Nike asked a federal judge of the US District Court for the Southern District of New York on Tuesday to add counterfeiting and false advertising claims to an existing trademark infringement lawsuit against the online secondary sneaker marketplace, StockX. According to reporting from Bloomberg, Nike legal representatives purchased four counterfeit pairs from the platform over a two-month period of time, all with receipts stating the items were one hundred percent authentic.

Nike filed a lawsuit against StockX back in February over its “Vault NFTs” offering, which the StockX website describes as, “new digital tokens providing unprecedented access and utility for our customers.” Each Vault NFT is tied to a physical version of its depicted product, which StockX claims is a kind of ticket to prove ownership of a coveted shoe, like the Nike SB Dunk Low Ben & Jerry's that are featured prominently on the vault NFT landing page. Nike’s filing indicates that the Vault NFTs are assets that StockX is profiting from on "the back of Nike's famous trademarks,” which it did not grant permission for use in this circumstance. “Unfortunately, novel product offerings, burgeoning technologies, and gold rush markets tend to create opportunities for third parties to capitalize on the goodwill of reputable brands and create confusion in the marketplace,” Nike states in the court document.

An image from StockX.com depicted in the filed complaint by Nike.

The Nike case is not the only one that could define how trademark law will be applied to this new realm of NFTs. A federal judge, also in New York’s Southern District, is allowing an Hermès lawsuit against artist Mason Rothschild to proceed after rejecting a motion to dismiss the case on behalf of the artist last week.

Rothschild was sued after selling "MetaBirkin" NFTs during last year’s Miami Art Basel event in December. The non-fungible tokens sold initially through Basic.Space depicted the traditionally leather luxury Birkin bags in one hundred different faux fur versions. Reuters reports that Rothschild had made at least one million dollars from MetaBirkin sales by the time Hermès sued him in January. In the lawsuit, Hermès called the Los Angeles-based artist a “digital speculator who is seeking to get rich quick by appropriating the brand.” The French fashion house also claims that Rothschild “seeks to make his fortune by swapping out Hermès’ “real life” rights for “virtual rights,” noting that he elected to sell digital MetaBirkins “because a Birkin handbag is a highly valuable asset in the physical world.”

Why Hermès could Lose

After receiving an initial cease and desist letter from Hermès in December, Rothschild posted a public response to the company on the MetaBirkins Instagram account noting that his First Amendment rights, established in the US Constitution, allow him to “create art based on my interpretations of the world around me.”

Even though the judge rejected the motion for dismissal so that the case can be heard, Rothschild’s lawyers laid out examples of settled law in that filed complaint that could ultimately see the case decided in their favor.

“Rothschild’s art does not lose its First Amendment protection just because he sells it,” the filed complaint states, citing the 1989 Rogers v. Grimaldi trademark case where Academy Award-winning actress, Ginger Rogers, sued Italian film producer, Alberto Grimaldi, and MGM Studios over a film titled “Ginger and Fred.” Rodgers argued that the film’s name misled consumers and insinuated that she was in some way involved with the film when she wasn’t and that it violated her common law right of publicity, which is meant to prevent any unauthorized commercial use of an individual's name, likeness, or other recognizable aspects of one's persona—according to a legal dictionary made available by Cornell Law School. Rogers lost. The judge at the time found that if a work has “minimal artistic relevance” and is not explicitly misleading as to the source of the work, the danger of suppressing it is greater than other risks because that would “unduly restrict expression.”

Rothschild’s legal team argues that his work is artistically relevant because the Birkin bags depicted in fur reflect “his comment on the fashion industry’s animal cruelty and the movement to find leather alternatives” and that the images “show luxury with no function but communication, luxury emptied of anything but its own image, calling into question what it is that luxury lovers actually pay for.”

Louis Vuitton lost a similar case in 2012 against Warner Bros. Entertainment on First Amendment grounds where they alleged a scene featuring a knockoff Vuitton bag in the “The Hangover Part II” comedy infringed on their trademark.

Hermès does not currently operate at all in the metaverse. “For the time being, we’re interested to see how this world evolves and changes,” Hermès CEO, Axel Dumas, said at the company shareholders’ meeting last month, according to Forbes. “But this is not a priority of ours.”

Update 12 May 2022, 10:55 am

Statement from StockX

We take customer protection extremely seriously, and we’ve invested millions to fight the proliferation of counterfeit products that virtually every global marketplace faces today. Nike’s latest filing is not only baseless but also is curious given that their own brand protection team has communicated confidence in our authentication program, and that hundreds of Nike employees – including current senior executives – use StockX to buy and sell products. This latest tactic amounts to nothing more than a panicked and desperate attempt to resuscitate its losing legal case against our innovative Vault NFT program that revolutionizes the way that consumers can buy, store, and sell collectibles safely, efficiently, and sustainably. Nike’s challenge has no merit and clearly demonstrates their lack of understanding of the modern marketplace.