SAN FRANCISCO, United States — Allbirds, a direct-to-consumer shoe brand, has filed a trade dress infringement lawsuit in the Northern District of California against Steve Madden for allegedly copying its signature wool lace-up sneakers.
Founded by Tim Brown, a former New Zealand footballer, and Joey Zwillinger, a bio-material engineer and renewables specialist, Allbirds officially debuted in March 2016 with the single $95 wool runner style and introduced a second shoe style for adults in April. The company has raised $27.5 million in funding so far and, according to market sources, is on track to generate $50 million in sales in 2017 due to the lace-ups cult-like following, especially in Silicon Valley.
A representative for Steve Madden declined to comment.
The Steve Madden shoes in question, the women’s "Traveler" sneakers, are available under the company’s Steven by Steve Madden line and are sold for $89 at Macy’s, Zappos and other retailers as well as through Steve Madden’s own channels. Allbirds is currently only available online and through two stores in San Francisco and New York, the latter of which opened this autumn.
Trade dress is a form of intellectual property that is so identifiable, consumers are able to cite the source of a product through its design. (An example is the Hermès Birkin bag.) According to Allbirds, the combination of the wool-like textile on the entire upper part of the sneaker, unified midsole and outsole, embroidered eyelets and woven shoelaces is unique in the footwear industry.
Steve Madden sells products under its own brand names, through private labels and is a licensee for other brands. It saw sales of $1.4 billion in the 2016 fiscal year. In the most recent quarter ending September 30, net sales increased nearly 9 percent to $376.9 million but same-store retail sales decreased nearly 4 percent. Chief executive Edward R. Rosenfeld told analysts that sneakers were an important growth category for the company.
Steve Madden is also a frequent target of alleged infringement cases. Valentino filed a lawsuit against the company in June for allegedly copying a handbag and bag strap. And AirWair International Ltd., parent company of Dr. Martens, filed a lawsuit in February alleging Steve Madden had copied elements of its signature black boot style, which Steve Madden later argued was “common and not distinctive” and therefore not protected by trade dress.
For a startup like Allbirds, that is centered around one core style and that is just starting to scale, a trade dress infringement could be more damaging than it would be for other, more established brands. While there are other potential copycat styles on the market, this case marks the first time Allbirds has filed a lawsuit against another brand. The founders declined to comment on whether or not they have sent out any cease-and-desist letters in the past.
“A billion dollar business has taken a stab at our very livelihood and mission that we are on, and we felt like it was wrong,” says Allbirds’ Brown.
“It has the potential to hurt us, but more importantly it has the potential to hurt the positive environmental mission we set out to achieve,” says Zwillinger, underscoring Allbirds’ guiding principle to make shoes out of sustainable, natural materials such as ZQ-certified merino wool. The company is a certified B Corporation, a verification awarded to companies based on their commitment to non-shareholding stakeholders, such as society and the environment. “It’s going to be distracting for management and costly and all the rest of it. It’s still worth it because that’s what we are here to do, and it’s so formalized in our [company charter], that it’s hard to ignore.” To further that point, the company promises to donate any proceeds from lawsuit to the Audubon Society.
Zwillinger also says that Allbirds received a phone call from Steve Madden’s chief executive Edward R. Rosenfeld before releasing the women’s "Traveler" sneakers last month, “well in advance of this, asking how the business was going and what not, before we knew that they were going to rip us off.”
Across the fashion industry, many of these types of design infringement lawsuits are settled before they ever become public.“Some companies, rather than relying on their own design teams, make copying others’ most commercially successful work part of their business structures — and treat the payment of settlements when intellectual property rights are infringed as a cost of doing business,” says Susan Scafidi, professor of fashion law at Fordham Law School and founder of the Fashion Law Institute, not in reference to this specific case.
"Essentially the settlements function as post hoc licensing fees, but paid without the original designer's prior consent and only under the threat of a lawsuit,” she says. Which party moves first to settle, however, is rarely disclosed.