Disputes often arise when bands split up and different band members claim rights in the band’s name. Usually this occurs sometime after the band’s peak success, but while band members still want to tour and earn revenues from live performances. In recent years we have seen disputes between the former members of Frankie Goes to Hollywood and New Order. They have now been joined by the UK reggae band UB40, the name derived from the UK government number given to the form for claiming unemployment benefit.
Though this was a summary judgment application and so not quite as weighty as a judgment following a trial, the case contains some useful reminders of the complications which can arise around brands which are not registered as trade marks and where more than one party claims to own goodwill in the brand, but where in fact that goodwill may have been abandoned.
Background to the dispute
UB40 enjoyed a large degree of success in the 80’s and 90’s. The band carried on business through a company called DEP International Limited and each band member had a contract of employment with DEP. DEP owned all rights in the “UB40” name and the copyrights in the relevant musical works. DEP went into administration in 2006. A new company was formed and the band continued to perform for another year until several members left the band. The remaining (“old”) members continued to perform as “UB40” but the new members also set themselves up as “UB40”. DEP did not carry on business after being put into administration, other than it received royalties for a couple more years.
Who owned the name?
In 2014 the old band members sued the new band for passing off, relying on goodwill built up from performing together since 2008. The new band claimed instead that DEP owned the goodwill in the name “UB40” and that it had consented to the new band’s use of the name. They bolstered this with an assignment from the DEP liquidators of all DEP’s rights in the name “UB40” to the new band. The case came before the court through a series of claims and counterclaims and this decision is on an application for summary judgement and to strike out, brought by the Defendants.
The impact of the assignment was that the Claimants had to argue that DEP had not been entitled to assign any rights because it had abandoned them prior to the assignment being entered into. The main part of the decision therefore boiled down to an analysis of whether the goodwill had been abandoned and also whether the assignment itself was valid because it assigned goodwill without also assigning the underlying business (known as an assignment “in gross”).
Was goodwill abandoned?
The Court held that there was no property in a name as such (assuming it is not registered as a trade mark) and that therefore DEP had no property in the name “UB40”. There could be property in goodwill attached to a name but if DEP had not owned any goodwill at the time of the assignment then the assignment was of no impact. It held that DEP did not have any business “in any real sense” at the relevant time. The business and goodwill was not sold at the time it went into administration and it had no control over what the band members subsequently did. Reviewing earlier authorities, the Court found a clear distinction between cases where there had been an intention to carry on trading even though trading had been suspended for a period of time, and those where there was no such intention and the goodwill was abandoned. Following the well-known judgement of Lord Diplock in Star Industrial Co. Limited v Yap Kwe Kor that “goodwill is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached so when the business is abandoned in one country, in which it acquired the goodwill, the goodwill in that country perishes with it”, this appeared to be a case of abandonment.
Assigning goodwill in gross is ineffective
The assignment from the liquidators assigned rights in “goodwill, as such term is understood by legal and accounting practitioners”, but did not say anything about the business to which the goodwill attached. Goodwill in an IP sense only exists where it is connected to a business. It was argued that the assignment was ineffective to transfer the goodwill, as that was all it did, without reference to the business it attached to, and so amounted to an impermissible assignment in gross. The defendants later sought to make good the assignment with a further communication from the liquidators. However, the Court was not convinced that there had still been a business to which the goodwill could be attached and so it could still have been an assignment in gross.
As a result, the new UB40 could not show that old UB40 had no argument that the assignment from DEP was ineffective to transfer the goodwill relied upon. Therefore the Defendants’ summary judgment application failed.