January 09, 2013

Supreme Court Decides Already, LLC v. Nike, Inc.

On January 9, 2013, the United States Supreme Court decided Already, LLC v. Nike, Inc., No. 11-982, holding that a broad and unconditional covenant not to enforce a trademark against a competitor's existing products and any future "colorable imitations" moots the competitor's claim challenging the validity of the trademark.

Nike sued Already claiming that Already's Soulja Boys and Sugar shoe lines infringed and diluted Nike's Air Force 1 trademark. Already counterclaimed that Nike's Air Force 1 trademark was invalid. Four months after Already counterclaimed, Nike dismissed its claims with prejudice against Already. Nike also issued to Already a covenant not to sue, promising not to raise against Already or any Already-affiliated entity (including customers and distributors) any possible trademark or unfair competition claim or demand based on any of Already's existing shoe designs or future designs that were a "colorable imitation" of Already's current products. Nike then moved to dismiss Already's counterclaim as moot. The district court granted Nike's motion, holding that there was no longer "a substantial controversy of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." The Second Circuit affirmed, holding that the covenant eliminated a justiciable case or controversy. The Second Circuit found that because the covenant covered "past sales and future sales of both existing products and colorable imitations," it was hard to conceive of an Already shoe that would infringe Nike's Air Force 1 trademark yet not fall within the covenant.

The Supreme Court affirmed. Applying the voluntary cessation doctrine, the Court held that Nike met its "formidable burden of showing" that it "could not reasonably be expected" to resume its trademark enforcement efforts against Already. Looking to the terms of the covenant, the Court found that the "breadth of this covenant suffices to meet the burden imposed by the voluntary cessation test" because it prohibited Nike "from making any claim or any demand," "reached beyond Already to protect Already's distributors and customers," and "covers not just current or previous designs, but any colorable imitations." The Court stated it could not imagine an Already shoe that would potentially infringe Nike's Air Force 1 trademark and yet not fall under the covenant: "If such a shoe exists, the parties have not pointed to it, there is no evidence that Already has dreamt of it, and we cannot conceive of it. It sits, as far as we can tell, on a shelf between Dorothy's ruby slippers and Perseus's winged sandals."

Chief Justice Roberts delivered the opinion for a unanimous Court. Justice Kennedy filed a concurring opinion, in which Justices Thomas, Alito, and Sotomayor joined.  

FaegreBD's Amie Peele Carter is on the Board of Directors of the American Intellectual Property Law Association, which filed an amicus brief in the case supporting the mootness argument that the Court adopted.

Download Opinion of the Court

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