Nike filed a lawsuit against online reseller StockX in New York federal court on Thursday, accusing it of creating and marketing non-fungible tokens (NFTs) based on the brand’s products without its permission.
The Oregon-headquartered company is suing StockX, which buys and resells clothing, technology products, and other collectible goods; for trademark infringement and dilution, as well as unfair competition in connection with its offering of the NFTs.
An NFT is a digital asset that uses blockchain technology to record the ownership status of digital objects such as artwork and music.
They are non-fungible, meaning they are one-of-a-kind and are generally purchased using the cryptocurrency of the Ethereum blockchain.
The company’s lawyers accused StockX of “minting” NFTs using Nike trademarks and trading on the brand’s “goodwill” to market them.
“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 complaint reads.
StockX told buyers that they would be able to redeem the non-fungible tokens for physical versions of the shoes “in the near future,” as per the complaint.
Furthermore, lawyers accused StockX of heavily inflating prices of its NFTs to customers 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 complaint gives examples such as the 2022 version of the Nike Dunk Low—Retro White Black physical pair of shoes which will retail for $100 from nike.com and for $282 on StockX, while the NFT version is selling for an average price of $809.
“In addition, the Vault NFTs’ inflated prices and murky terms of purchase and ownership ... have already led to public criticism of StockX and allegations that the Vault NFTs are a scam,” lawyers said.
The lawsuit seeks unspecified damages and a request for injunctive relief blocking StockX’s sale of the NFTs.
“Nike did not approve of or authorize StockX’s Nike-branded Vault NFTs,” the complaint reads. “Those unsanctioned products are likely to confuse consumers, create a false association between those products and Nike, and dilute Nike’s famous trademarks.”
In its complaint, Nike asserts that 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.”
However, “this new frontier has swiftly become a virtual playground for infringers to usurp the goodwill of some of the most famous trademarks in the world and use those trademarks without authorization to market their virtual products and generate ill-gotten profits,” Nike added.
The American multinational corporation said it has its own plans for digital goods and will release “a number of virtual products” later this month in conjunction with the digital art studio RTFKT, which it acquired in December.
“As a direct and proximate result of StockX’s wrongful acts, Nike has suffered, continues to suffer, and/or is likely to suffer damage to its trademarks, business reputation, and goodwill that money cannot compensate,” lawyers said.
“Unless enjoined, StockX will continue to use Nike’s Asserted Marks and/or confusingly similar marks and will cause irreparable damage to Nike, Nike’s Asserted Marks, and to the business and goodwill represented thereby, for which Nike has no adequate remedy at law.”
A StockX spokesperson told The Epoch Times, “StockX does not comment on pending legal matters.”
“We’re just seeing mountains and mountains of fraud in this area,” Ryan Korner from the IRS Criminal Investigation’s Los Angeles field said earlier this month.
Korner said his unit ended 2021 with active 80 cases in its inventory where the primary violation was tied to cryptocurrencies and that the unit is working to train all of its staff on the issues surrounding cryptocurrencies and NFTs.
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