Tahir Basheer, member of The Industry and partner at Sheridans, walks us through the intricacies of getting involved in a fashion collaboration. Sheridans is a firm of creative business lawyers and specialists in film, music, television, fashion and more, and Tahir sits on their Fashion, Brands and IP team.
With high street and designer brand collaborations becoming ever more popular (H&M’s link-up with Versace being a recent example) it is important to consider the legal framework within which such joint venture projects operate. There is no specific law in the UK relating to collaborations and these can be carried out utilising a number of different vehicles. Whilst there are broad commercial principles which the parties involved should consider, it is also important to remember that the collaboration is likely to be subject to a myriad of legal rules and regulations.
One of the first considerations in any collaboration should be whether or not a separate legal entity should be established as a vehicle for the newly formed relationship. This could involve setting up a limited Company or a Partnership. Alternatively some collaborations, particularly for one-off or limited projects tend to be governed simply by a contractual relationship. Each option involves complying with a varying degree of legal formalities, but the final form of collaboration should ultimately be a commercial decision based on the degree of integration sought by the parties to the venture.
Where the collaboration is limited to a one-off range then a simple contractual association might be most appropriate, whereby each party retains separate assets, costs and revenues. In circumstances where the collaboration is intended to be more long-term, setting up a new corporate structure may be more suitable, so as to vest the specific collaboration trading activities of both parties in the newly-formed vehicle. This would give the collaboration its own legal identity to enter into contracts and to provide financial flexibility. The parties will need to give serious consideration to the nature and purpose of the collaboration to ensure that the collaboration takes the most commercially advantageous form. Whilst the exact legal formalities will depend upon the type of collaboration, consideration should be given to the following factors: management; roles and responsibilities; control; revenues; the amount of the collaboration; liabilities; termination and exit.
The parties should be aware that there may be disclosure of sensitive company information, such as accounting figures, between the parties over the course of the collaboration. The parties may therefore seek to limit any potential disclosure by entering into a non-disclosure agreement at the outset of any such negotiation in order to protect confidential information. Likewise, it will also be prudent to incorporate confidentiality provisions in the joint venture/collaboration agreement itself.
Given the nature of any fashion collaborations, intellectual property law will most likely underpin any contractual arrangement. The intellectual property rights (in particular, copyright, trademarks and design rights) of each party will need to be carefully managed to ensure that the value of its intellectual property is maintained. Each party will inevitably want to relinquish its ownership of such rights only as far as is absolutely necessary. In terms of existing rights owned by the parties, thought must therefore be given to their scope, whether they should be licensed or assigned between the parties and to what extent the parties should retain the right to continue to use the intellectual property rights themselves. When entering into any collaboration the parties must also decide and agree upon what is to happen to the intellectual property developed in the course of the collaboration, including who is to own it and what rights the other party shall have to it, if any. Further, there must be an agreement as to the ownership and control of such rights once the collaboration is terminated
Finally depending on the size of the parties involved, collaboration could raise competition law issues. If certain thresholds are met, UK and/or European competition law could determine that the collaboration would create a dominant market position for the collaboration. If that is the case, the UK and EU authorities have certain powers to prevent the collaboration from going ahead. Depending on the form the collaboration takes, it may be necessary for either or both parties to transfer a number of employees with the relevant expertise into a collaboration vehicle.
Whether or not the collaboration will be bound to take on those employees on their existing terms and conditions of employment or whether they will have freedom to renegotiate, will largely depend upon the purpose for which the joint venture has been established. If it is to take on parts of the existing business of the parties, it is likely that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) will apply, so that the employees will automatically transfer to the collaboration vehicle. Accordingly the receiving entity must honour their existing terms and conditions of employment. Where the joint venture is to set up a new business, TUPE is unlikely to apply and so the joint venture must obtain the relevant employees' consent to the transfer.
The position above sets out a general overview of the legal framework within which collaborations must operate in England. For international collaborations additional considerations are necessary with respect to the legal rules and regulations applicable in each territory.
It is wise before entering into a collaboration to enter into a form of agreement, which from the outset provides transparency to all involved. This should assist in forming a strong foundation for the relationship reducing uncertainty and conflict, and hopefully developing the success and longevity of the collaboration.
By Tahir Basheer
Would you like to get in touch with Tahir? You can find his full contact details in The Industry Directory.
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