The Supreme Court of Appeal recently handed down a rare trade mark judgment.  The protagonists were Adidas and Pepkor, and the main issue was whether Pepkor had infringed certain trade mark registrations belonging to Adidas for its famous three-stripe mark.

Adidas was founded by a German called Adi Dassler in 1920. The company started with athletic footwear, but in time it branched out into soccer boots, sports equipment and clothing.  It first used a three-stripe mark on its footwear back in 1949, and to emphasize the trade mark significance of the stripes it described it as ‘the mark with three stripes’. Although stripes are now used on many shoes, Adidas regards the three-stripe mark as a very valuable brand.  In South Africa, Adidas’s goods are sold at its own stores, as well as in stores like Foschini, Edgars and Sportsman’s Warehouse.

Pepkor, on the other hand, is a South African retailer which trades under the names Ackerman’s and Pep Stores. When Pepkor started selling trainers and soccer boots featuring two and four-stripe marks, Adidas sued for trade mark infringement. Adidas relied on various South African trade mark registrations that it has for three-stripe marks. These registrations contain representations of the marks, as well as descriptions which specify various things, such as the fact that there are three equally spaced parallel stripes which are equidistant from one another.  Adidas claimed that Pepkor was using marks that were so similar to its registered marks that there was a likelihood of confusion.

Pepkor’s main defence was an interesting one: it said that it wasn’t using stripes as a trade mark but simply for decorative purposes.  Defences of this nature have become quite popular since the Supreme Court of Appeal ruled  in the case of BMW v Verimark that a trade mark registration  is not infringed if it is used in a ‘non-trade mark’ manner – in that case BMW claimed that Verimark had infringed the BMW logo by using a BMW vehicle in a TV ad for a car polish, and the court held that the use of the BMW logo (visible on the vehicle that was used) was incidental or non-trade mark use, and that there was no infringement. On top of that, some courts have been somewhat dubious about whether ‘modern’ usages such as the use of a brand name on the front of a t-shirt, or the use of stripes on shoes, is in fact trade mark usage.

In this case, however, the Supreme Court of Appeal had no such doubts. The judge who handed down the judgment pointed out that the definition of a ‘mark’ in the Trade Marks Act specifically includes ‘ornamentation’. He said this:  ‘ It seems to me that it will be very difficult to persuade a court that any mark applied to goods for ‘embellishment’ or ‘ decoration’... is not applied for the purposes of distinguishing the goods.’   He went on to say that it’s a question of fact whether stripes will be perceived as being decorative or trade mark usage: ‘If the use creates an impression of a material link between the product and the owner of the mark there is infringement, otherwise not.’  And he said that, as consumers are used to seeing stripes being on footwear to identify goods, they would make the same assumption about Pepkor’s shoes. The mere fact that Pepkor’s shoes featured other marks (such as names) in addition to the stripes made no difference, because it’s quite common for more than one mark to be used on the same product.

So Pepkor’s use of stripes was trade mark usage, but was there a likelihood of confusion?   The court reiterated the tests that need to be applied, according to the old South African case of Plascon Evans v Van Riebeeck Paints.  These include the following: the owner of the trade mark registration must show that a  substantial number of potential purchasers will be confused as to the origin of the goods; the court needs to see the matter through the eyes of an ordinary, reasonable customer, who is a person   of average intelligence and  proper eyesight, and one who buys with ordinary caution; the court must look at the marks both side by side and separately, remembering that the consumer does not have an imperfect recollection, and is likely to remember the dominant and striking features of marks. Or as a European Court said more recently in a case involving Puma - there must be a ‘global appreciation of the visual, aural and conceptual similarity of the marks in question.’

An interesting feature of this case was that in the 1976 case of Adidas v Harry Walt the Supreme Court of Appeal actually held that a four-striped mark infringed Adidas's registrations for three-stripe marks.   Yet Pepkor argued that circumstances had changed, and that the three-stripe mark had become so famous that no-one seeing two or four stripes would be confused.  The court rejected this counter-intuitive argument: ‘ In my view, the fact that the first appellants’ three stripes trademarks are famous, does not justify a finding that there is no likelihood of deception or confusion because purchasers of the goods will see immediately that the respondent's marks are not the first appellant’s marks. In my view the contrary is true. The more distinctive the trademark is, or the greater its reputation, the greater the likelihood that there will be deception or confusion where a similar mark is used on a competing product.’

So the court held that, although there was no likelihood of confusion in the case of certain shoes sold by Pepkor, namely leisure shoes with two stripes, there was a likelihood of confusion in the case of others, namely those where the four stripes ran parallel, were slanted towards the heel, were of the same width, and were equidistant from one another.  The fact that Adidas could not prove any actual confusion did not matter because actual confusion is difficult to prove. And the fact that  Pepkor’s shoes were far cheaper than those of Adidas did not matter either, because there was no reason to suppose  that people who shop in Pep Stores don’t also shop in Foschini or Edgars.

The court also had to consider the question of passing off and had little difficulty in also finding in favour of Adidas on this ground in respect of certain of the respondent’s products.

The court granted Adidas an interdict and ordered an enquiry into damages. In the process it finally put to bed the argument that when stripes are used on shoes it’s decorative rather  trade mark usage.