LOS ANGELES — An arbitration panel has ruled in favor of Cherokee Inc. in its dispute with Mossimo Inc. over finder’s fee royalties generated by Mossimo’s licensing deal with Target.
Cherokee, which brokered the three-year contract, will recover attorneys’ fees and interest on the disputed royalties. The undisclosed sum has been held in an escrow account since April.
"We’re happy it’s over," said Cherokee chief executive Robert Margolis. "It benefits our organization and our shareholders for Mossimo to do well, so we’ll just put this behind us and go forward."
Mossimo Giannulli, ceo of Mossimo, did not return a phone call at press time.
Cherokee is entitled to a finder’s fee equal to 15 percent of Mossimo’s royalties as long as Target continues to license the Mossimo trademark. The brand has been enormously popular with Target shoppers, grossing an estimated $700 million in its first year alone.
For the first six months of the year, Cherokee received slightly over $2 million in royalties from Mossimo Inc., said Cherokee chief financial officer Kyle Westcoat.
According to Cherokee, the dispute stemmed from Mossimo Inc.’s attempts to recover fees associated with design services personally provided by Giannulli. In its second quarter filing, Cherokee countered that those services were "required to be performed under the Target license agreement."
In other news, Cherokee is actively looking for brand acquisitions, Margolis said. The Van Nuys, Calif.-based company hasn’t acquired a brand since its 1997 purchase of the Sideout trademark. This year, that business will do more than $100 million in mid-tier department stores, Margolis said.
The company recently signed a deal to represent House Beautiful in home-related licensing deals.
Margolis noted that Cherokee is closing in on international licensing deals for junior sportswear firm Hot Kiss.
"We’re presently negotiating with some very interested parties in Europe and Asia," he said.
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