Ranee van der Straaten - The risks of personal branding

Recent changes to EU trademark law have made it easier to take action against infringing trade names. But how should companies approach situations in which the alleged infringer is an individual trading under his or her own name? Your personal name has been yours since birth and will be yours for the rest of your life. Unsurprisingly, you feel entitled to use it as you please. However, using your name as your company name or product brand can have serious legal consequences. Your personal name might be similar or identical to someone else’s trademark and using it in the course of trade might thus amount to trademark infringement.

Recent changes to EU trademark law have made it easier for rights holders to act against infringing trade names. Since the EU reforms, the so-alled ‘own name defence’ can now be successfully invoked only by natural persons and is no longer available for companies. However, what are the consequences of these reforms in practice and how should companies approach delicate situations where the alleged infringer is actually an individual trading under his or her own name? 

Infringing company names before EU reforms 
In 2007 the European Court of Justice (ECJ) issued a landmark decision in Céline SARL v Céline SA. This case concerned the use of the company name Céline, which was identical to the earlier trademark CELINE registered by well-known fashion house Céline SA. The alleged infringing company name Céline was used to operate a business trading in clothing and accessories since 1950, with the name being transferred by the successive operators of the business. The international luxury fashion house Céline SA discovered this use of Céline as a company name and initiated legal proceedings against Céline SARL seeking an order to prohibit the infringing use of the trademark CELINE, which it had secured in 1948. The French appeal court was unsure whether to prohibit a company name on the basis of an earlier trademark. It held that using a company name might not constitute “use in relation to goods”, which can be prevented by a trademark owner. It considered that the purpose of a company name is to distinguish a company, whereas the purpose of a trademark is to distinguish goods and services. The French appeal court therefore asked the ECJ for clarification by means of prejudicial questions. In its 2007 judgment in Céline, the ECJ paved the way for trademark owners to act against infringing company names under certain conditions. The court held that if a company name were affixed to the company’s products, this could be regarded as use in relation to goods. This would also be the case if the company name were used in such a way that a link was established between the company name and the goods marketed by that same company. Therefore, the ECJ ruled that a trademark owner may prevent the use of an identical company name in relation to goods which are identical to those for which its trademark is registered if that use affects the trademark’s functions – in particular, its essential function of guaranteeing the origin of the goods. However, a trademark owner may not act against a trade name where it is used in accordance with honest practices in industrial or commercial matters. In its 2005 judgment in Gillette v LA Laboratories, the ECJ explained that the condition of ‘honest use’ is not met if the wrong impression is given that there is a commercial connection between the third party and the trademark owner, or if the use affects the value of the trademark by taking unfair advantage of its distinctive character or reputation. Although it is clear that when a trade name is affixed on a product, it is being used in relation to goods and can thus be infringing, this judgment also leaves some room for discussion. For example, when exactly is a link established between a company name and the goods marketed by that company?

Own name defence before EU reforms
With regard to the use of a personal name as a company name, the ECJ referred in its Céline judgment to its previous decision in Anheuser-Busch. It reiterated that a trademark does not entitle its owner to prevent a third party from using his or her own name or address in the course of trade, provided that this is done in accordance with honest practices in industrial or commercial matters. The court also explained that this provision was not limited to the names of natural persons. Article 12 of the previous EU Trademark Regulation (207/2009) contained a provision stating that a Community trademark shall not entitle the owner to prohibit a third party from using his or her own name or address in the course of trade. Therefore, based on the previous EU Trademark Regulation, legal entities could rely on the own name defence as well.

