SC refuses to reconsider adidas' claim that four-striped shoes infringe its three-stripe mark

Israel

In adidas Salomon AG v Yassin (ACH 6658/12, August 27 2014), the Supreme Court has refused a petition for an additional hearing regarding its appellate ruling in this case, in which the court had rejected adidas' claims of trademark infringement, passing off, dilution and unjust enrichment against an importer of lower-end shoes bearing four stripes. Nevertheless, in effect, the court significantly tempered the appellate ruling.

adidas, a major manufacturer of sportswear, unsuccessfully sued an importer of athletic shoes bearing four parallel diagonal stripes on their side for infringement of adidas' famous three-stripe trademark (which is registered in Israel), passing off, dilution and unjust enrichment.

Registered marks:

3     4

Defendant's goods:

 1   2

After the claim was dismissed by the district court, adidas unsuccessfully appealed to the Supreme Court. The Supreme Court affirmed the district court's decision on all grounds, holding as follows:

  1. The four-stripe mark did not infringe the three-stripe mark, because, among other things, as the marks were visual signs, they should not be examined in isolation from the goods to which they are affixed.

  2. On the issue of dilution, the Supreme Court held that, while it was true that the doctrine of dilution does not require a showing of a likelihood of confusion, dilution in the absence of any confusion should be reserved for extraordinary cases, such as where the absence of confusion results from totally different types of goods or a different “commercial family”.

  3. In respect of unjust enrichment, the majority of the court left unresolved the question of whether, in principle, a party is entitled to a remedy under unjust enrichment law where such party is not entitled to a remedy under traditional trademark law. It was noted that, even if unjust enrichment law could apply in principle, in the present case this would be of no avail. However, assuming that a trademark owner may in principle be entitled to a remedy under unjust enrichment law, the finding of an absence of confusion carried a very substantial weight in determining the applicability of the unjust enrichment doctrine. The minority of the court was of the opinion that adidas should be granted a remedy under unjust enrichment law, as its reputation was being exploited, even though consumers bought the imitations knowingly and not as a result of confusion.

adidas sought an additional hearing, arguing that the Supreme Court had made several deviations from the existing case law. The Supreme Court refused an additional hearing, which may be granted in cases where the ruling is novel, important or difficult in a substantial and significant way. It held that the appellate ruling did not conflict with earlier case law, but was a development thereof which did not justify an additional hearing. Nonetheless, the additional hearing proceedings included some comments that mitigated the effect of the court's appellate judgment.

Regarding trademark infringement, adidas argued that the appellate judgment's analysis of confusing similarity, which did not examine the marks in isolation from the products, had blurred the distinction between trademark infringement and the tort of passing off. In this respect, the Supreme Court, in the additional hearing proceedings, toned down the appellate ruling and interpreted it as meaning that the appellate court had not laid down a general rule for examining trademark infringement, but rather had applied the test of confusing similarity to this particular case. Further, the Supreme Court distinguished its earlier ruling on adidas' three-stripe mark in a different infringement case and held that, in that case, the court had not ruled out the possibility that a visual mark should, for the purpose of confusing similarity, be examined in relation to the goods on which it appears. The court further clarified that confusing similarity must be examined differently in trademark infringement and passing-off cases, since, in passing-off cases, the examination concerns the overall conduct of the defendant.

With regard to dilution in the absence of confusion, adidas argued that the appellate ruling created an anomalous situation in which a lack of confusion would result in lesser protection for goods of the same description than for goods of a different description. In this regard, in the additional hearing proceedings, the Supreme Court tempered the  effect of the appellate ruling, stressing that the distinction between goods of the same description and goods of different descriptions was merely an example of a situation where a lack of confusion would not be material to the examination of dilution, and not the principal part of the ruling; the main rule was that, in the absence of confusion, dilution would be recognised only in extraordinary cases.

As to unjust enrichment, adidas argued that, where a trademark infringement claim does not succeed, the trademark owner may be entitled to a remedy under unjust enrichment. The Supreme Court, in the additional hearing proceedings, clarified that the appellate ruling did not rule out the applicability of unjust enrichment law in cases where a trademark owner was not entitled to a remedy under trademark infringement or passing off, as may have been inferred from the appellate judgment; rather, the appellate ruling weighed the considerations of the case at hand, particularly the lack of confusion.

The petition for an additional hearing was refused, and attorneys’ fees in the amount of IS20,000 were awarded against adidas.

David Gilat and Sonia Shnyder, Gilat, Bareket & Co, Reinhold Cohn Group, Tel Aviv

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