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 by selling her eponymous perfume brand in 1999, but decades later her only regret is never being able to use her name again.
Malone founded the fragrance brand Jo Malone London in 1990 and sold it nine years later to Estée Lauder Companies, along with the rights to use her name in all businesses.
“I don’t look back and say, ‘If I had waited five more years, I could have made twice as much money,'” the 62-year-old British entrepreneur said on an episode of CNBC’s “Executive Decisions” podcast with Steve Sedgwick.
But she added: “One of the things I regret is using my name. And they (Estee Lauder) might not have bought the company (otherwise). It still hurts.”
“In fact, we feel the law needs to be changed.”
Under UK law, when you sell a business built on your name, you typically sell the goodwill and the right to use that name, Simon Barker, partner and head of intellectual property at Freeth Law Firm, told CNBC Make It.
After you sell your business, using your name for a similar business can cause consumer confusion, breach your contract, and infringe on trademarks currently owned by the purchaser.
It may also fall under the category of “impersonation.” This is a British legal concept that prevents someone from misleading the public into believing that their goods or services are related to another business.
Malone’s subsequent business uses only her first name to avoid violating her contract with Estée Lauder. These include her luxury fragrance brand Jo Loves and, more recently, alcohol brand Jo Vodka.
Malone said he became wealthy after selling his first brand, but sacrificing his name was “the hardest thing to do.”
“I don’t want to cause trouble, but I actually feel like the law needs to change on this, because people are using their names to sell their businesses. If you’re saying you can’t use your name for the rest of your life, that’s a lifelong non-compete,” she said.
“I think the law needs to look at how companies are sold and how that non-compete affects them,” she added.
“Contractual restrictions supersede everything.”
Mr Malone is one of several British entrepreneurs who have sold their namesake brand but later regretted it.
Fashion designer Karen Millen sold her business in 2004 and agreed not to use her name in competing businesses around the world. She later challenged this restriction, but a court ruled that using her name would cause consumer confusion.
Meanwhile, Elizabeth Emanuel, the designer of Princess Diana’s wedding dress, sold her business, including the rights to use her name, to a company, which then transferred the rights to a new owner. When she tried to block the use of “Elizabeth Emanuel,” the court ruled that the sale meant the new owner would have legal control over the name and trademark.
“Contractual restrictions trump everything,” Barker said. “They’re top of mind for everything. So if you say, ‘I’m not going to use my name in a competing business,’ the new buyer can enforce that agreement against 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 competition with that brand.
The US has similar laws that prevent entrepreneurs from breaking their contractual obligations, but there is also a “right of publicity” that the UK does not have.
This “prevents unauthorized commercial use of someone’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 on similar products and services, but publicity rights may allow you to control other uses, advertising, and endorsements of your name.”
negotiate a contract
Malone advised young entrepreneurs and first-time founders to think twice before selling the rights to their name.
“I would say to anyone considering an acquisition, especially if your name is associated with your business, think through all the implications first,” Malone said. “Think about those things, because you have to sacrifice something, make concessions, so you can get something else, but never do it just for the money.”
Barker added that the terms of the deal, possibly including a name change, can be negotiated before the business is sold. However, there are some caveats, as without the original name, brands often don’t hold as much value in the event of an acquisition.
He said founders should consult their advisors and seek “watering down restrictions” in some cases.
“But of course it’s not always that simple because someone is going to be waving millions of pounds at you,” he added. “And if you say, ‘I want all this,’ they’ll probably turn around and say, ‘Well, we’re not going to give you that much.'”
