Recently, Estée Lauder sued Jo Malone, Jo Loves, and Inditex (Zara's parent company) in respect of the use of "Jo Malone" on packaging and marketing materials. The case highlights the issues affecting founders who name their company after themselves, particularly in an exit scenario.
Back in 1999, Jo Malone London (and the rights to use the Jo Malone name) were sold to Estée Lauder. In 2011, Jo Malone launched a new business named Jo Loves. In 2019, Jo Malone joined forces with Zara to launch a new fragrance range with her name appearing on the packaging and marketing as "perfumer Ms Jo Malone CBE, founder of Jo Loves". Over 6 years later, Estée Lauder aren't happy about it.
The legal reasoning
Estée Lauder alleges that under the original sale agreement, Jo Malone was restricted from using "Jo Malone" in a number of scenarios, one of these being, fragrance marketing. Estée Lauder is arguing that the Zara collaboration crosses that line, and has brought claims for breach of contract, trade mark infringement, and passing off (essentially, misleading consumers into thinking there's a connection between products when there isn't one). Malone is yet to file the defence but statements on social media already suggest that the claim will be defended by arguing that the 'CBE' and 'founder of Jo Loves' elements used on the products make it clear that she is referring to her personal identity and not the 'Jo Malone' brand (which was sold, along with the associated IP under the agreement).
The bottom line
This case is likely to hinge on whether: 1) Malone breached the terms of the sale agreement; 2) consumers could be confused about where the Zara fragrances originate from; and 3) the use of "Jo Malone" takes unfair advantage of, or is detrimental to, the repute of Estée Lauder's registered trade marks.
This isn’t the first time these types of disputes have arisen. In 2016, Karen Millen lost her fight to trade under her own name after selling her business in 2004. The court strictly applied the original agreement terms and held that the restrictions not only applied to her use of 'Karen Millen' but also to 'Karen' or 'K.M' for similar businesses.
A timely reminder
For any founder who has built a business around their own name, keep in mind that the very thing that makes your brand distinctive can become a significant liability on exit.
Once your name is sold, getting it back (or even just using it freely) is far from straightforward and the restrictions may extend further than you expect. If you're considering naming your company after yourself, or you're approaching an exit, be mindful of the rights you may be giving up.
Practical considerations
If your company is named after you or, you are thinking of naming it after yourself, consider:
- Registering trade marks early and broadly - register your name as a trade mark across multiple Classes before any sale. This preserves optionality and strengthens your negotiating position when it comes to carving out permitted uses of what is and is not included in the sale longer term.
- Things change! On exit, you may be fine with the restrictions included in a sale agreement now and think that you have no intention of using your name again, but things change. New opportunities come up. As far as possible, future proof against these scenarios and ensure that any restrictions on how you can use your name are as narrow in scope as possible.
- Retaining personal endorsement rights - negotiate the right to continue using your name in a personal capacity, such as for endorsements, public appearances, or non-competing ventures. Drawing a clear contractual line between your personal identity and the brand can prevent disputes down the line.
- Including a reversion clause - where possible, negotiate for your name and associated IP rights to revert to you in certain circumstances, such as if the buyer ceases trading under the brand, materially alters its positioning, or enters insolvency. This acts as a safeguard against your name being misused.
- Defining permitted personal use in a schedule - rather than relying on general contractual language, agree a detailed schedule setting out exactly how you may continue to reference your name post-sale (e.g., biographical references, personal social media, academic or charitable activities). The more granular the schedule, the less room there is for ambiguity.
- Licensing and not fully assigning – to the extent possible, assign IP rights to a holding company before the sale of the company to give you more flexibility (and negotiation power) on the basis that such company licenses your name rather than being assigned it outright (though this may affect the sale price of the company).
Trowers & Hamlins' Intellectual Property team specialises in helping businesses develop and implement trade mark and brand protection strategies. If you would like advice on these issues, please get in touch. We would be happy to assist.
