By Joel Leeman.
Men’s clothing designer Joseph Abboud may be entitled to identify himself by name in promoting his new high-end label, an appellate court has ruled. This would hardly be newsworthy, except that to all appearances Abboud had sold all use of his name to another clothing company.
If he gets to use his own name, he will have contract ambiguity to thank, as well as the Second Circuit, a court with a record of reluctance in barring individuals from using their own names in business.
Abboud registered his name as a trademark in 1987. For many years, he licensed the trademark to JA Apparel Corporation, a company that made, marketed and sold menswear under the Abboud name. Abboud designed clothing for JA.
Prelude to a clash
In 2000, Abboud agreed to sell all trademarks, and other intellectual property associated with his Abboud clothing line, to JA Apparel. Abboud also sold all rights to apply for new trademarks containing the words “Joseph Abboud,” “designed by Joseph Abboud,” or any similar verbiage. In return, JA paid Abboud $65 million.
At the same time, Abboud agreed to supply design and marketing ideas to JA for five years, and not to compete with JA for two additional years.
As his non-compete period drew to an end, Abboud announced that he would use his name to market and advertise his new collection under the “jaz” label. JA Apparel wasted no time in suing Abboud for breach of contract and trademark infringement. The trial judge came down hard on Abboud, entering a permanent injunction barring Abboud from using his name to market any goods.
The trial judge’s view
The judge’s opinion focused on Abboud’s agreement to transfer to JA all rights to “the names, trademarks” and other designations listed on a schedule to the contract. Since the name Joseph Abboud appears repeatedly on that schedule, “the Court must interpret the Agreement in a manner that provides JA Apparel with that which it expressly purchased—all of Abboud’s rights to use his name for commercial purposes.”
For good measure, the trial judge also found Abboud liable for trademark infringement. True, the Lanham Act recognizes a “fair use” defense where a defendant uses his own name in a non-trademark fashion. However, the court concluded that Abboud’s intended use had a trademark flavor and would commit the ultimate Lanham Act sin: confusing consumers into believing that “Joseph Abboud” and “jaz” products came from the same source.
The appeals court sees it differently
On appeal, in JA Apparel Corp. v. Joseph Abboud, the Second Circuit relied on an exceedingly subtle reading of the parties’ contract to vacate the trial court’s ruling. Apparently, Abboud’s sale of all “right, title and interest” to the names listed on the contractual schedule was not as comprehensive as one might have thought.
According to the appellate court, when Abboud agreed to sell rights to use the Abboud name in existing marks and in new marks, JA did not acquire exclusive use. Abboud was not barred by contract from making non-trademark use of his name after his non-compete period ran its course.
Enthusiasts of contract interpretation will savor the court’s approach. It is standard judicial procedure that a trial court does not consider extrinsic evidence of the parties’ intentions (e.g., offers of documentary proof or testimony of witnesses) with respect to contract language that is unambiguous. Here, the judge had duly opined that the meaning of the word “names,” in Abboud’s agreement to sell “the names” on the contractual schedule to JA Apparel, was unambiguous.
By contrast, the Second Circuit felt that Abboud’s sale to JA of the “names” (including “Joseph Abboud”) identified on the contractual schedule could signify more than one thing. It could mean “names” in the broadest literal sense, or “names” only in the sense of brands, a meaning suggested by the contract’s conveyance of existing and future trademarks.
By discerning this ambiguity, the Second Circuit opened the door to extrinsic evidence of the parties’ intentions. Abboud is now entitled to testify that “names” was intended to mean only brand names and was not intended to prevent non-trademark usage, such as by letting the public know that he is involved with the “jaz” label (but without branding garments with his name).
On the infringement front, the court said that Abboud may qualify for the fair use defense available by statute to one who uses his own name (1) in a non-trademark fashion, (2) in a descriptive sense, and (3) in good faith.
The trial judge said phrases like “by the award-winning designer Joseph Abboud” may in fact be merely descriptive. However, he believed that Abboud’s intended use had a trademark character and that the inevitable confusion of the public indicated lack of good faith. Abboud would thus fail two-thirds of the fair use test.
The Second Circuit faulted the trial court’s trademark analysis. In short, the judge’s view (which the appellate court called into question) that the contract barred Abboud from making even limited commercial use of his own name tainted the judge’s evaluation of Abboud’s good faith.
The court sent the case back to the trial court, which must now allow the parties an opportunity to give evidence as to their contractual intent. The Second Circuit even instructed that, in weighing the infringement claim, the trial court consider the mock-up advertising copy that Abboud had previously introduced into evidence but that the trial court ignored.
Reflections on the case
The Second Circuit’s conclusion was not inevitable and was surely a bitter pill for JA Apparel to swallow. There was ample contractual support for the trial court’s ruling that Abboud had given away all commercial uses of his name.
The court may have dug deep for an alternative to the trial court’s draconian view of the contract because of an institutional disposition to allow individuals to make at least limited use of their own names in business.
In a 1986 case, the Second Circuit wrote that, unless the contract of sale explicitly provides otherwise, a person can sell a trademark comprised of his personal name and still take advantage of his reputation in the business, such as by advertising a competing product. In that opinion, the court reversed an injunction that had stopped the seller of a business identified by his name from advertising the fact that he was now connected with a competitor.
Undoubtedly, a contract can be written that the Second Circuit would acknowledge as absolutely ceding an individual’s right to use his own name for any business purpose. The Abboud case did not present that contract.
A lesson can be woven from this men’s wear decision: Purchasers of a business identified by an individual’s name must use a belt-and-suspenders approach that will unmistakably button down the contractual prohibition on the seller’s commercial use of that name.