Nike has asked a New York federal court to allow it to amend the complaint that it filed against StockX early this year over the resale marketplace’s allegedly infringing “Vault” NFTs, asserting that since it lodged that complaint, “additional facts transpired or were discovered that are highly relevant to [its] claims against StockX.” In addition to entering into the non-fungible token (“NFT”) market since the filing of its suit by way of a venture with its RTFKT brand, the Beaverton, Oregon-based sportswear behemoth claims that it has purchased a number of pairs of counterfeit “Nike” sneakers from the StockX platform, and all the while, StockX has altered its terms for the “Vault” NFTs, giving rise to the need for Nike to make relevant amendments to its original filing. 

In the 25-page memo of law in support that it filed with the U.S. District Court for the Southern District of New York on Tuesday, counsel for Nike seeks leave to amend the complaint that it filed against StockX in February, in which it accused the fashion and footwear resale platform of trademark infringement, trademark dilution, and unfair competition. Since it lodged that complaint, Nike claims that there are “multiple facts that occurred or were discovered” that are directly related to its claims against StockX. 

Primarily, Nike argues that “StockX has made a series of modifications to its representations surrounding [the] Vault NFTs” at the center of the case. For example, Nike states that after it “shined a spotlight on several problematic and deceptive terms governing the infringing Nike-branded NFTs, StockX deleted and/or replaced those terms.” StockX also allegedly “modified Vault NFT marketing that, e.g., promised owners of the infringing Nike-branded NFTs exclusive StockX benefits.” While these changes “do nothing to excuse StockX’s ongoing infringement of Nike’s marks or to resolve its past infringement and, indeed, by the time those modifications were made, StockX had already offered for sale, sold, and/or released into the stream of commerce all of the infringing Nike-branded NFTs,” Nike argues that StockX’s “revisionary conduct is, nonetheless, relevant to [its] claims,” and thus, should be included in an amended complaint. 

Beyond that, Nike says that its own position has changed since it filed suit, as it has since entered the NFT market, a fact that is critical to the likelihood of confusion analysis. “Two key factors in the likelihood of confusion analysis are ‘proximity of the products and their competitiveness with one another’ and evidence that the senior user may ‘bridge the gap’ by developing a product for sale in the market of the alleged infringer’s product,” Nike asserts. “Sure enough, after Nike’s drop of these NFTs, additional actual confusion between the parties’ occurred because of StockX’s infringing Nike-branded NFTs.”

Finally, Nike proposes supplementing its pleadings with additional allegations – and two addition causes of action – centering on its alleged purchase of “four confirmed pairs of counterfeit ‘Nike’ shoes” from the StockX platform. Despite “StockX’s numerous guarantees of authenticity,” and its argument that each of the Vault NFTs functions as “a ‘claim ticket’ to a pair of Nike shoes that StockX authenticated using its ‘proprietary, multi-step authentication process,’” Nike claims that it purchased the counterfeit sneakers “within a two-month period on StockX’s platform.” 

“At least one pair of those counterfeit shoes are the same style as one of the infringing Nike-branded Vault NFTs,” Nike asserts. 

Nike StockX

In addition to seeking to include factual allegations about how StockX is “actively and directly selling counterfeit goods on its platform,” Nike says that it is looking to add counterfeiting and false advertising causes of action to its original five causes of action. Nike claims that it has a claim for false advertising in light of StockX’s practice of “guaranteeing [its] sales as ‘100% Verified Authentic’ based on its ‘proprietary’ authentication process when they are not,” and give that “those statements are material to [consumers’] purchasing decisions.”  

As support for proposed inclusion of counterfeiting and false advertising claims, Nike asserts that “a court in this District recently denied a Rule 12(b)(6) motion to dismiss nearly identical causes of action for counterfeiting and false advertising.” The case that Nike is referencing is Chanel v. The RealReal (“TRR”), in which the court held that “Chanel has adequately averred that its own investigation revealed that TRR marketed and sold counterfeit Chanel products, and Chanel has also alleged that TRR’s own customers have complained about the receipt of counterfeit merchandise.” 

