JC Penney Delays Stocking Some Martha Stewart Products

As Trial Drags On, Companies Will Enter Into Mediation

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The trial between Macy's, JC Penney and Martha Stewart Living Omnimedia took a turn today. Set to take a break until after the Easter holiday, Justice Jeffrey Oing instead requested the three parties enter into mediation for the next month.

J.C. Penney is already promoting Martha Stewart products.
J.C. Penney is already promoting Martha Stewart products.

The trial, which started on February 20, was set to end on Friday, but long testimonies from both Terry Lundgren and Ron Johnson, among others have drawn it out longer than expected. That's problematic, as JC Penney was set to release a line of products designed by MSLO in early April that fell within the categories defined as exclusive under the Macy's contract.

Macy's was expected to apply for an injunction on Friday to prohibit those items from being stocked on the shelves. Instead, JC Penney agreed to keep the products off its shelves until April 8.

Macy's was awarded a preliminary injunction last July that keeps JC Penney from selling Martha Stewart-branded goods that are exclusive under the Macy's contract in its stores. But at the time it was awarded, JC Penney had already sourced the line of home products set to launch in April. They did so, however, not under the Martha Stewart brand, but under the trademark "JC Penney Everyday."

Today, Justice Oing spent most of the afternoon in conference with the three legal teams and also had calls with Martha Stewart and Mr. Lundgren. At the end of those meetings JC Penney agreed to hold off stocking their shelves with any Martha Stewart items--branded or not--in the exclusive product categories.

That doesn't mean, however, that Martha Stewart won't be in JC Penney. The company's website is promoting the launch of her branded products online in March and in stores in April. But those products fall in the celebration, pantry and window categories, all of which are non-exclusive to Macy's.

Until April 8, Macy's, JC Penney and MSLO will enter mediation with the goal of settling at least some of their issues. If no agreement can be made in the next month, the trial will start up again on April 8.

"The best business decisions are made by the business people," said Justice Oing, who made it clear that while he would have no problem making a decision in the case, he thought it was reaching a critical point, and it was time for everyone to step back and find some common ground. "If you sit down and cut a deal, everyone in the retail industry would breathe a sigh of relief."

The stakes are high for JC Penney if mediation does not work. The company licensed 2,500 designs from MSLO last spring, 900 of which are in the Macy's exclusive home categories.

When discussing the possibility of an extension of the injunction earlier this week, Justice Oing said that JC Penney rightfully owns those 2,500 designs because there was no injunctive order when they licensed them. But he also made it clear that he thinks that, if Macy's prevails with an injunction, there is nothing that prevents him from telling JCP "you've got 900 designs, I think you've got to put them in the closet." Ownership of a design, he clarified, doesn't mean that you can do whatever you want with it.

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