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Macy's CEO sues J.C. Penny over Martha Stewart contract dispute

Can one company claim the exclusive use of a product brand? If there's any question over whether a competing company does not have the right to sell or market the brand that one company has already been supplying, the issue may need to be resolved in court.

The CEO of Macy's Inc. has sued Plano, Texas-based J.C. Penney Co. over J.C. Penney's new deal to start selling some of Martha Stewart Living's products. In return, Martha Stewart's company is accusing Macy's of a breach of contract over the way Stewart's products have been sold and marketed.

The J.C. Penney arrangement was to supply certain Martha Stewart Living items, after J.C. Penney acquired a 17 percent stake in the household goods company in December 2011, and made plans for mini-stores dedicated to Martha Stewart Living and other brands.

Macy's has been awarded a preliminary injunction by the New York State Supreme Court that blocks J.C. Penney's agreement with Martha Stewart Living. Macy's has sold Martha Stewart products in certain categories, such as bedding and cookware, since 2007, and the CEO says J.C. Penney is trying to reap the rewards of Macy's exclusive work with Martha Stewart to build up her line after her release from prison in 2005.

A Martha Stewart spokeswoman says Macy's CEO is distracting the case with irrelevant emotional stories. She claims the real issue is a contract dispute - that Macy's did not honor the original 2006 contract that stated Macy's had to prominently feature Martha Stewart products in its stores, and that it favored private labels over the Martha Stewart brand.

The outcome of the trial may clarify whether companies can claim exclusive rights to certain brands they sell.

Source: Bloomberg, "Macy's CEO Says He Expected Martha Stewart Exclusivity," Chris Dolmetsch, Feb. 25, 2013

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