One celebrity trainer has responded to the lawsuit filed against her by another celebrity trainer, calling the case “a frivolous and unprovoked effort to bully a rising competitor.” On the heels of Tracy Anderson Mind and Body, LLC and T.A. Studio New York LLC (collectively, “TA”) filing suit against fellow trainer Megan Roup and her company The Sculpt Society (collectively, “Roup”) in a federal court in California this summer, Megan Roup is looking to get the lawsuit tossed out on the basis that TA has not only failed to make its copyright infringement, false designation of origin, breach of contract, and unfair competition claims, but is engaging in a strategic lawsuit against public participation (“SLAPP”) “aimed at chilling [Roup’s] expression through costly, time- consuming litigation.” 

Setting the stage in the September 27 motion to dismiss, counsel for Megan Roup asserts that Anderson, “a self-styled ‘pioneer’ of the dance-fitness movement” filed the lawsuit at hand, accusing Roup of copyright infringement, false designation of origin, and breach of contract. TA claims that “a significant number” of the fitness videos that Roup makes available to her company’s members use copyright-protected exercise sequences that Anderson developed. Beyond that, Roup allegedly co-opted “confidential info” – including “nonpublic transcriptions of choreography routines” that she allegedly accessed while she was employed as a TA trainer – to build her own fitness business, thereby, breaching the trainer agreement she signed, which “prohibits trainers from using or disclosing company ‘confidential info” and which “expressly survives a trainer’s termination of employment.” 

Still yet, TA has argued that Roup engaged in false designation of origin by “purposefully conceal[ing] [her] training from and association with [TA] from the public so that [she] can claim to be the original creator of the choreography movements, sequences, and routines that comprise the Sculpt Society Method.” 

In the newly-filed motion, counsel for Roup asserts that TA’s claims are “foreclosed by binding Supreme Court and Ninth Circuit precedent,” which hold that “no one ‘owns’ functional exercise movements,” as well as by “the plain terms of the contract TA seeks to enforce against Roup.”  

Pushing back against TA’s copyright infringement claim, Roup argues that precedent from the Ninth Circuit “forecloses [the claim] in its entirety.” Specifically, Roup points to the decision in Bikram’s Yoga College of India v. Evolation Yoga, in which the federal appeals court determined that “functional exercise sequences – even if aesthetically pleasing or incorporating choreographic elements – are unprotectable ideas or processes under [the Copyright Act] and non-copyrightable.” The problem for TA, according to Roup’s counsel is that she “repeatedly admits the functional – and thus non-protectable – nature of her exercises, stating that [the TA] method ‘combines choreography, fitness, and cardiovascular movement,’ and is ‘[r]ooted in research, dance and the elements of choreography.” 

“These inescapable concessions doom the copyright claim,” Roup claims, noting that even if TA “owns valid copyrights in the DVDs that depict exercises of [her] Method,” the company “does not have – and cannot obtain – a copyright or any other protectable interest in the Method, itself” because the movements at issue, “whether individually or as a compilation,” are unprotectable subject matter. 

In addition to looking to get TA’s copyright infringement claim dismissed, Roup also contends that TA fails to make its false advertising claim under the Lanham Act. (The claim centers on two sentences in Roup’s online biography: “I knew that there was something missing from the boutique fitness community, so I combined my passion for dance and love for fitness to create The Sculpt Society. I spent years teaching fitness and developing The Sculpt Society method before launching in 2017.”)

While TA alleges that Roup has peddled “false and/or misleading public statements and advertising that creates the false impression that Roup, on her own, created the choreography” by way of the aforementioned excerpt, Roup argues that “there is no actionable representation of ‘fact’ in the two challenged sentences, as they are classic examples of non-actionable opinions or puffery, which are both nonmaterial and unlikely to induce consumer reliance,” and thus, the claim should be tossed out.

As for TA’s breach of contract claim, that should similarly be dismissed, per Roup. The issue? TA has failed to identify “any actually non-public, protectable confidential info” at play here, which is significant as the contract contains an “express carve out for any publicly disclosed information.” All of the information at issue here, including “the TA Method, and the movements and routines that comprise it, are made publicly available via in-person classes, DVDs, and streaming videos,” Roup claims. Moreover, TA “fails to identify any specific ‘confidential info that Roup obtained that she could not have learned as a member of the public who took [TA] classes,” according to Roup, making it so that “any ‘confidential info that Roup supposedly used in developing [her] Method (which Roup expressly den[ies]) falls within this exception and is not actionable.” 

