Friday, February 14, 2020

when you buy a business whose mark is the owner's photo, make sure you get all the rights

Minott v. Wichita Water Conditioning, Inc., No. 18-cv-01656-MSK-SKC, 2020 WL 616359 (D. Colo. Feb. 7, 2020)

Minott used to own Fluid, which operated a water conditioning business under the trade name Chuck, The Water Man. Fluid made extensive use of a photograph of Minott’s face as “a sort of logo,” displaying it prominently in its promotional materials, on billboards, on the side of trucks, on customer-facing equipment, and so on. In 2016 defendant WWC bought Fluid, including “all of [Fluid’s] right, title and interest in and to the assets owned by [Fluid] and used in connection with [the Chuck business]” and specifically including all “trade names (including ‘Chuck, the Water Man’) [and] trademarks” held by Fluid.

Minott alleged that during negotiations over the Asset Purchase Agreement, he explained to WWC that Fluid held only a license to use the photo of his face, not ownership of that likeness, and that therefore, “use of my personal likeness was not included in Fluid’s” assets. He offered a one-year license for a separate payment of $100,000, which WWC allegedly rejected. “Notwithstanding that discussion, the Asset Purchase Agreement contained no language excluding Mr. Minott’s likeness – to the extent it was used as a trademark – from the terms of the sale.”

WWC eventually merged Chuck with its Culligan brand (e.g. referring to the business as “Chuck’s Culligan” or “Chuck the Culligan Man”). In 2017, WWC prepared a promotional image that used the photo of. Minott’s face, edited onto the body of another model (who wore a Culligan-branded shirt), alongside the statement “Chuck The Water Man is now Chuck The CULLIGAN Man.” WWC sent a version of the image to Minott and “invited comment,” and Minott responded, “unless [you’re] hiring me as a professional model (very expensive) NO...Our discussion was a verbal chat. We discussed that you could use that one picture of my face as the logo for one year from acquisition date...You dismissed those discussions without conclusion...I do appreciate you asking and I like the fact that you see value in my name & face being attached to the company, but NO.”

Nonetheless, and perhaps as a result of a slip-up, WWC sent out a series of mailers to its customers, using the photo of Mr. Minott’s face (and the model’s body). In response to Minott’s complaint, WWC responded that it had instructed its marketing vendor to “change all future mailers to not use your picture,” but also advised that “there may be some [existing mailers] in the system to be mailed but it has been changed.” The relevant employee also e-mailed WWC’s marketing vendor to determine how many mailers featuring Minott had already been printed; since the December mailers had been printed, he instructed the vendor to “leave it.”

Minott sued for misappropriation of likeness under Colorado common law, false endorsement under the Lanham Act, and deceptive advertising under in violation of the Colorado Consumer Protection Act.

WWC argued, among other things, that (1) the photo was a trademark that was transferred, (2) the mailers lacked an effect on interstate commerce so there was no Lanham Act claim, (3) because of the noncompete Minott signed, he couldn’t experience cognizable harm from the mailers, and (4) there was no evidence of deceptiveness.

Misappropriation: consent is an affirmative defense; WWC has the burden of proof. Here, this requires proof that: (i) Minott, by words or conduct, led WWC reasonably to believe that he had authorized WWC to make use of his photograph as a trademark; and (ii) WWC acted in a manner and for a purpose to which Minott agreed. It’s true that Fluid established a use of Minott’s photograph as a trademark, but that didn’t “overcome all other intellectual property rights that might attach” to the photo.  [I think it’s pretty sharp dealing, at best, on these facts where he’s also the owner of the company doing the transfer of rights. But:] Minott testified that Fluid never owned the image and was only a licensee, and the record didn’t disclose the terms of the license. “WWC acquired nothing more than Fluid had. WWC did not acquire rights to the photograph itself, nor the right to depict Mr. Minott’s likeness.”  If anyone wants to use a photo as a mark, they have to be sure that neither copyright nor the right of publicity preclude such use. There was at least a disputed issue of fact on whether there was a terminable-at-will license (apparently both for the copyright and for the right of publicity) that was terminated on transfer of Fluid. There was also at least a disputed issue whether Minott specifically told WWC at the time of the purchase that Fluid didn’t own rights to his likeness. Likewise, WWC failed to establish that its use was consistent with the scope of any consent that WWC reasonably believed Minott had given, given the parties’ emails.

JA Apparel Corp. v. Abboud, 682 F. Supp. 2d 294 (S.D.N.Y. 2010), was not to the contrary. There, Abboud was a party to the sale of his clothing business and its trademarks; here, Minott was not a party to the Fluid-WWC transaction.

False endorsement under the Lanham Act:  The rare lack of use in interstate commerce! It was undisputed that Chuck’s only provided service in Colorado. Minott didn’t claim to have trademark rights extending outside of Colorado, so there was no effect on interstate commerce that way. Though WWC itself operated interestate, “the record is so scant as to how WWC’s mailers here may have advanced WWC’s business interests outside of Colorado as to preclude a finding of an effect on interstate commerce simply because WWC has interstate operations.”

In terms of interstate effects, Minott argued only that, of the roughly 3,600 relevant mailers WWC sent out, 9 went to addresses in Wyoming, South Dakota, or New Jersey. That wasn’t a “substantial” effect on interstate commerce. The recipients were “current customers” according to its billing software, and, given the geographic limits of service provision, the record suggests that out-of-state addresses were unintentional, erroneous, or forwarding addresses for final bills. “Given the minimal number of advertisements involved, and the clear indication that any stray mailings leaving Colorado were inadvertent oversights, the Court concludes that Mr. Minott has not come forward with evidence indicating that any false endorsements perpetrated by WWC occurred in interstate commerce.”

CCPA deceptive advertising: even assuming deception in the course of WWC’s business with an impact on the public, as required by state law, Minott failed to show the requisite injury. He was neither a deceived consumer nor a current competitor.

It was speculative to allege only a belief that his reputation has been harmed and that this harm may manifest when the noncompete expires in mid-2021, at which point he intends to return to Colorado and start another water conditioning business. He cited Yelp reviews, but even putting aside “substantial hearsay concerns as to whether such reviews are admissible as proof of the reviewer’s perception” of Minott, several of those made clear they were aware of and distinguished between the Minott iteration and WWC’s version, while other bad reviews related to the period Minott himself ran the business. Thus, the Yelp reviews could not show harm to his reputation resulting from WWC suggesting his affiliation with or endorsement of WWC.

Among other things, there was no evidence that the mailers caused harm to his reputation; there was no evidence that disgruntled WWC customers contacted him, or that surveys showed lost respect for “Chuck, the Water Man.” And his future plans merely highlighted the lack of present injury. Further, he testified that he didn’t intend to solicit past customers, which meant his prior reputation would be irrelevant. 

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