On the heels of its out-of-court settlement with Ralph Lauren last month, Converse is in the process of settling more of the 22 lawsuits it filed this past October against an array of brands (think: everyone from Tory Burch and Ralph Lauren to Walmart and K-Mart). The Massachusetts-based sneaker company has recently filed to voluntarily dismiss its lawsuits against H&M, Tory Burch, and Zulily, signaling the parties’ ability to come to an agreement regarding the defendants’ production of copycat shoes, which Converse claims resulted in federal trademark infringement and dilution, false designation of origin/unfair competition, and common law trademark infringement and unfair competition, among other claims. Of the 22 lawsuits filed against 31 different defendants, it hardly comes as a surprise that a growing number of these matters are being settled out of court.
There is a strong argument that given Converse’s bold mass-lawsuit filing tactic (one that certainly shocked the legal community), the company was primarily aiming to send a larger message (namely, that it will sue you if you copy its legally-protected designs) than to litigate 22 different lawsuits. Moreover, given the bad press associated with being on the defendant side of a lawsuit and the legal fees associated with such matters, it is likely in the best interest of the vast majority of the parties to come to terms outside of court and settle the matter in a timely manner.
This is not to say that Converse will not walk away with some noteworthy monetary settlements. However, we will probably never know what those sums are, as the terms of most settlement agreements will, in fact, be confidential. What we do know is this: Ralph Lauren agreed to settle its case almost exactly a month ago after an investigation by the U.S. International Trade Commission found that a total of 36 Ralph Lauren shoe styles infringed Converse’s trademarks. As part of the settlement, Ralph Lauren will destroy the infringing shoes within 30 days. It has also agreed to destroy all the parts, tools and molds used to make the sneakers, and all marketing and promotional materials and the packaging in connection with them. In addition, Lauren will pay an undisclosed sum to Converse.
With those suits out of the way, there are just 27 more defendants to go. As for why the sneaker company waited so long to enforce its trademark rights? Well, according to sources the Converse legal team has been actively policing unauthorized uses of its trademark for years (namely via cease and desist letters). However, chances are the company waited so long to file a major flurry of lawsuits due to its precarious financial situation. You may recall that the company filed for bankruptcy in 2003 and the brand’s intellectual property rights were purchased by Nike. As such, Converse, Inc. is now a wholly-owned subsidiary of Nike, and has since made a rather impressive turn around. In 2014, the Converse brand brought in $1.7 billion (of Nike’s $28 billion total) in revenues. This translates to a 15% increase over the previous fiscal year, and a nine fold increase from Converse sales around the time it went bankrupt. With this in mind, it likely makes a bit more sense (financially) for Converse to now start heavily enforcing its IP rights. More to come …