Nike makes many lines of shoes, including footwear designed for running, basketball, football, soccer and training. In light of its recent legal maneuvering in a Federal trademark dispute that threatened the viability of its "Air Force 1" trademark, it might be time for Nike to consider add a line of shoes for playing chess.
Article III of the United States Constitution grants limited authority to the Judicial Branch to adjudicate "cases" and "controversies". The U.S. Supreme Court has explained that, absent an actual such case or controversy, courts have “no business” deciding legal disputes or expounding on the law. A party that invokes the power of a federal court is therefore required to demonstrate it has "standing" to sue. That is, it must establish a “personal injury fairly traceable to the defendant’s allegedly unlawful conduct and likely to be redressed by the requested relief.” And standing must exist not only at the time the complaint is filed but through all stages of the litigation. Nike employed this doctrine to obtain dismissal of a trademark infringement lawsuit it had itself commenced.
Nike originally filed its trademark infringement suit against Already, LLC, which, under the name Yums, sells a shoe line popularly known as “Sugars” and “Soulja Boys.” Nike alleged that the Soulja Boys line infringed and diluted its Air Force 1 trademark. Already denied the allegations and filed a counterclaim, asserting it was also entitled to a declaration that Nike's Air Force 1 trademark was invalid. Nike responded by employing a strategy with echoes of a classic chess maneuver designed to protect the king: it castled.
Several months after had Nike filed its complaint, it asked the court to dismiss its claims in a manner that would ultimately end the threat to its Air Force 1 trademark. First, Nike issued a “Covenant Not to Sue,” in which it stated that “Already’s actions... no longer infringe or dilute the NIKE Mark at a level sufficient to warrant the substantial time and expense of continued litigation.” Nike further promised it would not raise any trademark or unfair competition claims against Already or any affiliated entities based on any of Already’s existing footwear designs or any future Already designs that constituted a “colorable imitation” of Already’s current products.
Following its issuance of this covenant, Nike then moved to dismiss its own claims with prejudice and also asked the court to dismiss Already’s invalidity counterclaim on the ground that the covenant not to sue extinguished the case or controversy between the parties. Already opposed Nike's request to dismiss its counterclaim, arguing that Nike had not established that its voluntary cessation had mooted the case. Already submitted an affidavit in which its president stated that Already had plans to introduce new versions of its shoe lines into the market. It also submitted affidavits from three potential investors who asserted they would not consider investing in Already until Nike’s trademark was invalidated. It also submitted an affidavit from one of its executives, stating that Nike had intimidated retailers into refusing to carry Already’s shoes.
But the district court granted Nike's request and dismissed Already’s counterclaim. The court explained that because Already was seeking to invoke the court’s declaratory judgment jurisdiction, it continued to bear the burden of demonstrating the court had subject matter jurisdiction over its counterclaim. The court found Already could not meet this burden. The court broadly interpreted Nike's covenant not to sue and concluded that any of Already’s future products that arguably infringed Nike's mark would be considered "colorable imitations” of Already’s current footwear and therefore were protected against future trademark infringement claims Nike might bring. The court found there was no evidence that Already was seeking to develop any shoes that would not be covered by the covenant and concluded there was no longer a substantial controversy between the parties that might allow the court to continue to excercise jurisdiction. Therefore, it dismissed the case.
Already appealed to the Second Circuit but it was unsuccessful in the Court of Appeals. It then appealed to the U.S. Supreme Court. However, the Supreme Court also affirmed the dismissal, unanimously. Check mate.
The Supreme Court's decision, in Already, LLC v. Nike, Inc., is available here.
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