February 22, 2011
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As many of you know the Brinks dealer program changed names after a long run and became Broadview. Shortly after weathering that adjustment Broadview sold to ADT. Some dealers were welcomed to the ADT program, others were rejected. Some, I assume, resisted becoming ADT dealers. All of them, at least those who contacted me, were faced with restrictive covenants in the Brinks dealer agreement which prohibited the dealer from soliciting the subscribers sold to Brinks or Broadview, and also restricting the dealer from competing in the alarm business.
Can ADT hold the Brinks / Broadview dealer to the Brinks dealer agreement and enforce the restrictive covenants? Analysis of the law dealing with restrictive covenants would suggest that those provisions are enforceable, particularly a provision which prohibits a dealer from soliciting the very subscribers which were sold to Brinks.
But I approached the issue with a different view. What exactly was the dealer agreement all about? The answer may surprise you, or may seem obvious.
Brinks’ dealer agreement granted the dealer the right to use the Brinks trademark. The dealer was required to use the Mark in an approved way; all equipment was to have the Mark, and equipment had to be approved. Of course the attraction to the Brinks dealer program was the high recognition that the Brinks name had. The famous trademark seemed to blend well with security systems. But Broadview had no such name recognition and only a well financed and planned marketing campaign could help transform an otherwise non descriptive name to a high recognition name. The transition could not have been easy for the dealers. New names had to be used on everything from equipment, ads, truck lettering, stationary, etc.
Then came ADT. Of course here was instant name recognition, but not all dealers were pleased with the ADT brand or reputation. ADT relied on the Brinks dealer agreement to negotiate its way with dealers.
The Brinks dealer agreement however does not appear to have any provision which permits the change in trademark. There is nothing that I read that permitted the Brinks dealer program to call itself something else. The dealer agreement licenses the Brinks Mark to the dealer. It does not license any Mark the program decides to use.
I concluded that Brinks change to Broadview and then to ADT renders the contract unenforceable by ADT; the dealers would be released from their obligation and any provisions in the agreement. I think ADT could still prevent dealers from soliciting the accounts sold to Brink/Broadview, but that’s because the law implies a restriction in that situation, not because of the contract in place.
Before you run and rely on this advice, keep in mind that I read only the agreements sent by a few dealers; there may be other agreements in place. Have your own attorney read the agreement and advise you.