Osbournes Suit Tries to Bite Head Off Hot Topic
By Tim Arango
06/03/2002 06:38 PM EDT
Excuse Hot Topic (HOTT:Nasdaq - news - commentary) investors for flipping the channel when The Osbournes comes on.
Teens who shop at Hot Topic, a chain of clothing stores featuring music-related duds, may rank among the biggest fans of the smash MTV series. But Hot Topic investors might feel otherwise now that the City of Industry, Calif., chain is a defendant in a multimillion-dollar trademark infringement lawsuit along with star Ozzy Osbourne and two record labels.
A New York online T-shirt company, Tshirthell.com, claims a shirt promoted on the show is a knockoff that violated an existing trademark. The suit contends Osbourne designed the knockoff and sold it through Hot Topic, among other channels.
"We don't know anything about this and we have not been served with a lawsuit," says Jay Johnson, spokesman at Hot Topic.
Still, the threat that the company might lose a patent infringement suit has sparked the interest of short-sellers, who bet that share prices will fall. Some observers note that Hot Topic has been subject of cease-and-desist orders from a number of trademark holders in the past. The company has said in the past that it acts properly in licensing and trademark matters, pointing to its quick response in previous disputes.
Tshirthell.com, which describes itself in a press release as "an offensive Internet T-shirt company," is seeking to recover lost profits and $15 million in damages from a group of defendants that includes Hot Topic, Ozzy Osbourne, his wife Sharon and the record labels Sony Music and Epic Records.
The suit was filed on May 28 in federal court in New York. The shirt in question bears the slogan "**** My Family. I'm Moving in with the ... Osbourne Family." Tshirthell says it began selling a similar shirt in March.
"Hot Topic is one of the largest distributors of the shirt in the case," says Aaron Landau Schwarz, Tshirthell.com's president, in an interview.
Hot Topic has seen its shares soar over the last year and a half, on strong sales of its music-inspired clothing. The stock is up about 70% since the market tanked after Sept. 11.
The company is facing a separate suit from a small California underwear company. Hot Topic has several times received cease-and-desist orders from companies such as Mattel, Dairy Queen and the Girl Scouts, a company executive admitted in a deposition for the underwear lawsuit. The company has called the California suit "totally without merit."
Schwarz says he sent Hot Topic a cease-and-desist letter about a week before filing the suit but didn't get a response.
Hot Topic shares closed down 6 cents at $25.54.