Nancy Chen is an IPilogue Writer and a 2L JD/MBA Candidate at the University of Toronto.

In a battle of the stripes, athletic fashion giant Adidas went head-to-head with American luxury fashion brand Thom Browne in a that tested the delicate balance between protecting a company's branding and allowing for creativity and competition in the marketplace. 

At the heart of the case was Adidas' iconic three-stripe design, which the company claimed was being infringed upon by Thom Browne’s four-striped signature. The sportswear giant argued that the stripes were crucial to its brand identity and that Thom Browne's use of similar stripes would dilute the distinctiveness of its trademark and cause confusion among consumers. If successful, Adidas sought and profits earned by Browne’s use of the stripes. However, , a jury rejected Adidas’ allegations, finding no infringement or dilution.

The case can be traced back to 2005 when Browne debuted his “Three-Bar Signature” motif. This prompted Adidas to reach out to the designer in 2007, citing the similarity between the two brands’ designs. In response, Browne added another stripe to his design and launched his “Four-Bar Signature.” Adidas seemingly approved this design, as the sportswear giant stayed quiet for the next decade while Browne produced jackets, ties, socks and athletic wear bearing the Four-Bar Signature.

However, in 2018 Adidas approached Browne about his use of the stripes, claiming that they only became aware of the infringement at that time. Settlement negotiations began but ultimately fell through, and Adidas filed an .

The proceedings of the case were extensive, with both sides presenting a large amount of evidence supporting their respective positions. Adidas presented evidence of the widespread use and recognition of their three-stripe design, and survey evidence suggesting that consumers were likely to be confused by the stripes used by Thom Browne.

Thom Browne, on the other hand, argued that the decade-long delay in bringing forth an allegation was unacceptable. Furthermore, the brands served different markets; Adidas is an affordable sportswear brand, whereas Thom Browne is a high-end luxury brand not centered around sportswear. “Adidas does not own stripes,” said Robert T. Maldonade, Browne’s attorney. The jury ultimately sided with Browne’s arguments.

The trial has set an important precedent in shaping the future of trademark protection and its impact on the fashion industry. The verdict showed that the legal system recognizes the potential for stifling creativity and competition if trademark protection is extended too far, emphasizing the need for a nuanced approach that balances the interests of trademark holders and the wider creative community. The in Adidas' bid to extend its Three-Stripe trademark in 2019 further reinforced these limits, as the court ruled that the trademark lacked "distinctive character". This underscores the importance of being cautious when granting trademark protection for non-distinctive marks to ensure that it does not infringe on the creativity and competitiveness of the marketplace.

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Katie Graham is an IPilogue Writer and a 2L JD Candidate at Osgoode Hall Law School.

On October 25, 2022, following a string of antisemitic remarks and hate speech from Ye (formerly known as Kanye West) on social media, Adidas their decision to terminate their co-branding partnership with Ye and end production of all Yeezy branded products. The termination of this seven-year partnership, most famously known for its development of the Yeezy sneakers, raises important questions about IP ownership when business collaborations collapse.

While Ye’s company, Mascotte Holdings Inc. (“Mascotte”), owns a portfolio of 160 trademark applications in the US connected to the “Yeezy” brand, Adidas solely owns all design rights to existing products, as well as previous and new colorways under the partnership. This includes at least eight filed by Adidas in 2016 that claim the ornamental design of the Yeezy sneakers. A licensing agreement between Mascotte and Adidas exists for the “Yeezy” trademarks. The dissolution of this contract will rely on the termination clauses that stipulate the division of IP between the parties or whether any “moral” clauses allow early termination of the contract.

Adidas intends to take advantage of its design rights by selling the Yeezy sneakers using its own branding. Adidas has the right to continue to manufacture identical sneakers to Yeezys, so long as they do not use the trademarks owned by Ye. However, the inherent link between Ye and this distinguishable sneaker design may prove problematic to Adidas regardless of the name etched onto the shoes.

How can businesses protect their public perception in co-branding partnerships?

