JA Apparel Corp. v. Joseph Abboud

Contents

1. Background
2. Abboud by any other name: The JAZ Brand
3. Current Dispute
4. Madrigal Audio Labs v. Cello Ltd. – 2d Cir. 1986
5. Final Arguments

1. Background

Joseph Abboud was one of the hottest designers of the 1980s and 1990s.  He designed clothes for professional men, which combined European elegance with classic American tailoring.[1]  In 1989 and 1990 he was the first designer to ever win back-to-back  prestigious Menswear Designer of the Year awards from the Council of Fashion Designers of America.[2]  Eager to expand on his success, Mr. Abboud sold his Joseph Abboud trademark to RCS MediaGroup SpA in 2000, for $65 million.[3]  He remained with the label both as a designer and business partner, only to end up clashing with executives over who would have control over the creative process.[4]  The disputes culminated in lawsuits, and in 2004, a month after the lawsuits were dropped, J.W. Childs Associates LP bought the company for $73 million and named Mr. Abboud the chief creative director.[5]  However, the clashes over the direction of the brand resumed and Mr. Abboud departed the company in 2005.[6]  Because Mr. Abboud had sold his name as a trademark, he could no longer use it to mark any goods he designed or created.  The right to place the Joseph Abboud trademarks on goods belongs exclusively to JA Apparel.  After his departure from JA Apparel Corp., Joseph Abboud was bound by a 2 year non-compete agreement.[7]

2. Abboud by any other name: The JAZ Brand

     Shortly after the expiration of the non-compete agreement, on July 13, 2007, Joseph Abboud began work on a new line of menswear under the label of JAZ.  JAZ was set to debut in fall 2008.  He acquired a shirt-factory in Fall River, Massachusets, which specializes in the creation of high-quality dress shirts.  The Alden Street Shirt Factory was on the verge of closing until Mr. Abboud stepped in and saved both the factory and the jobs of its 140 workers.  Mr. Abboud’s intention was for the designer to use his name to promote the new line.  However, Mr. Abboud’s name would not appear on the label. 

JA Apparel, hearing rumblings in the industry about Abboud’s new line and troubled by the possible trademark infringement which could occur when it debuted, took out a full page ad in Daily News Record (“DNR”), the now-defunct daily men’s fashion trade magazine.  The ad read “The Finest Trademark Lawyers in the World Wear Joseph Abboud.”  Lead attorney for JA Apparel, Phillip Geraci (“Geraci”) of New York-based law firm Kaye Scholer, remarked that this advertisement was meant to serve as a warning shot to Mr. Abboud.  It’s placement shortly after the expiration of Mr. Abboud’s non-compete agreement was intentional, and it was meant to indicate, Geraci said, that JA Apparel was prepared to defend vigorously its rights.  (Geraci also remarked that the ad was true—JA Apparel provided the entire Kaye Scholer team with wardrobes for the trial.)            

            Later, in an interview with DNR concerning JAZ, Mr. Abboud initially stated that he understood that he could not use his name to promote JAZ.  Shortly after DNR published the article though, Mr. Abboud demanded that DNR correct the article containing that statement.  Mr. Abboud stated that it was not his intention to create confusion among the public and that he just wanted the public to know who is creating certain pieces. Considering that the JAZ line would be sold at a higher price point, Mr. Abboud pointed out, it would be in his favor not to have his brand confused with items produced by JA Apparel.

Mr. Abboud’s “correction” in DNR, Geraci said, was the straw that broke the camel’s back.  Shortly after DNR published it, JA Apparel brought suit.  A month after JA Apparel filed the claim in the U.S. District Court in Manhattan, a Wall Street Journal article made Mr. Abboud’s intentions even more clear.  It stated that Mr. Abboud planned to he planned to promote JAZ with the tagline "a new composition by designer Joseph Abboud."

3. Current Dispute

On September 4^th, 2007, JA Apparel filed a suit against Joseph Abboud charging misappropriation of trademarks, trade names, brand names and designations.[14]  The complaint specifically mentioned that “a new composition by the designer Joseph Abboud” would be a misappropriation of JA Apparel property.[15]  In response, Mr. Abboud denied the charges, and counter sued JA Apparel for $93 million for unauthorized use of Mr. Abboud’s reputation and publicity rights in marketing campaigns which created the impression that Mr. Abboud still works and designs for JA Apparel.[16]  So examples of the slogans at issue were “Do U Know Joe?”[17]

4. Madrigal Audio Labs v. Cello Ltd. – 2d Cir. 1986

Joseph Abboud strongly relies on Madrigal Audio Labs v. Cell Ltd.[18]  The case centered around Mark Levinson who produced audio equipment in the 1970s through Mark Levinson Audio Systems Inc.[19]  Levinson had sold his business, trade name and trademark to the plaintiff, Madrigal Audio Labs, but continued to work with the company.[20]  In 1984, after clashing with the management Levinson left Mark Levinson Audio Systems Inc. and created a separate company, named Cello Ltd., which also produced high end audio-equipment.[21]  Mr. Levinson’s name appeared on promotional brochures for this new equipment.[22]

