February 9, 2017
Reputation v Goodwill: IPEC Draws the Line
Reputation v Goodwill: IPEC Draws the Line
The recent case of Bhayani & BLL  v Taylor Bracewell LLP provides further guidance around the ownership of goodwill as opposed to a mere reputation.

Ms Bhayani joined Taylor Bracewell in 2011 as a salaried partner, with her arrival creating an employment law department. Taylor Bracewell wished to capitalise on Ms Bhayani’s reputation and called the employment law offering Bhayani Bracewell. Taylor Bracewell filed a trade mark application in May 2014. Ms Bhayani left the firm in October 2014 and later started Bhayani Law Limited (BLL), the second claimant.

A claim for passing off was subsequently brought by Ms Bhayani based on Taylor Bracewell’s continued use of her name in Bhayani Bracewell. Ms Bhayani claimed that she owned the goodwill generated from working at Taylor Bracewell.  A revocation action was also sought against the trade mark on the basis that it misled the public into thinking that she was still a partner at the firm.

Taylor Bracewell denied both claims and sought summary judgment, which formed the subject of the present case. It claimed that it, as a firm, owned the goodwill under both tort law (passing off) and contract law (the partnership agreement), and that Taylor Bracewell’s status as the legal owner of the goodwill, meant that it should also defeat the revocation claim. His Honour Judge Hacon began by distinguishing between a mere reputation (which exists by itself) and goodwill (which is indivisible from the business that it is linked to).

The interesting discussion centred around whether Ms Bhayani or Taylor Bracewell owned the goodwill. Ms Bhayani argued that the circumstances were such that the present case could be distinguished from the general rule that the goodwill generated by an employee accrues to their employer. This was rejected by HHJ Hacon for two main reasons:
  1. Ms Bhayani was simply acting in her capacity as a solicitor;
  2. The public would be well aware that a solicitor employed in a traditional partnership structure was under the control of their employer and not acting outside of their remit.
In coming to the above conclusion, HHJ Hacon drew a distinction between more orthodox forms of employment and those of artists, including celebrities. Artists were found to be afforded special treatment and an exception to the general rule that goodwill diverts to an employer. This was because of the unique business structure and public perception of artists. Using the seminal passing off case of Irvine v Talksport (which dealt with false endorsement) as an example, HHJ Hacon highlighted that the endorsement work undertaken by Eddie Irvine warranted its own goodwill because it was a separate business activity from his career as a racing driver. Furthermore, there was no other entity other than Eddie Irvine in which the goodwill for that endorsement work could vest. Neither of those two points applied in the present case.

Based on the above, Taylor Bracewell obtained summary judgment in respect of the passing off action. However, HHJ Hacon rejected summary judgment against the claim for revocation and held that it required a full trial. This was because BLL as a firm would have generated goodwill by the date that the claimants issued proceedings, meaning that the public could well be misled as to Ms Bhayani’s current place of work.

It has been argued in recent times that the law of passing off has morphed to provide something closer to images rights, which do not explicitly exist in the United Kingdom. The acknowledgment that artists are able to generate goodwill more liberally, particularly where the activities are outside of their main area and the goodwill could only divert to them, does little to contradict this view. At the same time, this decision serves as a welcome reminder that a successful case in passing off in respect of an individual’s reputation is very fact-specific and difficult to establish.

The take-home: see if there is a mere reputation or goodwill; ask what the goodwill is in; check to see if there is another entity that could own it; and consider if the goodwill is distinct from that entity.

Stobbs advises a number of clients, including individuals, on licensing, merchandising, personality and image rights. If you’re interested in discussing any of the issues raised here, drop us a line.
Trademarks /  Celebrity /  Commercial Contracts /  Disputes

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