Playboy Partners Abroad Lose Challenge to Lawsuit

CHICAGO (CN) - Playboy can continue its suit against two foreign companies licensed to sell Playboy-branded products in Japan, a federal judge ruled.

In 2006, Playboy granted Smartitan PTE a license to use its trademarks on a narrowly defined group of products, such as apparel and women's bags.

Two years later, the two companies' relationship had soured. Smartitan was caught selling unapproved products both within and outside of Japan, and sales reports and royalty payments frequently came late. An audit uncovered that Smartitan owed Playboy more than $300,000.

The audit was conducted at the Hong Kong executive offices of another company, Eltex. Though the relationship between Smartitan and Eltex was somewhat ambiguous, Playboy had treated Eltex as Smartitan's parent company for the purposes of the license.

When Smartitan dissolved, Eltex continued the contract. Playboy did not notice the change.

Seeking damages for the unauthorized merchandise, Playboy filed suit in Illinois, alleging breach of contract and unjust enrichment against both Smartitan and Eltex. Smartitan Managing Director George Chan was also named as a defendant, but claims against him were dismissed.

U.S. District Judge Marvin Aspen denied Smartitan and Eltex's motions to dismiss, finding that both companies were bound by the initial license agreement, which provided that all litigation would occur in Illinois.

Playboy seeks $750,000 in damages.

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