New license pact extends Callanen-Guess partnership through 2016

Callanen International, Inc., a wholly owned subsidiary of Timex Corp., has signed a new exclusive 10-year worldwide license with Guess? Inc., ending a public dispute with Fossil Watches and a threatened multi-million dollar lawsuit.

The new pact, which runs through 2016, authorizes Callanen to continue to design, market, and distribute Guess fashion watches, as it has for more than two decades. Its current license ends Dec. 31, 2006.

The new pact starts Jan. 1, 2007, and has a five-year option to renew. It calls for Callanen to establish a separate company to manage the distribution and marketing of Guess watches. “A substantial portion” of Callanen’s business, according to Callanen documents, comes from revenues from Guess watches, which generate about $150 million in annual worldwide sales.

The Sept. 28 announcement of the new license came almost a month after Callanen filed a multi-million-dollar lawsuit to stop a proposed license agreement between Guess and Fossil Watches, and nine days after Guess and Fossil ended their negotiations.

Top officials of both companies praised the new pact, with no reference to the recent dispute or lawsuit.

Cindy Livingston, Callanen president and chief executive officer, said, “The Callanen family of associates and distributors around the world is delighted that Guess will continue to have its home with Callanen.” She called the Guess watch brand “the single largest licensed watch brand in the world [with] a strong reputation in the fashion watch market for excellence in design, quality and marketing.”

Paul Marciano, co-chairman and co-CEO of Guess, said, “The watch business for the Guess, GC Guess Collection, and Marciano brands has an immense future with the talent and creativity of Callanen, especially under the leadership of Cindy Livingston, who has been our partner on this exciting business venture for the last 16 years.”

The public dispute between Callanen and Fossil began Aug. 26, when Fossil and Guess announced they were in “advanced negotiations” for a 10-year global license agreement, effective Jan. 1, 2007. That also called for Fossil to set up a separate company to make and distribute Guess and Guess Collection watches. Kosta Kartsotis, Fossil’s president and CEO, said the company was “very excited” about the proposed, long term partnership with Guess, and expected it to be finalized in a week. Marciano said at the time that the proposed partnership would be “a strong one and contribute to the further expansion [of Guess watches] domestically and internationally.”

However, on Aug. 31, Callanen sued Fossil asking the federal court in Los Angeles to stop the proposed pact, claiming it violated federal antitrust and state unfair competition laws; “interfered with Callanen’s contractual relationship” with Guess, and would give Fossil a monopoly of the fashion watch market, which it already dominates with 40%. It also asked for unspecified damages that, said Callanen attorneys, could potentially be “hundreds of millions of dollars.”

Then, on Sept. 19. instead of announcing a new pact, Guess and Fossil said they were ending negotiations because they couldn’t agree on “certain material terms.”

Callanen, based in Norwalk, Conn., makes and distributes several designer brands under license, including Versace, Versus, Nautica, Marc Ecko and Guess. Fossil Inc., based in Richardson, Tex., sells watches under its Fossil and Relic brands, and under licenses with several others, including DKNY, Burberry, Diesel, Marc Jacobs, Marc by Marc Jacobs, Emporio Armani, Giorgio Armani, Michael Kors, and Donna Karan and private-label watches for Eddie Bauer and Walt Disney. Guess is based in Los Angeles and designs, markets, distributes and licenses casual wear and accessories for men, women and children. Its licensed watch business began two decades ago. It also owns and operates 302 retail stores in the United States and Canada.