On the contract front, counsel for Roup asserts that TA’s attempt to enforce the confidentiality provision “in such anti-competitive manner constitutes an unenforceable restriction on trade as a matter of law,” which weighs in favor of dismissal. 

Finally, in terms of TA’s California unfair competition claim (“UCL”), Roup points to California’s anti-SLAPP statute, asserting that TA’s UCL claim – which centers on the claims that Roup makes about herself on the Sculpt Society website – is “subject to the anti-SLAPP statute because it is based in part on [Roup’s] right to free speech and lacks even minimal merit as a matter of law … as demonstrated above.” As a celebrity fitness trainer and influencer, “Roup is a public figure and her life and biography are an issue of public interest,” and given that TA is unlikely to prevail on the merits of its UCL claim (as it is “derivative of [TA’s] failed Lanham Act claim”), Roup’s counsel states that the claim “should be struck with prejudice under the anti-SLAPP law.” 

With the forgoing in mind, Megan Roup asserts that Anderson’s lawsuit should be dismissed prejudice and Anderson’s UCL claim should be struck pursuant to California’s anti-SLAPP law.

THE BIG PICTURE: As TFL reported this summer, this case appears to be even more about competition than copyright, which Roup alludes to in her response, stating that TA’s complaint is an “attempt to weaponize meritless claims against Roup for daring to strike out on her own and establish a competing business,” and claiming that “rather than support other women in the fitness industry, Anderson attempts to intimidate them [by seeking to] lay claim to dance-cardio exercises and movement that have their roots in the true pioneers of the field,” including the likes of Jane Fonda and Richard Simmons. 

It is worth noting, of course, that the lawsuit follows from the stunning rise in popularity of live-streamed and on-demand fitness programming, including subscription app-based services, thanks to gym restrictions imposed during the COVID-19 pandemic. According to World Economic Forum data, between Q1 and Q2 2020, alone, health and fitness app downloads grew by 46 percent worldwide. Since then, 74 percent of Americans revealed that they used at least one fitness app during quarantine, with some 60 percent of them saying that they “enjoyed their home workouts so much that they now plan on canceling their gym membership for good.” These sentiments (and the enduring use of at-home workouts apps post-pandemic) have led to increased competition among players in this space. 

Not the only companies looking to generate revenue from this shift, Lululemon announced this week that it is launching Lululemon Studio, a new fitness-content platform that would allow customers to access on-demand and live-streamed classes at home by way of the smart-home gym product, Mirror and the Mirror app. Lululemon acquired Mirror for $500 million in June 2020.

The case is Tracy Anderson Mind and Body, LLC, et al. v. Megan Roup, et al., 2:22-cv-04735 (C.D. Cal.) 

The shape of Christian Dior’s Saddle bag is not a significant enough departure from the typical designs coming out of the fashion industry to warrant a handbag-specific trademark registration. That is what the Second Board of Appeal of the European Union Intellectual Property Office (“EUIPO”) asserted in a decision early this month, refusing to register the shape of LVMH-owned Dior’s well-known handbag for use in connection with various types of leather goods, including bags, as a three-dimensional trademark, but letting Dior’s application move forward for other goods.

The Board’s determination follows from an earlier loss for Dior when an EUIPO examiner refused to register the mark (in part) on the basis that the shape lacks distinctiveness – and “would be regarded as ‘typical’” – when used on handbags, as well as eyewear and phone cases. Dior subsequently intervention from the Board of Appeal in January, arguing that the shape of the handbag – which it first filed an application for in March 2021 – does, in fact, meet the requirements for unconventional marks, as the mark is a “significant departure from the norm or customs of the sector.” 

Dior Saddle bag trademark drawing and a bag
Dior’s trademark drawing (left) & a Saddle bag (right)

(In a nutshell, the EUIPO refused to register the mark on the basis that “relevant” consumers – namely, “average end consumers with a medium to high degree of attention” – would view the Saddle bag shape “as being typical of the shapes” of leather goods, and eyewear and phone cases. The examiner noted that such goods “come in many shapes,” and thus, “are not significantly different from the mark applied for.” The EUIPO also stated that “it is important to take into account the possible functional character” of the mark, as the shape of the Saddle bag “will be perceived as … a functional and practical shape for storing objects and not as a distinctive trademark.”)

