When you sell your name, is it still yours to use?

Industry abounds with businesses named after their founders. We see it everywhere from fashion houses to law firms. What happens when you sell that business, and down the track wish to re-enter the same industry. Can you still use your name?

This question was prompted by an article in The Age and Sydney Morning Herald newspapers, looking at individuals in the fashion and fragrance fields who had to find new names for their new businesses.

Basic legal principles

If the sold business has a registered trade mark, then normal trade mark infringement test would apply. Under section 122(1)(a)(i) of the Trade Marks Act 1995 (Cth), it is an exception from trade mark infringement for a person to use, in good faith, their own name as a trade mark.

However, that is not an absolute right. In circumstances where the trade mark was sold with the business, or registered by the purchaser on the basis of goodwill sold with the business, the vendor adopting a new business name similar to the name that was sold is not necessarily going to be in good faith.

Using trade indicia that are similar to that used by the business that was sold can also be misleading or deceptive, contrary to the Australian Consumer Law, and constitute a common law passing off.

The Bob Jane example

Back in 2011, the Federal Court considered such an issue in Bob Jane Corporation Pty Ltd v ACN 149 801 141 Pty Ltd [2013] FCA 1255. Former racing driver Bob Jane had sold his interest in Bob Jane Corporation and its “Bob Jane T-Marts” tyre store chain in January 2011. He then founded the defendant company (then known as Bob Jane Global Tyre Corporation (Australia) Pty Ltd and commenced trading in May 2011 to compete with his former business.

The respondent had argued at an interlocutory (ie preliminary) hearing in 2011 that it was not misleading for Mr Jane to use his own name for his new business, as well as the defence under section 122(1)(a)(i). The court rejected that assertion.

When it came to the final hearing in 2013, the court looked at the defence in detail. It found that Mr Jane had agreed for his name to become part of the Bob Jane T-Marts business trade mark. When the relationship soured, the court found (at [127]) that “[t]he respondents’ marks were used with the intention that consumers would associate the respondents’ business with the applicant.” There was clear evidence that the use of the “Bob Jane” name was not in good faith, and so the defence would not apply.

The Federal Court ordered Bob Jane’s new company to cease using various “Bob Jane” trade marks.

The take away

If your business’ brand is your own personal name or likeness, and you then sell that business together with the rights to that name or likeness, you cannot expect to be able to use it in future for any competing business. If you want to be able to do so, then you need to cover that in the sale contract.

Even if the business sale contract does not include any express restraints regarding that name or likeness, once the rights have been sold, those rights and the right to protect them belong to the purchaser. Using similar brand indicia on a new business will potentially infringe those sold rights. It might be your name and/or likeness, but if you’ve received good money to sell those rights, a court is not going to let you have your cake and eat it too.

Macpherson Kelley can help

If you’re looking to establish a new business or rebrand an existing business, speak with the Macpherson Kelley IP team first. We can assist you with all of your brand selection and protection questions.

This article was first published by Macpherson Kelley on 29 April 2024.