Nike and Lontex Corp. have brought their years-long trademark battle to a close, with a settlement that eliminates a multimillion-dollar attorneys’ fee award against Nike. At the parties’ request, the U.S. Court of Appeals for the Third Circuit vacated lower court rulings that deemed the trademark case “exceptional” under the Lanham Act and required Nike to pay millions in attorneys’ fees based, in part, on its “unreasonable” litigation conduct.
In an August 20 opinion, the Third Circuit granted a joint request from Nike and Lontex to vacate the attorneys’ fee judgment after the companies reached a post-oral-argument settlement during court-ordered mediation. The appeals court found that the circumstances surrounding the parties’ request presented the “exceptional circumstances” necessary to warrant vacatur. “Judicial economies achieved by the settlement, which we encouraged, outweigh the public’s interest in those decisions by the District Court,” Circuit Judge Emil Bove wrote, calling it one of the “rare cases where vacatur is appropriate.”
The result eliminates a fee award that had swelled to approximately $5.8 million and, significantly, erases the district court decisions that contained some of the most pointed findings about Nike’s conduct during the litigation.
What the Settlement Does – and Does Not – Undo
The dispute dates back to 2018, when Pennsylvania-based Lontex accused Nike of infringing its “Cool Compression” trademark by using it on athletic apparel. A jury ultimately found Nike liable for willful infringement, and the district court awarded Lontex damages and attorneys’ fees. Nike appealed. In a 2024 precedential opinion, the Third Circuit upheld Nike’s infringement liability and the damages rulings, but vacated the attorneys’ fee award and sent that issue back to the district court for reconsideration. (That Third Circuit decision remains intact despite the parties’ settlement and the subsequent vacatur of the district court’s fee-related rulings.)
On remand, the district court again found the case exceptional and awarded Lontex more than $5 million in attorneys’ fees, based in significant part on Nike’s conduct before and during the litigation.
As TFL reported at the time, a court-appointed special master concluded that Nike had demonstrated “reckless indifference” to Lontex’s trademark rights and engaged in unusually aggressive litigation behavior. Among other things, the special master’s report pointed to evidence that Nike threatened to “kill Lontex’s business” through litigation costs and refused to engage in meaningful settlement negotiations with Lontex.
The district court adopted the core of those findings and again awarded Lontex millions in attorneys’ fees, determining that Nike’s pretrial conduct was unreasonable and improper enough to make the case “exceptional” under federal trademark law. Nike appealed again.
A Rare Vacatur
The parties ultimately reached a settlement this month after oral argument before the Third Circuit and jointly asked the appeals court to vacate the fee-related rulings as part of the deal. It is worth noting that courts do not automatically erase lower-court decisions merely because litigants settle while an appeal is pending. The Third Circuit acknowledged that vacatur following settlement requires “exceptional circumstances,” but said those circumstances were present here.
Central to the Third Circuit’s August 20 decision to vacate the fee-related rulings was the fact that its 2024 precedential opinion, which set out the legal framework the district court applied on remand, will remain on the books. That reduced the public interest in preserving the subsequent district court decisions, the court said, particularly because both Nike and Lontex had challenged aspects of those rulings on appeal.
THE BOTTOM LINE: The jury’s finding that Nike willfully infringed Lontex’s trademark remains intact, while the later rulings requiring Nike to pay millions in attorneys’ fees based on its litigation conduct have been vacated. The settlement ends the parties’ years-long dispute without disturbing Nike’s underlying infringement liability, but removes the fee-related rulings that found its litigation conduct sufficiently unreasonable to make the case “exceptional” under the Lanham Act.
The case is Lontex Corporation v. Nike, Inc., 24-3284 (3d Cir.).
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