ARIS ASSUMES CONTROL OF ITS OWN TRADEMARKS
Byline: Katherine Bowers
LOS ANGELES — It took armed security guards around its Commerce, Calif., facility and court battles here and in New York, but Aris Industries has finally retrieved its five trademarks — including XOXO sportswear and Baby Phat apparel — from former licensee Grupo Xtra of New York Inc. As reported, Judge Ernest Robles ruled in favor of Aris last Thursday in U.S. bankruptcy court here, ordering Grupo Xtra to cease using the trademarks, turn inventory and work-in-progress over to factor CIT Commercial Services and vacate the premises.
As part of the now-defunct, five-year licensing deal, Grupo ran production out of the XOXO facility in Commerce and had more than 300 employees there. The employees have not been paid in several weeks, according to a source. The settlement allows Aris to rehire any of the employees, a prospect that Reuben & Novikoff attorney Michael L. Novikoff said is likely.
Arnold Simon, president of Aris Industries, crowed that Grupo president Mark Stern “finally got his day in court.”
XOXO chief executive officer Gregg Fiene, who has designed and marketed the brand throughout Grupo’s tenure, also reacted jubilantly to the split.
“Free at last,” he said. “They were playing games with credit, deliveries and [letters of credit], which held up the business. Finally, Arnie said, ‘Enough is enough.”‘
Fiene, an employee of Aris, will remain with the company.
Grupo Xtra took some defensive measures to block the license termination. On April 19, less than an hour after a New York state judge terminated the license, Grupo filed for Chapter 11 bankruptcy protection in a Los Angeles federal court. Until last Thursday’s court order, the bankruptcy essentially restrained Aris from retrieving its trademarks.
But Stern sounded relieved Thursday, calling the court order “favorable” and pointing out that he retained $4.8 million in personal collateral and is cleared of $31 million obligation to factor CIT Commercial Services.
“We wanted to give this license up,” Stern said. “And we’re not sticking any contractors. They’ll get paid.”
Simon said he will not seek another licensee and will hold the production reins for the foreseeable future. In recent days, he’s been meeting with contractors here, where the bulk of the inventory is in various stages of production.
He said he also spoke to key retail accounts, allaying increasing market concern about the company’s late deliveries.
A couple of issues are potentially pending: according to affidavits submitted to the court, Aris is owed $6.2 million in unpaid royalties and other obligations. Under terms of the licensing deal, Grupo guaranteed Aris a minimum of $8.1 million in licensing royalties.
“In the papers submitted to court, we alleged some of the items being sold were not properly listed as being royalty- bearing. We also contend some of the invoices may not have reflected what [retail accounts] were actually charged,” said Steven Pokotilow, managing partner at Stroock & Stroock & Lanvan LLP, representing Aris.
Simon was more blunt in the courtroom Thursday. “There is lots of fraud in this case. Lots and lots,” he said. “In my 25 years in business, I’ve never seen anything like it.” He declined to elaborate.
At press time, attorneys representing Aris had not made a decision whether or how to proceed about the outstanding royalties.