The End of Irreparable Harm in Trademark Cases

ADIDAS AMERICA, INC., Plaintiffs-Appellees,
v.
SKECHERS USA, INC., Defendant-Appellant.

Back in 2015, Adidas America Inc, filed a lawsuit against Manhattan Beach-based Skechers USA Inc., claiming that Skechers infringed upon Adidas’s product when Skechers decided to design two of its shoes in a similar design belonging to Adidas.  Precisely, Adidas alleged that Skechers’s Onix shoe looked exactly like Stan Smith’s Adidas original design. Adidas further alleged that Skechers’s Relaxed Fit Cross Court TR copied Adidas’s Three-Stripe trademark, in violation of 15 U.S.C. § 1125(a), (c). While in front of the District court of Oregon Adidas succeeded in showing how Skechers sale of a lower quality product devalued Adidas’ sneakers. The District court held for Adidas and issued a preliminary injunction against Skechers proscribing it from selling the mentioned shoes.

Upon an appeal from Skechers, the case made it to the Ninth Circuit’s Court of Appeals to determine the issue of whether Skechers design infringed upon Adidas’s intellectual property. The Ninth Circuit had to evaluate this issue under two theories, which Skechers contested. The merit theory and the irreparable harm theory. See Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008) (“A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.”).

After an extensive explanation, this Court reversed the District court’s preliminary injunction relief regarding Skechers’s imitation of a design similar to Adidas’s Three-Stripe trademark. However, this Court did confirm the preliminary injunction concerning the claim for infringement of Stan Smith’s Adidas design for which Adidas has trade dress rights.

Essentially, the Ninth Circuit agreed with the lower court that Adidas’s main product Stan Smith is infringed upon due to the close similarity with Onix.  The Court explained how consumer will be faced with a great amount of confusion having to decide between the two brands when purchasing Stan Smith. This confusion in conjunction with other factor are necessary in proving infringement caused by Skechers deceiving product. Accordingly, the Ninth Circuit found that Adidas is entitled to irreparable harm pursuant to the decision of Herb Reed Enterprises v. Florida Entertainment Management, 736 F.3d 1239 (9th Cir. 2013).  In Herb Reed Enterprises, LLC v. Florida Entertainment Management, Inc.,the court stated that “[e]vidence of loss of control over business reputation and damage to goodwill [can] constitute irreparable harm,”

The Ninth Circuit held that due to the closed similarity between the Onix (Skechers) and Stan Smith (Adidas), and based on Adidas’s evidence indicating its long time holding of this particular brand reputation and goodwill, if the injunction is not sustained on the sale of Onix Stan Smith’s sale will suffer and as result Adidas will be affected.

However, the Ninth Circuit, was reluctant to agree with the lower court regarding the irreparable harm that Adidas will incur as a result of issues stemming from Skechers’s design of its Relax Cross Court shoe and Adidas’s Three Strips trademark. The Court stated that it is not enough for Adidas to assume that irreparable harm will result just because consumers will see other people in the street wearing Skechers’s Cross Court shoe. The Court further asserted, while there is some similarity between the Adidas Three Strip shoe and the Skechers Cross Court, and that some Adidas employees’ are characterizing Cross Court shoe as lesser quality product, it is not certain that people who are wearing Adidas product will be thinking that they are wearing lesser quality product. Adidas alleged argument regarding its consumer being confused is flawed as the Court noted. It is in conflict with its irreparable harm argument. How could someone who is confused from, afar, about whether another person is wearing Cross Court or Adidas Three Strips infer, that those shoes are of less quality? Essentially, if someone cannot differentiate the quality of these two products form such a distance, it is impossible to say that Adidas’s brand is suffering from such a confusion. Due to the lack of evidence to support this argument the Court rejected Adidas claim for irreparable harm.

The finding of this case is very interesting because until 2006, the rule for judgement for irreparable harm was dependent upon a showing of the possibility of victory on a trademark infringement issue. For several decades the norm was:  Trademark infringement necessitate the proving of the likelihood of confusion among consumer due to a new product; if this prong is met, then it was rational to compensate companies that suffered from such harm. However, this rule is no longer the law because of the two famous Supreme court decisions, eBay v. Mercexchange, 547 U.S. 388 (2006),and Winter v. NRDC,555 U.S. 7 (2008). In addition, in 2010, in Salinger v. Colting,607 F. 3d 68 (2d Cir. 2010), the Second Circuit stated that the presupposition of irreparable harm is not applicable in a copy right case. Not too long after this case, we had another case in Ninth Circuit, Herb Reed Enterprises v. Florida Entertainment Management, 736 F.3d 1239 (9th Cir. 2013), in which the Court stated that after the holding of eBay and Winter, irreparable harm does not apply in a trademark case. This last decision set the stage for Adidas’s holding.

In short, a trademark lawyer can no longer take for granted that the court will find irreparable harm in any given case of trademark infringement. It is paramount that ample evidence is needed to support a case for irreparable harm. To prevail for such case, a lawyer needs to come up with more evidentiary verification to show basis for the irreparable harm; such as media testimony and expert comment to support its claim. Currently, courts are keen in scrutinizing evidence regarding irreparable harm in the area of trademark more than ever before. Thus, lawyers have lesser chances of winning cases that lack strong proof of irreparable harm.  For example, in the case of Adidas, while Adidas shared a lot of evidence indicating the strength of the brand, its proof of how Skechers shoes are viewed as a low quality and affected consumer purchasing decision, depended on the testimony of its own employees and as a result, these testimonies proved inadequate in convincing the court. Had Adidas relied on other evidence such as media and expert witness testimony in conjunction with the totality of the circumstance, it would of possibly had a better chance of proving its case to the court for irreparable harm.

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Sources:

https://www.bizjournals.com/portland/news/2018/05/10/adidas-trademark-infringement-suit-against.html

 Adidas Am., Inc. v. Skechers USA, Inc., 890 F.3d 747, 756 (9th Cir. 2018) 

https://www.law.com/newyorklawjournal/2018/06/05/adidas-case-informs-importance-of-building-a-strong-case-of-irreparable-harm-in-trademark-cases/

Image:

https://www.google.com/search?q=skechers+onix+vs+adidas+stan+smith&rlz=1C5CHFA_enUS730US731&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiW0vjB2oPeAhWlmuAKHVflAwkQ_AUIDygC&biw=1119&bih=695

 

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