Apparel giant Nike has filed a lawsuit against StockX, accusing the resale marketplace of using Nike trademarks to mint and sell Non-Fungible Tokens (NFTs) without permission. StockX are selling NFTs which are tied to popular Nike shoes, supposedly making it easier for consumers to purchase and 'flip' the shoe without having to worry about shipping costs.
The 'StockX Vault' is the marketplace's NFT project allowing customers to purchase and sell like-for-like sneakers, linked to NFTs, operating on a public blockchain. While the project is a creative use of the technology and potentially a sign of things to come, it was unable to sneak past Nike.
The complaint was filed in a New York federal court and outlines the extent of the breach by StockX:
Nike did not approve of or authorize StockX’s Nike-branded Vault NFTs. Those unsanctioned products are likely to confuse consumers, create a false association between those products and Nike, and dilute Nike’s famous trademarks.
Nike criticizes StockX's terms of purchase for being "murky" while also accusing the marketplace of inflating stock prices, going so far as to allege that the Vault NFTs are a "scam".
Part of Nike's complaint relates to a concern that the marketplace is claiming association with Nike, and that this would negatively impact Nike's reputation in the digital space:
Given Nike’s longstanding use in this space, StockX’s unauthorized and unapproved branding of Vault NFTs with Nike trademarks is all the more likely to confuse consumers, create a false association between the parties, jeopardize the capacity of Nike’s famous marks to identify its own digital goods in the metaverse and beyond
Nike's acquisition of RTFKT, a digital art and collectible creative studio, in December 2021 demonstrated Nike's intention to enter into the virtual space and start issuing NFTs themselves. Nike has set up a designated team to facilitate this project:
On or around January 18, 2022, Nike announced to its employees the formation of Nike Virtual Studios, a new division that will operate as an independent studio to further develop Nike’s business around virtual products and partner with its core business to deliver best-in-class Web3, metaverse, and blockchain-based experiences.
Along with damages for compensation and profits, Nike is seeking orders to prevent StockX from dealing in any NFT products that fall under Nike's asserted trademarks, as well as requesting an order that all Vault NFTs in StockX's possession be delivered to Nike for destruction.
It remains to be seen whether Nike's allegations will run the distance or if an NFT showing a picture of a product stored and redeemable by the holder will jog into legal safety. What is clear is that there is an increasing willingness for major brands to move to protect their trademarks in the NFT space, as they look to take a piece of the growing market for these digital products, with recent examples including a DAO mistakenly thinking they could use rights from a purchased manuscript to create a cartoon, Hermes suing over MetaBirkins for infringement and Miramax getting into a fight with Quentin Tarrantino over movie NFTs.
Download the complaint here.