Woody Allen takes on American Apparel in a real-life black comedy

If Woody Allen were on the couch today, he might have a moment of clarity about the little battle he began last year with American Apparel, the hipster clothing company, after it used his image on billboards in New York and Los Angeles. Deciding to sue them – for $10m no less – was quite possibly a terrible idea.

The chutzpah of the company had got under the director's skin. The ads, which only stayed up a week, showed a frame from his film Annie Hall, for which he won a director's Oscar, featuring him dressed as a rabbi beneath some Yiddish script and then, simply, "American Apparel". In New York, it appeared exclusively on a billboard on Allen Street on the Lower East Side. It was clever and knowing. But Allen did not see the humour, especially coming from a company that normally prides itself on display advertising featuring models clad in skimpy clothing.

This particular Allen movie – call it Crimes and Misdemeanors Part Deux or even Bullets over Broadway – will premiere in a New York court room next Monday with the start of jury selection, unless, of course, a pre-trial settlement is reached. The viewing public may be hoping it goes forward because the trailers for it have been pretty gripping so far. It's the kind of plot that you know can't have a happy ending for anyone involved.

Allen, of all people, should have seen how the story would develop. First, he sues Los Angeles-based American Apparel alleging they put up the ads without his permission, violating his long-standing position of not making commercial endorsements. He also contends that the ads had ruined his reputation – damage he values at the aforementioned $10m – on the grounds that the company is known for "sleazy" and "infantile" advertising.

Now it is the company's turn to feel hurt and its lawyers don't hold back. The pecuniary extravagance of Allen's lawsuit implies he had a reputation to begin with. With the words "sleazy" and "infantile" swimming in their heads, they began seeking documents from Allen about the collapse in 1992 of his relationship with the actress Mia Farrow after she found that he had begun a relationship with her adopted daughter and his now-wife, Soon-Yi Previn, who was 22 at the time. Ms Farrow also accused him of molesting their 7-year-old adopted daughter Dylan.

Allen, we all know, was exonerated, although Farrow won custody of Dylan. Yet we can assume that the director and jazz clarinetist, now 73 years old, would rather we not revisit those dark days when his reputation was virtually in tatters. But it is precisely the tatters, of course, that American Apparel is seeking to highlight.

In recently filed court papers, the director's legal team accuses American Apparel of adopting "a scorched earth approach" that means to "tarnish Mr Allen's reputation a second time". They go on to characterise the company's strategy as a "despicable effort to intimidate him". The exchange has led to media reports that American Apparel was planning to bring Farrow, Soon-Yi and even Allen's sister to the witness stand.

American Apparel has not flinched so far, although its founder and CEO, Dov Charney, did consider it necessary last week to post a blog on the company's web site denying that Farrow would be called to testify and, indeed, insisting that he remains a big Woody Allen fan.

"The media has misinformed the public that American Apparel supposedly plans to make Woody Allen's personal life the central focus of our defense. This is false," Charney wrote. "It has also been reported that American Apparel intends to call Mia Farrow and Soon-Yi as witnesses in the upcoming trial. This also is false." And he contended: "I have deep respect for Mr. Allen who is a source of inspiration to me."

That is all very well. Maybe Charney sensed that while the squabble with Allen was generating publicity for his company on a scale that even a thousand Allen-adorned billboards could never achieve the risk was also growing of the public siding against him and with Allen if his tactics became too nasty. But nothing so conciliatory has yet surfaced from the lawyers spearheading American Apparel's defence ahead of next week's trial.

"Woody Allen expects $10 m for use of his image on billboards that were up and down in less than one week. I think Woody Allen overestimates the value of his image," Stuart Slotnick told the Reuters news agency. "Certainly, our belief is that after the various sex scandals that Woody Allen has been associated with, corporate America's desire to have Woody Allen endorse their product is not what he may believe it is."

The American Apparel team has also complained that Allen's lawyers have declined to supply documents asked of them, including any records of companies withdrawing requests for commercial endorsements from the comic in the wake of the Soon-Yi scandal. Bringing up the director's sex life is not a cheap shot, Slotnick has claimed meanwhile. "It's certainly relevant in assessing the value of an endorsement," he said, noting that the swimmer Michael Phelps "lost endorsement power after a photograph surfaced of him using marijuana".

For now, then, it seems that the case will go forward. Who knows who will emerge the winner? But before it's over, it seems likely that we will all once more have the dubious pleasure of watching those less-than-salubrious reels of Mr Allen's life that he really would rather we didn't.