Even the metaverse isn’t free from rules and regulations when it comes to trademark law.
In one of the first major legal spats to occur in the virtual realm, Nike filed a lawsuit against StockX in February, alleging that the sneaker resale marketplace used Nike’s trademarked logos and products in attempts to enter the NFT, or or non-fungible token, market. According to the initial complaint, which was filed in a United States District Court in New York, StockX is minting, marketing, and selling NFTs that bear Nike’s trademarks at “heavily inflated prices” without the approval or authorization of Nike.
Now, StockX is hitting back at Nike over claims that it sells counterfeit shoes. In its response filed in U.S. District Court in New York City on June 6, StockX defended its anti-counterfeiting measures and said Nike’s “new-found litigation position” is “suspicious at best” as the brand had previously praised them.
“Nike’s suggestion that StockX is a bad actor that intentionally deals in counterfeits and misleads its consumers is not only contradicted by the facts, but by Nike’s own dealings with StockX,” the online marketplace wrote in its response on Monday. “In the past, Nike has sought to collaborate with StockX and has communicated confidence in the StockX authentication process, including by inviting StockX to join an anti-counterfeiting counsel with the United States Department of Homeland Security.”
StockX went on to provide further examples of Nike endorsing its authentication process citing the footwear brand’s VP of global litigation and investigations praising StockX in writing as a “good actor” in connection with efforts to remove a counterfeit listing, and in 2020, Nike’s brand protection director of authentication and innovation describing the two companies as “aligned on ensuring consumers only receive authentic product.”
In a statement on Monday, StockX CEO Scott Cutler added that the company was “built to make the secondary market safer and more efficient for consumers” and has “invested millions of dollars to fight the proliferation of counterfeit goods.”
“Nike’s recent allegations lack merit, demonstrate a lack of understanding of the modern marketplace, and display anticompetitive behavior that will stifle the secondary market and hurt consumers,” Cutler added. “We look forward to defending our reputation and understanding why Nike, which once sought to collaborate in combating counterfeits, now seeks to undermine StockX’s business model.”
In May, Nike amended its original complaint against StockX to include additional facts surrounding the case that have emerged in the last few months, including the fact the Nike has now released its own virtual products, which could cause even more confusion in the marketplace. What’s more, Nike also claimed in May that it obtained four pairs of counterfeit Nike shoes within a two-month period through StockX. One of those counterfeit shoes, Nike said, represents the same style as one of StockX’s infringing sneaker NFTs.
“Nike’s continuing investigation into StockX’s conduct has also revealed that StockX has been and is currently dealing in counterfeit Nike goods,” the amended complaint read in May.
In January, StockX rolled out “Vault NFTs,” a program that allows users to invest in NFTs that are linked to physical sneaker counterparts. As part of the launch, StockX released NFTs of sneakers such as the A Ma Maniére x Air Jordan 3, the Ben & Jerry’s x Nike SB Dunk Low, and the Bad Bunny x Adidas Forum Low “First Café.”
In its initial complaint, Nike alleged that the use of unauthorized Nike-branded Vault NFTs would confuse consumers and “create a false association between those products and Nike, and dilute Nike’s famous trademarks.” Now, given Nike’s recent launch of its own NFTs, the sportswear giant argues that “the public has already conflated the parties’ NFT offerings.”
Nike declined to comment. In a statement on its website from late March, StockX said its Vault NFTs “are absolutely not ‘virtual products’ or digital sneakers” and do not violate any rights from the manufacturers of the original goods.
In a statement in May, StockX said that Nike’s recent filing is “baseless” and added that hundreds of Nike employees – including current senior executives – use StockX to buy and sell products.”
“This latest tactic amounts to nothing more than a panicked and desperate attempt to resuscitate its losing legal case against our innovative Vault NFT program that revolutionizes the way that consumers can buy, store, and sell collectibles safely, efficiently, and sustainably,” StockX said. “Nike’s challenge has no merit and clearly demonstrates their lack of understanding of the modern marketplace.”
The case represents one of the first major legal disputes to emerge in the realm of virtual goods. In the last few months, multiple brands have announced forays into the metaverse, either via virtual games, products or NFTs. In many cases, these brands have filed trademark applications for digital virtual footwear, clothing and more.
“The existing registrations that they have on these brands do not cover virtual goods because virtual goods was not a thing five or 10 years ago,” explained trademark attorney Josh Gerben of Gerben Law Firm to FN previously. “No one really thought that you might need protection on something like this.”
In this case, Nike pointed to its recent public efforts to enter the metaverse, including its December acquisition of RTFKT, a digital creator of virtual sneakers, collectibles and accessories. Before that, Nike filed seven trademark applications related to its goal to create and sell virtual sneakers and apparel. Nike also partnered with the Roblox video game platform to launch “Nikeland,” a digital world for Nike fans to play games, connect, and dress their avatars in virtual apparel via a digital showroom, which includes products like the Air Force 1 and Nike Blazer.
“StockX has known about Nike’s plans to expand into the NFT market long prior to its January 2022 ‘Vault NFT’ launch,” Nike alleged in the initial complaint.
In addition to its trademark applications in the virtual realm, Nike also pointed to previously registered trademarks on physical products, arguing that Nike has used these marks in connection with products in the virtual world as well. Therefore, Nike suggested that the trademark ownership should be fully upheld in the virtual realm in the context of this case.