Nike v. Skechers - Complaint

8/20/2019 Nike v. Skechers - Complaint

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Page 1 - COMPLAINT FOR PATENT INFRINGEMENT

80809937.1 0063718-00217

Per A. Ramfjord, OSB No. 934024

[email protected]

STOEL RIVES LLP 900 SW Fifth Avenue, Suite 2600

Portland, OR 97204

Telephone: (503) 224-3380Facsimile: (503) 220-2480

Christopher J. Renk, ILSB No. 6199012

[email protected] S. Maurer, ILSB No. 6275467

[email protected]

Michael J. Harris, ILSB No. [email protected]

Audra C. Eidem Heinze, ILSB No. 6299717

[email protected]

Aaron Bowling, ILSB No. [email protected]

BANNER & WITCOFF, LTD.

Ten South Wacker DriveSuite 3000

Chicago, IL 60606-7407

Telephone: (312) 463-5000Facsimile: (312) 463-5001Pro Hac Vice Pending

Attorneys for Plaintiff Nike, Inc.

UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

PORTLAND DIVISION

NIKE, INC., an Oregon corporation,

Plaintiff,

v.

SKECHERS U.S.A., INC., a Delawarecorporation,

Defendant.

Case No.: __________________

COMPLAINT FOR PATENTINFRINGEMENT

(35 U.S.C. § 101)

JURY TRIAL REQUESTED

Case 3:16-cv-00007 Document 1 Filed 01/04/16 Page 1 of 14


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Plaintiff Nike, Inc. (“NIKE”), for its Complaint against Defendant Skechers U.S.A., Inc.

(“Skechers”), alleges as follows:

INTRODUCTION

1. This is an action for patent infringement arising under the Patent Laws of the

United States, 35 U.S.C. § 101 et seq. NIKE owns exclusive rights in the ornamental designs

claimed in United States Design Patent Nos. D696,853; D700,423; and D707,032, each titled

“Shoe Upper,” and D723,772; D723,781; D723,783; D725,356; and D725,359, each titled “Shoe

Sole” (collectively, the “NIKE Patents”).

2.

Skechers has used and continues to use the claimed designs of the NIKE Patents,

without NIKE’s permission, on shoes that Skechers makes, uses, offers for sale, sells, and/or

imports into the United States.

3. NIKE seeks, among other relief, an injunction preventing Skechers from further

infringing the NIKE Patents, and damages and/or a disgorgement of Skechers’ profits from its

patent infringements.

THE PARTIES

4. NIKE is a corporation organized and existing under the laws of the State of

Oregon with a principal place of business at One Bowerman Drive, Beaverton, Oregon 97005.

5. On information and belief, Skechers is a corporation organized and existing under

the laws of the State of Delaware with a principal place of business at 228 Manhattan Beach

Boulevard, Manhattan Beach, California 90266.



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JURISDICTION AND VENUE

6. This action arises under the patent laws of the United States, Title 35, United

States Code. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.

§§ 1331 and 1338.

7. This Court has personal jurisdiction over Skechers at least because Skechers

transacts and solicits business in the State of Oregon, including with respect to shoes that

infringe the NIKE Patents, and because Skechers is committing and has committed acts of patent

infringement in the State of Oregon, at least by selling and offering to sell shoes that infringe the

NIKE Patents in Oregon.

8. Venue is proper in this judicial district under 28 U.S.C. §§ 1391 and 1400 at least

because Skechers resides in this district by transacting and soliciting business in this district,

including with respect to shoes that infringe the NIKE Patents, and committing acts of patent

infringement in this district by selling and offering to sell shoes that infringe the NIKE Patents.

FACTUAL ALLEGATIONS

A.

The NIKE Patents

9. For many years, NIKE has designed, developed, made, and sold a wide array of

athletic and fashion footwear, apparel, and sports equipment.

10. NIKE has taken steps to protect its innovative designs, including its footwear-

related designs. In particular, NIKE owns various United States design patents relating to its

footwear designs. Relevant to this dispute, NIKE owns all right, title, and interest in, and has the

right to sue and recover for past, present, and future infringement of, each of the NIKE Patents

identified in Table 1 from the date each patent duly and legally issued to NIKE. A copy of each

NIKE Patent is attached to this Complaint as indicated in Table 1.



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Table 1: The NIKE Patents

U.S. Patent Number TitleIssue Date of

Patent

Complaint

Exhibit

D696,853 (the “‘853 Patent”) Shoe Upper January 7, 2014 A

D700,423 (the “‘423 Patent”) Shoe Upper March 4, 2014 B

D707,032 (the “‘032 Patent”) Shoe Upper June 17, 2014 C

D723,772 (the “‘772 Patent”) Shoe Sole March 10, 2015 D

D723,781 (the “‘781 Patent”) Shoe Sole March 10, 2015 E

D723,783 (the “‘783 Patent”) Shoe Sole March 10, 2015 F

D725,356 (the “‘356 Patent”) Shoe Sole March 31, 2015 G

D725,359 (the “‘359 Patent”) Shoe Sole March 31, 2015 H

11. The NIKE Patents are presumed to be valid.

B. Skechers’ Infringing Activities

12.

On information and belief, without NIKE’s authorization, Skechers made, used,

offered for sale, sold, and/or imported into the United States shoes having designs that violate the

NIKE Patents (hereafter, the “Infringing Shoes”). The Infringing Shoes include at least products

identified by the model names: Skechers’ Burst, Women’s Flex Appeal, Men’s Flex Advantage,

Girl’s Skech Appeal, and Boy’s Flex Advantage shoes, as well as Skechers’ shoes bearing the

same or substantially similar infringing designs, regardless of model name.

13. On information and belief, the overall appearance of the designs of the NIKE

Patents and the corresponding designs of Skechers’ Infringing Shoes are substantially the same.

