The Supreme Court on Wednesday supported efforts by Nike Inc. to rid itself of a rival’s trademark suit by promising not to pursue its own lawsuit against the competitor, Already LLC.
The promise or covenant, the court agreed, rendered the litigation moot. It was a significant win for Nike, and a continuation of the court’s efforts to rein in business litigation through jurisdictional and other procedural devices. The case was Already LLC v. Nike Inc. A brief in the case by the International Trademark Association said that allowing Already’s suit to continue would “weaken the incentives that foster compromise and settlement of trademark disputes.”
Chief Justice John Roberts Jr. wrote the opinion for a unanimous court, though Justice Anthony Kennedy wrote a concurrence joined by justices Clarence Thomas, Samuel Alito Jr., and Sonia Sotomayor.
Nike took the first step in the litigation, suing Already in 2008 to protect its “Air Force 1″ shoe line trademark, which Nike said was being diluted by Already’s “Soulja Boys” and “Sugars” shoes. Already responded by filing a counterclaim, challenging the validity of Nike’s trademark in the first place. In March 2009, Nike issued a broadly worded covenant, stating that Already no longer infringed the Nike trademark at a level that made further litigation worthwhile. It promised that Nike would not litigate in the future against any of Already’s current footwear lines of any “colorable imitation.”
Nike then successfully moved to dismiss its claims and end the litigation. Despite opposition from Already, Nike won at the district court and appeals court level, setting the stage for Already’s challenge in the Supreme Court.
The Supreme Court agreed with the dismissal, finding that Nike had met its “formidable burden” of showing that the covenant prevented Nike from resuming the litigation. “The covenant is unconditional and irrevocable.” Roberts emphasized the weight of the burden on Nike as a way to prevent the possibility that Nike would refile its lawsuit against Already later. The Kennedy concurrence also underscored this point.
Roberts shrugged off Already’s arguments that the litigation is not moot. Given the breadth of the covenant, Roberts said that Already stands in the favorable position of being the only Nike competitor that cannot be sued by Nike over the Air Force 1 trademark. “Already is Nike’s least injured competitor.”
As he does on occasion, Roberts used some fanciful imagery in the decision when he knocked down Already’s argument that the lawsuit should remain alive because Already could conceivably produce sneakers in the future that would prompt Nike to sue again.
“If such a shoe exists, the parties have not pointed it out, there is no evidence that Already has dreamt of it, and we cannot conceive of it,” Roberts wrote. “It sits, as far as we can tell, on a shelf between Dorothy’s ruby slippers and Perseus’s winged sandals.”
Reacting to the opinion, Mayer Brown partner Donald Falk said Wednesday that the “most practically significant aspect of the ruling” may be that “the court rejected the notion that a competitor can always sue to invalidate its rival’s IP even if there is no concrete real-world dispute.” He said the decision was also another example of “strict jurisprudence of Article III standing, while also making clear that there are equally clear and strict limits on a party’s ability to escape a lawsuit by voluntarily abandoning the challenged conduct.”
Tony Mauro can be contacted at firstname.lastname@example.org.