Nike Sues Retail Platform Over NFTs In Potentially Precedent-Setting Case

• Published date: 26 July 2022
• Subject Matter: Intellectual Property, Technology, Trademark, Fin Tech
• Law Firm: Taft Stettinius & Hollister
• Author: Mr Joseph Balthazor Jr.

Nike's lawsuit against online retail platform StockX offers plenty of food for thought for rights holders and practitioners considering involvement in non-fungible tokens (NFTs) (see part one of this article for background into NFTs and associated trademark law).

On Feb. 3, 2022, Nike filed a complaint in a federal district court in the Southern District of New York, alleging that StockX was infringing on Nike's trademarks by:

• minting NFTs that prominently use Nike's trademarks;
• marketing those NFTs using Nike's goodwill; and
• selling those NFTs at heavily inflated prices to unsuspecting consumers who believe or are likely to believe that the NFTs are in fact, authorized by Nike when they are not (Complaint, Paragraph 4, Case Number 1:22-cv-00983).

StockX operates an online retail platform selling sneakers, apparel and electronics. It recently launched an NFT offering called StockX Vault NFTs, that allows purchasers to secure ownership of an NFT, as well as the physical product depicted in it.

Nike NFT offered for sale on StockX's website

On the back side of the NFT, StockX includes the following text

StockX disputes that its Vault NFTs violate Nike's trademark rights, arguing that the NFTs displaying the Nike logo merely track ownership of a physical Nike product stored securely in StockX's Vault (Answer p3, Case Number 1:22-cv-00983). In addition, StockX advises purchasers that "[a]ny Nike names, use and trademarks used in a Vault NFT are all the property of Nike".

StockX is, in other words, invoking the nominative fair use defense. In its view, using images of Nike sneakers and descriptions of Nike products "is not different than major e-commerce retailers and marketplaces who use images and descriptions of products to sell physical sneakers and other goods" (Answer, pp7-8).

According to Nike, however, StockX's Nike-branded Vault NFTs do more than simply track ownership; they also allow purchasers to trade, collect and gain access to a bundle of other StockX services, such as releases, promotions and events (Complaint, Paragraph 5). Nike also claims that StockX boasts that Nike products produce more sales than any other brand on its platform (Id Paragraph 3).

In the Court of Appeals for the Second Circuit, in which the Southern District of New York sits, judges will consider the following factors in addition to the traditional likelihood-of-confusion factors to determine whether a claim of nominative fair use is...