A new record was set this summer when a federal jury ordered Payless ShoeSource to pay $304.6 million to Adidas for trademark infringement. It was the largest award in a trademark-infringement case in U.S. history, and now Payless has decided to settle a similar case with K-Swiss.
Wait? Payless ShoeSource? The home of insanely cheap shoes? The mecca for drag queens in search of size 16 stilettos? I don’t know about you, but I assumed that the biggest trademark-infringement cases in this country would probably involve something more lucrative than sneakers. Turns out the previous record was held by big-pharma Pfizer, but that award, decided in 1999, was $143 million, less than half the mega-judgment against Payless.
What happened? After all, it’s not that Payless tried to pass off their cheap sneakers as Adidas by putting a misleading label in them â€“ Abibas, for instance. No, their tragic, infringing error was putting two or four stripes on the sides of their shoes â€“ according to the suit, this tricked consumers into thinking the shoes were made by Adidas . . . even though Adidas shoes always have three stripes.
As a long-time aficionado of Payless’ cheap wares, I think I can safely say that anyone who’s ever set foot in a Payless ShoeSource knows immediately from the bargain-basement prices and the intoxicating smell of vinyl that none of the shoes on offer are from the big brands.
The Lear Center has performed a good deal of research on the fashion industry because it offers a fascinating example of an industry that thrives despite the fact that it operates with virtually no copyright or patent protection (imagine the music or film industry in similar straights). But apparel designers have long had trademark protection, and, ever since the Lanham Act passed in 1994, they’ve had access to something called ‘trade dress’ protection as well. This has allowed Adidas to claim ownership not only of their logo, but also of their iconic three-stripe design. Fully aware of this, Payless knocked-off the Adidas designs â€“ a perfectly legal practice in the global fashion industry â€“ and changed the number of stripes to either two or four.
It may seem like a silly case, but here’s where the chilling effects begin. The award is seven times larger than Payless’ gross revenue in 2007, and it sends out a signal to designers and retailers throughout the fashion industry that they’d better mind their P’s and Q’s in a way they never had to before. While pirating a designer’s trademark has never been legal, borrowing from existing designs is a natural part of the creative process and it is essential to the industry’s effort to establish and monetize trends. Overall, legislators and the courts have agreed time and again that the lack of copyright protection has served the industry very well. Now, an item that appears to imitate the look and feel of another trademarked product may also be subject to legal action and profound financial sorrows.
Where will the lines be drawn? How does one define the je ne sais quoi of a signature Chanel suit? If juries will be asked to draw the line between creations inspired by iconic designs and knock-offs that seek to confuse consumers, we better add fashion literacy to our educational curriculum tout de suite.
One of my fears is that the fashion industry will suffer the same fate that has befallen the music industry, where outdated notions of intellectual property protection have poisoned the relationship between music labels, musicians and their most ardent fans. Let’s hope the fashion industry doesn’t try to cling to the same rope that’s strangling the music industry.
Johanna Blakley will be addressing this topic and more at this year’s iSummit in Sapporo, Japan.