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Adidas’ Recent Trial Loss Unlikely to Deter Brand Enforcement

Jan. 23, 2023, 9:57 AM

Adidas AG‘s recent jury trial loss to the luxury fashion brand Thom Browne Inc. over a trademark dispute concerning the “three-stripes” logo is unlikely to chasten the German sportswear giant’s aggressive trademark enforcement strategy.

The eight-person jury in Manhattan federal court took just two hours on Jan. 12 to return a decisive verdict finding that Thom Browne’s use of two and four stripes on suits and other high-end fashion items didn’t infringe or dilute Adidas’ trademarks, which center on a three-stripe motif.

While Adidas may lose some cases, its expansive approach to trademark enforcement still has strategic and legal reasoning behind it and is unlikely to change, said Alexandra Roberts, an intellectual property law professor at Northeastern University.

“One loss, even one really high-profile loss, isn’t going to do much to move the needle on that strategy,” Roberts said. “That’s still going to be the way they approach things.”

“I don’t see this dissuading them because what they still want to do, as far as policing their mark goes, is to keep as many brands away from using stripes as possible,” said trademark attorney Josh Gerben of Gerben Perrott PLLC.

Since 2008, Adidas has filed more than 90 lawsuits and reached at least 200 settlement agreements related to its three-stripes trademark, court filings in the case show. The company has 24 registered trademarks related to the stripes, which it first began putting on shoes sold in the US in the 1950s.

The company has brawled with numerous brands using striped clothing, including Forever 21, J. Crew Group Inc., Skechers USA Inc., and Puma SE. In a 2008 case against the discount shoe store Payless, a jury awarded Adidas a $305 million verdict that was later reduced to $65 million.

Adidas has faced some losses in foreign courts. In 2019, the company lost a trademark battle in Japan against a footwear company selling shoes with two stripes, and it was rebuffed in a European court in a case involving a company selling shoes with three stripes.

Following the Thom Browne verdict, an Adidas spokesperson said the company “will continue to vigilantly enforce our intellectual property, including filing any appropriate appeals.”

‘Natural Bias’

The dispute with Thom Browne dates to 2007, when the high-fashion brand began using three parallel stripes on a jacket design.

After discussions with Adidas, Thom Browne switched to a four-stripe design and developed a red, white, and blue-striped design known as the Grosgrain Signature.

The brands co-existed peacefully until 2018, when Thom Browne began expanding into active wear, inking a deal with Spanish soccer megaclub FC Barcelona and collaborating with the NBA’s Cleveland Cavaliers. Adidas sued in 2021.

Gerben said it would be difficult to call Adidas a “trademark bully” in this case, considering Thom Browne’s stature as a valuable luxury brand. But he said juries can have a “natural bias against giving a verdict to a large multinational corporation” in this kind of case.

At trial, Thom Browne argued that the fashion label operated in an entirely different market: a pair Thom Browne sweatpants costs $650, while a similar product from Adidas is less than $100. During closing arguments, Thom Browne’s attorney made a final appeal to the jury, saying that Adidas “does not own stripes.”

Those arguments may provide a blueprint for brands facing challenges from Adidas, said Michael Palmisciano, an intellectual property attorney at Sullivan & Worcester, but it’s difficult to draw broad conclusions from a single case, especially one as fact-specific as this.

Palmisciano noted that the increase in collaborations between high-fashion and mass-market brands has come with increased legal risks. A new product line from a collaboration could pose a threat to competitors in their respective markets.

“Even if you’re in the right, and ultimately litigate a case to this conclusion and you win, that’s an expensive endeavor,” he said.

Dilution

The fear among large brands is that without aggressive prosecution, a once-distinctive trademark may lose its value as more and more third parties begin to use similar looking marks. The end result of lax enforcement in the short term could be a mark that’s harder to protect down the line.

Katie Brown, an assistant professor of sports management at Texas Tech University, said that in the long run, a brand like Adidas is better off using a proactive approach, even if it faces some losses.

Brown’s research focuses on sports branding, and she co-authored a paper last year analyzing Adidas’ trademark protection strategy. She found that Adidas was “willing to pursue lengthy litigation with almost any potential opponent,” which resulted in more settlements.

“They have the money behind them to protect their mark, and they’re going to continue to pursue it,” she said. “Other companies or smaller retailers don’t have the money to go all the way to trial.”

While Adidas has proactively protected its three-stripes mark for decades, the American shoe company Converse, known for the iconic Chuck Taylor All Star shoe, relaxed its trademark enforcement in the late 1990s and early 2000s while facing bankruptcy.

Brown’s research found that Converse’s lack of trademark litigation over that period harmed its ability to enforce its rights later. Over that time, competitors like Walmart Inc., Skechers, and New Balance Athletics Inc. began selling similar-looking shoes.

In 2016, the US International Trade Commission ruled that various elements of the Chuck Taylor shoe, including its upper and rubber toe, weren’t protectable under trademark law.

Although an appeals court reversed that ruling, the brand has lost some of its distinctiveness, Brown said.

“It was too little, too late.”

To contact the reporter on this story: Isaiah Poritz in Washington at iporitz@bloombergindustry.com

To contact the editors responsible for this story: Adam M. Taylor at ataylor@bloombergindustry.com; Tonia Moore at tmoore@bloombergindustry.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com