September 3, 2008

Wal-Mart Settles With Adidas In Case With Potential for Major Punitive Damages

According to, Adidas and Wal-Mart have settled a lawsuit in which Adidas contended that Wal-Mart infringed on Adidas's trademark by copying its distinctive three-stripe sneaker design. As we previously reported, Adidas had boldly predicted it would obtain a huge punitive damages award in this case. The prediction wasn't all that far fetched, since Adidas recently won $137 million in punitive damages in the same court in a nearly identical lawsuit against Collective Brands, the parent company of Payless Shoes.

Both parties may have been motivated to settle in part because the state of Oregon (where this case was pending) claims 60 percent of all punitive damages awards. Indeed, Oregon stepped forward to claim its share of Adidas' big win against Payless. As previous experience has shown, if an Oregon plaintiff wins a big punitive damages award, the parties will have difficulty settling without giving the state its cut. As a result, parties in Oregon (and other states with similar statutes) have an added incentive to settle before trial if they think a major punitive damages award is possible.