14. On information and belief, an ordinary observer will perceive the overall

appearance of the designs of the NIKE Patents and the corresponding designs of Skechers’

Infringing Shoes to be substantially the same. For example, a recent article describes the

Skechers’ Burst Infringing Shoe as having “ripped off” NIKE’s “Flyknit” design that is covered

by the ‘853, ‘423, and ‘032 Patents, as shown in Illustration 1 below. The complete article is

attached to the Complaint as Exhibit I.



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Illustration 1: Complex.com Article About Skechers’ Burst Infringing Shoe

15. Tables 2 through 8 below illustrate Skechers’ infringement by comparing figures

from the NIKE Patents with exemplary images of Infringing Shoes.

Table 2: Comparison of ‘853 Patent with Exemplary Infringing Shoes

‘853 Patent Figures Exemplary Infringing Shoes

Women’s Burst Men’s Burst




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Women’s BurstMen’s Burst



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Women’s Flex Appeal

Girls’ Skech Appeal

Men’s Flex Advantage

Boys’ Flex Advantage







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16. On information and belief, Skechers intended to copy the designs covered by the

NIKE Patents.

17.

On information and belief, Skechers sells and offers to sell its shoes, including the

Infringing Shoes, directly to end-user customers through its e-commerce websites and its own

retail stores, as well as to third-party resellers, such as department and specialty stores, through

its wholesale distribution channel. (See, e.g., Exhibit J, Skechers’ Form 10-K at 2, 9–10.)



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18. Skechers sells and offers to sell Infringing Shoes directly to end-user customers in

the United States, including in Oregon. Third-party resellers also sell and offer to sell the

Infringing Shoes in the United States, including in Oregon. For example, Exhibit K attached

shows Infringing Shoes for sale on www.kohls.com, which, on information and belief, were

distributed through Skechers’ wholesale distribution channel, as well as a map showing Kohl’s

locations in the Portland, Oregon area.

19. On information and belief, Skechers has infringed and continues to infringe the

NIKE Patents within the meaning of 35 U.S.C. § 271 at least by making, using, selling, offering

to sell, and/or importing the Infringing Shoes into the United States without NIKE’s

authorization.

FIRST CLAIM FOR RELIEF

(Infringement Under 35 U.S.C. § 271 of the NIKE Patents)

20. NIKE re-alleges and incorporates by reference the allegations set forth in

paragraphs 1– 20 of this Complaint.

21.

Skechers, without authorization from NIKE, has made, used, offered for sale,

sold, and/or imported in or into the United States, and continues to make, use, offer for sale, sell,

and/or import in or into the United States, shoes having designs that infringe the NIKE Patents.

22. NIKE has been and will continue to be irreparably harmed by Skechers’

infringements of the NIKE Patents


http://www.kohls.com/http://www.kohls.com/


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WHEREFORE, NIKE respectfully requests that the Court grant the following relief:

1. A judgment that Skechers infringed each of the NIKE Patents;

2. A permanent injunction enjoining Skechers, and all persons acting in concert with

Skechers, from infringing each of the NIKE Patents;

3. A judgment and order requiring Skechers to pay NIKE all damages caused by

Skechers’ infringement of each of the NIKE Patents (but in no event less than a reasonable

royalty) pursuant to 35 U.S.C. § 284, or the total profit made by Skechers from its infringement

of each of the NIKE Patents pursuant to 35 U.S.C. § 289;

4.

A judgment and order requiring Skechers to pay NIKE supplemental damages or

profits for any continuing post-verdict infringement up until entry of the final judgment, with an

accounting, as needed;

5. A judgment and order requiring Skechers to pay NIKE increased damages up to

three times the amount found or assessed pursuant to 35 U.S.C. § 284;

6. A judgment and order requiring Skechers to pay NIKE pre-judgment and post-

judgment interest on any damages or profits awarded;

7. A determination that this action is an exceptional case pursuant to 35 U.S.C.

§ 285;

8. An award of NIKE’s attorneys’ fees for bringing and prosecuting this action;

9. An award of NIKE’s costs and expenses incurred in bringing and prosecuting this

action; and



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10. Such further and additional relief as this Court deems just and proper.

DEMAND FOR JURY TRIAL

NIKE hereby demands a jury for all issues so triable.

DATED: January 4, 2016.

STOEL RIVES LLP

/s/ Per A. Ramfjord

PER A. RAMFJORD, OSB No. 934024

[email protected]

BANNER & WITCOFF, LTD.

Christopher J. Renk, ILSB No. 6199012

[email protected] S. Maurer, ILSB No. 6275467

[email protected]

Michael J. Harris, ILSB No. [email protected]

Audra C. Eidem Heinze, ILSB No. 6299717

[email protected]

Aaron P. Bowling, ILSB No. [email protected] Hac Vice Pending

Attorneys for Plaintiff Nike, Inc.



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EXHIBIT A

Case 3:16-cv-00007 Document 1-1 Filed 01/04/16 Page 1 of 168


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EXHIBIT B



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EXHIBIT C



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EXHIBIT E



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EXHIBIT F



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EXHIBIT H



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EXHIBIT I



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hers Rips off Nike and adidas With the Energy Burst Sneaker | Complex

//www.complex.com/sneakers/2015/11/skechers-energy-burst[11/18/2015 12:34:27 PM]

SHARE TWEET 0 0

Skechers Ripped Off Boostand Flyknit in One Sneaker

and Completely FailedBY RILEY JONES

Contributing writer specializing in sneakers. @rchrstphr .

EXHIBIT IPage 1 of 6


http://www.complex.com/author/riley-joneshttps://twitter.com/rchrstphrhttp://www.complex.com/sneakers/http://www.complex.com/sneakers/http://www.complex.com/http://www.youtube.com/user/complexmagazinehttp://instagram.com/complexhttps://twitter.com/#!/ComplexMaghttp://www.facebook.com/complexhttps://twitter.com/rchrstphrhttp://www.complex.com/author/riley-jones


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Bruh, what is going on over at Skechers?

