A couple of weeks ago, we wrote an article concerning Nike's lawsuit against StockX. The original complaint primarily concerned StockX's nascent NFT program and Vault NFT offerings, alleging that the StockX NFTs featuring Nike's brands constituted trademark infringement and dilution. On Tuesday, May 10, 2022, Nike filed a motion to amend its original complaint. Amended complaints are typically filed to add additional facts, parties, or causes of action and typically receive very little fanfare. Nike's proposed amended complaint, however, adds some new allegations against StockX that have created significant buzz.
Proposed Amendments
Now, in its proposed amended complaint, Nike alleges that, since the filing of its original complaint, StockX has made changes to its advertising concerning its Vault NFT offerings, seeming to address some of the problematic language that Nike highlighted in its original complaint. Nike's proposed amended complaint also adds facts pertaining to Nike's recent entry into the NFT market.
Next, Nike's proposed amended complaint adds causes of action for counterfeiting and false advertising related to StockX's marketing and promotion of its platform, and more specifically its authentication process. Nike alleges that it purchased four pairs of counterfeit "Nike" sneakers from StockX within a two-month period, sneakers that StockX itself had "Verified Authentic." According to Nike, "[a]t least one pair of those counterfeit shoes are the same style as one of the infringing Nike-branded Vault NFTs." Thus, these new allegations put more focus on StockX's core business—the resale of "100% authentic" goods. In response, StockX issued a statement on May 11, 2022, defending its authentication process and stating that Nike's brand protection team "has communicated confidence in our authentication program, and that hundreds of Nike employees—including current senior executives—use StockX to buy and sell products."
Impact of New Allegations
These new allegations are significant for several reasons. First, the allegations that StockX is selling products that are not 100% authentic provides a separate basis for Nike to pursue damages for false advertising and other Lanham Act violations. Second, these allegations cut to the heart of the fair use and first sale doctrine defenses that StockX raised in its answer, as these defenses apply only to the sale of genuine branded products.
Last, these allegations may open the door for additional liability for StockX vis-à-vis its own customers. Indeed, just days ago, a consumer class action was filed against StockX with allegations that closely track the allegations in Nike's proposed amended complaint. See Heriberto Valiente v. StockX, Inc., No. 1:22-cv-21489-KMM (S.D. Fla. May 13, 2022). The class action complaint alleges that "credible reports indicate that a significant percentage of the items sold through StockX are not '100% Verified Authentic,' but counterfeit." The class action complaint asserts a number of causes of action, including negligent misrepresentation, fraud, unjust enrichment, and violations of various consumer protection statutes. But the main argument is that StockX misled consumers by representing that the products purchased and sold on the platform were 100% authentic, and that the NFTs sold on the platform "had independent, and not illusory value."
With these new allegations, the potential scope of the case has broadened significantly.