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Macy’s Loses Bid to Stop J.C. Penney From Selling Unbranded Wares

Appeals court denies temporary restraining order against J.C. Penney.

NEW YORK — J.C. Penney Co. Inc. and Martha Stewart Living Omnimedia Inc. scored another small victory Thursday in their lengthy legal battle with Macy’s Inc.

An appeals court judge ruled Thursday that Penney’s would be able to sell unbranded goods designed by Martha Stewart.

The decision by New York Associate Appellate Court Judge Richard Andrias denied Macy’s request for a temporary restraining order, which it sought against Penney’s Tuesday evening in a closed-door hearing. At the time, the judge put a temporary ban on Penney’s selling the goods in stores.

But Thursday, Andrias agreed with the lower court decision and said Penney’s could continue selling the unbranded wares bearing Penney’s’ “JCP Everyday” or “double-house” logos until the matter goes before a panel of appeals court judges, which will likely take place within the next two weeks, sources told WWD. A definitive date on the appeal has yet to be determined.

The one caveat Andrias noted in his pithy decision was that Penney’s could not “promote, display or sell” the unbranded goods if they were associated with the Martha Stewart brand. For instance, if the goods were sold under a Martha Stewart sign within stores, this would constitute a violation.

The ruling comes on the heels of New York Supreme Court Judge Jeffrey Oing’s decision on Friday to not broaden Macy’s preliminary injunction to include a ban preventing Penney’s from selling the unbranded goods. Oing issued a preliminary injunction over the summer that barred Penney’s from selling certain home goods bearing the Martha Stewart trademark.

Macy’s quickly filed an appeal Monday against the denial of the injunction expansion, as well as five other claims by the retailer, all of which Oing threw out in favor of MSLO and Penney’s.

The trial, which continued Thursday with MSLO presenting its side of the case, proceeded with four witnesses from the media and design firm, including testimony from interim chief principal officer Dan Taitz, who had appeared on the stand once before during the trial, which kicked off in late February.

Taitz, who also continues to serve as chief administrative officer, corporate secretary and general counsel for MSLO since he joined the company in 2009, had a few fiery exchanges with Macy’s lawyer Theodore Grossman over his knowledge of the intricacies of the Macy’s-MSLO contract inked in 2007.

“I think this case emanates from Macy’s not wanting us to do business with J.C. Penney’s,” Taitz noted with a hint of defiance.

Before his testimony continued in the afternoon, Oing, coming back from lunch, popped his head in the courtroom before putting on his robe.

“Brevity is the soul of wit on the first department’s decision, don’t you think?” said a smiling Oing, referring to Andrias’ decision. His smile quickly vanished when Patsy Pollack, MSLO senior executive vice president of merchandising, took the stand.

Like other witnesses before her that day, Pollack underscored that designs made for Macy’s were kept separate and were not shared with Penney’s. She explained that designs that were presented to but discarded by Macy’s were “earmarked” for the retailer in case it wanted to use the designs at a later time. Pollack said this scenario has happened before with Macy’s. That did not jibe with Grossman’s suggestion that MSLO would offer the discarded designs to rival Penney’s.

“We’re not a museum. We’re not an art house,” Pollack said. “We serve the needs of our client, and in this case, our client is Macy’s.”

Grossman pressed on, trying to get Pollack to admit that MSLO comes up with designs first and then chooses what to present to its partners, but the executive did not budge.

“We don’t come up with product design randomly, and we design into their [Macy’s] requirements.” Pollack said, explaining that Macy’s comes to MSLO with requests for certain products and other specifications and then it “designs around” that.

Grossman’s needling of Pollack began to wear on Oing’s nerves.

“We are getting to a point now where I’m really starting to understand this case,” the judge said before he asked Pollack if she had any involvement in the drawing up of the MSLO-Penney’s contract. She said she didn’t, and with that Oing said she was free to go.

The trial will resume Monday with MSLO continuing to try its side of the case.