Re: But why file suit in Milan?
I was talking to a friend of mine in the pub about this. While that may seem an indication that this information is not high quality, I'd note that he is a patent attorney that deals with exactly this sort of thing.
Apparently the Italian trademark legal system is the least efficient and most arkward one to deal with. If you were seeking a settlement and wanted to make it least appealing to contest this, you'd go there as the costs and annoyance to a business would be much more.
He also suggested they had a very poor case because iWatch is such a weak trademark (watch is useless as a trademark because it's descriptive, and everyone's putting an "i" in front of things), but I'll leave it to him if he wants to come on here and share the rest of his view on this :).