UPDATE 2-Appeals court won't stop Penney sale of Martha Stewart line

Tue Apr 30, 2013 4:20pm EDT

By Karen Freifeld

NEW YORK, April 30 (Reuters) - An appeals court ruled on Tuesday that J.C. Penney Co Inc can keep selling a line of home goods designed by Martha Stewart, pending a verdict in Macy's Inc lawsuit to stop Penney from selling the products.

New York State Supreme Court's Appellate Division, First Department, denied Macy's request for a preliminary injunction blocking sale of the goods Penney began selling them last week, using the "JCP Everyday" brand instead of the Martha Stewart name.

Macy's, which claims it has exclusive rights to certain Martha Stewart products, sued its Plano, Texas-based rival and Stewart's company, Martha Stewart Living Omnimedia, after the two companies announced a partnership in December, 2011.

A non-jury trial started in New York state court in February. Testimony ended last week and post-trial briefs are due May 31. It is unclear when a verdict will be rendered.

Macy's claims it has the exclusive right to Martha Stewart cookware, bedding and bath products, even without her name. Martha Stewart is Macy's number one home brand.

J.C. Penney decided in September to manufacture Martha Stewart-designed goods under the "JCP Everyday" label after the trial judge blocked their sale under her name.

Tuesday's ruling upholds an April 12 decision by Justice Jeffrey Oing of New York State Supreme Court, who refused to expand the block to include "JCP Everyday" products.

Oing said he could not ignore the economic harm an adverse ruling would have caused Penney, even if it was a result of their own acts. An analyst has estimated the value of the goods at $100 million. The appeals panel did not give any reason for its decision.

In addition to the "JCP Everyday" products, Penney is stocking Martha Stewart-branded party goods, curtains and other products in categories not claimed by Macy's.

Theodore Grossman, a lawyer for Macy's, said the retailer is disappointed with the appeals court decision but that Macy's is looking forward to "full relief" at the end of the case.

In the meantime, he said Penney is barred from selling Martha Stewart-branded kitchen, bath and bed goods, and Stewart is prohibited from promoting "JCP Everyday" products.

A spokeswoman for Penney declined comment, and a spokesman for Martha Stewart did not return a call for comment.

Former J.C. Penney Chief Executive Ron Johnson viewed Martha Stewart as key to his vision for remaking the struggling retailer. Johnson, who failed to win over shoppers and investors, was ousted April 8.

The cases are Macy's Inc v Martha Stewart Living Omnimedia Inc, 650197/2012, and Macy's Inc v J.C. Penney Corp, 652861/2012, New York State Supreme Court, New York County.

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