Selling Oneself Out The Problem of Selling a Personal Name Trademark
Article Date: Monday, February 28, 2011
Written By: Luke MacDowall
One of the most influential thinkers of the twentieth century, Jacques Lacan, argued that the taking of a name marked a human being’s entrance into the Symbolic order (the world of language) that distinguishes human beings from other beings in the world. In this way, our names form an integral part of our existence. Aside from this ontological importance, personal names can anchor one’s economic identity as well. Personal name trademarks have helped build some of the most recognizable and important businesses on the planet; it’s the Ralph Laurens and Armanis of the world that illustrate just how a name can transform into a commercial power. However, an interesting problem can arise when a personal name trademark owner wants to sell the rights to his or her trademark, as it can unintentionally limit the owner’s ability to continue using her name in future business endeavors.
A litany of cases demonstrates the power of trademark law to protect the value of a name (or more appropriately, the goodwill associated with the use of a personal name trademark). But this power is carefully circumscribed as protection is not easily attainable in this arena; instead, personal names are not subject to trademark protection unless they attain secondary meaning. 1-2 Gilson on Trademarks § 2.03. Essentially, a name attains secondary meaning once the name no longer identifies just the individual, but rather when consumers come to associate the name with the product, as its source identifier.
As explained by one court, there are three primary reasons for restricting trademark protection for personal names: (1) public policy favors the freedom to use one’s name in business, (2) protection is unnecessary since consumers do not identify the source of a product by the personal name associated with it, and (3) consumers will be prohibited access to useful information, for example, if trademark protection prevents a business from using the owner’s name. Peaceable Planet, Inc. v. Ty, Inc., 362 F3d 986, 988-89 (7th Cir. 2004).
Nonetheless, those whose names are famous enough to warrant trademark protection can pursue claims under the Trademark Dilution Revision Act. 15 U.S.C. § 1125(c)(1); § 5A.01[c][ii]. Once a trademark owner attains rights in the personal name mark, she may also sell the use of the trademark. It is at the intersection of these two rights – the right to protect one’s name and also to sell the use of that name – that a unique problem arises: trademark owner A sells the rights to B but later wants to continue using name A in future commercial activity.
In 2009, the Second Circuit dealt with this scenario where the famous fashion designer, Joseph Abboud, decided to sell the rights to his personal name trademark. JA Apparel Corp. v. Abboud, 591 F. Supp. 2d 306, 2008 WL 2329533 (S.D.N.Y. 2008). Having registered his personal name mark in 1987, Abboud sold all of the rights, title, and interest to JA Apparel for $65.5 million including: “the names, trademarks, trade names, service marks, logos, insignias, and designations identified.” JA Apparel Corp. v. Abboud, 568 F.3d 390, 394 (2d Cir. 2009). The parties also entered into a “Personal Services Agreement” (“PSA”) prohibiting Abboud from competing with the new owner of JA Apparel for seven years. The problem arose when Abboud began to develop a new product line, which he called “jaz,” that was set for release after the end of his seven year agreement. JA Apparel brought action alleging a breach of the PSA and trademark infringement claims under the Lanham Act and New York common law. Ultimately, the district court placed a permanent injunction on Abboud from “using his name to sell, market, or promote goods, products, or services to the consuming public.” Id. at 392.
Perhaps we have grown accustomed to this ability to sell one’s services/goods/etc. or maybe the ubiquity of trademark rights has desensitized us to the outcome at the district court level. But if one takes a few moments to consider what exactly occurred, it’s quite striking. Abboud was being told that he had no right to use his personal name as a trademark in commerce since he had sold his rights to do so. Courts are hesitant to grant personal name trademark protection so that those with similar names will not be prohibited from using their names in business. In this case, the problem comes full circle. The granting of trademark protection allowed Abboud the right to sell the use of the trademark, which in turn, prohibited him from using his name in business.
Breaking Down the Arguments
1. The PSA unambiguously stripped Abboud of the right to use his personal name.
First, the district court handled the contract claim that Abboud had violated the terms of his PSA. The court found that Abboud had entered into an unambiguous contract with JA Apparel granting “exclusive rights to the commercial use of the name ‘Joseph Abboud’.” Id. at 392. Quite simply, the district court found that Abboud had “conveyed to JA ‘all of Abboud’s rights to use his name for commercial purposes,” thus using his name in connection with “jaz” would breach the exclusivity of the PSA transaction. Id. at 395.