One day, it looks like the brand is making serious strides to becoming a top

contender in the footwear industry. Next, it's dropping blatant rip-offs of popularsneakers that can only be described as utterly offensive. Apparently, not even

lawsuits are enough to stop the brand's biting ways, as Nice Kicks has just found a

new model that somehow manages to ape Nike's Flyknit tech and adidas Boost in the

very same sneaker.

Known as the Energy Burst — c'mon fam, who do you really think you're fooling with

that name? — this abysmal sneaker features a "unique flat knit mesh one piece fabric

upper," which, to be honest, isn't unique at all, and a "Burst Compound midsole with

superior impact cushioning protection and remarkable energy return." From the

sounds of this, Skechers has not only ripped off the look of adidas Boost, but it's gone

as far as to steal the marketing, too.

Take a look at the Skechers Energy Burst side-by-side with the Nike Flyknit Air Max

and adidas Pure Boost below, and if for some reason you're feeling really brave, head

over to the Skechers site to check them out for yourself.

Image via Skechers



http://www.complex.com/sneakers/2015/04/skechers-shoes-second-most-popular-brandhttp://www.complex.com/sneakers/2015/04/skechers-shoes-second-most-popular-brandhttp://www.complex.com/sneakers/2015/05/skechers-number-two-brand-americahttp://www.complex.com/sneakers/2015/05/skechers-number-two-brand-americahttp://www.complex.com/sneakers/2015/05/skechers-number-two-brand-americahttp://www.complex.com/sneakers/2015/09/skechers-ripping-off-adidashttp://www.complex.com/sneakers/2015/09/adidas-sues-skechers-over-stan-smithhttp://www.complex.com/sneakers/2015/09/adidas-sues-skechers-over-stan-smithhttp://www.nicekicks.com/2015/11/11/skechers-shamelessly-rips-off-adidas-boost-technology/http://www.nicekicks.com/2015/11/11/skechers-shamelessly-rips-off-adidas-boost-technology/http://www.complex.com/tag/nike-flyknithttp://www.complex.com/tag/nike-flyknithttp://www.complex.com/tag/adidas-boost-technologyhttps://www.skechers.com/en-us/search?t=burst&CJPID=2617611&cj_linkd=11412711https://www.skechers.com/en-us/search?t=burst&CJPID=2617611&cj_linkd=11412711https://www.skechers.com/en-us/search?t=burst&CJPID=2617611&cj_linkd=11412711https://www.skechers.com/en-us/search?t=burst&CJPID=2617611&cj_linkd=11412711http://www.complex.com/tag/adidas-boost-technologyhttp://www.complex.com/tag/nike-flyknithttp://www.nicekicks.com/2015/11/11/skechers-shamelessly-rips-off-adidas-boost-technology/http://www.complex.com/sneakers/2015/09/adidas-sues-skechers-over-stan-smithhttp://www.complex.com/sneakers/2015/09/skechers-ripping-off-adidashttp://www.complex.com/sneakers/2015/05/skechers-number-two-brand-americahttp://www.complex.com/sneakers/2015/05/skechers-number-two-brand-americahttp://www.complex.com/sneakers/2015/04/skechers-shoes-second-most-popular-brand


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WATCH NOW

Tags: News, Flyknit, Nike Flyknit, Sneaker News, sneaker-culture, adidas Boost cushioning, adidas boost, adidas boost



http://www.complex.com/sneakers/cat/newshttp://www.complex.com/tag/flyknithttp://www.complex.com/tag/nike-flyknithttp://www.complex.com/tag/sneaker-newshttp://www.complex.com/tag/sneaker-culturehttp://www.complex.com/tag/adidas-boost-cushioninghttp://www.complex.com/tag/adidas-boosthttp://www.complex.com/tag/adidas-boost-technologyhttp://www.complex.com/tag/adidas-boost-technologyhttp://www.complex.com/tag/adidas-boosthttp://www.complex.com/tag/adidas-boost-cushioninghttp://www.complex.com/tag/sneaker-culturehttp://www.complex.com/tag/sneaker-newshttp://www.complex.com/tag/nike-flyknithttp://www.complex.com/tag/flyknithttp://www.complex.com/sneakers/cat/news


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technology, Nike Flyknit Air Max, Skechers

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3 Comments Sort by

Donnie Calentura · Founder at Brolic Hardware

I read this article and it didn't sit well with me for two reasons. 1st Skechers out sales Adidas in the

US, and 2nd everyone copies eachother in the apparel market. If you doubt my words read the

article below.

http://www.wsj.com/.../skecherss-shares-rise-as-profit...

Like · Reply · 20 hrs

Jeff Scheid · Key Account Executive at New England Footwear

Taking a leading brands good ideas, design and trademarks is something they have always been

known for. I worked for GoLite and our Outdoor Retailer booth was across the aisle from theirs. Our

marketing for the show was "Go" (Go Run, Go Hike, Go Climb). I recall people from their booth

shooting pictures of our banners. Down to the font their Go campaign was born from ours.

Like · Reply · Nov 16, 2015 9:36am

Jeffrey Nelson · Shawnee, Kansas

yawn

Like · Reply · Nov 13, 2015 12:54am

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EXHIBIT K



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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ̈ No x

As of June 30, 2014, the aggregate market value of the voting and non-voting Class A and Class B Common Stock held by non-affiliates of the Registrantwas approximately $1.831 bil lion based upon the closing p rice of $45.70 of the Class A Common Stock on the New York Stock Exchange on such date.

The number of shares of Class A Common Stock outstanding as of February 17, 2015: 41,551,376.

The number of shares of Class B Common Stock outstanding as of February 17, 2015: 10,469,918.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Definitive Proxy Statement issued in connection with the 2015 Annual Meeting of the Stockholders of the Registrant areincorporated by reference into Part III.