Dior’s Appeal

Arguing for a registration of the Saddle bag trademark on appeal, counsel for Dior asserted that, among other things, the examiner failed to properly identify the relevant consumer at issue. Given the “luxurious and expensive” nature of Dior’s goods, the “relevant” consumer is part of “an audience of insiders and/or well-to-do and not at an average consumer.” As such, “it is undeniable” that consumers “will show high or at least above-average attention.” Beyond that, Dior claimed that “a brief Internet search” makes it “clear that the contested sign stands out very clearly from the forms usually encountered in the leather goods and eyewear sectors.” In furtherance of this assertion, Dior points to examples of handbags and other goods from the likes of Chanel, Louis Vuitton, and Hermès, which it says “demonstrate that the contested mark clearly diverges from the norm.” 

Handbags

And finally, counsel for the brand cited the July 2021 outcome on the Guerlain case (in which the EU General Court held that the shape of the Rouge G de Guerlain lipstick has “distinctive character because it departs significantly from the norm and customs of the lipstick sector”) as weighing in its favor, or “in the alternative,” it states that the shape of its bag “has acquired a distinctive character through its use.”  

Refusal to Register 

Reviewing the EUIPO’s decision and Dior’s subsequent appeal, the Board confirmed in its September 7 decision that “the examiner was right to refuse registration of the mark applied-for for lack of distinctive character under Article 7(1)(b) EUTMR for the products “bags, handbags; pouches (leatherware), travel cases (leatherware), toiletry and make-up cases (empty).” 

The Board set the stage by stating that settled case-law establishes that “the criteria for assessing the distinctive character of 3D marks [that] consist of the appearance of the product itself are no different from those applicable to other categories of marks.” Part of the issue for Dior here, according to the Board, is that “average consumers are not used to presuming the origin of products based on their shape or that of their packaging, in the absence of any graphic or textual element.”

“Under these conditions, only a mark which, in a significant way, diverges from the norm or customs of the sector … is not devoid of distinctive character,” the Board states, noting that “it could, therefore, prove more difficult to establish the distinctive character of a 3D mark than that of a word or figurative mark.” 

Siding with the EUIPO examiner, the Board took issue with a number of Dior’s arguments on appeal starting with the way the French fashion house defined relevant consumers, noting that these are luxury goods and some “may be particularly expensive.” At the same time, however, there is a “wide range of prices of the products in question,” which widens the pool of potential consumers beyond “the subset of articles of an exclusive nature put forward by [Dior].” 

Echoing the determination of the EUIPO, the Board stated that “it is a well-known fact that [fashion] is characterized by a multitude and an abundance of forms to which the public is regularly exposed,” and that Dior’s mark “consists of a combination of elements of presentation that are typical of the goods concerned and therefore, does not, as a whole, deviate significantly from the norm or customs of the leather goods sector.” On the latter issue, the Board notes that “a mere departure from the norm” is not sufficient enough to avoid refusal. Instead, “the difference between the sign applied for and the norms or customs of the sector must be significant,” which is not the case here. 

With the foregoing in mind, the Board upheld the Board’s decision with regard to certain leather goods, including “Bags, handbags; Pouches (leather goods),” and “glasses cases; phone cases” – but not for the other goods in classes 9 and 18 that Dior listed in its application. As a result, the application for the latter is permitted to proceed in the registration process. (It is worth noting, of course, that the remaining elements of the application are likely not particularly meaningful given that the Board struck down the Saddle bag trademark for use on bags, which the undoubtedly the real item of value here for Dior.)

The court sent the matter back before the examiner “to consider the alternative claim of distinctiveness by use of the mark within the meaning of Article 7(3) EUTMR as claimed by the [Dior].” 

Reflecting on the outcome of the latest round, Eleonora Rosati, a Professor of Intellectual Property Law and Director of the Institute for Intellectual Property and Market Law  at Stockholm University, stated that the decision “adds to a long string of unsuccessful attempts on the side of fashion companies to register their less conventional signs as trademarks,” with recent examples including decisions that center on Buffalo boots, Louis Vuitton’s Damier Azur pattern, Tecnica’s Moon Boots, and Eos lip balm.

“While the public interest rationale underlying the ‘significant departure’ test is something we can all agree with,” she states that “perhaps it is time to ask and understand more in detail what the actual criteria are for one to pass it and what kind of evidence can assist in this regard.” In the meantime, “it seems that Guerlain’s success in registering the shape of its lipstick case as a [registered trademark] is bound to remain the exception rather than the rule.” 

