Fashionista has been reading a recent case in the UK High Court which highlights some of the issues that can arise when designers sell their business without considering future ventures they may wish to purse.

The UK women’s fashion designer, Karen Millen, has lost the right to trade under her own name in the US and China. Millen initially founded the fashion brand in 1981 as a women’s clothing stall . In the 1990s, the business expanded, with concessions opening in London in Harrods and Fenwick. In about 2002, Millen scaled down her creative role in the business and, in 2004, the designer sold the majority of her shares in Karen Millen Holdings to an Icelandic Investor under a Share Purchase Agreement (SPA).

The SPA contained a number of clauses relating to future business ventures which prevented the designer from using the name ‘Karen Millen’, ‘KM’ and ‘K Millen’ or any other word deemed to be confusingly similar in the US and China.

In 2011, Karen Millen gave an interview in which she stated her desire to return to the fashion business under the name ‘KAREN’ to sell new products such as home ware. This led to litigation with the purchaser regarding her intentions in the UK, which was eventually settled in 2015. The outcome of the settlement restricts Karen Millen’s used ofthe marks KAREN or KAREN MILLEN in the UK or EU.

Since 2011, the parties had also been embroiled in registry disputes in the US and China for various contending applications, cancellation and opposition proceedings involving the marks “KAREN”, “KAREN MILLEN” or “KM”. As the settlement action did not address the position in the US or China, the designer brought an action in the UK High Court in an attempt to clarify her position to use her name or variations of it, by seeking a series of negative declarations.

The designer argued that the restrictions in the SPA could not apply to registered marks which she had applied for after the SPA and in respect of her intended new products which were not being produced by the business when she sold her shares to the Icelandic investor.

The High Court held that the goods for which the designer was seeking negative declarations, such as home ware, covered areas which fashion brands typically seek to branch into, and the designer was therefore not permitted to use her name in relation to these goods.

The High Court also held that the designer must consent to the Defendant’s future applications in the US and China. Richard Meade QC sitting as deputy Judge held that “blocking the Defendants from registrations for the very mark the rights in which were, in substance bought under the SPA has been petty, and escalated the complexity of the worldwide dispute unnecessarily.”

 Takeaway points

This case illustrates the importance of ensuring that at the time of any transfer of ownership in a business, all intellectual property rights are considered and clearly assigned. This crucially means considering any future expansion of the business into different areas and geographical regions.

If a designer does not wish to completely relinquish his or her involvement in a brand, a licencing agreement is often the best method to achieve this result.

 

Posted by Sarah Brooks

By: Hemma Lad
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