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Kraft takes dispute with Starbucks to court

Company seeks injunction over Starbucks licensing contract

In an ongoing dispute over a 12-year licensing agreement, Kraft Foods Inc. said Monday it was seeking a preliminary injunction to stop Starbucks from moving forward with its plan to bring its packaged coffee and tea business in house with a new partner.

Starbucks called the move “self-serving and blatantly disruptive” and said it would oppose any action on Kraft’s part to prevent the coffeehouse chain from “rightfully assuming full control of our brand and our business.”

Last month, Starbucks said its licensing agreement with Kraft would end next March. The Seattle-based company said it planned to bring its bagged coffee and tea business in house, with the help of Jacksonville, Fla.-based Acosta Sales & Marketing, a brokerage firm that helped build the Starbucks' instant coffee line.

EARLIER: Starbucks offers plans on packaged coffee

After launching arbitration proceedings last week, Kraft said Monday it was seeking an injunction in U.S. District Court for the Southern District of New York because Starbucks is “proceeding as if the agreement has been terminated, when, in fact, the contract is still in force.”

“Starbucks is proceeding with flagrant indifference to the terms of the contract and customary business practices," Marc Firestone, Kraft’s executive vice president of corporate and legal affairs and general counsel, said in a statement. "Instead of executing its rights under the contract to buy back the business, Starbucks has chosen a remarkably aggressive strategy that publicly disparages our achievements, interferes with our customer relations and threatens to harm Kraft.”

Kraft contends its licensing contract with Starbucks renews automatically every 10 years and has no expiration date. To break the contract, the Northfield, Ill.-based food company has maintained that Starbucks must allow time for a transition and must compensate Kraft for the fair-market value of the $500 million bagged coffee business, plus a premium of up to 35 percent of that value.

In August, Starbucks made an offer to buy Kraft out of the agreement, but Kraft said the offer was deemed “inadequate.”

Starbucks later charged Kraft with breach of contract, saying the licensee had not met its responsibilities in actively protecting and promoting the Starbucks Coffee and Seattle’s Best Coffee brands.

Kraft said arbitration proceedings initiated last week would continue “on a parallel path” along with the injunction effort.

In Monday’s statement, Starbucks expressed concern that Kraft’s legal battle would create unnecessary confusion for the shared customers of both companies.

The coffeehouse giant added that it looks “forward to presenting our case through the pending arbitration process.”

Contact Lisa Jennings at [email protected].

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