Meanwhile, in the U.S., Dior previously sought to register the shape of its Saddle bag as a 3D mark for use on “coin purses; bags in the nature of purses, clutches and handbags; handbags; leather clutch bags,” but abandoned that application following pushback from the U.S. Patent and Trademark Office. An application for registration for just the shape of the flap of the bag – more specifically, “a two-dimensional design with a straight line across the top with a curved line extending from the left side of the straight line down and to the right connecting on the right to the top line” – for use in Classes 9, 18, and 25 is currently pending before the USPTO.

High fashion brands are sliding into the secondary market, with Balenciaga, Valentino, Jean Paul Gaultier, Oscar de la Renta, and brands under the Kering umbrella among the companies looking to take some stake in the market for pre-owned products, one that is very much on the rise. Sales of pre-owned luxury goods “were up 65 percent last year relative to 2017, compared with a 12 percent rise in new luxury sales,” the Wall Street Journal reported this weekend, citing Bain & Co. data, which forecasts that “over the next five years,” sales within the luxury resale market “will increase annually at around 15 percent, double the expected rate of new sales.” 

While a number of very-big-names in luxury have been unapologetic about their unwillingness to actively participate in the resale market (Louis Vuitton, Chanel, and Hermès come to mind), the tide appears to be changing to some extent if the likes of Gucci and co. are any indication – and to some extent, for good reason. Getting into the burgeoning market for pre-owned goods stands to enable fashion and luxury goods brands to tap into the cash that consumers – including the coveted Gen-Z and millennial cohorts – are routinely spending in this segment of the market, prompted in many cases by the affordability that the resale market provides (as distinct from enduring price-hikes by brands) and the elements of sustainability at play.

At the same time, there may be an even more important driver behind high-end brands’ pushes to enter into this space: control. As TFL reported back in 2019, the foundation upon which luxury depends – a mix of exclusivity, high prices, meticulously-crafted marketing, valuable intellectual property, and careful governance of distribution – may be influx given the mainstreaming of resale, thereby, making control one of the critical elements for brands that are looking to maintain their positions in the upper echelon of the industry (and thus, command the necessary pricing power for their offerings). 

Chances are, if brands want to maintain some semblance of command over what happens to their often-trademark-emblazoned-goods after the initial sale of those goods (and if enduring lawsuits over authentication after-the-fact tell us anything, it seems that many of them do), taking a larger role in resale – either by way of in-house operations (à la Gucci) or partnerships (such as those between Vestiaire and Alexander McQueen, The RealReal and Burberry, and Reflaunt and Balenciaga) could prove useful. The potential for brands to be tempted to enter into the secondary market (or alternatively, trademark/false advertising litigation) may be furthered by the fact that their wares are being offered up – and advertised – in this capacity with or without their involvement or authorization. 

Also potentially luring brands into resale? Green credentials, which can be parlayed into Gen Z and millennial-centric goodwill. “We think initiatives in both resale and rental are important in raising the brand’s reputation with younger consumers,” Jefferies analysts Flavio Cereda and Kathyrn Parker stated in a note this summer, reflecting on Sandro and Maje-owner SMCP’s first-half results. They stated that secondary market-centric efforts by the likes of Sandro, as well as Gucci, Valentino, and Jean Paul Gaultier, among others, are “further evidence” that the high-end fashion/luxury market is looking to “address sustainability issues.” 

And finally, brands are likely looking to garner benefits from a post-sale consumer engagement and/or loyalty perspective by tapping into the secondary market (as opposed to opting out or taking a strong stance against it by way of litigation, for instance).

Luxury Hold-Outs

Despite many elements lining up in favor of companies engaging in resale activity, the matter is not so simple that luxury brands are rushing to put their stamp of approval on pre-owned products. It is difficult not to notice that many of the biggest names in the industry continue to distance themselves. This spring, Hermès CEO Axel Dumas, for example, explicitly shot down the prospect during an earnings call with analysts, saying that active participation by the brand in the resale market “would be to the detriment of our regular client who comes to the store.” 