Consequences of EU reforms
The new EU Trademark Regulation (2015/2424) entered into force on March 23 2016. The revised Article 9(3) now explicitly states that “using the sign as a trade or company name or part of a trade or company name” may be prohibited. Article 9(2) refers to use of a sign “in relation to goods or services”. In accordance with the Céline judgment, the recitals explain that confusion with a trademark may take place when a company uses the same or a similar sign as a trade name in such a way that a link is established between the company bearing the name and the goods or services of that company. Therefore, an EU trademark could also be infringed by the use of a sign as a trade name or similar designation, as long as that use is made for the purposes of distinguishing goods or services. This change does not solely apply to EU trademarks. It is likely that it will soon also apply to national trademarks registered for EU member states (eg, German or French trademarks). The new Trademark Directive provides an identical provision in Article 10(3)(d). As part of the EU trademark reform package, this directive must be implemented by all EU member states by January 14 2019. With regard to the use of a sign for purposes other than for distinguishing goods or services, the directive’s preamble explains that this is still subject to the provisions of national law. In Benelux, for example, Article 2.20(1)(d) prescribes that using a sign for purposes other than those of distinguishing goods or services may be prohibited by a trademark owner if this would take unfair advantage of or be detrimental to the distinctive character or reputation of the trademark without due cause. 

Consequences of EU trademark law reforms for own name defence
The EU Trademark Regulation has strengthened the position of trademark owners by limiting the alleged infringer’s possible own name defence to natural persons only; companies can no longer rely on the so-called ‘own name’ defence. Whereas in Céline and Anheuser-Busch, the ECJ considered that trademark owners are not entitled to prevent a third party from using his or her own name or address in the course of trade, the regulation now states that an EU trademark owner may not prohibit a third party from using in the course of trade “the name or address of the third party, where that third party is a natural person”. The latter sentence makes it clear that this provision no longer provides any defence for legal entities. It also follows from the regulation that the own name defence can be successfully applied only where use of the name is in accordance with honest practices in industrial or commercial matters. This condition also followed from the ECJ’s decision in Céline. In this respect, the EU trademark reform package incorporated the ECJ’s established case law. If your personal name is actually Calvin Klein and you trade in clothing and accessories, you may still use your name in the course of trade, in accordance with said honest practices (eg, to identify yourself as the company’s owner on your corporate website). However, using your personal name Calvin Klein as a company name or brand may well cross the boundaries of honest practices, because it may not be limited to use in the course of trade as the name of a natural person. Following this revision, it has become much easier for EU trademark owners to act against infringing company names, given that the own name defence is now limited to personal names and addresses of natural persons. On the other hand, it has also become more important for companies to perform proper trademark research before choosing a new company name. As soon as a new company name is chosen, steps should be taken to register it as soon as possible.

How should companies approach individuals using their personal names?
Individuals using their personal names as company names might not be deliberately infringing a trademark owner’s rights. Given that most individuals feel entitled to use their personal names in any manner they choose, an action preventing the use of their own name as a company name may not be easily understood and accepted. Moreover, any harsh legal measures that a trademark owner takes against an individual risk alienating the public. Therefore, trademark owners should take care to strike a balance between protecting their trademarks from free riding and loss of distinctiveness on the one hand and protecting their brand image from negative headlines on the other. In any event, infringing use of a similar or identical company name must be prevented where use of that name without due cause takes unfair advantage of, or is detrimental to, the distinctive character or reputation of a well-known trademark. However, the factual circumstances of the case should always be taken into account and any actions should be proportional given the circumstances. Even if coexistence cannot be achieved, such a balancing act may lead to resolutions being explored in a more amicable way.

Is branding your personal name such a good idea anyway?
It is common practice for designers to let their brand coincide with their personal name, with famous examples including Vivienne Westwood, Philippe Starck, Yves Saint Laurent and Giorgio Armani. However, using your personal name as your trademark and company name could have implications when it comes to selling your business. The core assets of a design company mainly consist of its IP rights, in particular its trademark and trade name. Therefore, the buyer of such a company will be particularly interested in obtaining exclusive ownership of these rights. If the trademark and company name include the designer’s personal name, the designer might be compelled to agree to cease using his or her personal name in the course of trade. Coexistence is difficult to achieve as it can lead to direct competition between the designer and the buyer. In some cases, the use of a personal name as a trademark has required far more redesigning than initially expected. In 2007 Kate Spade sold her fashion company Kate Spade LLC to Liz Claiborne. After the sale, Spade had to cease the use of her personal name in a commercial manner in order not to infringe the IP rights now owned by Liz Claiborne. Spade continued designing under a different name, eventually changing not only her trade name, but also her personal name to Frances Valentine – a useful reminder that you might want to think twice before branding yourself and your product at once.