Last month, Payless was ordered by a jury in Oregon to pay $304 million to adidas for infringing its famed three-stripe mark, an amount believed to be the largest jury award for trade mark infringement in US history.

But Collective Brands dubbed the award "excessive" and requested that the verdict be overturned.

K-Swiss filed its complaint against the bargain shoe store in February 2004, claiming trade mark and trade dress infringement, trade mark dilution and unfair competition.

In a filing with the US Securities and Exchange Commission (SEC), Collective Brands said that it had "meritorious defenses to the claims asserted in the lawsuit", but also said that "the ultimate resolution of this matter could have a material adverse effect on our financial position and results of operations".

Under the settlement agreement, Collective Brands did not admit liability to K-Swiss, but agreed that Payless would "refrain from making, advertising, promoting or selling footwear confusingly similar to that sold by K-Swiss, including footwear that bears K-Swiss' trademark or trade dress".

However, the store will have until the end of 2008 to sell any existing inventory of the shoes at issue in the suit.

In April 2006, Crocs, Inc, maker of the popular Crocs footwear, also filed two actions against Collective Licensing International, which licenses the Airwalk brand of footwear to Collective Brands, claiming patent infringement, trade dress infringement and unfair competition at the US International Trade Commission (ITC) and in a federal district court in Colorado. Footwear designer Asics has also filed a complaint against Payless in a California district court.

The series of recent trade mark suits against the company could threaten the Payless business model, which relies on the ability to parody popular brands and sell them at reduced prices.