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LICENSING LITIGATION

Licensee Accusation: Asics Deliberately Tried to Drive Us Out of Business

By Glenn S. Demby, Esq.

What Happened: Asics gave Windsor Financial Group, LLC, financing and exclusive rights to open and operate 13 Asics stores, including flagships in Boston and New York. The deal was supposed to run for 20 years but a couple of years in, Asics terminated the agreement. As a result, Windsor had to close the stores and eat the millions of dollars it had invested to open them.

The Claim: Windsor is accusing Asics of bad faith and fraud. It contends that Asics deliberately withheld promised product access, new products and marketing support in an effort to starve the stores of cash and leave them at the mercy of Nike, Skechers and other rivals. Ending the agreement was supposedly the final blow designed to force the stores to shutter and clear the way for Asics to scoop up Windsor’s remaining store assets for pennies on the dollar.

The Outlook: Windsor filed a lawsuit against Asics and its Japanese parent company in Los Angeles on October 14. Asics has yet to comment publicly on the case. But when Asics announced that it was terminating the agreement this June, it cited unspecified “material breaches” committed by Windsor as the reason. So you can expect the company to deny Windsor’s allegations and mount a vigorous defense.

The Moral: I have absolutely no idea whether Windsor’s claim that Asics acted in bad faith has merit. But what I do know is that when a licensee feels like it’s not getting the expected support from its licensor, the culprit is often not bad faith, but bad contracting.

The Takeaway: Since licensors and licensees both have an interest in maximizing sales of the licensed product, you’d expect licensing agreements to list the specific things each side must do to achieve that end. In fact, agreements typically place the entire burden of maximizing sales on the licensee without specifying what the licensor must do to support those efforts. To avoid falling into this trap, you should ensure that your own agreement sets out the sales, supply, marketing, advertising and other support the licensor must provide to the licensee.

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