Adidas AG v Pacific Brands Footwear Pty Ltd (No 3) [2013] FCA 905 (12 September 2013)

Adidas had a partial but significant victory in a Federal Court dispute against Pacific Brands Footwear Pty Ltd ("Pacific Brands").  Pacific Brands was found to have infringed Adidas' famous 3-Stripe trade mark by using 4 stripes on sports shoes. 

This decision provides assistance to owners of design (as opposed to word) trade marks which are applied to products (here to the side of shoes) and a warning for sellers of "look-alike" products, particularly footwear. 

The Court confirmed that an alleged infringer attempting to "sail close to the wind" but avoid infringement will not assist to establish trade mark infringement. 

Limited weight was given to the survey evidence due to questionable methodology.

Allegations made against Pacific Brands

Since 1957 Adidas has used three stripe marks on shoes in Australia.  The trade marks alleged to be infringed can be seen below:

  • Registration No. 131325

Click here to view image.

  • Registration No. 92492

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("the 3-striped Marks")

Both trade marks contained slightly different endorsements to the effect that the trade marks consisted of three stripes forming a contrast to the basic color of the shoes.

Adidas tendered these photographs to demonstrate use of its marks:

Click here to view image.

Adidas asserted that Pacific Brands had infringed the 3-Stripe Marks by using, without licence from Adidas, four parallel stripes on the side of the footwear, in a contrasting colour to that of the shoe. 

Pacific Brands imported the allegedly infringing shoes between 2006 and February 2010.  Pacific Brands and Adidas also had a history of licensing and distribution arrangements.  It was common ground that Adidas' 3-Stripe Trade Marks were very well-known in Australia.  Adidas "had never used four stripes on its footwear".  There was no evidence of confusion. 

Pacific Brands denied it had infringed Adidas' 3-Stripe Marks:

  1. first, on the basis that Pacific Brands had not used the four stripes on its shoes as a trade mark.  Pacific Brands claimed they had used the stripes decoratively, or for functional purposes, and not for "branding" purposes; and
  2. secondly, that the stripes were not deceptively similar to Adidas' 3-Stripe trade marks and consumers would not be deceived or confused by the use of the 4 stripes on the shoes and be caused to wonder if Pacific Brands shoes came from the same source as Adidas shoes.

The stripes on Pacific Brands shoes were being used as trade marks on Pacific Brands shoes

Adidas contended that consumers are conditioned to seeing markings on the side of shoes as brand elements (using the Nike "swoosh", ASICS stripes and New Balance "N" as examples).

Justice Robertson accepted that the stripes have a decorative element and may also indicate that each shoe is a sports shoe. However, he concluded that the stripes were capable of functioning as an identifier of source.  In Justice Robertson's opinion, merely because a consumer could not identify the particular manufacturer or seller of the shoe did not mean the sign is not functioning as a trade mark to distinguish one traders' goods from those of another trader.

Even though Pacific Brands was not promoting the four stripes used on its shoes as a "brand", the stripes were functioning as such and therefore being used as trade marks.

Pacific Brands’ four stripe marks of contrasting colour were deceptively similar to Adidas 3-Stripe Marks

To establish "deceptive similarity" it was not sufficient that the two marks conveyed merely the same idea.  "Stripeness" as was coined by Senior Counsel for Adidas had the character of an idea and was considered "far too liberal an approach to the notion of recollection (even an imperfect one)" in an assessment of deceptive similarity.  The comparison was between the trade marks and the various four stripes as they appear on the Pacific Brands shoes.

Did Pacific Brands have an intention to “sail too close to the wind” and if so, did it affect the finding of trade mark infringement? 

Adidas submitted Pacific Brands had a strategy to "sail too close to the wind". 

However, no evidence could be produced of Pacific Brands deliberately manufacturing or ordering products which were based upon the 3-Stripe Marks, with the intention to deceive or cause confusion.  The intention asserted by Adidas was therefore based on the fact that the Pacific Brands' shoes resembled Adidas' shoes.

His Honour observed that:

… No doubt an intention to infringe would be good evidence confirming the fact of infringement and the likelihood of deceptive similarity but if, as seems to be put here by the applicants, the intention was to “sail close to the wind”, that is, to come close to but to avoid infringement, intention does not assist at a general level."

What weight did Justice Robertson give to Adidas’ survey evidence? 

A survey was conducted using the Internet where 400 participants were shown a photograph of one of four different shoes; including a "control" no stripes shoes.  The participants saw a photograph of the shoe; they were not shown the shoe itself to indicate whether or not the shoes bore any other branding or markings; and they did not see any promotional or point of sale material around the shoe.  Relevantly, the participants were asked:

...B1. Who do you think makes this shoe?
B2. Why do you say that?...

Approximately 42% of participants identified Adidas as the maker of the shoe.  Adidas submitted that the Judges of the Australian Federal Court do not necessarily possess all of the qualities of the average consumer. 

As to the methodology of the survey, his Honour noted that:

The survey did not sufficiently replicate or correspond with the experience of a consumer in the marketplace; and

The question "who do you think makes this shoe?" suggested to the participant that they ought to be able to discern the origin of the shoe from the decoration in the photograph.  This would lead to an over-attribution of the shoes to the leading brands.  The question put in the pilot survey "what is your reaction on seeing this shoe" did not elicit the same association (6 out of 300 participants);

As such, his Honour gave the survey "little weight".  He took "the results of it into account as a point of comparison with [his] conclusions" but did not use the results to alter his conclusions.

Had Pacific Brands infringed Adidas’ 3-Stripe Mark?

 

Justice Robertson considered that the dominant visual impression of Adidas' 3-Stripe Marks is not of three stripes only but is of three stripes in a contrasting colour to the basic colour of the footwear.  At a general level he accepted that the fame of a mark tends in favour of a finding of deceptive similarity but that did not mean that the fame of the Adidas mark had the consequence, in the present case, that a four striped mark could never be deceptively similar to Adidas' 3-Striped Marks.  The average consumer would not have forgotten the Adidas' trade mark but he did not assume that the average consumer would perfectly recollect the number of stripes. 

His Honour did not give weight to the relative prices of the shoes or to the different stores in which they were sold or to the character of the probable purchaser because that evidence "does not establish any clear differentiation between the two when making the required comparison between the marks" .  The greatest weight is to be given to the marks on the shoes as seen in the setting of a retail store.

His Honour concluded that the trade marks on four of the Pacific Brands shoes infringed the 3-Stripe Marks.  The trade marks used on the remaining eight pairs of shoes were not infringing. 

In relation to the infringing shoes, even though there were four stripes instead of three stripes, looking at the overall impression of the stripes of contrasting colours to the Pacific Brands shoes, there was a real tangible danger of confusion occurring.  Justice Robertson did not give weight to the results of the survey evidence or to Pacific Brands' overall intention to "sail too close to the wind" as asserted by Adidas.

In relation to the non-infringing shoes, there was 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 stripe were applied.

Click here to view table.

Take Home Messages for Trade Mark Owners

  1. This decision gives owners of design or device trade marks applied to products, in this case the side of footwear, confidence about the investment made to protect such trade marks and to enforce those trade marks against manufacturers or sellers of look-a-like products.
  2. The fact that an infringer attempts to "sail too close to the wind" but avoid infringement will generally not assist in a determination of trade mark infringement. 
  3. Great care should be exercised in developing the methodology of a survey to be relied upon in trade mark infringement proceedings.