Three Point Shot - June 2018

Three Stripes and You’re Out in Adidas-Skechers Sneaker Trademark Row

Since at least 2004, Adidas has proclaimed “Impossible is nothing,” and has showcased various athletes’ determination in overcoming adversity to achieve excellence. Sprint forward to February 2016: impossible apparently was not a barrier for Adidas America, Inc. (“Adidas”), as Adidas convinced an Oregon district court to issue not one, but three preliminary injunctions in a trademark dispute against another footwear company Skechers USA, Inc. (“Skechers”). Each preliminary injunction banned the sale of a certain Skechers shoe that allegedly infringed Adidas’s marks or trade dress. Considering that a preliminary injunction is considered an “extraordinary remedy” by the U.S. Supreme Court, the securing of three preliminary injunctions really made the “impossible” slogan a representation of reality for Adidas. However, this past May, the Ninth Circuit showed Adidas that not everything was possible, as it affirmed in part, but also reversed in part the lower court’s injunctions. (Adidas Am., Inc. v. Skechers USA, Inc., No. 16-35204 (9^th Cir. May 10, 2018)). How we got here requires a long walk in several pairs of shoes.

The home court for this trademark dispute was the district court of Oregon, and the case involved two of Adidas’s registered trademarks, the Three-Stripe mark and the Supernova mark, as well as Adidas’s unregistered Stan Smith sneaker trade dress. Adidas, as we know, is “the Brand with the Three Stripes.” It began using the Three-Stripe logo on its shoes in the 1950s and, by the late 1960s, Adidas started to use the logo on apparel and other merchandise as well. The Supernova mark, although not as famous as the Three-Stripe mark, is also a well-known mark that Adidas has used to name and promote specific types of running shoes and apparel. Last but not least, the Stan Smith is a shoe line Adidas launched in 1973, which was named after an American tennis player who in the 70s was ranked number one in the world and won both the U.S. Open and the Australian Open. The sneakers were originally produced as tennis sneakers, but they eventually moved from the court to the street and runways – and, according to Adidas, have sold more than 40 million pairs worldwide since its introduction.

For you sneaker fans out there, you may be a bit surprised to learn that Skechers is one of the largest footwear companies in the U.S. As noted by the lower court, one major reason for its success has been its “serial branding strategy.” The strategy includes a process the brand calls “Skecherizing,” whereby, as the court quoted, “its designers transform market trends into unique footwear products… prominently featuring Skechers’ famous marks, brands and logos.” Adidas has not always looked favorably upon Skecherizing, and has sued Skechers or sent a demand letter multiple times over the past two decades claiming that Skechers’s shoes were infringing Adidas’s own trademarked designs.

Most recently, the battle reignited over three Skechers shoes that Adidas believed were confusingly similar imitations of the Three-Strip mark, the Stan Smith trade dress, and the Supernova mark (see below). Adidas argued that Skechers Relaxed Fit Cross Court TR was a “knockoff” of Adidas’s famous Three-Stripe mark, that Skechers “blatantly” copied Adidas’s famous Stan Smith trade dress in producing the Onix, and also claimed that Skechers Relaxed Fit Supernova infringed Adidas’s registered Supernova mark. Adidas firmly believed that Skechers had infringed its IP and asked the district court for a preliminary injunction that would prevent Skechers from selling the shoes in question.

A party seeking a preliminary injunction must establish that it is likely to succeed on the merits and that it is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in its favor, and that an injunction is in the public interest. In February 2016, Team Adidas successfully convinced the lower court that it was likely to succeed in showing that the Skechers shoes at issue infringed Adidas's Three-Stripe mark, Supernova mark, and Stan Smith trade dress because the Skechers shoes were likely to cause consumer confusion about the source of the products. In granting Adidas’s motion, the court ruled that Adidas produced sufficient evidence of irreparable harm and the other elements required to warrant injunctive relief. In finding the requisite harm, the lower court held that Skechers’s attempts to “piggy back” off of Adidas’s efforts by imitating Adidas’s marks meant that Adidas would lose control over its trademarks, reputations, and goodwill – “a quintessentially irreparable injury.”

On appeal, Skechers lodged two coach’s challenges, one against the Onix-Stan Smith trade dress ruling and another against the Cross Court – Three-Stripe ruling. Skechers argued that the lower court presumed irreparable harm even though Adidas failed to present sufficient evidence of existing or future harm. In May 2018, the Ninth Circuit affirmed the preliminary injunction related to the Onix-Stan Smith, ruling that there was ample evidence that Adidas would be irreparably injured by the Onix, but reversed in part, overturning the sales ban on the Skechers Cross Court, stating that there was no comparable evidence supporting the likelihood of irreparable injury. In short, one of the challenges was accepted and the other reversed, making the final score Adidas 2, Skechers 1.

Judge Nguyen, who presided over this battle between the two shoe brand giants and who wrote for the Ninth Circuit majority, provided her explanation of what constitutes sufficient evidence for irreparable injury. On the Onix-Stan Smith trade dress dispute, the appeals court first affirmed the ruling that the Stan Smith trade dress acquired distinctiveness and was an enforceable trade dress under the Lanham Act due to its commercial success, robust marketing efforts and wide media coverage. The court then affirmed that the Skechers Onix shoe, although containing some minor differences with regard to non-functional design elements, likely infringed Adidas’s Stan Smith trade dress and presented an “unmistakable” overall impression that these were nearly-identical shoes. As the court summarized, those striking similarities suggested Skechers's intent to create an association between its marks and Adidas's IP. The Ninth Circuit also found sufficient evidence for irreparable harm to the Stan Smith brand because, among other things, Skechers's likely infringement undermined Adidas's substantial investment in building the Stan Smith brand reputation through specific media campaigns and market scarcity strategies.

In comparison, the Ninth Circuit held that the lower court’s analysis over the Skechers Cross Court – Adidas Three-Stripe mark claim went over the line. The Ninth Circuit, while agreeing with the lower court’s reasoning that Adidas showed a likelihood of success on the merits of its infringement claim (given Adidas’s strong mark and the Cross Court’s similar stripe design), nevertheless found that the lower court erred in finding that Adidas made a requisite showing of irreparable harm. Adidas’s irreparable harm argument, in a shoebox, was that “Skechers harmed Adidas’s ability to control its brand image because consumers who see others wearing Cross Court shoes associate the allegedly lesser-quality Cross Courts with Adidas and its three-stripe mark.” However, the appeals court ruled that Adidas did not present evidence sufficient to show its efforts to cultivate a supposedly premium brand image for itself. It also did not help, according to the appeals court, that Adidas did not set forth “evidence probative of Skecher’s allegedly less favorable reputation” or how it would suffer irreparable harm especially when consumers viewing the Skechers Cross Court from afar could not tell the shoes were not Adidas or low quality to begin with. The court’s ultimate post-sale confusion question went unanswered: “If the ‘misled’ consumers could not assess the quality of the shoe from afar, why would they think any differently about Adidas's products?”

Having been denied a preliminary injunction in its trademark infringement dispute, one may assume Adidas’s disappointment with the Ninth Circuit ruling. Regardless, Adidas, already seems to have moved forward. Another battle line emerged between Adidas and Skechers as Adidas filed a motion for contempt sanctions after allegedly discovering another Skechers copy of the Stan Smith, called Ironwood (which Skechers claims it had voluntarily suspended sales of following notice from Adidas). The parties settled twelve days after that filing, on May 30, 2018, and on undisclosed terms, but judging by the trend, we may be seeing another judicial playoff series between the two brands soon.