            On May 15, 1985, Madrigal which now owned the Mark Levinson trademarks, sued Cello for trademark and trade name infringement.[23]  Madrigal received two injunctions, one of which barred Levinson from generating publicity about this relationship , enjoined Levinson from communicating with dealers or customers on Cello's behalf, and ordered Cello to inform everyone who had received Cello publicity brochures advertising Levinson's designing of products for Cello that Madrigal owned the Levinson trade name and trademark.[24]

            On appeal before the Second Circuit the determinative issue was whether an individual who sold the right to use his personal name as a trademark may be enjoined from using his name in advertisements for a competing company.[25]  The court found that even when a personal name becomes a trademark, the name nevertheless continues to function as a symbol of that individual's personality, and bears the individual’s reputation and accomplishments as distinguished from that of the business.[26]  Whether or not an individual who sells his or her trade name rights is barred from using their personal name depends on the terms of the sale.[27]  A court cannot bar a person from using their personal name unless the intention to convey exclusive rights to the name is clearly shown in the agreement.[28]  The court found that the Levinson agreement showed no intention to convey exclusive rights to his name, and therefore Levinson could use his name in advertising another business so long as it was not used as a trademark.[29]

5. Final Arguments

            At final arguments the defense felt that there were two main questions.[30]  First, whether when Mr. Abboud sold the trademark rights to his name, he sold also the exclusive right to use the name other than a trademark.  Second, how can a name be used other than a trademark.  The defense emphasized that Abboud only sold the trademark rights to his name.  He reserved the right to make personal appearances based on his status as a celebrity.  The enormous sum of $65 million dollars, could not be used to imply that all rights to the name were sold.  In fact, JA Apparel recouped that amount in 3 years.  In the Purchase and Sale Agreement between Joseph Abboud and JA Apparel, Mr. Abboud assigned only the marks.  This was implied because all the trademarks, service marks, and logos were collectively referred to as the Trademarks.  If JA Apparel truly bought the exclusive right to the Joseph Abboud name for all time, they would have stated so clearly in the agreement.  When Abboud advertises his new line with “JAZ a new composition by Joseph Abboud,” he is only communicating to the public that he is the designer.  This situation is similar to Madrigal.  The defense argued that there was a distinction between an individual’s personal reputation, and the goodwill of the brand.  Mr. Abboud had built up his reputation over the years with media appearances, by writing a book, and designing innovative apparel.

            To answer the second question, the defense stated that a distinction could be made between a trademark and a reference to a person through the prominence, placement and presentation of the name.  Since the Abboud name would not be placed on any products it would not be a trademark.  The prominence of the name would not be emphasized and would rather appear in the same size, type and color font as the words around it.  Finally, this name would be presented in the media and advertisements.  They were even willing to include a disclaimer stating that the JAZ line was completely separate from the Joseph Abboud line. 

            The defense addressed the charge of confusion, by stating that JA Apparel was wrong on the law. Section 33(b)(4) of the Lanham Act allows individuals to use their personal name in business, even if the name is trademarked, and even if there is confusion.  Confusion is the risk that manufacturers take when they use someone’s personal name as a trademark.  Further, the First Amendment protects the right to engage in truthful speech.  Mr. Abboud is merely communicating that he is the designer of this JAZ line.  So long as the speech is truthful courts have tolerated some level of confusion.  This balance’s the public’s right to know the truth against the danger that the public might be confused.  Indeed if there were confusion, it is fault of JA Apparel who engaged in advertising campaigns that suggested that someone with the name of Joe or Joseph was still with the company and designing the apparel.  Because of this JA Apparel comes before the court with unclean hands, and this lead the Mr. Abboud’s counterclaim. 

            Finally, the claim by JA Apparel that Mr. Abboud breached his non-compete agreement, by entering into agreements with manufacturers before the expiration of the deal was incorrect.  Mr. Abboud at all time made clear that a non-compete existed, and that he could not start working with anyone until after it expired.  In fact, not only was no license agreement signed before the expiration of the non-compete, but no license agreement was even drafted.

            In final arguments the plaintiff stated that Mr. Abboud is attempting to keep for himself the rights he has sold to JA Apparel.[31]  Through the Purchase and Sale Agreement Mr. Abboud had transferred right to use his name in commerce and as a designation to JA Apparel.  In fact “by Joseph Abboud” was on the list of designations sold to the plaintiff.  The plaintiff argued that Mr. Abboud would be forbidden to advertise with his name even if he were to make a personal appearance at Bloomingdale’s because JA Apparel bought the full rights to use the name in trade.  A reasonable businessman would not enter into an agreement for $65 million where they do not own the name Joseph Abboud in a non-trademark sense.  The defense argued that Mr. Abboud is attempting the use the goodwill of his name, which he sold, to publicized JAZ.  That goodwill belongs to JA Apparel.