CoolBrands files $360 million lawsuit against Weight Watchers International for breaching licensing agreement
Wednesday August 11, 8:32 am ET
Seeks Redress from Weight Watchers and Wells Dairy for Tortious Interference with CoolBrands' business
TORONTO, Canada and RONKONKOMA, NY, Aug. 11 /CNW/ - CoolBrands International Inc. (TSX: COB.A - News) today announced that it has filed a lawsuit against Weight Watchers International Inc. (NYSE: WTW - News) and Wells' Dairy in response to their violation of Weight Watchers' binding, exclusive Master License Agreement ("MLA") with CoolBrands. That Agreement confers upon CoolBrands the exclusive right to use the Weight Watchers trademark in connection with the manufacture, sale and distribution of ice cream and frozen novelty products until September 28, 2004. Additionally, after that time the Agreement confers upon CoolBrands a non-exclusive right to continue using that trademark in connection with the manufacture, sale and distribution of ice cream and frozen novelty products until September 28, 2005.
The lawsuit, filed in New York Supreme Court in Nassau County, seeks to recover compensatory and punitive damages of $360 million resulting from Weight Watchers and Wells' Dairy disregard and multiple breaches of the MLA, and redress from both defendants for using false claims and omissions of fact to tortiously interfere with CoolBrands' existing strong relationships with its customers.
Specifically, the lawsuit charges that Weight Watchers:
- Unlawfully entered into a licensing agreement with Wells' Dairy on
July 28, 2004, violating the terms of its existing Agreement with
CoolBrands, which prohibits Weight Watchers from entering into any
future licenses for the use of the Weight Watchers trademark on frozen
novelties and ice cream until Weight Watchers' exclusive agreement
with CoolBrands expires on September 28, 2004. (paragraphs 7-8)
- Conspired with Wells Dairy to breach the MLA, with the intent to deny
CoolBrands the opportunity to use the remaining two months before the
expiration of the Agreement to conclude negotiations with other
potential licensors on terms favorable to CoolBrands, and begin
competing with CoolBrands before the MLA gave them a right to do so.
(paragraphs 9-11)
- Jointly issued a press release with Wells Dairy, in addition to
Wells Dairy sending a letter to CoolBrands' customers, falsely
claiming that Wells had the exclusive license to manufacture, sell and
distribute Weight Watchers branded frozen novelties and ice cream,
when, in fact, the MLA remains in effect until twelve months after
September 28, 2004. (paragraphs 16-17)
- Breached the Agreement by granting Wells an exclusive license to use
the Weight Watchers trademark on such products prior to September 28,
2005. (paragraph 15)
- In a further attempt to deny CoolBrands its rights under the MLA,
filed and publicized a legal action in which Weight Watchers sought in
effect to rewrite the MLA and prematurely terminate the MLA.
(paragraph 18)
The Company said that these actions and false statements were an attempt to impair CoolBrands' ability to sell its popular and successful Smart Ones brand of ice cream and frozen novelties, and damage CoolBrands' goodwill and reputation with customers, investors and the general public.
David Stein, President and Chief Executive Officer, said, "The issue is clear cut: Weight Watchers broke their Agreement with us, and then tried to deceive our retailers into accepting a new product from Wells, in further violation of the terms of the agreement. CoolBrands will not be bullied by Weight Watchers, and we will hold them accountable for their attempt to damage our business. We have sought to enforce the terms of our legally binding Agreement."
"Weight Watchers and Wells' unlawful action is a transparent attempt to undermine our competitive position in the market. By breaching our Agreement, Weight Watchers has attempted unlawfully to obtain an unfair competitive advantage. They resorted to litigation against us in a blatant publicity attempt to push retailers into replacing the highly popular Smart Ones products with the Wells' Dairy new product. We will vigorously enforce the plain language of the contract and our legal rights, which prohibit such conduct. We will seek redress for the damage Weight Watchers has inflicted. And we will fight to protect our customers, employees and shareholders and ensure that they will not be disadvantaged because of Weight Watchers' actions.
"Despite Weight Watchers' unlawful conduct, we will continue to build upon our position of leadership in the "better-for-you" frozen novelty segment by pursuing exciting new partnerships such as our recent alliances with Yoplait for Yoplait Frozen Breakfast Bars and Atkin's, that we expect will grow our base of consumers and retailers," Mr. Stein concluded.
The Company said that the full text of its complaint will be available today on its website, www.coolbrandsinc.com
TIMELINE
- In 1995, Eskimo Pie Corporation (now owned by CoolBrands International
Inc.) entered into a licensing agreement with H.J. Heinz for the
manufacture, distribution and sale of Weight Watchers branded frozen
novelties.
- In 1998, with sales of Weight Watchers frozen meals and frozen
novelties sharply declining, H.J. Heinz rebranded these products by
adding a new and distinctive Smart Ones identity, resulting in a
transformation of the brand.
- In August 2000, CoolBrands and its subsidiary Integrated Brands
purchased Eskimo Pie and in October 2000, Weight Watchers consented to
the change of control of Eskimo Pie and Eskimo and the continuation of
the exclusive agreement.
- Before the rebranding of Weight Watchers products by adding the Smart
Ones identity, Weight Watchers failed to rank in the top 20 brands in
the frozen novelty category and sales were trending consistently lower
year after year. Since the rebranding, and through the investment and
stewardship of CoolBrands after August 2000, annual sales of Smart
Ones frozen novelties and ice cream have grown eight-fold. Currently,
CoolBrands' line of Smart Ones frozen novelties rank in the top 3
national brands, with sales increasing substantially in each of the
past 6 years.
- Today, Smart Ones products earn $400 million of retail sales
nationwide. Smart Ones is the registered trademark of H.J. Heinz
Company.
- Under the provisions of the MLA, following the expiration date of
September 28, 2004, there is a one-year period in which CoolBrands may
continue to sell, manufacture and distribute Weight Watchers frozen
desserts on a non-exclusive basis. During that period, CoolBrands will
be the only company marketing Smart Ones frozen novelties and ice
cream.
- Under the provisions of the MLA, Weight Watchers is prohibited from
entering into any future license prior to September 28, 2004.
Additionally, Weight Watchers is prohibited from granting exclusive
licensing rights to any party that take effect prior to September 28,
2005.
- By entering into the Future License, Weight Watchers and Wells' Dairy
violated these prohibitions of the MLA.
- On July 28, 2004, Weight Watchers' and Wells' Dairy issued a press
release stating that "Weight Watchers International, Inc. and Wells'
Dairy,...have entered into an exclusive licensing agreement commencing
October 1, 2004. Under this agreement, Wells Dairy will be the
exclusive marketer, producer and distributor of the extensive line of
frozen novelties and ice cream under the Weight Watchers brand."
- Wells Dairy also distributed to retailers, including CoolBrands'
customers, a letter misleading customers to believe that Wells' Dairy
had an "exclusive licensing agreement with Weight Watchers
International effective October 1, 2004 to develop, produce, market,
sell and distribute all Weight Watchers ice cream and frozen
novelties..."
- By falsely claiming that Wells' license to use the Weight Watchers
name is exclusive, and thereby deceiving retailers into buying the new
Wells Dairy product, Weight Watchers and Wells are seeking to deny
CoolBrands its right to market its Smart Ones products in accordance
with the MLA.
- As described in the complaint, Wells and Weight Watchers acted with
full knowledge of the fact that a breach of the Agreement with
CoolBrands and their conduct constituted tortious interference with
CoolBrands' contracts and business relationships. |