EXHIBIT JPage 2 of 93



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Table of Contents

SKECHERS U.S.A., INC. AND SUBSIDIARIES

TABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2014

PART I

ITEM 1. BUSINESS 2

ITEM 1A. RISK FACTORS 17

ITEM 1B. UNRESOLVED STAFF COMMENTS 24

ITEM 2. PROPERTIES 24

ITEM 3. LEGAL PROCEEDINGS 25

ITEM 4. MINE SAFETY DISCLOSURES 29

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES 30

ITEM 6. SELECTED FINANCIAL DATA 32

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 33

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 46

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 48

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 73

ITEM 9A. CONTROLS AND PROCEDURES 73

ITEM 9B. OTHER INFORMATION 76

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 76

ITEM 11. EXECUTIVE COMPENSATION 76

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 76

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 76

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 76

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 76

This annual report includes our trademarks, including Skechers®, Skechers Performance™, Skechers GOrun®, Skechers GOwalk®, ®, ®,Skechers Cali™, Relaxed Fit®, Skechers Memory Foam™, Skech-Air®, BOBS®, Hot Lights®, Twinkle Toes®, each of which is our property. This reportcontains additional trademarks of other companies. We do not intend our use or display of other companies’ trade names or trademarks to imply anendorsement or sponsorship of us by such companies, or any relationship with any of these companies.

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SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995, including statements with regards to future revenue, projected 2015 results, earnings, spending, margins, cash flow, orders,expected timing of shipment of products, inventory levels, future growth or success in specific countries, categories or market sectors, continued o r expecteddistribution to specific retailers, liquidity, capital resources and market risk, strategies and objectives. Forward-looking statements include, withoutlimitation, any statement that may predict, forecast, indicate or simply state future results, performance or achievements, and can be identified by the use of forward-looking language such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will result,” “could,”

“may,” “might,” or any variations of such words with similar meanings. These forward-looking statements involve risks and uncertainties that could causeactual results to differ materially from those projected in forward-looking statements, and reported results shall not be considered an indication of our company’s future performance. Factors that might cause or contribute to such differences include:

• international economic, political and market conditions including the uncertainty of sustained recovery in our European markets;

• our ability to maintain our brand image and to anticipate, forecast, identify, and respond to changes in fashion trends, consumer demand for the products and other market factors;

• our ability to remain competitive among sellers of footwear for consumers, including in the highly competitive performance footwear market;

• our ability to sustain, manage and forecast our costs and proper inventory levels;

• the loss of any significant customers, decreased demand by industry retailers and the cancellation of order commitments;

• our ability to continue to manufacture and ship our products that are sourced in China, which could be adversely affected by various economic, poli tical or trade condi tions, or a natural disaster in China;

• our ability to predict our revenues, which have varied significantly in the past and can be expected to fluctuate in the future due to a number of

reasons, many of which are beyond our control; and

• sales levels during the spring, back-to-school and holiday selling seasons.

The risks included here are not exhaustive. Other sections of this report may include additional factors that could adversely impact our business,financial condition and results of operations. Moreover, we operate in a very competitive and rapidly changing environment and new risk factors emergefrom time to time. We cannot predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Given these inherent andchanging risks and uncertainties, investors should not place undue reliance on forward-looking statements, which reflect our opinions only as of the date of this annual report, as a prediction of actual results. We undertake no obligation to publi cly release any revisions to the forward-looking statements after thedate of this document, except as otherwise required by reporting requirements of applicable federal and states securities laws.

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PART I

ITEM 1. BUSINESS

We were incorporated in California in 1992 and reincorporated in Delaware in 1999. Throughout this annual report, we refer to Skechers U.S.A., Inc., aDelaware corporation, its consolidated subsidiaries and certain variable interest entities (“VIE’s”) of which it is the primary beneficiary, as “we,” “us,” “our,”“our Company” and “Skechers” unless otherwise indicated. Our Internet address is www.skechers.com. Our annual report on Form 10-K, quarterly reports onForm 10-Q, current reports on Form 8-K, Form 3’s, 4’s and 5’s filed on behalf of directors, officers and 10% stockholders, and any amendments to thosereports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on our corporate website,www.skx.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission(“SEC”). You can learn more about us by reviewing such filings at www.skx.com or at the SEC’s website at www.sec.gov.

GENERAL

We design and market Skechers-branded lifestyle footwear for men, women and children, and performance footwear for men and women under theSkechers GO brand name. Our footwear reflects a combination of style, quality and value that appeals to a broad range of consumers. Our brands are soldthrough department and specialty stores, athletic and independent retailers, boutiques and internet retailers. In addition to wholesale distribution, our footwear is available at our e-commerce websites and our own retail stores. As of February 15, 2015, we owned and operated 119 concept stores, 146 factoryoutlet stores and 98 warehouse outlet stores in the United States, and 51 concept stores, 33 factory outlet stores, and three warehouse outlet storesinternationally. Our objective is to profitably grow our operations worldwide while leveraging our recognizable Skechers brand through our strong productlines, innovative advertising and diversified distribution channels.

We seek to offer consumers a vast array of fashionable footwear that satisfies their active, casual, dress casual and athletic footwear needs. Our coreconsumers are style-conscious men and women attracted to our you thful brand image and fashion-forward designs, as well as athletes and fitness enthusiastsattracted to our performance footwear. Many of our best-selling and core styles are also developed for children with colors and materials that reflect a playfulimage appropriate for this demographic.

We believe that brand recognition is an important element for success in the footwear business. We have aggressively marketed our brands throughcomprehensive marketing campaigns for men, women and children. During 2014, our Skechers brand was supported by print, television and outdoor campaigns for men and women; animated kids’ television campaigns featuring our own action heroes and characters; marathons and other events for our Skechers Performance Division; donation events surrounding our BOBS from Skechers charitable footwear program; and print, television, online and outdoor campaigns featuring our Skechers Performance and Skechers lifestyle endorsees. These endorsees included tel evision personality multi-platinum recordingartist Demi Lovato, baseball legend Pete Rose, Brooke Burke-Charvet, Hall of Fame quarterbacks Joe Montana and Joe Namath, Dallas Mavericks owner Mark Cuban, Dodgers baseball legend Tommy Lasorda, Olympians Kara Goucher and Meb Keflezighi, and legendary drummer and recording artist RingoStarr.

