PARIS — Chanel was cleared Friday of counterfeiting charges lodged by one of its former knitwear suppliers, World Tricot.

This story first appeared in the December 14, 2009 issue of WWD. Subscribe Today.

However, the commercial court here also ruled Chanel improperly terminated its contract with World Tricot, lawyers for the dueling firms said.

World Tricot was ordered to pay Chanel 200,002 euros, or about $294,500 at current exchange, for publicizing its allegations the couture firm copied one of its crochet designs. In turn, Chanel was ordered to pay 400,000 euros, or about $589,000, to World Tricot for the contract termination that imperiled its manufacturing business.

Bruno Pavlovsky, Chanel’s president of fashion, said being cleared of the counterfeiting charges was very important. “We produce eight collections per year and work with 200 factories….Our daily work and creation has been thrown into question by this sort of accusation,” he said.

Chanel lawyer Gérard Delisle said the fashion house chose not to communicate on the case and instead “serenely” await the court’s decision. “I don’t know if the case is a victory for Chanel, but it’s definitely a loss for World Tricot,” he said.

The case, which has dragged on for four years, draws to a close amid dark times for apparel manufacturers here. Subcontractors are considered an endangered species, largely due to brands outsourcing production abroad.

World Tricot founder Carmen Colle said the court’s decision was a “first victory” for the country’s manufacturers. She also confirmed that since challenging one of fashion’s goliaths, World Tricot’s business is in tatters.

“All of the brands have closed their doors [to us],” she said, noting since 2004, employee numbers at her firm, which has produced knitwear for Yves Saint Laurent, Dior, Christian Lacroix, Jean Paul Gaultier, Givenchy and Kenzo, dropped to 10 from more than 40. “I wasn’t here to win or lose. My priority is to save my company from closure.”

Pascal Crehange, lawyer for World Tricot, charged that Chanel nixed its contract from one day to the next. “We’re satisfied with the results, insofar as it highlights the fact that even for small subcontractors, contracts are to be respected,” he said.

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