Breaking Up In Hard To Do – Especially Where A Brand Is Involved

My late brother and I founded and had a successful boutique entertainment firm for over 20 years. We were blessed during that time to represent some very prominent musical acts.

Unfortunately, soon after we acquired one from their prior law firm, they decided to break up. It appeared their worldwide, multi-platinum success led the two alpha dogs in that band to become unable to agree on pretty much anything – set lists, hotels to stay in, even the food and drink for them backstage – including what color M&Ms.  

Each of the alphas wanted to continue to record and tour under the band's name. Neither my brother nor I then knew much about trademark law, but did know it was applicable to that dispute.

We then realized one of us now had to become conversant in trademark law. We flipped a coin. I won (or lost, depending how you look at it). It became my obligation to add trademark law to my areas of expertise.

I quickly learned that typically, when a band dissolves, no single member has the right to exclusively use the band's name. It’s a basic principle of trademark law, designed to protect the public from being confused about the source of the music. The band's fans expect their music to come from the original group, not just one or a few members.

This basic principle doesn't just apply to musical acts. It applies to any partnership or multi-person entity, like a corporation or LLC (I’ll now refer to these for convenience in this blog as “Partnership/s”) that has established a name/brand/trademark (I’ll now call these “Brand/s”), and breaks up. In that event, it often becomes an issue of who gets to continue to use that Brand and the goodwill and value that has become associated with it.

I also learned ways to prevent these types of Partnership disputes, and we began to advise all of our talent and business clients accordingly.

The solution was basically advanced planning – the Partnership deciding as soon as possible how their valuable Brands could be used post-dissolution.

One common and effective way to accomplish this is through a Partnership agreement. This is basically a governance agreement covering how the business of the Partnership is conducted, and revenues and other assets shared, like music publishing and recordings, including in the event of a breakup. Such an agreement typically specifies whether the Partnership’s Brands and other intellectual property can be used by any of the Partnership's individual members post-breakup, and under what conditions.

A Partnership can also form a separate legal entity, to own and manage its Brands, including clear post-breakup guidelines on Brand use and licensing. This agreement survives the breakup, and could include terms and conditions allowing individual members limited use of the Brands after a breakup, subject to some type of approvals and revenue splits.   

It's also advisable for these agreements to have clear dispute resolution provisions. These provide a structured way for resolution of post-dissolution conflicts.

I like to first require mediation, of a limited time period, in front of a mediator with experience in the type of disputes at issue, with each Partnership member bearing a pro rata share of the mediator’s fees.

If the mediation fails to resolve the disputes, then binding arbitration, in front of an arbitrator with experience in the type of disputed issues. Each Partnership member would initially bear a pro rata share of the arbitrator's fees.

However, arbitration, like litigation, can be expensive. Informal resolution, like mediation, is far less so. This makes it the optimal way to try and resolve the dispute. To encourage this, I add a prevailing party attorneys’ fees clause in the Partnership agreement, and separate Brands agreement, if one exists. This serves as a strong disincentive to more formal dispute resolution, like arbitration.

This is because with a prevailing party attorneys’ fees clause, the losing party in the arbitration not only has to pay all of the arbitrator’s fees, but the prevailing party’s or parties’ as well. This would be in addition to any damages awarded to the prevailing party/ies in the arbitration.

The takeaway? Bands and other Partnerships need to consider and protect the legal aspects of their collaborations, as carefully as they do their artistic and business visions. Creative collaborations require artistic synergy. With talent and a little luck, those collaborations can lead to fame and fortune.

But they also require careful and clear legal planning. It could prove critical in protecting the long-term legacy and livelihood of those involved.

Just Sayin’ TM

(c) 2024 Paul I. Menes