Adidas America v. Payless Shoesource

Adidas America, Inc et al v. Payless Shoesource, Inc, 2002 U.S. Dist. LEXIS 27438.

Facts: in Nov 2001, Adidas brought this action against Payless Shoesource 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 alleges that Payless, the defendant, is offering a shoe that bears the same THREE STRIPES trademark and SUPERSTAR Trade Dress of Adidas and 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. Adidas’s trademark is very famous and non-functional and the three stripe logo means to the public that it is adidas.

Issue: Whether Payless Shoesource has violated Adidas’s THREE STRIPES trademark and the SUPERSTAR Trade dress by infringement, dilution or injury to business reputation?

Holding: 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.

Discussion: The defendant’s main contention is that the plaintiffs failed to state a claim for which relief can be granted. Payless claimed that plaintiffs SUPTERSTAR trade dress in invalid. They also contend that there is no likelihood of confusion regarding the payless brand or shoe store. Defendants are claiming that nobody would confuse the two. They say the use of one or more stripes on a pair of shoes, clothing, sports equipment, or other good has been used for decades. They further argue that stripes are generic designs and that all shoes incorporate stripes in different forms and colors. The bottom line is plaintiffs cannot monopolize the use of a stripe. Therefore, the plaintiffs are using their trademark to monopolize in violation of the U.S. Antitrust laws.
The defendants are also claiming that under their 1994 settlement that plaintiff’s claims are barred. The agreement can only be reasonably interpreted as imposing on Payless an ongoing obligation to refrain from selling shoes bearing the stripes prohibited under the agreement, and imposing on Adidas a reciprocal ongoing obligation to refrain from taking legal action against Payless based solely on its use of stripes. However, Adidas is claiming payless broke this action. After many appeals, motions, and judgments the final jury verdict in 2008 awarded Adidas a staggering total of $304.6 million.

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