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J.C. Penney Gets Macy’s Unfair Competition Claim Tossed

April 12 (Bloomberg) -- Bloomberg's Sheila Dharmarajan reports that J.C. Penney Co. won dismissal of a claim of unfair competition brought by Macy’s Inc. as the retailers battle in court over rights to Martha Stewart Living Omnimedia Inc. products. She speaks on Bloomberg Television's "Market Makers."

J.C. Penney Co. (JCP) won dismissal of a claim of unfair competition brought by Macy’s Inc. over the sale of Martha Stewart Living Omnimedia Inc. products. One claim, for tortious interference, remains against J.C. Penney.

Macy’s is suing both companies in New York state court, alleging they improperly sold Martha-Stewart-branded products in J.C. Penney stores, in violation of an exclusivity deal between Martha Stewart and Macy’s. A single breach-of-contract claim remains in the suit against Martha Stewart Living.

New York State Supreme Court Justice Jeffrey Oing said today that he initially thought J.C. Penney may have been seeking to gain an unfair advantage by exploiting language in the Macy’s contract that permitted sales through “freestanding” stores to create Martha Stewart (MSO) stores-within- stores.

The judge said he changed his mind after an executive for Plano, Texas-based J.C. Penney testified that the idea of creating such stores came from the chain’s experience with cosmetics retailer Sephora.

“These companies have been around for a long time,” Oing said. “They know what they need to put in these contracts. They’re going to try to protect themselves.”

Macy’s today is asking Oing to broaden a preliminary injunction he issued in July that blocked Martha Stewart Living from selling goods with the Stewart name at J.C. Penney in categories exclusive to Cincinnati-based Macy’s (M), including soft home goods and cookware.

‘JCP Everyday’

Macy’s wants Oing to extend the injunction to cover goods designed by Stewart’s New York-based company that don’t carry her name, which J.C. Penney plans to sell under the name “JCP Everyday.” Macy’s also wants Oing to declare that plastic partyware sold at J.C. Penney under the name “MarthaCelebrations” violates his injunction and should be pulled from the shelves.

The cases are Macy’s Inc. (M) v. Martha Stewart Living Omnimedia (MSO) Inc., 650197/2012; Macy’s Inc. v. J.C. Penney Corp., 652861/2012, New York State Supreme Court (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court at 8969 or cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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