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| Elsa Peretti by Francesco Scavullo, originally published in Francesco Scavullo on Beauty in 1976. |
Jewelry designer, Elsa Peretti, who has created pieces for Tiffany & Co. for nearly four decades, is attempting to end her relationship with the luxury retail jeweler, according to a U.S. Securities and Exchange Commission filing Wednesday.
Peretti’s jewelry—which specializes in relatively simple figures, such as open hearts, teardrops and rounded shapes that are striking in its execution—is among Tiffany’s most popular brands, accounting for 10 percent of the retailer’s net sales in 2009, 2010 and 2011. Peretti, 72, receives a royalty for Tiffany’s use of her property rights, the retailer said in the 8k filing. Since 1974, Tiffany has been the sole licensee for the intellectual property rights (Peretti Intellectual Property) necessary to make and sell Peretti-designed products under her trademarks.
The two sides cannot agree on a price for Tiffany to purchase the intellectual property rights of Peretti, according to the 8k report filed by Tiffany in advance of its first quarter earnings report Thursday. If an agreement can’t be reached, Peretti’s advisors told Tiffany that she’d “consider exercising her right to terminate the License Agreement.” Either party can terminate the agreement with written notice.
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| Elsa Peretti open heart pendant in 18k rose gold. |
“If Tiffany ceases to have an exclusive license to use the Peretti Intellectual Property, … operating results may be adversely affected,” Tiffany said in the report.
In the filing, Tiffany said that it “made a firm offer to Ms. Peretti in an amount that is based upon the value of the Peretti Intellectual Property to Tiffany.”
If Peretti exercises her right to terminate the license agreement, Tiffany said it would retain all rights for six months, including the right to make Peretti-designed products, following the date of notice of termination. After the six-month period, Tiffany would have a year to sell any Peretti-designed products it has on hand or on order. Afterward, Tiffany would still be permitted to sell Peretti-designed products it has on hand, subject to Peretti’s right to purchase these remaining products.
Under the current license agreement, Peretti retains ownership of Peretti Intellectual Property and exercises approval rights in regards to promotion, display, manufacture and merchandising of Peretti-designed products. In addition, Tiffany is contractually required to devote a portion of its advertising budget to the promotion of the Peretti-designed products.
Tiffany said in its report that the separation provisions in the contract would soften the blow, at least short-term. For example, marketing and merchandising requirements to promote and sell Peretti designs could be moved to other existing products. And, Tiffany said it would be “relieved” of advertisement and royalty obligations.
But Tiffany still warns of the possibility of difficult days ahead if an agreement between the two sides can’t be reached.
“Tiffany has enjoyed significant success and profitability from its longstanding relationship with Ms. Peretti, and there can be no assurance as to whether or the extent to which such mitigation efforts would offset the results realized under the License Agreement.”
