CrossFit Inc. filed a lawsuit against the company’s exclusive licensing partner, Reebok. The dispute stems from a change Reebok made in how the company calculates royalties
In the lawsuit, CrossFit cites efforts to hide underpayments from CrossFit and Reebok’s failure to comply with its marketing obligations under the licensing agreement.
The ten-year deal was signed in 2010 and gave Reebok the exclusive license to sell fitness apparel and footwear products bearing the CrossFit trademark. Reebok secured exclusive rights to produce clothes or shoes bearing the CrossFit trademark. In exchange, Reebok agreed to pay CrossFit royalties for the CrossFit-branded products and made a marketing commitment to help sell those products.
According to a statement from CrossFit, “The agreement is widely seen as a significant part of Reebok’s revival; as CrossFit and the CrossFit Games have continued to see explosive growth, sales of athletic footwear and apparel affiliated with the CrossFit name have surged.”
The complaint filed by CrossFit alleges that in 2013, Reebok began altering the way it calculated royalty payments. CrossFit charges that Reebok’s calculation method, which Reebok did not disclose to CrossFit, has resulted in millions of dollars in underpaid royalties to CrossFit.
“Reebok signed a sweetheart deal before CrossFit was a household name, and our growth helped make their brand relevant again,” said CrossFit Inc. CEO Jeff Cain. “But it’s past time for them to meet the terms of our agreement, and that’s all we are asking for today.”
“The allegations set forth in CrossFit’s complaint have no merit,” a Reebok spokesperson said in a statement. “We are disappointed that CrossFit chose to escalate a disagreement between longtime partners in an unreasonable manner that damages Reebok’s reputation. We will respond through the appropriate legal channels and we expect a favorable outcome. In the meantime, Reebok will continue to fully support the community of coaches, athletes, boxes and members who inspire us every day with their passion, energy and camaraderie.”
CrossFit filed the lawsuit in United States District Court, Northern District of California. A copy of the lawsuit can be found online here.
Photo courtesy CrossFit
