Adidas has named Nike in a new lawsuit, accusing the Beaverton, Oregon-based company of “knowingly and intentionally” infringing nine of its patents, the latest development in an enduring battle between the market’s leading sportswear titans. According to the complaint that it filed in a federal court in Texas on June 10, adidas claims that it maintains patents for various technologies, including (but not limited to) a “location-aware fitness training device,” “performance information sharing systems and methods,” and “Intelligent Footwear Systems,” which it says that Nike is infringing by way of its Nike Run Club, Training Club, and SNKRS apps, among others.

In the newly-filed complaint, as first reported by Reuters, adidas asserts that it “has long had a culture of innovation, research and development,” and in furtherance of its efforts “to innovate and change sports through technology, [it] has made continuous investments in sports science, sensor technology, wearables and digital communication platforms.” Among these innovations are “technology related to mobile fitness and mobile purchases, [as] adidas was the first in the industry to comprehensively bring data analytics to athletes.” 

As a result of such innovation, adidas owns over 800 patents, including ones for the tech embodied in its various apps, which it claims that Nike is infringing via its Nike Run Club and Training Club, SNKRS, and Nike Adapt apps. Specifically, adidas assets that Nike’s SNKRS app infringes one of its patents (10,275,823) that extends to “a computer-implemented method implemented in a customer device for ensuring customer authenticity of an electronic reservation for a product from a retailer by generating reservations only if threshold authentication conditions are satisfied.” Nike’s Training Club app, on the other hand, allegedly infringes an adidas patent (8,814,755) by providing “a method for sharing information about a first individual who has engaged or is engaging in a first physical activity” by “wirelessly transmitting the first performance information from the first portable performance monitoring system” to “a computing device that is not carried with the first individual during the first physical activity, and generating a visual display” based on that performance information.

Reflecting on Nike’s alleged infringement, adidas contends that the Swoosh “has been aware of its infringement of the patents-in-suit prior to the filing of this lawsuit,” with adidas pointing to the widely-reported patent infringement lawsuit that it filed against Under Armour, Inc. and MapMyFitness, Inc. in 2014, as at least two of the adidas patents that Nike has allegedly infringed were at issue in that case. In addition to allegedly being aware of that lawsuit (and the corresponding patents), adidas contends that Nike almost certainly knew about the lawsuit that it filed against ASICS – and thus, the patents at issue in that case – in 2017, which similarly centered in a number of patents related to the ones at issue in the case at hand. Finally, adidas claims that Nike’s “pre-suit knowledge of its infringement of the patents-in-suit” also extends to Nike’s practice of citing the adidas patents in its own U.S. Patents or published applications. 

In addition to being aware of the patents-in-suit, adidas claims that Nike “knowingly and intentionally induces infringement” of those patents. For example, adidas asserts that by “operating the accused [apps] in their default condition,” a customer or end user “will directly practice at least one claim of each of the patents.” Nike “induces infringement,” per adidas, “by, for example, knowing and intending that its customers and end users will commit these infringing acts.” Proof that Nike intends for its customers to use the apps and commit the infringing act? According to adidas, it instructs consumers to download – and use – the apps, stating, for example, that the Nike Run Club app is “everything you need to start running, keep running, and enjoy running more” or that the SNKRS app enables consumers to “get access to the most coveted drops and one-of-a-kind experiences.” 

With the foregoing in mind, adidas claims that it “has been and continues to be irreparably injured by [Nike’s] infringement of” the patents at issue, and in addition to injunctive relief, is entitled to recover damages “adequate to compensate it for [Nike’s] infringing activities in an amount to be determined at trial but in no event less than a reasonable royalty.” 

The lawsuit is the latest in a string of clashes between Nike and adidas, including a decade-long fight over the two companies’ rival knitted footwear technology, which recently spilled over into a proceeding before the International Trade Commission, with Nike asking the federal trade body last year to block the import of adidas’ Primeknit footwear on the basis that the sneaker tech infringes a number of its utility patents.

Not only does the new lawsuit come against a fractured background between the two titans, it comes as the companies derive notable engagement – and revenue – from their digital offerings and connected products, particularly in the wake of the pandemic. Nike revealed in March, for example, that its Digital division, which consists of various digital channels and applications (including those at issue in this case), accounted for 26 percent of company $10.9 billion in Q3 revenue and that digital sales in the U.S. were up by 33 percent on a year-over-year basis. 

