Although they may have thought they were within their legal limits, the executives at Payless Shoesource were operating on the edge of trademark law.
Sure, Payless was selling shoes modeled after some of the best-selling shoes made by German-based Adidas-Salomon (now Adidas). The Payless shoes had stripes that were similar to Adidas' three-stripe trademark. And many of the shoes had a style similar to the trade dress of Adidas' Superstar line. Payless employees even referred to them as Adidas knockoffs.
For instance, although Payless had obtained infringement "risk assessments" from outside trademark experts, many of these assessments were conducted only after Adidas had initiated the current lawsuit. "It is difficult to see how Payless could have relied in good faith upon advice that it did not seek or obtain until after Adidas filed suit for willful infringement," the court wrote.
More significantly, the court found problems with the opinion provided by outside counsel. These attorneys had reviewed only 40 of the 267 shoe styles at issue, and the court felt this was insufficient. "With respect to the unreviewed shoes, it is difficult to see how Payless can rely on advice that it did not actually seek or obtain," the court wrote.
The ruling seems likely to cause U.S. businesses to toughen their trademark clearance procedures--at least in certain circumstances. "In situations where the parties have litigated before, the issues are close, or a challenge is likely, the opinion [of counsel] should be thorough and intended for the court or jury, in addition to the client," Johnston says.