Adidas Logo Could Lose Some Trademark Protection in EU: Ruling

Legend has it that Adidas founder Adi Dassler purchased the brand’s iconic three-stripes trademark in 1951 for a sum equivalent to 1,600 euros and two bottles of whiskey. The company has been fighting tooth and nail to protect that investment ever since.

Its latest effort to protect those three stripes, however, came up short in a surprising European court decision yesterday, a ruling that could complicate the company’s marketing efforts around the world. On Wednesday, the General Court of the European Union struck down Adidas’ bid to broaden trademark protections around the famous three-stripes design, part of the company’s effort to stop competitors from bringing to market products with similar symbols.

The ruling doesn’t mean Adidas is stripped of using its distinctive three-stripes design in the EU, or anywhere else around the world. But legal experts believe it will be harder now for the brand to effectively fight rivals who put similar patterns on their shoes, shirts and sportswear offerings.

“This loss, the loss of reputation, is enormous for Adidas,” Tim Meyer-Dulheuer, managing partner of Dr. Meyer-Dulheuer & Partners LLP, a German law firm specializing in trademark law, told Fortune. “They’ve been cultivating three stripes since the ’80s, since the days of the Run-DMC guys running around with the three stripes on their sneakers.”

Meyer-Dulheuer could not recall a setback of this magnitude for Adidas in a trademark decision. He predicted the ruling could open the floodgates to legal challenges against Adidas’ claims it is the only sportswear brand entitled to the three-stripes design.

“If they are unable to fully protect their trademark in Europe, they will have the same problem elsewhere, in the United States and in Asia,” he says. For a defendant, “you would definitely submit this ruling to the judge. And, certainly, any judge would follow the logic of the court’s argument.”

The German sportswear brand, the world’s second largest, had sought earlier this decade to expand trademark protections around the distinctive three-stripes design. In a 2014 registration application, Adidas asked for protection of its trademark, which it then defined “as consisting of three parallel equidistant stripes of identical width, applied on the product in any direction.” The European Union Intellectual Property Office (EUIPO) was perfectly fine with that somewhat broad definition at first, granting Adidas trademark protection under those terms at the time.

Two years later though EUIPO went back on its decision and annulled the protections, saying, “Adidas had failed to establish that the mark had acquired distinctive character through use throughout the EU.” The General Court of the European Union yesterday upheld that annulment decision, ruling that the three-stripe design was not “distinctive” enough to merit such a broad protection.

Adidas said it was disappointed in the ruling. It can appeal the decision to the European court of justice but has not indicated if it will. In the meantime, it’s playing down the significance of yesterday’s court decision, saying it has no bearing on their use of the three-stripe design on products.

“This ruling is limited to this particular execution of the three-stripe mark and does not impact on the broad scope of protection that Adidas has on its well-known three-stripe mark in various forms in Europe,” the company said in a statement.

The matter ended up in court because of an ongoing feud with a smaller Belgian rival, Shoe Branding Europe, which has had its own two-stripe trademark invalidated last year on virtually the same grounds—“that it was devoid of any distinctive character,” the same court had ruled.

Adidas has been dogged over the years in defending its three-stripe design, which is visible in playgrounds around the world and is worn by the most recognizable professional athletes on the planet, from the Chicago Cubs’ Kris Bryant to the starting eleven of soccer powerhouse Manchester United. In recent years the company has taken successful legal action against Skechers and Payless Shoes arguing they brought to market sportswear products that looked too similar to those of Adidas.

According to Brand Finance, Adidas has the world’s third most valuable apparel brand, worth $16.7 billion.

In any currency, that’s a lot of stripes.