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Adidas America, Inc. v. Skechers USA, Inc.

United States Court of Appeals, Ninth Circuit

May 10, 2018

ADIDAS AMERICA, INC., a Delaware corporation; ADIDAS AG; ADIDAS INTERNATIONAL MARKETING B.V., a foreign entity, Plaintiffs-Appellees

          Argued and Submitted October 7, 2016 Portland, Oregon

          Appeal from the United States District Court for the District of Oregon Marco A. Hernandez, District Judge, Presiding D.C. No. 3:15-cv-01741-HZ

          Jonathan Hacker (argued), O'Melveny & Myers LLP, Washington, D.C.; Jordan Raphael, Jeffrey A. Barker, Mark A. Samuels, and Daniel M. Petrocelli, O'Melveny & Myers LLP, Los Angeles, California; for Defendant-Appellant.

          Richard Charles Henn Jr. (argued) and Charles H. Hooker III, Kilpatrick Townsend & Stockton LLP, Atlanta, Georgia; Adam H. Charnes, Kilpatrick Townsend & Stockton LLP, Dallas, Texas; for Plaintiffs-Appellees.

          Before: Diarmuid F. O'Scannlain, Richard R. Clifton, and Jacqueline H. Nguyen, Circuit Judges.

         SUMMARY [*]

         Lanham Act / Preliminary Injunction

         The panel affirmed in part and reversed in part the district court's preliminary injunction prohibiting Skechers USA, Inc., from selling shoes that allegedly infringe and dilute adidas America, Inc.'s Stan Smith trade dress and Three-Stripe mark.

         Affirming in part, the panel held that the district court did not abuse its discretion in issuing the preliminary injunction as to adidas's claim the Skechers's Onix shoe infringed on adidas's unregistered trade dress of its Stan Smith shoe. The panel concluded that adidas was likely to succeed on the merits of this claim because the trade dress was nonfunctional, the trade dress had acquired secondary meaning, and there was a substantial likelihood of confusion between the parties' products. In addition, the district court did not clearly err in finding a likelihood of irreparable harm to the Stan Smith.

         Reversing in part, the panel held that the district court erred in issuing a preliminary injunction as to adidas's claim that Skechers's Cross Court shoe infringed and diluted its Three-Stripe mark. The panel held that the district court did not err in finding that adidas showed a likelihood of success on its trademark infringement and trademark dilution claims. Nonetheless, the district court abused its discretion in issuing the preliminary injunction because adidas did not show that it would be irreparably harmed from sale of the Cross Court.

         Concurring in part and dissenting in part, Judge Clifton wrote that the preliminary injunction should be affirmed in full. Judge Clifton disagreed with the majority's reversal of the preliminary injunction as to the Cross Court shoe on the ground that there was not evidence to support the district court's determination that adidas was likely to suffer irreparable injury.

          OPINION

          NGUYEN, Circuit Judge:

         Skechers USA, Inc. appeals the district court's issuance of a preliminary injunction prohibiting it from selling shoes that allegedly infringe and dilute adidas America, Inc.'s Stan Smith trade dress and Three-Stripe trademark. We hold that the district court did not abuse its discretion in issuing the preliminary injunction as to adidas's claim that Skechers's Onix shoe infringes on adidas's unregistered trade dress of its Stan Smith shoe. We conclude, however, that the district court erred in issuing a preliminary injunction as to adidas's claim that Skechers's Cross Court shoe infringes and dilutes its Three-Stripe mark. Accordingly, we affirm in part and reverse in part.

         I.

         FACTUAL BACKGROUND

         adidas is a leading manufacturer of athletic apparel and footwear. Skechers is a footwear company that competes with adidas in the active footwear and apparel market. Skechers has grown to become the second largest footwear company in the United States, ahead of adidas and behind only Nike.

         The Stan Smith has become one of adidas's most successful shoes in terms of sales and influence since its release in the 1970s. Deemed "[t]he favorite shoe of [fashion industry] insiders like designer Raf Simons and Marc Jacobs" by The Wall Street Journal and the "ultimate fashion shoe" by i-D magazine, the Stan Smith has received extensive media coverage and been featured in such print and online publications as Time, Elle, InStyle, and Vogue. The Stan Smith also has frequently appeared on lists of the most important or influential sneakers of all time and has earned industry accolades such as Footwear News's 2014 "Shoe of the Year." That same year, adidas announced that the Stan Smith had become its top-selling shoe of all time, selling more than 40 million pairs worldwide.

         adidas is also known for its Three-Stripe mark, which has been featured on its products for many years as part of its branding strategy and for which it owns federal trademark registrations. adidas claims to earn several hundred million dollars in annual domestic sales of products bearing the Three-Stripe mark. adidas advertises the Three-Stripe mark in print publications, on television, and in digital media and promotes it through celebrity endorsements, sporting events sponsorships, and athletic partnerships.

         The parties have a history of trademark litigation that has previously resulted in Skechers acknowledging that "adidas is the exclusive owner" of the Three-Stripe mark and agreeing not to use it or any other protected mark "confusingly similar thereto." Despite the agreement, adidas has sued Skechers several times in the last twenty years for infringement of its Three-Stripe trademark.[1]

         adidas filed the present lawsuit against Skechers on September 14, 2015, alleging, among other things, that Skechers's Onix shoe infringes on and dilutes the unregistered trade dress of adidas's Stan Smith shoe (both pictured below). adidas further alleges that Skechers's Relaxed Fit Cross Court TR (pictured below) infringes and dilutes adidas's Three-Stripe trademark, in violation of 15 U.S.C. § 1125(a), (c).

