Nike Files Trademark Infringement Lawsuit Against StockX

In the 3D virtual world known as the metaverse, pioneering companies are exploring ways to capitalize on the growing popularity of this new frontier. As expected, the use of company marks and trademarks is becoming an issue to watch. Take Nike’s recent lawsuit against online resale platform StockX. The lawsuit alleges that StockX NFTs that incorporate images of Nike sneakers infringe on Nike’s famous trademarks. The complaint presents new legal issues that, when resolved, have the potential to define the scope of trademark rights in the world of NFTs.

What is an NFT?

Before we get into counterfeiting, we need to understand the landscape at play. Non-fungible tokens, or NFTs, are unique digital assets stored on the blockchain, which is a digital, non-centralized ledger that publicly discloses who owns an NFT. particular. NFTs act as a digital representation of ownership of tangible and non-tangible things in the real world, such as artwork, real estate, and video game skins. Each NFT has a unique address associated with its owner that helps prove ownership. NFTs can exist in any form of digital media, ranging from images to songs. Some of the famous examples include Bored Ape Yacht Club NFTs, which act as both a digital avatar and a ticket to an exclusive online social club.

Bored Ape Yacht Club NFTs are represented by a digital avatar of a uniquely designed monkey. The middle image is a Bored Ape owned by Tonight Show host Jimmy Fallon, who bought the NFT for over $200,000.

While the first NFT premiered in May 2014, they only recently gained mainstream attention following celebrity endorsements and reports of NFTs selling for millions of dollars. In 2021, a crypto entrepreneur purchased Twitter founder Jack Dorsey’s very first tweet as an NFT for $2.9 million. As expensive NFTs captured mainstream attention, many wondered why anyone would pay millions of dollars to purchase what appears to be a single image or video readily available online for free. Although it is possible to capture and download copies of digital art that someone has purchased as NFTs, the NFT buyer still remains the owner of the original work and this ownership is recorded on the blockchain. While someone may have a copy of one of Monet’s Impressionist landscapes hanging in their living room, only one original copy of the painting exists and ownership of that original has significant value despite the existence of copies.

Nike makes its entrance

Nike filed a trademark infringement lawsuit in February 2022 against StockX, a major online resale marketplace. StockX is a streetwear reseller that, unlike other marketplaces, also acts as an intermediary that provides authentication services to its customers. Recently, StockX extended this authentication service by launching its own collection of NFTs, which it claims are linked to authenticated physical goods. Many NFTs created by StockX consist of images of Nike sneakers. Nike alleges that such use of Nike’s famous marks constitutes trademark infringement, misrepresentation of origin and trademark dilution, among other violations.

Nike NFT from StockX.

The case hinges on whether StockX’s NFTs represent proof of ownership of physical goods or whether the NFTs themselves are virtual goods.

StockX maintains that its NFTs are simply a method of tracking ownership of physical Nike products sold on the StockX marketplace and held by StockX. By denying that its NFTs are virtual goods, StockX points to its redemption process in which NFTs can be redeemed by an owner at any time in exchange for delivery of the physical shoes. Importantly, this new method of tracking ownership facilitates a more efficient and sustainable resale process. Instead of physical goods that are frequently sold and traded between consumers being repeatedly shipped after each sale, users can simply sell and trade an NFT.

Nike argues that StockX’s Nike-branded NFTs are themselves virtual goods, and not simply a representation of ownership of physical Nike sneakers. While StockX touts the ability of its customers to redeem an NFT in exchange for owning the physical product as proof that their NFTs merely act as proof of ownership, such a redemption process is currently not available, with no indication of when. , if applicable, such a service will become available. Instead of presenting a new and efficient method to exchange goods, Nike alleges that StockX manufactures NFTs to take advantage of Nike’s goodwill and reputation in the streetwear scene. Indeed, the potential profit from the sale of Nike-branded NFTs is significant – a physical pair of Nike Dunk Low shoes has a resale price of $282 on StockX, but the StockX NFT allegedly linked to this shoe has traded for more than $3,000, or nearly 1,000 percent. price difference between the physical shoe and the NFT. Nike concludes that StockX NFTs are virtual collectibles, created and distributed by StockX using the Nike trademark without permission.

Nike has a particularly strong interest in avoiding trademark confusion in this case, as it recently acquired RTFKT Studios (pronounced “artifact”), a digital art and collectibles studio committed to creating NFTs. , hoping to combine blockchain technology with sneaker culture and fashion. With this new acquisition, Nike released NFTs through RTFKT, including collectible digital sneakers. Notably, Nike additionally has several trademark applications pending before the United States Patent and Trademark Office to register its sneakers as virtual goods.

The Nike case is poised to be key to the development of metaverse jurisprudence because of its potential to address the scope of a trademark owner’s right to regulate unauthorized uses of its trademarks in NFTs. While the outcome of this case remains to be seen, other major brands are already seeking to protect their brand image in this emerging space by filing trademarks to specifically protect virtual goods and services. Given the emerging uncertainty as to how our current legal framework will apply in the metaverse, applying for registration for virtual goods and services is a prudent step for brand owners as we operate in the fast-growing digital economy.

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