Meanwhile, LVMH’s head of image and environment Antoine Arnault revealed this spring that the group “will stay away from that secondhand market” for the time being; the statement came after Mr. Arnault said in 2020 that LVMH was “looking at [the resale segment] carefully,” but also noting that it was “still a little early” to say whether the group would enter into the space. And last year, Bruno Pavlovsky, president of fashion and president of Chanel SAS, explained the brand’s own aversion to resale, telling WWD that, among other things, “We want to retain control of our distribution.” 

The balancing of factors that brands must do when considering their role in resale market includes considerations of things like cannibalization, as well as the demanding and time-consuming nature of such activities if carried out in house, especially since this is a new market for most brands. 

One need not look further than the balance sheet of The RealReal to see just how difficult – and expensive – it is to successfully build, operate, and scale a luxury resale company. “The business has been a stinker for years,” Martin Peers wrote for The Information in June. “Its losses have mounted as its revenue has grown—we think red ink is supposed to dry up as revenue expands.” In addition to being a costly and consuming endeavor, complete with overhead for platform infrastructure, authentication efforts, etc., and no easy path to profitability, brands may be further put off by the fact that they will likely never maintain complete control over the increasingly robust – and crowded – resale channel. (In other words, the reality of what resale distribution would look like as a whole is a far cry from their retail operations; after all, most brands in the upper-end of the spectrum either consist of direct-to-consumers businesses or in the case of a number of Kering brands, for instance, are in the process of walking way back on their wholesale efforts in order to exclusively maintain self-owned and operated retail stores.)

Still yet, there is the unignorable issue of competition, namely, between a company’s new offerings and any pre-owned ones. To date, “the fear” among fashion’s well-established houses “is that we are cannibalizing their business,” Julie Wainwright, the founder and former CEO of The RealReal, has said. And opinions on this front are mixed. McKinsey analysts, for instance, stated back in 2021 that if “done prudently, brand entry [in the resale market] should not erode margins, and would result in only limited cannibalization.” Achim Berg, McKinsey’s leader of McKinsey’s apparel, fashion, and luxury group, has, nonetheless, referred to the potential for cannibalization as “the elephant in the room” for luxury. 

More recently, Cereda and Parker stated this spring that when it comes to resale, brands are cognizant of and “keen to limit any cannibalization of primary products.”

For the biggest brands, the potential drawbacks and the risks may be too great to allow for an embrace of resale at this time (or ever). On the other hand, the reluctance of some of the biggest names may be the result of their well-documented hesitation to divert from their core business and/or their long-standing understanding of how luxury should operate (think: their unwillingness to operate fully in an e-commerce capacity). Chances are, it very well may be a mix of both. 

The U.S. Patent and Trademark Office (“USPTO”) has withdrawn a pending trademark application filed by Off-White from publication, determining that the mark – “For Walking” for use on footwear – does not “function as a trademark.” After first publishing the mark for opposition last month, a USPTO examining attorney stated in a newly-issued Office Action that “upon further review,” the mark cannot move forward in the registration process, as it is “a slogan or term that would be perceived by consumers” not as an indicator of source but as “merely conveying information about [Off-White’s goods] or similar goods and/or services,” in the same way that “UNLIMITED CARRYOVER,” for instance, “simply provides information about the services.”   

In the non-final Office Action sent to Off-White on September 21, USPTO examiner Shaunia Carlyle refused registration for Off-White for the “For Walking” trademark – quotation marks, included – for use on shoes, as it falls within the realm of “terms and expressions that merely convey an informational message,” which are not registrable.  

Delving into her decision, Carlyle states that determining whether a term or expression functions as a trademark depends on “how it would be perceived by the relevant public.” Citing precedent from the USPTO’s Trademark Trial and Appeal Board (“TTAB”), she asserts that “the more commonly a term or expression is used, the less likely that the public will use it to identify only one source and the less likely that it will be recognized by purchasers as a trademark.” This poses an issue here, she says, pointing to “evidence from various websites found on the internet” in which the term “For Walking” is widely used to indicate that footwear serves a particular purpose: It “can be used for walking.” (The evidence consists of screenshots of articles from sites like Elle and Who What Wear that primarily discuss comfortable heels “for walking” in.)

Off-White's "For Walking" trademark application

“Because consumers are accustomed to seeing [the “For Walking”] slogan or term used in this manner and would take the words at their ordinary meaning as applied to [Off-White’s] goods and/or services,” Carlyle contends that “consumers are likely to perceive the wording merely as informational matter about the goods.” (She makes no mention in this round of the significance of the inclusion of the quotation marks on such consumer perception.)

