In a recent case the Tel Aviv-Jaffa District Court held that the use of four stripes on sports shoes imported by the defendant did not infringe the registered and well-known three-stripe trademark owned by Adidas-Salomon.(1) The court also noted that the use of four stripes on a sports shoe does not amount to passing off, unjust enrichment nor misappropriation or dilution of goodwill.
Adidas' Registered Israeli Trademark Number 118277.
The defendant, a resident of the Palestinian Authority, imported sports shoes bearing a four-stripe mark for subsequent distribution within the authority. Israeli Customs, which monitors suspect or potentially infringing goods that are imported into the authority, alerted Adidas of the defendant's shoe shipment on its arrival and inspection by Customs.
Adidas claimed that the use of a four-stripe mark alone on the defendant's shoes constituted infringement of its three-stripe mark. Apart from the four-stripe mark, the defendant's shoes contained no other mark which could be regarded as resembling a mark registered or owned by Adidas. Moreover, the defendant's shoes bore the word 'Sydney' prominently in three locations.
The court rejected Adidas's claim and ruled that the defendant's shoes did not mislead consumers into believing that they were Adidas shoes. The court took several arguments into account.
The court reviewed trademark legislation in Israel and abroad, and noted that the basis for trademark protection is to limit unfair competition. The fact that the conditions for establishing trademark infringement focus on consumers (ie, whether they would be misled) does not negate this basis. Thus, as long as consumers are not being misled regarding the origin of the particular goods, using a mark that is similar to a registered or well-known trademark constitutes fair competition and does not amount to trademark infringement.
Nevertheless, over the years changes in the nature of trade and globalisation have caused trademarks to acquire independent economic value. Nowadays, trademarks are used not only to indicate the quality of the goods, but also to encourage consumers to buy additional products under the same trademark. As a result, trademark owners have sought to expand the scope of protection given to trademarks. The question that arises is whether a trademark should be protected even in the absence of unfair competition or exploitation of the goodwill of the trademark owner.
In answering this question, the court noted the following:
- Unlike other IP rights, trademarks are not issued to promote social advancement or to encourage works or inventions. Therefore, from a utility perspective, no market failure would occur if no protection was granted to Adidas.
- Over-protection of a trademark, not on the basis of unfair competition, would unduly limit the public domain.
- Over-protection of a trademark would harm fair competition, the latter being desirable and good for the market in general and consumers in particular. Accordingly, the basis for trademark protection should remain as limiting unfair competition and dilution of a trademark, which at its core constitutes unfair competition. The three-stripe mark excludes the use of three stripes or a similar mark in a certain form. Nonetheless, it cannot be concluded that the three-stripe mark excludes others from using stripes in general on a sports shoe. Moreover, it cannot be said that in any case, the use of four stripes is similar to that of three stripes.
- Allowing Adidas's claim would have a chilling effect on small businesses. A manufacturer should know that if it stamps its logo (which is not another's trademark, or similar thereto) on a shoe in a clear manner, it can use a simple design, such as stripes, without fear of being sued by a large corporation. In this context, the court noted that Skechers sells sports shoes that bear four stripes. However, Adidas brought no evidence to establish that it had filed claims against Skechers for infringement as well.
The court also recognised the right of manufacturers and consumers to self-expression by manufacturing or wearing, as applicable, sports shoes bearing four stripes. Such consumers may know of the three-stripe mark and its relation to Adidas; however, they might not be able to afford Adidas sports shoes. Thus, a consumer may wish to buy the defendant's shoes in order to wear sports shoes that somehow resemble Adidas sports shoes. The court therefore held the view that in the absence of a concern for unfair competition, a mistake or misleading the public, the right to self-expression should be acknowledged. Therefore, potential consumers of the defendant's shoes, who associate stripes with high-quality sports shoes, should be allowed to purchase and enjoy the same freely. Any other ruling would limit both the defendant and consumers from using stripes and other designs in order to experience 'the real thing', (ie, buying Adidas sports shoes when they cannot afford them). In this respect the court noted that consumers are the cause for the creation of economic value to a trademark.
