UPDATE 1-CALVIN KLEIN, WARNACO SETTLE TRADEMARK DISPUTE
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By Gail Appleson, Law Correspondent
NEW YORK, Jan 22 (Reuters) - Calvin Klein and Warnaco
Group's chief executive Linda Wachner settled their
bitter trademark dispute on Monday with a kiss in federal court
minutes before a jury was to be picked in their battle over the
sale of designer jeans to warehouse clubs.
The cordial exchange between the high-powered fashion
figures not only signaled an end to the nasty war between the
two, but breathed new life into Warnaco that could have been
gravely hurt if their licensing agreements had ended. Calvin
Klein jeans account for about one-third of Warnaco's revenue.
News of the deal helped drive Warnaco's shares up 40
percent, or $1 to $3-1/2, in early afternoon New York Stock
Exchange trading. The stock has fallen as low as $1-1/4 from a
high of $12-9/16 in the past 52 weeks.
Calvin Klein, who had sued Warnaco for selling his
trademarked jeans to discount retailers like Sam's Club, BJ's
and Costco, told reporters after the deal was announced that
licensing agreements remained intact but that the terms would
not be made public.
"It's confidential," he said.
While no information was available on any monetary
agreements, a statement released by the two companies indicated
that Calvin Klein jeans would no longer be sold to warehouse
discounters.
"The parties look forward to expanding jeanswear sales
consistent with the image and prestige of Calvin Klein products
and to expanding and concentrating the distribution of Calvin
Klein jeanswear products in the department and specialty
stores," the statement said.
The statement said the companies believe the settlement
will "protect and promote the integrity and success of the
Calvin Klein brand."
The legal dispute began in May, when Calvin Klein sued
Warnaco and its feisty chief executive Wachner alleging they
had tarnished his lucrative trademark and broke a licensing
contract by distributing Calvin Klein jeans to warehouse clubs
without his consent.
A month later Warnaco countersued asserting that it is
contractually entitled to sell Klein's jeans to discounters and
that Calvin Klein knew where the jeans were being sold and
received more than $85 million in royalties between 1998 and
2000. Warnaco also charged that it was Calvin Klein who
violated their licensing agreements, and the company accused
the designer of defamation and trade libel for "false and
malicious public statements."
Shortly before jury selection was set to begin in Manhattan
federal court in what promised to be a particularly nasty
trial, a Calvin Klein lawyer asked U.S. District Judge Jed
Rakoff for a brief delay because the two sides were close to a
deal after negotiating all night.
During the short recess, Klein walked over to the counsel
table where a smiling Wachner was seated. They shook hands and
shared a brief peck on the cheek in front of a courtroom packed
with lawyers and fashion industry observers.
The scene between what looked like two old friends sharply
contrasted with their vitriol since the litigation began.
The designer had said in his suit that Warnaco and Wachner
"have become a cancer on the value and integrity" of his
trademark. In addition to bringing suit, Klein went on CNN's
"Larry King Live" and accused Warnaco of making substandard
products.
Privately held Calvin Klein Inc. claimed that Warnaco was
also altering the company's designs and skimping on quality in
violation of the contract, which gives Warnaco the license to
make Calvin Klein jeans through 2044.
The suit had sought millions of dollars in damages and a
termination of contracts with Warnaco.
Warnaco countersued alleging Klein hurt the brand himself
through allegedly defamatory remarks made on "Larry King Live"
and in a speech to retail executives.
Sales of Calvin Klein jeans accounted for $628.6 million in
Warnaco revenue for 1999, roughly one-third of its total
revenue. Stock analystssaid the jeans were also responsible
for one-third of Warnaco's cash flow.
Some analysts had predicted that Warnaco, which has posted
losses for the last two quarters, could not have survived if it
lost the Calvin Klein contracts.
The settlement marks the latest crisis that Wachner, a
tough and determined businesswoman, has survived. She has
credited her strength to the diagnosis of severe scoliosis
(curvature of the spine) as a child. After her husband died in
1983, she became even more of a fighter.
She led a buyout at Warnaco in 1986 and turned the $450
million company into a $2.3 billion giant with a stable of
well-known and designer apparel brands.
REUTERS
Rtr 14:17 01-22-01 |
