Belkin suing OtterBox over distribution rights; reports indicate smartphone case maker is exploring a sale

FORT COLLINS – Amid reports that owners are exploring a sale of the company, Otter Products LLC also finds itself embroiled in another lawsuit.

California-based consumer products company Belkin International Inc. is suing Fort Collins-based Otter Products – maker of OtterBox smartphone and tablet cases – in U.S. District Court in California, seeking damages of $10 million. The suit alleges that OtterBox, which purchased competitor LifeProof in 2013, has since been violating an agreement that had granted Belkin exclusive rights to distribute LifeProof cases in Europe, the Middle East and Africa.

Late Tuesday, Reuters reported that OtterBox – the No. 1 smartphone case seller in the United States – is exploring a sale valuing the company at more than $2.5 billion. Citing anonymous sources, the report stated that OtterBox has hired investment bank Goldman Sachs Group Inc. to manage the process.

An OtterBox spokesperson declined comment Wednesday on both the Belkin lawsuit and the Reuters report.

Regarding the Reuters report, Fort Collins Chamber of Commerce president David May said it’s difficult to say what a sale would mean to the community of Fort Collins without more information. Gauging interest and determining value is different than having an actual deal in place, he said. He called OtterBox, founded by Curt Richardson in 1998, a “great local success story.”

“If the company does go up for sale, good for Curt and (wife) Nancy Richardson,” May wrote in an email. “They are a great American success story and deserve every good thing that comes their way.”

May likened WaterPik and Poudre Valley Health System’s transformation into University of Colorado Health as locally founded companies that have continued to be valued members of the local community despite going through significant changes.

“Losing a company’s original local ties always brings uncertainty,” May wrote. “New owners don’t necessarily have the same connections to vendors and suppliers or have the same sense of community spirit. But I would characterize all that as ‘different’ not necessarily ‘good’ or ‘bad.’”

It’s unclear how the pending lawsuit with Belkin would factor into any potential sale of OtterBox.

In the lawsuit filed July 14, Belkin states that it signed an agreement with LifeProof in 2012 to obtain exclusive distribution rights for LifeProof’s cases for three years. The agreement prohibited LifeProof from “directly or indirectly selling either the products or competing similar products” in Belkin territory, or even authorizing another entity to do so.

The suit states that within months of purchasing LifeProof, OtterBox began selling and marketing LifeProof and competing OtterBox products in Belkin’s territory. Among other accusations, Belkin also argues that OtterBox has set price terms in that territory with which Belkin cannot compete, and has undermined Belkin by disclosing Belkin’s cost lists and profit margins on LifeProof products to Belkin’s customers.

OtterBox filed a motion to dismiss the suit earlier this month, arguing that the California court lacks jurisdiction over the company and that the court lacks subject-matter jurisdiction. A hearing for the motion to dismiss is slated for Dec. 1.

OtterBox bought LifeProof last year for a reported $325 million after filing multiple lawsuits against the competitor alleging patent infringement.

Earlier this year, OtterBox paid the U.S. government $4.3 million to settle allegations that the company violated federal law by underpaying customs duties.

OtterBox employs more than 850 people in the United States, most of whom are in Fort Collins where the company has its 52,000-square-foot global headquarters, three other office buildings and a distribution center. The company also has a distribution center in Frederick and offices in Boston and San Diego.

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