2010 WL 103399 (S.D.N.Y. Jan. 12, 2010)

ABSTRACT

In its initial decision in this long-running legal battle surrounding the “Joseph Abboud” name, the Southern District of New York found in favor of plaintiff who had purchased defendant’s trademarks. On appeal, the Second Circuit vacated that decision, instead finding that the language of the trademark purchase and sale agreement was ambiguous as to whether defendant had assigned plaintiff not only his trademarks, but also the exclusive rights to all commercial use of defendant’s name. On remand, the Southern District of New York evaluated extrinsic evidence to determine the true scope of the purchase and sale agreement. After determining that defendant had only assigned his trademarks and not his personal name, the court examined defendant’s specific proposed advertisements to determine which advertisements constituted descriptive fair use of defendant’s name and which infringed on the trademarks purchased by plaintiff. The court ordered tailored injunctive relief to fit its specific findings with respect to the fair-use defense.

CASE SUMMARY

FACTS

In the 1980s, defendant Joseph Abboud, a well-known designer of menswear, along with a business partner, created plaintiff JA Apparel Corp. (“JA Apparel”) to manufacture, market, and sell various products under the JOSEPH ABBOUD brand name. In the 1990s, Abboud sold his interest in JA Apparel to his partner and licensed JA Apparel to use the “JOSEPH ABBOUD” trademark.

In 2000, JA Apparel entered into a purchase and sale agreement with Abboud, paying him $65.5 million for exclusive rights to his “names, trademarks, trade names, service marks, logos, insignias, and designations” associated with the business. The agreement included a specific list of marks covered by the agreement, including JOSEPH ABBOUD, DESIGNED BY JOSEPH ABBOUD, JA, and JOE. The agreement also included a noncompete agreement lasting until mid-July 2007. Following the 2000 agreement, Abboud had a falling out with the company.

After the falling out but prior to the expiration of the noncompete agreement, Abboud began work on a new, competing menswear line called JAZ, which was targeted to launch upon the expiration of the noncompete agreement. Abboud planned to promote the new line with phrases like “a new composition by designer Joseph Abboud.”

Upon learning of Abboud’s plans to use his name in marketing JAZ, JA Apparel sued Abboud in the Southern District of New York, alleging trademark infringement and breach of contract. During the district court litigation, both JA Apparel and Abboud argued that the purchase and sale agreement was “unambiguous.” However, JA Apparel argued that the agreement unambiguously assigned Abboud’s personal name since the assignment grant included the term “names.” Abboud, on the other hand, argued that the agreement was unambiguous in assigning only specific registered trademarks listed in the exhibit to the agreement, explaining that the term “name” in the agreement was simply a synonym for the word “trademark.” Abboud also argued that the use of his name in the planned promotional materials was “descriptive fair use.” The district court found that the agreement unambiguously assigned JA Apparel all commercial rights to Abboud’s personal name since the term “names” was included in the assigned assets. As such, the court rejected Abboud’s fair-use defense.

On appeal, the Second Circuit vacated the district court’s decision on the ground that the purchase and sale agreement was ambiguous as to whether it assigned all commercial rights to Abboud’s personal name. The Second Circuit remanded the case to the district court with instructions to examine extrinsic evidence to determine the scope of the agreement, and, in the event that Abboud’s personal name had not been assigned to JA Apparel, to consider Abboud’s fair-use defense with respect to the proposed advertisements.

ANALYSIS

Because the Second Circuit determined that the agreement was ambiguous as a matter of law, the district court considered extrinsic evidence in interpreting the agreement on remand. In at least six separate documents (including letters of intent, meeting minutes, and correspondence memorializing the negotiations), the parties referred to Abboud as assigning “the trademarks” associated with the business. In none of those documents did either party indicate that Abboud would be assigning his personal name. The parties only used the term “trademarks” to identify the assigned assets. In three documents, the parties suggested that Abboud retained at least some rights to his personal name. Specifically, in correspondence prior to drafting the purchase and sale agreement, JA Apparel conceded that it would need Abboud’s consent to use “the name ‘Joseph Abboud’ in association with products different from the ones mentioned [specifically in the agreement].” Further, in a subsequent letter, Abboud stated that he retained the option of practicing his design skills elsewhere, and that in such an event, Abboud would “separate Joseph Abboud personally from the JOSEPH ABBOUD trademarks.” Finally, a letter from Abboud’s counsel to JA Apparel discussing Abboud’s future design plans stated that “technically JA Apparel is only acquiring Mr. Abboud’s trademarks.”