A rep for Nike told TFL that the company “doesn’t comment on pending litigation.”

The case is adidas AG, et al., v. Nike, Inc., 2:22-cv-00198 (E.D. Tex.).

Steve Madden has landed on the receiving end of a new lawsuit, with New Balance claiming that its fellow footwear brand has “deliberately copied [its] patent-protected 327 model sneaker and traded off of [its] design, goodwill, and reputation” in an attempt to piggyback on the “commercial and critical success of the 327 design.”  According to the complaint that it filed with U.S. District Court for the District of Massachusetts on Tuesday, New Balance alleges that “in late 2020 or early 2021, Madden launched its ‘Chasen’ model sneaker, a deliberate knock-off intended to free-ride off of the popularity of New Balance’s 327.” 

Seeing the “instant success” of the 327 sneaker, including the “several million pairs” that it has sold since the sneaker first hit the market back in 2020, New Balance asserts that Steve Madden launched its Chasen model “specifically to capitalize on and free-ride off of the success that New Balance had achieved.” New Balance claims in the newly-filed lawsuit that the original “Chasen” model that Steve Madden began selling in 2021 “not only slavishly copied the design of the 327 model shoe, including the distinctive outer sole design, but it also utilized two diagonal downward stripes that copied the placement and mimicked the appearance of the two sides of New Balance’s famous ‘N’ mark.” 

New Balance claims that New Balance has also offered up a variation of the Chasen sneaker that replaces the two stripes on the side with “SM NY90,” but that shoes is still not above-board, as it infringes New Balance’s design patents (D932,755 and D939,813) for the sole of the 327 sneaker. 

Setting the stage for its argument that Madden has a pattern of “free-riding off of other designers’ shoe designs,” New Balance asserts that “it appears to be a common business strategy for Madden to identify popular innovative designs and copy them to capitalize on the creativity of other shoe manufacturers.” In terms of litigation, Boston-based New Balance asserts that Madden “has been involved in more than a dozen lawsuits” since 2006, in which it was accused of “knocking off popular designs created by other shoe designers.” Converse, Ugg-owner Deckers Outdoor Corp, and Rothy’s were among some of the plaintiffs in these cases, per New Balance. 

New Balance’s 327 sneaker (left) & Steve Madden’s Chasen sneaker (right)

In terms of its individual infringement claims, New Balance contends that Steve Madden’s original Chasen and its second, stripe-less iteration infringe its design patents for sole and outsole of the 327 sneaker, arguing that “there is no question that an ordinary observer of either model of the Chasen shoe in comparison to the New Balance 327 shoe design, giving such attention that a shoe purchaser usually gives, would find the two designs to be substantially the same.” 

Reflecting on the newly-filed design patent claims, “Due to all the dotted lines [in New Balance’s patent drawings], these design patent claims are pretty broad, and the visual similarity looks pretty high,” Suffolk University Law School professor Sarah Burstein stated in a tweet on Tuesday. As such, she stated that New Balance looks like it has “a strong design patent infringement claim.” 

On the trademark front, New Balance asserts claims of infringement and dilution of its “N” marks, which consist of a stylized letter “N” for use on footwear and the specific placement of the letter “N” on the side of shoe. According to New Balance, its “ownership and exclusive use in commerce of [such] marks” – which it has made use of since the 1970s – “predates the use by Madden of the downward sloping stripes on the original Chasen copy of the 327 design of footwear.” New Balance also asserts that while “the designs may vary slightly, an N has appeared on the side of nearly all New Balance footwear sold for more than forty years,” resulting in the sale of “more than one billion products sold in the United States” that bear its trademark.

As for the potential for consumer confusion over the source of Madden’s Chasen sneakers that bear the two diagonal lines on the side, New Balance claims that “Madden’s use of the two diagonal stripe design in connection with the nearly identical shoe design would cause confusion for consumers, or cause consumers to assume that the shoe is associated with or otherwise sponsored by or affiliated with New Balance.” The likelihood of confusion is heightened, per New Balance, by the fact that it and Madden sell their wares through overlapping sales channels, “as they both sell their goods through the same retail stores (e.g., Nordstrom and Macy’s) and through the Internet.” Beyond that, they advertise through overlapping marketing channels, using “the same social media platforms,” among other mediums, “to advertise the relevant goods,” New Balance asserts. 

