“For decades it’s looked like no company could ever topple Nike, the $86 billion global sneaker juggernaut. But just across town from ultra-secretive Nike HQ in Oregon, adidas has suddenly mounted a full-scale arms race, poaching designers, signing superstar endorsements, and unveiling space-age technology in an attempt to dethrone the king.”
This is what GQ’s Matthew Shaer wrote the market’s biggest sportswear rivals in September 2015. Now, exactly two years later, adidas has overtaken Nike’s Jordan brand as the second-most popular sneaker company based on sales in the U.S. With such a milestone in mind, it seems an appropriate time to look back at the legal history between the two sportswear giants …
Denis Dekovic, Marc Dolce and Mark Miner
Let us start off with the $10 million lawsuit that almost everyone knows about: the one which Nike in late 2014 against its three top-level designers who jumped ship to adidas, allegedly taking with them a “treasure trove” of confidential information.
According to Nike’s complaint, which was filed in December 2014 in the Circuit Court of the State of Oregon for the County of Multnomah, Denis Dekovic, Marc Dolce and Mark Miner violated their non-compete agreements with Nike, which prohibited them from working for a competitor for a year after leaving Nike’s employ.
Moreover, Nike alleges that the three men stole millions of dollars in confidential information (think: confidential design and business documents, including drawings for unreleased shoes made for one of Nike’s sponsored athletes) when they had their work computers copied and took that info with them to adidas, where they were allegedly recruited to set up a copycat of Nike’s design studio.
Nike further contended that the designers began plotting their departure in April 2013, pitching their studio plan (one that Nike claims is merely a knockoff of its existing design studio, the Innovation Kitchen) to adidas and subsequently bringing adidas information about Nike’s plans for the next several years in connection with its running, sportswear and soccer divisions. Adidas reportedly loved the studio idea so much that its execs offered the designers lucrative employment contracts to jump ship from Nike.
Unsurprisingly, that lawsuit “was resolved through a confidential settlement” outside of court in June 2015 and as of March 2016, Marc Dolce, Denis Dekovic and Mark Miner began their tenures at adidas. While the suit was not directly filed against adidas, the German sportswear giant reportedly promised to pay the three designers’ legal fees if Nike sued and so, it was heavily involved. Nike claimed that adidas knew of the non-compete agreements and promised to pay for any legal fallout.
All the while, Nike and adidas were in court in connection with a number of other cases.
Battle Over the Knitted Shoes
For instance, there is the ongoing legal drama surrounding both brands’ knitted footwear designs. Leading up to the London Olympics in 2012, Nike and adidas released their first knitted running shoes: the Flyknit for Nike and the Primeknit for adidas. Nike announced the debut of its shoe in February 2012. Adidas unveiled its knitted footwear the following July, hailing the product as “a first-of-its-kind running shoe.”
The adidas debut was swiftly followed by a patent infringement lawsuit filed by Nike in a District Court in Nuremberg, Germany, in which Nike sought to prohibit adidas from making and selling the Primeknit in Germany for the duration of the litigation and depending on the outcome of the case, permanently thereafter. (Nike spokeswoman Mary Remuzzi said the case was filed in and limited to Germany because it’s the only place where adidas was making and distributing the Primeknit at the time).
In August 2012, the court granted Nike’s injunction, ordering that adidas halt the sale and production of its knitted sneaker. In return, adidas moved to challenge the validity of Nike’s European patent a few months later.
While it appeared, given the court’s granting of Nike’s injunction, that the case was initially looking quite favorable for Nike, the court ended up ruling in adidas’s favor on the grounds that the technology involved in making both the shoe’s knitted upper has been around since the 1940s (thereby failing to meet the novelty element required for patentability). As a result, the injunction was set aside, Nike’s patent was deemed invalid, and adidas is free to manufacture shoes bearing the knitted elements. But it does not end there, of course.
Since then, both Nike and adidas have started selling their respective knitted footwear in the U.S. and adidas filed to challenge the validity of Nike’s patent in late 2012, in an attempt to prevent Nike from filing suit in order to stop adidas from selling the shoe. Adidas is arguing that Nike’s patent is invalid based on another party’s patent application from 1991, which discloses a process for creating uppers that are cut from a web of textile material and then shaped and connected to a sole – thereby, making Nike’s patent obvious (non-obviousness is an necessary element in order to achieve patentability).
That case is still ongoing. Most recently: adidas filed an array of petitions for inter partes review (a proceeding to invalidate an already-issued patent) with the U.S. Patent Trial and Appeal Board in April 2016.
And there is more. There is the 2005 case that Nike filed against adidas in a federal court in Oregon, seeking a declaration from the Court that its use of two stripes in apparel designs does not infringe or dilute adidas’s Three-Stripe Mark. (This type of action is called a declaratory judgment). It turns out, Nike was prompted to file this action on the heels of adidas filing lawsuits against Nike in Germany and the Netherlands in connection with Nike’s use of two stripes on apparel. On January 20, 2005, a German court entered judgment in favor of adidas and ruled that apparel sold by Nike in Germany incorporating two stripes infringed adidas’s Three-Stripe Mark.
A year later, in 2006, Nike filed suit against adidas in the U.S. District Court for the Eastern District of Texas citing patent infringement – in connection with a patent for footwear with a lateral stabilizing sole (read: elements of Nike’s SHOX cushioning technology). According to Nike’s complaint, the SHOX technology took 16 years to develop, as well as considerable financial investment to bring to the market, and is protected by at least 19 separate patents.
Upon filing suit, Nike spokesman, Vada Manager told press: “SHOX was the next evolution in our footwear technology since Nike Air, which debuted in 1979, so for us it’s a major core technology. Despite Nike’s patent protection, adidas has built shoes that use Nike’s technology.” Eric Spunk, a vice president of global footwear at Nike, also released a statement, saying: “It is deeply frustrating and inappropriate when companies borrow or refashion such technologies as their own without making similar investments.”
Meanwhile, legal outlets noted the significance of the mounting legal rivalry between the two sportswear giants, writing: Nike’s “move signals that IP will play a big part in the companies’ mounting battle for market share in the quickly-consolidating industry.” That case was dismissed in 2007.
In short, as these two fight for market share in the U.S., in particular, their battle is inevitably spilling over into court. And even with Kanye West in its camp, Nike is still firmly holding its primary position. As GQ stated in its article: Nike is “not only the most popular sneaker manufacturer but the single most valuable apparel brand in the world. Nike has 57,000 employees and a market cap north of $86 billion.
And in these halcyon days of sneaker culture—the once humble sneaker having become the focal point of personal style—Nike has a heritage that consumers respect and that its competitors can’t buy” – even by way of lawsuits.