When clothing designer Joseph Abboud had a falling out with the new management of JA Apparel, the clothing company he had founded, he tried to start a competing clothing line called “jaz.” He planned to use his name in jaz promotions, identifying himself as the designer of the new line. One little problem – Abboud had sold the exclusive rights to the use of his name for commercial purposes to JA Apparel a few years earlier. JA Apparel sought an injunction against Abboud, seeking to prohibit Abboud from using his own name to promote any fashion line. The magistrate judge agreed, finding that Abboud had forever contracted away the rights to use his own name.
In 1988, renowned menswear fashion designer Joseph Abboud entered into a joint venture with GFT International Inc. (“GFT”) to create JA Apparel Corp. to manufacture, market, and sell various products under the Joseph Abboud brand name. In 1996, GFT bought out Abboud’s interest in JA Apparel and secured new licenses from Abboud to use the “Joseph Abboud” trademark.
In 2000, JA Apparel entered into a contract with Abboud, paying him $65.5 million for exclusive rights to the label, along with the associated names and trademarks including “Joseph Abboud, “designed by Joseph Abboud,” “JA,” “JOE,” and similar names. The agreement also included a non-compete agreement lasting until mid-July 2007. Following the 2000 agreement, Abboud had a falling-out with the company.
Prior to July 2007, Abboud began work on a new, competing menswear line called “jaz” that he planned to launch as soon as the non-compete agreement expired. He planned to promote the new line with promotional phrases like “a new composition by designer Joseph Abboud.”
JA Apparel immediately sued Abboud in federal court in New York, alleging trademark infringement and breach of contract over Abboud’s plan to use his name in the jaz marketing. The company also claimed that Abboud breached his noncompete agreement by working on the new line before the agreement expired.
The opinion is found at JA Apparel Corp. v. Joseph Abboud, NO. 07 Civ. 7787(THK), 2008 WL 2329533 (SDNY, June 5, 2008).
Abboud’s plans to use his name constituted breach of the contract
Though both parties claimed that the contract was unambiguous and relied heavily on the contract language to support their positions, the parties offered wildly different interpretations of the contract’s meaning. Abboud claimed that the agreement only transferred ownership of the trademarks but not the rights to his name for all commercial purposes. JA Apparel asserted that the contract sold both the trademarks and the exclusive right to use Abboud’s name commercially in the fashion arena.
The court agreed with JA Apparel, swayed by the contract language stating that Abboud agreed to sell “all of [his] right, title and interest in …[t]he names, trademarks, trade names, service marks, logos, insignias and designations…” Slip op., p. 2. The magistrate judge determined that each of these words represented a separate category of assets conveyed by Abboud; the judge construed the word “names” to refer to and include Abboud’s personal name. Slip op., pp. 9-10. Abboud did, after all, receive $65.5 million under the agreement, likely in recognition of the fact that the reputation and goodwill of JA Apparel were fully intertwined with Abboud’s own name and reputation. The court held that Abboud could use his own personal name for personal use and to make media appearances as himself or as a fashion expert, but he was forever barred from using his name to promote competing goods and services. Slip op., p.15.
As a result, Abboud was also barred from using phrases like “a new composition by designer Joseph Abboud” and “by the award-winning designer Joseph Abboud” to promote jaz, regardless of any trademark infringement issue. Slip op., p. 16.
The court also found that Abboud’s development work on jaz while he was still bound by the terms of the non-compete covenant constituted a breach of contract, but the court declined to award any damages as a result. Slip op., p. 31.
Abboud’s use would constitute trademark infringement without a valid defense
The court determined that the contract issue was decisive of the case, since a party can contract away rights to acts that may otherwise be allowed under the Lanham Act. As a result, the court largely declined to resolve the infringement claims. However, the court did indicate its opinion that Abboud’s proposed uses would infringe on JA’s trademark rights. The court stated that Abboud’s use was likely to cause consumer confusion, satisfying the Second Circuit’s Polaroid factors – strength of the marks, close promixity of goods in the marketplace and evidence of actual confusion – thus constituting trademark infringement. Slip op., p. 17 (citing Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2nd Cir. 1961).
Abboud asserted a fair use defense – under Section 33(b) of the Lanham Act (15 USC Section 1115(b)), fair use allows for some confusion, so long as the term is used descriptively (not as a mark) and in good faith. The court found that Abboud’s use of his name to promote jaz would be more of a mark, identifying and advertising the source of the product, than as descriptive of the “ingredients, quality or composition” of the product. Slip op., pp. 18-19. The court could not ignore the existence of the contract Abboud signed in assessing whether or not Abboud was acting in good faith – he specifically contracted away his rights to exactly the terms he was proposing to use. Slip op., p. 19.
