Karen Millen, the co-founder of the fashion brand of the same name, has lost her legal battle regarding the right to use her own name in respect of new business ventures. The case highlights the factors to be considered by designers, and others trading under their own name, when deciding upon a brand name.

Karen Millen founded the Karen Millen clothing chain in 1983 with her then partner, Kevin Stanford. The business expanded well and by 2004 there were either stores or concessions in 9 countries, and franchises in a further 15. In 2004 Karen Millen and Kevin Stanford were approached by an Icelandic consortium which purchased Ms Millen’s and Mr Standford’s shares in the holding company which owned the business. Ms Millen received £95m for her shares. The Share Purchase Agreement (‘SPA’) contained a provision prohibiting Ms Millen from using her name in any business in the future.

Ms Millen sought to overturn the provisions contained in the SPA in respect of using her name in China and the US in a different sector, namely homeware and lifestyle. The court held that the risk of confusion between the well known fashion brand and any future venture of Ms Millen would be too great, and therefore Ms Millen would be in breach of the SPA if she were to use her name in relation to any new business.

It is not uncommon for designers, fashion or otherwise, to name their business after themselves, however, those new to the industry should carefully consider whether it is the right thing to do at an early stage of their career. Disputes in relation to restrictions such as those contained in the SPA have been a common trend for many years, with the majority of the claimants (the designers) being unable to overturn such restrictions. It is clear to see why such provisions are so valuable to a brand, as after all it is the brand name in which goodwill is built up, and when purchasing a business the buyer wants to ensure they are buying all of that goodwill. It would have been of no use, for example, for the buyers of say Jimmy Choo or Louis Vuitton (both now owned by conglomerates) to purchase the businesses without the rights to their eponymous names.

A new trend which has emerged has seen designers, when working in-house or for an existing brand, refusing to allow their name to be associated with the brand during their time there. Tom Ford and Sarah Burton are examples of this. Whilst he was creative director at Gucci, Tom Ford did not allow his name to be used for any of his work; it all went out under the Gucci name. This left him free to set up his Tom Ford empire following his departure from the Italian luxury brand. Similarly, Sarah Burton, creative director at McQueen, does not allow her name to be used in respect of her designs for the British brand so that when she eventually parts company with the label, she too will be free to use her own name for any future business.

It is important that designers retain ownership of their brand, and their name. When choosing a name for their business, the designer (and equally any business owner) has the option of their own name, or an entirely unique and original name. When registering the business name as a trade mark, if the name is the designer’s own name they would be well advised to register the mark in their own name so that they own the trade mark. If the company is eventually sold the individual will own the trade mark (which invariably the buyer will want to own), and at this stage the designer can truly consider what price their name is worth.

Similar to restrictions in a sale agreement prohibiting the designer from using their name in future businesses, are provisions restricting what the seller can and can’t do in relation to the sector in which they once operated. For example, Jo Malone sold part of her fragrance business to Estée Lauder for an undisclosed sum in 1999. In 2006 Malone completely stepped down from the business, a consequence of which was that not only was she prohibited from starting another fragrance business (entirely expected), she was also prohibited from stepping foot near a beauty counter such was her influence considered to be.

When starting out in business choice of business name is usually one of the first considerations. When making such a decision, however, owners should carefully consider the longevity of the brand and the associated goodwill that may build up in respect of the name. It may be possible to protect your name whilst you are in control of your business, but when the right time (and the right price) comes to sell the business it is often significantly harder, if not impossible, to retain control of your name once the deal is done.