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Attorneys

Three-Stripes and the Burden of Irreparable Injury

May 30 2018

By James Kachmar

adidas and Skechers are athletic shoe and apparel manufacturers who have a long history of litigation between them arising out of claims that Skechers has repeatedly infringed upon adidas’ trademarks. In Adidas America, Inc. v. Skechers USA, Inc. (decided May 10, 2018), the Ninth Circuit once again had to weigh in on Skechers’ alleged infringement of adidas’ trademarks.

adidas is well known for its “three-stripe” mark, which it has featured on its shoes and clothes for decades as part of its branding strategy and for which it owns a federal trademark. adidas claims that the mark is worth millions of dollars in sales and that it invests heavily to advertise the three-stripe mark in various media. In past lawsuits with Skechers, Skechers has had to admit that adidas is “the exclusive owner” of the three-stripe mark and has agreed not to use it or any other protected mark, which may be “confusingly similar thereto.”

In September 2015, adidas sued Skechers once again for trademark infringement, among other claims, arising out of the adidas Stan Smith shoe and the competing Skechers Onyx shoe (which this article will not discuss) as well as Skechers Relaxed Fit Cross Court TR shoe, which utilized a three-stripe mark similar to adidas trademark. adidas successfully moved for a preliminary injunction in the trial court barring Skechers from manufacturing, distributing, advertising, selling or offering for sale the Cross Court shoe. Skechers appealed that decision to the Ninth Circuit.

The Ninth Circuit began by recognizing that it reviews the issuance of a preliminary injunction for abuse of discretion which means that the Court’s “decision is based on either an erroneous legal standard or clearly erroneous factual findings ….” To obtain an injunction, a plaintiff usually has to establish: (1) the likelihood of success on the merits of its claim(s); and (2) that it is likely to suffer irreparable harm in the absence of an injunction.

The Ninth Circuit, in reviewing the lower court’s issuance of the injunction as to Skechers’ Cross Court shoe, found that the trial court had properly determined that adidas had established a likelihood of success on the merits of its claims. To meet its burden of establishing trademark infringement, adidas had to show “among other things, ownership of its trademark and a likelihood of confusion between its and the defendant’s [Skechers] marks.” Given that Skechers had essentially conceded adidas ownership of the three strip mark, the only issue was whether adidas had met its confusion element.

The Ninth Circuit found that the district court had properly applied the Sleekcraft factors to find that they favored adidas in finding a likelihood of trademark infringement. The Court found the following significant in reaching this determination: (1) both the cross court and adidas designs have three-stripes; (2) although there may have been slight differences in the three-stripes marks, they were attached to closely related products and the court could overlook any minor differences between them; (3) there was significant strength in adidas three-stripe mark given that it was “more likely … to be remembered and associated in the public mind with the marks’ owners”; and (4) Skechers having previously admitted the three-stripe mark belonged to adidas, could be construed as having adapted the mark similar to adidas’ to deceive the public. Taken together, these factors weighed heavily in adidas favor and the Ninth Circuit found that the trial court had properly concluded that adidas had established the likelihood of success on the merits as to its trademark infringement claim.

Next, the Ninth Circuit turned to adidas’ trademark dilution claim. Trademark dilution is “the lessening of the capacity of a famous mark to identify and distinguish goods or services regardless of the presence of or absence of: (1) competition between the owner of the famous mark and other parties; or (2) likelihood of confusion, mistake or deception.” In order to establish dilution, a plaintiff must show several factors which are similar to the Sleekcraft factors. In opposing adidas’ trademark dilution claim, Skechers relied on many of the same objections regarding the trademark infringement claim which the Ninth Circuit concluded had properly been overruled. Skechers further argued that adidas failed to produce evidence of the degree of recognition of the three-stripe market, but the Court rejected this finding and concluded that there was significant evidence that “the three-stripe mark enjoyed a high degree of recognition.” Like the trademark infringement claim, the Ninth Circuit affirmed the trial court’s finding as to adidas’ trademark dilution claim in support of the granting of the motion for preliminary injunction.

However, the Court found that the trial court had erred in finding that there was a likelihood of irreparable harm. adidas had argued that Skechers, by selling the Cross Court shoe, had “harmed adidas’ ability to control its brand image because consumers who see others wearing Cross Court shoes, would associate the allegedly lesser quality Cross Courts with adidas and its three-stripes mark.” The Ninth Circuit concluded that there was no evidence in the record to support this loss of control theory.

First, the Ninth Circuit recognized that this claim relied on the assumption that adidas is viewed by consumers as a premium brand while Skechers is viewed as a lower quality discount brand. However, the only evidence offered by adidas in support of this position were statements made by adidas personnel. The Ninth Circuit concluded that “Skechers’ reputation among the ranks of adidas employees does not indicate how the general consumer views it.”

Second, the Ninth Circuit rejected this loss of control theory on the ground that this theory of harm was contradictory to adidas’ theory of consumer confusion to establish its likelihood of success on the merits. Essentially, adidas was arguing not that a Cross Court purchaser would believe that he or she was buying an adidas product, but that someone else seeing the wearer of a Cross Court shoe would somehow mistake it for an adidas. The Court found it inconsistent as to how a supposed consumer viewing the Cross Court shoe from afar would somehow (1) mistake it for an Adidas; and (2) somehow be able to determine that it was in fact a lower quality shoe. Drilling down a bit further, the Ninth Circuit said that if an observer was not close enough to be able to see the Skechers logos on the shoes that would distinguish from an adidas shoe, how could that observer reasonably assess the quality of the shoes? Further, how could that observer determine that the shoe was a “discount” brand without knowing the price of the shoe or being able to determine it was a Skecher shoe to begin with. The Court found that this failure of proof on the part of adidas meant that the trial court should have denied the motion for preliminary injunction as to the cross Court shoe.

Circuit Judge Clifton dissented from the opinion and found that the Court should have upheld the preliminary injunction in its entirety. Judge Clifton found that the Ninth Circuit should have been more deferential to the trial court’s factual findings and believed that there had been sufficient evidence under prior case law to establish irreparable injury.

Litigants in trademark infringement/dilution cases seeking injunctive relief need to remember that they bear the burden of establishing with admissible evidence both the likelihood of success on the merits and the danger of irreparable injury. Merely relying on internal employee statements may not be sufficient to meet this burden.