Strategic Agreements in Brand Transactions

What happens when a business built on a celebrity’s name no longer controls the name itself? In this episode of The Briefing, attorneys Scott Hervey and Jessica Marlow break down the Nicklaus Companies v. GBI decision and what it means for venture funds, PE firms, and brand-driven businesses.

They discuss how Jack Nicklaus was able to legally walk away from the company bearing his name—and start competing—because the company failed to secure critical rights to his name, image, and likeness.

Scott and Jessica examine the key legal documents that every investor should review when financing a business tied to personal branding, and the structures that can help prevent this kind of brand exodus. Whether you’re a creator behind a growing company, venture financing an influencer, a sports icon, or a lifestyle mogul, this is a must-listen for anyone putting money into a business that leverages a personal brand.

Watch this episode on the Weintraub YouTube channel.

Show Notes:

Scott: It’s not unusual for celebrities and influencers to build an empire around their personal brand. But what happens when they sell a piece of that empire and later want back in the game? That’s the question at the heart of a recent New York Supreme Court decision in Nicholas Companies versus GBI Investors and Jack Nicklaus. The court had to determine who owned the commercial rights to the name and image of one of golf’s most iconic figures, and whether he, Jack Nicholas, could compete against the very company he helped create.

I’m Scott Hervey, a partner with the law firm of Weintraub Tobin, and I’m joined today by my partner, Jessica Marlow. We are going to talk about branding rights, post-sale competition, and the high-stakes world of influencer-built businesses on today’s installment of The Briefing.

Jessica, welcome back to The Briefing.

Jessica: Thank you. Thank you for having me. Excited to talk about this very timely topic.

Scott: Yeah, I think it is really, really timely with the continued evolution of the creator economy and some of their businesses just getting bigger and bigger and huge financing transactions for a number of them. I think this is a timely lesson, both for influencers and for those that are buying or financing those businesses.

Jessica: Absolutely. I don’t I don’t think there’s any slow in this business, so better for everyone to get on the same page and avoid some of the pitfalls that we’re about to talk about.

Scott: Right. Well, let’s dive right into it. So in 2007, Jack Nicklaus and GBI Investors, it was a company owned and controlled by Jack Nicklaus, entered into an agreement with Nicklaus Companies, LLC. This was a company that was formed by a real estate magnate, Howard Milstein. And Nicklaus Companies, for $145 million, purchased certain assets of GBI, which included a substantial portfolio of trademarks and applications, wealth registrations and applications related to Jack Nicklaus’s name and his signature and the Golden Bear nickname in the United States and various other countries around the world, more than 600 in the US and 50 other countries. It also included in the purchase was the exclusive right to the golf course design service business that was rendered by GBI and marketing, promotional, and branding businesses of GBI, which included the right to use Jack Nicklaus’s name, image, and likeness. The complaint alleges that Nicklaus Companies became the sole owner of all of the rights to use all of the intellectual property related to Jack Nicklaus. GBI and Mr. Nicklaus became members the company, and Mr. Nicklaus became a manager.

Jessica: Fast forward to 2022, Jack Nicklaus retires from his day-to-day involvement with Nicklaus Companies, but then started to pursue deals for the use of his name, likeness, and trademarks, including personal endorsements outside of the Nicklaus Companies, which included Jack Nicklaus being paid to promote a European tour golf tournament and the tournament’s right to use certain Nicklaus IP. Nicholas Companies sued him, alleging breach of contract, among other claims, and seeks to stop him from competing and using his name.

Scott: Early in the litigation, Nicklaus Companies filed for a temporary restraining order and argued that the 2007 transaction, the $145 million transaction, resulted in the purchase of all golf course design services branded and identified under Nicklaus, Jack Nicklaus, and Jack Nicklaus’s signature brands, the various marketing, promotional, and branding activities involving the use and licensing of Jack Nicklaus’s persona in endorsements, other commercial rights, publicity rights, and intellectual property rights related to his identity and history as one of the most recognizable public figures in golf. So essentially, they claimed that they owned absolutely everything.