Against that background, Carlyle states that “For Walking” would “not be perceived as a mark that distinguishes [Off-White’s] goods from those of others and identifies the source of [Off-White’s] goods.” As such, the USPTO removed “For Walking” from publication, asserting that “an applicant may not overcome this refusal by amending the application to seek registration on the Supplemental Register or asserting a claim of acquired distinctiveness … nor will submitting a substitute specimen overcome this refusal.”

So, what can counsel for Off-White do now, almost two years after first filing the “For Walking” application?

It is not necessarily without recourse. Trademark attorney and former USPTO examining attorney Ed Timberlake claims that counsel for Off-White can respond to this Office Action by arguing that the mark does, in fact, function. Then when the failure-to-function refusal is made final, “the brand can request reconsideration, and also has the option of appealing to the TTAB, which appears to have shown some appetite for reversing failure-to-function refusals.” Hardly a sure-fire win, Timberlake says that “it is difficult to imagine, on this record, the TTAB reversing on behalf of quotation marks.”

It is worth noting, he says, that at the first Office Action stage, the examining attorney’s position “had not yet hardened into failure-to-function.” (In her initial Office Action in January 2021, Carlyle took issue with the mark on the basis that it “merely describes a feature and purpose of applicant’s goods,” and proposed registration on the Supplemental Register.) It is “possible – and somewhat tempting,” per Timberlake, “to read the first Office Action as an opportunity for Off-White to respond with evidence of acquired distinctiveness.” (And counsel for Off-White did argue for active distinctiveness in response to a subsequent Office Action.)

Off-White's "For Walking" boots

However, that approach has to be balanced with “the risk that the examining attorney may actually go a step further, refusing registration on the basis of a failure to function as a trademark,” he says. “If that happens, the applicant will no longer have the option of amending to the Supplemental Register.”

A “strategic move” to accept registration on the Supplemental Register, which provides protection for non-distinctive marks that have the potential of acquiring distinctiveness, would not have been a total loss for Off-White, according to Timberlake. “The R in a circle symbol looks exactly the same for the Supplemental Register as it does for the Principal Register, so, Off-White could have gained some benefit (even if it did not come with all of the legal boosts we associate with the Principal Register).”

The latest refusal for the late Virgil Abloh’s brand follows from previous rounds, in which the USPTO took issue with the ability of “For Walking” to indicate the source of Off-White’s footwear. Counsel for Off-White has pushed back against such refusals arguing that, among other things, the inclusion of its signature quotation marks is significant, as the mark is “elevated beyond being descriptive [of the goods upon which it appears] due to the unique commercial impression created by [Off-White’s] distinct use of quotation marks.” The mark is different from “mere use of the word or phrase without the quotation marks,” Off-White asserted, claiming that due to the inclusion of the quotation marks, the mark acts as a “double entendre.”

Unpersuaded by such claims, Carlyle stated in an Office Action in July 2021 that generally, “adding punctuation marks to a descriptive term will not ordinarily change the term into a non-descriptive one,” and specifically, “here, with and without the quotation marks, the mark implies a feature of the goods – desirable and made FOR WALKING.” 

As for Off-White’s other quotation-centric mark, “Product Bag” – for use on “tops as clothing; bottoms as clothing,” after overcoming more than one non-final refusal from the USPTO, the trademark office issued a notice of allowance back in December 2020 but Off-White has not yet filed a statement of use. 

A magistrate judge says that a counterclaim lodged by Thom Browne in the case filed against it by adidas for allegedly infringing one of the German sportswear giant’s three-stripe trademarks should be tossed out. According to a newly-filed recommendation and report, Magistrate Judge Robert Lehrburger of the U.S. District Court for the Southern District of New York states that Thom Browne has failed to assert a plausible claim that adidas’ Three-Quadrilaterals trademark is aesthetically functional (and thus, should be invalidated), and as a result, Judge Jed Rakoff should dismiss the counterclaim, and at the same time, strike two of the affirmative defenses that Thom Browne raised in response to adidas’ suit. 

In his September 21 recommendation and report, Magistrate Judge Lehrburger sets the stage by distinguishing the two brands at play. Adidas is “a clothing company famous for its activewear and accessories,” the judge asserts, and citing Thom Browne’s counterclaim, states that adidas is also known for its “overzealous enforce[ment] of its actual and perceived rights in its ‘Three-Stripe mark.’” Thom Browne, on the other hand, is a “clothing and accessories” company, whose offerings are “sold for several hundred to several thousand dollars per garment,” “known for their tailoring and craftsmanship,” and “recognized through Thom Browne’s signature four-band design.”  

