New Callanen-Guess License Ends Dispute with Fossil

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

The new pact, which runs through 2016, authorizes Callanen to continue designing, marketing, and distributing 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 includes a five-year option to renew.

The agreement 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, derives from revenues from Guess watches, which generate approximately $150 million in annual worldwide sales.

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

Top officials of both companies praised the new pact and made 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, which was to become effective Jan. 1, 2007. The agreement called for Fossil to establish a separate company to make and distribute Guess and Guess Collection watches.

Kosta Kartsotis, Fossil’s president and chief executive officer, said at the time that the company was very excited about the proposed long-term partnership with Guess and expected the agreement 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.”

On Aug. 31, however, Callanen sued Fossil, but not Guess, 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 a 40 percent share.

Callanen’s lawsuit also asked for unspecified damages that Callanen attorneys said could potentially amount to hundreds of millions of dollars.

Then, on Sept. 19, instead of announcing a new pact, Guess and Fossil said that they were ending their 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, Texas, 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. The company also sells 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. The company also owns and operates 302 retail stores in the United States and Canada.