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Condom manufacturer sues Playboy for $100 million over terminated licensing deal

The Thailand-based condom maker claims Playboy used failed audits — audits it had never asked for before — as a pretext to terminate the licensing agreement.

LOS ANGELES (CN) — When shopping for prophylactics, one wouldn't think a preference for Playboy-branded condoms is high on anyone's list. But the Thai manufacturer of Playboy-licensed condoms thinks otherwise and wants $100 million in damages over what it claims was a scheme by the the former men's magazine publisher to get into the business itself.

Thai Nippon Rubber Industry claims in a federal lawsuit filed Friday that Playboy Enterprises poached their U.S. sales manager to undermine its business as part of a scheme to reacquire the global license. When that didn't work, Thai Nippon Rubber claims Playboy accused the company of immaterial breaches of the license agreement as a pretext to terminate it.

The condom maker now has $13 million in unsold inventory it can no longer move, according to the complaint.

"TNR attempted to discuss the audit ‘findings’ with Playboy, offered to pay for a new audit, and expressed a desire on multiple occasions to resolve the issues between the parties, but Playboy failed to meaningfully engage in a productive dialogue," the manufacturer says in its complaint. "Instead, Playboy simply bullied TNR to forcibly terminate the product license agreement consistent with Playboy’s real intent of taking the license back to distribute products itself."

Representatives of Playboy didn't immediately respond to an email seeking comment on the lawsuit.

Playboy, which renamed itself PLBY Group and went public through a merger with a special purpose acquisition company, or SPAC, this year, boasts one of the most recognized brands in the world with the iconic bow-tied bunny. The company exited the publishing business last year and is now focused on sexual wellness products, such as condoms and lubricant, apparel, gaming and grooming products.

The Los Angeles-based company has said it wants to capture a bigger share of the $3 billion consumers spent annually on Playboy-licensed products by transitioning from licensing its brand to selling its own products. That, according to TNR, is the reason it lost the license.

TNR claims Playboy began chipping away at the license by excluding CBD products even though, according to TNR, those had been part of the original agreement. The Bangkok-based company claims its chief executive officer was rushed into signing an amendment that excluded CBD products by their U.S. sales manager without having time to consult a lawyer.

Next, TNR says Playboy poached its U.S. sales manager who was developing his own Playboy-branded wipes. The orgasm-delaying wipes its sales manager was unbeknownst to TNR teaming up with Playboy to create showed up at TNR's shelf-space at Walmart stores in packaging almost identical to TNR's best-selling "studded pleasure" condoms, the company claims.

Moreover, Playboy and TNR's sales manager used TNR's account with Walmart and TNR's insurance to distribute the wipes, according to the lawsuit.

When the sales manager and Playboy parted way in December 2020, he revealed to TNR that Playboy had pressured him to deliver them condom distribution rights and showed them an email from Playboy offering him a high-paid position and requiring him to provide Playboy with information about TNR logistics and distribution operations.

After Playboy went public this year, TNR was told it would be audited, which according to TNR had never been done before. The audit found a number of supposed breaches of their licensing agreement, "ranging from purported late payments of royalties to TNR’s alleged failure to obtain certain product approvals," according to the complaint.

"The audit findings were, at best, disingenuous, and none of the purported breaches of the product license agreement presented in the audit were material or justified immediate termination of the agreement," TNR says in its complaint. "Moreover, the audit contained no notice of Playboy’s intent to terminate the product license agreement, nor any date upon which such a termination would be effective."

TNR's claims include breach of contract, unfair competition and breaches of California's Franchise Investment Law and Franchise Relations Act.

It is represented by Cyndie Chang of the LA firm Duane Morris.

Follow @edpettersson
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