Legal News

Adidas v. Payless: $100 Million for Every Stripe; Payless Could Pay More

By Dan Slater

The last time the Law Blog obsessed over sneakers was 1991, when we watched Dee Brown use Reebok Pump Omni Lites, which were anything but light, to pull off the no-look dunk that won him the 1991 NBA slam-dunk contest. But we found ourselves again transfixed by kicks while paging through the 267 kinds of infringing shoes pictured in the verdict form from the case of Adidas v. Payless. Yesterday, a federal jury in Oregon awarded Adidas about $305 million, understood by some lawyers to be the largest trademark verdict ever. (Here’s the 3rd amended complaint.)

Payless, owned by Kansas-based Collective Brands, called the verdict “excessive and unjustified” and said it plans to ask the court to set the verdict aside. If that request is not granted, the company said in a statement, Collective “intends to take all necessary steps to overturn it.”

But Kilpatrick Stockton’s Charlie Henn, who represented Adidas in the case, told that Law Blog that, while a reduction of the verdict is possible on appeal, he thinks Payless could wind up paying Adidas quite a bit more than $305 million. Upon a finding of willful infringement, said Henn, the judge can not only award the plaintiffs attorneys fees (here, seven years worth) but can triple the damages portion of the verdict, which is $137 million.

Henn, who was joined by Kilpatrick’s Jerre Swann and William Brewster, said Payless bought multiple versions of the three-stripe Adidas sneakers, sent them off to china to be manufactured with either two or four stripes, and then sold approximately 30 million pairs of the infringing shoes in stores, or about $400 million worth.

Here’s how the jury verdict breaks down: The actual damages — for trademark and trade dress infringement, trademark and trade dress dilution, and unfair and deceptive trade practices — amounted to $30 million. With the finding of willfulness, the jury also ordered Payless to disgorge profits, which amounted to about $137 million on the infringing shoes. The punitive damages mirrored the disgorged profits, for a total of about $305 million.

Stephen Feldman and Thomas Johnson, from Perkins Coie, served as co-counsel for Adidas. On the Payless side was Lathrop & Gage’s Bill Rudy, who did not immediately respond to a phone call seeking comment.

Full post as published by Law Blog - WSJ.com on May 07, 2008 (boomark / email).