Jessica: And in opposition to the temporary restraining order, Jack Nicklaus argued that he is free to conduct his own business because the non-compete agreement he signed in connection with the 2007 transaction expired when he left Nicklaus Companies in 2017. Nicklaus argued that it was GBI that sold the assets and businesses to the plaintiffs, not him personally, and that he was only bound by the non-compete.

Scott: Yeah, that’s right. And after a three-day hearing, the New York Supreme Court issued a preliminary injunction prohibiting Nicklaus from using his name and likeness from competing with the Nicklaus companies. Although Jack Nicholas can compete with the Nicklaus companies for golf course design jobs, he can’t use his name and likeness in doing so. And that’s what the court said. While the non-compete has expired, the ownership of the Jack Nicklaus intellectual property is with the Nicklaus Companies, and that isn’t something that expires, the judge said in ruling on the TRO. The exploitive value of his name as an endorser of products and the like is where the line is drawn, so said the court.

Jessica: But the court also made clear that the conclusions underlying the court granting a plaintiff’s TRO were preliminary and could be revisited based on additional evidence available, whether after the conclusion of the discovery on summary judgment or at trial.

Scott: And that brings us here. The court’s ruling on the party’s cross motion for summary judgment. The court examined the agreements from the 2007 transaction and analyzed whether GBI, as a matter of law, had the authority to convey to Nicklaus Company the rights to Jack Nicklaus ‘s name, image, and likeness, being exclusive to the Nicklaus Companies, even against Jack Nicklaus himself. Based on the evidentiary record, the court found that Nicklaus Company had not demonstrated that GBI had that authority.

Jessica: And specifically, the court noted that the purchase and sale agreement was between Nicklaus Companies and GBI and not Jack Nicklaus himself. Therefore, any rights transfer were limited to what GBI legally possessed. The court concluded that Nicklaus Companies failed to demonstrate that GBI had the authority to grant exclusive rights to the Nicklaus’ name, image, and likeness that would bind him personally.

Scott: Right. And as a result, the court granted Jack Nicklaus’ motion for summary judgment, effectively dismissing all of the claims brought by Nicklaus Companies. The decision allows for Jack Nicklaus to use his name, image, and likeness in his business ventures moving forward. Okay, this case does provide some takeaways for influencers and branding transactions, wouldn’t you say?

Jessica: Absolutely. There’s a lot to pull from this ruling and apply going forward. And from the perspective of Jack Nicklaus, the individual, the court’s decision reflects a successful preservation of his right to control and exploit his own name, image, and likeness, despite the existence of a seemingly expansive intellectual property sale involving his personal brand.

Scott: Yeah, expensive is one way to say $145 million.

Jessica: $145. Yeah.

Scott: Okay, so this approach included both strategic strengths and legal risks on Nicklaus aside. So let’s break those down. Let’s first start with what Jack did write.

Jessica: Sure. He did not personally to find a way his name, image, and likeness rights. So despite the 2007 transaction, Nicklaus never executed a personal assignment transferring his name, image, and likeness to the Nicklaus companies. This was critical. The court emphasized that only GBI was a party to the PSA, and individual rights of publicity must be conveyed personally and explicitly. As a result, he retained control of his personal brand because the contractual paper trail did not bind him individually.

Scott: Right. He used a corporate vehicle, GBI, as the seller. So structuring the deal through his wholly owned entity gave him this layer of separation between himself and the assets that were sold. While GBI might have owned IP assets like trademark registrations and applications or licensing rights, it did not own his full personal publicity rights. This structure allowed him to sell assets but avoid personally limiting his future autonomy. A savvy move for someone with ongoing business ambitions.

Jessica: Savvy indeed. He also allowed the non-compete to lapse and then waited to act. So rather than immediately competing or challenging Nicklaus Company’s use of the brand, he waited for the non-compete period to end before reentering the marketplace. This demonstrated respect for the terms of the original 2007 deal and helped bolster his position that he did not intend to abandon his name, image, and likeness rights permanently.

Scott: Right. Okay. There were some risks to the strategy that he took. Let’s talk about what he did and the aspects of what he did that had significant potential risks. So first, he allowed for this ambiguity over the 2007 documents, what they really did or did not do, to persist for years. For over a decade, he operated under a structure that led Nicklaus companies to, some would say, reasonably believe that they had the exclusive rights to his brand and name, image, and likeness. While that ambiguity ultimately worked in his favor, it could have easily backfired had the court found implied consent or detrimental reliance.

