Nike is getting serious about protecting its brand in the burgeoning NFT marketplace.
The shoe and apparel company filed a lawsuit last week against Detroit-based sneaker and apparel exchange StockX, which Nike has accused of selling NFTs that infringe on its trademarks.
A complaint filed by Nike on Feb. 3 in the U.S. District Court for the Southern District of New York alleges that StockX has been selling NFTs that use Nike’s trademarks without its authorization or approval.
“Recognizing firsthand the immense value of Nike’s brands, 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 freeriding, almost exclusively, on the back of Nike’s famous trademarks and associated goodwill,” the filing said.
A spokesperson for StockX told Fortune that it does not comment on “pending legal matters.”
When contacted for comment, a spokesperson for Nike referred Fortune to the filing.
A non-fungible token, or NFT, is a digital asset that can be an image, audio clip, or GIF and whose ownership is recorded on a digital ledger called the blockchain. The market for NFTs has exploded over the last year, with one selling for as much as $69 million in 2021. Since then, a slew of celebrities and companies have gotten more involved with creating, buying and selling the tokens.
Nike’s lawsuit is just the most recent example of companies and notable individuals pursuing legal means to protect their territory in the emerging NFT and metaverse industry. Luxury French fashion brand Hèrmes sued Mason Rothschild, a digital artist based in Los Angeles, in January for “seeking to get rich quick by appropriating the brand METABIRKINS for use in creating, marketing, selling, and facilitating the exchange of digital assets known as non-fungible tokens (“NFTs”),” according to the complaint filed in the U.S. District Court for the Southern District of New York on Jan. 14. Rothschild created and sold “MetaBirkins,” NFT versions of the company’s Birkin bag.
“Companies are going to be on the lookout to make sure that nobody is out there creating NFTs in this space that are violating their rights and their intellectual property rights,” said Michael Rueda, a lawyer and head of the U.S. sports and entertainment group at the London-based law firm Withers.
There might also be a defensive component to Nike’s suit. Complaints like the one the company filed against StockX could protect it from being blamed if fraudulent versions of the NFTs appear on other marketplaces, said Rueda.
“If they’re not protecting against fraud or counterfeits and people are feeling defrauded, if there end up being counterfeits on the platform or what have you, then yeah, they will look to Nike and think Nike’s involved with it.” he said.
StockX’s NFTs are part of a project it launched last month called “Vault NFTs,” in which a user can buy an NFT picture of a shoe that also gives them ownership of a physical version of that shoe at a later date for an additional fee. However, that feature is not yet available, according to StockX’s website.
Nike argued in its filings that the majority of StockX’s NFTs are Nike-trademarked products. And Nike alleges that consumers will believe these NFTs are authorized by Nike—which they are not.
“Nike did not approve of or authorize StockX’s Nike-branded Vault NFTs,” the lawsuit reads. “Those unsanctioned products are likely to confuse consumers, create a false association between those products and Nike, and dilute Nike’s famous trademarks.”
Nike has recently stepped up its involvement in the NFT and metaverse space by purchasing RTFKT Studios, which makes shoes for the metaverse. In late January, the company posted five jobs that deal with the metaverse directly, signaling its intention to incorporate NFTs and the metaverse into its business. The Oregon-based shoe and apparel company also filed seven trademarks last November to sell virtual versions of its products, according to CNBC.
