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The pitfalls of selling your name – lessons for entrepreneurs

23/09/2016 | Tom Spiller

The decision in the High Court case of Karen Millen v (1) Karen Millen Fashions, (2) Mosaic Fashions US [2016] EWHC 2104 (Ch) should come as a warning to entrepreneurs doing business in England and Wales. When selling a business with which you have a close personal association and bears your name, problems may arise at a later date if you also sell the intellectual property rights associated to that name. This is of particular importance to the business community of the UK, for many British entrepreneurs build and sell more than one business during their career.

Background

Karen Denise Millen, together with her then-partner Kevin Stanford, began a fashion business in Kent in 1983 which traded under the name of “Karen Millen” (her middle name “Denise” apparently not being considered fashionable enough). Gaining momentum and prestige by trading in Harrods and Fenwick department stores in West London, after it had grown to include several lines of clothing and retail outlets, the business was transferred from a partnership into a limited company named “Karen Millen Limited”. Shortly thereafter, the structure was changed again with the incorporation of a holding company. The business spread internationally, to include a presence in Hong Kong, Japan and Canada. It expanded by using franchising, although when sufficient capital was available the business opened its own retail outlets in new jurisdictions.

By 2004, “Karen Millen” was global in scale and the name was a well-recognised and highly valuable brand. In June of that year, both Ms Millen and Mr Stanford sold their interest in the business to an Icelandic consortium (which included Kaupthing HF and was led by Baugur Group). As at the date of the sale, the business included directly owned stores in nine countries and a presence via franchises in a further 15.

The contract by which the business was sold contained provisions restricting the use of the brand’s intellectual property, the most important being the trademark “Karen Millen”.

Ms Millen said that one of the major reasons behind her decision to sell her business was to spend time with her family and, in particular, her youngest child. However, in 2011, Ms Millen gave an interview in which she said that she wished to make a return to the fashion industry under the name “Karen”.

This change of heart led to litigation in the UK on the basis that, when Ms Millen sold her business, she had also sold the rights to trade in the EU using the trademarks “Karen” or “Karen Millen”. Those proceedings were eventually settled in February 2015.  However, there was no settlement in respect of the position worldwide. In particular, the parties did not address the question of whether Ms Millen could go back into the fashion industry using her own Christian name in America or China. This residual dispute formed the subject matter of further proceedings issued in the High Court of England and Wales by Ms Millen in October 2014, somewhat strangely prior to settlement of the first.

The Decision

Resolution of the second set of proceedings required judicial interpretation of the terms of the contract by which Ms Millen had sold her former business. Ms Millen sought a series of “declarations” (a less commonly known remedy in which the court states the extent or existence of a party’s rights, makes a finding of facts or states a principle of law) to the effect that she was entitled to use that name.

However, finding against Ms Millen, the Court decided that when she sold her share in her former business in 2004, Ms Millen had also sold the right to use the above-referenced trademarks in America and China.

Practical Lessons

What entrepreneurs trading in today’s brand-obsessed, commercial world should learn from Ms Millen’s litigation is that you can only sell your name once. So if you decide to sell your business for personal reasons, it is wise to build in protections that will allow you to trade using your own name at a later date.

Ms Millen’s desire to realise value from her business while simultaneously freeing up more time to spend with her family was reasonable at the time, but she may now wish she had spent longer considering the future options for her business activities before selling the rights to trade using her own name. This is an increasingly common problem, from which even the Special One, Jose Mourinho, suffers, although in his case it is only his image rights that his former employer still owns; trademarks relating to his name and signature have expired so he is now free to sell them again.

Should you find yourself considering your intellectual property rights in the context of a sale of your business, or perhaps becoming embroiled in an intellectual property dispute, get in touch. Whatever your name is, or perhaps was, Rosenblatt will be able to help. In the meantime, perhaps Ms Millen’s middle name Denise will finally have the opportunity to shine as the next major name in fashion.

This article should not be taken as definitive legal advice on any of the subjects covered.  If you do require legal advice in relation to any of the above, please contact Simon Walton on 020 7955 1455 or any member of the Rosenblatt Dispute Resolution Department.

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