Nike sues StockX in US over unauthorised NFTs

After expanding into the NFT market through its recent acquisition of RTFKT, a digital art and collectible creative studio, Nike has now issued proceedings against StockX in the US for trade mark infringement, dilution and unfair competition for the use of unauthorised Nike-branded NFTs. StockX is a collectibles marketplace and describes its mission "to provide access to the world’s most coveted items in the smartest way possible" including limited edition sneakers, clothing, trading cards and accessories.

Nike's complaint relates to StockX minting and selling NFTs linked to images of Nike trainers and sales of physical trainers (examples pictured below). Nike alleges that StockX’s Nike-branded Vault NFTs make unauthorised use of its trade marks and associated goodwill to market and sell the NFTs to consumers who mistakenly believe the NFTs are authorised by Nike.  According to Nike, “StockX has chosen to compete in the NFT market not by taking 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”.

(example Vault NFTs pictured in Nike’s legal complaint)

The suit follows on from Hermès' legal action for trade mark infringement against Mason Rothschild in connection with the "MetaBirkin" NFTs, which picture Hermès' iconic Birkin bags. As yet, there have been no reported trade mark infringement claims in the UK concerning unauthorised NFTs, but as the NFT market expands and matures, it seems like only a matter of time before the litigation trickles over to the UK.

Cases involving NFTs do raise some interesting legal questions that are yet to be answered, particularly regarding the scope of protection and applicability of existing registered trade marks in a virtual environment. The court in the UK has not had the opportunity to consider the question of whether registrations for real world goods, such as trainers, extend to “virtual trainers”, or if those goods can be considered identical or similar for the purposes of TM infringement. Other potential issues include jurisdiction, particularly establishing a sufficient nexus to the UK to engage UK rights and the nature of use, for example whether the act of minting an NFT can amount to use in the course of trade.

Even though NFTs are not new technology, the concept of the transferrable digital assets is still alien to some and not commonly understood. Whilst the underlying technology may be complex and raise some novel legal questions, the digital content to which NFTs relate is much the same as any other digital content used on the Internet. Importantly, this means that where digital content relating to an NFT incorporates a registered trade mark (or similar sign) or trade dress, rights holders can rely on existing registered and unregistered rights (passing off) to combat unauthorised use. Understandably, the unknowns of the “metaverse” and NFTs are a source of concern, but brand owners should be reassured that existing rights can offer protection against unauthorised NFTs and use in virtual contexts.

The Hermès' and Nike cases are likely to have a considerable impact on the market for NFTs one way or another and it will be interesting to see how US courts grapple with some of the novel legal issues NFTs present. Hopefully, in the near future, the English courts will have a similar opportunity to tackle the interaction between NFTs and UK intellectual property rights.

Stay tuned for further updates on the US cases and more commentary on the interplay between NFTs and IP rights in the UK. For anyone seeking specific advice in the area of NFTs and brand protection and enforcement, please do contact the BDC Team at Bristows for more information and support.