And still yet, “like New Balance, Madden is also well-known for its collaborations with others,” New Balance states, arguing that “Madden’s participation in collaborations significantly increases the likelihood of consumer confusion concerning an affiliation, connection, or association between New Balance and Madden because consumers are likely to believe that New Balance authorized or licensed Madden to use the novel 327 shoe design and its famous N marks on its shoes.” 

New Balance goes on to claim that Steve Madden has engaged in dilution by way of its copycat footwear, pointing to the decision in the New Balance Athletics, Inc. v. USA New Bunren Int’l Co. case, in which the Federal District Court for the District of Delaware “found the N marks [to be] famous.”

With the foregoing in mind, New Balance sets out claims of design patent infringement, trademark infringement and dilution, and false designation of origin, and is seeking injunctive relief to bar Madden from “using any design, or any derivative(s) thereof” that infringe the patents at issue or that bear marks that are confusingly similar to its “N” marks, as well as monetary damages. 

New Balance’s lawsuit comes just days after Steve Madden was named in a trade dress infringement lawsuit by Teva-owner Deckers for allegedly infringing its “Original Universal 90’s Multi Colorway Trade Dress.” 

A rep for Steve Madden was not immediately available for comment.

The case is New Balance Athletics, Inc. v. Steven Madden, Ltd., 1:22-cv-10879 (D. Mass.)

Many predict that the metaverse will be the next big thing in the internet’s evolution. Large tech companies, including Meta (formerly Facebook), Microsoft, and Amazon are investing massive resources into building it. Among other opportunities, it’s expected to be a robust environment for selling digital goods. One of the big challenges facing brands who hope to profit from the metaverse is protecting their intellectual property. Right now, when infringement occurs in the form of digital goods, brands have little recourse but to turn to the courts. As the metaverse grows, platforms may benefit from putting in place non-judicial protocols, as described below, that help brands enforce their IP rights.

The term “metaverse” is not new – it was first coined in Neal Stephenson’s 1992 novel Snow Crash. Today’s metaverse is in its nascent stage. However, it is envisioned as an immersive digital world where people will use virtual reality and augmented reality hardware devices to socialize, work, and play, in furtherance of what Mark Zuckerberg has referred to as the “successor to the mobile internet.”

The metaverse will also give rise to a digital economy, enabled by digital currencies and non-fungible tokens (“NFTs”), in which users can create, buy, and sell digital goods. And the potential is significant, with market research firm Gartner predicting that by 2026, 25 percent of people will spend at least one hour a day in the metaverse for work, shopping, education, social and/or entertainment, and 30 percent of organizations worldwide will have products, such as apparel, automobiles, artwork, and other goods in the form of NFTs, available in the metaverse. It is not surprising that analysts, such as those from investment bank Jeffries, project that the NFT market will reach $35 billion for 2022, and over $80 billion for 2025.

Intellectual Property Challenges in the Metaverse

Against this background, the metaverse presents significant opportunities for companies to expand into the sale of digital goods, as opposed to purely dealing in physical goods. At the same time, however, it poses legal risks, particularly in the area of intellectual property. A plethora of intellectual property issues, including patent and trademark infringement, will likely come about in connection with the rise of the metaverse. For instance, just as in the physical world, brands will be forced to deal with counterfeiting and piracy by infringers, especially those looking to profit from the decentralized nature of the metaverse. 

We are already seeing alleged infringement occurring, and brands taking steps to protect their intellectual property. One of the most high-profile examples to date is the lawsuit filed by luxury brand Hermès against Mason Rothschild. Hermès alleges that the digital artist created images of the Hermès Birkin bag, minted them as NFTs, and then sold the NFTs for as much as $23,000. Hermès argues that using the MetaBirkins name, Rothchild’s NFTs “infringed upon the intellectual property and trademark rights of Hermès and are an example of fake Hermès products in the metaverse.”

