Canadian apparel manufacturer Gildan Activewear Inc. (TSX:GIL) has reached a $1-million trademark infringement settlement with two American companies.
The settlement with Russell Brands and Fruit of the Loom, both based in Bowling Green, Ky., stems from the relabelling and resale of Jerzees brand sportswear at stores in several U.S. states.
Under the terms of the agreement, Montreal-based Gildan must stop removing or altering Jerzees labels and tags and must destroy any stock of the sportswear. Gildan will also pay $50,000 in attorney's fees for the two companies.
The American companies accused Gildan of trademark infringement and unfair competition for selling about US$100,000 worth of Jerzees brand clothing after replacing Jerzees labels with its own after winning a contract with Dollar General stores in the U.S.
The dispute arose in late 2011 when Dollar General stores stopped buying Jerzees branded clothing from Russell Brands and Fruit of the Loom. The discount chain switched to Gildan Activewear as its supplier.
Russell Brands and Fruit of the Loom alleged that Gildan Activewear began altering the Jerzees merchandise by tearing off labels and putting its own trademark on the clothing. They said the relabelled items were sold in stores in Kentucky, Alabama, Florida and in stores in the Midwest and Northeast.
Iliopoulos conceded that a portion of the Jerzees inventory that had been purchased was shipped back to the retailer with the Gildan label.
However, he said Gildan immediately moved to correct the problem and make changes to keep similar issues from arising again.
A Gildan spokesman says the company offered the settlement to end the litigation and did not admit any wrongdoing.
"From our perspective ... we essentially offered a million-dollar settlement to end it," spokesman Peter Iliopoulos said. "We wanted to put the matter behind us."
Gildan was required to purchase about US$1 million worth of Jerzees inventory when it won the Dollar General contract and began to supply the retailer with its own Gildan Smart Basics label products.
Typically, it would resell the inventory with their original labels in the seconds market, where flawed or irregular products are sold at a discount.
A company spokesman said at the time that it was conducting an internal review to determine how the error in relabelling was made at one of its distribution centres in the United States.
On the Toronto Stock Exchange, Gildan shares were up 10 cents at $38.02 in midday trading Friday.
— With files from The Canadian Press