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Nike Sues Platform over NFTs

Nike sues StockX,
Claims that sales of NFTs
Infringe its trademarks

Nike has sued the StockX platform for trademark infringement because the platform minted, marketed, and sold non-fungible tokens (NFTs) using Nike trademarks.

As The Verge reported,

StockX is a reseller for streetwear, bags, and sneakers, among other items. Unlike some marketplaces, it’s also an intermediary that takes in items and verifies their authenticity. StockX built on that system in January by launching NFTs linked with physical goods. The announcement promises these “Vault NFTs” can be redeemed for physical items but also traded instantly as digital goods.

As The Verge notes, Nike shoes are very popular on StockX. In fact, the site boasts that Nike products drive more sales on its e-commerce platform than any other brand.

The Vault NFTs are sold with the name and picture of the corresponding products – such as Nike shoes.

As The Verge explains,

The case hinges on whether StockX’s NFTs are an extension of its normal reselling process (like a digital receipt of ownership) or whether they’re products in their own right, with potentially significant implications for NFTs in general.

As we’ve explained in a previous blog (quoting the New York Times),

An NFT is an asset verified using blockchain technology, in which a network of computers records transactions and gives buyers proof of authenticity and ownership. The current boom is mostly for digital assets, including images, GIFs, songs, or videos. Most importantly, NFTs make digital artworks unique, and therefore sellable.

An NFT isn’t itself generally considered a form of intellectual property (IP). It’s more akin to a receipt for a unique digital asset kept in a blockchain-based vault.

As Nike’s complaint describes them,

Non-Fungible Tokens or “NFTs” have quickly become pervasive in their use by brand owners seeking to enter the nascent marketplace of virtual or digital products connected to a token on the blockchain. NFTs are commonly understood to be blockchain-based virtual products that can be collected, sold, and traded in the marketplace. They are an exciting way for brands to interact with their consumers in and out of the “metaverse,” and diverse commercial applications of NFTs have emerged throughout the past two years. Far more than a fleeting trend, NFTs are part of the future of commerce.

However, Nike alleges,

Unfortunately, novel product offerings, burgeoning technologies, and gold rush markets tend to create opportunities for third parties to capitalize on the goodwill of reputable brands and create confusion in the marketplace. NFTs are, not surprisingly, no exception to the rule, and this new frontier has swiftly become a virtual playground for infringers to usurp the goodwill of some of the most famous trademarks in the world and use those trademarks without authorization to market their virtual products and generate ill-gotten profits.

According to Nike,

without Nike’s authorization or approval, StockX is “minting” NFTs that prominently use 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 when they are not.

StockX even advertises that its Nike-branded Vault NFTs are “100% Authentic” – whatever that means in this context.

Nike itself has filed applications for trademarks for use in connection with “[d]ownloadable virtual goods, namely computer programs featuring footwear,” (i.e., digital sneaker NFTs) and “[r]etail store services featuring virtual goods, namely footwear” (i.e., a digital sneaker NFT trading platform).

If the case reaches a judge – rather than settles – it will be interesting to see how the court rules on this issue.

Just like the haiku above, we like to keep our posts short and sweet. Hopefully, you found this bite-sized information helpful. If you would like more information, please do not hesitate to contact us here.

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