Collective Brands agrees to settlement

Topeka Capital-Journal, The, Jun 28, 2008 by Michael Hooper

By Michael Hooper

THE CAPITAL-JOURNAL

Collective Brands, Inc., owner of Payless ShoeSource and Stride Rite, has agreed to pay $30 million to K-Swiss to resolve claims K- Swiss had against Payless regarding trademark issues, Collective Brands announced Friday.

Under the parties' settlement agreement neither company admits liability to the other, however, Payless has agreed to pay K-Swiss $30 million on account of K-Swiss' claims for compensatory damages.

Collective Brands anticipates that some portion of the $30 million settlement payment will be covered by insurance, but the precise amount isn't determinable at this time.

K-Swiss has given Payless and its affiliates a full release of all known or unknown claims with respect to any shoe advertised, marketed, or sold by Payless or its affiliates up to June 24, including claims that were or could have been brought in the pending action. As a result of this settlement, Collective Brands will record a charge in the quarter ending Aug. 2 in the amount of $30 million not including consideration of any related insurance recovery or additional legal and other expenses.

Under the settlement agreement, Payless has agreed to refrain from making, advertising, promoting or selling footwear confusingly similar to that sold by K-Swiss, including footwear that bears K- Swiss' trademark or trade dress. K-Swiss, a shoe retailer based in Westlake Village, Calif., uses a five-stripe logo on its athletic footwear. The company's Web site says it has been making leather tennis shoes since 1966.

Under the settlement agreement, Payless will have until Dec. 31 to sell any existing inventory of shoes whose sale would be precluded under the terms of the settlement agreement.

The announcement follows a May 5 jury verdict of $304 million against Payless for trademark infringement of Adidas' three-stripe logo. Collective Brands is fighting the judgment, but earlier this month set aside $30 million for the lawsuit.

Michael Hooper can be reached

at (785)295-1293

or michael.hooper@cjonline.com.