1.Introduction
The Court of Appeal of Helsinki held that products containing markings with four stripes infringed the well-known three-stripe mark of Adidas. A company distributing shoes with the four-stripe mark was ordered to cease selling such shoes, destroy the remaining stock of shoes with the four-stripe mark and compensate Adidas for the hypothetical license fees for the shoes sold and damages caused by the distribution and sale of infringing shoes.
2.Parties
Adidas is a producer of sports and leisure clothes, shoes and athletic gear. Adidas has used the three-stipe mark for decades to identify its products and has also registered the three-stripe mark as a trademark. Adidas has actively taken action against any of marks that it considers confusingly similar to its three-stripe mark and Adidas believes that no four-stripe marks have been freely used in Finland.
Donna Moderna Ltd is a Finnish distribution and agent company for different international brands. It also represents Industria de Calcados West Coast Limitada, which distributes shoes and other goods under the WEST COAST brand. According to Donna Moderna, WEST COAST is an independent, distinct mark known to the public.
In 2008 Adidas noticed that several WEST COAST sports and leisure shoe models sold in Finland appeared with a mark containing four-stripes. Adidas considered the four-stripe mark to be confusingly similar to its three-stripe mark and to cause the general public to associate Donna Moderna's four-stripe shoes commercially with Adidas' three-stripe shoes. Adidas requested Donna Moderna to stop importing, marketing and selling WEST COAST's four-stripe shoes. Donna Moderna refused and in aggregate sold 10.500 pairs of shoes with the sign to Finnish customers.
3.The parties' claims
(i) Adidas' claims
Adidas sued Donna Moderna in the District Court of Helsinki for trademark infringement claiming an injunction, reasonable compensation and damages. According to Adidas, the three-stripe mark is a well-known mark among the general public in Finland and world-wide and is therefore protected against the use of the same or similar marks by others. Adidas claimed that the similarities of the marks and their placing on the goods made appear almost identical.
Adidas was of the opinion that the assessment of the likelihood of confusion shall be limited to the overall assessment of the two marks only. Adidas further argued that other additional figures, words or signs on shoes sold by Donna Moderna must be disregarded.
A market research conducted for Adidas indicated that the general public confused the four-stripe products with Adidas' original three-stripe products. In addition, Adidas referred to the case law concluding that it is sufficient to examine whether the degree of similarity between four-stripe mark and Adidas' well-known mark is high enough to cause the public to associate the four-stripe sign with Adidas' three-stripe mark.
In addition, Adidas alleged that the unfair exploitation of the reputation of its three-stripe mark by Donna Moderna would depreciate the value of its mark's good will, causing dilution to the mark.
(ii) Donna Moderna's defense
Donna Moderna rejected all the claims of Adidas and argued that none of the four-stripe signs used in WEST COAST shoes were similar to the three-stripe mark. Further, there was no confusion because in addition to the four stripes, most of the WEST COAST shoe models included additional figures, words and signs clearly distinguishing the products.
Donna Moderna further argued that Adidas' exclusive right was limited to the three-stripe mark it had registered. Therefore Adidas was not entitled to protection against the use of other kinds of stripe marks especially because a stripe figure is not especially distinctive and others had used stripe figures on shoes in Finland.
Donna Moderna argued that the four-stripe sign has become a non-distinctive sign to which Adidas has no rights. The general public does not associate such signs with Adidas three-stripe mark. Donna Moderna also referred to previous decision by OHIM (the Harmonization Office of European Union). OHIM had concluded that the stripes were very commonly used figures in shoes and that a five-stripe sign had become a non-distinctive sign (R 1109/2004-1 whereby OHIM considered that five-stripe sign on shoes was not a distinctive mark).
4.Court Decisions
(i) The District Court of Helsinki
The District Court therefore held that most of the WEST COAST shoes subject to the claims of Adidas infringed Adidas' three-stripe mark. The District Court ordered Donna Moderna to cease its infringing behavior and to destroy the infringing shoes.
As a compensation for lost profit, the District Court ordered Donna Moderna to pay 15.000 euros. The District Court also ordered Donna Moderna to pay 25.000 euros in damages. As Adidas was unable to provide conclusive evidence of the common license fee practice in the respective industry or on the damages incurred, the court set the compensation and damages based on what it considered reasonable in the circumstances.
(ii) The Court of Appeal of Helsinki
Both parties appealed from the decision of the District Court of Helsinki to the Court of Appeal of Helsinki. In its decision the Court of Appeal agreed with the District Court and held that the four stripes used in WEST COAST sports and leisure time shoes infringed the rights of Adidas to its three-stripe mark.
It also considered Adidas' three-stripe mark to be a well-known and distinctive mark given its reputation on the markets. As a well-known mark, the three-stripe mark benefitted from a wider scope of protection.
In conformity with the 10th recital of the Trademark Directive, the court concluded that the assessment of the likelihood of confusion depends on numerous elements and, in particular, on the recognition of the trademark on the market, the association which can be made with the used or registered sign, and the degree of similarity between the trademark and the sign and between the goods or services identified. The Court of Appeal also concluded that the assessment of the similarity should be based on the overall appearance of the mark, taking especially into account the distinctive and dominant part of the mark.
The Court of Appeal also took a stance to the field of assessment. In the overall assessment, the determining factor in each shoe model is whether the four-stripe sign appears in them as a distinctive and distinguished mark. Colors play an important role in making this assessment.
In particular, as four stripes had been used in the same products as Adidas' mark (in sports and leisure shoes), the Court of Appeal concluded that it is likely that Donna Moderna's four-stripe sign will be associated with Adidas' well-known three-stripe mark. In addition, the Court of Appeal held that the marks will cause confusion and an association of WEST COAST four-stripe shoes with Adidas shoes.
The Court of Appeal held that all of Donna Moderna's four-stripe shoes infringed Adidas' trademark rights. The Court of Appeal ordered Donna Moderna to cease the selling of the shoes with four stripes and to destroy the infringing shoes.
The court also ordered Donna Moderna to compensate Adidas for the loss of profit in aggregate of 22.050 euros. The compensation was based on a hypothetical license fee of 6% that would have been payable if Donna Modena had been able to obtain a license for its infringing use.
Finally, the Court of Appeal also held that Donna Moderna's infringement was negligent. The court accepted that it is difficult to provide evidence of the amount of the actual damage and concluded that it is likely that damage was caused to Adidas and its three-stripe mark especially given the reputation and value of Adidas' mark and the extent of the marketing and sales of infringing shoes. The Court of Appeal therefore ordered Donna Moderna to pay an amount of 50.000 euros in damages.
5. Comments
Both courts' conclusions were consistent with earlier case law of the Finnish Supreme Court (e.g. Supreme Court decision no 1987:11) and the Courts of Appeal (Court of Appeal of Helsinki decision no 2006:29). Despite the fairly moderate amount of compensation ordered by the court, the Court of Appeal has based its compensation for loss of profit on a calculation of the hypothetical license fees providing some basis for assessing damage claims in similar action.
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