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Did the EU court cross a line with shocking Adidas trademark ruling?

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Adidas

In June, sports apparel giant, Adidas, had its stripes thrown back at it by the European Union General Court in a shocking decision ruling against the arguably deserved trademark protection its famous “three-stripes” deserves.

The ruling is part of a long-running dispute between the German sportswear manufacturer and the Belgian company, Patrick, owned by Shoe Branding Europe.

The question that Europe’s second highest court faced was whether “three-stripes” are a trademark?

“The mark is not a pattern mark composes of a series of regularly repetitive elements, but an ordinary figurative mark,” the court said in a statement.

When it comes to brand management, the Adidas three stripes rank among the most recognizable product markings. The “three-stripes” logo was first registered in August 1949 by founder Adolf “Adi” Dassler on a football boot, and has been an established label ever-since. The corporate giant was initially granted a trademark on “three parallel equidistant stripes of identical width, applied on the product in any direction” back in 2014.

The trademark battle began in 2016 when Patrick applied to the EU’s Intellectual Property Office (EU IPO), requesting for the trademark to be annulled.

However, three years ago, the EU IPO struck down the registration of the mark on the grounds it was not distinctive enough throughout the bloc. The EU General Court agreed with that assessment, ruling the design did not have enough “distinctive character” to qualify for trademark protection throughout the EU territory.

Unfortunately, this is not the first time Adidas has failed to protect its three-stripe motif, flashing back to 2003 where it lost a dispute against Dutch company, Fitnessworld, which was using a “two-stripe” design.

Breaking down the law

Trademarks are governed by both state and federal law. The main federal statute at work is the Lanham Act, providing for the main and by and large, the most extensive source of trademark protection. In order to be granted trademark protection, a mark must be “distinctive” — meaning, it must be capable of identifying the source of a particular good.

In 1976, the U.S. Court of Appeals decided Abercrombie & Fitch Co. v. Hunting World, Inc., which established the “spectrum of distinctiveness” based upon the relationship between the mark and the underlying product:

The level of protection awarded, depends upon which category a mark falls in. With Adidas, there’s no question the “three-stripes” identifies its product.

What this means for Adidas

As for this case, for starters, reports are saying the company “lost its stripes”—which is inaccurate, as it has not lost anything other than arguably, the earned and necessary protection its design warrants.

Granted, Adidas’ mark is only in a handful of the 28 EU countries, this is still extremely problematic for Adidas, and one that many, including the sport apparel giant did not expect.

Adidas said it was disappointed in the ruling and it will be considering its next options—most likely appealing to the European court of justice, which is fair to assume it will do.

It’s no surprise that Adidas over the years, has gone after anyone attempting to get away with using its three-stripes on products. Well, for those infringers and markets who encourage the illicit trade of bootleg products, Thursday’s decision by the EU just gave them the push they needed.

The ruling itself doesn’t mean Adidas is “stripped” of using its distinctive three-stripes design in the EU, or anywhere else around the world. Rather, this just makes it increasingly difficult for the brand to effectively combat rivals who put similar patterns on their products—shoes, shirts, and sportswear. This is a shocking result from the European Court, essentially diluting the value of Adidas’ long-established mark.

What are experts saying?

Indeed, legal experts, such as Tim Meyer-Dulheuer, managing partner of Dr. Meyer-Dulheuer & Partners LLP, a German law firm specializing in trademark law, who believe this is an enormous hit to the brand.

“This loss, the loss of reputation, is enormous for Addidas,” he told Fortune. “They’ve been cultivating three stripes since the ‘80’s, since the days of the Run-DMC guys running around with the three stripes on their sneakers.

“If they are unable to fully protect their trademark in Europe, they will have the same problem elsewhere, in the United States and in Asia,” he added.

However, there are those who believe Adidas hasn’t done enough to warrant its protection.

According to Mark Caddle, a trademark layer at the European intellectual property firm, Withers & Rogers, Adidas “failed to provide sufficient evidence to show that when seeing three stripes on clothing, footwear or headgear, consumers immediately associate such products with Adidas,” he told The Guardian.

“This ruling is limited to this particular execution of the three-stripe mark and does ot impact on the broad scope of protection that Adidas has on its well-known three-stripe mark in various forms in Europe,” the company said in a statement.

At the end of the day. Adidas’ brand value will take a hit, which is currently worth $16.7 billion, according to Brand Finance.

Should others be worried?

Wednesday’s ruling leaves companies with well-known brands like McDonalds, Apple, and even Volkswagen wondering whether their marks are safe from similar rulings throughout the EU?

As technology has evolved and advanced over the years, the sporting goods industry has seen an increase in trademark disputes. High-profile cases have also included Adidas going up against Skechers USA and Nike, taking on Puma.

If we were applying case law and Abercrombie’s test, I would have to agree with the court.

If, however, we were applying public perception and status, I would say that no matter what a court says or the spectrum says, the public identifies and associates the “three-stripes” with Adidas—forever and always.

Should we abide by stare decisis, or appeal to market perception?

Andrew Rossow Andrew Rossow is a millennial technology attorney, writer, serial entrepreneur, and adjunct law professor based in Dayton, Ohio. In his criminal defense practice, he assists individuals in cases where they find themselves victims of crimes committed through the Internet, including social media and other virtual platforms. He is also the co-founder and Managing Editor of national news outlet, Grit Daily News, as well as the president of Make It Happen, LLC, a brand/reputation management company throughout Silicon Valley and Hollywood. He graduated from The University of Dayton School of Law and received his Bachelor's Degree from Hofstra University.