Learn about a recent legal case highlighting the importance of obtaining the owner’s consent when using seller’s assets, such as trademarks with owner’s photo, during business acquisitions. Explore the details of the case and key takeaways for a smooth transition of assets in mergers and acquisitions.
February 21, 2020
Introduction:
When a business is sold, especially if it’s run as a corporation or LLC, certain assets might be owned by the company’s owner. This applies not only to tangible assets like property but also to intellectual property used in the business. To use such assets, the buyer might need the owner’s permission. This blog discusses a legal case that highlights the importance of obtaining consent in such situations.
The Scenario:
In a recent case, a Colorado-based water conditioning business was sold to a nationwide competitor named Culligan. This company used a logo that prominently featured the owner’s photograph. This logo appeared on promotional materials, billboards, trucks, and customer equipment. When Culligan bought the business, it also acquired this logo.
The Lawsuit:
After the purchase, Culligan launched a marketing campaign showcasing the transition from the owner’s company to Culligan, featuring the owner’s photo. In response, the owner filed a lawsuit in a Denver federal district court. The lawsuit claimed that Culligan’s use of the owner’s photo without consent was a violation of Colorado common law, constituting the unauthorized appropriation of the owner’s likeness for commercial gain. Culligan argued that since the logo was part of the assets they acquired, they had the right to use it.
The Legal Ruling:
Culligan sought a summary judgment, asserting that their acquisition of the logo included the right to use it. However, the court ruled against them. The court stated that Culligan needed explicit consent from the owner, not just from the owner’s company, to use the photo. Since the matter of consent was disputed, a trial was required to determine whether consent was given.
Key Takeaways:
1. Assess Ownership: Buyers should determine if the business uses assets owned by the owner.
2.Obtain Consent: If owner assets are used, buyers must secure the owner’s consent to use them.
3, Written Agreement: Acquiring rights to owner assets should be documented in a written agreement to avoid disputes.
By being mindful of these lessons, buyers can avoid legal complications and ensure a smooth transition of assets during mergers and acquisitions.
Case Reference:
This case is referred to as Minott v. Wichita Water Conditioning, Inc., Civil Action No. 18-cv-01656-MSK-SKC, United States District Court, D. Colorado (February 7, 2020).
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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