Date: 22 December 2022
It is quite common in the fashion and beauty industry to use the first name and surname of the owner as a company brand name. However, it is important for future brand owners to understand the consequences relating to trade mark law.
Recently, Estée Lauder Cosmetics acquired Tom Ford for $2.8 billion. This demonstrates that the creation of a strong brand can bring a lot of money to its owner, if they decide later to sell their trade mark rights. The trade mark owner can also decide to licence their trade mark rights to other companies.
We do not have the inside track on the acquisition agreement between Estée Lauder and Tom Ford. The official statement says that Tom Ford will continue to stay on as the brand´s “creative visionary” until the end of 2023. But what happens afterwards? For anyone considering registering their name and surname as a trade mark, it is important to understand the potential consequences of selling their trade mark rights right at the beginning.
The first direct consequence for Tom Ford of selling his brand is that he will not be able to use his name and surname for the goods and services for which the trade marks were registered and which are now owned by Estee Lauder.
Furthermore, he will no longer be able to control the quality of goods which will be sold by Estee Lauder. This means that Estee Lauder could potentially start to sell products of a worse quality for the same price. We should then consider the reputational damage to Tom Ford. As is the case for many people, he may continue to be associated with the brand (at least for some time after the acquisition).
The question also remains regarding Tom Ford's ability to register his name as a trade mark for other goods (in different industries to the ones now owned by Estee Lauder). According to EU law, a trade mark owner could object to Tom Ford using his name as a trade mark not only for the goods or services for which his trade marks are registered - but also for other, even dissimilar goods and/or services by proving that the trade marks have reputation on the territory in question.
Estée Lauder already holds the license to Tom Ford Beauty including its fragrance and makeup line. After the acquisition, the licence agreement with Ermenegildo Zegna Group will be extended for all men’s and women’s fashion as well as accessories and underwear. Also, the license with Marcolin, who produces and distributes Tom Ford eyewear, will be kept and further extended.
Licencing is very popular in the world of brands and can be an excellent source of profits for the owner. However, giving a licence to many different companies can take away some of the owner's control, leading to a potential dilution of the brand. Brand dilution usually happens when a brand loses its value because of unauthorized overuse. However, the value may be also lost when a product no longer meets the expectations customers have of the brand. This is a particular risk when there is a difference in the quality promised by original brand and the product provided by the licencee. The licencee may also be tempted to use the brand name for unrelated products. These potential problems should be carefully considered before entering into a licensing agreement and it is important to take legal advice.
Taking the example of the Tom Ford mark, it is important for brand owners to consider the advantages and disadvantages of registering their name as a trade mark. Equally important is that the provisions of the acquisition or licensing contract are carefully reviewed not only by brand owners and brand managers but also by their legal team.