Steve Sidkin of Fox Williams looks into the rights you have when selling your business, and whether you can retain your name
I am looking to sell my business, a small occasionwear house. The company I am talking to want sole use of my name - does that mean I cannot then have another business in my name? And what if they start producing a different quality of product?
“I want my name back” was a headline in the Mail on Sunday last year concerning litigation brought by Karen Millen regarding the sale of her eponymous business to Baugur some years earlier. The sale agreement restricted the extent to which she could use her name in the future.
This raised a key issue - that it may be possible to avoid future disputes by giving thought beforehand as to what both parties want to achieve regarding the name.
When an individual’s name is used in a business the name is automatically an unregistered trade mark. The law provides limited protection for the owner of an unregistered trade mark if a third party uses it without permission or seeks to take advantage of it. The legal claim which you would bring in this type of situation is one for passing off. Unsurprisingly, there are various requirements which must be satisfied if you are to be successful in such a claim. However, the major difficulty with such a claim is it is often a very expensive one to pursue in terms of legal fees. This is the reason why many businesses apply to register the trade marks which they use.
It is understandable that when a purchaser is looking to acquire a design house that it will want to be able to use the name, given that is where some, if not all, of the goodwill resides. In view of this and given the Millen example, it is very important that you and the purchaser set out in the sale agreement what is to happen in the future regarding the use of your name by both the purchaser and you.
Bear in mind that restrictions on the purchaser’s use of your name need to be capable of being monitored. You may be concerned that the purchaser might start producing a different quality of product. But how is ‘quality’ to be measured? One solution may be to agree that if in the future there is a dispute about quality then the dispute will be referred to a third-party expert to determine. You will also need to give thought as to how long a restriction is to last.
As to your future use of your name, it is always better to try and agree a wider range of uses than a narrower range. This is because it is invariably harder to widen than it is to narrow!
Finally, give urgent and detailed thought to applying to register your name as a trade mark. There will be costs incurred in applying for registration and it will take some time depending on the trade mark and the country where registration is sought, but it is likely to be worth it. On registration, you will have a legal property right which is capable of being used, licensed, and sold and a property right which is more easily capable of protection than an action for passing off.