“Murky Terms of Purchase and Ownership”: Nike Sues StockX Over Virtual Sneaker NFTs

“Murky Terms of Purchase and Ownership”: Nike Sues StockX Over Virtual Sneaker NFTs

Photo by Hermes Rivera (Unsplash)

Shawn Dhue is an IPilogue Writer and a 2L JD Candidate at Osgoode Hall Law School.

For those of you like me who have survived this long asking the question “what is an NFT?” and requiring someone to repeat their answer after you zoned out, here is the definition:

Non-fungible token (“NFT”): a digital asset that represents real-world objects like art, music, in-game items, and videos. They are bought and sold online, frequently with cryptocurrency, and are generally encoded with the same underlying software as many cryptos.

Usually brought up with an example of a monkey picture, this phenomenon is making a pretty big debut at the beginning of this decade. Like with many new technologies these days, the laws around NFTs are constantly updating to accommodate this new concept of digital assets. This is all to say that this recent lawsuit filed will once again change NFT’s meaning.

On February 3, 2022, Nike filed a trademark lawsuit in New York’s federal trial court claiming the online sneaker reseller, StockX, sells unauthorized pictures of Nike’s shoes through NFTs. The mega shoe brand alleges that these sales will confuse customers.

StockX is a relatively new online marketplace that sells sneakers, streetwear, electronics, and other daily accessories. What makes this marketplace different from the others is its business of selling NFTs linked to physical goods. Buyers purchase the NFT, which can be sold for the physical item in the image or traded as a digital good.

Here is the confusing part. When StockX sells these NFTs, the NFT is often a picture of the item made by another company—in Nike’s case, eight out of nine times. Therefore, Nike claims that the sale of the NFT of a Nike product constitutes a trademark infringement, trademark dilution, false designation of origin, and many other unauthorized use violations.

Nike is asking for the destruction of all NFTs showing a Nike product and their well-known swoosh logo. In addition to destroying these NFTs, Nike is asking for damages for all related sales and for StockX to stop selling any NFTs related to the Nike brand.

The lawsuit so far contains many harsh comments about StockX, including that it “has chosen to compete in the NFT market not by taking the time to develop its own intellectual property rights, but rather by blatantly freeriding, almost exclusively, on the back of Nike’s famous trademarks and associated goodwill.”

StockX responded to the lawsuit by saying that NFTs are a “growing part of today’s global landscape” and that they will be fighting the claim in court.

Regarding StockX’s comment, I believe it is true that NFTs, a new concept that has taken society by storm in the last two years, continue to grow. This type of lawsuit was bound to happen, and the intellectual property law sector needs answers. Unfortunately, Nike and StockX happen to be the parties which must go through the legal process to benefit others. It will be interesting to see the outcome as the decision will likely set a precedent and change how many global companies conduct business.