Nike, Inc. claims that StockX is creating and selling non-fungible tokens (“NFT”) that infringe Nike’s intellectual property to StockX, LLC, an online resale market in the southern part of New York. , Filed a federal complaint. StockX is a fair use and legal first-sale doctrine because its NFT is closely related to the ownership of the actual physical Nike sneakers and is intended to prove that ownership. Claims to be a good exercise.
As one of the first documented challenges for NFTs used to prove ownership of physical goods, this case raises the issue of first impressions, where NFTs are associated with physical goods. It may make the line between infringement and fair use clearer.
StockX is an online global marketplace where users can buy and sell the coveted “items of the current culture” such as sneakers, apparel, collectibles, trading cards and accessories. According to the company, StockX’s platform is interested in acquiring and trading these products purely for investment purposes and will immediately or ever wear or physically own these products. It attracts a large number of customers who are not interested in it. For these clients, StockX proposes to store investment products in temperature-controlled, high-security vaults (“storage items”). It also uses a unique multi-step authentication process to verify the authenticity of the products sold on the platform.
StockX uses NFTs to track ownership of stored items held in StockX vaults. According to the company, these “Vault NFTs” are “ Track Proof of ownership of the actual sneakers stored inside [the] StockX Vault. Consumers who purchase Vault NFTs retain digital ownership of Vault NFTs and can leave certified physical merchandise in the StockX vault or own physical merchandise from the vault at any time. In this case, Vault NFT will be removed from the customer’s digital. Removed from portfolio and distribution. StockX claims that when a user purchases a Vault NFT, they purchase the underlying stored item and there is no markup for the Vault NFT itself. In addition, StockX claims that Vault NFTs cannot be traded individually or separated from ownership of the underlying storage item. This is just a “billing ticket” or “key” to access the underlying storage item.
The Vault NFT in question in this case contains images of several Nike branded sneakers, including the Nike Dunk Low Black and White sneakers shown in the image.
Nike argues that these NFTs are likely to confuse consumers, create false associations between StockX NFTs and Nike, and dilute the Nike trademark. In addition, Nike claims that StockX’s products are hampering Nike’s own success in the NFT market, saying: Above all We recently acquired an NFT company in December 2021 as evidence of market expansion.
In addition, Nike disagrees with the argument that StockX NFT has no independent value other than the physical product to which it is linked because of the redemption rights listed on the StockX website. Specifically, Nike points out the Vault NFT Terms. Under these terms, NFT holders may be entitled to “get certain additional products or benefits to engage in certain experiences such as rewards, unlocking access or exclusive sales”. .. The independent value of these NFTs, if any, is an important de facto decision made by the court and can have a significant impact on StockX’s defense of fair use.
According to Nike, StockX has already sold 600 of these NFTs, making thousands of dollars in the process. Nike further claims that StockX misleads consumers by claiming that NFTs are “100% genuine” if Nike does not allow the sale of these NFTs.
StockX said in its response that the use of images and descriptions of resale products related to Vault NFT was “a major e-commerce retailer and market that uses product images and descriptions to sell sneakers and other merchandise. Same as. Consumers are watching (and not confused) every day. “StockX also claims a positive defense of first-sale doctorins and fair-use.
First-sale doctrine is a legal principle that generally limits the rights of intellectual property owners to claim infringement in connection with products that have already been sold to consumers. StockX believes that its actions do not violate trademark law, as each NFT corresponds to a particular physical Nike shoe that is legitimately owned. Under established litigation law regarding First Sale Doctrine, StockX will not infringe on Nike’s intellectual property rights if the limited use of Nike’s IP does not cause consumer confusion, these physical shoes. Can be resold.Whether the First Sale Doctrine allows consumers to sell remains an open question. virtual Images of shoes without infringing on the rights of intellectual property owners.
The fair use principle is generally a legal principle that allows a third party to use the trademark of another person without liability in limited circumstances. For example, StockX violated trademark law because the shoe images and resale product descriptions associated with the Vault NFT were allowed and used to refer to a particular physical product (Nike shoes). Claims not to. Under general litigation law regarding nominal fair use, StockX uses Nike’s trademarks without infringing Nike’s intellectual property rights on these tangible shoes (ie, genuine Nike’s). Shoes) can be resold. Above all The use of the Nike trademark has been made in the manner and scope necessary to describe or refer to Nike’s products without causing consumer confusion.
It is not yet known whether Nike will succeed in claiming its intellectual property rights or Stock X will succeed in maintaining the legality of its actions.
Importance of the case
Given the unique circumstances at hand, this case is expected to shed light on the significant intellectual property issues surrounding NFTs, especially when they are associated with physical commodities. .. As the first major law firm to purchase land in the Metaverse, ArentFox Schiff carefully monitors progress in this case and other important intellectual property considerations in the Metaverse.