IP News

In a unanimous decision, the Supreme Court ruled in Already, LLC dba YUMS v. Nike, Inc., No. 11-982 that due to Nike giving Already an unconditional covenant not to sue, Already could not challenge the validity of Nike's trademark registration in federal court. The question presented was “whether a covenant not to enforce a trademark against a competitor's existing products and any future 'colorable imitations' moots the competitor's action to have the trademark declared invalid.” Slip Op. at 1. The case arose when Nike filed a trademark infringement action, alleging that Already infringed and diluted its Air Force 1 trademark. Id. Already filed a counterclaim alleging that the trademark was invalid. Id. Eight months later, Nike issued a covenant not to sue, promising that Nike would not raise any trademark or unfair competition claim based on any of Already's existing footwear designs. Id. at 2. Due to this covenant, and over Already's objection, the district court dismissed its counterclaim. Id. The lower court held that because Already had not presented any evidence that it was developing shoes not covered by the covenant, there was no longer a substantial controversy to warrant the issuance of a declaratory judgment. Id. at 2-3. The Second Circuit affirmed.

The Supreme Court affirmed, noting that “it is hard to imagine a scenario that would potentially infringe [Nike's trademark] and yet not fall under the Covenant.” Slip Op. at 7 (internal quotation omitted). Justice John G. Roberts, Jr. went on to state, “The case is moot if the court, considering the covenant's language and the plaintiff's anticipated future activities, is satisfied that it is 'absolutely clear' that the allegedly unlawful activity cannot reasonably be expected to recur.” Id. at 8. Already argued that because Nike remained free to assert its trademark, investors would be “apprehensive about investing in Already.” Id. at 9. However, the Court held that “the fact that some individuals may base decisions on 'conjectural or hypothetical' speculation does not give rise to the sort of 'concrete' and 'actual' injury necessary to establish Article III standing.” Id. at 10 (internal quotations omitted).