In addition to an exhibit listing the specific (and uncontested) marks being assigned, the grant paragraph of the draft agreement contained the following boilerplate general description of the assigned assets: “names, trademarks, trade names, service marks, logos, insignias, and designations.” The term “names” was first included among the assets being transferred to JA Apparel in the draft of the agreement prepared by JA Apparel, and there was no evidence of any negotiation or discussion about the appearance of “names” in the assigned assets or whether the boilerplate description was actually meant to expand the assigned assets beyond the “trademarks” discussed in the negotiation documents.

Based on the extrinsic evidence, the court determined that the parties intended for JA Apparel to purchase only Abboud’s trademarks and related intellectual property but not for JA Apparel to acquire all commercial rights to Abboud’s personal name. The term “names” was never used in negotiations to describe a separate asset to be sold to JA Apparel along with the trademarks, but rather only appeared when JA Apparel unilaterally inserted the term in its first draft of the purchase and sale agreement. Under such circumstances, Abboud’s failure to object to the insertion of the term in a phrase generally describing the assigned assets could not evidence his intent to sell his personal name. Therefore, the court determined that Abboud had not conveyed to JA Apparel the exclusive right to commercial use of his personal name other than as it was embodied in the assigned trademarks. The court reasoned that in memorializing the parties’ intent, JA Apparel simply created a laundry list of words, including the term “names,” that fell under the general penumbra of “trademarks.” There was nothing to indicate that both parties intended to ascribe a broader meaning to “names” such that it included personal names.

Since Abboud did not convey all commercial rights to his personal name, the court’s next task was to determine whether Abboud’s proposed uses of his name constituted trademark infringement. Since JA Apparel’s marks encompassed the JOSEPH ABBOUD name, the court had no difficulty concluding that there was a substantial likelihood of confusion between JA Apparel’s marks and Abboud’s proposed use of his name in connection with the JAZ line of clothing. However, as noted by the Second Circuit, Abboud might have a valid descriptive fair-use defense to JA Apparel’s infringement claim. To prove fair use, Abboud must establish that he used his name (1) descriptively, (2) other than as a trademark, and (3) in good faith. In evaluating the issue of fair use, the court noted that it must foreclose any attempt by Abboud both to keep for himself the asset that he sold (i.e., his name-based trademarks), and also to keep the sales price he received for that asset.

In analyzing Abboud’s specific advertisements, the court first reviewed a piece containing the following phrase: “JAZ is a new luxury collection created by the award winning designer Joseph Abboud.” The court found that the use of the name in that situation was descriptive because it was the only reasonable means for Abboud to inform potential customers that he is the designer of the JAZ line of products. Further, the name “Joseph Abboud” in that advertisement was not used in a trademark manner because it was (1) displayed in the lower left-hand corner of the advertisement; (2) in text that was less than 25% the size of the featured, centrally positioned JAZ trademark; (3) part of a complete sentence; and (4) not set apart from other words in the sentence. With respect to the good-faith requirement, the court was concerned that the average consumer might not be able to discern the difference between Joseph Abboud as a person versus the JOSEPH ABBOUD brand now owned by JA Apparel. Therefore, to meet the fair-use test, the court required that Abboud include a disclaimer of his affiliation with JA Apparel in this particular advertisement.

In contrast, other advertisements that placed “Joseph Abboud” just below or to the side of the slightly larger JAZ trademark were deemed not to be fair use as they displayed the name in the same eye-catching manner as the JAZ trademark. As such, the name was neither merely descriptive, nor nontrademark in appearance, nor in good faith.

Accordingly, the court modified its original injunction to address only the proposed uses of the “Joseph Abboud” name that would constitute trademark infringement not otherwise protected by the fair-use defense. Thus, Abboud was permanently enjoined from using JOSEPH ABBOUD unless the name is (1) used descriptively; (2) in the context of a complete sentence or descriptive phrase; (3) in text no larger or more distinct than the surrounding words in that sentence or phrase; (4) displayed in a location removed from the prominent JAZ mark; and (5) accompanied by a disclaimer (unless the name is displayed in very small type).

CONCLUSION

When drafting an agreement, it is vital that the parties pay adequate attention to the language used in the agreement. Apparent “boilerplate” language should always be carefully reviewed to make certain that it reflects the parties’ actual intentions. Assignors and licensors should be careful that such boilerplate wording does not inadvertently convey or license assets that they intend to retain. Similarly, assignees and licensees should not rely on boilerplate language alone to identify all the assets that they believe they have acquired or been licensed to use.

Furthermore, when acquiring trademarks that encompass a personal name, the assignee should be mindful that the individual may still be able to engage in some limited use of his or her name under the fair-use doctrine. If the assignee’s intention is to foreclose all use of the individual’s name in advertising, the assignee will need to craft the agreement very carefully to avoid allowing the fair-use defense to swallow the very assets that the assignee believed he was acquiring.