In the case at hand, just as Chanel asserts in its case against TRR, Nike argues that it sets out “plausible claims for counterfeiting and false advertising because the proposed [amended complaint] sufficiently alleges that StockX has been and is currently dealing in counterfeit Nike goods, which renders false and/or misleading StockX’s ‘100% Verified Authentic’ claims and its claims about the ‘proprietary multi-step verification process’ it employs to authenticate goods.” 

Nike also contends that it “sufficiently alleges that StockX is knowingly deceiving consumers with these false and/or misleading statements about the authenticity of the Nike goods for sale on its platform, continuing to engage in such improper and unlawful business practices to attract consumers to its platform and induce consumers to purchase supposedly genuine Nike goods and purchase and trade the infringing Nike-branded Vault NFTs.” And still yet, Nike alleges that “the continued sale of counterfeit Nike goods on StockX’s platform and StockX’s false and/or misleading claims about its authentication process has caused and is causing Nike injury as a result of, inter alia, harm to reputation, diverted sales, consumer confusion, dilution, and tarnishment of its valuable trademarks.” 

For the foregoing reasons, Nike requests the Court grant it leave to file a first amended complaint. 

In a statement in response to Nike’s filing, a spokesman for StockX stated on Wednesday, “We take customer protection extremely seriously, and we’ve invested millions to fight the proliferation of counterfeit products that virtually every global marketplace faces today. Nike’s latest filing is not only baseless but also is curious given that their own brand protection team has communicated confidence in our authentication program, and that hundreds of Nike employees – including current senior executives – use StockX to buy and sell products. This latest tactic amounts to nothing more than a panicked and desperate attempt to resuscitate its losing legal case against our innovative Vault NFT program that revolutionizes the way that consumers can buy, store, and sell collectibles safely, efficiently, and sustainably. Nike’s challenge has no merit and clearly demonstrates their lack of understanding of the modern Marketplace.”

The case is Nike, Inc. v. StockX LLC, 1:22-cv-00983 (SDNY).

A stripes-centric legal battle between adidas and Thom Browne is heating up. On the heels of a New York federal court refusing to toss out the trademark case that adidas filed against it last year, Thom Browne has filed its answer, complete with 18 affirmative defenses – and a counterclaim aimed at getting one of adidas’ 3-stripe trademark registrations canceled. In addition to denying the bulk of the allegations that adidas has made against it in its complaint, Thom Browne sets out an array of affirmative defenses, arguing that, among other things, it should be shielded from liability because adidas failed to take action against it – in a timely manner – over its use of a 4-stripe pattern, which has appeared on Thom Browne wares since 2009. 

In furtherance of its Laches, Acquiescence, and Estoppel defense, Thom Browne claims that adidas has been aware of its use of the 4-stripe mark since 2007 when “adidas complained about Browne’s use of three horizontal parallel bands on its clothing,” prompting it to adopt a logo that consists of “four horizontal parallel bands.” From 2009 through 2018, which is when adidas first initiated an opposition proceeding over one of Browne’s 4-stripe marks in the European Union, Thom Browne claims that “adidas did not complain about [its] use of four horizontal parallel bands on clothing.”

The New York-based fashion brand also claims that “throughout this period of time … there have been no instances of actual confusion between [its] use of four horizontal parallel bands, and adidas’ use of three stripes.” 

adidas Thom Browne

In connection with other affirmative defenses, the brand asserts that it and adidas operate in “entirely separate markets, at vastly different price points, and are not competitors,” thereby, diminishing the likelihood of confusion. Beyond that, Browne argues that it despite adidas’ allegations to the contrary, it has “not encroached into adidas’ market,” and that “any changes to [its] product line over the years” – i.e., its expansion from high fashion into sportswear/activewear – “has been natural and anticipated.” 

Additionally (and setting the stage for its cancellation-focused affirmative defense), Browne argues that adidas lacks robust rights in the 3-stripe motif, as the German giant’s use of stripes on clothing and footwear “has not been exclusive.” In fact, Browne asserts that “numerous third parties use stripes, in multiple variations and iterations, on clothing and footwear,” and claims that adidas has “failed to police the market, and, as a result, has allowed third parties to use stripes on clothing and footwear,” thereby, removing adidas’ ability to make its trademark claims in this case. (The failure-to-enforce claim is an interesting one given that later on in its filing, Browne specifically points to adidas’ “notoriety as an overzealous enforcer of its actual and perceived rights in its ‘Three- Stripe Mark.’”)

