27 September, 2013
Spruson

Case Note: Adidas AG v Pacific Brands Footwear Pty Ltd (No 3) [2013] FCA 905

Case Note: Adidas AG v Pacific Brands Footwear Pty Ltd (No 3) [2013] FCA 905

The Federal Court of Australia recently delivered judgment in Adidas AG v Pacific Brands Footwear Pty Ltd (No 3) [2013] FCA 905, in which Adidas sued Pacific Brands for infringement of its trade mark registration depicting the well-known ‘Three Stripe’ logo, typically placed on the side of its shoes as depicted below.

The infringing goods under examination were all shoes which bore four stripes on the side.

The application was defended on the grounds that (a) use of four stripes on the side of shoes by Pacific Brands was not use as a trade mark, and (b) the stripes were not deceptively similar to the adidas trade mark.

Several witnesses were called, including officers of adidas and Pacific Brands, as well as experts who were experienced and qualified in market research and marketing.

Use as a Trade Mark

Pacific Brands argued that the four stripes on its shoes were a ‘decorative element’and used for functional reasons to indicate the shoe to be a sports shoe. Distinctions were also made as to the different nature of the goods and the different types of stores that the goods are sold in. The adidas shoes are performance shoes typically sold in a specialist store, whereas the Pacific Brands’shoes were lacking in technical specification, sold in low-cost stores, and amongst other things, were sold with little or no sales assistance in a “hang-sell” form.

It was submitted that given the widespread use of stripes on sports shoes, and all of the above considerations, that the use of the four stripes by Pacific Brands was not use as a trade mark.

In response, adidas argued that the location of the stripes, being on the side of the shoe, was a place that usually bore a mark serving as a badge of origin (such as the Nike ‘swoosh’ logo, or the New Balance ‘N’ design).

Justice Robertson found that the stripes on the Pacific Brands’ shoes were used as a trade mark, and in each case indicated a connection between the shoes and Pacific Brands. His Honour reasoned that whilst the stripes on the shoes may have a decorative element, this is not mutually exclusive to their functioning as a badge of origin.

Deceptive Similarity

The question of deceptive similarity involved a consideration of whether the use of the stripes on the Pacific Brands’ shoes would result in a real and tangible danger of confusion occurring.

To determine the likelihood of confusion adidas argued that the intention of Pacific Brands should be considered. In support of this argument adidas referred back to past cases wherein it has been accepted that if a mark has been adopted for the purpose of appropriating part of a trade or reputation of a rival, it should be presumed to be fitted for the purpose and therefore likely to deceive or cause confusion.

Ultimately it is of course a question of fact as to whether there is a likelihood of deception and confusion. However, the presence of an intention to cause confusion will assist in determining this question.

Intention

Adidas argued that the conduct of Pacific Brands demonstrated a “conscious attempt to create colourable variations on the 3-Stripe Trade Marks while still retaining their essential features, apparently in an effort to maintain plausible deniability of infringement”. However, his Honour pointed out that there was no contemporaneous evidence of an intention to mislead or deceive produced in discovery.

Pacific Brands were said by adidas not to have called relevant witnesses. Adidas asked the court to apply Jones v Dunkel which recognises that where a party fails to call a potentially material witness, then in some circumstances, an adverse inference may be drawn.1 Adidas argued that the inference of a strategy to deceive and confuse was available on the limited evidence led. Thus, Pacific Brand’s failure to call witnesses in relation to this strategy indicates that the uncalled witness would have given evidence adverse to the position of Pacific Brands.

Pacific Brands submitted that there was no inference available in the first place (there was no basis in evidence to perceive anintention or strategy to deceiveor confuse) and that Jones v Dunkel therefore had no application.

His Honour found that, on the evidence before the court, there was no strategy to deceive or confuse. Further, even if there was material that warranted a Jones v Dunkel inference, the individuals to whom adidas pointed as potential uncalled witnesses, were not involved in the design of selection of the relevant shoes, and therefore could not have spoken to the ‘strategy’ assertion in any event.

Survey evidence

Adidas relied upon the results of an online survey conducted by a market research organisation.  This survey involved displaying relevant images of shoes to participants and asking material questions such as “who do you think makes this shoe?” and “when did you last buy a pair of sports shoes?

His Honour gave little weight to this evidence as it lacked “ecological validity” in that the survey did not sufficiently replicate or correspond with the experience of a consumer in the market place”.

Conclusion

In arriving at his decision Justice Robertson accepted that the average consumer would not have forgotten adidas ‘Three Stripe’ trade marks. However, he did not assume that the average consumer would perfectly remember the number of stripes.

Moreover Justice Robertson concluded that in deciding this case the greatest weight should be given to the marks being used on shoes, and to a purchaser of the Pacific Brands’ shoes seeing them in the setting of a store and being able to look at them in that setting. His Honour did not give weight to the relative prices of the shoes, to the different stores in which they would be purchased, or to the character of the probable purchaser.

His Honour then continued to assess each of the shoes the subject of the proceedings. In doing so, he found that certain shoes were likely to deceive and cause confusion (examples below), and were therefore infringing, while others were not.

INFRINGING

NOT INFRINGING

The messages from this decision are:

  1. It is important to be conscious and alert as to the use of decorative elements on products that bear similarity to a registered trade mark.
  2. Survey evidence in trade mark infringement cases needs to have ecological validity in that it must sufficiently replicate the experience of a consumer in the market place.

If you would like any further information, please do not hesitate to contact us.


1Jones v Dunkel(1959) 101 CLR 298


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