One of the biggest challenges brands will face in the metaverse stems from the fact that it so easy to create and sell digital products, such as an image of a Birkin bag, relative to the cost and complexity of creating and selling a physical counterfeit product. As a result, brands will likely be forced to pursue aggressive enforcement actions in the metaverse.

A Non-Judicial Alternative to Enforcement in the Metaverse

The metaverse is emerging alongside what is referred to as Web 3.0 – often heralded as the next phase of the internet. Web 3.0 runs on the blockchain, thereby, allowing it to function as a decentralized environment, while Web 2.0, on the other hand, is the internet as we know it today, dominated by a few huge companies in areas such as search, social networking, and online commerce. If Web 3.0 is about who controls the internet of tomorrow, the metaverse is about how we will experience it. And part of that experience will almost certainly involve aspects of commerce, with brands advertising and selling digital goods on metaverse platforms. That means new intellectual property challenges will arise for brands, and if the decentralized ethos of Web 3.0 flourishes in the metaverse, then enforcing intellectual property rights will become a difficult, expensive undertaking.

While Web 2.0 may seem archaic in the not-too-distant future, we may look back and realize that its dominant players helped pave the way for metaverse platforms to enable robust economic activity while guarding against rampant intellectual property infringement. As e-commerce has grown significantly on Web 2.0 platforms, such as Amazon and Etsy, over the past decade, infringement became a big problem. For many years, brands had no choice but to run to court to seek a surefire remedy when they copyrights, patents and/or trademarks were infringed, as the platforms on which the infringement occurred were ill-equipped to deal with the problem of intellectual property infringement by sellers.

The solution that emerged on Web 2.0 platforms was the establishment of non-judicial alternatives to resolve intellectual property disputes, such as Amazon’s Neutral Patent Evaluation system, which is meant to streamline dispute resolution for patent infringement claims. Pursuant to the Neutral Patent Evaluation system, a party can lodge a complaint alleging infringement, and if an accused party responds, then Amazon will select a qualified patent attorney to serve as the neutral evaluator to assess the claims. If an accused party either (1) fails to respond to a complaint or (2) loses the evaluation, the relevant product listing(s) will be removed by Amazon. The entire process can take only a few months, and the expenses tend to be significantly lower than they would be if a patent infringement claim was litigated through the judicial system.

Amazon has other procedures in place for sellers on the platform to identify and address other forms of intellectual property infringement, such as trademark and copyright infringement. And other e-commerce platforms that allow third parties to sell goods, such as eBay and Etsy, also have similar policies and procedures in place.

In short, as Web 2.0 platforms matured, they took it upon themselves to enable brands to seek recourse for infringement without necessarily having to resort to the judicial system, and while we currently are in the “Wild West” phase of the metaverse, platforms hoping to monetize by enabling third-party commerce (e.g., sales of digital goods in the form of NFTs) may want to consider, sooner rather than later, creating similar protocols to help guard against IP infringement.

To the extent that a metaverse platform has no means of curbing intellectual property infringement, then it stands to reason that brands selling digital goods will be less likely to utilize such a platform, instead opting for ones that put an emphasis on intellectual property protection. In an infinite metaverse made of bits, intellectual property enforcement and resolution protocols that enable brands to avoid costly lawsuits may create a notable competitive advantage.

Ben Stasa is a shareholder at Brooks Kushman, where he guides the development of clients’ patent portfolios with his extensive knowledge and passion for new and innovative technologies.

Nike and RTFKT, the digital fashion/footwear brand it acquired last year, are making headlines with their first joint endeavor into the metaverse. In a widely-covered drop on April 23, the two companies revealed that each of the MNLTH NFT cubes that RTFKT released in February contain a pair of virtual sneakers that mirror the silhouette Nike’s Dunks but can be customized via RTFKT-created skins. In addition to setting the stage for more offerings from the Swoosh and RTFKT, including physical offerings, the drop of the virtual sneakers – which have been coined CryptoKicks – is significant as the name appears to be a nod to some of the technology at the heart of the patent that Nike received back in December 2019 for a “system and method for providing cryptographically secured digital assets,” including the “breeding” of digital sneakers. 

