Nike has doubled down on its litigation against StockX in a heavy-handed lawsuit between the world’s largest shoemaker and shoe resale platform hypebeast which is now valued at $3.8 billion.
The battle started in February, when Nike filed a lawsuit against StockX, after StockX announced a program that promised to turn your shoe purchases on its site into instant NFTs. (Nike, having not created these NFTs itself, claimed that StockX was abusing its trademark by creating NFTs from Nike shoes.) Then last week, Nike upped the legal ante: added a forgery charge in addition to his existing designer suit, claiming he purchased four pairs of fake Nikes from StockX.
At first glance, the story may look like another example of Nike overprotecting its intellectual property. Last June, Nike sued Brooklyn-based art collective MSCHF, after the group released Satan Shoes, which were Nikes the company purchased and then filled with a drop of Lil Nas X’s own blood. (Nike and MSCHF colonized before the case went to court, but many legal scholars sided with MSCHF, since MSCHF had simply bought and modified Nike shoes like anyone could modify and resell a Ford Bronco.)
The new combination tests the relationship between a retailer and a manufacturer – and that’s unprecedented territory. “I don’t think we’ve seen a case like this,” says Leah Chan Grinvald, associate dean and professor of law at Suffolk University. “I think it’s going to be of real interest to lawyers if he makes it to court.”
Manufacturers regularly check for counterfeiting and buy their own products from retailers all the time, according to Grinvald. However, it is rare for a manufacturer to sue a retailer for selling products that may have been counterfeit.
“They rarely sue the seller, but in this case, StockX is different from Amazon or eBay, in that Amazon or eBay simply says to consumers, ‘Buyer beware!’ what a market!” says Grinvald. “As StockX takes that next step. . . and says that we verify that the shoes you buy are genuinely Nike.
Indeed, StockX doesn’t just connect a buyer and a seller to close a deal and drop the tokens however they can. It is an active intermediary in each purchase. StockX receives a resold pair of shoes on its platform and verifies that the shoes are authentic, even adding a special tag to mark their authenticity. Taking that extra step of guaranteed authenticity is StockX’s whole value proposition. But it also increases their legal vulnerability to an infringement claim.
To make matters worse for StockX, if an investigation found that StockX was knowingly selling counterfeit products, it would have to pay triple the damages of a standard infringement claim. Damages are notoriously difficult to award, but the prospect of tripling potential damages would be unsettling for any defendant.
But none of this is quite dry, and StockX could win in court, depending on how the evidence and arguments are presented. Grinvald offers one such scenario in which this could happen: maybe Nike is right and the shoes are counterfeit. But what if they were fakes so good they were completely indistinguishable from the real thing? Would StockX then be held responsible? She notes how sometimes a plant will run a “third teamin which the counterfeit products are made on the same equipment and with the same materials as the original product. They are completely indistinguishable and they could pass any test StockX could throw at them. And even . . . they are still, technically, unauthorized Nikes.
Nike might claim that such a shoe is a counterfeit, but, “in the end, it was made by Nike!” said Grinvald. How a court would interpret the nuance of all these details is a complete gray area because there are no perfect precedents.
The closest case was filed in 2011, when Coach sued former employee Gina Kim who the company said was selling counterfeit Coach bags on eBay. “It’s an integral part of large corporations trying to maintain control over brands, products, and distribution lines,” says Grinvald. But during the trial, the facts came to light: These were actually legitimate Coach products that Kim got on discount as an employee, and she was simply returning them for a profit. It may have been a breach of his contract, but it wasn’t about infringement, Grinvald notes. Products were Coach.
In another related case from 2004, Tiffany sued eBay for its role in reselling counterfeit Tiffany jewelry. In defense, eBay pointed to its significant investment in its Verified Rights Owner (VerO). Basically, eBay argued that it had made significant investments to ensure that companies like Tiffany could report fraudulent listings, while defending that it was just a plat anyway. – form of resale. (The argument is reminiscent of how social media companies today offer a few misinformation tools to distance themselves from fake news on their own platforms!) In this case, eBay won.
Of course, Nike might not care about the counterfeiting of a few shoes as much as this lawsuit might imply. Grinvald thinks Nike’s own lawyers added the infringement allegations, which could be very effective in court, to reinforce what the company is really worried about: StockX was selling Nike NFTs when Nike acquired its own company in December 2021 for sell their own NFTs. On Twitter, Alexandra Roberts, professor at UNH Franklin Pierce School of Law posted a thread describing the complicated house of cards for StockX in this situation. To oversimplify: even if StockX could win the argument that its NFTs don’t break the brand, if any of those NFTs are based on counterfeit Nikes, then the NFTs could also be considered counterfeits.
So far, StockX has refuted Nike’s claims by a public statement he shared with fast business when we asked for feedback and pointed out that Nike senior executives use its platform– but this is not necessarily a valid defense. Grinvald says if she were StockX’s in-house counsel, she’d advise them to settle with Nike, and she thinks that’s the most likely way to end this story, especially given the nearly endless legal resources of Nike and its own reputation for aggressive legal action to protect its intellectual interests. property.
“It’s going to be tough for StockX to defend,” Grinvald says. “Whether [investigations] actually found them to be counterfeit, this is going to be bad for public relations. And they’re going to be more concerned with the court of the public, consumer opinion, than the principle of getting it right.
Indeed, even if StockX were to beat Nike in court, it would only serve to remind us of Nike’s claims: that those expensive shoes you carefully buy in the secondary market might actually just be knockoffs anyway.
Nike did not respond to a request for comment by press time.