2022 Trademark Law Recap: NFTs, Distinct Branding, And The First ... - JD Supra

2022 Trademark Law Recap: NFTs, Distinct Branding, And The First … – JD Supra

NON-FUNGIBLE TOKENS AND TRADEMARK INFRINGEMENT: WHERE DOES THE LAW STAND?
In Nike v. StockX, LLC, Nike filed a trademark infringement lawsuit against StockX, LLC, an online resale sneaker retailer, in February 2022 in the U.S. District Court for the Southern District of New York. This case is an important one to follow because it will likely shape the course of how intellectual property law will apply to non-fungible tokens (NFTs).

The infringement landed on Nike’s radar when StockX launched Vault NFT which is a collection of digital tokens whereby StockX’s customers can purchase a Vault NFT which is tied to a StockX sneaker. Many of the sneakers offered by StockX are Nike sneakers. The buying, selling and trading of rare sneakers has been a popular fad for many collectors for decades. Acquiring a Vault NFT allows customers to purchase, trade, and sell rare sneakers more easily without taking physical possession of the shoe. Once the customer is ready to take physical possession of the sneaker, they simply redeem their Vault NFT online, and the sneaker tied to the NFT is shipped directly to the customer’s address. Nike took issue with this process although the company itself allows resellers to authenticate and re-sell their shoes all the time. In fact, according to StockX’s answer to the complaint, many senior executives of Nike purchase shoes through StockX’s website often.

Nike’s position in the case is that the Vault NFTs make use of Nike’s trademarks and that StockX is capitalizing off Nike’s goodwill which is misleading customers into paying “heavily inflated prices” for their sneakers. The Vault NFTs in question depict Nike sneakers and, Nike’s trademarks on those sneakers, without Nike’s permission. StockX contends that this is fair use of Nike’s trademarks, no different than e-commerce stores using images and descriptions of products that are sold online. StockX’s entire position revolves around its argument that NFTs are not virtual products or digital sneakers because, in this case, they are tied to a physical good that has already been authenticated by StockX.

The district court will be tasked with determining if this is an actionable trademark infringement case. The U.S. Court of Appeals for the Second Circuit applies the “Rogers test” in determining when the use of a trademark in artistic work is actionable which provides that such uses are only actionable if the mark has no “artistic relevance” to the underlying work, or explicitly misleads as to the source or content of the work (see Rogers v. Grimaldi). For many who are interested in minting their own NFTs, or defending the use of their trademarks in NFTs, this ruling could have broad implications on the application of the Lanham Act to the NFT space. The case is currently in the discovery phase and is one worth keeping an eye on as the case proceeds.

MSCHF CONTINUES THE MISCHIEF
McNees’ IP team has been following the Nike v. MSCHF case which involved a trademark infringement action by Nike against MSCHF for their controversial remake of a Nike shoe, in collaboration with the rapper Lil Nas X. Nike distanced themselves from MSCHF’s modified sneaker, known as Satan Shoes.

As it turns out, MSCHF Production Studio hasn’t given up on its shoe remake collaborations with famous artists. Vans, Inc. filed a trademark and trade dress infringement lawsuit against MSCHF in Vans, Inc. v. MSCHF Prod. Studio, Inc. for its use of Vans’ “jazz stripe” trademark, “Flying-V” mark, “OFF THE WALL” mark, waffle sole mark, and Vans’ footbed logo on MSCHF’s “Wavy Baby” shoe which was made in collaboration with the rapper Tyga.

In the Nike v. MSCHF case, the Satan Shoes were Nike Air Mac 97 shoes which MSCHF attached satanic symbols to but otherwise retained the Nike branding intact. In the Vans case, MSCHF seems to be attempting to avoid the direct use Vans trademarks by altering the Vans trademarks prominently featur