Nike’s “Cryptokicks” is one of the most widely-covered patents when it comes to the metaverse (and virtual fashion/footwear, more specifically), but it is certainly not the only innovation aimed at the virtual world, as leading tech players are developing new hardware and software to cater to consumers’ budding interest in the metaverse, i.e., the combination of aspects of social media, gaming, augmented and virtual reality, and the web that form “an immersive digital world.” 

Noting an uptick on interest in metaverse patents as companies that are developing the building blocks for the virtual world look to protect their innovations, ArentFox Schiff’s Michael Fainberg and Mohammad Zaryab state that among metaverse-specific technologies that they are seeing companies amass patents are “systems for optimizing shared views of virtual objects to multiple wearers of VR headsets; algorithms for generating and moving virtual shapes and scenes in a VR environment based on hand gestures, head motion, or line of sight of the user; systems for generating haptic feedback corresponding to users’ interaction with virtual objects in a virtual environment; and methods for generating 3D avatars of the users, which emulate users’ appearance and behavior,” among others. 

Pursuing patent protection in connection with the virtual world is not without challenges. Just as with physical world-centric inventions, in order to be eligible for patent protection in the U.S. (with regard to the metaverse or virtual world), an invention must new, useful process, and fall within the one of the four statutory categories (machine, manufacture or composition of matter) – or amount to a new and useful improvement on such an invention. While patent protection (i.e., the process of drafting, filing, and working with the United States Patent and Trademark Office (“USPTO”)) “for hardware technologies for the metaverse tends to be quite straightforward – and there are many existing patents for virtual reality and augmented reality headsets,” Mathys & Squire’s Dani Kramer asserts that obtaining software patents for metaverse technologies is “likely to be comparatively more difficult from a subject matter point of view.”  

Fainberg and Zaryab echo this, asserting that patent prosecution is challenging in connection with metaverse tech in large part “due to the strict subject matter eligibility requirements applied to software inventions under 35 U.S.C. 101 in view of the U.S. Supreme Court decision in Alice Corp v. CLS Bank,” which asks – in part – whether a patent application contains claims that are directed to an abstract idea. (This subject matter hurdle was demonstrated in Sandbox Software, LLC v. 18Birdies, LLC back in June 2019 when a Delaware federal court determined that one of metaverse platform Sandbox’s inventions was ineligible for patent protection because it was directed to the abstract idea of playing a multiplayer game and keeping track of its progress, and thus, did not amount to patentable subject matter.)

Software in this realm can also be thorny from novelty/non-obviousness point of view. One of the larger considerations in evaluating a metaverse innovation for novelty/non-obviousness is determining whether the process within the metaverse environment is similar to the same process outside the metaverse environment,” according to DLA Piper’s Joseph Wolfe. “If, for example, the only difference between the proposed invention and the prior art is that the proposed invention is confined to the metaverse environment, it may be difficult for applicants to clear the prior art [with the USPTO].” This is why applicants should “identify that step in the process that is unique to execution in the metaverse environment,” he asserts. 

Looking beyond utility-focused patents, companies are also expected to try to utilize design patent protection for any “new, original and ornamental designs” that they are using in the metaverse. “A virtual business may have – as a primary core asset – a virtual product design, aspects of which that may need protection as trade dress under trademark law – or through a design patent,” Holland & Knight’s Thomas Brooke stated in a recent note

Design patent protection for metaverse-focused ornamental design is certainly possible. As the USPTO states in its Manual of Patent Examining Procedure, “Computer-generated icons, such as full screen displays and individual icons, are 2-dimensional images [that] alone are surface ornamentation,” and that comply with the “article of manufacture” requirement of 35 U.S.C. 171

Protection will, of course, depends on how such designs are claimed. As of now, for instance. “a design patent for, say, a purse, would not cover a purse shown in the metaverse,” Suffolk University Law School professor Sarah Burstein tells TFL. It would be possible, she says, to patent the design of a purse for use in the metaverse “if you put a dotted line around an image of the purse and call it a ‘display screen portion with user interface,’ (e.g., the icons in Apple v. Samsung).” Burstein notes that the USPTO “seems to want to go further, to be able to issue patents for VR/AR/projected purses.” (In a December 2020 request for comments about the article of manufacture requirement of 35 U.S.C. 171, the USPTO suggested that designs for “projections, holograms, and virtual and augmented reality” are protectable.) 

