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Metaverse Beef Alert! Nike are Suing StockX Over Sale of Sneaker NFTs

Nike Sue StockX Over Sneaker NFTs

This news was originally published on February 4, 2022.

Update (April 1, 2022): After getting served a steaming hot lawsuit from Nike over their 'Vault' NFTs that featured Nike sneakers back in February, StockX is clapping back at the Swoosh with a filing of their own.

An abridged version of the filing, which can be seen on StockX's news page, says the claims in Nike's lawsuit 'lack merit, disregard settled doctrines of trademark law (including those of first sale and nominative fair use) and show a fundamental misunderstanding of the various functions NFTs can serve.'

What this means in layman's terms is that StockX feels Nike is disregarding trademark law and that their use of Nike products in their NFTs is 'no different than major e-commerce retailers and marketplaces that use images and descriptions of products to sell physical sneakers and other goods.' It also mentions that the NFTs themselves have no standalone value as they cannot be sold seperately from the physical sneakers in the StockX vault that they're backed up by. The filing also mentions that the NFTs reduce the physical impact of repeated shipping and 'should not be disturbed.'

At the time of writing, Nike have yet to respond to StockX's counter-claim. Another salvo is likely coming soon, so keep it locked here for further updates and check out the original story below.

As a leading global platform for trading and consuming current culture products, StockX customers use the platform not only to sell or acquire physical products to wear or consume, but also to trade such physical products for investment purposes. Our recent introduction of non-fungible tokens (NFTs) to track ownership of frequently traded physical products is transforming the trading experience on our platform. StockX Vault NFTs are absolutely not “virtual products” or digital sneakers. Instead, the Vault NFT program draws on our longstanding commitment to access and disruption by leveraging our proven authentication process and high-security storage infrastructure to track ownership of physical products and save our customers time and money while reducing the environmental impact of repeated shipping. 

Using NFTs in this manner is lawful and violates no legitimate right of any of the manufacturers of the underlying goods. Nike’s claims lack merit, disregard settled doctrines of trademark law (including those of first sale and nominative fair use), and show a fundamental misunderstanding of the various functions NFTs can serve. Contrary to trademark law, Nike’s position is that resellers of products are legally prohibited from accurately describing the physical products they seek to trade in a digital world. The use of images of Nike sneakers and descriptions of resale Nike products in connection with StockX Vault NFTs is nominative fair use. It is no different than major e-commerce retailers and marketplaces who use images and descriptions of products to sell physical sneakers and other goods, which consumers see every single day. As such, the use of NFTs to digitally track ownership of physical products is not only lawful, but also increases efficiency for and decreases costs to consumers, promotes sustainability, and should not be disturbed.

At StockX, our top priority is providing customers with the best experience possible. Second to that, is a commitment to innovation, and the Vault NFT program is a product of our remaining steadfast in that mission. We will continue to strive to provide our global customer community access to the products they love in tech-forward ways that suit their needs.

After Nike filed a lawsuit against StockX over the latter’s sneaker NFTs in February, the resale marketplace is responding today with a new filing in the southern district of New York.

In the response, which is accompanied by an abbreviated version on StockX’s news site, the Detroit-based company calls Nike’s lawsuit a “a baseless and misleading attempt to interfere with the application of a new technology to the increasingly popular and lawful secondary market for the sale of its sneakers and other good.” It argues Nike’s claims lack merit and disregard already established trademark laws.

StockX stresses that its Vault NFTs are not virtual products or so-called digital sneakers, and instead are merely tokens tied to already authenticated products in its warehouse. This, StockX argues, provides users the benefit of bypassing the sometimes lengthy turnaround of getting a pair authenticated. The response states that the NFTs themselves have no inherent value and cannot be traded separately from their associated physical item.

“The benefit of taking possession of the Vault NFT…is that the owner can make a future trade without incurring transaction costs, delay, or risk of damage or loss associated with shipping physical sneakers to StockX and then to the ultimate recipients,” the filing reads. On its website response, StockX also touts the apparent reduced environmental impact of repeated shipping allowed by the NFTs.

StockX says it has released 11 Vault NFT sneakers thus far from brands including Nike, Adidas, and Puma. The styles were chosen because they were the best-selling products with sufficient sizes in physical product available.

Metaverse beef might be the most quintessentially 2022 thing ever, and there's a doozy of a showdown brewin' in the virtual – and the physical – realm between Nike and StockX. On Thursday, February 3, Nike sued StockX in New York federal court over StockX's sale of 'Vault' NFTs, based on popular Nike sneakers like the Dunk Low in black and white and the A Ma Maniére x Air Jordan 3.

Nike claim that StockX's 'Vault' NFT program – which offers purchasers a unique 'digital token' backed up by a real pair of shoes in the StockX warehouse – hurts their business reputation due to their 'inflated prices': the average aftermarket price of a 'Panda' on StockX is $282, while the 'Panda' NFT goes for $809. The complaint, examined by Reuters, also states that 'murky terms of purchase and ownership' could have a negative impact on the Swoosh's business. 'Nike did not approve of or authorise StockX’s Nike-branded Vault NFTs', continues the complaint. 'Those unsanctioned products are likely to confuse consumers, create a false association between those products and Nike, and dilute Nike’s famous trademarks.'

The complaint also goes on to question the murky ownership terms around the 'Vault' NFTs, which also received blowback on social media after being announced. As part of StockX's NFT terms, the company can redeem a user's NFT for an 'experiential component' at their discretion, essentially enabling them to take away an NFT and replace it with a physical product regardless of if the NFT holder agrees to the swap or not.

Nike have rapidly expanded their metaverse real estate in recent months, planting their flag in the digital sphere by acquiring NFT outfit RTFKT in December 2021 and recently announcing a new Nike Virtual Studios division, under which RTFKT will operate. RTFTK will also release its first Nike products in February, which underscores the Swoosh's effort to get StockX to stop selling their products. The lawsuit demands that StockX be prohibited from promoting or selling any Nike-related Vault NFTs, insists that the existing NFTs be destroyed and requests that StockX pays for unspecified 'damages' suffered by Nike. According to Complex's Brendan Dunne, Nike was unwilling to comment on the suit, citing a policy that prohibits public statements on pending litigation. StockX also did not respond to a request for comment.

Though a virtual kerfuffle of this nature is new to the sneaker industry, it's been happening across entertainment and luxury goods as well. Film distributor Miramax sued the director Quentin Tarantino in November 2021 over his plans to auction off a set of NFTs inspired by his classic 1994 film Pulp Fiction (which Miramax distributed), and in January French luxury house Hermes sued the artist Mason Rothschild over a 'MetaBirkin' series of NFTs inspired by their Birkin bags.

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