Jones Apparel Group ( JNY) filed a $550 million breach of contract lawsuit against Polo Ralph Lauren ( RL) and a former Jones president, alleging that they embarked on a scheme to wrongly take the Lauren by Ralph Lauren license back from the company.

Jones alleges that the former president, Jackwyn Nemerov, as well as Polo and its affiliates, claimed that the Lauren license ends at the end of 2003. Jones said it believed that it owns the exclusive U.S. and Canadian rights to use the Lauren trademark through the end of 2006. The company filed the suit in New York, and along with $550 million, it is also seeking punitive damages and to enforce the noncompete and confidentiality clauses in Nemerov's employment agreement.

Shares of New York-based Jones fell 55 cents, to $30.25, and Polo dropped $1.08, to $26.

During discussions at the end of last year, Jones said Polo contended that the expiration of the Ralph by Ralph Lauren license contract in 2003 will cause the Lauren license to end on Dec. 31, 2003, instead of Dec. 31, 2006. Jones, however, said the expiration of the Ralph license doesn't cause the Lauren license to end.

Ending the Lauren license at the end of 2003 "will have a material adverse impact on Jones' results of operations after 2003," the company said, but not its liquidity, and Jones said it would still have a "strong financial position."

Polo, meanwhile, sued Jones and is seeking an injunction and a declaratory judgment that the Lauren license agreements terminate as of Dec. 31, 2003.

Roger Farah, president and chief operating officer of Polo, said in a press release that, "We regret taking this action, but we felt we had no choice but to seek immediate court relief from what we believe is obstructionist behavior from a business partner that may irreparably damage our brands. We believe that we are well within our legal right to reclaim our licenses. We are confident that the court will enforce our clear contractual rights enabling us to serve our customers without interruption."

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