Since 1992, when we introduced our first line, Skechers USA Sport Utility Footwear, we have expanded our product offering and grown our net saleswhile substantially increasing the breadth and penetration of our account base. Our men’s, women’s and chi ldren’s Skechers-branded product lines benefitfrom the Skechers reputation for contemporary and progressive styling, quality, comfort and affordability. Our Performance lines benefit from our marketing, product development and manufacturing support, and management expertise. To promote innovation and brand relevance, we manage our product linesseparately by utilizing dedicated sales and design teams. Our product lines share back office services in order to limit our operating expenses and fully utilize

our management’s vast experience in the footwear industry.

SKECHERS LINES

We offer a wide array of Skechers-branded product lines for men, women, and children. Within these product lines, we also have numerous categories,many of which have developed into well-known names. Most of these categories are marketed and packaged with unique shoe boxes, hangtags and in-storesupport. Management evaluates segment performance based primarily on net sales and gross margins; however, sales and costs are not allocated to specific product l ines.

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Lifestyle Brands

Skechers USA. Our Skechers USA category for men and women includes: (i) Casuals, (ii) Dress Casuals, (iii) Relaxed Fit from Skechers, (iv) CasualFusion, and (v) seasonal sandals and boots. This category is generally sold through mid-tier retailers, department stores and some footwear specialty shops.

• The Casuals line for men and women is defined by lugged outsoles and utilizes value-oriented and leather materials in the uppers. For men, theCasuals category includes “black and brown” boots, shoes and sandals that generally have a rugged urban design — some with industrial-inspired fashion features. For women, the Casuals category includes basic “black and brown” oxfords and slip-ons, lug outsole and fashion boot s,and casual sandals. We design and price both the men’s and women’s categories to appeal primarily to younger consumers with broad acceptance

across age groups.

• The Dress Casuals category for men is comprised of basic “black and brown” men’s shoes that feature shiny leathers and dress details, but mayutilize traditional or lugged outsoles as well as value-oriented materials. The Dress Casual line for women is comprised of trend-influencedstylized boots and shoes, which may include leather uppers, shearling or faux fur lining o r trim, and water-resistant materials.

• Relaxed Fit from Skechers is a line of trend-right casuals with a wider toe box for men and women who want all-day comfort withoutcompromising style. Characteristics of the product line include comfortable outsoles, Skechers Memory Foam insoles and quality leather uppers.We market and package Relaxed Fit from Skechers styles in a unique shoe box that is distinct from other categories in the Skechers USA line of footwear.

• Our Casual Fusion line is comprised of low-profile, sport-influenced Euro casuals targeted to trend-conscious young men and women. Theoutsoles are primarily rubber and adopted from our men’s Sport and women’s Active lines. This collection features leather or nubuck uppers, butmay also include mesh.

• Our seasonal sandals and boots for men and women are designed with many of our existing and proven outsoles for our Casuals, Dress Casualsand Casual Fusion lines, stylized with basic or core uppers as well as fresh looks. These styles are generally made with quality leather uppers, butmay also be in canvas or fabric for sandals, and water-resistant materials and faux fur and Sherpa linings for boots.

Skechers Sport . Our Skechers Sport footwear collection for men and women includes: (i) Skechers Memory Foam styles, (ii) lightweight performance-inspired athletics, (iii) classic athletic-inspired styles and (iv) sport sandals and boots. Our Skechers Sport category is distinguished by its technical performance-inspired looks; however, we general ly do not promote the technical performance features of these shoes. Skechers Sport is typically sold throughspecialty shoe stores, department stores and athletic footwear retailers.

• Skechers Memory Foam styles are designed with a high-volume memory foam insole that will contour to your foot and provide greater comfort.The lightweight and ultra-soft looks al so feature a flexible outsole and soft uppers, some of which feature bio-engineered mesh, soft knit fabrics,and stretchable woven materials. This category features bright, multi-colored and solid basic-colored uppers.

• Our lightweight performance-inspired athletics are designed with comfort and flexibility in mind. Careful attention is devoted to the cushioning,weight, materials, design and construction of the outsoles. Designed as a versatile, trend-right athletic shoe suitable for all-day wear, the productline features leather and trubuck uppers in both bright and classic athletic colors.

• Classic athletic-inspired styles are core proven looks that continue to be strong performers. With all-day comfort and durable rubber tread, theseshoes are intended to be a mainstay of any footwear collection. Many of the designs are in white, black and natural shades, with some athleticaccents. The uppers are designed in leather, suede and nubuck.

• Our sport sandals and boots are primarily designed from existing Skechers Sport outsoles and may include many of the same sport features as our sneakers with the addition of new technologies geared toward making a comfortable sport sandal. Sport sandals and boots are designed asseasonal footwear for the consumer who already wears our Skechers Sport sneakers.

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Skechers Active and Skechers Sport Active. A natural companion to Skechers Sport, Skechers Active and Skechers Sport Active have grown from acasual everyday line into two complete lines of sneakers and casual sneakers for active females of all ages. The Skechers Active line, with lace-up, MaryJanes, sandals and open back styles, is available in a multitude of colors as well as solid white or black, in fabrics, leathers and meshes, and with variousclosures – traditional laces, zig-zag and cross straps, among others. The Skechers Sport Active line includes low-profile, lightweight, flexible and sportystyles, many of which have Skechers Memory Foam. Skechers Active and Skechers Sport Active shoes are typically available through specialty casual shoestores and department stores.

BOBS from Skechers. The BOBS from Skechers line has grown into a year-round product offering with the addition of vulcanized looks and an “at

Home” line. Primarily marketed to young women, the BOBS collection also includes footwear for kids, and men to a smaller degree. BOBS are available atdepartment stores, specialty shoe stores and online retailers.

