Intellectual Property Law

Adidas-Payless Court Found Decorative Design Can Cause Dilution

By Michael Atkins

This case is too meaty to let go. So here’s one last bite — a rundown on how the District of Oregon analyzed the dilution claim in Adidas America, Inc. v. Payless Shoesource, Inc.

The unhappy Payless moved for a new trial based in part on its claim that the Trademark Dilution Revision Act and its predecessor, the Federal Trademark Dilution Act, both require the defendant to use a trademark to blur or tarnish the plaintiff’s famous trademark. Payless argued it did no such thing, since the two and four stripes it put on shoes were solely for decoration — not to indicate source — so the jury’s finding that Payless had diluted Adidas’ three-stripe mark was not supported in the law.

Indeed, the court apparently found that Payless puts stripes on its shoes “merely for decoration and not as a brand or trademark.”

However, the court disagreed with the importance of this fact. On Sept. 12, it found: 

“Payless’ argument that its subjective intent to use stripes as mere decoration, rather than as a trademark, controls whether its use of stripes falls within the scope of the TDRA is supported by neither the case law nor the policy underlying federal dilution law. The TDRA provides, in relevant part, that ‘the owner of a famous mark … shall be entitled to an injunction against another person who, at any time after the owner’s mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution … of the famous mark.’ 15 U.S.C. § 1125(c)(1).

“Dilution is the lessening of the capacity of a famous mark to identify and distinguish goods or services of the owner of the famous mark such that the strong identification value of the owner’s trademark whittles away or is gradually attenuated as a result of its use by another.’ Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1035 (9th Cir. 2007).

“As adidas notes, I have rejected Payless’ present argument more than once. I agree with adidas that the important issue is whether consumers perceive Payless’ use of two and four stripes as a trademark so that the value of the mark to adidas is diluted. This can occur even if Payless does not put a nickel into promoting the stripes as its own trademark. Although Horphag does not address the issue directly, Payless’ argument is undercut by Horphag because the court found that the famous mark was diluted by the competitor, even though the competitor did not use the famous mark as its own mark.”

Creative argument on Payless’ part, but I’ve got to agree with the court. Why should it matter what the defendant intended? What would seem to count is the detrimental impact the defendant had on the plaintiff’s famous mark.

The case cite is Adidas America, Inc. v. Payless Shoesource, Inc., No. 01-1655 (King, J.).

Full post as published by Seattle Trademark Lawyer on September 17, 2008 (boomark / email).