Learn about the significance of publicity rights in M&A deals through a recent California court case involving a juice company. Understand how broad language in asset purchase agreements can impact the acquisition of intellectual and intangible property.
M&A Stories
July 12, 2021
Introduction:
In mergers and acquisitions (M&A), disputes may arise over who owns certain assets, including the rights to use a founder’s name and story for marketing. This right is known as “publicity rights,” and a recent California court case sheds light on its significance in asset deals.
The Deal:
The case involved a juice company that began in 1935 with a visionary founder who gained fame as the “Juice King” of Southern California. When financial difficulties struck the company in 1988, it sold “substantially all assets,” but the agreement didn’t explicitly mention the buyer acquiring the founder’s publicity rights.
The Lawsuit:
In 2009, the buyer started marketing juice under the founder’s name and using his story on labels. The founder’s family sued, claiming they owned the publicity rights, and won $10 million in damages. However, the buyer appealed, arguing that they may have acquired the founder’s publicity rights through the asset purchase.
The Appellate Court’s Decision:
The intermediate appellate court agreed with the buyer, stating that the right of publicity is a type of intellectual property. Since the asset purchase agreement included “other intellectual property” and had broad language, it could reasonably encompass the right of publicity. As a result, the case goes back to trial for further consideration.
This case is referred to as Hansen v. Coca-Cola Company, No. D077588, Court of Appeals of California, Fourth District, Division One, (Filed June 17, 2021).
Conclusion:
Publicity rights are valuable assets, recognized in 41 states. For both buyers and sellers in an asset deal, it’s crucial to explicitly state whether publicity rights are part of the agreement to avoid disputes over this valuable asset.
By John McCauley: I help people manage M&A legal risks.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
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