Nike Vs. StockX: A Metaverse Lawsuit
Nike Inc.’s competitive streak is alive and well in the metaverse.
The sportswear giant sued StockX in Manhattan federal court, charging that the online marketplace inappropriately used the Nike trademark as it launched into the world of NFTs, or non-fungible tokens.
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The suit brings the age-old fashion trademark battle to a new and hotly contested playing field.
While the metaverse is still an idea only partway to reality, companies are eager to claim their territory.
Last year, Nike bought the blockchain-centric metaverse-ready start-up Rtfkt, which made a splash by selling more than $3 million worth of digital sneakers in less than seven minutes through a collaboration with the 18-year-old artist Fewocious.
John Donahoe, Nike president and chief executive officer, said at the time that the deal “accelerates Nike’s digital transformation and allows us to serve athletes and creators at the intersection of sport, creativity, gaming and culture.”
In its suit, Nike said it told its own employees on Jan. 18 that it was forming “Nike Virtual Studios, a new division that will operate as an independent studio to further develop Nike’s business around virtual products and partner with its core business to deliver best-in-class Web3, metaverse and blockchain-based experiences.”
And this month, Nike and Rtfkt plan to release a number of virtual products.
But StockX, in a way, beat them to the punch.
The same day that Nike started talking internally about its Virtual Studios, StockX launched its Vault NFTs, which the marketplace’s CEO Scott Cutler described in a statement as “an experience where our customers can invest in NFTs tied to physical products and trade them instantly with lower fees.”
“We believe that the physical items that trade on our platform are part of a new alternative asset class that can be uniquely associated with NFTs,” Cutler said. “The buyer of a StockX Vault NFT will also own the corresponding physical item including the opportunity to take possession of it at any time.”
Nike argued in its suit that the fine print on StockX’s Vault is more nuanced and that the marketplace is going too far and encroaching on its brand.
“StockX has chosen to compete in the NFT market not by taking the time to develop its own intellectual property rights, but rather by blatantly free-riding, almost exclusively, on the back of Nike’s famous trademarks and associated goodwill,” the suit argued. “StockX is ‘minting’ NFTs that prominently use Nike’s trademarks, marketing those NFTs using Nike’s goodwill, and selling those NFTs at heavily inflated prices to unsuspecting consumers who believe or are likely to believe that those ‘investible digital assets’ (as StockX calls them) are, in fact, authorized by Nike when they are not.”
The suit points out that StockX retains the right to “unilaterally redeem a Vault NFT for a so-called ‘Experiential Component,’ and take away the NFT, completely depriving the Vault NFT owner of possession of the shoes that are supposedly connected to the NFT.”
It’s a situation that comes with a strange kind of math — that might only make sense online and with an overwhelming faith in market forces. Regardless, big-time profits are also clearly in the balance.
Nike points out that StockX has made a Vault NFT of the 2022 version of the Nike Dunk Low — Retro White Black, which, as of Wednesday, was trading at an average price of $809 while the physical pair of shoes will sell on nike.com for $100.
The sneaker giant pointed to a comment from a TikTok user describing StockX’s Vault NFTs as “just a stupid scam for Nike to make money.”
“Unless stopped, StockX’s Vault NFTs and StockX’s use of Nike’s Asserted Marks will continue to confuse consumers in the marketplace and dilute Nike’s famous marks by blurring and tarnishment,” Nike said.
StockX’s early move could also make it harder for Nike to get its own piece of the metaverse action.
“[NFTs] are an exciting way for brands to interact with their consumers in and out of the ‘metaverse,’ and diverse commercial applications of NFTs have emerged throughout the past two years,” Nike said in its suit. “Far more than a fleeting trend, NFTs are part of the future of commerce.
“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 said.
A spokesperson for StockX said the company does not comment on legal matters.
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