With the foregoing defenses (and others) in mind, counsel for Thom Browne is seeking “a judgment dismissing the complaint, for costs and disbursements, an award of attorneys’ fees, and such other and further relief as to the Court seems proper.” 

Thom Browne’s Cancellation Counterclaim

Turning its attention to its counterclaim, Thom Browne asserts that adidas’ “Three-Quadrilaterals Design” mark (Registration No. 4,910,643) is “merely ornamental and/or aesthetically functional” and “has not acquired secondary meaning.” Pushing for the court to cancel the registration, which extends to “articles made of leather and imitation leather,” clothing, and “athletic sporting goods,” Thom Browne argues that during the registration process, adidas did not “specifically establish that the design is perceived as an ‘indicia of source,’” and thus, the U.S. Patent and Trademark Office (“USPTO”) should never have registered the mark back in 2016. 

adidas Thom Browne

In responding to a March 2015 Office Action from the USPTO, which preliminarily refused to register the mark on the basis that it was “merely a decorative or ornamental feature of the goods,” Thom Browne claims that “nearly all” of the product photographs that adidas provided to the USPTO show the Three-Quadrilaterals Design used alongside the “adidas” work mark and/or its “Badge of Sport” mark, “if they show the Three-Quadrilateral Designs at all.” In short: Thom Browne claims that adidas did not establish that the Three-Quadrilaterals Design, by itself, serves as an indicator of source for consumers. 

“The Three-Quadrilaterals Design is merely ornamental and/or aesthetically functional as applied to the goods” cited in the registration, Browne alleges, and in lieu of a showing of secondary meaning, “the mark is not likely to be perceived by the consuming public as an identification of the source of the goods.” 

Thom Browne states that it “believes it is likely to be damaged by maintenance of adidas AG’s Registration No. 4,910,643 because adidas is asserting that registration against Thom Browne in this case in an effort to disrupt Thom Browne’s business.” As a result, Browne is looking to have “the complaint and each and every purported claim for relief be dismissed with prejudice,” and judgment entered in Thom Browne’s favor on its counterclaim, including an order from the court cancelling the adidas trademark registration at issue. 

In the complaint that it filed in June 2021, in which it sets out claims of trademark infringement, unfair competition, and dilution, adidas argues that in furtherance of Thom Browne’s “recent encroach[ment] into direct competition with adidas by offering sportswear and athletic-styled footwear that bear confusingly similar imitations” of adidas’s three-stripe mark, which adidas asserts that it has “extensively and continuously has used and promoted … in connection with apparel and footwear … for over half a century.” 

The case is adidas America, Inc., et al., v. Thom Browne, Inc., 1:21-cv-05615 (SDNY).

Adidas’ case against Thom Browne will move forward in the wake of an unsuccessful attempt by the New York-based fashion brand to get the stripe-centric spat tossed out of court. On the heels of Thom Browne filing a motion to get adidas’ trademark infringement, unfair competition, and trademark dilution complaint suit dismissed, which was largely denied in a report and recommendation from a magistrate judge for the U.S. District Court for the Southern District of New York last month, Judge Jed Rakoff adopted the magistrate judge’s report in a move that enables adidas’ headline-making lawsuit to move forward.

“The court finds itself in complete agreement with Magistrate Judge Lehrburger’s Report and Recommendation,” Judge Rakoff stated in an order dated April 21. In particular, Judge Rakoff pointed to Lehrburger’s conclusion that adidas’ complaint “sufficiently alleges that [its] three-stripe mark functions as a unitary mark.” Not a total loss for Thom Browne, Judge Rakoff also upheld Lehrburger’s determination that adidas “improperly requests the court to sustain the pending Trademark Trial and Appeal Board opposition proceeding that adidas filed against Thom Browne’s application for a striped design mark” on the basis that the court does not have jurisdiction to sustain or overrule the pending opposition.