• The BOBS classic espadrille collection is designed in basic colors with canvas, tweed, crochet and boiled wool uppers, suede, and patternedfabrics. Many styles now include Skechers Memory Foam.

• BOBS vulcanized looks have a very youthful and California lifestyle appeal. Primarily designed with canvas uppers but also jersey fabrics, theline features both classic retro looks and fresh colors and materials for a relevant style. Many styles now include Skechers Memory Foam.

• The BOBS at Home collection for women is designed with our flexible rubber Keepsakes outsole, and features faux fur linings for the ultimatedorm or winter shoe. The uppers are primarily designed with tweeds, knits or suede.

• The BOBS for Kids line is inspired by the successful women’s styles, designed with bright and patterned fabrics and embellished uppers for girls.

• BOBS for men features basic slip-on and lace-up canvas styles as well as vulcanized designs. Some styles include Skechers Memory Foam.

Skechers donates new shoes to children in need when consumers purchase BOBS. By the end of 2014, we had donated over 10 million pairs primarilyto SolesforSouls and Fashion Delivers, our charity donation partners, who in turn donate the shoes to various reputable charity organizations in the United

States and around the world.

Performance Brands

Skechers Performance. Skechers Performance is a collection of technical footwear designed with a focus on a specific activity to maximize performance and promote natural motion. Developed by the Skechers Performance Design Team, the footwear util izes the latest advancements in materialsand innovative design, including an ultra-lightweight Resalyte compound for the midsole and GOimpulse sensors for responsive feedback. Limited edition packs with Skechers GOdri all-weather protection or Skechers Nite Owl glow-in-the-dark technology are featu red across multiple product l ines. The foo twear is available at athletic footwear retailers, department stores and specialty running stores.

• Skechers GOrun. Skechers GOrun 4 and Skechers GOrun 3 are the latest in a collection of lightweight, flexible running shoes that features amidfoot strike design for efficient running. Skechers GOrun Ride 4 and Skechers GOrun Ride 3 feature similar designs as its GOrun counterpartwith enhanced cushioning for elevated comfort and support. Skechers GOrun Ultra offers maximum cushioning with the most support making it perfect for distance or recovery runs. Skechers GOmeb Speed 3 is the h igh-performance racing shoe worn by elite marathon runner Meb. Theseflagship lines as well as other Skechers GOrun products are marketed to serious runners and recreational runners alike.

• Skechers GOwalk. Skechers GOwalk is designed for walking and casual wear, and offers performance features in a comfortable casual slip-on.

The product line features a lightweight and flexible design to promote natural foot movement when walking. Skechers GOwalk 3 incorporatesmore advanced performance technologies including a high-rebound GOga Mat insole, adaptive GO Pillars on the outsole and Memory Form Fitfor a custom-fit experience. Skechers GOwalk 2 incorporates more performance technologies with a unique V-Stride outsole designedspecifically to promote a natural walking stride. Skechers on-the-GO footwear fuses iconic designs and premium materials with SkechersPerformance technologies for comfort and style.

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• Skechers GObionic. Designed for trail running, Skechers GObionic is engineered with 18 fully articulated bio-responsive zones that offer

flexibility, feel and ground conformity. A proprietary Resagrip outsole increases the durability to handle wear-and-tear from tougher terrain.

• Skechers GOtrain. Skechers GOtrain is designed for the gym and features a wider forefoot and extended outriggers for maximum stability andcontrol at lateral and medial strike points. This shoe is an all-encompassing trainer that meets the need of in tense and rigorous workouts.

• Skechers GOgolf. Skechers GOgolf is designed for the golf course and offers a zero heel d rop design, which keeps feet in a neut ral position that islow to the ground to promote a solid foundation while playing golf. A Resagrip outsole helps with traction control and a soft Resamaxcushioned insole delivers comfort.

kechers Kids

The Skechers Kids line includes: (i) Skechers Kids, which is a range of infants’, toddlers’, boys’ and girls’ boots, shoes and sneakers, (ii) SkechersLightweight Sport, (iii) Skechers GOrun and Skechers GOwalk, (iv) S-Lights, Hot Lights by Skechers and Luminators by Skechers, (v) Skechers Cali for Girls,(vi) Airators by Skechers, (vii) Skechers Super Z-Strap, (viii) Elastika by Skechers, (ix) Bella Ballerina by Skechers, (x) Twinkle Toes by Skechers, (xi) Air-Mazing by Skechers, and (xii) Foamies by Skechers.

• The Skechers Kids line includes embellishments or adornments such as fresh colors and fabrics from our Skechers adult shoes. Some of thesestyles are also adapted for toddlers with softer, more pliable out soles and for infants with soft, leather-sole crib shoes.

• Skechers Lightweight Sport styles with Skechers Memory Foam are sneakers designed with many of the same meshes, knits and weaves as theadult Skechers Sport styles in bright colors and patterns. The collection is designed to appeal both to younger kids as well as tweenstransitioning to adult shoes.

• Skechers GOrun and Skechers GOwalk for boys and girls are casual adaptations of our popular Skechers Performance styles for the kids’ market,designed in bright and bold colors for daily play. The collection is designed to appeal both to younger kids as well as tweens transitioning to

adult shoes.

• S-Lights, Hot Lights by Skechers and Luminators by Skechers are lighted sneakers and sandals for boys and girls. The S-Lights combine patternsof lights on the outsoles and sides of the shoes while Hot Lights feature lights on the front of the toe to simulate headlights as well as on other areas of the shoes. Luminators by Skechers feature glowing green lights and a marketing campaign with the Luminators character.

• Skechers Cali for Girls is a line of sandals inspired by our women’s line of the same name with bright colors, textiles and adornments.

• Airators by Skechers is a line of boys’ sneakers with a foot-cooling system designed to pump air from the heel through to the toes. The productline is marketed with the character, Kewl Breeze.

