Ms Jo Malone CBE, British perfumer and founder of fragrance brands Jo Malone London and Jo Loves.
Mike Green, CNBC
Ms Jo Malone CBE became a millionaire after selling her eponymous perfume brand in 1999, and decades later she has only one regret: never being able to use her name again.
Malone founded the Jo Malone London perfume brand in 1990 and sold it to the Estée Lauder Companies nine years later – along with the rights to use her name in any company.
“I don’t look back and think, ‘If I had waited five more years, I could have made twice as much,'” the 62-year-old British entrepreneur said on an episode of CNBC’s Executive Decisions podcast with Steve Sedgwick.
But she added: “I think the only regret I have is – and her.” [Estée Lauder] He may not have bought the company [without it] – is the use of my name. This is still a struggle today.
“I actually feel like the law needs to change.”
Under U.K. law, when you sell a business based on your name, you’re typically selling the goodwill and the right to use that name, Simon Barker, partner and head of intellectual property at law firm Freeths, told CNBC Make It.
Once you sell the business, using your name for a similar business could cause confusion among consumers and could violate your contract or infringe on trademarks the buyer now owns.
It could also amount to “passing off” – a UK legal concept that prevents someone from misleading the public into thinking their goods or services are linked to another company.
Malone’s subsequent deals only use her first name to ensure they do not violate her agreement with Estée Lauder. These include her luxury perfume brand Jo Loves and more recently her alcohol brand Jo Vodka.
While selling her first brand made her rich, Malone said sacrificing her name was “the hardest thing.”
“I don’t want to cause problems, but I think the law actually needs to change in this regard because people sell their businesses under their name, and when you say you can’t use your name for the rest of your life, that’s a lifetime non-compete,” she said.
“I think the law needs to address the way businesses are sold and how this non-compete comes about,” she added.
“Contractual restrictions trump everything”
Malone is one of several British entrepreneurs who have sold an eponymous brand only to later regret it.
Fashion designer Karen Millen sold her company in 2004 and agreed not to use her name in a globally competing company. She later objected to the restrictions, but a court ruled that the use of her name would cause confusion among consumers.
Meanwhile, Elizabeth Emanuel, the designer behind Princess Diana’s wedding dress, sold her business – including the rights to use her name – to a company that later transferred those rights to new owners. When she tried to stop them from using “Elizabeth Emanuel,” the courts ruled that the sale meant the new owners legally controlled the name and trademark.
“Contractual restrictions trump everything,” said attorney Barker. “You’re at the forefront of everything. So if you say, ‘I’m not going to use my name for a competing business,’ then the new buyer can enforce that agreement on you.”
It’s a similar story on the other side of the Atlantic. American makeup artist and entrepreneur Bobbi Brown also sold her eponymous cosmetics company to Estée Lauder in 1995 and was contractually obligated not to use her name commercially in a way that would compete with the brand.
While there are similar laws in the US that prevent business owners from breaching contractual obligations, they also have the “right of publicity,” a law that does not exist in the UK.
This “protects against the unauthorized commercial use of a person’s name, image or likeness,” Barker explained. “The difference is that contractual restrictions will almost certainly mean you lose the right to use your name for similar goods or services, but the right of publicity may still allow you to control other uses of your name, as well as advertising or endorsements.”
Negotiate your contract
Malone advised young entrepreneurs and first-time founders to think twice before selling the rights to their name.
“I would tell people: Anyone considering an acquisition, especially if your name is attached to your company, should think through all the implications first,” Malone said. “Think about these things, because you will sacrifice things, and you will have to give and give in, and you will gain something else, but never do it just for money.”
Barker adds that before selling the business, you can negotiate what’s in the contract, including a possible name change. However, there are some reservations, because without the original name the brand often does not retain as much value during takeovers.
He said founders should consult advisors and perhaps ask for “watered down restrictions.”
“But of course it’s not always that easy because someone is waving millions of pounds at you,” he added. “And if you say, ‘I want all of this,’ they’ll probably turn around and say, ‘Well, then we won’t give you that much.'”
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