Aug 18, 2023

Buyer Beware – NIL (Name, Image and Likeness) is not a Business Asset

Mergers and Acquisitions By Paul Levites
Frustrated businessman in navy blue suit sitting at office desk talking on the phone while looking at a computer

The Problem

So you just bought a new business to add to your operating portfolio and its founders and movers/shakers are two social media up-and-comers. Your new products are all branded under their names, their photo images are all over your new product packaging, their signatures adorn your newly acquired website, and all your new promo materials and their personas are all over social media.

You purchased all of the assets of their business or maybe you bought all of its capital stock, so you are home-free and you can do whatever you want with the new business and its assets, correct?  Not necessarily so!

One day, not so long after your acquisition closes, your two rock star brand ambassadors from whom you acquired the business, to whom you paid lots of cash (which you probably had to borrow) and with whom you entered into new, lucrative (for them) employment agreements come to you and say, “Wait a minute, you bought our business and we thank you for all the money you paid us, but you didn’t buy the ‘right of publicity,’ that is, the right to use our images, likenesses, signatures, quotes, stories, voices, endorsements or names in your branding, packaging and promotional materials. Neither our acquisition agreement nor our employment agreements with you address any rights of publicity enabling you to use those assets, and those assets are not assets of the business we sold to you, they are our personal property. We will let you use these personal property assets, but only if you enter into a separate license agreement with us to use our likenesses and you pay us more money.

“That’s right, you thought you bought our business, our personal brand, for a negotiated, set price, but now, if you want to continue to use our likenesses, our personas, in your (our) brand marketing, you will have to pay us more. If you don’t pay us, we will take you to court to stop you from using our personal property.”

Your jaw drops.  “Wait a minute, I just bought their business, all their assets, their brand, I paid them a lot of money and I can’t even use their names, images, and likenesses in marketing what I purchased? How is that possible?”

The Short Answer

The so-called “Right of Publicity,” the right to use a person’s name, image or likeness, sometimes referred to as “NIL,” or “personality rights,” is a personal property right associated with the right to privacy. The Right of Publicity asserts that a person has the right to control the commercial use of their identity and persona.

That is, personal identity, in all its various permutations, is not a business asset: it is a personal property asset. It is an asset that does not attach to or run with a business and does not transfer automatically to a buyer when a business is sold. It stays with the person to whom it relates as that person’s personal property, even after death. No matter how intrinsically a person’s NIL is linked to a business brand, it is not a given that if you buy the brand, you buy the NIL.

The Right of Publicity is governed by statute in some states and by common law in others, its protections vary from state to state, from narrow to broad, and it preempts federal copyright and trademark law.  It is not something to take lightly or ignore!

The Solution

When buying a brand business that is built on or around a personality or persona, make sure that your business purchase agreement (whether you are buying assets or stock) specifically includes a consent to the post-acquisition use of NIL, that your purchase right is specifically spelled out in the agreement to define what you can use and how you can use it and that the person or persons providing the consent are signatories to the agreement specifically with respect to this consent. Otherwise, you may be in for an uncomfortable awakening!