• Skechers Super Z-Strap is a line of athletic-styled sneakers with an easy “z” shaped closure system. The product line is marketed with thecharacter, Z-Strap.

• Elastika by Skechers is a line of girls’ sneakers with bungee closures. The product line is marketed with the character, Elastika.

• Bella Ballerina by Skechers is a line of girls’ shoes with a disc that spins on the outsole, allowing girls to twirl like a ballerina.

• Twinkle Toes by Skechers is a line of girls’ sneakers and boots that feature bejeweled toe caps and brightly designed uppers. Some styles also

include light s. The product line is marketed with the character, Twinkle Toes.

• Air-Mazing by Skechers is a lightweight line of colorful sneakers designed for older boys. The product line is marketed with the character, Air-Mazing Kid, who performs air tricks in his sneakers.

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• Foamies by Skechers is a colorful line of lightweight, flexible boys’ and girls’ sneakers constructed with Skechers Memory Foam that can easily

be washed in a washing machine.

Skechers Kids, Skechers Kids Memory Foam, Skechers GO for kids, and Skechers Cali for Girls are comprised primarily of shoes that are designed as“takedowns” of their adult counterparts, allowing the younger consumers the opportunity to wear the same popular styles as their older siblings andschoolmates. This “takedown” strategy maintains the product’s integrity by offering premium leathers, hardware and outsoles without the costs involved indesigning and developing new products. In addition, we adapt current fashions from our men’s and women’s lines by modifying designs and choosing colorsand materials that are more suitable for the playful image that we have established in the children’s footwear market. Each Skechers Kids line is marketed and

packaged separately with a distinct shoe box. Skechers Kids shoes are available at department stores and specialty and ath letic retailers.

kechers Work

Skechers Work offers a complete line of men’s and women’s casuals such as field boots, hikers and athletic shoes, many of which may also includeSkechers Memory Foam. The Skechers Work line includes athletic-inspired, casual safety toe and non-slip safety toe categories that may feature lightweightaluminum safety toe, electrical hazard and slip-resistant technologies, as well as breathable, seam-sealed waterproof membranes. Designed for men andwomen working in jobs with certain safety requirements, these durable styles are constructed on high-abrasion, long-wearing soles, and feature breathablelining, oil- and abrasion-resistant outsoles offering all-day comfort and prolonged durability. The Skechers Work line incorporates design elements fromother Skechers men’s and women’s lines. The uppers are comprised of high-quality leather, nubuck, trubuck and durabuck. Our safety toe athletic sneakers, boots, h ikers and casuals are ideal for environments requiring safety footwear and offer comfort and safety in dry or wet condi tions. Our slip-resistant boots,hikers, athletics, casuals and clogs are ideal for the service industry. Our safety toe products have been independently tested and certified to meet ASTMstandards, and our slip-resistant soles have been tested pursuant to the Mark II testing method for slip-resistance. Skechers Work is typically sold throughdepartment stores, athletic footwear retailers and specialty shoe stores, as well as marketed di rectly to consumers through business-to-business channels.

PRODUCT DESIGN AND DEVELOPMENT

Our principal goal in product design is to generate new and exciting footwear in all of our product lines with contemporary and progressive styles andcomfort-enhancing performance features. Targeted to the active, youthful and style-savvy, we design our l ifestyle line to be fashionable and marketable tothe 12- to 24-year-old consumer, while substantially all of our lines appeal to the broader range of 5- to 50-year olds, with an exclusive selection for infantsand todd lers. Designed by the Skechers Performance Division, our performance products are for professional and recreational athletes who want a t echnicalfitness shoe.

We believe that our products’ success is related to our ability to recognize trends in the footwear markets and to design products that anticipate andaccommodate consumers’ ever-evolving preferences. We are able to quick ly translate the latest fashion trends into stylish, quality footwear at a reasonable price by analyzing and interpreting current and emerging l ifestyle t rends. Lifestyle t rend information is compiled and analyzed by our designers from varioussources, including the review and analysis of modern music, television, cinema, clothing, and other trend-setting media; traveling to domestic andinternational fashion markets to identify and confirm current trends; consulting with our retail and e-commerce customers for information on current retailselling trends; participating in major footwear trade shows to stay ab reast of popular brands, fashions and styles; and subscribing to various fashion and color information services. In addition, a key component of our design philosophy is to continually reinterpret and develop our successful styles in our brands’images.

The footwear design process typically begins about nine months before the start of a season. Our products are designed and developed primarily by our in-house design staff. To promote innovation and brand relevance, we utilize dedicated design t eams, who report to our senior design executives and focuson each of the men’s, women’s and children’s categories. In addition, we utilize outside design firms on an item-specific basis to supplement our internaldesign efforts. The design process is extremely collaborative, as members of the design staff frequently meet with the heads of retail, merchandising, sales, product ion and sourcing to further refine our product s to meet the particular needs of the target market .

After a design team arrives at a consensus regarding the fashion themes for the coming season, the designers then translate these themes into our products. These interpretat ions include variations in product color, material structure and embellishments, which are arrived at after close consult ation withour production department. Prototype blueprints and specifications are created and forwarded to our manufacturers for a design prototype. The design prototypes are then sent back to our design teams. Our major retail cu stomers

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may also review these new design concepts. Customer input not only allows us to measure consumer reaction to the latest designs, but also affords us anopportunity to foster deeper and more collaborative relationships with our customers. We also occasionally order limited production runs that may initially be tested in our concept stores. By working closely with store personnel, we obtain customer feedback that often influences product design and development.Our design teams can easily and quickly modify and refine a design based on customer input. Generally, the production process can take six to nine monthsfrom design concept to commercialization.

For disclosure of product design and development costs during the last three fiscal years, see Note 1 — The Company and Summary of SignificantAccounting Policies in the consolidated financial statements included in this annual report.