The court also acknowledged the bona fide defence against trademark infringement. Nevertheless, the court noted that it is not sufficient that the alleged infringer proves that it believed in good faith that its actions do not infringe the trademark; but rather, it is necessary that such belief was objectively based and the primary purpose of the alleged infringer was not to enjoy the goodwill of the trademark owner. The court noted that, because the three-stripe mark is well-known and famous and since other sports shoes also bear stripes (in a number differing from three), the defendant, which is familiar with Adidas sports shoes, believed that using four stripes would not amount to an infringement. Therefore, the defendant could have sincerely assumed that using four stripes did not infringe the three-stripe mark. In addition, the court noted that Adidas did not act in good faith by claiming infringement of the three-stripe mark.
The court emphasised that the likelihood of confusion should be considered normatively, rather than empirically. In considering whether there is a likelihood of confusion between the defendant's shoes and Adidas sports shoes, the court implemented the triangular test.(2)
As for the visual and phonetic test, the court noted that the defendant's shoes are sold under the trade name SYDNEY, which is reflected in three different locations on the defendant's shoes and on a colour tag attached to the tongue of the shoes. The court noted that it is possible that the four stripes were marked on the shoes in order to create a resemblance to Adidas sports shoes or other sports shoes, and the court even assumed that such resemblance exists. However, the overall impression gained from the defendant's shoes is that there was no intention by the manufacturer to create an imitation product or to mislead consumers into believing that the defendant's shoes were in fact Adidas sports shoes. On the contrary, the intention was to emphasise that the defendant's shoes were sold under the brand name SYDNEY, which in no way is similar to ADIDAS. In this respect, the court rejected Adidas's claim and stated that the concept of similarity should be examined only with respect to the marks themselves and that the overall look of the shoe should be ignored. The court also noted that the distinction between the shoes is further emphasised by the fact that the defendant's shoes are basic sports shoes and much cheaper than Adidas sports shoes.
The type of customer and class of goods test and the remaining relevant circumstances test also point to no misleading similarity between Adidas sports shoes and the defendant's shoes. In this respect, the court noted that a consumer interested in buying Adidas sports shoes will not be misled into believing that the defendant's shoes are Adidas sports shoes. The court also noted that it was reasonable to assume that since the Adidas brand is identified with three stripes, the public will not associate sports shoes bearing a different number of stripes with Adidas sports shoes.
In light of all of the above, the court rejected Adidas's claim for trademark infringement. Similarly, the court ruled that the defendant's actions did not amount to passing off, since no misleading act had occurred.
The court also rejected the claim of unjust enrichment, since expanding the scope of protection granted to trademark owners on the grounds of unjust enrichment in this case would harm competition, lead to a chilling effect and raise all the other concerns mentioned above.
Finally, the court rejected the claim of misappropriation of goodwill, since the defendant did not exploit Adidas's goodwill unfairly, as well as the claim of dilution of goodwill, since the defendant did not make any use of the registered trademark, Adidas's name or any other mark referring to Adidas shoes on the defendant's shoes.
As mentioned above, Adidas has filed an appeal on the judgment, which is pending before the Supreme Court.
The Supreme Court has previously ruled, in the framework of a request to appeal a decision rendered in interim injunction proceedings, that shoes bearing four stripes, prima facie, do infringe the three-stripe mark.(3)
The judgment rendered by Judge Dr Agmon-Gonen is another chain in her judicial agenda aiming to promote free and fair competition on the one hand, and limiting unfair use of intellectual property by its owners on the other hand. For example, Agmon-Gonen ruled that streaming on the Internet of live soccer matches does not amount to an infringement of copyright since, among other things, streaming is not an infringing act and, if it were, it would be regarded as fair use of the work.(4) Agmon-Gonen has also ruled that operating a website advertising jobs, which merely copies job advertisement content from other websites and publishes them on its own website, does not amount to unjust enrichment.(5)
For further information on this topic please contact Avi Ordo at S Horowitz & Co by telephone (+972 3 567 0876), fax (+972 3 566 0974) or email ([email protected]).
(1) CF 2177/05 (Tel Aviv-Jaffa District Court) Adidas-Salomon v Yasin, December 13 2010. The judgment is pending appeal before the Supreme Court.
(2) For a discussion on the triangular test please see "Court rules no confusing similarity between marks EVE and EVA".
(3) LCA 3581/05 She'hanaal Matayma Ltd v ADIDAS-SALOMON AG, July 7 2005.
(4) CM 11646/08 (Tel Aviv-Jaffa District Court) The Football Association Premier League v John Doe, September 2 2009.
(5) CF 1074/05 (Tel Aviv-Jaffa District Court) Ma'ariv Publishing Modin v All U Need Ltd, July 11 2010.