Genuine Goods With Unauthorized Alterations Is Risky Business
Consumers of pop culture news received a lesson in trademark law last month when Nike sued rapper Lil Nas X and his art collective partner, MSCHF, for trademark infringement. The dispute involved the sale of genuine Nike sneakers that MSCHF modified with Satan-themed adornments (called “the Satan Shoes”). The sneakers were released as a promotional tool for Lil Nas X’s new song “MONTERO (Call Me By Your Name).” The case quickly settled, serving as an example to future collaboration partners that re-selling genuine products with unauthorized alterations runs the risk of infringing trademarks of the manufacturer and seller of the original genuine unaltered product.
MSCHF, in partnership with Lil Nas X, released a limited run of modified Nike Air Max 97s. The shoes were tied to the release of a song and music video from Lil Nas X, “MONTERO (Call Me By Your Name),” which debuted at No. 1 on the Billboard Hot 100. The music video portrays Lil Nas X attempting to seduce the devil. The art collective planned to sell 666 pairs in an additional nod to the devil-theme. Further alternations included the price of $1,018 (an homage to the biblical scripture emblazoned on the side of the Satan Shoes, i.e., Luke 10:18, which references Satan's banishment from heaven), a bronze pentagram, and midsoles purporting to contain one drop of human blood. To say that the sneakers were very popular is an understatement, with all 666 pairs being sold online in less than one minute.
Almost immediately after the Satan Shoes were revealed to the public, social media users criticized Nike for the supposed collaboration, presumably outraged based on religious or moral grounds. Some social media users called for a boycott of Nike products. In response, Nike released the following statement: “Nike did not design or release these shoes and we do not endorse them.” This statement is noteworthy because it addresses the crux of the argument that the Satan Shoes infringed Nike’s trademarks. Namely, the criticism of Nike for the Satan Shoes, a project Nike was not involved with, clearly shows that consumers were confused as to the source or origin of the sneakers, mistakenly directing their anger and outrage at the global athletic wear company. Nike is a well-respected and widely recognized company that tightly monitors and enforces their brands and image. Nike’s dedication to enforcing their intellectual property rights has strengthened their brand and built consumer trust in the company and their products around the world. Accordingly, it is not surprising that when consumers encountered the Satan Shoes, which prominently display the classic swoosh-shaped trademark, they assumed Nike was the source of the sneakers.
Nike filed a lawsuit in the United States District Court for the Eastern District of New York, alleging trademark infringement and dilution, unfair competition and false designation of origin under the Lanham Act. Specifically, the complaint states that MSCHF “has attempted to capitalize on Nike’s valuable reputation and customer goodwill by using the Nike Asserted Marks and/or confusingly similar marks in a manner that is likely to cause consumers and potential customers to believe that MSCHF’s Satan Shoes are associated with Nike, when they are not.” MSCHF’s continued sale of the shoes, alleged Nike, will cause confusion in the marketplace and damage Nike’s brands.
Nike also asserted a dilution claim on its trademarks, based on the negative social media comments, arguing that the use of similar or confusing marks will harm the quality of Nike’s trademarks, and the use of the mark in connection with satanic imagery will tarnish the brand. Underscoring this point, MSCHF previously sold a similar item called “Jesus Shoes,” also an altered version of Air Max 97 sneakers, without triggering any complaint from or lawsuit filed by Nike.
Days after filing the lawsuit, Nike obtained a temporary restraining order blocking MSCHF from fulfilling any additional orders. MSCHF said more than 600 orders had already been shipped by the time the complaint was filed.
This case seemed to generate some confusion in the public, in part because the facts did not align with what one might think of as classic trademark infringement, i.e., slapping a third party’s trademark onto a counterfeit product. However, 15 U.S.C. §1125 (a)(1)(A) of the Lanham Act states (emphasis added):
(a) Civil action
(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person…
Here, the outrage directed at Nike online made it clear that the public did indeed think the Satan Shoes originated from, or were sponsored by, Nike. "MSCHF and its unauthorized Satan Shoes are likely to cause confusion and dilution and create an erroneous association between MSCHF's products and Nike," the sports shoe giant said in the lawsuit. While perhaps not the classic trademark infringement fact pattern, the damage to Nike’s brand caused by consumer confusion was obvious, and MSCHF’s sale of the Satan Shoes was actionable as trademark infringement under the Lanham Act.
But what about the “first sale doctrine,” that is, the principle of exhaustion of intellectual property rights? Typically, the first sale doctrine is a defense to trademark infringement actions. Essentially, the first sale doctrine protects a person’s right to sell an item that was lawfully purchased without being liable for trademark infringement. For example, it is common for individuals to sell pairs of shoes that no longer fit, or they no longer want. So, why would this doctrine not apply to this situation, when MSCHF lawfully purchased the Air Max 97 sneakers from Nike before altering the product? Importantly, this doctrine does not apply when lawfully purchased items are altered by the buyer, and those alterations make the product materially different from the original. MSCHF did assert this defense, but the lawsuit settled shortly after MSCHF filed their answer to the suit. Settlement was likely the best option for MSCHF as it is doubtful that first sale doctrine would have been a successful defense against Nike’s assertion that associating their sneakers with the devil and devil worship constitutes a material alteration of the product.
The parties settled their dispute upon MSCHF’s agreement to a voluntary recall and purchaseprice refund of the Satan Shoes to remove them from circulation. In addition, MSCHF agreed to recall and refund consumers for the previously sold Jesus-themed sneakers, despite Nike having not previously complained about their sale. After settling the lawsuit, Nike released the following statement: “If any purchasers were confused, or if they otherwise want to return their shoes, they may do so for a full refund. Purchasers who choose not to return their shoes and later encounter a product issue, defect or health concern should contact MSCHF, not Nike.”
This case highlights a few practice tips. First, when a company decides to alter and sell another company’s products, they should not rely on the first sale doctrine to protect their actions from claims of trademark infringement. Second, in order for companies to preserve and maintain their valuable trademark rights, it is important to actively monitor and enforce the proper use of their trademarks. Had Nike enforced its intellectual property rights more aggressively when MSCHF released the Jesus-themed sneakers, that strong reaction may have dissuaded MSCF from attempting a subsequent collaboration involving devil worship. Finally, it must be kept in mind that consumers are often confused about what is permissible use of a third party’s trademarks, and the more unauthorized use that is allowed, the weaker one’s rights in those marks will become.
