On Wednesday, the European Union General Court ruled against the German sports apparel giant, Adidas, in a trademark dispute that been going on since as early as 2016.

In the courts ruling, it held that the “three-stripe” logo, which was first registered in August 1949 by Adidas founder, Adolf “Adi” Dassler, was not “distinctive” enough to warrant trademark protection throughout EU territories.

Back in 2014, the European Union Intellectual Property Office (EU IPO) registered the mark, in favor of Adidas, for clothing, footwear, and headgear.

In its registration application, Adidas described the mark as consisting of “three-parallel equidistant stripes of identical width, applied on the product in any direction.”

However, in 2016, Adidas competitor, Shoe Branding Europe BVBA, filed an application for declaration of invalidity, requesting the mark be annulled on the ground that it was void of any “distinctive” character. Unfortunately for Adidas, the EU IPO agreed, admitting that the mark should not have been registered, and that Adidas had failed to establish that the mark had acquired distinctive character throughout the EU.

In its ruling, the court held stated that “the mark is not a pattern mark composed of a series of regularly repetitive elements, but an ordinary figurative mark.” It went further to add that “the forms of use which fail to respect the other essential characteristics of the mark, such as its colour scheme (black stripes against white background), cannot be taken into account.”

Breaking Down the Law

Trademarks are governed by both state and federal law. The main federal statute at work is the Lanham Act, providing for the main and by and large, the most extensive source of trademark protection. In order to be granted trademark protection, a mark must be “distinctive” –meaning, it must be capable of identifying the source of a particular good.

In 1976, the U.S. Court of Appeals decided Abercrombie & Fitch Co. v. Hunting World, Inc., which established the “spectrum of distinctiveness” based upon the relationship between the mark and the underlying product:

  • Is it “arbitrary or fanciful?”
  • Is it “suggestive?”
  • Is it “descriptive?” or
  • Is it “generic?”

The level of legal protection awarded, depends upon which category a mark falls in. With Adidas, there’s no question the “three-stripes” identifies its product.

What Direction Do the Stripes Point Now?

While disappointing for Adidas, the company has stated it will be considering its next options. Under the law, it can appeal to the European court of justice, which is likely.

Many legal experts in favor of the mark’s protection, believe this to be a huge hit to the company’s $16.7 billion valuation, according to Brand Finance.

According to Tim Meyer-Dulheuer, managing partner of Dr. Meyer-Dulheuer & Partners LLP, the court’s ruling is a huge loss of reputation for Adidas.

“They’ve been cultivating three stripes since the ‘80’s, since the days of the Run-DMC guys running around with the three stripes on their sneakers,” he said in an interview with Fortune Magazine.

But for others like Mark Caddle, a trademark layer at the European intellectual property firm, Withers & Rogers, Adidas “failed to provide sufficient evidence to show that when seeing three stripes on clothing, footwear or headgear, consumers immediately associate such products with Adidas,” he told The Guardian.

Should Others Be Worried?

Wednesday’s ruling leaves companies with well-known brands like McDonalds, Apple, and even Volkswagen wondering whether their marks are safe from similar rulings throughout the EU?

As technology has evolved and advanced over the years, the sporting goods industry has seen an increase in trademark disputes. High-profile cases have also included Adidas going up against Skechers USA and Nike, taking on Puma.

If we were applying case law and Abercrombie’s test, I would have to agree with the court.

If, however, we were applying public perception and status, I would say that no matter what a court says or the spectrum says, the public identifies and associates the “three-stripes” with Adidas—forever and always.

Should we abide by stare decisis, or appeal to market perception?