Audrey Dufrenoy Clément Birault July 18 2022 Trademark and design counterfeiting: multiple facets of Palladium decision MIIP MADE IN IP | Intellectual Property - France Audrey Dufrenoy, Clément Birault Intellectual Property IntroductionFactsDecisionCommentIntroductionOn 15 November 2021, the Appeal Court of Lyon issued an interesting decision covering a wide range of IP matters.(1) Among the interesting points discussed by the Court were:design validity and infringement;trademark infringement; andunfair and parasitic competition.FactsIn 2003, the company Palladium filed the following IP rights:French design No. 03 0904-004 for its "Baggy" shoes. Seven views were reproduced, among which those shown in Figures 1 and 2; andfigurative trademark No. 03/3239720, in class 25 for clothes and shoes (Figure 3).Figure 1: first view of Baggy shoeFigure 2: second view of Baggy shoeFigure 3: figurative trademarkPalladium became aware of the fact that the commercially linked companies Yoobizz, Sissi Perla and Aubestar were marketing infringing shoes bearing the trademarks PALMBEACH and YANGBOKAI and reproducing the characteristics of its Baggy shoes. Palladium brought an action against the companies in 2014.The bases of the action were:infringement of Palladium's registered design and trademark; andunfair and parasitic competition.Considering the judgment held by the Lyon High Court in October 2018 was not satisfactory, Palladium and Sissi Perla both appealed against the decision.Decision Several points were submitted to the Court of Appeal, including:the validity of the Baggy shoe design;the counterfeiting thereof;the infringement of the PALLADIUM trademark; andthe question of unfair and parasitic competition.Validity of Baggy shoe designRegarding the validity of the Baggy shoe design, it was argued that the appearance of Baggy shoes was a version of a previous Palladium shoe design, the "Pallabrousse". This design, which was inspired by the military model "Pataugas", had been declared as invalid in 2011.In rejecting the invalidity of the Baggy shoe design, the judges described the essential characteristics of the Baggy shoes, the Pallabrousse shoes and the Pataugas shoes. The appearance of the Baggy shoes was characterised by important differences – and not insignificant details. This gave them an overall impression that was different from the prior shoe models. The Court thus confirmed the design's validity.Counterfeiting of Baggy shoe designThe potential counterfeiting of the Baggy shoe design could therefore be analysed. The judges compared their appearance with those bearing the trademarks PALMBEACH and YANGBOKAI.All of the shoes were high-top canvas sneakers characterised by a rod, a rolled-up tongue and a circular badge on each side. According to this comparison, the essential characteristics of the Baggy shoes were reproduced on the PALMBEACH and YANGBOKAI shoes, and the impression produced by the models was identical. Therefore, the infringement was admitted.Infringement of PALLADIUM trademarkWith regard to trademark infringement, it was argued that the PALLADIUM trademark was not a real figurative trademark. Sissi Perla further argued that reproducing the typeface was not reprehensible as it could be reproduced by dozens of other trademarks, especially as the signs were different from a visual, phonetic and conceptual perspective.Regarding the trademarks PALLADIUM and PALMBEACH, the appeal judges confirmed the first-instance judges' position with regard to the existence of a risk of confusion. However, surprisingly, they rejected the previous judges' judgment about the trademarks PALLADIUM and YANGBOKAI. While the first-instance judges had stated that there was no risk of confusion between the signs (considering that the trademarks had nothing in common other than the same number of letters, the overall shape of the logo and the typeface), the judges of appeal adopted an opposite position. They specified as follows:[W]hen the sign YANGBOKAI is observed from a distance higher than 20 cm, as it is the case of the shoes, whether they are worn or arranged on the shelves or in the window of a store, or represented on a sales website, a similarity appears between the inscriptions Palladium and Yangbokai, which it is advisable to note that they are both in relief and formed by a kind of rubber put on a base of the same colour.The judges added that:the vertical of the Y reminds the vertical bar of the P, the A which follows is common, the N presents two verticals like the two LL of Palladium, the B and the O by their forms evoke the A and the D of Palladium and the I ends the term by a vertical like the second leg of the M of Palladium.Considering the above, the signs had a very close visual impression, justifying the admission of a risk of confusion. Contrary to the previous judges, the judges of appeal considered the trademarks' concrete and real use in commerce to state that YANGBOKAI also constituted an infringement of the trademark PALLADIUM.Parasitic competitionFinally, among other measures requested by Palladium, the Court upheld the judgment that the companies Sissi Perla and Aubestar had committed parasitic competition by benefitting from the visibility of Palladium's Baggy model to sell their own products.Comment Regarding design law, this decision is not particularly original, and it was to be expected. Nevertheless, it is always compelling when judges recall the general legal principles. The way they described the process of analysing the validity of a design and considering the existence of a counterfeiting behaviour (ie, through a detailed analysis of the designs, the identification of their essential characteristics and a comparison of their overall impressions) is also extremely interesting.Regarding trademark law, the most significant part of the decision was how the sale context and the way in which consumers would see and perceive the trademarks was considered (and more precisely the comparison of the appearance of the letters, which are seen and read by consumers at a certain distance) and how the judges admitted a risk of confusion between two trademarks that were a priori different.Lastly, the decision highlights the importance of multiplying parallel rights to protect products against counterfeiting.For further information on this topic please contact Audrey Dufrenoy or Clément Birault at INLEX IP Expertise by telephone (+33 1 56 59 70 90) or email ([email protected] or [email protected]). The INLEX IP Expertise website can be accessed at inlex.com.Endnotes(1) Case No. 18/08615.