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.

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.)

Lululemon and Peloton are fighting about more than lookalike sports bras and yoga pants in their newly-initiated legal clash. Peloton apparel, which allegedly infringes Lululemon design patents and trade dress, is at the heart of the declaratory judgment (“DJ”) action that the exercise bike-maker lodged in a New York federal court and the infringement complaint that Lululemon filed with a California federal court shortly thereafter. However, as the motion to dismiss that Lululemon filed on Friday indicates, the parties are currently at odds over a more fundamental issue: where their case should play out. 

According to the motion to dismiss it filed with the U.S. District Court for the Southern District of New York on January 7 in response to Peloton’s complaint, Lululemon argues that its former partner used the “professional courtesy” that Lululemon granted it to “game” the venue in the design patent and trade dress infringement case. Specifically, Lululemon asserts that it was “misled” by Peloton’s legal counsel, which requested additional time to provide a substantive response to the cease-and-desist letter that it received from Lululemon, and then used that time to “prepare a [DJ] complaint and then race to this courthouse, its home forum, to preempt Lululemon from filing a complaint in its choice of forum.” 

While venue conflicts are generally governed by the first-to-file rule, which mandates that when there are two competing lawsuits, the first suit should have priority, Lululemon argues that there is a “critical exception” when the first-filed lawsuit is “an improper anticipatory declaratory judgment action.” That is precisely what is going on here, per Lululemon, given that New York-based Peloton’s DJ action was filed in response to a direct – and concrete – threat of litigation. 

Turning its attention to a number of arguments that Peloton made to refute the characterization of its DJ as anticipatory, including that it filed the action because “it could not afford the harm to its reputation from leaving Lululemon’s claims unanswered,” Lululemon asserts that such arguments are “baseless.” Among other things, Lululemon argues that there was no risk of reputation harm for Peloton as a result of the claims that it made in its cease-and-desist, as such claims were not public at that time, and thus, “posed no harm” to Peloton’s reputation. In fact, Lululemon alleges that it was Peloton that “publicly aired the parties’ dispute.” 

Lululemon Peloton
One of Peloton’s bras (left) & a Lululemon patent drawing (right)

Also weighing in favor of dismissal? The issue of convenience, which is typically a venue-related consideration, but according to Lululemon, is not quite as relevant here as it might be in other cases, as both parties are “enormous, publicly-traded companies, each having annual revenues exceeding $4 billion” and a “nationwide presence.” This makes it so that “litigation in any specific venue in the U.S. is not particularly convenient or inconvenient.” 

Beyond that, Lululemon claims that California – not New York – is the “center of Peloton’s infringing activities.” Peloton maintains “13 showrooms in California, its greatest number in any state” versus 6 in New York. As for its own operations, Lululemon states that a redacted (but seemingly substantial) percentage of its annual sales come from California, which plays home to what is “effectively its U.S. headquarters for product and branding, where [it] makes most of its major project development and branding decisions.” Meanwhile, 17 percent of Lululemon’s retail stores are located in California, versus 6 percent in New York.   

Considered along with the policy at play (namely that “federal courts, including both the Second Circuit and Federal Circuit, uniformly condemn this sort of conduct,” as it serves to “discourage potential plaintiffs from communicating with potential defendants in an effort to reach out-of-court resolutions of their disputes”), Lululemon argues that “the plainly anticipatory nature of Peloton’s [DJ] action weighs heavily in favor if dismissal of this action.” 

Should the court opt to dismiss Peloton’s DJ, the case as a whole would still be far from over, as such a decision would not impact the complaint that Lululemon lodged in California in the wake of Peloton’s filing, and Peloton would inevitable lodge its own claims in connection with that suit.

The rival cases got their start in late November when Peloton – fresh out of a 5-year-long apparel deal with Lululemon – filed a DJ action in New York federal court, seeking an order that it is not infringing a number of Lululemon’s design patents and trade dress by way of its new apparel offerings. Lululemon responded with a counter suit, arguing that the Peloton is on the hook for design patent and trade dress infringement in connection with its sale of “copycat” athleticwear on the heels of pulling the plug on the parties’ 5-year-long co-branding partnership. 

According to its complaint, Lululemon claims that “unlike innovators such as [itself],” when Peloton opted to launch its own collection of apparel, it “did not spend the time, effort, and expense to create an original product line, [and] instead, Peloton imitated several of lululemon’s innovative designs and sold knock-offs of lululemon’s products, claiming them as its own.” 

