Nike is suing an online marketplace for launching a non-forgeable token (NFT) based on Nike shoes, testing the limits of cryptocurrency trademark law and the actual content of the NFT.
StockX is a reseller of items such as streetwear, luggage and sneakers. Unlike some marketplaces, it is also an intermediary that receives items and verifies their authenticity. stockX set up the system in January with the launch of NFTs associated with physical goods. the announcement promised that these vault NFTs could be exchanged for physical goods, but could also be traded instantly as digital goods.
The problem is that Nike shoes are so popular on StockX that their Vault tokens are tied to the names and images of the corresponding products. Nike claims that the resulting cryptocurrency assets constitute trademark infringement, false designation of origin and trademark dilution, among other violations. The case hinges on whether StockX’s NFTs are an extension of its normal resale process (e.g., digital receipts of ownership) or whether they are products in their own right, which has potentially significant implications for NFTs in general.
Stockx is using Nike’s trademark almost exclusively to launch its Vault Nfts
Nike’s lawsuit, filed Feb. 3, states that StockX has launched nine limited-edition Vault NFT collections, eight of which are associated with Nike shoes. It claims this has produced a series of digital items that look like official Nike merchandise. StockX used the Nike logo almost exclusively to launch its Vault NFTs because it knew it would gain attention, drive sales and convince consumers that Nike had partnered with StockX to launch the Vault NFTs, it said. stockX is using the Nike logo to market, promote and attract potential purchasers.
Nike points out that you can’t yet trade NFTs for actual shoes, making them less obvious like ownership receipts – which is how StockX is positioning them. (To complicate things further, NFTs aren’t technically images as StockX presents them; they’re code sections on a cryptocurrency blockchain that includes a link to an image hosted elsewhere.) Some of the fine print also gives StockX the right to cancel NFTs. Nike characterized the entire launch as being plagued by inflated prices and vague purchase and ownership terms, which would damage Nike’s reputation if people believed Nike was behind the project – as some of the social media posts included in the document suggest.
Nike acquired its own NFT studio last year
StockX denied the allegations in a statement issued by Katy Cockrel, vice president of communications. Our vault NFTs describe and represent proof of ownership of the physical goods stored in our vault that customers can trade on our platform. stockX vault NFTs are not digital or virtual sneakers. We do not state or imply that our vault NFTs are affiliated with, sponsored by or formally associated with any third-party brands, it reads. StockX is undoubtedly entitled to offer our customers this new and innovative way to trade current cultural products, and we plan to vigorously defend our position.
Nike has a particularly strong incentive to avoid brand confusion. Last year, the company acquired NFT studio RTFKT (pronounced divine weapon) to create its own line of cryptocurrencies. RTFKT launched a line of sneaker NFTs prior to the acquisition, and like StockX, it plans to let buyers trade in NFTs for real shoes. However, the NFTs showcased shoes with custom designs and did not highlight the brand of the product. Under its new ownership, it may work on tokens that highlight the Knicks brand more prominently.
Many NFT controversies involve allegations of copyright infringement – typically, a cryptocurrency project minting tokens based on an artist’s work without permission. Sometimes artists and publishers also fight over who owns the rights associated with the work, such as Quentin Tarantino’s lawsuit based on Pulp Fiction’s NFTs.
The trademark infringement claim here raises a different issue. Under a legal concept called the first sale doctrine, a marketplace can often resell goods – and display images of those goods, including trademarks – without the permission of the IP holder. I guess you’d say StockX has the right to own a marketplace that displays Nike merchandise, says Moishe Pelz, an attorney who works on NFT and Web3 law. what StockX is saying is, well, fundamentally we’re doing the same deal, but we’re just doing an NFT in lieu of physical shoes. Nike, on the other hand, sees the NFT as a standalone product that takes advantage of its brand.
Last year, Nike filed a lawsuit over a series of modified Nike Satanic shoes created by Internet group MSCHF and rapper Lil Nas X, which created a potential first sale problem. But the popularity of NFTs suggests that even if Nike and StockX follow suit here, this won’t be the last cryptocurrency trademark battle.