In what could be one of the biggest NFT cases to arise so far, Nike has sued resale marketplace StockX for trademark infringement in the Southern District of New York, claiming that StockX is selling NFTs that display Nike’s trademarks without Nike’s permission. In the Complaint, Nike alleges that StockX has infringed nine of its sneaker designs to create a line of NFTs that are part of its collection that StockX has branded the “Vault.” The collection consists entirely of allegedly unauthorized images of Nike sneakers. According to Nike, that’s because StockX is using Nike’s reputation and popularity to increase its sales. Specifically, Nike alleges that “Recognizing firsthand the immense value of Nike’s brands, StockX has chosen to compete in the NFT market not by taking the time to develop its own intellectual property rights, but rather by blatantly freeriding, almost exclusively, on the back of Nike’s famous trademarks and associated goodwill.”
In January 2022, StockX released the Vault collection and claimed that each asset is linked to a physical sneaker that it stores at its facility. StockX said that this allows customers to buy and resell the shoes without having to pay shipping fees, go through additional authentications, or pay storage space fees. According to Nike’s Complaint, StockX has sold almost 600 NFTs, and they are trading for thousands of dollars. Nike takes issue with StockX characterizing the NFTs as authentic since they do not have Nike’s consent.
Nike also claims that these products are going to create consumer confusion and dilute Nike’s famous trademarks. According to Nike, consumers have called the Nike-themed NFTs a scam and called the purchase agreements into question because of certain provisions that purport to allow StockX to revoke ownership of the NFT or physical asset, which seems a bit shady to say the least. It seems quite strange that the seller of an asset would maintain a right to simply revoke the buyer’s ownership. In fact, it seems that it would be deemed illusory due to what appears to be a lack of mutuality.
In any event, one of the driving forces behind the suit, aside from the issues referenced directly above, is the fact that Nike acquired virtual sneaker and collectible company RTFKT in December, which was supposedly a step toward entering the NFT industry. According to the Complaint, the allegedly inferior product offered by StockX is impeding Nike’s ability to move into the digital marketplace.
It will be interesting to see how this plays out. In its defense, StockX will presumably raise the First Sale Doctrine, which allows marketplaces to resell goods and display images of those goods that include protected trademarks without a license. StockX will likely argue that it is simply reselling the goods and that it is just making an NFT to stand in for the actual shoes. Nike, however, will argue that the NFT is a separate product, as evidenced by the increased value associated with the NFT/physical asset combination juxtaposed with the value of the sneaker without the accompanying NFT. It remains to be seen how a court would deal with these arguments, but I really hope that we find out. For now, we’ll be watching what could eventually become a landmark case in NFT-IP jurisprudence.