         (Image Omitted)

         adidas filed a motion for preliminary injunction to prohibit Skechers from manufacturing, distributing, advertising, selling, or offering for sale the Onix and Cross Court. The district court granted adidas's motion and issued the preliminary injunction, finding that adidas established all the Winter factors. See Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (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.").

         Skechers timely appealed.

         II.

         STANDARD OF REVIEW

         We review the district court's issuance of a preliminary injunction for an abuse of discretion. See Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 876 (9th Cir. 2009). "A district court abuses its discretion in issuing a preliminary injunction if its decision is based on either an erroneous legal standard or clearly erroneous factual findings . . . ." Negrete v. Allianz Life Ins. Co. of N.A., 523 F.3d 1091, 1096 (9th Cir. 2008). "The legal issues underlying the injunction are reviewed de novo because a district court would necessarily abuse its discretion if it based its ruling on an erroneous view of law." GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1204 (9th Cir. 2000) (internal quotation marks omitted). By contrast, the district court's factual findings are reviewed for clear error. See Lahoti v. VeriCheck, Inc., 586 F.3d 1190, 1195-96 (9th Cir. 2009).

         III.

         ANALYSIS

         Skechers contests only two of the factors under Winter, specifically, the district court's findings that adidas showed a likelihood of success on the merits and irreparable harm. Because the analysis for Skechers's Onix and Cross Court shoes differ, we take them each in turn.

         A. Skechers's Onix and adidas's Stan Smith

         i. Likelihood of Success on the Merits

         Skechers challenges the district court's finding that adidas demonstrated a likelihood of success on its claim that Skechers's Onix shoe infringes on and dilutes adidas's unregistered Stan Smith trade dress.

         "Trade dress protection applies to 'a combination of any elements in which a product is presented to a buyer, ' including the shape and design of a product." Art Attacks Ink, LLC v. MGA Entm't Inc., 581 F.3d 1138, 1145 (9th Cir. 2009) (quoting 1 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 8:1 (4th ed. 2008)).[2]To prove infringement of an unregistered trade dress, "a plaintiff must demonstrate that (1) the trade dress is nonfunctional, (2) the trade dress has acquired secondary meaning, and (3) there is a substantial likelihood of confusion between the plaintiff's and defendant's products." Id. Skechers contests only the latter two elements.

         A trade dress has acquired secondary meaning when consumers associate the design features with a particular producer. Fleischer Studios, Inc. v. A.V.E.L.A., Inc., 654 F.3d 958, 967 (9th Cir. 2011) (citation omitted). "Secondary meaning and likelihood of buyer confusion are separate but related determinations . . . ." Levi Strauss & Co. v. Blue Bell, Inc., 632 F.2d 817, 821 (9th Cir. 1980). Some of the relevant factors for determining secondary meaning include the exclusivity, manner, and length of use of the trade dress, the amount and manner of advertising, the amount of sales, and proof of intentional copying by the defendant. Art Attacks, 581 F.3d at 1145.

         The district court's finding that the Stan Smith has likely acquired secondary meaning is supported by ample evidence in the record. The evidence showed that adidas has used the Stan Smith trade dress exclusively since the early 1970s, expended considerable capital and human resources to promote the shoe, and reaped significant but difficult-to-quantify value from placing the Stan Smith with celebrities, musicians, athletes, and other "influencers" to drive consumer hype and recognition of the trade dress-which, in 2014, became adidas's top selling shoe of all time with the 40 millionth pair sold. See Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1016 (9th Cir. 1985) (finding evidence of sales, promotional efforts, and duration of exclusive use indicative of secondary meaning). Also indicative of secondary meaning is the considerable amount of unsolicited media coverage praising the Stan Smith's influence and iconic status as one of the most famous sneakers of all time. See Golden Door, Inc. v. Odisho, 646 F.2d 347, 350-51 (9th Cir. 1980) ("The district court's finding that a secondary meaning has attached is supported by evidence of the extensive media coverage . . . .").

         Skechers's own conduct also supports the district court's finding. "[P]roof of copying strongly supports an inference of secondary meaning." Vision Sports, Inc. v. Melville Corp., 888 F.2d 609, 615 (9th Cir. 1989). Skechers placed metadata tags on its website that directed consumers who searched for "adidas Stan Smith" to the page for the Onix shoe. "Using another's trademark in one's metatags is much like posting a sign with another's trademark in front of one's store." Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1064 (9th Cir. 1999). We agree with the district court that "the only reason 'adidas Stan Smith' is a useful search term is that consumers associate the term with a distinctive and recognizable shoe made by adidas." Therefore, the district court did not clearly err by finding that the Stan Smith had acquired secondary meaning.

         We turn next to the likelihood of confusion between the shoes. This factor turns on whether a reasonably prudent consumer would be confused about the source of the goods bearing the marks. Dreamwerks Prod. Grp., Inc. v. SKG Studio, 142 F.3d 1127, 1129 (9th Cir. 1998). "Likelihood of confusion in the trade dress context is evaluated by reference to the same factors used in the ordinary trademark context[:] strength of the trade dress, similarity between plaintiff's and defendant's trade dress, evidence of actual confusion, marketing channels used, type of goods and likely degree of purchaser care, and the defendant's intent in selecting its trade dress." Vision Sports, 888 F.2d at 616 (internal citation omitted) (citing AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, ...


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