Apparently Wal-Mart has a history of selling knock offs of copyrighted Adidas shoes, and after 2 warnings, Adidas is looking to put a stop to it. Adidas has recently sued several other companies, including Payless Shoes and won considerable money from them. They won over $300 million from Payless, and could win $326 million from Wal-Mart, or more in the Jury decides that Wal-Mart should pay more in punitive damages. The Payless verdict saw Payless paying 7 times it's profit that year (it made $42.7 million and paid $304.6 million). So in fairness, because Wal-Mart has a history of ripping off the brand, the jury could force Wal-Mart to pay a similar 7 times it's most recent annual profit. That would be around $77 billion. That is not likely to happen, but it does seem likely that Adidas will win a large sum from Wal-Mart.
Read the full story from Bloomberg:
Adidas Poised to Win $1.60/Share on Wal-Mart CopycatsAdidas AG, which was awarded a $304.6 million verdict against Payless ShoeSource on May 5 for selling knockoff striped sneakers, is poised to win even more from Wal-Mart Stores Inc. in a lawsuit making similar claims.
The world's second-biggest sporting-goods maker may collect at least $326 million in damages, the equivalent of $1.60 a share, if a jury agrees Wal-Mart copied Adidas's three-stripe sneakers by selling shoes with two- and four-stripe motifs as Payless did. A jury trial is set to start Oct. 6 in federal court in Portland, Oregon, the same courthouse where the Payless trademark-infringement case was decided.
Wal-Mart, the world's largest retailer, settled two earlier suits by Adidas over striped sneakers. The company's repeated promises not to mimic Adidas may prompt a jury to award punitive damages much higher than those against Payless, said Steven Nataupsky, managing partner of the law firm Knobbe Martens Olson & Bear in Irvine, California.
``Adidas will be arguing that a company has infringed twice, has agreed to stop twice and yet is marching forward with more infringing shoes,'' said Nataupsky, whose firm represents plaintiffs and defendants and isn't involved in the Adidas case. Its clients include Starbucks Corp. and Ranbaxy Pharmaceuticals Inc.
Adidas, based in Herzogenaurach, Germany, has sued about three dozen retailers since 1999 in the U.S. and Europe to keep what it considers knockoffs of its trademarked shoes and clothing from diluting the brand. The campaign is finally paying off.
Brand Value
``The brand value is incredibly important,'' said Alexander Roepers, president of New York-based Atlantic Investment Management Inc., Adidas's second-largest investor. ``Just like Coke or Nike, they'd be wise to protect it, and that's what they're doing.''
Wal-Mart, based in Bentonville, Arkansas, disagrees with Adidas's assertion that the stripe pattern, used since at least 1952, has significance in the sporting world.
``Wal-Mart denies that the three-stripe mark has achieved international fame and tremendous public recognition,'' the company said in court papers.
The Arkansas retailer ``probably watched every step'' of the Payless trial to develop its own strategy and recognizes problems in the Payless defense, Nataupsky said.
``If Wal-Mart's going to take it to trial, then they have clearly in their own minds determined how they can avoid mistakes,'' he said.
Wal-Mart SpokeswomanDaphne Moore, a spokeswoman for Wal-Mart, declined to comment on the likelihood of another settlement or any other aspect of the case.
The suit, filed in 2005, claims Wal-Mart ``maliciously'' sold hundreds of thousands of imitation Adidas shoes in violation of a 2002 settlement that barred it from offering ``confusingly similar'' products. A previous settlement, in 1995, prohibited Wal-Mart from selling shoes with three parallel stripes or certain four-stripe designs.
Topeka, Kansas-based Payless, which last year changed its name to Collective Brands Inc. after buying the Stride Rite chain, was told by a jury to pay Adidas $304.6 million. Two days later, Sears Holdings Corp.'s Kmart unit reached a confidential settlement of a suit Adidas filed in Portland in 2005.
``You can see where Kmart stepped up and settled because there was now a precedent for an enormous award out there,'' Nataupsky said. ``Adidas now has a game plan in place for seeking an enormous number and obtaining that result.''
Payless Verdict
The Payless verdict was more than seven times the retailer's profit last year of $42.7 million. The award consisted of $30 million in actual damages, $137 million in forfeited profit and another $137 million in punitive damages.
Wal-Mart reported sales last year of $378.8 billion, dwarfing Payless's $3 billion. The companies' relative sizes might cause the jury to impose higher punitive damages than the Payless jury did, according to Nataupsky.
``The size of the defendant is absolutely taken into consideration'' in punitive-damage awards, which are ``designed to punish and deter future infringement,'' he said.
Andrea Corso, a spokeswoman for Adidas, declined to comment on the case.
The German sportswear company also enjoys a hometown advantage, with its North American headquarters located in Portland.
``That can only be a plus for Adidas,'' Nataupsky said.
Adidas Profit
Adidas, founded in 1924, had profit last year of 551 million euros ($852.3 million) on sales of 10.3 billion euros. The shares rose 35 cents to 45 euros at 2:44 p.m. local time today in Frankfurt trading. Wal-Mart rose 13 cents to $59.31 yesterday in New York Stock Exchange composite trading.
Shoe sales represent about 1.7 percent of Wal-Mart's revenue, according to Edward Weller, an analyst at ThinkEquity Partners LLC in San Francisco. Based on that estimate, Wal-Mart had shoe sales of about $25 billion in the U.S. and Canada in the six-year period covered by the lawsuit.
Payless shoe sales totaled more than $22 billion in the eight years covered by the Adidas suit. A jury said it should forfeit $137 million, which equals 0.6 percent of its sales for those years.
If Wal-Mart's disputed shoes enjoyed the same margins, its profit would be about $148 million. Should the retailer lose, a jury applying the formula used in the Payless case might order Wal-Mart to pay $326 million -- the profit, an equal amount of punitive damages and $30 million in actual damages.
Adidas has also sued Steven Madden Ltd., Polo Ralph Lauren Corp., Target Corp. and Nordstrom Inc. Those cases were all settled before going to trial.
``A ruling against Wal-Mart will give Adidas more security,'' said Uwe Weinreich, an Adidas analyst at UniCredit in Munich. ``In the future, there will be clear and transparent limits, which have to be observed by competitors and retailers.''
The case is Adidas America Inc. v. Wal-Mart Stores Inc., 3:05-cv-01297, U.S. District Court, District of Oregon (Portland).
Posted by Taylor - June 17, 2008 10:20 AM - In The News