by Dennis Crouch
Already (YUMS) v. Nike (SCT 2012)
Nike sued YUMS back in 2009 alleging trademark infringement, unfair competition, and dilution under both federal and NY state law. The complaint included the image below comparing YUMS brand shoes with Nike’s federal trademark registration number 3,451,905. The design is related to Nike’s Air Force 1 shoe that was first released in 1982. The Yums intentionally retro look is apparently fashionable for skaters and freestyle BMX riders. [Buy the shoes here] (The image does not show the shoes’ creative soles.)
After being sued, YUMS counterclaimed — seeking to cancel the registration. However, before the court could reach a decision on the merits, Nike’s attorneys at Banner & Witcoff provided YUMS with a covenant-not-to-sue on the AF1 design rights. In the document, Nike wrote that YUMS brand “no longer infringe or dilute the Nike Mark at a level sufficient to warrant the substantial time and expense of continued litigation."
The covenant was limited to YUMS current shoes as well as ‘colorable imitations’ of current lines. In particular, Nike promised to:
refrain from making any claim(s) or demand(s), or from commencing, causing, or permitting to be prosecuted any action in law or equity, against [Yums] or any of its [successors or customers], on account of any possible cause of action based on or involving trademark infringement, unfair competition, or dilution, under state or federal law in the United States relating to the [Nike eAir Force 1 Mark] based on the appearance of any of [Yums]’s current and/or previous footwear product designs, and any colorable imitations thereof, regardless of whether that footwear is produced, distributed, offered for sale, advertised, sold, or otherwise used in commerce before or after the Effective Date of this Covenant.
YUMS was apparently happy with the document, but not fully satiated. Rather, YUMS maintained its declaratory judgment lawsuit — arguing that the Nike Mark continued to improperly chill its innovative marketing efforts. However, the district court dismissed the case — finding that it lacked subject matter jurisdiction because there was no ongoing case or controversy. Important for its ruling, YUMS had not taken any “meaninful steps” toward developing a new potentially infringing product not covered by the covenant-not-to-sue.
On appeal, the Second Circuit affirmed, holding specifically that the cancelation power under 15 U.S.C. § 1119 does not provide federal courts with an independent basis for jurisdiction absent an actual case-or-controversy between the parties.
Supreme Court: Now, YUMS has appealed to the US Supreme Court — relying upon the expertise of Jim Dabney and Prof John Duffy (of KSR fame) to bring their case. They raise the simple question: “Whether a federal district court is divested of Article III jurisdiction over a party's challenge to the validity of a federally registered trademark if the registrant promises not to assert its mark against the party's then-existing commercial activities.” The complaint raises a circuit split between the Second Circuit here and the Ninth Circuit, which is much more friendly to DJ trademark actions in this type of situation. In addition, the petition highlights Supreme Court precedent that suggest broad jurisdiction should be available to challenge the validity of suspect intellectual property rights. See Lear, Inc. v. Adkins, 395 U.S. 653 (1969), MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83 (1993), and Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249 (1945).
The Supreme Court has now asked Nike to respond to the petition – due May 4. This move greatly increases the odds that the petition will eventually be granted.
Of interest, a key element of the Myriad gene patent case is whether the ACLU and AMP have standing to sue. This case may shed further light on that outcome.
