The International Trade Commission ("ITC") has recently found in an Initial Determination that Converse's "Chuck Taylor" midsole shoe design is entitled to trade dress protection, and that several of the accused shoe designs sold by Wal-Mart, Skechers, New Balance, and Highline infringed Converse's trade dress. Weighing heavily in favor of the Administrative Law Judge's ("ALJ") Initial Determination that the midsole design was protectable was the fact that Converse had a federal trademark registration for a combination of elements that made up its claimed "midsole design."
This initial favorable decision for Converse may increase use of the ITC as a forum for deciding trademark disputes, given the ITC's authority to issue limited or general exclusion orders and cease and desist orders. The ALJ's November 17, 2015 Initial Determination was made public December 17, 2015.
Converse's Allegations and Midsole Design Registration
Converse owns three federal trademark registrations covering design elements of its "Chuck Taylor" shoes. One covers the "midsole design" (U.S. Reg. No. 4,398,753), while the other two cover more complete versions of the shoes (U.S. Reg. No. 4,065,482 for the high top, and U.S. Reg. No. 4,062,112 for the low top).
The ITC Complaint concerned Converse's alleged rights in the midsole design, specifically the combination of a toe bumper and toe cap, plus either an upper stripe and/or a lower stripe. Converse's U.S. Reg. No. 4,398,753 specifically claims: (a) the design of the two stripes on the midsole of the shoe, (b) the design of the toe cap, (c) the design of the multi-layered toe bumper featuring diamonds and line patterns, and (d) the relative position of these elements to each other.
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Converse's ITC Complaint also concerned its alleged rights in the "outsole" (bottom of shoe) design. However, the outsole design was only at issue with respect to certain defaulting respondents that did not contest Converse's allegations. Of the original group of more than 30 respondents, 21 had entered into private settlements with Converse and several others had defaulted or been terminated from the investigation prior to the issue of the ALJ's Initial Determination. Only four respondents, Wal-Mart, Skechers, New Balance and Highline, were actively participating in the investigation at the time of the decision.
The ALJ's Decision
The Initial Determination found there was a violation of Section 337 with respect to Converse's federal trademark registrations, but not as to the asserted common law trade dress. The ALJ first determined that Converse's registered trade dress was protected. To be protectable under trademark law, trade dress such as Converse's shoe design must be both nonfunctional and distinctive (i.e., has acquired "secondary meaning").
In narrowly finding that the midsole design had acquired secondary meaning, the ALJ noted that four of the relevant factors weighed in Converse's favor, specifically, the degree and manner of use; length of use; the degree and manner of sales, advertising and promotional activities; and evidence of deliberate copying. One factor weighed against Converse: survey evidence regarding whether actual purchasers associate the trade dress with a particular source. Two factors, the exclusivity of use and the effectiveness of the effort to create secondary meaning, were neutral.
Although the ALJ found that most of the factors weighed in favor of finding secondary meaning, the ALJ explained that "[b]ecause the factor that weighs against secondary meaning provides the ‘strongest and most relevant' evidence, the outcome here is a close call". The survey evidence showed that only 21.5 percent of consumers associated the midsole design with Converse, which the ALJ found was insufficient to support secondary meaning.
What did weigh heavily in Converse's favor was that it had a federal trademark registration for its shoe design that the ALJ was required to show deference. The ALJ did not afford such deference to the common law trademarks, and found that Converse did not meet its burden to show that those trademarks were protectable. The ALJ also found that the registered trademarks were nonfunctional.
Having determined that Converse's registered trade dress was protected, the ALJ then addressed whether each of the accused designs by Wal-Mart, Skechers, Highline and New Balance infringed Converse's trade dress. The ALJ found two of Skechers' product lines, one of Wal-Mart's product lines, five of Highline's product lines, and two of New Balance's product lines to be infringing. The ALJ found several other of the accused product lines to be non-infringing.
The ALJ's decision is an important but narrow victory for Converse. It is also only the first of what could be several in this dispute, as the ruling will now be reviewed by the Commission. If upheld, the respondents may appeal to the Federal Circuit. If ultimately upheld on appeal, the ruling could lead to a sweeping order barring the importation of the infringing footwear. The decision may also serve to increase interest among brand owners regarding the ITC as an alternate forum for adjudicating trademark disputes where damages are not at issue.