IP Law Daily, TRADEMARK—S.D.N.Y.: Thom Browne fails to nullify adidas three-stripe mark as aesthetically functional, (Oct 21, 2022)

By Robert B. Barnett Jr., J.D.

The counterclaim was dismissed because it was predicated on a description of the trademark that failed to match the actual description contained in the trademark registration.

In a trademark suit by adidas alleging that Thom Browne, Inc., infringed its Three-Stripe mark for footwear and sportwear, Thom Browne’s counterclaim seeking cancellation of adidas’s trademark on aesthetic functionality grounds was dismissed with prejudice because the counterclaim theorized a registered trademark on all numbers and orientation of stripes rather than the three stripes contained in the actual trademark registration, a New York City federal district court has ruled, in accepting a magistrate judge’s Report and Recommendation in full. The court also agreed to dismiss Thom Browne’s affirmative defenses of aesthetic functionality and most of unjust enrichment, which was described as “nonsensical.” However, Thom Browne’s defense of laches, acquiescence, and estoppel was adequately pleaded (adidas America, Inc. v Thom Browne, Inc., October 18, 2022, Rakoff, J.).

Background. adidas is a clothing company that uses its famous three stripes mark on footwear, sportwear, and related products, which is trademarked with the U.S Patent and Trademark Office. In the registration, the mark was described as “three diagonal quadrilaterals positioned parallel to each other.” The registration otherwise contained no limit as to length, orientation, or placement of the three stripes, although on adidas products the stripes are typically right-leaning.

Thom Browne, Inc., founded in 2001 as a clothing and accessories manufacturer, originally adopted three stripes as its mark. About 10 years ago, after infringement discussions between Thom Browne and adidas, adidas acquiesced to Thom Browne’s decision to change from a three-stripe mark to a four-stripe mark. The Thom Browne stripes are oriented horizontally.

adidas’s acquiescence changed, however, when Thom Browne moved into athletic sportswear. In 2021, adidas sued Thom Browne in New York federal court for trademark infringement, unfair competition, and dilution. Thom Browne answered with 18 affirmative defenses and a counterclaim seeking cancellation of adidas’s trademark registration on aesthetic functionality grounds. In essence, Thom Browne argued that, if clothing designers were not permitted to use parallel stripes on clothing, they would be placed at a significant non-reputational disadvantage. adidas, in turn, filed a motion to dismiss the counterclaim and to strike Thom Browne’s first (laches, acquiescence, and estoppel), ninth (unjust enrichment), and twelfth (aesthetic functionality) affirmative defenses.

The magistrate judge recommended that the motions be granted in part and denied in part, with the counterclaim being dismissed and affirmative defenses nine and twelve being stricken. Thom Browne filed an objection to the magistrate’ recommendations, with the court agreeing to review the issues de novo.

Registration cancellation. A mark is considered to be aesthetically functional, and thus ineligible for Lanham Act protection, if protection of the mark “significantly undermines competitors’ ability to compete in the relevant market” (Christian Louboutin S.A. v. Yves Saint Laurent America Holdings, Inc., 696 F. 3d 206, 222 (2nd Cir. 2012)). The magistrate had found that Thom Browne misconstrued the scope of adidas’s mark. The adidas mark consists of three right-leaning stripes. Thom Browne’s argument for aesthetic functionality, however, treated the mark as if it applied to the use of stripes generally, without reference to any particular number. In other words, Thom Browne argued that competitors would be at a non-reputational disadvantage because they could not use stripes. Nowhere, however, did Thom Browne argue that the use of three parallel stripes would place competitors at a non-reputational disadvantage, as it must if its argument was to succeed. The magistrate concluded that “Thom Browne thus has not asserted a plausible claim that the trademark protected by the Challenged Registration is aesthetically functional.” Thus, “Thom Browne’s aesthetic functionality argument theorizes a registered trademark that does not exist: a trademark on all number and orientations of stripes.”

Furthermore, the magistrate noted, if Thom Browne were to succeed in its arguments that the three stripes mark was invalid on grounds of aesthetic functionality, why would that same argument not apply to Thom Browne’s four stripes mark? Thus, Thom Browne stayed away from focusing on the description in the actual registration. When it did, however, it failed to assert a plausible claim for invalidity.

The federal court judge agreed with the magistrate’s finding on the counterclaim and adopted it in full. As a result, the judge agreed with the magistrate that the counterclaim should be dismissed with prejudice because “further amendment would be futile.”

Motion to strike defenses. adidas sought to the strike affirmative defense for (1) laches, acquiescence, and estoppel, (2) unjust enrichment, and (3) aesthetic functionality.

As for the defense of laches, acquiescence, and estoppel, the magistrate recommended that it not be stricken because it was adequately pleaded. Thom Browne sufficiently stated it suffered undue prejudice from an “unreasonable delay in bringing this action.” Thom Browne asserted that it was prejudiced by reliance on adidas’s original acquiescence to its four stripes. The magistrate concluded that a reasonable inference could be drawn that Thom Browne reasonably assumed that adidas would not complain about using four stripes on sportswear because it had not complained about four stripes on other types of wear.

As for unjust enrichment, the magistrate recommended that it be mostly stricken, referring to the use of unjust enrichment as an affirmative defense, which is usually a separate claim rather than an affirmative defense, as “nonsensical.” The magistrate also concluded, however, that he had no problem with Thom Browne keeping the part of the unjust enrichment affirmative defense that stated that “adidas suffered no harm or damages from Thom Browne’s conduct.” Thom Browne has every right to challenge the sufficiency of adidas’s claims. Thus, the magistrate recommended that the affirmative defense be stricken, except for the part generally challenging adidas’s claims.

As for aesthetic functionality, the magistrate recommending striking it as an affirmative defense for the same reasons that aesthetic functionality failed as a counterclaim argument.

Once again, the trial judge agreed with the magistrate in full, and he adopted the magistrate’s recommendations on matters related to the striking of affirmative defenses.

The court, therefore, granted the motion to dismiss the counterclaim, granted the motion to strike the aesthetic functionality affirmative defense, granted the motion to strike the unjust enrichment affirmative defense except for the assertion that adidas suffered no harm, and denied the motion to dismiss the laches, acquiescence, and estoppel affirmative defense.

The Case is No. 1:21-cv-05615-JSR-RWL.

Attorneys: Bethany R. Nelson (Kilpatrick Townsend & Stockton LLP) for adidas America, Inc. and adidas AG. Robert T. Maldonado (Wolf Greenfield & Sacks, PC) for Thom Browne, Inc.

Companies: adidas America, Inc.; adidas AG; Thom Browne, Inc.

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