Case Study – Already, LLC v. Nike, Inc.

Sometimes, in the contentious world of trademark defense, a case can “boomerang” on a plaintiff. That is, a plaintiff may sue an alleged infringer, and be met with a defense or countersuit that unexpectedly imperils the plaintiff’s mark. Such was the case in Already, LLC v. Nike, Inc., 133 S. Ct. 721 (2013).

In the underlying suit, Nike sued Already, claiming that Already’s “YUMS” shoe was too similar to Nike’s “Air Force 1” shoe design (a federally protected trademark). Part of Already’s response was to countersue Nike, arguing that Nike’s trademark was invalid. Faced with the possibility of losing a valuable asset in the ensuing litigation, Nike instead opted to send Already an unequivocal surrender.

Nike’s “Covenant Not to Sue”

Nike’s surrender took the form of an unconditional and irrevocable written promise not to make any claim or demand on Already (or any distributors and customers) in connection with current or previous shoe designs, or colorable imitations thereof. In the opinion of the Supreme Court, this covenant was broad enough to cover all of Already’s allegedly unlawful conduct that had brought the parties into court in the first place. Essentially, Nike was willing to allow Already to continue its activities undisturbed and yield any and all claims arising therefrom.

Why did that not end the dispute?

Already, having been drawn into court and perhaps optimistic about its chances of invalidating Nike’s trademark, wanted to go ahead with the lawsuit, despite Nike’s withdrawal. Nike, however, successfully argued that the Covenant Not to Sue had rendered the litigation “moot,” requiring dismissal. Lower courts agreed, and Already appealed. Ultimately, the Supreme Court agreed to hear the case.

So, was the case moot?

As the Court noted, a case is moot when, “The issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” One way to meet this standard is for a defendant to voluntarily cease its unlawful conduct once sued. This is known as the “voluntary cessation doctrine.” (For purposes of this analysis, Nike is considered to be the defendant with respect to Already’s counter claims.)

The burden of proof on this point is heavy. If defendants were able to moot disputes by pausing their conduct until litigation was dismissed, and then resuming it afterward, the civil judicial system would be easy to circumvent. Instead, courts require that defendants demonstrate that they, “Could not be reasonably expected to resume” the behavior that created the controversy.

In this case, Nike’s Covenant Not to Sue was held to be sufficiently broad to cover all possible litigation against Already or related parties in connection with the Air Force 1 trademark. In the Court’s opinion, this left nothing for any court to decide with respect to Already’s challenge to the mark. Nike’s conduct that led to the challenge (i.e., suing Already for trademark infringement) had been completely and irrevocably terminated, such that Nike could not reasonably be expected to repeat the behavior in the future. As a result, the Court held that the case was moot, and affirmed the lower court’s dismissals thereof.

Takeaways

The case essentially confirms the existence of a legal “escape hatch” for trademark holders (and potentially the owners of other protected IP assets). If a trademark holder decides to file a complaint against an alleged infringer, and finds a counter claim based on trademark invalidity to be overly threatening, the owner can end the threat with a comprehensive formal promise not to litigate any further. This diminishes the risk of harm from “boomeranging” litigation, and may well lead to increased enforcement of protected IP assets by owners in the future.

If you are interested in learning more, the @WashULaw online LL.M. in U.S. Law program offers a course called “Intellectual Property” that can help expand your understanding of certain issues that may be relevant to cases involving trademark law like these.