Trademark Law Updates | New Settlements and Verdicts

May 19, 2008

Jury Awards Adidas a Record-Setting $305M in Damages, But Payless Fights for Reversal

Adidas America, Inc. and Adidas-Salomon AG v. Payless Shoesource, Inc.
No. 01-CV-01655-RE, U.S. District Court for the District of Oregon, 5/6/2008

Jury Awards Adidas a Record-Setting $305M in Damages, But Payless Fights for Reversal

Holding:

In this action for trademark infringement and dilution under the Trademark Act of 1946 and deceptive trade practices under state laws, a nine-person jury issued a verdict in favor of shoemaker Adidas and against shoe retailer Payless. Specifically, the jury before the U.S. District Court for the District of Oregon unanimously awarded Adidas AG's' U.S. subsidiary $30.6 million in actual damages, $137 million in punitive damages and $137 million in Payless profits for a total of $304.6 million. The award was for infringing Adidas’ three-stripe trademark and shoe styles, aggravated by a finding of malice and reckless disregard of Adidas’ rights. A week after the verdict was issued, defendant Payless filed at least three motions that sought to overturn the adverse ruling, including a motion for judgment as a matter of law or new trial, allegedly on the ground that Adidas failed to prove actual damages and willfulness.

Detailed Summary:

Plaintiffs Adidas America, Inc. and Adidas-Salomon AG (“Adidas”) instituted this action in November 2001 against defendant Payless Shoesource, Inc. (“Payless”) for trademark infringement and dilution, injury to business reputation, unfair competition under the Trademark Act of 1946; anti-dilution laws of several states, including that of Oregon; the fair business practices and unfair and deceptive trade practices acts of several states, including the Oregon Unlawful Trade Practices Act.

Specifically, the complaint alleged that “defendant is offering for sale and offering footwear that bears confusingly similar imitations of Plaintiffs’ registered THREE STRIPE Mark and SUPERSTAR Trade Dress. Defendant’s footwear is not manufactured by adidas…  Defendant’s merchandise is likely to cause confusion and to deceive consumers and the public regarding its source, and dilutes and tarnishes the distinctive quality of adidas’s mark and trade dress.” Adidas accused the retailer of selling shoes with two and four parallel stripes with the intent of deceiving consumers into thinking they were Adidas shoes. It also said Payless harmed Adidas’ popular Superstar model by selling shoes that mimicked Superstar’s rubber “shell toe,” flat sole and colored portion of the outer back heel.  Adidas also alleged that Payless sold 30 imitations of its Country Ripple shoe, 17 imitations of Tuscany/adi Racer and a dozen imitations of its Prajna, among other styles.

Plaintiffs based its action on the ownership of Adidas-Salomon AG of several federal and other trademark registration for the three-stripe mark covering footwear and various items of apparel. ”Defendant’s use of confusingly similar imitations of Plaintiffs’ THREE STRIPE mark and SUPERSTAR Trade Dress is likely to deceive, confuse and mislead prospective purchasers and purchasers into believing that footwear sold by defendant is manufactured, authorized by or in some manner associated with Plaintiffs, which it is not.  The likelihood of confusion, mistake and deception engendered by Defendant’s misappropriation of Plaintiff’s mark and trade dress is causing irreparable harm to the goodwill symbolized by the THREE STRIPE Mark and SUPERSTAR Trade Dress and the reputation for quality that they embody.”

Aside from the payment of damages, plaintiffs asked the court to enjoin defendant from using the three stripe mark, Superstar trade dress, or any other copy, reproduction, or colorable imitation or simulation of such mark or trade dress on or in connection with defendant’s goods and services, and from “passing off, palming off, or assisting in passing off or palming off Defendant’s goods or services as those of Plaintiffs.”

In its answer, defendant asserted that plaintiffs’ complaint failed to state a claim for which relief can be granted, its claims are barred by the doctrines of waiver, laches, and/or estoppel.  According to Payless, plaintiffs have “no valid trade dress in their Superstar, Prajna, Country Ripple, Tuscany/adi Racer, Copa Mundial, Campus, Samoa, Stan Smith Millenium, and Mei product configurations.”  Further, there is no likelihood of confusion regarding the “source, sponsorship, or affiliation of the Payless footwear at issue.”  In addition, the “use of one or more stripes on shoes, clothing, sports equipment, and other goods is, and has been for decades, a common practice. Stripes are a generic, decorative design feature used by all makers of shoes and apparel.  Plaintiffs cannot monopolize the use of a common, generic design feature.” Also, plaintiffs “are attempting to misuse their trademarks and alleged trade dress to acquire a monopoly in violation of U.S. antitrust laws.”

Payless prayed for the dismissal of plaintiffs’ complaint in each count with prejudice at plaintiffs’ costs, and for the payment of attorneys’ fees and costs.

On May 6, 2008, following a 14-day trial and two days of deliberation, the jury found in Adidas’ favor on all seven claims it was asked to consider. These seven claims consisted of the following: federal trademark infringement of the three-stripe mark, federal trade dress infringement of the Superstar trade dress, federal trademark dilution with respect to its three-stripe mark , federal trade dress dilution with respect to its Superstar trade dress, state trademark dilution and injury to business reputation with respect to its three-stripe mark, unfair and deceptive trade practices with respect to its three-stripe mark three-stripe mark, and unfair and deceptive trade practices with respect to its Superstar trade dress.  The jury found 267 different styles and colors of Payless shoes resembled Adidas’ trademarks.  In particular, the jury that sat before the district court unanimously awarded Adidas AG’s’ U.S. subsidiary $30.6 million in actual damages, $137 million in punitive damages and $137 million in Payless profits for a total of $304.6 million.

On May 12, 2008, or a week after the issuance of the adverse ruling, Payless filed the following motions, to wit: (1) Motion for Judgment Not Withstanding the Verdict Defendant’s Motion for Judgment as a Matter of Law on Adidas’ Damage Claims or, in the Alternative, for New Trial or Remittitur (with a request for oral argument); (2) Motion for Judgment Not Withstanding the Verdict Defendant’s Motion for Judgment as a Matter of Law or a New Trial (i) Due to Plaintiff’s Failure to Prove the Fact of Actual Damage, and (ii) on the Issue of Willfulness (with a request for oral argument); and (3) Motion for Judgment Not Withstanding the Verdict Defendant’s Motion for Judgment as a Matter of Law on Adidas’ Liability Claims or, in the Alternative, for New Trial ( with a request for oral argument).

View a PDF of the verdict

Companies Mentioned

Adidas America, Inc.

Adidas-Salomon AG

Payless Shoesource, Inc.

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