InsideCounsel » May 2008
Reviews Revisited
Court demands more substance from opinion-of-counsel defense in trademark disputes.
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.
But that’s not trademark infringement, Payless asserted in court after Adidas sued the Topeka, Kan.-based shoe retailer. It’s certainly not willful infringement as Adidas asserted, Payless claimed, because it had acted in reliance on the opinion of outside counsel. (The identity of outside counsel was concealed in court documents.)
These attorneys had assured Payless it was doing nothing wrong. So the company moved for summary judgment, asking the trial judge to throw out Adidas’ claims of willful infringement.
Oregon Federal Judge Garr King refused. His December 2007 ruling in Adidas America Inc. v. Payless Shoesource Inc. provides some important lessons for businesses across the country about how and when to rely on the opinions of trademark counsel.
“Anyone involved in the trademark clearance process—whether in-house or as outside counsel—should use this case as an opportunity to revisit their standard practices in preparing clearance opinions,” says Jeremy Thornton, an IP lawyer in the Columbus, Ohio, office of Schottenstein Zox & Dunn.
Unforgotten Foes
This isn’t the first time Adidas has sued Payless for infringement. In 1994, Adidas alleged Payless was selling athletic shoes with three decorative stripes confusingly similar to Adidas’ three-stripe mark.
Adidas dropped its lawsuit later that year when Payless agreed not to sell athletic shoes bearing “three substantially straight parallel stripes on the side of the shoe” or “two or four parallel double-
serrated stripes.” Both parties lived up to the settlement agreement. Payless, however, continued to sell shoes that had two or four straight-edged stripes.
So in 2001, Adidas again filed suit, alleging among other things that by selling these two- and four-stripe shoes, Payless was willfully infringing Adidas’ three-stripe mark and Superstar trade dress. And if found guilty of willful infringement, Payless could face some hefty penalties.
One well-established way to overcome allegations of willful infringement is for a defendant to claim it relied in good faith on the opinion of its legal counsel. Although this opinion-of-counsel defense is
commonly used in patent infringement suits, it is rarely asserted in trademark cases. Therefore, according to many trademark experts, the court’s decision in Adidas is important because it sets forth strict standards for using the opinion-of-counsel defense in a trademark case.
