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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