video transcript

Domestic diva Martha Stewart took the stand in New York State court, facing a legal situation that is quite messy. Stewart defended her struggling company's controversial decision to sell their products at J.C. Penney's which also bought a stake in her company- even though they had an exclusive contract with Macy's. At issue: the store within a store loophole. Fordham Law Professor Susan Scafidi explains: SOUNDBITE: SUSAN SCAFIDI, PROFESSOR AND DIRECTOR OF THE FASHION LAW INSTITUTE, FORDHAM LAW SCHOOL (ENGLISH) SAYING: "Penney's looked at that and said well she could have independent stores then she could have shop in shops inside Penney's. That is to say, if she could have small, leased spaces that were open to the rest of Penney's, looked to most consumers like Penney's, but were technically independent Martha Stewart stores, and the judge really wasn't buying that one. " Stewart was asked if she thought someone who bought a casserole designed by her company at one end of the mall was less likely to then buy one at Macy's- she said "I don't think so". Both J.C. Penney and Martha Stewart are under heavy pressure. J.C. Penney stock has lost more than half its value in the last year- as CEO Ron Johnson's grand turnaround plan tanks. Shares of Martha Stewart have also been beaten down- falling about 40 percent in the last year. The company's publishing and television divisions are struggling- making merchandise all that much more important. And that is why Scafidi says this deal is worth so much: SOUNDBITE: SUSAN SCAFIDI, PROFESSOR AND DIRECTOR OF THE FASHION LAW INSTITUTE, FORDHAM LAW SCHOOL (ENGLISH) SAYING: "Billions and billions of dollars. Who knew that towels and curtains could be worth that much money? But apparently Martha despite the fillips in her career which we are also familiar is a very compelling brand when it comes to housewares." REPORTER BRIDGE: BOBBI REBELL, REUTERS REPORTER (ENGLISH) SAYING: Macy's says Martha Stewart is their #1 brand, and that sales increased 8 percent last year- about twice that of Macy's as a whole. But while all this legal mess probably won't bother consumers- future business partners will be wary: BrandKeys President Robert Passikoff.: SOUNDBITE: ROBERT PASSIKOFF, PRESIDENT, BRANDKEYS (ENGLISH) SAYING: "It doesn't do anything to her brand or image in the market place in the consumer market place but it strikes a chord about the way you trust the woman and that was one of the critical values that people were looking for years ago when she was so popular." The clock is ticking for Penney. The judge put a temporary block against them selling Martha Stewart branded products in categories deemed exclusive with Macy's- and if the case is not over by Friday, says he will expand that to include unbranded products like JCP Everyday, which Penney says it wants to stock in time for Mothers Day.