Jessica: Absolutely. The second part is Jack benefited from the company’s use of his name and goodwill. During the years that the Nicklaus Company operated using his name, image, and likeness, Nicklaus allowed this association without objection, potentially risking a waiver of the stop will argument. A more aggressive enforcement of boundaries earlier might have prevented the litigation altogether.

Scott: Right. The reliance on GBI as a corporate proxy was clever, as we discussed previously, but it was fragile. Gbi’s transfer of assets was a legally thin premise for transferring broad name, image, and likeness rights. If a court had found that GBI effectively functioned as an alter ego or that Nicklaus implicitly ratified the transfer, personally, the outcome could have been different. Okay, so we talked about what he did right, we talked about what he did wrong or risky. Let’s talk about what he could have done differently. So So he could have clarified in writing that he was retaining his personal NIL rights. Even a simple reservation clause stating Jack Nicklaus retains the right to use his name, image, and likeness for personal and commercial purposes outside of this agreement after the non-compete period would have saved litigation costs and risk. But I dare say it probably would have lowered the purchase price.

Jessica: I think so. He could have entered into a parallel licensing agreement instead of an implied assignment. So rather vaguely permitting the company to use Jack’s name, image, and likeness, he could have structured it as a time-limited license with defined termination and renewal rights, and this would have solidified that Jack remained the ultimate rights holder.

Scott: Right. He could have also documented the expiration of his non-compete and his future plans. By communicating his intentions when the non-compete lapsed, he could have helped avoid claims of bad faith or surprise when he began to compete again. All these, though, I think, would definitely lead to a reduction in the purchase price. I think the fact that Nicklaus Companies believed that they were purchasing all these exclusive rights was really what resulted in such a large purchase price. I think otherwise, if they were just getting a license or if they knew that after a particular period of time, Jack Nicklaus would compete with Nicklaus Companies, I don’t know But there’s not much value then to the purchase, really.

Jessica: Right. I have to imagine they believed 145 million was a complete and exclusive buyout.

Scott: Right. No, I believe that. Okay, so this decision reveals several steps by Nicklaus companies in structuring the purchase and sale agreement and the broader transaction. Let’s talk about what went wrong and what they could have done differently to better protect their interest, particularly in acquiring and enforcing rights to Jack Nicklaus’ name, image, and likeness. Okay, so I think the first and most obvious mistake was that they contracted only with GBI and not with Jack Nicklaus personally. The purchase and sale agreement, the IP assignment agreement, all these related documents were executed between Nicklaus Companies and GBI, a corporate entity that was wholly owned by Jack Nicklaus, but Jack Nicklaus himself was not a party to the PSA. So let’s Let’s talk about why this matters. GBI cannot assign rights that it does not own. The court found that there was no evidence that GBI independently owned the rights to Jack Nicholas’s name, image, and likeness, including his personal rights of publicity or any enforceable trademark rights beyond those already in use or already registered or pending by GBI. I don’t know. I think I chalk this up to really bad due diligence, where a company is is based on an individual’s brand.

Scott: You want to make sure that those assets sit within the company that you’re buying.

Jessica: Well, next, there was a lack of a personal assignment of NAL rights from Jack Nicklaus. While Jack Nicklaus was involved in the transaction and held roles within the company, he never executed a personal assignment of his name, image, and likeness or signature as commercial property in a way that bound him. And why this matters? Rights of publicity and privacy are inherently personal. So if an individual doesn’t personally transfer those rights in writing, then any purported ownership by a third party is vulnerable to challenge. And that’s exactly what occurred here.

Scott: There was a lot of ambiguity about exclusivity in the scope of IP rights in this transaction. And if you’re the buyer selling out $145 million, even if you’re selling out $50 million, ambiguity is not your friend. The PSA was vague. It seems like due diligence might have been not as due or diligent as it should have been. They really didn’t dig into the exclusivity and the scope of the IP rights being transferred. Even when branding rights were mentioned, the documentation failed to specify that Nicholas himself would be restricted from using his name, image, and like this in future business activities. So why does this matter? Well, without clear language about exclusivity, courts will not infer that a person has given up the rights to exploit their identity, especially when they’re not a party to the agreement.