On appeal, the Second Circuit disagreed and held that “the scope of the right to use Abboud’s name conveyed by the [PSA was] ambiguous” Id. at 397. The Second Circuit found that the PSA could be interpreted narrowly to include only a sale of those registered marks (i.e. “Joseph Abboud” the trademark) or it could be interpreted broadly to mean the name itself “Joseph Abboud” could not be used in connection with any future commercial purpose. The court went on to dismiss the argument that because JA paid a large sum, the court should automatically conclude that the parties intended to prevent Abboud from using his name in any new, commercial ventures. The Second Circuit rejected that conclusion because there simply wasn’t an explicit “provision in the [PSA] conveying all of Abboud’s rights to use his name for commercial purposes.” This conclusion can obviously be taken at face value: the PSA was not explicit enough about the rights for exclusive use of the name. Perhaps the reason the Second Circuit was hesitant to read the PSA so broadly was because of the underlying, although unmentioned, public policy that favors the freedom to use one’s name in business. Instead, the Second Circuit wanted to carve out a space in the PSA that allowed Abboud to “refer to himself in a ‘non-trademark sense’.” Id. at 398.
This first issue demonstrates the importance of hammering out the details of the assignment or sale of trademark rights, especially in cases of personal name marks. Given the reasons for allowing these marks and our hesitance to prohibit an individual from using her name, courts may be reluctant to grant a broad reading of agreements where ambiguity may inhere, simply to avoid having to enjoin the use of a personal name.
2. Any use of Abboud’s name would constitute trademark infringement
The second important issue dealt with in this case was the district court’s finding that “any proposed use by Abboud of his name commercially is improper” because it would constitute trademark infringement. Id. at 395. Abboud conceded that JA Apparel passed the Polaroid test with a prima facie showing of confusion if Abboud continued to use his name as a trademark. Id. at 400. Nonetheless, the defense raised a fair use defense under 15 U.S.C. § 1115(b)(4) of the Lanham Act, which requires three elements: (1) use other than as a mark, (2) in a descriptive sense, and (3) in good faith. EMI Catalouge Partnership v. Hill, Holliday, Connors, Cosmopulos Inc., 228 F.3d 56, 64 (2d Cir. 2000). The defense argued that Abboud was “not seeking to use the Joseph Abboud name on clothes, labels, or hang-tags for the ‘jaz’ line; he want[ed] instead to use his name in advertising to identify himself as the designer.” In response, the plaintiffs argued that the use of his personal name in advertising [would] “infuse the goodwill of his brand that he sold” to JA. JA Apparel Corp. v. Abboud, 568 F.3d at 400.
The district court found JA’s argument persuasive, holding that although the use would be “descriptive,” Abboud could not show it was used “other than as a mark” or “in good faith.” Id. at 401. As the court noted: “it is patently obvious that consumers seeing JA Apparels’ products … would be utterly confused as to whether the “jaz” products … were derived from the same source.” Id. at 396.
On this issue as well, the Second Circuit vacated the judgment finding that the district court had incorrectly analyzed whether Abboud was acting in “good faith” and whether the use would be “other than as a mark.”
a. Use Other than as a Mark:
This element presents a very difficult analytic challenge because there is a fine line between describing a product (as Abboud argued a “designed by” mark would do) versus a trademark (as Abboud’s name functioned in its “brand name” role). This situation calls for a fact-intensive inquiry not properly done by the district court. What will these “advertisements” (i.e. “non-trademark” signifiers) look like in size, shape, etc.? Id. at 402. Ultimately, the Second Circuit remanded for a closer look at the specific “jaz” line uses of the name Abboud.
Practitioners should recognize that the specific “look” of the mark will be used to determine whether it is used as a descriptive mark or a true trademark.
b. Good Faith:
As for the good faith element, the district court erred for two reasons. First, the PSA did not unambiguously grant JA Apparel exclusive rights to Abboud’s name. As the Second Circuit points out, if the agreement were unambiguous then it may give rise to an inference that Abboud acted in bad faith by using his name, knowing that he had sold the entirety of his rights to use his name in commercial transactions. Id. at 402. However, since the PSA was ambiguous, it could not be used as a basis to find “bad faith.”
Second, the district court erred by equating an admission of consumer confusion with bad faith. The fact that consumer confusion would exist does not mean Abboud intended to confuse consumers. JA Apparel Corp. v. Abboud, 568 F.3d at 401. Rather, Abboud correctly pointed out that the fair use defense is not precluded by the existence of some confusion. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 US 111 (2004). Thus, admission to the Polaroid findings was not dispositive on the “good faith” element.
In the end, the case proves useful for practitioners in two ways. First, assignment of trademark rights must clarify the parties’ intent for future use of the name by the original owner of the mark. Second, without this unambiguous agreement not to use one’s name in the future, the “fair use” defense is extremely effective against infringement claims for two reasons: (1) it is difficult to prove intent-based bad faith and (2) the line between a personal name as descriptive (i.e. other than as a mark) and a personal name as trademark remains extremely hazy.
Luke MacDowall is a third-year law student at Wake Forest University School of Law. Mr. MacDowall intends to practice general business litigation with special emphasis on intellectual property and employment issues.
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