Tiffany & Co and Elsa Peretti Extend Partnership For 20 Years

Elsa Peretti

TIFFANY & CO  will continue its relationship with world-renowned jewellery designer Elsa Peretti, according to a U.S. Securities and Exchange Commission.

Under the agreement, the international luxury retail jeweller will continue to be the exclusive sales outlet for jewellery created by Peretti. Since 1974, Tiffany has been the sole licensee for the intellectual property rights (Peretti Intellectual Property) necessary to make and sell Peretti-designed products under her trademarks.

The new agreement, which has a term of 20 years, was finalised on December 27, 2012, according to the 8K SEC filing. Under the amended terms, “Peretti grants Tiffany an exclusive license, in all of the countries in which Peretti-designed jewellery and products are currently sold, to make, have made, advertise and sell these items, which are made in conformance to Peretti’s designs and bear her trademarks.”

Elsa Peretti

Peretti’s jewellery—which specialises in relatively simple figures, such as open hearts, teardrops and rounded shapes that are striking in its execution—is among Tiffany’s most popular brands. Back in May 2012, Peretti was rumoured to be considering “retiring” from her 35+ year relationship with Tiffany & Co. and taking her beloved beans and hearts with her, which accounted for 10 percent of the retailer’s net sales in 2009, 2010 and 2011.

As part of the agreement, on December 31, 2012, Tiffany paid a one-time fee of more than $47.2 million to Peretti. In addition, Peretti, 72, will receive a basic annual royalty fee of $450,000 for use of Peretti Intellectual Property ($9 million dollars over 20 years) and 5 percent of net sales of Peretti jewellery. If Peretti jewellery continues to amount to 10 percent of total net sales for Tiffany, this could amount to another $18 million per year for Peretti. The one-time payment does not reduce future royalties.

Tiffany & Co Elsa Peretti Teardrop pendant

In May, 2012, it appeared that the long-time relationship between the two parties was coming to an end. In an SEC filing, Tiffany said the two sides were unable to agree on a price for Tiffany to purchase the intellectual property rights of Peretti. Peretti’s advisors told Tiffany that she’d “consider exercising her right to terminate the License Agreement,” according to the May 23 document. Under the terms of the agreement at the time, either party could terminate the agreement with written notice.

The new agreement is terminable by Peretti “only in the event of a material breach by Tiffany or upon a change of control of Tiffany,” according to the SEC filing. Tiffany can terminate the agreement “only in the event of a material breach by Ms. Peretti or following an attempt by Ms. Peretti to revoke the exclusive licence.”

Tiffany & Co Elsa_Peretti Open Heart pendant

If the agreement is terminated, Tiffany would have an exclusive right for one year to sell any Peretti-designed products on hand or on order. For at least an additional six months afterward, Tiffany would have the exclusive right to sell any Peretti-designed products on hand, subject to Peretti’s right to purchase the remaining products.

In addition, Peretti retains ownership of the Peretti Intellectual Property and exercises approval and consultation rights with respect to important aspects of the promotion, display, manufacture and merchandising of licensed products. The agreement further requires Tiffany to display the licensed products in stores, to devote a portion of its advertising budget to the promotion of Peretti products, to increase the inventory of non-jewellery licensed products (that inventory averaged approximately $4 million during the past 60 months) and to protect the use and registration of the Peretti Intellectual Property.

During the term of the agreement, Peretti may not sell, lease or otherwise dispose of the Peretti Intellectual Property unless it has the approval of Tiffany. The agreement also provides that any heir, estate, trustee or permitted successor or assignee of Peretti will be bound by its terms.

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