Supreme Court to Review Whether Trademark Cancellation Claim Was Properly Dismissed

By Anandashankar Mazumdar  

Whether the public interest should allow a trademark registration cancellation claim to go forward in the face of a finding of an absence of case or controversy will be weighed as a result of the granting of a writ of certiorari on June 25 by the U.S. Supreme Court (Already LLC d/b/a Yums v. Nike Inc., U.S., No. 11-982, review granted 6/25/12).

The case involves a trademark dispute between the makers of Nike and Yums footwear, which Nike sought to end by delivering a covenant not to sue. However, the Yums maker wanted to proceed with its claim that the relevant trademark registration held by Nike should nevertheless be cancelled.

Covenant Leads to Dismissal Below.

The dispute began with Nike Inc., a well-known designer and manufacturer of apparel, particularly athletic shoes. In 1982, Nike designed and began distributing its Air Force 1 sneaker. Since then, Nike has issued more than 1,700 color variations of the Air Force 1. Nike holds several U.S. trademark registrations related to the appearance of the Air Force 1.

Already LLC d/b/a Yums is a competing footwear maker. In 2009, Nike sued Yums, alleging that Yums's Sugar and Soulja Boy shoes infringed its trademark rights. Yums counterclaimed, seeking cancellation of one of Nike's trademark registrations.

In 2010, Nike presented a “covenant not to sue” to Yums, seeking to settle the dispute and agreeing not to pursue further trademark action against Yums. Yums argued that, despite the covenant, there was a persisting case or controversy.

Judge Richard J. Sullivan of the U.S. District Court for the Southern District of New York dismissed Nike's claims with prejudice and dismissed Yums's counterclaims without prejudice.

On appeal, the U.S. Court of Appeals for the Second Circuit affirmed the lower court's conclusion that upon delivery of the covenant not to sue, the court was divested of subject matter jurisdiction under the case or controversy requirement of Article III of the U.S. Constitution(222 PTD, 11/17/11).

Petition Seeks to Resolve Counterclaim.

Yums then petitioned the Supreme Court for a writ of certiorari, arguing that there was a split among circuits and also that the Second Circuit's ruling was inconsistent with Supreme Court precedent (34 PTD, 2/22/12).

Furthermore, according to the petitioner, the Second Circuit's rule was in conflict with the public interest in challenges to the validity of registered trademarks.

“The alleged 'trademark' at issue is a shoe configuration that entered the public domain nearly 30 years ago,” the petition argued. “Whether the shoe configuration can rightly be deemed a 'trademark,' and as such protected against imitation in perpetuity, is a question in which 'the consuming public is deeply interested.' ”

In its brief in opposition, Nike disputed the claim of a circuit split. The Ninth Circuit decision that Yums alleged was in conflict with the Second Circuit was Bancroft and Masters Inc. v. Augusta National Inc., 223 F.3d 1082, 55 USPQ2d 1941 (9th Cir. 2000).

According to Yums, Bancroft “held that a promise not to assert a registered trademark against an accused infringer's existing activities did not divest the district court of Article III jurisdiction to hear the accused infringer's claim challenging the validity of the asserted mark.”

Nike countered that Bancroft, however, was based on a finding that “the offer of settlement in that case was 'incomplete and qualified.' ”

Nike further asserted that other courts had refused to follow Bancroft. This claim was disputed by Yums in its reply brief, which characterized Nike's brief as erroneously applying the standards of a declaratory judgment action to the matter.

Nike is represented by Thomas C. Goldstein of Goldstein & Russell, Washington, D.C. Yums is represented by James W. Dabney of Fried, Frank, Harris, Shriver & Jacobson, New York.

By Anandashankar Mazumdar