In adidas America, Inc. v. Skechers USA, Inc., 890 F.3d 747 (9th Cir. 2018), the Ninth Circuit considered Skechers USA, Inc.’s appeal of a preliminary injunction prohibiting it from selling shoes that allegedly infringed and diluted adidas America, Inc.’s unregistered Stan Smith trade dress as well as its “Three Stripe” trademark—and issued a mixed decision. The court affirmed the district court’s PI to the extent it prevents the sale of its Skechers’ Onix shoe but not to the extent it prevents the sale of Skechers’ Cross Court shoe. The decision was 2-1, with Judge Clifton concluding that he would have affirmed the PI in full.
The court first addressed the Onix, and the claim that it infringed adidas’s unregistered Stan Smith trade dress, noting that Skechers challenged only two elements of adidas’s claim: whether the Stan Smith had acquired secondary meaning and whether there was a substantial likelihood of confusion between the Stan Smith and the Onix. The court concluded that both elements had been shown. Initially, it found that the Stan Smith (adidas’s best-selling shoe of all time) had likely acquired secondary meaning. Then, turning to the issue of likelihood of confusion, the court expressed little doubt that the public would reasonably think the shoes came from the same source. Indeed, the court inferred that Skechers intended to confuse consumers, noting that Skechers used metadata tags to direct consumers who searched for “adidas stan smith” to the Onix web page. Thus, the court concluded that the district court had not erred in finding that adidas was likely to succeed on its trade-dress claim. Further, it concluded that the Onix’s continued sale was likely to cause adidas irreparable harm. Among other things, it noted that adidas had built a specific reputation around the Stan Smith and also that customer surveys showed that if the Onix stayed on the market, consumers would be “confused about the source of the shoes.”
But when the court addressed Skechers’s Cross Court, it reached a different conclusion. It agreed that adidas had shown a likelihood of success on the merits, but it held that adidas had not shown that it was likely to suffer irreparable harm. Specifically, the court found that no evidence supported adidas’s argument that Skechers harmed adidas’s ability to control its brand image because consumers would associate the allegedly lesser-quality Cross Courts with adidas and its Three-Stripe mark. According to the court, even if there was evidence that adidas attempted to cultivate a premium brand image, no evidence showed that Skechers’s reputation was less favorable. And the court further stated that even if Skechers made inferior products (or consumers thought that), there was no evidence that consumers would associate Skechers’ lesser-quality products with adidas, nor was there any reason to conclude, absent concrete evidence, that any possible confusion about who made the Cross Court would cause adidas irreparable harm. Thus, the court held that the district court abused its discretion when it issued a PI for the Cross Court.
In his partial concurrence, Judge Clifton agreed that the district court had properly enjoined the sale of Skechers’s Onix, but he would also have affirmed the district court’s decision to prevent the sale of the Cross Court. Judge Clifton recognized that precedent required irreparable harm to be shown—and not simply presumed from a likelihood of success on the merits—but he concluded that this did not mean that the logic of the presumption had been discarded. Instead, he reasoned that where the district court had concluded that Skechers’s Cross Court likely infringed and diluted adidas’s famous Three-Stripe mark, it was “not a big leap” to conclude that adidas would be injured. Further, Judge Clifton identified this injury, stating that if a Three-Stripe shoe could not reliably be identified as an adidas shoe, the Three-Stripe mark had lost some of its value. And he also noted that the district court found that Skecher’s conduct caused adidas to lose “control over its trademarks, reputation, and goodwill,” which would support a dilution claim. Further, to Judge Clifton, the majority correctly identified the standard of review that applies to a district court’s factual determinations—clear error—but failed to apply it, and he also faulted the majority for not explaining why the evidence of adidas’s substantial efforts to promote its brand and its Three-Stripe mark were insufficient to support its claim of irreparable harm. Thus, Judge Clifton believed that the district court was well within its discretion to infer that confusion between Skechers’s “lower-end” footwear and adidas’s footwear would likely cause irreparable harm to adidas’s reputation and goodwill, and he would have affirmed the PI in full.