When NFTs Trigger Sneaker Lawsuits: Nike vs. StockX

Nike and StockX are currently involved in a legal battle involving the intersection of sneakers and NFTs, which has major impacts on everyone involved in these industries.

When NFTs Trigger Sneaker Lawsuits: Nike vs. StockX

StockX is one of the world’s leading marketplaces for buying and selling sneakers, streetwear, and other collectibles online. In January, we wrote about StockX launching Vault NFTs, a new product that allowed people to buy NFT digital versions of sneakers that represented their ownership in a corresponding pair of physical sneakers held in a secure vault managed by StockX. For example, you could buy an NFT of a pair of Nike Dunks that meant you owned a physical version of the pair held in StockX’s vault. You could sell the NFT instead of needing to hold and manage the physical pair. From StockX’s perspective, this increases the efficiency of trading sneakers and decreases the costs for buyers and sellers.

Nike disagreed and ended up suing StockX because of these NFTs. In a lawsuit launched in February, Nike claimed that these NFTs infringed on Nike trademarks and would confuse customers into thinking that these were official Nike NFTs. This was a serious accusation from Nike and the situation has continued to evolve. Last month, Nike accused StockX of knowingly selling counterfeit shoes. Nike now claims that they purchased sneakers from StockX and found them to be fake. Each item sold on StockX goes through a formal verification process, which is a key part of the company’s value proposition. The Nike lawsuit essentially undermines StockX’s integrity and credibility. In response, StockX has called Nike’s claims ‘meritless.’

In some ways, Nike is helped by the existence of a platform like StockX. The sneaker resale market helps drive overall awareness and interest in sneakers. At the same time, every sneaker sale that happens on StockX is revenue that could be going to Nike instead. But the biggest issue here comes from the NFTs. Before StockX launched NFTs, they had a fairly pleasant relationship with Nike. In fact, Nike had previously praised the quality of StockX’s authentication process.

NFTs can pose two challenges for Nike - one has to do with brand protection and the other has to do with competition. From a brand perspective, it is a legitimate concern that Nike thinks people could mistake the StockX NFTs as coming from Nike. Whether or not you think Nike is being overly litigious, it is common practice for many major brands to fight anything that even sniffs at a potential trademark violation.

From a competition perspective, Nike has also recently launched their own sneaker NFTs with RTFKT, the NFT creative studio they acquired at the end of last year. While the CryptoKicks NFTs released with RTFKT are a different product than StockX’s Vault NFTs, you could argue there is sufficient overlap to make the two NFT products competitors. Right now, many of these CryptoKicks NFTs are selling for much higher prices than Nike’s physical sneakers. Can this demand continue, despite a market downturn in crypto and NFTs? Nike is making the calculations to answer that question right now. And if Nike is making strategic decisions around how to integrate NFTs into their business, a corollary issue is how to deal with companies like StockX making NFT derivatives on top of the Nike brand.

In situations like this, what really matters is how the courts rule and interpret the law. If the courts rule in favor of Nike, that could discourage NFT projects creating digital assets that resemble sneakers. And if the courts rule in favor of StockX, this could allow more bold and open experiments across digital footwear. For anyone in the process of making an NFT project–whether you are a startup or a major brand–this ruling could inform your future.

As our lives become more digital, these unfamiliar challenges are going to become more relevant to all of us. When major brands start augmenting their physical product sales with digital product sales, they need to recalculate their priorities. Nike is not the only company dealing with this. Recently, Hermes sued an NFT artist who created a NFT project based on the Birkin bag design called ‘Meta Birkins.’ Will fashion brands have to start more strictly enforcing their trademarks in the metaverse? There’s a lot at stake and depending on how the courts decide, people across the NFT and sneaker worlds will have guidance on what’s legal or illegal.