Selling a Business? Intellectual Property Rights Matter!

Selling a business can involve far more than merely transferring shares for cash and intellectual property rights can often be an important factor. In one case, a woman who sold her eponymous fashion retailing company faced claims that she gave up her right to use her personal name in a broad business context.

The woman and her business partner sold their shares in the holding company for £95 million to venture capital interests based in Iceland. The deal was subject to a number of restrictive covenants which were designed to protect the business and that of its subsidiaries and, in particular, their intellectual property rights.

Following the sale, the business expanded around the world and started to trade in more than just fashion goods. The corporate purchasers went into administration during the financial crisis and had since been dissolved. The woman disputed claims made by two other companies (the alleged successors) that they had succeeded to the original purchasers’ rights under the sale agreement.

A dispute developed after she opposed the alleged successors’ applications to register trade marks in America and China which featured her personal name. She argued that that could not be done without her consent. She also claimed that her obligations under the agreement extended only to the intellectual property rights in existence at the date of the sale and that she was entitled to use her name to compete in areas other than fashion retailing.

The alleged successors argued that they enjoyed the entire right to use the woman’s name, both in relation to the business as it then existed and in any manner in which it might naturally expand, whether in terms of geographical operation or additional products. The nature and facts of the dispute emerged as the High Court gave directions for a full hearing of the action.