The success of Ye and Adidas’ co-branding partnership demonstrates how cross-licensing IP, including industrial designs and trademarks, can be a strategic marketing scheme to tap into different markets or classes of consumers. Ye and Adidas join the rank co-branding fails including the for Pepsi with Kendall Jenner that was pulled back 48 hours after release; the partnership between Lego and Shell, which due to Shell’s negative environmental reputation; and, more recently in Canada, the of Lululemon and Peloton due to alleged unfair competition from Peloton. These examples stress the need for companies to protect their public perception through strategic negotiation and drafting of co-branding licensing agreements, particularly through “moral” clauses.

Moral clauses hold contracting parties to a behavioural standard so as not to bring scandal to the other party. These clauses should address the potential for “tarnishment, loss of goodwill or reduction in brand value that may stem from reputational damage experienced by either party” (). Remedies for breach of such clauses include corrective advertising, damages, and contract termination.

Before entering into co-branding agreements, especially those involving celebrities, contracting parties should also ensure their shared goals and values are aligned to mitigate the risk of negative backlash or future fallout. For Adidas, a risk assessment of entering this partnership with Ye in 2016 may have involved balancing the precarious public perception of Ye against the potential commercial market for Yeezy-branded shoes.

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Emily Chow is an IPilogue Writer and a 2L JD Candidate at Osgoode Hall Law School.

On June 10, 2022, Adidas launched its first federal lawsuit against its main competitor, Nike, at the US District Court in Eastern Texas. Demanding a jury trial, the alleges that Nike has conducted nine counts of patent infringement relating to Adidas’ GPS, sensor and wearable technologies.

Both retailers are at the forefront of the sportswear/sporting goods industry, although Nike substantially exceeds Adidas in global sales with a profit of compared to The are Puma ($5.72B), Under Armour ($5.22B) and Lululemon Athletica ($3.75B).

The global sneaker industry, valued at by the end of 2027. According to , a large proportion of Nike’s income comes from footwear, with an estimated revenue of $28 billion USD in 2021 compared to Adidas’ $12.84 billion.

In its complaint, Adidas claims that Nike induced infringements of nine patents through their development of the , , and mobile applications. Adidas also takes issue with shoe line, which launched in 2016 and features self-tightening laces according to the wearer’s foot. The company claims that this is an infringement of Adidas’ existing patent for an that senses and adjusts the comfort of the shoe when worn. was announced in 2004 and released in 2005, touted as the world’s first intelligent running shoe.

In addition to selling sneakers, Adidas and Nike have both developed various mobile applications and exercise companions. According to , features of Nike’s apps – such as location-based GPS run tracking, the creation of training plans, audio feedback, and integration with third party devices – are direct infringements of Adidas’ intellectual property and its app.  

Furthermore, Adidas points to similarities between its app, launched in February 2015, and , introduced a few days later. Both apps claim to make buying exclusive products easier and fairer for users, . The patented technology in question is , “systems and techniques for computer-enabled geo-targeted product reservation for secure and authenticated online reservations,” which allows Adidas to confirm a and prevent a bot from reserving the product in advance of the launch.

Adidas seeks a declaration from the court that Nike has infringed its patents, a permanent injunction, and compensatory damages, that “unless enjoined by this Court, [Nike’s] acts of infringement will continue to damage adidas irreparably.”

This new lawsuit comes at the and corresponding lawsuit filed in Oregon in December 2021. Nike sought to ban the import of shoes, accusing Adidas of appropriating Nike’s patented technology – a special knit weave made up of recycled and reclaimed yarn that creates a sock-like fit for the wearer.

The in Washington is often a forum for companies competing in the global market. Given the ITC’s relatively faster decisions – 15 to 18 months – , the ITC offers an expedited, comprehensive mechanism for addressing patent infringements.

Back in 2005, Nike also sued Adidas in East Texas. However, the companies It will be interesting to see how the ITC and Oregon verdicts will affect both companies’ strategies moving forward.

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