Nike, Inc. v. ALREADY, LLC
663 F.3d 89
| 2d Cir. | 2011Background
- Nike filed suit in 2009 against Yums for trademark infringement, false designation, unfair competition, and dilution based on Nike's Air Force 1 trade dress and the '905 registration.
- Nike owns U.S. Trademark Registration No. 3,451,905 for specific Air Force 1 design elements; Yums sells shoes resembling Air Force 1, including Sugar and Soulja Boy models.
- In 2010 Nike delivered a Covenant Not to Sue broad in scope, promising not to sue Yums or related entities for current and future shoe designs that resemble Nike’s mark.
- In 2011 the District Court dismissed Nike's claims with prejudice and Yums's counterclaims without prejudice, ruling no Article III case or controversy existed after the Covenant.
- The District Court held Yums's cancellation claim under §1119 lacked subject matter jurisdiction since it could not arise independently where the covenant had resolved the infringement dispute; it also denied attorneys’ fees.
- Yums appealed, challenging both the jurisdictional dismissal and the denial of fees; Nike cross-appealed or defended the Covenant-based jurisdictional ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Covenant Not to Sue divest the court of jurisdiction over the counterclaims? | Nike contends the Covenant broad enough to remove Article III controversy. | Yums argues residual controversy exists due to ongoing effects of litigation and potential future infringement. | Yes; Covenant divested jurisdiction; no justiciable controversy remained. |
| Does § 1119 provide independent federal jurisdiction for cancellation after a covenant ends the controversy? | Yums asserts § 1119 creates its own jurisdiction for cancellation. | Nike argues § 1119 is remedial and requires a live controversy in an underlying action to proceed. | No; § 1119 does not confer independent jurisdiction when the covenant resolves the underlying dispute. |
Key Cases Cited
- MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (U.S. 2007) (totality-of-the-circumstances test for declaratory judgments in IP cases)
- Starter Corp. v. Converse, Inc., 84 F.3d 592 (2d Cir. 1996) (two-pronged test for declaratory judgment jurisdiction in trademark cases)
- Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 556 F.3d 1294 (Fed. Cir. 2009) (covenant not to sue with future-coverage factors to determine controversy)
- Cardinal Chemical Co. v. Morton International, Inc., 508 U.S. 83 (U.S. 1993) (jurisdictional limits; appellate context; confirms scope of declaratory relief)
- Diamonds.net LLC v. Idex Online, Ltd., 590 F. Supp. 2d 593 (S.D.N.Y. 2008) (considerations of covenant scope and future activity in declaratory actions)