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Mar 13, 2015

Converse is kicking out the competition – Los Angeles Daily Journal

As appeared in the March 12, 2015 issue of the Los Angeles Daily Journal

Nicholas Rozansky is a partner with Brutzkus Gubner LLP.

Last October, Nike’s Converse Inc. dropped a legal bombshell on 31 companies, including Wal- Mart, Sketchers USA and FILA, claiming that the companies are infringing upon a configuration of elements Converse claims are protected by trademark law – a rubber “bumper” running around the front of the shoe, a “toe cap” on the top of the shoe above the bumper, and lines or stripes running around the sides. These, Converse claims, are signature elements of its signature Chuck Taylor All Stars.

Converse, acquired by Nike in 2003, wants the transgressing shoes off the shelves, along with monetary damages. Because the former is of utmost importance, Converse is pursuing a separate complaint with the International Trade Commission (Certain Footwear Products, investigation number 337-TA-936, in the U.S. International Trade Commission), which has the power to stop any shoe it considers to be counterfeit from entering the country.

Nike and Converse are serious. The unusual move of pursuing a separate complaint before the U.S. International Trade Commission (ITC) shows they are dead-set on protecting the $1.7 billion of Nike’s roughly $28 billion in sales that Converse represents.

In November 2014, the ITC “voted to institute an investigation of certain footwear products. The products at issue … are shoes that allegedly infringe or dilute registered and common law trademarks used in connection with certain Converse shoes, such as the Chuck Taylor All Star Shoe. The complaint, as amended, alleges violations of section 337 of the Tariff Act of 1930 in the importation into the United States and sale of certain footwear products that infringe or dilute registered and common law trademarks asserted by Converse. The complainant requests that the ITC issue a general exclusion order, or in the alternative a limited exclusion order, and a cease and desist order.”

Trademark cases rarely make it to the ITC, an underutilized venue for brands aiming to fight infringement. So rare that the defendants are asking for a stay in the federal litigation until the ITC makes its determination.

Earlier this year, one defendant, Ralph Lauren Corp., caved after the ITC determined that Ralph Lauren infringed on Converse’s trademarks, including “washed canvas, Western leather, camouflage shoes, and bleached denim shoes.” Ralph Lauren then had 20 days to scrap all of its 36 copycat sneakers and related “molds, parts, tools, marketing, packaging and promotional materials,” and paid Converse an undisclosed amount. The ITC went wider than the “bumpers,” “caps” and “stripes.”

One would think this determination would scare the other defendants into settling. Interestingly enough, on Feb. 10, Converse filed notice it was dismissing its case against Zulily “in view of an agreement” reached between the two parties and, in late February, Converse notified the U.S. district court in Brooklyn that it was dismissing its suits against H&M and Tory Burch.

The other defendants continue to stand firm, mainly because trademark infringement is difficult to prove in the apparel and fashion world. Trademark law does not allow companies to protect aspects of their designs that are functional, and companies must also prove that consumers associate the specific design with the manufacturer.

Two defendants argue that the rubber “bumper,” the “toe cap,” and the lines or stripes running around the sides are merely functional elements of a sneaker, which cannot be protected by trademark. These defendants also say Converse waited so long to sue that widespread copying had made this sneaker design generic. Others defendants are likely to argue that the collection of elements has not acquired sufficient distinctiveness to function as a source designator to make the shoe unique and protectable.

In that vein, it is important to take a look at recent high profile cases drawing media attention, such as Apple v. Samsung, 678 F.3d 1314, 1316 (Fed. Cir. 2012), and Christian Louboutin v. Yves Saint Laurent, 696 F.3d 206, 211 (2d Cir. 2012), that continue to push courts to look at protection issues.

The more relevant case is Christian Louboutin, in which a court found that Louboutin’s signature red shoe sole was a “distinctive symbol” that represented the brand and deserved trademark status. The court stated, “the lacquered red outsole, as applied to a shoe with an ‘upper’ of a different color, has ‘come to identify and distinguish’ the Louboutin brand, and is therefore a distinctive symbol that qualifies for trademark protection.” Determining factors include (1) advertising expenditures; (2) consumer studies linking the mark to a source; (3) unsolicited media coverage; (4) sales success; (5) attempts to plagiarize the mark; and (6) length and exclusivity of the mark’s use.

This holding narrowed Louboutin’s trademark to circumstances where the red shoe sole is matched with a contrasting upper. The court relied on evidence that the red sole mark’s ability to stand out from competitors depended on the color contrast between the red sole and a non-red upper of the shoe. Conversely, the court determined that shoes employing the same red color on the sole and upper was not a use of the red sole mark. This conclusion led to the court dismissing Louboutin’s trademark claims because YSL’s shoe was entirely red and thus not a use of the red sole mark.

Courts probably will look at Christian Louboutin when ruling in the Converse case.

In another recent development, New Balance, not named in Converse’s initial lawsuit, took preemptive action by filing a federal lawsuit denouncing Converse’s “aggressive efforts” to protect its Chuck Taylor All-Star sneakers from “imitators.” New Balance even contacted Converse to ensure that New Balance’s PF Flyers shoe would be excluded from Converse’s aggressive legal campaign. In return, Converse threatened to add New Balance to the list of alleged infringers it submitted to the ITC.

Shortly thereafter, Converse issued a statement saying it “brought its case to the International Trade Commission to prevent consumer confusion, to protect its legitimate intellectual property rights, and to stop the sale of knockoff Chucks, all of which remain unchanged.” “We are committed to protecting our rights and will respond to [New Balance’s] filing accordingly.”

Depending on the outcome, the Converse case may prove to be a harbinger of similar cases in years to come.

 

 

 

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