In this three-part series, we identified at least three distinct seasons in the lifecycle of an eponymous brand: (1) Choosing the Brand, (2) Commercialization, and (3) Legacy of the Brand. In Part 1, we discussed "Choosing the Brand" and the high stakes involved in the making that choice. In this article, Part 2 in the series, we explore "Commercializing the Brand" and consider some unique issues that arise in the context of personal name brands.
Commercializing the Brand
All eponymous brands start as a moniker, a simple appellation, of an entrepreneur with an idea. However, when you build a successful business enterprise around an "entrepreneur with an idea," what started as "just a name" can be transformed into a very valuable commercial brand, including multiple trademarks and consumer goodwill. The personal nature and emotional connection of these brands is particularly appealing to customers -- and to investors -- given the financial potential and possibility for social impact through both the core business and possible brand extension opportunities. To undergird this potential, it is crucial to pay close attention to the various legal issues unique to personal name brands that necessarily arise during the commercialization process, including ownership, control, and use of the brand. Dotting the i's and crossing the t's will benefit all stakeholders, the founder and commercial partners alike, and inevitably reduce the risk attendant with building these types of companies.
A. Document Ownership and Control of the Brand Name
There is an indissoluble link between a founder and their namesake brand. The person/family behind a personal brand will always feel entitled to use their name, regardless of involvement in the business, and will always have a vested interest in the brand's legacy, even if only emotional (e.g. fashion designers Joseph Abboud and Kate Millen). Similarly, the associated business will always demand unfettered rights to control the brand name in connection with the products/services it represents. Balancing these interests through well-crafted legal documents is key to long term commercial success.
As a starting point, personal name trademarks should always be federally registered in the name of the entity that legally owns and controls use of the brand name (preferably a juristic entity rather than individual). For some, this will be the core business organization (e.g. Ben & Jerry's Homemade, Inc. and Carvel Corporation), for others it will be a holding company created for the sole purpose of owning and managing the core entity's intellectual property rights, among other assets (e.g. Ben Sherman IP Holdings LP).
The governing documents for the entity-owner, including bylaws, operating agreements, and shareholder/member agreements, should make clear the rights and responsibilities for each stakeholder, including the founder -- both while actively participating in the business and upon exit. Additionally, if the entity-owner licenses rights in the names to the core business and/or others, including the founder, for other commercial ventures (e.g. Sequential Brands Group, Inc. for MARTHA STEWART), the license agreements should thoroughly and precisely state the agreed-upon terms regarding the nature and scope of use of the brand and include adequate contingencies for disputes, which will inevitably arise with valuable brands, particularly once the founder scales back personal involvement and/or leaves the company.
B. Clarify Use of the Brand Name
As the business grows, the number of people with a vested interest in how the brand name is used also grows, and can become unnecessarily complicated absent clear agreements. This is particularly noticeable with family-owned businesses. And, the higher the profile of the founder, the higher the stakes in how the name is used. Consider, for example, founders who wish to personally associate themselves with other products, companies, or causes of personal importance, wholly unrelated to the core mission of their namesake brand, but which invite controversy or negative attention (this is quite common in the fashion and entertainment industries). Given the inextricable link between a founder and their brand name, bad publicity arising from personal activities or associations can negatively affect sales and damage brand equity (e.g. Lance Armstrong's resignation from the Lance Armstrong Foundation and name change to Livestrong Foundation amid doping scandal; the hit to brand equity suffered by Martha Stewart’s eponymous company following her arrest for insider trading).
To mitigate against some of this fallout, founders and their companies should foster an open dialog regarding use of their personal names in other contexts unrelated to trademark use, such as promoting or supporting products or causes – online and offline, launching a personal website or blog for personal purposes and optimizing the site with keywords (particularly the brand name), or actively engaging in public discourse on social and political issues. While some of this use can be legally restricted or controlled, some cannot. Coming to an agreement early on about the range and scope of use will help provide clarity as the business grows.
To take an example from current events, debate around the Trump family's commercial use of the eponymous brand name during President Trump's tenure in office has become a cause célèbre. The controversy has also extended to his daughter, Ivanka Trump, and her eponymous company. It is widely reported that the hashtag #GrabYourWallet was introduced last fall to support a boycott of all companies doing business with the Trump family, including Ivanka Trump's brand, reportedly in response to the Trumps' controversial politics (source). While this is a particularly high profile -- and arguably unusual -- example, it sheds a light on how non-commercial use of a name can impact the business behind the brand.
- Always register eponymous trademarks in the name of the business entity that controls use of the name, whether it is the primary business or holding company.
- Ensure the governing documents for the owner-entity are clear as to use and control of the brand name in the event a shareholder or member exits the business, a new generation assumes control, or if the business is sold to a third party.
- Draft clear and precise license agreements with all who use the brand name, including the founder for use in unrelated contexts.
- Finally, negotiate carefully considered agreements between the founder and business as to use of the name in connection with the core business and otherwise (whether active in the business or not), including ownership and control of social media accounts, domain names, and product endorsements, to name a few.
Successful brands will inevitably see the exit of their founder/s at some point. How the brand is built, how it performs after the namesake's personal involvement ceases, and how the founder uses his/her name outside of the key business will shape the legacy of the brand. Check back next month for a discussion of the Legacy of the Eponymous brand in part three of this three-part series on navigating the lifecycle of personal name brands.
This article appeared in the March 2017 issue of MarkIt to Market. To view our past issues, as well as other firm newsletters, please click here.