* Nike accused smaller rival Already of trademark violation
* Rival accused of copying elements of Air Force 1 sneakers
By Jonathan Stempel
WASHINGTON, Nov 7 Nike Inc urged the
U.S. Supreme Court on Wednesday to make a lawsuit by a smaller
rival go away with one big swoosh.
Several justices appeared sympathetic to the sporting goods
maker's argument to stop Already LLC from challenging its
trademark covering a top-selling pair of sneakers, after Nike
had agreed to drop its own lawsuit accusing that company of
making illegal copies.
The case may be especially significant to companies such as
Nike rival Adidas SE and luxury goods makers Coach
Inc and LVMH Moet Hennessy Louis Vuitton SA,
which generate substantial revenue and customer goodwill from
products with recognizable trademarks and often sue to fend off
A loss for Nike could make companies more hesitant to file
trademark lawsuits, given the lessened incentive for alleged
infringers to drop or settle counterclaims.
In 2008, Nike registered a trademark on the stitching,
eyelet panels and other design features of Air Force 1, a
low-cut sneaker that the Beaverton, Oregon-based company
launched in 1982 and which sells in the millions each year.
In July 2009, Nike sued Already, which makes sneakers under
the Yums brand, saying its "Sugar" and "Soulja Boy" shoes had
features covered by the Air Force 1 trademark. Already had been
on Nike's internal "top 10" list of alleged infringers.
After Already countersued to void the trademark, Nike
decided to drop its lawsuit, believing Yums sneakers posed no
real commercial threat. It also promised, through a legal
promise known as a covenant, not to sue Already.
But the Arlington, Texas-based company refused to abandon
its counterclaim and accused Nike of dropping the original
lawsuit to deprive courts of jurisdiction over the whole matter.
Last November, the 2nd U.S. Circuit Court of Appeals in New
York said Nike's action did just that, and the Supreme Court
agreed to decide whether that ruling was correct.
PROMISES LEFT AND RIGHT
At Wednesday's oral argument, James Dabney, a lawyer for
Already, contended that Nike was asserting an improper,
"far-reaching claim of right to exclude competition."
But some justices were troubled by Already's refusal to say
that it would produce no sneakers that would bother Nike, and
Dabney's inability to explain what kind of protection would
satisfy the smaller company.
"Is there any covenant that exists in the world that would
make you secure?" Justice Elena Kagan asked. "I suppose I'm
having a little bit of difficulty with an answer that says
Chief Justice John Roberts suggested Already had extracted
more from Nike than most in winning a covenant not to be sued.
"Nike can't go around giving these covenants left and right,
because if they do, they will undermine their own trademark," he
Thomas Goldstein, a lawyer for Nike, called Already "the
only company in the entire world that has a promise that's
substantial not to be sued under this trademark," and that this
"really resolved the case."
He did acknowledge that Nike's promise would not cover exact
copies or "colorable imitations" of its sneakers. "Our point is
not that it covers every future shoe of theirs," he said.
Goldstein urged the court to reject the federal government's
recommendation that the 2nd Circuit ruling be thrown out and
that the case be remanded, or returned, to a lower court to gain
more clarity about Nike's covenant and Already's product plans.
Kagan appeared to agree that keeping the case going might
not resolve much.
"It sounds as though we're remanding for no purpose, given
what Already has said throughout the course of the litigation
and, indeed, in this court today," she told Ginger Anders, a
Justice Department lawyer.
Two companies with well-known trademarks, clothing maker
Levi Strauss & Co and automaker Volkswagen AG, filed
briefs supporting Nike.
A decision is expected by the end of June.
The case is Already LLC v. Nike Inc, U.S. Supreme Court, No.