Nike sues an NFT marketplace for using their products as a Redeemable good in its Launch

Nike has announced that they will sue an online marketplace for launching NFTs based on their shoes. The company under fire is StockX, a reseller for streetwear, bags, and sneakers. StockX, unlike other marketplaces, also operates as an intermediary that verifies its items’ authenticity.

StockX took to the NFT space to build on its physical offerings. However, this recent lawsuit puts into question the limits of crypto trademark law and questions what an NFT truly is. The NFTs sold on the marketplace are said to be redeemable for physical goods for StockX, but collectors can also trade these tokens as digital goods.

The issue lies with the popularity of Nike shoes and how the tokens are linked with the name and picture of their corresponding products. Nike has then stated that the assets constitute trademark infringement, false designation of origin, and trademark dilution, among other violations.

The case then hinges on the company’s and the court’s definition of these tokens. Whether they are considered as an extension of StockX’s reselling process or if these tokens are products in their own right. Due to these conflicts, the case could prove to be influential to the future of NFTs as a whole as famous brands are often used in these artworks, often without a proper agreement in place.

In its lawsuit, Nike states that “StockX almost exclusively used Nike’s marks to launch its Vault NFTs because it knew that doing so would garner attention, drive sales, and confuse consumers into believing that Nike collaborated with StockX on the Vault NFTs.”

“StockX is using Nike’s trademarks to market, promote, and attract potential purchasers,” said Nike.

The sneaker giant also remarked that this project is riddled with “inflated prices and murky terms of purchase and ownership.” Nike claims that if people believe that they’re associated with the project it could damage the company’s reputation.

The case raises several legal issues, mainly regarding something called the first scale doctrine. The doctrine implies that marketplaces can resell goods without the permission of those who hold intellectual property of said goods.

“I think you would say StockX has the right to have a marketplace where they display Nike goods,” says attorney Moish Eli Peltz, who works in NFT and Web3 law. “What StockX is saying is, well, we’re fundamentally doing the same transaction, but we’re just making an NFT to stand in the place of the physical shoes.”

However, Nike refutes this argument, claiming that NFTs are a separate product that takes advantage of its branding.

Source: The Verge