On January 13 2012 the Alicante Court of Appeal, acting as a Community trademark court, partially upheld an appeal filed by Adidas AG and Adidas International Marketing BV, and dismissed the appeal brought by Mr Haibao Yu and Almonte Import Export SL against a April 27 2011 judgment of Alicante Commercial Court No 1.
The commercial court had partially upheld the claim filed by Adidas; it nullified the DAAOBOS trademark, which had been registered by Yu, and confirmed that Almonte had infringed Adidas's well-known three stripes trademark by including two parallel stripes on its sportswear. The defendant was ordered to compensate Adidas in the amount of €17,600.
The defendant appealed the judgment, and as the damages awarded by the court were much lower than those claimed, Adidas also appealed.
First, the court of appeal confirmed the nullity of Yu's trademark. Regarding infringement, it held that the defendant's trademark recalled or evoked Adidas's marks. As these were well-known trademarks, the so-called secondary factors of differentiation (ie, lower price and quality, presentation and different distribution channels) contributed to the existence of subtypes of nullity and infringement causes, because they harmed the distinctiveness and reputation of the Adidas trademarks.
Second, the court resolved Adidas's appeal regarding damages. Given that the defendant had not submitted the requisite commercial, financial and accounting documentation during the preliminary hearing, Adidas chose the criterion of a hypothetical royalty under Article 43.2(b) of the Trademark Act during the trial, and claimed the minimum guaranteed amount for which it would grant a licence, which was calculated by taking into account Adidas's clothing sales in Spain.
However, the commercial court did not consider it appropriate to apply this criterion; it held that the figure proposed by Adidas was too high, since it could not determine the total number of infringing items imported and sold and the period of time for which the infringement had taken place. Although it questioned the reliability of the defendant's data in the judgment itself, the commercial court set the damages by taking into account Almonte's annual turnover.
The court of appeal upheld Adidas's appeal against the damages set by the commercial court and stated that the approach taken by the commercial court was inappropriate because it meant that the defendant effectively benefited from its failure to provide the requisite documentation at trial.
The appeal court went on to consider the reasonableness of the evaluation criteria used by the plaintiff's economic expert. First, taking into account the defendant's lack of cooperation, the court of appeal accepted the time period specified in the expert report in order to calculate damages.
Second, it stressed that the fact that the plaintiff did not grant licences did not preclude the application of the hypothetical royalty criterion, and accepted the expert's criterion of setting a minimum guaranteed amount taking into account Adidas's clothing sales in Spain. However, since the defendant imported fleeces and tracksuits only, it applied a percentage to Adidas's total clothing sales in Spain and set the damages at €171,094.46.
Finally, the appeal court set the damages for disrepute. The commercial court had rejected Adidas's claim that damages for disrepute be calculated on the basis of the costs incurred in maintaining the trademarks' prestige, such as advertising and promotional expenses. Instead, it had taken into account the defendant's turnover and quantified it at €1,600.
The court of appeal also rejected the quantification of the disrepute fixed in the first instance judgment because it considered that this was based on parameters that the judgment itself considered unreliable (the defendant's turnover), and stated that Adidas's claim to calculate disrepute taking into account the amount that the plaintiffs used towards advertising related to sportswear was correct. However, the court of appeal reduced the damages to €24,693.80, taking into account the types of garment imported and sold by the defendant.
For further information on this topic please contact Yvonne Sastre at Grau & Angulo by telephone (+34 93 202 34 56), fax (+34 93 240 53 83) or email ([email protected]).