By  on April 12, 2007

Iconix Brand Group has come out on top in a long-running legal dispute involving its Bongo denim brand.

A Los Angeles Superior Court jury ruled in favor of Iconix in a lawsuit the company filed in 2004 against its former denim licensees. Iconix said in a statement that the jury awarded the company $45 million in compensatory damages and found in the company's favor "on every one of the claims it pursued, and against the defendants on every counterclaim asserted."

"Based upon the multiple findings of malice and willfulness, a punitive damages phase of the trial will begin shortly," the company added.

Neil Cole, chairman and chief executive officer, said in the statement, "We are extremely pleased with the verdict and feel that justice has been served."

In August 2004, Iconix filed suit against Sweet Sportswear LLC, Azteca Production International and Apparel Distribution Services, which owned the exclusive right to operate, manufacture and distribute Bongo jeans. The suit also named Hubert Guez as a principal of all three companies. Guez is a former member of the Iconix board.

According to the company's 2004 annual regulatory filing with the Securities and Exchange Commission, Iconix and Sweet Sportswear had entered into a 50-50 partnership in 1998 to form Unzipped Apparel, which would market Bongo apparel and denim. In 2002, Iconix acquired the remaining 50 percent interest in Unzipped from Sweet Sportswear. The price Iconix paid to acquire sole interest in the company ultimately became a key point of contention in the 2004 lawsuit.

"Plaintiffs allege that defendants fraudulently induced plaintiff to purchase Sweet's 50 percent interest in Unzipped for an inflated price; Sweet and Azteca committed material breaches of management, supply and distribution agreements, and Guez materially breached his fiduciary obligations to the company while a member of the company's board of directors, and seeks damages in excess of $50 million," said Iconix in the SEC filing.

Shortly after filing the suit, the court granted Iconix a preliminary injunction that required Guez and the other defendants to release 657,000 pairs of Bongo jeans that were in their possession, provided Iconix posted a $1.7 million bond.

In March 2005, a countersuit was filed by Sweet Sportswear, Azteca and ADS that accused Iconix and its management of some of the same infractions that had been levied against them. According to the SEC filing, the countersuit accused Cole of interfering with Sweet Sportswear's performance and that he had "fraudulently induced Sweet to sell its 50 percent interest in Unzipped for a deflated price."The jury trial kicked off in January. Iconix noted the ruling could be appealed.

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