As such, Lehrburger – and now Judge Rakoff – determined that adidas’ request that the court sustain its opposition should be stricken. 

adidas Thom Browne
Some of the Thom Browne’s allegedly infringing wares

Judge Rakoff’s order follows from a motion to dismiss that Thom Browne filed in October 2021, primarily arguing that adidas’ June 2021 complaint does not provide it with “sufficient notice of the claims against it because the complaint does not specify which of the accused products infringe which trademark registrations and which products dilute which trademarks,” adidas “lacks standing to assert its claims because it does not own the registrations,” and the court cannot sustain an opposition pending before the USPTO’s Trademark Trial and Appeal Board.” 

Reflecting on these arguments last month, the magistrate judge largely sided with adidas (before sending his report and recommendation to the district court judge for determination), finding that the German sportswear giant sufficiently pled its trademark infringement, unfair competition, and trademark dilution claims, and that it has standing to bring such claims against Thom Browne. 

Primarily, Thom Browne claimed that adidas’ complaint falls short of the requisite pleading standard, as it does not specify exactly which of the 24 trademark registrations that adidas cites in its complaint (all of which extend to its famed three-stripe mark) are being infringed upon and does not “sufficiently define the ‘parameters of the design’ that comprises its asserted ‘three-stripe mark.’” As Thom Browne argued in its motion to dismiss, the 24 different trademark registrations have “such significant variation that they cannot constitute a single three-stripe mark,” and thus, adidas’ complaint “lacks sufficient specificity to provide fair notice of [the plaintiffs’] claims.” 

Unpersuaded by Browne’s arguments, Lehrburger stated in his report that adidas is only “required to allege sufficient facts establishing they own a protectible mark, which [it has] done.” Specifically, adidas’ complaint “provides fair notice of [its] claims, alleges facts sufficient to establish each required claim element, and adequately identifies the protected mark and the products that allegedly infringe on that mark.”  

adidas Thom Browne
Some of adidas’ 24 registered trademarks 

The magistrate judge asserted – and Judge Rakoff has since agreed – that adidas need not allege more than this simply because it “consistently refers to its three-stripe mark as a unitary mark,” or one that creates a commercial impression that is separate and apart from any unregistrable component. (Or as the Federal Circuit put it in the Dena Corp. case, a mark may be considered “unitary” if the elements of the mark “endow the whole with a single, integrated, and distinct commercial impression,” even if those elements would otherwise be unregistrable.)

Citing the decision of U.S. District Court for the District of Oregon in Adidas America, Inc. v. Forever 21, Inc., Lehrburger asserted that “at least one federal court has already rejected the notion that adidas’ pleading of multiple registrations and a unitary three-stripe mark requires a more definite statement.” 

The case is the latest in a long line of trademark lawsuits (and proceedings before the USPTO’s Opposition Division) that adidas has waged in furtherance of an aggressive and enduring practice that sees the 73-year-old sportswear behemoth police others’ unauthorized uses of stripes when its legal counsel believes that such third-party uses are likely to confuse consumers and/or diminish the distinctiveness of adidas’ three-stripe marks and the ability of those marks to identify a single source. Putting adidas’s long-running pattern in perspective, the late Judge Garr King summarized in 2008 in an opinion in the case that adidas filed against the now-defunct Payless Shoes: between 1995 and 2008, alone, adidas had “pursue[d] over 325 infringement matters involving the three-stripe mark in the United States, filed more than 35 separate lawsuits for infringement of the three-stripe mark, and entered into more than 45 settlement agreements with companies selling infringing footwear.” 

The case is adidas America, Inc., et. al., v. Thom Browne, Inc., 1:21-cv-05615 (SDNY).

Nike has retained its top spot on a list of the world’s most valuable apparel brands, Brand Finance revealed in connection with the release of its annual brand review. Benefitting from significant growth this year, Nike’s brand value increased by 9 percent to $33.2 billion, per Brand Finance, putting the Beaverton, Oregon-based sportwear titan in the number 1 spot for the eighth year in a row, followed by Louis Vuitton, which nabbed the second-place spot from Gucci, which fell from the number 2 spot on last year’s list to occupy third place for 2022. Chanel, adidas, Hermès, Zara, H&M, Cartier, and Uniqlo round out the rest of the top 10.

