The exclusive right to use the founder’s name, likeness and goodwill in connection with the marketing and sale of the founder’s business may be a very valuable asset. And if it is, the buyer may want to acquire the exclusive right to use it to promote the buyer’s business; namely the right of publicity. This would also give the buyer the right to stop the founder from using his name, image and goodwill to promote a competitor.
This deal involved a business where the founder, Joe Traeger, is credited with inventing the wood pellet grill in the 1980s. Following this invention, Joe manufactured and sold wood pellet grills through a company owned and operated by Joe and his family. Joe and one of his sons, Brian, were well known in the industry.
In 2006 the Joe’s company sold its assets to the buyer for $3.4 million. The buyer also paid $9 million to Joe and his 3 sons for the buyer’s right to use the family’s IP, which included “personal goodwill and IP assets and properties used or usable in the business.”
In 2018, a competitor of the buyer issued a marketing release announcing that it had hired Joe and Brian Traeger to elevate one of the competitor’s grill brands. The competitor’ marketing release features two photos of Joe and Brian and competitor executives, standing in front of the Traeger barn (the founder is credited with inventing the wood pellet barbeque grill in his family’s barn in the 1980s), with the Traeger name prominently displayed behind them, and a third photo of Joe Traeger and Dan Thiessen, the competitor’s CEO.
The buyer then sent the competitor a cease and desist letter, demanding that that the competitor “discontinue all activities which suggest or create the impression of a connection between the competitor and the buyer.”
In early 2019, the competitor announced that one of its grill brands planned to introduce a new series of grills in Fall 2019 called the Founders Series “brought to you proudly by Joe Traeger, the founder of the original pellet grill, and Dan Thiessen, an accomplished innovator in the pellet grill industry.” Following this announcement, the competitor began posting a series of advertisements on Instagram, Facebook and Twitter, including photos and statements featuring the names and likenesses of Joe and Brian promoting the competitor, Competitor’s products, and the Founders Series.
On July 16, 2019, buyer sued the competitor in an Arizona federal district court to stop it from using Joe and Brian’s names, images and goodwill to promote the competitor and its products. The buyer specifically asked the court to issue a preliminary injunction to stop the competitor from doing so pending the outcome of the lawsuit.
One of the conditions for issuing a preliminary injunction was that the buyer probably had exclusive right to use the names, images and goodwill of Joe and Brian to promote the sale of grills, referred to as publicity rights; and that the competitor probably had misappropriated the publicity rights. The court concluded that the buyer probably acquired these publicity rights and that the competitor probably misappropriated these rights. The court issued the preliminary injunction.
This case is referred to as Traeger Pellet Grills, LLC v. Dansons US, LLC, No. CV-19-04732-PHX-DLR, United States District Court, D. Arizona (October 3, 2019)
The buyer had also sued Joe and Brian in a Florida district court at the same time to stop them from using their names, images and goodwill to promote the competitor. The buyer also asked the Florida court for a preliminary injunction. The court there denied the request, having doubts that the buyer had acquired Joe and Brian’s publicity rights. See my earlier blog. http://www.mk-law.com/wpblog/business-buyer-sues-seller-founder-for-using-his-personal-name-to-promote-competitor/
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
Telephone: 714 273-6291
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