the tagline “a new composition by designer Joseph Abboud” to promote the JAZ brand. The key question before the court was whether the sale of Mr. Abboud’s trademarks also included the exclusive right to use the Joseph Abboud name commercially, in contexts beyond simple trademark use. The court sided with the designer, and an accommodation regarding Mr. Abboud’s ongoing commercial use his name was reached. See JA Apparel Corp. v. Abboud, 682 F. Supp. 2d 294 (2010). It goes without saying that such details are ideally worked out prior to separation.

(3) Domain Names / Social Media Usernames: Another hotspot for potential disagreement is how a founder uses their name in domain names and/or social media usernames, and the resulting commercial activity from that use. This may extend to keyword advertising and other search engine optimization strategies. As with all trademark-adjacent use of an personal name and identity, coming to an agreement as to parties’ expectations as to these uses can also significantly reduce the risk of litigation.

Post-mortem: Creating a New Commercial Identity
Once a founder has negotiated a successful exit, it becomes no simple task to forge a new commercial identity separate from the eponymous business. And, if a founder is restricted from doing business under their name, abbreviations, or even derivatives – such as nicknames, the task is that much more difficult. Just ask famed French designer Catherine Malandrino – when Malandrino separated from her eponymous label, an ensuing legal battle reportedly restricted her continued use of her name or likeness in any commercial context, essentially rendering her nameless. When she launched a new collection for the Home Shopping Network, the brand was originally touted as “French Rendez Vous by Catherine Malandrino.” However, references to this collection no longer contain any reference to Ms. Malandrino, perhaps hinting at a behind-the-scenes struggle regarding continued commercialization of her personal identity.

PRACTICE TIPS:
For founders looking to withdraw from their eponymous businesses, following are points to consider when drafting separation and license agreements to help draw to a close the lifecycle of an eponymous brand:

• Ensure all separation and related agreements describe how all brand assets, not just the trademarks, will be owned, controlled, and managed.
• Specifically define the commercial rights the founder is retaining in their name, likeness, and related branding elements, and clarify parameters for future use.
• Anticipate buyback rights and create pathway to pursue them, where possible.
• Expect conflict over these issues and make contingencies for disputes in all agreements and identify a constructive process for dispute resolution.

This article appeared in the April 2017 issue of MarkIt to Market. To view our past issues, as well as other firm newsletters, please click here.