Breaking down the methodology for its “apparel” ranking, Brand Finance examines the 5,000 “biggest brands” across segments, such as “luxury, sportswear, fast fashion, watches, accessories and jewelry, high street designer, underwear, and footwear,” and ranks companies by “brand value.” The London-based consultancy defines its central metric as “the value of the “names, terms, signs, symbols, logos, and designs” that a company uses to identify and distinguish its “goods, services or entities” from those of others, thereby creating “distinctive images and associations in the minds of stakeholders, and generating economic benefits” for the company as a result.” 

While “changing consumer and industry pressures” are impacting the appearance of the apparel industry, including by causing a contraction in value of most fast fashion brands (Chinese fast fashion titan Shein is not included on the list), Brand Finance found that sportswear brands and luxury names have fared well in the wake of the COVID-19 pandemic, seeing their respective aggregate brand value grow by 10 percent this year (from $68 billion to $74 billion) for sportswear and 21 percent this year (from $103 billion to $125 billion) for luxury names.

At the same time, the value of brands in the fast fashion segment dropped by 7 percent (from $44 billion to $41 billion), driven down by an array of factors, including “the fundamental disruption of their brand model.” Specifically, Brand Finance notes that the “difficulty of selling low-margin products online is further exacerbated by the additional logistics and delivery costs,” which has “caused the drop in value of brands in the fast fashion sector of the apparel industry.”

Looking to the luxury segment, Brand Finance states that brands like Louis Vuitton (brand value up 58 percent to $23.4 billion), Gucci (brand value up 16 percent to $18.1 billion) and Armani (brand value up 9 percent to $3.3 billion) “surged in terms of brand value” over the past year. Additionally, the consultancy states that new entrants into the top 50 apparel ranking are dominated by luxury brands: BOSS (brand value up 54 percent to $1.7 billion), Bottega Veneta (brand value up 25 percent to $1.7 billion), and luxury jewelry brand Van Cleef & Arpels (brand value up 37 percent to $1.7 billion, as well).

In the sportswear and athleisure realm, the brand valuation firm asserts that over the course of the pandemic, brands have seen a steady growth in brand value as consumers spent more time at home as consumers selected brands for comfort rather than style. As a result of increased consumer demand for sportswear, Nike saw its brand value increase, followed by Adidas (brand value up 2 percent to $14.6 billion), Puma (brand value up 13 percent to $4.5 billion), and Lululemon (brand value up 28 percent to $4.2 billion). 

Brand Finance notes that smaller sportswear brands are amongst the fastest growing brands in the ranking with Skechers seeing its brand value increase by 68 percent to $3.2 billion, and more interestingly, budding Chinese brand Li-Ning increasing its brand value by 68 percent to $2 billion, as it continues to seek market share outside of its native China. (Li-Ning is joined by a number of other China-founded companies on this year’s Top 50 list, including sportswear company ANTA, jewelry companies Chow Tai Fook and Lao Feng Xiang, and outerwear-maker Bosideng, bringing China’s brand value to 15.3 billion, which is 5 percent of the total of the 2022 ranking.)

In addition to Skechers and Li-Ning, Louis Vuitton was among the brands that exhibited the greatest growth in brand value on a year-over-year basis, followed by BOSS, Van Cleef & Arpels, Tag Heuer, FILA, Saint Laurent, Moncler, and Celine. 

Beyond ranking companies in accordance with the most valuable brands metric, Brand Finance also judges companies by their “Brand Strength,” which takes into account a company’s “marketing investment, customer familiarity, staff satisfaction, and corporate reputation.” There were some changes on this list compared to last year, with Dior taking the top spot from Rolex, which landed in the number 4 spot this year. Dior “performed exceedingly well in 2022,” per Brand Finance, “going from the 12th rank in 2021 to the top of the table,” as the brand “continued to host socially distanced fashion shows and events to launch new collections,” “engaged in a number of digital campaigns to engage with customers online,” and “most importantly, leveraged the online medium to a great capacity with influencer marketing campaigns.” 