Ultimately, increasing attempts by brands to engage with the consumers in the metaverse by way of games and specific metaverse platforms are “sure to present applicants and practitioners with its own unique set of challenges for obtaining patent protection,” Wolfe states. The potential good news for filing parties, per Wolfe is that “broadly speaking,” many of the same principles or best practices for patenting things like “blockchain innovations and artificial intelligence innovations can be applied to metaverse innovations to help applications successfully navigate through the patent office.” 

As part of its deadly assault on Ukraine, Russia has taken the rare step to use intellectual property rights as a war tactic. In early March, the Russian government issued a decree saying that Russian companies are no longer obliged to compensate owners of patents, utility models, and industrial designs from “unfriendly” countries, namely western states who have issued sanctions against Russia, including the United Kingdom and United States. 

This means that Russian businesses can use intellectual property, such as patented inventions or fashion designs, without having to pay or seek the consent of the rights holders. Affected companies cannot enforce their patents and designs against Russian imitators. This effectively legalizes intellectual piracy in a country already known for failing to adequately protect intangible assets. Last year, Russia was added to a U.S. government “priority watch list” of countries which do not sufficiently protect US intellectual properties.

Vladimir Putin’s move is clearly a reaction to the west’s economic sanctions and suspension of Russia’s trade privileges. It is also an answer to many multinational companies’ decisions to cease doing business with Russian companies. Sanctions and boycotts have massively affected the Russian economy to the extent that the country is now on the verge of bankruptcy with interest rates having doubled. The stock market has remained closed for weeks and the ruble has fallen dramatically.

Unprecedented attack on intellectual property

The suspension of intellectual property rights as an economic weapon in the context of a conflict is unprecedented, at least in recent decades. Historical examples date back to the first world war, when the U.S. introduced the Trading With the Enemy Act. This act seized copyright and patents owned by enemy countries, including the patent to aspirin, famously a German invention. Following the war, the Aspirin trademark owned by the German pharmaceutical company Bayer was given up to the U.S., France, UK, and Russia, as part of Germany’s war reparations agreed in the Treaty of Versailles. 

Russian officials have hinted that other intellectual property rights owned by western countries may be soon restricted, including software and trademarks. This could allow local entrepreneurs to appropriate and exploit – without permission and for free – brands such as McDonald’s. One Russian restaurant chain has even recently adopted, and applied to register locally, a logo very similar to the famous golden arches. The sanctions have also led a Russian judge to dismiss a copyright and trademark infringement lawsuit brought by the British company that produces animated series Peppa Pig. Andrei Slavinsky said in court that the “unfriendly actions of the United States of America and affiliated foreign countries” influenced his decision. 

Russia Intellectual Property
image via @JoshGerben

Ukraine, for its part, has not been inactive in this intellectual property battle. Its ministry of defense recently hacked and leaked confidential documents it claimed to have taken from a Russian nuclear power station.

Does it violate international law?

Russia’s suspension of patents and other intellectual property rights owned by western companies may violate international treaties which protect these assets at global level. All countries of the World Trade Organization (“WTO”) need to respect these laws and guarantee that foreign businesses can enforce intellectual property rights against imitators.

Countries damaged by the Russian measure may bring Russia to a WTO court and ask for additional sanctions to be imposed. This would again hit Russian businesses, especially those which rely on brands and patented technology, as well as the creative industry sector. The only way Russia could justify the measure would be to rely on a security exception made available by the WTO itself. This exception allows countries to take any action they consider necessary to protect their essential security interests in times of war. But it has never been invoked by any state in the context of an armed conflict, and therefore never tested before the WTO judges.

If Russia is expelled from the WTO club, as has been proposed, that would, paradoxically, insulate it from global intellectual property challenges. No country would be able to bring Russia before a court of an organization it is no longer a member of. These are predictions of what could happen if the war continues. It goes without saying that a prompt end to the conflict may instead relax the tension between the west and Russia, and put an end to the current intellectual property battle.

Enrico Bonadio is a Reader in Intellectual Property Law at City, University of London. Alina Trapova is an Assistant Professor in Law and Autonomous Systems at the University of Nottingham. (This article was initially published by The Conversation.)