Pattishall IP Blog

January 11, 2013

Air Force 1 trade dress dispute held moot – Nike wins at Supreme Court, but at what cost?

Filed under: Litigation, Trade Dress, Uncategorized — Tags: , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 10:41 am

UW low res

by Uli Widmaier

A sues B for infringing its registered mark.  B counterclaims for cancellation of A’s registration.  A executes a comprehensive covenant not to sue B in the future for using any colorable imitation of A’s mark, and moves to dismiss the lawsuit with prejudice.  B, intent on pursuing its counterclaim, opposes the motion.  The district court holds that the case is moot, and grants A’s motion.  The Court of Appeals affirms, as does the Supreme Court.  Case over.

This is the short version of Already, LLC, v. Nike, Inc., decided unanimously by the Supreme Court on January 13, 2013.  See — U.S. –, No. 11-982 (U.S. January 9, 2013).  To put some meat on the factual bones:  Nike was the plaintiff, Already was the defendant, the mark was the trade dress of Nike’s famous Air Force 1 shoe, for which Nike has a federal registration.  Already sold shoes that Nike felt infringed the Air Force 1 trade dress.  Nike sued, Already counterclaimed.  Nike then reconsidered, successfully mooting the case via a unilateral covenant not to sue.  “The covenant promised that Nike would not raise against Already or any affiliated entity any trademark or unfair competition claim based on any of Already’s existing footwear designs, or any future Already designs that constituted a “colorable imitation” of Already’s current products.”  Already, slip op. at 2.

The Supreme Court’s decision clarifies (to a degree) the burden for showing the existence or absence of an actual controversy where a plaintiff seeks to moot a defendant’s counterclaim via a unilateral covenant not to sue.  But its importance lies just as much, if not more, in the barriers the Court erects against future uses of covenants not to sue, and in the insight it provides into the Justices’ thinking about trademarks and about basic competitive fairness.

The opinion was written by Chief Justice Roberts.  Justice Kennedy wrote a concurrence, which Justices Thomas, Alito, and Sotomayor joined.

I.    The Holding:  Burdens and Burden-Shifting

Both the district court and the Second Circuit held that, once Nike had executed the covenant not to sue, the burden was on Already to show that the case had not become moot.  Slip op., Kennedy concurrence at 1.  This was “wrong.”  Id.  “Under our precedents, it was Nike’s burden to show that it could not reasonably be expected to resume its enforcement efforts against Already.”  Slip op. at 5, quoting Friends of the Earth, Inc., v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 190 (2000) (quotation marks omitted).  In other words, the “voluntary cessation doctrine” articulated in Friends of the Earth applies to Nike, who in this situation was the party who voluntarily ceased the allegedly wrongful conduct (i.e. a lawsuit based on an allegedly invalid registration) .  Id. at 5-6.  This burden imposed on Nike by the doctrine is a “formidable” one.  Id. at 6. (more…)

Blog at WordPress.com.