Oscar de la Renta received an early Christmas present from L’Oréal: Its fragrance license back.

This story first appeared in the December 21, 2009 issue of WWD. Subscribe Today.

As of Friday, the license reverted to Oscar de la Renta as a result of arbitration stemming from an 18-month legal dispute. It involved the actual license holder YSL Beauté, which was acquired by L’Oréal in 2008, and Elizabeth Arden, which had acted as distributor.

L’Oréal, the Paris-based industry leader, said Friday the two sides had agreed to terminate the license between YSL and Oscar de la Renta “for the manufacture and distribution of fragrances and other beauty-related categories.”

Alex Bolen, chief executive officer of the fashion house, confirmed the move. “We reached an agreement to terminate our license agreement with L’Oréal,” he said. The ceo then added, “We are actively working on a partnership to take advantage of the beauty category more broadly.”

He declined to elaborate, saying only that de la Renta’s fragrance business remains viable. “It is in the stores and we intend to keep it in the stores,” he said. “We plan to expand its presence in the stores.”

The business certainly has staying power. The designer’s original women’s scent, Oscar, is considered an American classic. Formulated as a tuberose white floral oriental, it was developed in partnership with Milton Stern and launched in 1977. The scent won an industry FiFi award in 1978.

Through the decades, the license changed hands, being acquired in succession by Avon Products Inc., El-Sanofi SA, YSL Beauté, then finally L’Oréal.

Neither de la Renta nor L’Oréal would break out the exact size of the business. L’Oréal stated the surrendered license “represents a small portion of the Yves Saint Laurent Beauté U.S. and worldwide portfolio.”

However, industry sources estimate that Oscar and its subsequent fragrance siblings generated a combined volume of $110 million when the business peaked several years ago. Now it is estimated to be doing more than $30 million.

NPD still ranks the original Oscar fragrance in the top 100 of women’s scents in the U.S. In addition, the entire franchise, which now includes 15 fragrances, variations and spin-offs, is selling in the top 50 of women’s brands.

The legal battle broke out in June 2008. Oscar de la Renta Ltd. filed a trademark infringement suit against Elizabeth Arden Inc. in U.S. District Court in Manhattan, alleging it had sold 4-ml. fragrance samples to Wal-Mart and other mass retailers without authorization. In the suit, lawyers for Oscar de la Renta wrote that the samples had never been intended for commercial sale.

Arden soon responded, calling the complaint without merit. According to a representative of the company at the time, Elizabeth Arden had for years been buying Oscar de la Renta fragrances for resale in the U.S. mass channel from the company’s fragrance licensee, YSL Beauté. L’Oréal closed its purchase of YSL Beauté in July 2008.

In August 2008, Arden filed a counterclaim against Oscar de la Renta. Arden alleged that under the terms of Oscar de la Renta’s cosmetics and fragrance licensing agreement, YSL was the actual owner of the brand’s trademark rights in the categories and thus was the only party that could sue for infringement.

According to the court documents, YSL had served Oscar de la Renta with a demand for arbitration with the American Arbitration Association on June 10, 2008.

“The issues to be determined in the AAA arbitration are the same issues that this court would need to resolve in this action,” attorneys for Elizabeth Arden wrote at the time.

The judge overseeing the case later stayed the federal suit pending the arbitration at the behest of YSL.

Attorneys for Oscar de la Renta and Elizabeth Arden signed off on a voluntary dismissal of the original suit Friday. The agreement made no mention of the outcome of the arbitration and stipulated only that Arden and Oscar de la Renta cover their own legal fees.

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