Nike Sues StockX Over NFT

The newest craze (potentially for the next couple of decades) is the surge of non-fungible tokens or more well-known as NFTs. They have been around since 2014, but it took almost a decade for people to understand and accept these new products. In the virtual reality space called the “Metaverse,” people can purchase NFTs and interact with other users about them. With the current rise of interest of NFTs, the metaverse companies are just figuring out products that they can send out to consumers. Just like anything else when there is a boom, there are opportunistic people out there trying to take advantage to make some money. In the beginning of the new metaverse era trademark and copyright infringement has been difficult for large companies to handle. There is no concrete case law and many lawyers have called the NFT landscape the “wild west.” (Heitner, 2022). As a result, NFTs are created and sold without the permission of companies. Many companies and professional teams such as Walmart, Brooklyn Nets, Puma, and New Balance have filed or added to their already-existing trademarks regarding the Metaverse. (Heitner, 2022).

Identical to many companies trying to fight against infringement, Nike is suing StockX over NFTs. The lawsuit was filed on Thursday in U.S. District Court for the Southern District of New York and are seeking monetary damages as well as injunctive relief to stop StockX from creating NFTs with Nike’s logo. StockX is a resale marketplace that is valued at $3.8 billion. A majority of the shoes and products in their resale market are Nike, and StockX has created an insanely successful business from reselling Nike products having 76,537 of their items listed on their site. (Heitner, 2022). StockX wants to continue to expand their portfolio of products by selling NFTs of various Nike shoes, but they might have done so too soon.

Relatedly, in October, Nike filed a trademark application related to the Metaverse. The application was filed, “for use in connection with downloadable virtual goods, namely computer programs featuring footwear,’ (digital sneaker NFTs) and ‘retail store services featuring virtual goods, namely footwear’ (digital sneaker NFT trading platform).” (TFL, 2022). Nike has not yet launched NFTs, but is planning to release “a number of virtual products” this month with digital art studio. Nike claims that StockX has sold 558 individual Nike-branded Vault NFTs. (TFL, 2022). They do not want any brand confusion by having consumers mixed up with the NFTs that StockX has created thinking that it is Nike’s. Nike believes that they have created other types of virtual products that could count as common law trademark rights.

The claim states, “in October 2019, through its SNKRS mobile application, partnered with 2K Sports, makers of the NBA 2K basketball video game franchise, to offer ‘Gamer Exclusives,’ limited edition digital and physical Nike sneakers that NBA 2K20 players can unlock through gameplay.” Nike v StockX, 283 F. Supp. 22 (S.D.N.Y., 2022). Also, Nike created a virtual space, Nike Virtual Studios, where fans and sneakerheads can connect, create, share experiences, and compete in different games on Roblox. Nike and other companies having existing rights to any virtual goods and services would be huge for all sides. Companies would not have to rush to file new applications, a precedent could potentially be set for courts to easily follow, and the United States Patent and Trademark Office would not have as many applications during a time where they are already backed up for months.

However, StockX filed a trademark for its digital goods on January 5th, 2022, then launched their first NFT project later that month. StockX’s NFTs give consumers a traceable digital receipt where they have the exact number that the NFT is as well as specific StockX releases, promotions, and events. StockX’s intermediary business model of authenticating physical sneakers, apparel, and other accessories, may make an exception to the clear view of trademark infringement by selling goods with another company’s logo. This distinctive aspect of their services could possibly give StockX the weight that they need to have their trademark application pass. Since they already resell Nike products it may be possible that courts can see them doing the same with NFTs in the future. StockX’s brand is based on sneakerheads having a chance to collect a certain type of sneaker after they are released. These kinds of NFTs could be viewed as a great way for fans to collect their favorite shoes in a different way. StockX selling their NFTs for a higher price is on brand for them because of their normal business practice of reselling most of their shoes for a lot more than retail value. In a way, they are truly trying to continue their business practices in the metaverse that have made them successful thus far.

If Nike wins the lawsuit, they can use this act to make StockX take down their NFTs. The problem of companies using copyrighted material will only increase in the future and could be a way to monitor the metaverse. This case is of the upmost importance for future metaverse trademark and copyright infringement. The case could establish precedent or create first come first serve trademark reign in the Metaverse.

Citations

Heitner, D. (2022, February 4). Nike Attacks StockX In An NFT Lawsuit For Trademark Infringement And Dilution. Retrieved from Above the Law: https://abovethelaw.com/2022/02/nike-attacks-stockx-in-an-nft-lawsuit-for-trademark-infringement-and-dilution/

TFL. (2022, February 3). Nike Names StockX in New Lawsuit Over Unauthorized Sneaker NFTs. Retrieved from The Fashion Law: https://www.thefashionlaw.com/nike-names-stockx-in-lawsuit-over-sale-of-unauthorized-sneaker-centric-nfts/