Ms Jo Malone CBE, British perfumer and founder of fragrance brands Jo Malone London and Jo Loves.
Mike Green, CNBC
Ms Jo Malone CBE became a millionaire after selling her namesake perfume brand in 1999, and decades later has only one regret: never being able to use her name again.
Malone founded fragrance brand Jo Malone London in 1990 and sold it to the Estée Lauder Companies nine years later — along with the rights to use her name in any business.
“I don’t look back and think to myself: ‘If I’d waited another five years, I could have made double the amount,'” the 62-year-old British entrepreneur said on an episode of CNBC’s “Executive Decisions” podcast with Steve Sedgwick.
But she added: “I think the one thing I regret — and they [Estée Lauder] may not have bought the company [without it] — is the use of my name. That’s a struggle, even today.”
‘I feel the law needs to change, actually’
Under British law, when you sell a business built on your name, you usually sell the goodwill and the right to use that name, Simon Barker, partner and intellectual property head at Freeths law firm, told CNBC Make It.
Once you’ve sold the business, using your name for a similar business could cause consumer confusion and breach your contract or infringe any trademarks the buyer now owns.
It could also amount to “passing off” — a British legal concept that stops someone from misleading the public into thinking their goods or services are connected to another business.
Malone’s later businesses only use her first name to ensure they don’t violate her agreement with Estée Lauder. These include her luxury fragrance brand Jo Loves and, more recently, her alcohol brand Jo Vodka.
While the sale of her first brand made her wealthy, Malone said sacrificing her name was “the hardest thing.”
“I don’t want to cause any problems, but I feel the law needs to change, actually, in this, because people are selling their businesses with their names, and if you’re saying you can’t use your name for the rest of your life, that’s a lifelong non-compete,” she said.
“I think the law is going to have to look at the way businesses are sold and how that non-compete comes in,” she added.
‘Contractual restrictions trump everything’
Malone is one of a number of British entrepreneurs who have sold an eponymous brand only to regret it later.
Fashion designer Karen Millen sold her business in 2004, and agreed not to use her name in a competing business globally. She later challenged the restrictions, but a court ruled that using her name would cause consumer confusion.
Meanwhile, Elizabeth Emanuel, the designer behind Princess Diana’s wedding dress, sold her business — including the rights to use her name — to a company that later transferred those rights to new owners. When she tried to stop them from using “Elizabeth Emanuel,” the courts ruled that the sale meant the new owners legally controlled the name and trademark.
“Contractual restrictions trump everything,” lawyer Barker said. “They go on the top of everything. So if you say: I won’t use my name for a competing business, then the new buyer can enforce that covenant against you.”
It’s a similar story across the Atlantic. American makeup artist and entrepreneur Bobbi Brown also sold her namesake cosmetics company to Estée Lauder in 1995 and was contractually obliged not to use her name commercially in a way that would compete with the brand.
While the U.S. has similar laws preventing entrepreneurs from breaking contractual obligations, it also has the “right of publicity,” which is a law that the U.K. doesn’t have.
This “protects against the unauthorized commercial use of somebody’s name, image or likeness,” Barker explained. “Where the difference lies is that you’ll almost certainly lose the right to use your name for similar goods or services because of the contractual restrictions, but the right of publicity might still allow you to control other uses of your name and advertising or endorsements.”
Negotiate your contract
Malone advised young entrepreneurs and first-time founders to think twice before selling the rights to their name.
“I would say to people, anyone that is looking at acquisition, especially if your name is attached to your business, think through all the implications first,” Malone said. “Think about those things, because you will sacrifice things, and you will have to give and yield, and you will gain something else, but never do it solely, just for money.”
Barker adds to this that you can negotiate what’s in the contract before selling the business, including perhaps changing the name. However, there are some caveats, as oftentimes, without the original name, the brand doesn’t retain as much value in acquisitions.
He said founders should consult advisors and potentially ask for “watered-down restrictions.”
“But of course, it’s not always as simple as that, because somebody will be waving many millions of pounds at you,” he added. “And if you say: ‘I want all of this,’ they’re likely to turn around and say: ‘Well, we’re not going to give you as much then.'”