Tuesday, October 8, 2013

adidas AG v Pacific Brands Footwear Pty Ltd

Adidas Conductor High Olympics 1988 re-edition sneakersThe Federal Court of Australia recently delivered a ruling in the adidas AG v Pacific Brands Footwear Pty Ltd. In this case, adidas filed a suit against Pacific Brands over infringement of adidas' trade mark, the '3 stripes' design. This design also serves as adidas' logo. adidas claimed shoe designs used Pacific Brands that bore 4 stripes in the same location on shoes infringed adidas' trade marks.

adidas claimed two registered trade marks were infringed:

a. TM No 131325, which dates as far back as March 13, 1957, applying to sports shoes and special sports shoes (including football boots, runners, training shoes and other sporting footwear in the same class). This mark is made up of 3 stripes of a color that is different from the color of the shoes in which they are applied, starting from the area of lacing all the way to the vicinity of the instep.

b. TM No 924921, registered in July 17, 2002 and applies to footwear, including sports and casual. The trade mark is described as 3 stripes that form a contrast to the basic colour of the shoes.

Pacific Brands' Defence
Pacific Brands' main argument was that their use of the four stripes on their shoes were meant for design or decorative purposes, and to serve as an indication that the shoe is meant for "sports use" (the use of stripes on sports shoes is widespread, as stripes are commonly used to indicate speed or velocity in the context of graphic design.)

It was also noted that adidas and Pacific Brands' shoes are sold in different types of stores and belong to different price categories.

adidas responded by arguing that shoe manufacturers commonly use the side of the shoe as a place for marks that serve as a badge of origin. The best known of these is Nike's 'swoosh' logo.

Deceptive Similarities

The court accepted that Pacific Brands' use of the stripes are decorative, but the stripes nonetheless served the function of a trade mark.

While the presence of 4 stripes instead of 3 was not an exact infringement, it still had the tendency to confuse or deceive due to inherent similarities. In the words of Justice Robertson:

"this shoe is deceptively similar to the applicants’ trade marks. I note in particular the parallel equidistant stripes of equal width (with blue edgings) in a different or contrasting colour to the footwear, running from the lacing area to the instep area of the shoes."

Some of the Pacific Brands shoes were not considered constituting an infringement on adidas' trade marks. These specific shoes did not have the same equidistant stripes set against a contrasting background. One of the shoes even featured a wide gap in the middle of the stripes. This resulted in the impression of two sets of two stripes, instead of a single set of four stripes:

Other examples were also found not to be infringing because the stripes were used in conjunction with other design elements, further distancing it from adidas' trade mark:

"...the inclusion of panels in the shoe of a similar colour to the stripes (black or close to black), and the stitched-in element of contrasting colour (white) extending behind the stripes, mean that as a matter of impression there is no deceptive similarity with the applicants' trade marks. There is no sufficiently clear impression of the stripes forming a contrast to the basic colour of the shoes or being a colour different from that of the article of footwear to which the stripes were applied."

Intention to Infringe

adidas argues that Pacific Brands has an intention to infringe, citing that the company demonstrated a “conscious attempt to create colourable variations on the 3-Stripe Trade Marks while still retaining their essential features, apparently in an effort to maintain plausible deniability of infringement”. However, Justice Robertson found no evidence of an intention to mislead or deceive.

adidas then pointed out that Pacific Brands did not call any relevant witnesses, and pleaded for the court to refer to Jones v Dunkel, which recognises that an adverse inference may be drawn when a party fails to call a relevant witness. This Implied that any witness called by Pacific Brands would have given evidence supporting adidas' claim of infringement.

Pacific Brands argued that Jones v Dunkel does not apply because there was simply no evidence that an intention to deceive or confuse is present. The court agreed.

adidas also relied upon the results of an online survey that was conducted by a market research organisation online, in which visitors are shown relevant images and asked questions that seek to determine whether they can recognise a shoe's manufacturer based on visual cues.

Justice Robertson did not give much weight to the survey, on the grounds that it lacked "ecological validity," which means that it does not replicate the experience that a consumer would have in the market place.

In the end, Justice Robertson accepted that consumers would remember adidas' trade mark, but would not be able to perfectly remember the number of stripes. His Honour also did not give much weight to the price of the shoes or the stores that sell them, nor the character of the purchaser. Instead, the greatest weight was given to the marks used on the shoes and consumers' reactions after seeing the products in question in a store setting.

Judge Robertson assessed each shoe presented in the proceedings, finding that some were not likely to cause deception and confusion while others did, and were therefore considered infringing.

The key takeaway from the decision is that it is important for companies to conduct proper searches of design elements, in order to ensure that these do not infringe on third party brands.

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