Nike v StockX, NFTs and Counterfeit products

American footwear and apparel company Nike has launched trademark infringement actions against the Detroit-based trainers and streetwear resale platform StockX, after allegedly using Nike’s Intellectual Property rights without authorisation in the digital metaverse of NFT sales. 

With an estimated net worth of $29.6 billion, it comes as no surprise that Nike are attempting to maintain and protect their assets and reputation against the $1 billion valued company StockX. 

After reselling physical, tangible items since 2015, StockX took their leap into the metverse and world of cryptocurrencies and NFTs in mid-January, when they launched ‘Vault’; an online platform that allowed owners to trade and sell ownership of trainers via NFT data and coding, while keeping the physical shoe on-site at StockX’s headquarters. StockX suggested that this would enable shows to never leave their holdings, which would only lower the costs associated with transporting, verifying and shipping the shoes across the globe on multiple occasions. Each of these NFTs contain an individual code that prevents it from being replaced or replicated.

Immediately after StockX launched their own metaverse, Nike submitted forms to sue StockX within the United States District Court for the Southern District of New York [SDNY], which alleged that StockX infringed Nike’s trademarks within the NFTs. 

The Vault currently has released 9 NFTs, with 8 of those having links to Nike sneakers, which are each promised by StockX to exist as real, verified goods under their ‘Buy/Sell Authentic Guaranteed’ pledge.

Nike, originally founded in 1964, states that their sales rely on their reputation and popularity, and that their limited-edition sneakers are anticipated by collectors and shoe fans alike. They have suggested that StockX have ‘piggybacked’ off of these reputations to sell their own NFTs of Nike’s products, and that the virtual items have been intentionally produced to present as official Nike footwear and products, despite there being no collaboration between StockX and Nike, and no authorisation granted to use Nike’s trademarks on these digital products. 

With the trainer collecting and reselling market estimated to reach £30 million by 2030, it surprises no one that Nike are eager to protect their trademarks and their footwear by suing StockX for trademark infringement, trademark dilution and false designation of origin. Within the application, Nike stated that StockX intentionally deceived the customers within their digital products by suggesting that Nike sponsor, approve or have worked on the NFTs Vault. However, the court would have to confirm that there is bona fide evidence that consumer confusion exists within the NFTs.

In response to the alleged infringement, StockX have denied all allegations of infringement, and have claimed that their Vault’s NFTs simply represent ownership of the physical goods that are kept at their warehouse, and that they are not digital trainers that are being bought and sold as NFTs. They also state that they do not imply any association with a third-party brand within their Vault collections. They have additionally said that, within American copyright law, they have not violated any of Nike’s Intellectual Property rights for the following reasons:

  1. StockX’s resale of the original and real Nike products is protected by the first sale doctrine
  2. StockX’s use of images and names of genuine Nike products for the purposes of the Vault’s NFTs constitutes nominative fair use. 
  3. Consumers are highly unlikely to be confused by StockX’s Vault’s NFTs.

In response to these, Nike conducted test purchases from StockX and discovered that at least four pairs were counterfeit that were sold as authentic products. Due to this, Nike quickly filed a motion for leave from the court to amend its claim to include additional causes of action for counterfeiting and false advertisement of original Nike products. 

StockX then provided a response to this complaint, that they use a ‘proprietary, multi-step authentication process for every product sold on its platform’, which we can assume includes physical Nike sneakers. 

There is yet to be any further actions taken or brought against either party, but any events that take place will be caught and reported here. 

If you have any questions on any topics within this article, please don’t hesitate to get in contact with the team at Lawdit today.

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