The high likelihood of consumer confusion posed another strike against Abboud’s fair use defense. The court wrote: “It is patently obvious that consumers seeing JA Apparel’s products, marked or advertised as ‘Joseph Abboud’ or ‘by Joseph Abboud’ would be utterly confused as to whether the ‘jaz’ products advertised ‘by designer Joseph Abboud’ were derived from the same source.” Slip op., p. 20 (citing KP permanent Make-Up Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 123 (2004)).
Abboud also claimed that his use of his name constituted commercial speech, protected by the First Amendment. As with Lanham Act rights, a party can contract to give up his First Amendment rights, as Abboud arguably did here. Slip op., p. 20. Absent the contract, this may have been a more difficult issue, as the speech is truthful and probably not “inherently” misleading, though the likelihood of confusion may be “inherently” misleading.
Abboud is permanently enjoined from using his name to promote fashion
In the end, the court saw this case as a prime example of the risks inherent in building a business and its goodwill around your personal name, then selling the rights to that business to a third party: “After Abboud began designing and marketing clothes under his personal name, with great and deserved success, the name ‘Joseph Abboud’ became closely associated with a brand of clothing, and the personal nature of his name naturally lose some of its identity.” Slip op., p. 21.
JA was entitled to a sweeping permanent injunction against Abboud, barring him from using his name to market any goods or services to the consuming public. It does not bar Abboud from making personal appearances to the trade or public appearances or on TV as, “for example, a philanthropist or fashion commentator, if those appearances are unrelated to the promotion or sale of goods and services.” Slip op., p. 24.
JA sought injunctive relief to extend the noncompete obligation for the amount of time that Abboud was in breach, but the court declined to do so. Abboud did not actually compete with JA by selling clothes during that time and JA Apparel failed to show any damages from the breach.
Abboud’s counterclaims failed for lack of merit
Abboud had counterclaimed for false endorsement, false advertising, violation of his right of publicity, and for general unfair competition, because JA Apparel was using slogans such as “Do You Know Joe?” and “Hey Joseph, What Should I Wear?” in its advertising campaigns. The counterclaims were generally defeated by the fact that Abboud had given JA Apparel his written consent to use his name and the company was using the marks and names that it owned. There was no evidence that consumers believed the slogans indicated Abboud, the individual, rather than the brand name. Slip op., p. 21-22.
Contrast JA Apparel with Gucci regarding sale of a personal name
The JA Apparel case makes some uncomfortable in its willingness to uphold a contract and prohibit an individual from using his own name to promote his own business. Indeed, the sweeping injunction of JA Apparel stands out as uniquely extreme among similar cases.
In the case Gucci v. Gucci Shops, Inc., 688 F. Supp. 916 (SDNY 1988), Paolo Gucci, then chief designer of Gucci products and grandson of the company’s famous founder, Guccio Gucci, sought a declaratory judgment that he had the right to use his name in business without infringing the “Gucci” trademarks owned by the defendant or violating an agreement in which the Gucci family agreed not to use the Gucci name apart from the defendant’s business. The court found the general family agreement to be unenforceable against Paolo.
However, applying the Polaroid factors, the court did find that a likelihood of consumer confusion would exist if Paolo used the Gucci name to promote his business. CITE Nevertheless, the court refused to deny Paolo the right to use his own name, stating: “[T]o prohibit an individual from using his true family surname is to take away his identity: without it he cannot make known who he is to those who may wish to deal with him; and that is so grievous an injury that courts will avoid imposing it, if they possibly can.” 688 F. Supp. at 927 (quoting Taylor Wine Co. v. Bully Hill Vineyards Inc, 569 F.2d 731 (2nd Cir. 1978).
The Gucci court’s remedy was to prohibit Paolo from using his name as a trademark or trade name because of the likelihood of consumer confusion. However, the court did permit Paolo to use his name to identify himself as the designer of the products sold under another trademark or trade name, so long as he also provided a disclaimer that he and his products were not affiliated with the Gucci brand. Id. at 927-928.
The difference between Gucci and JA Apparel is likely the direct involvement and waiver of the designer. In contrast to Joseph Abboud, Paolo Gucci was not the original designer who sold the rights to his own name, thus receiving the benefits of that bargain. Joseph Abboud could not make a palatable claim of good faith, while Paolo Gucci likely could. As a result, the Gucci court was unwilling to impose the strict penalty against Paolo Gucci that it was willing to impose against Joseph Abboud 20 years later.
The lesson: clarity of contract provisions and intent is critical
The JA Apparel case sounds a warning for any business owner that does business under a personal name and seeks to sell rights in that business. Any contract that purports to sell rights in the business needs to carefully set forth the exact intent of the parties and the precise scope of the purchaser’s rights. If Joseph Abboud wanted to continue to use his personal name in business after his affiliation with and obligations to JA Apparel ended, that should have been negotiated and specifically set forth in the contract.