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Contracting Away a Controversy: Nike v. Already LLC
In a case that could have important ramifications for trademark owners, as well as owners of other intellectual property and infringing defendants, the U.S. Supreme Court on Nov. 7, 2012, heard oral argument in the case of Already LLC v. Nike, Inc. The case revolves around under what circumstances a covenant not to sue can defeat jurisdiction.
The facts of the case involve the not-uncommon situation of a large trademark owner (in this case, Nike) suing a much smaller rival (in this case, Already LLC) for trademark infringement based on allegedly tenuous trademark rights. Once Already indicated that it was willing to challenge not just the alleged infringement but also Nike's rights in the mark, Nike attempted to remove the court's ability to hear the case by executing a covenant not to sue. The question for the Supreme Court is whether Nike's covenant removed the court's jurisdiction by eliminating any actual controversy between the parties.
If the Supreme Court upholds Nike's actions as removing a court's jurisdiction, trademark owners may feel they can take greater risks when asserting their rights against smaller rivals, as they could always resort to a covenant not to sue if their trademark rights are challenged. Conversely, if the Supreme Court rules the court still maintains jurisdiction to hear Already's counterclaims, trademark owners will likely be much more hesitant to assert trademark infringement claims based on weak marks.
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