SOURCING

Factories. Our products are produced by independent contract manufacturers located primarily in China and Vietnam. We do not own or operate anymanufacturing facilities. We believe that the use of independent manufacturers substantially increases our production flexibility and capacity, whilereducing capital expend itures and avoiding the costs of managing a large production work force. For disclosure of information regarding the risks associatedwith having our manufacturing operations abroad and relying on independent contract manufacturers, see the relevant risk factors under Item 1A of thisannual report.

When possible, we seek to use manufacturers that have previously produced our footwear, which we believe enhances continuity and quality whilecontrolling production costs. We source product for styles that account for a significant percentage of our net sales from at least five different manufacturers.During 2014, five of ou r contract manufacturers accounted for approximately 58.9% of total purchases. One manufacturer accounted for 37.5%, and another accounted for 6.1% of our total purchases. To date, we have not experienced difficulty in obtaining manufacturing services or with the availability of rawmaterials.

We finance our production activities in part through the use of interest-bearing open purchase arrangements with certain of our Asian manufacturers.

These facilities currently bear interest at a rate between 0% and 0.5% for 30- to 60-day financing, depending on the factory. We believe that the use of thesearrangements affords us additional liqu idity and flexibility. We do not have any long-term contracts with any of our manufacturers; however, we have long -standing relationships with many of our manufacturers and believe our relationships to be good.

We closely monitor sales activity after initial introduction of a product in our concept stores to determine whether there is substantial demand for astyle, thereby aiding us in our sourcing decisions. Styles that have substantial consumer appeal are highlighted in upcoming collections or offered as part of our periodic style offerings, while less popular styles can be discontinued after a limited production run. We believe that sales in our concept stores can alsohelp forecast sales in national retail stores, and we share this sales information with our wholesale customers. Sales, merchandising, production andallocations management analyze historical and current sales, and market data from our wholesale account base and our own retail stores to develop aninternal product quantity forecast that allows us to better manage our future production and inventory levels. For those styles with high sell-through percentages, we maintain an in-stock position to minimize the time necessary to fill customer orders by placing orders with our manufacturers p rior to thetime we receive customers’ orders for such footwear.

Product ion Oversight. To safeguard product quality and consistency, we oversee the key aspects of production from initial prototype manufacturethrough initial production runs to final manufacture. Monitoring of all production is performed in the United States by our in-house production departmentand in Asia through an approximately 230-person staff working from our offices in China. We believe that our Asian presence allows us to negotiate supplier

and manufacturer arrangements more effectively, decrease product turnaround time and ensure timely delivery of finished footwear. In addition, we requireour manufacturers to certify that neither convicted, forced nor indentured labor (as defined under U.S. law), nor child labor (as defined by law in themanufacturer’s country) is used in the p roduction process, that compensation will be paid according to local law, and that the factory is in compliance withlocal safety regulations.

Quality Control. We believe that quality control is an important and effective means of maintaining the quality and reputation of our products. Our quality control program is designed to ensure that not only finished goods meet our established design specifications, but also that all goods bearing our trademarks meet our standards for quality. Our quality control personnel located in China perform an array of inspection procedures at various stages of the product ion process, including examination and testing of prototypes of key raw materials prior to manufacture, samples and materials at various stages of product ion and final products prior to shipment . Our employees are on site at each of our major manufacturers to oversee production. For some of our lower volume manufacturers, our staff is on site during significant production runs or we will perform unannounced visits to their manufacturing sites to further monitor compliance with our manufacturing specifications.

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ADVERTISING AND MARKETING

With a marketing philosophy of “Unseen, Untold, Unsold,” we take a targeted approach to marketing to drive traffic, build brand recognition and properly position our diverse lines within the marketplace. Senior management is directly involved in shaping our image and the conception , developmentand implementation of our advertising and marketing activities. The focus of our marketing plan is print and television advertising, which is supported byonline, outdoor, trend-influenced marketing, public relations, social media, promotions, events and in-store support. In addition, we utilize celebrityendorsers in some of our advertisements. We also believe our websites and trade shows are effective marketing tools to both consumers and wholesaleaccounts. We have historically budgeted advertising as a percentage of projected net sales.

The majority of our advertising is conceptualized by our in-house design team. We believe that our advertising strategies, methods and creativecampaigns are directly related to our success. Through our lifestyle, performance-inspired and image-driven advertising, we generally seek to build andincrease brand awareness by linking the Skechers brand to youthful attitudes for our lifestyle lines, and technology with runners and athletes for our performance lines. Our ads are designed to provide merchandise flex ibili ty and to facilitate the Skechers brand’s direction.

To further build brand awareness and influence consumer spending, we have selectively signed endorsement agreements with celebrities whom we believe will reach new markets. Our Skechers lifestyle endorsees Demi Lovato, Brooke Burke-Charvet, Mark Cuban, Joe Montana, Joe Namath, Pete Rose andTommy Lasorda all appeared in advertising campaigns in 2014. Additionally, we signed Mariano Riviera and Ringo Starr, who are set to appear incampaigns in 2015. Our Skechers Performance Division endorsees are elite runner and Olympic medalist Meb and elite runner Kara Goucher, who bothappeared in marketing campaigns during 2014. Competing in Skechers GO speed footwear, Meb won the Boston Marathon in 2014. To launch our SkechersGO golf line, we signed leading golfer Matt Kuchar, who has and will continue to appear in marketing campaigns in 2015 . From time to time, we may signother celebrities to endorse our brand name and image in order to strategically market our products among specific consumer groups in the future.

With a t argeted approach, our print ads appear regularly in popular fashion, lifestyle and pop culture pub lications, including Runner’s World , Shape,Seven teen, Men’s Fitness, Women’s Fitness, Women’s Health , People, Us Weekly, and OK!, among others. Our advertisements also appear in internationalmagazines around the world.

Our television commercials are produced both in-house and through producers that we have utilized in the past who are familiar with our brands. In2014, we developed commercials for men, women and children for our Skechers brands

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