Keds moved to end its Champion footwear license agreement with Hanesbrands last week amid an acrimonious legal battle that began last year.
Keds and Champion inked their first licensing agreement 34 years ago. The original framework gave Hanes a perpetual license to use the Champion mark for “high performance athletic shoes” in the United States and Canada, according to Keds. A later amendment—set to expire Dec. 31, 2022—authorized it to sublicense the right to sell “non-athletic, casual” footwear.
Champion’s stateside footwear business has taken off in recent years. Last month, Hanes CEO Stephen Bratspies told investors it more than doubled the number of pairs sold in the first half of the year compared to 2019. When Hanes unveiled its “Full Potential” three-year growth plan in May, it specifically identified the rapid growth of its Champion brand—including via an expansion into women’s and kids’ apparel and casual footwear—as one of four growth pillars.
Those plans appear to be in imminent danger. As a result of what it characterized as “bad faith conduct,” Keds issued a notice of termination of the license agreement Thursday. That same day, it filed a lawsuit in a Massachusetts federal court alleging, among other things, breach of contract. According to that suit, the agreement will terminate on Oct. 2.
The move came more than a year after Hanes filed its own lawsuit alleging Keds failed to engage in what it described as “the promised renegotiation of the license agreement” and, while doing so, continued “its improper ‘historic uses’ of the Champion trademark around the world.” Keds denies a renegotiation was ever promised.
Keds pushed back against the lawsuit, requesting it be dismissed. A federal judge approved this motion in May. Hanes filed to appeal the decision the following month.
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Now, Keds is turning the tables on Hanes, accusing it of breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair and deceptive trade practices.
The new lawsuit’s main claim—breach of contract—centers around an amendment to the license agreement that both parties approved in 2017. According to Keds’ suit, Hanes waived and released Keds “from all causes of action it may have stemming from or arising out of Keds’s historic uses of the Champion trademark” abroad. The amendment further stated that Hanes would not contest the continuance of such historic uses for five years or until the renegotiation of the agreement, whichever occurred first.
As neither has yet to occur, Keds alleged Hanes’ lawsuit last year breached the license agreement. As a direct result of this breach, it claimed it has and will continue to suffer monetary damages for which Hanes is liable.
The footwear company asserted that Hanes actions over the past year—including what it called a “media campaign designed to disparage Keds”—were intended to put “pressure” on it to renegotiate their agreement and have “irreparably harmed” the reputation and goodwill of it and its parent company, Wolverine Worldwide.
Hanes’ public accusations, Keds added, “resulted in a fundamental breach of trust, irreversibly destroying the business relationship,” leaving it “with no choice but to discontinue the partnership.”
Keds acknowledged that ending the license agreement would result “in substantial lost royalties owed to Keds” in the short term. Though these losses are “significant,” remaining with Hanes, “a ‘partner’ Keds cannot trust, would undoubtedly result in even greater losses in the future,” it said.