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U.S. Supreme Court Says “Enough, Already” - Nike’s Broad Covenant Not to Sue Mooted Its Competitor’s Cancellation Counterclaim 

Published: February, 2013

Submission: February, 2013

 



Sometimes, litigants are forced to reevaluate their strategy mid-course. Occasionally, a plaintiff in a pending trademark infringement action faces a cancellation counterclaim that poses a real threat to the plaintiff’s trademark. In that situation, to avoid the risk of cancellation or a declaration of invalidity, the plaintiff may want to voluntarily dismiss its claim and grant a covenant not to sue to the alleged infringer. A recent Supreme Court decision makes it clear that this is a viable tactic ifthe covenant is sufficiently broad.

On January 9, 2013, in Already, LLC dba YUMS v. Nike, Inc., No. 11-982, the U.S. Supreme Court unanimously affirmed a Second Circuit decision holding that Nike’s covenant not to enforce its “Air Force 1” registered trademark covering several of the shoe’s design elements against footwear competitor Already, LLC dba YUMS’ (“YUMS”) existing products and any future “colorable imitations” renders moot YUMS’ counterclaim to have the trademark declared invalid.



The YUMS decision is significant because it clarifies whether and when the voluntary cessation doctrine applies to a trademark owner’s unilateral issuance of covenant not to sue. Under the voluntary cessation doctrine, a defendant claiming that its voluntary compliance moots a case must show that it is absolutely clear the allegedly wrongful conduct could not reasonably be expected to recur.



In YUMS, the Court confirmed that the doctrine applies when a mark owner issues a covenant not to sue in conjunction with its voluntary dismissal of its infringement action. This divests the federal court of Article III jurisdiction over a counterclaim challenging the validity of the trademark owner’s mark. The decision also provides guidance on how to draft a covenant not to sue to meet the “formidable burden” borne by a party defending an invalidity action to demonstrate that such party could not reasonably be expected to resume enforcement efforts against its competitor challenging the pleaded mark’s validity.





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