Lonsdale Sports, the British company behind the eponymous boxing brand owned by Mike Ashley’s Sports Direct group, is preparing to appeal a ruling issued by a London High Court judge last month that awarded substantial damages to a licensee due to an alleged breach of contract.
The case was brought by Leofelis, a Swiss-based company that obtained in November 2002 an exclusive apparel license to use the Lonsdale trademark throughout the European Economic Area (EEA) - including Switzerland but excluding the United Kingdom and Ireland - for six years starting from the beginning of 2002, at a fixed royalty of €16 million for the period.
In October 2005 Leofelis sued Lonsdale Sports for misrepresenting the situation and failing to terminate a license that was issued to another party before Lonsdale was acquired by Ashley in June 2002. Furthermore, Leofelis claimed damages for a large-scale sale of discounted Lonsdale products through Ashley’s stores in Belgium, although this country is part of Leofelis’ exclusive territory.
In their counter-claim, Lonsdale Sports and its partners called for the termination of the license agreement. They argued that Leofelis had failed to use the Lonsdale trademark throughout its territory, that it had failed to submit samples and that it had signed at least one sub-license without approval by Lonsdale, among other alleged problems.
However, the London High Court last month accepted all the claims of Leofelis and threw out all the counter-claims. The law firm of Dorsey & Whitney, representing Leofelis, indicated that the company had already obtained an interim damages award of £2.5 million (€3.7m-$5.0m), as well as £600,000 (€0.88m-$1.20m) for reimbursement of costs. An inquiry has been launched to determine the level of the full damages, which usually are substantially higher than the interim award.
Lonsdale Sports has obtained permission to appeal on two counts and is still waiting for permission on several other issues, but the inquiry will not be suspended during the likely appeal. Numerous calls to obtain comments from Sports Direct were not returned.
The complicated case stems largely from a dual ownership of the Lonsdale brand until 2002. The most widespread form of the trademark was then owned by Bernard Hart, who acquired it from the seventh Earl of Lonsdale in 1960. Hart issued the original licensing rights to Leofelis.
However, another Lonsdale trademark with a diamond shape belonged to a businessman called Javid Alavi and his company, Lord John. In February 2001, Lord John formally issued to Alavi a non-exclusive, royalty-free license to use that trademark around the world for three years, renewable automatically.
Then, in September 2001, Lord John granted an exclusive license for the production and sale of Lonsdale clothing to Maurizio Badii, for three years, and in January 2002, a German company called Punch obtained a similar license for all countries in the European Union, excluding the UK, but with the addition of Hungary, Poland the Czech Republic and Switzerland.
Once Ashley acquired all of the rights to the Lonsdale trademark in June 2002, it was agreed that Leofelis would be granted a full license for the brand and that all other licensees would be bought out or terminated. However, Leofelis later discovered that the license issued to Alavi had remained in force.