Jessica: Absolutely. So let’s talk about now what the Nicklaus Company could have done differently to prevent some of these issues.

Scott: Yeah, great. So first, Nicklaus Companies could have required Jack Nicklaus to personally sign a rights assignment agreement or some similar agreement, explicitly transferring all of his name, image, and likeness rights, including his voice and his signature for specified commercial uses. Ideally, it would have been irrevocable and with clearly defined business sectors.

Jessica: Certainly would have helped. Another thought is, Nicklaus Company could have included a personal services agreement or a spokesperson type agreement as part of the transaction, and that agreement It would have had language that said something along the lines of Jack Nicklaus will act exclusively through the Nicklaus companies for any public appearance, endorsements, branding work. This would have created a performance obligation and not just a straight asset sale.

Scott: Right. That would have been a good strategy. Some states do have a statutory limit on the length of a personal service contract. California imposes a seven-year cap on certain personal service contracts. I know the agreements in this case had both Florida and New York choices of law, and I don’t believe that either of those states have a similar type of cap on the length of a personal service agreement. So that might have worked under either Florida or New York law. Okay. Nicklaus companies had a better non-compete with Nicholas. The non-compete… It’s odd how they structured it. The non-compete with Jack Nicholas, it had a 13-year term. If Nicklaus companies didn’t want Jack competing, they probably should have negotiated for a longer term. Now, granted, the scope of a non-compete has to be reasonable, both in terms of length and the scope, the geographic scope. But that’s always in the context of the amount of the purchase price and the size of the transaction. So, I think for a transaction of this size and given the context of the transaction, they probably could have gotten away with asking for a much longer non-compete. Agreed. Okay. So in the creator economy, we are seeing a lot of interest in businesses that creators have built, based in part on leveraging their personal brands.

Scott: Whether that’s a purchase transaction or a financing, there are some deal pitfalls, this case highlights, that the buyer or the financier of such a company needs to be aware of.

Jessica: Let’s start with the basics. Who actually owns the brand? Has the individual legally transferred their NL rights, their name, their image, their likeness, their voice, their signature? Have they transferred all of this to the company? If not, what you’ve really got is a license, and a license can expire, or worse, they can be revoked.

Scott: Exactly. And you want to see a perpetual exclusive irrevocable license, or better yet, an outright assignment of those personal branding rights to the company. And if you’re stuck with a license, make sure it has teeth, strong renewal rights, a clear scope, and the ability to enforce it against third parties.

Jessica: Absolutely. And then there’s the non-compete. The only thing stopping Jack Nicklaus from going back into business under his own name was a 13-year non-compete, which expired in 2020. Once that was gone, there was nothing stopping him from launching something new.

Scott: Right. That’s a huge lesson. Non-competes expire. So investors need to secure talent deals with ongoing incentives for exclusivity, performance-based equity, earnouts, or other golden handcuffs to keep the talent committed.

Jessica: And also, don’t overlook the personal services agreement. If the brand relies on the personality being visible, whether it be on socials, on TV, at events, you need those appearances contractually nailed down. How many, how often, what happens if they don’t deliver? That should all be in the contract.

Scott: Right. And finally, make sure the IP actually lives inside the company. That includes trademarks, domain names, social media handles, even catch phrases. You’d be surprised how many of those are still held in the founder’s personal LLC or or worse, unregistered entirely. If the investors behind Nicklaus Companies had required a signed assignment of Jack’s name, image, and likeness rights, not just the non-compete, we might be She’s having a very different conversation, Jessica.

Jessica: Absolutely. That’s right. For investors backing brand-driven businesses, that’s a story worth learning from.

Scott: Well, that’s all for today’s episode of The Briefing. Thanks to Jessica for joining me today. Thank you, the listener or viewer, for tuning in. We hope that you found this episode informative and enjoyable. If you did, please remember to subscribe, leave us a review, and share this episode with your friends and colleagues. If you have any questions about the topics we covered today, please leave us a comment.