Karen Millen Loses Name Game, Again.

Karen Millen has lost yet another legal battle, in this case to use her own name on clothing and household goods in China and the US. In Karen Denise Millen v Karen Millen Fashions Limited and Others1, the judge found that the use of Millen's first name in connection with clothing and accessories would breach the terms of the agreement she made when she sold her eponymous clothing company to Baugur in 2004.

Karen Millen was one of the great British success stories. With a loan of just £100 and 100 metres of cotton cloth, Millen and her partner Kevin Stanford began making shirts and selling them to friends. They opened their first store in Maidstone, Kent in 1983 and a decade later had concessions in Harrods and Fenwick. Karen Millen Limited was incorporated in 1991 and a holding company, KMHL, was set up three years later. By 2004 Karen Millen was a successful global brand with stores or concessions in nine countries and franchises in a further 15.

In 2004, Millen and Stanford sold KMHL to Icelandic retail investor Baugur in a deal valued at £120m. Millen received £54m in cash and a significant shareholding in the group. The agreement included a number of restrictive covenants, one of which prevented Millen from using the name Karen Millen or any other "confusingly similar" names, including "KM" or "K.Millen" for a "similar or competing" business in the UK or anywhere in the world after the sale.

Restrictive covenants are a standard and often heavily negotiated feature of such agreements. Buyers want to restrict what the sellers can do (with the intellectual property, goodwill and other assets of the target business) after the sale while sellers will push back to narrow those restrictions, usually by way of time or geographic limitations. What is ultimately agreed will be shaped by the nature of the business being sold and parties' relative bargaining power.

The restrictions in Millen's agreement were so all-encompassing they effectively ruled out any possibility of Millen using her own name for anything fashion-related anywhere at any time in the future. Such terms might be acceptable to a seller if the price is right and she is truly ready to relinquish her name. Millen is on the record saying that in 2004 she "want[ed] a clean break" from the fashion industry and expressed no regrets about selling. Yet in 2011, she revealed plans for a comeback, telling an interviewer that although she was not looking to build another brand, she wanted...