The case is Peloton Interactive, Inc. v. Lululemon Athletica Canada Inc., 1:21-cv-10071 (SDNY).

“Nike has spent decades creating game-changing digital sport technologies,” the Beaverton, Oregon-based sportswear titan stated in a new lawsuit, with such efforts resulting in “a robust portfolio of patents” that protect these innovations, at least a few of which are allegedly being infringed by rival Lululemon via its Mirror Home Gym and accompanying mobile applications. According to the complaint that it filed in a New York federal court on Wednesday, Nike claims that the Lululemon Mirror relies upon tech that is protected by six of the utility patents that it maintains for an interactive athletic equipment system, as well as for athletic performance sensing and/or tracking systems and methods, and monitoring fitness using a mobile device, among other things. 

In its complaint, Nike asserts that the technology at the heart of the $1,500 at-home exercise system – which Lululemon brought in-house when it acquired fitness startup Mirror in June 2020 for $500 million – “practice[s] the claimed inventions of [its] asserted patents,” namely, U.S. patents 8,620,413; 9,278,256; 9,259,615; 10,188,930; 10,232,220; and 10,923,225, all of which are utility patents (as distinct from design patents), and thus, protect the invention of a new and useful process, machine, manufacture, or composition of matter. 

The Nike patents at issue here cover everything from “a watch or other type of portable electronic console that employs a number of different functions in order to improve its usability,” such as allowing a user “to connect the watch to one or more remote electronic devices,” and then “display[ing] information related to the connected electronic devices” to an “interactive athletic equipment system,” in connection with which “athletic data relating to a single person or group of people is collected at a central location, and subsequently displayed at a desired remote location so that the person or people can review and critique their performance.” 

Another one of the patents cited by Nike consists of “athletic performance sensing and/or tracking systems and methods,” namely, “components for measuring or sensing athletic performance data and/or for storing and/or displaying desired information associated with the athletic performance to the user (or others),” which allow users “create workouts, select and present media content during the athletic performance, etc., e.g., to help keep users entertained and motivated.” 

In furtherance of its patent rights, Nike generally enjoys the ability to exclude others from making, using, or selling an invention that makes use of claims in its patents without authorization for the duration of such patents, which is where Lululemon allegedly comes in. Per Nike, by way of the Mirror device, Lululemon “makes, uses, offers for sale, sells, and/or imports into the United States products that practice the claimed inventions” of its patents, and thus, is infringing claims of the ssserted patents. 

Despite being put on notice by Nike via a notice letter on November 3, 2021, Nike claims that Lululemon “continues to make and sell The Mirror Home Gym and accompanying mobile applications without [its] authorization and in violation of [its] patents,” prompting Nike to file suit.

A drawing from Nike’s 9,278,256 patent

According to the Swoosh, it “invests heavily in research, design, and development; and those efforts are key to [its] success” and its “competitive positioning,” making the suit a nod to Nike’s enduring quest to maintain its place at the top of the market as a whole, but also in the connected fitness space, as many consumers increasingly split their time between working out at the gym and at home. In addition to consumers increasingly adopting a hybrid approach to fitness, COVID-prompted lockdowns, corresponding gym closures, and enduring variants have served to accelerate the at-home and connected fitness, thereby, increasing competition for a piece of the market that at least some industry estimates expect will reach nearly $60 billion by in value in 2027.

This adds another element to the already cut-throat market segment, one that is largely dominated by giants with sizable portfolios of protections, large legal teams and budgets, and the desire to protect not just the often-enormous R&D that goes into sports tech but their spots in a market that is being infiltrated by relative new-comers, such as Mirror, Peloton, and co.

In a response to Nike’s letter late last year, Mirror took issue with the infringement claims made by counsel for Nike, and has since refused to back down from offering up its buzzy at-home workout system. A rep for Lululemon has since stated that Nike’s “patents in question are overly broad and invalid,” and the company is “confident in our position and look forward to defending it in court.” 

Setting out six claims of patent infringement, Nike is seeking monetary damages and injunctive relief to permanently bar Lululemon – which is currently embroiled in a legal squabble with Peloton after accusing the exercise bike-maker of infringing its design patent and trade dress-protected apparel – from infringing its patents.

The case is Nike, Inc. v. Lululemon Athletica Inc., et al., 1:22-cv-00082 (SDNY).