Adidas first filed its suit in June 2021, alleging that Browne has “encroached into direct competition with adidas by offering sportswear and athletic-styled footwear that bear confusingly similar imitations” of adidas’s three-stripe mark. In response to adidas’ suit, Browne lodged an answer and counterclaim seeking cancellation of adidas’ Three-Quadrilaterals trademark registration (No. 4,910,643) on grounds of aesthetic functionality.  

Three Stripes & Aesthetic Functionality

For some background: Supreme Court precedent states that aesthetic functionality arises when protection of a purported proprietary mark would ″put competitors at a significant non-reputation related disadvantage.″ In practice, Finnegan’s B. Brett Heavner has stated that the doctrine arises: “(a) when an asserted mark … does not actually identify the source of the products (traditional aesthetic functionality), or (b) when [an] asserted mark is protected, but a defendant has allegedly not infringed because it is only using the mark aesthetically and not as a source identifier (defensive aesthetic functionality).” 

In the case at hand, Browne argues that trademark protection for adidas’ Three-Quadrilaterals mark puts competitors at “a significant non-reputation-related disadvantage,” given that the registration “is not limited to any specific number or orientation of stripes,” and thus, its registration for the mark should be cancelled. In furtherance of its counterclaim, Browne alleges that “adidas is asserting its registered trademark against Thom Browne’s use of four horizontal, parallel bands,” and thus, is “admit[ting] that its Three Quadrilaterals [mark] is not limited to a diagonal orientation or to three stripes.” Building on that assertion, the magistrate judge states that “Thom Browne alleges that if clothing designers were not permitted to use parallel stripes on clothing,” they would be put at a significant disadvantage.

One of adidas' 3-stripe trademark registrations

However, Thom Browne gets it wrong on this front, the Magistrate Judge says. Instead of asserting a plausible claim that adidas’ three-stripe Quadrilaterals mark is aesthetically functional, such as by claiming that “the use of three parallel stripes – the subject of the challenged registration – is ‘essential to effective competition in a particular market,’” the brand “impermissibly attempts to transform an infringement argument into an invalidity argument.” 

Specifically, the magistrate states that Browne “premises its aesthetic functionality claim on the fact that adidas claims infringement of the challenged registration: ‘Because adidas is asserting this registered trademark in this litigation against Thom Browne’s use of four horizontal, parallel bands, adidas admits that its Three Quadrilaterals [mark] is not limited to a diagonal orientation or to three stripes.’” Accordingly, the magistrate judge finds that “the fact that Thom Browne’s use of its Four Band Design on athletic clothing may, if proven, infringe adidas’ Three Stripe Mark as reflected in the challenged registration says nothing about whether the registration itself is limited to three stripes, which it clearly is.” 

The Risk for Thom Browne

As for why Browne crafted its argument in this way, the magistrate judge has a theory (as first pointed out by adidas). It appears, Lehrburger states, that Thom Browne intentionally avoided claiming that adidas is putting competitors at a significant disadvantage by way of its exclusive rights in the Three-Stripe mark as embodied in the challenged Three Quadrilaterals because Thom Browne, itself, asserts that it has trademark rights in a multi-striped mark, “the Four Banded Design; namely, four horizontal parallel bands on a wide variety of clothing.” 

Were Browne to successfully argue that adidas Three-Stripe mark puts competitors at a significant disadvantage so as to render the mark unprotectable, that “would be an implicit admission that its own trademark was subject to invalidation on grounds of aesthetic functionality,” Lehrburger contends. “Accordingly, rather than focusing on the trademark that is the subject of [adidas’ Three Quadrilaterals registration], Thom Browne grounds its aesthetic functionality argument on the use of parallel stripes on clothing generally.” 

While that may have helped the brand to avoid shooting itself in the foot in terms of its own four-stripe mark, it ultimately prompted the magistrate judge to determine that it has failed to assert a plausible claim that adidas’ Three Quadrilaterals registration is invalid as aesthetically functional, and thus, its counterclaim should be dismissed for failure to state a claim.

The case is adidas America, Inc., et al., v. Thom Browne, Inc., 1:21-cv-05615 (SDNY).