Introduction
The personal name of the founder of a company such as the name of an inventor or fashion designer can be a very valuable asset in an acquisition. A buyer may want to minimize the risk that the inventor or designer will use his or her personal name after the closing to promote a competitor.
The deal
In this case the founder of the selling company invented a wood pellet grill. The founder manufactured and sold his new wood pellet grills under a trademark that contained his last name through a company owned and operated by him and his family.
On February 21, 2006, the buyer purchased all the seller’s assets, including its intellectual property. The buyer paid $9 million for the IP.
The lawsuit
After the closing, the buyer sued the founder in a Florida federal district court, accusing him of using his personal name and image to promote a competitor’s product. The buyer asked the court to issue a preliminary injunction to stop the founder from doing that pending the outcome of the trial.
The court looked at the description of the intellectual property transferred in the asset purchase agreement and the assignment document. The transferred IP included “personal goodwill … used or usable in the business,” which specifically included the founder’s last name “including but not limited to the following: … (the founder) … name and tree logo (which … (the seller) … is assigning including any rights to register, in connection with the Business only). Any other marks, logos, copyrights or other intellectual property used in connection with the Business, including without limitation likenesses of people and images used in advertising.”
The court concluded that the acquisition documents were not clear as to whether the buyer acquired the exclusive right to use the founder’s personal name and image in the wood pellet grill market. Therefore, the court denied the request for a preliminary injunction because the answer to that question depends upon the evidence to be presented by the litigants to the fact finder at trial.
This case is referred to as Traeger Pellet Grills LLC v. Traeger, Case No. 8:19-cv-1714-AEP, United States District Court, M.D. Florida, Tampa Division (September 11, 2019)
Comment
The court talked about a New York federal court case where the court concluded that buyer acquired the exclusive right to use the seller’s fashion designer’s personal name in a commercial context under the acquisition documents.
There the designer (Joseph Abboud) transferred: “All rights to use … the words “Joseph Abboud,” “designed by Joseph Abboud,” “by Joseph Abboud,” “JOE” or “JA,” or anything similar thereto or derivative thereof, either alone or in conjunction with other words or symbols … for any and all products or services.”
P.S. About a week ago, the buyer did persuade an Arizona federal district court to issue a preliminary injunction against the competitor to stop the competitor from using the founder’s name and image in promoting its wood grill products pending the resolution of the trial. https://www.govinfo.gov/content/pkg/USCOURTS-azd-2_19-cv-04732/pdf/USCOURTS-azd-2_19-cv-04732-0.pdf
By John McCauley: I help companies and their lawyers minimize legal risk associated with small U.S. business mergers and acquisitions (transaction value less than $50 million).
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
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