Louis Vuitton took the number 2 spot on the “Strongest Brands” list, followed by Gucci (3), Rolex (4), Nike (5), Saint Laurent (6), Skechers (7), Moncler (8), Li-Ning (9), and adidas (10). Hermès dropped out of the top ten after nabbing a number 5 spot last year. 

Overall, Brand Finance found that many of the brands on its ranking, including luxury brands, in particular, are readily bouncing back into growth after losing significant value over the previous two years. “Consumer sentiment is strengthening with a higher spending on clothing as people have been unable to spend on luxurious vacations.” It is unclear whether that trend will continue in light of enduring economic uncertainty and geopolitical crisis.

StockX is hitting back at the headline-making non-fungible token lawsuit filed against it earlier this year by Nike, arguing that it is not running afoul of the Swoosh’s trademark rights by offering up NFTs “to track ownership of frequently traded physical goods.” In an answer dated March 31, counsel for StockX asserts that the claims made by Nike “lack merit, disregard settled doctrines of trademark law, including the doctrines of first sale and nominative fair use, and show a fundamental misunderstanding of the various functions NFTs can serve.” Speaking to the specific utility of its “Vault NFTs,” StockX states that the tokens “are absolutely not ‘virtual products’ or digital sneakers,” and rather, each of the NFTs is “tied to a specific physical good that has already been authenticated by StockX.” As such, the NFTs, themselves, have “no intrinsic value,” and essentially serve as a “claim ticket, or a ‘key’ to access ownership of the underlying stored item.” 

Pushing back against Nike’s trademark claims, including that the Vault NFTs are “unsanctioned products are likely to confuse consumers, create a false association between those products and Nike, and dilute Nike’s famous trademarks,” StockX argues in a preliminary statement in its answer that the likelihood of consumer confusion is low. “At every point in the process,” StockX argues that “consumers are made aware they are purchasing physical goods that StockX has authenticated, that StockX is storing such physical products in its vault, that such physical goods may be traded via blockchain and tracked using a StockX-branded Vault NFT, and that the Vault NFT may be redeemed for the physical goods themselves.” As such, “No one has been – or could be – confused as to the source.” 

Nike StockX

Beyond that, StockX takes issue with Nike’s position that “resellers of products are legally prohibited from accurately describing the physical products they seek to trade in the digital world,” which it argues is “contrary to trademark law.” Setting the stage for the affirmative defenses that it claims in response to Nike’s causes of action, StockX states that its “use of images of Nike sneakers and descriptions of re-sale Nike products in connection with StockX Vault NFTs is nominative fair use,” or permissible use of another party’s trademark to refer to that party’s products/services. 

“It is no different than major e-commerce retailers and marketplaces who use images and descriptions of products to sell physical sneakers and other goods,” which StockX contends “consumers see (and are not confused by) every single day.” And the successful completion of 2,853 Vault NFT transactions since the launch of the offerings in mid-January shows that consumers are not confused by the NFTs, StockX argues, and instead, demonstrates that consumers “recognize that [the] Vault NFTs are cutting-edge technology that revolutionizes the trading of authenticated physical goods.” 

In addition to denying the bulk of Nike’s allegations, Detroit-based StockX asserts a number of affirmative defenses, claiming, among other things, that the acts that Nike cites in its complaint “constitute descriptive fair use and/or nominative fair use,” and thereby, should be shielded from trademark liability. Additionally, StockX argues that Nike’s claims are barred by the first sale doctrine, which “permits purchasers of lawfully trademarked goods to display, offer, and sell those goods under their original trademark,” and also barred given that Nike has allegedly “suffered no harm or damages” as a result of StockX’s offering up of the Vault NFTs.

StockX’s answer comes after Nike filed a trademark infringement and dilution, and unfair competition suit in a New York federal court in February, arguing that StockX was “minting” NFTs that make “prominent use [of] Nike’s trademarks, marketing those NFTs using Nike’s goodwill, and selling those NFTs at heavily inflated prices to unsuspecting consumers who believe or are likely to believe that those ‘investible digital assets’ (as StockX calls them) are, in fact, authorized by Nike.” 

The case is Nike, Inc. v. StockX LLC, 1:22-cv-00983 (SDNY).