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Buying and Selling Manufacturing Rights
By Dayan Shlomo Cohen, Author of “Pure Money” and Dayan at Ahavat Shalom, Yerushalaim
We usually think of buying and selling in regard to tangible items, such as cookies, pens, socks, and cars. Nowadays, though, there is an entire marketplace for intangible items, as well; people buy and sell royalties for a certain product or song, the rights to a specific brand name, the rights to sell an item in a particular region, and even airspace.
As with everything else in the business world, these types of sales bring to the fore many Halachic questions and cases in Bet Din. The following is but one example.
“QT-Pie” Times Two
One of the largest manufacturing companies of children’s clothes in the United States – which was owned by an observant Jew by the name of Meyer – bought the rights to a major brand name, “QT-Pie”, which would allow his company to print that brand name on the children’s clothes he manufactured. The deal, which cost many thousands of dollars, gave Meyer’s company the rights for one year. The deal proved to be a very worthwhile one, and sales soared.
Unbeknownst to Meyer, however, a different manufacturer – another religious Jew named Shlomo – also bought the rights to QT-Pie from that same company. When Meyer found out what Shlomo had done, he brought him to Bet Din, claiming that he was taking away his Parnassa – his livelihood. Shlomo did his homework and came to Bet Din armed with three claims (Te’anot) in his defense.
Bet Din Showdown
First of all, Shlomo claimed, a brand name is considered intangible property; just like air, which, according to Jewish law, cannot be bought or sold. So, said Shlomo, Meyer was not considered the owner of the rights, because one cannot become the owner of intangible property, just as one cannot own air.
Shlomo’s second claim was that even if Meyer were the owner of the name QT-Pie, there is no prohibition in this case of infringing on another Jew’s livelihood (Yored L’Umanuto Shel Havero); even if Meyer may have suffered a loss on account of Shlomo’s actions, his business was definitely still viable.
In his third claim, Shlomo pointed out that there was no stipulation in the contract stating that Meyer had the sole rights to the name QT-Pie. In fact, it is an accepted practice for these brand names to sell the rights to more than one company, which is obviously an easy way to improve their bottom line. Let’s deal with these claims one by one/
Buying or Selling Intangible Items
Regarding the first claim, Maran writes in Shulhan Aruch [1] that one cannot buy or sell property that is intangible (Sh’Ein Bo Mamash). Therefore, a person cannot buy and sell air, or the right to smell an apple. The Shulhan Aruch reasons that this is just like a “Davar She’Lo Ba La’Olam” – something which is not yet in existence, which one cannot buy or sell.
However, the Hattam Sofer [2] is of the opinion, that even regarding a Davar She’Lo Ba La’Olam – if it is accepted practice in the marketplace to buy and sell such a thing, then it can be bought and sold, and it would be considered a valid acquisition.
Presumably, the same would apply to intangible property. If the custom is to buy it and sell it, then the transaction would be valid and one can become the owner of such property. In our times, dealing in such intangible property is everyday business, whether it’s the rights to a song, a book, or a brand name. Therefore, according to Torah law, all of these deals are certainly valid. So in regard to this claim, Shlomo was not necessarily right.
Infringing on a Fellow’s Livelihood
Regarding the second claim, that in this case there is no prohibition of infringing on another Jew’s livelihood, Shlomo is correct. The Shulhan Aruch [3] rules that there is no prohibition against taking away from someone’s business. The only time that some authorities say it would be prohibited is if one is causing his competitor a total loss. One example is if there is a store at the end of a dead-end street, and a competitor opens up the same type of establishment at the entrance to the street. In this case, the competitor is taking away all of the business from the store at the end of the street, and that would be forbidden.
In the case of Meyer and Shlomo, on the other hand, Meyer is not suffering a total loss; he is just going to be making less profit. Therefore, according to all Halachic opinions, there would be no prohibition against Shlomo also buying the rights to the brand name.
Business Rights (Ma’arufya) with a Non-Jew
Additionally, the Rama[4] states that if a Jew has the sole rights to do business with a certain non-Jew, this is called a “Ma’arufya”. There are different customs as to whether another Jew can take those rights away by paying the non-Jew more than the first Jew paid for them.
Some hold that it is permitted, citing the Gemara[5] which says: “Nichse Oved Kochavim Hare Hen K’Midbar” — the possessions of a non-Jew, while they are being sold, are as ownerless as the desert – meaning that anyone can grab them, as they are, for a short period of time, ownerless. Yet there are others who hold that it is prohibited.
Nevertheless, says the Rama, even according to those who say it’s not allowed, the person can only be prevented from doing so L’Chathilah – before the transaction takes place. But, if the other Jew has already gone and bought the rights, Bet Din won’t take those rights away from him.
In our case as well, Shlomo who has also already paid thousands of dollars for the rights to the brand name “QT-Pie”, may have done the wrong thing by buying the rights in the first place. But once he has bought those rights, he cannot be forced to stop using them.
The Winning Claim
Nevertheless, it is Shlomo’s third claim that will ultimately win him the case. Shlomo claimed that the first manufacturer, Meyer, never bought the sole rights to the name “QT-Pie”. Therefore, according to all opinions, Shlomo has done nothing wrong by also buying those rights, and so he has every right to continue doing business.
Moral of the story? Read the fine print before signing on the dotted line… and definitely before taking your competitor to Bet Din!
Sources:
[1] חו”מ סי’ ריב
[2] חו”מ סי’ סו
[3] חו”מ סי’ קנו
[4] שם ס”ה
[5] ב”ב נ”ד ע”ב